POS AM

As filed with the Securities and Exchange Commission on January 20, 2012

Registration No. 333-160463

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 6 TO

FORM S-11

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

Resource Real Estate Opportunity REIT, Inc.

(Exact name of registrant as specified in its charter)

One Commerce Square, 2005 Market Street, 15th Floor

Philadelphia, Pennsylvania 19103

(215) 231-7050

(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices)

Alan F. Feldman

Chief Executive Officer

Resource Real Estate Opportunity REIT, Inc.

One Commerce Square, 2005 Market Street, 15th Floor

Philadelphia, Pennsylvania 19103

(215) 231-7050

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Robert H. Bergdolt, Esq.

DLA Piper LLP (US)

4141 Parklake Avenue, Suite 300

Raleigh, North Carolina 27612-2350

(919) 786-2000

Approximate date of commencement of proposed sale to public: As soon as practicable after the effectiveness of the registration statement.

If any of the securities on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if smaller reporting company)	Smaller Reporting Company	x

This Post-Effective Amendment No. 6 consists of the following:

1. The Registrant’s final prospectus dated July 15, 2011.

2. Supplement No. 8 dated January 20, 2012 to the Registrant’s prospectus dated July 15, 2011. Supplement No. 8 supersedes and replaces all prior supplements to the prospectus.

3. Part II, included herewith.

4. Signature, included herewith.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Maximum Offering – 82,500,000 Shares of Common Stock

Resource Real Estate Opportunity REIT, Inc. is a Maryland corporation that intends to purchase a diversified portfolio of U.S. commercial real estate and real estate related debt that has been significantly discounted due to the effects of recent economic events and high levels of leverage on U.S. commercial real estate, including properties that may benefit from extensive renovations intended to increase their long-term values. Following years of unprecedented appreciation in commercial real estate values fueled by readily available and inexpensive credit, the commercial real estate market began a significant decline in late 2007 as a result of the massive contraction in the credit and securitization markets. We believe that this decline has produced an attractive environment to acquire commercial real estate and real estate related debt at significantly discounted prices. We have a particular focus on operating multifamily assets, and we intend to target this asset class while also purchasing interests in other types of commercial property assets consistent with our investment objectives. Our targeted portfolio will consist principally of: (i) non-performing or distressed loans, including first- and second-priority mortgage loans, mezzanine loans, B-Notes and other loans, (ii) real estate owned by financial institutions, usually as a result of foreclosure, (iii) value-add multifamily rental properties, and (iv) discounted investment-grade commercial mortgage-backed securities. As of July 1, 2011, we owned two performing first mortgage loans, four non-performing first mortgage loans, and three multifamily properties. Because we have a limited portfolio of investments and, except as described in a supplement to this prospectus, we have not yet identified any additional assets to acquire, we are considered a blind pool. We intend to qualify as a real estate investment trust (“REIT”), beginning with the taxable year that ended December 31, 2010.

We are offering up to 75,000,000 shares of common stock in our primary offering for $10 per share, with volume discounts available to investors who purchase more than $1,000,000 of shares through the same participating broker-dealer. Discounts are also available for other categories of investors. We are also offering up to 7,500,000 shares pursuant to our distribution reinvestment plan at a purchase price initially equal to $9.50 per share. This offering will terminate on or before June 16, 2012 (unless extended by our board of directors for an additional year or as otherwise permitted by applicable securities law).

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 25 to read about risks you should consider before buying shares of our common stock. These risks include the following:

• No public market currently exists for our shares of common stock, and we have no current plans to list our shares on an exchange.

• We set the offering price arbitrarily. This price is unrelated to the book or net value of our assets or to our expected operating income.

• We have a limited operating history, and as of July 1, 2011, we owned two performing first mortgage loans, four non-performing first mortgage loans, and three multifamily properties. We have not identified any additional investments to acquire.

• We are dependent on our advisor and its affiliates to select investments and conduct our operations and this offering. Our advisor has a limited operating history and no experience operating a public company.

• We pay substantial fees and expenses to our advisor, its affiliates and broker-dealers, which payments increase the risk that you will not earn a profit on your investment.

• Our executive officers and some of our directors face conflicts of interest.

• We may lack diversification if we raise substantially less than the maximum offering.

• There are restrictions on the ownership and transferability of our shares of common stock. See “Description of Shares—Restriction on Ownership of Shares.”

• Our charter permits us to pay distributions from any source, including from offering proceeds, borrowings, sales of assets or waivers or deferrals of fees otherwise owed to our advisor. To the extent these distributions exceed our net income or net capital gain, a greater proportion of your distributions will generally represent a return of capital as opposed to current income or gain, as applicable. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

• We may change our targeted investments without stockholder consent.

• Some of the other programs sponsored by our sponsor have experienced adverse business developments or conditions.

Neither the Securities and Exchange Commission, the Attorney General of the State of New York nor any other state securities regulator has approved or disapproved of our common stock, determined if this prospectus is truthful or complete or passed on or endorsed the merits of this offering. Any representation to the contrary is a criminal offense.

This investment involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. The use of projections or forecasts in this offering is prohibited. No one is permitted to make any oral or written predictions about the cash benefits or tax consequences you will receive from your investment.

	Price to Public			Selling Commissions			Dealer Manager Fee			Net Proceeds (Before Expenses)
Primary Offering
Per Share	$	10.00	*	$	0.70	*	$	0.30	*	$	9.00
Total Maximum	$	750,000,000	*	$	52,500,000	*	$	22,500,000	*	$	675,000,000
Distribution Reinvestment Plan
Per Share	$	9.50		$	0.00		$	0.00		$	9.50
Total Maximum	$	71,250,000		$	0.00		$	0.00		$	71,250,000

* Discounts are available for some categories of investors. Reductions in commissions and fees will result in corresponding reductions in the purchase price.

The dealer manager, Chadwick Securities, Inc., our affiliate, is not required to sell any specific number or dollar amount of shares but will use its best efforts to sell the shares offered. The minimum permitted purchase is $2,500.

The date of this prospectus is July 15, 2011.

SUITABILITY STANDARDS

The shares we are offering through this prospectus are suitable only as a long-term investment for persons of adequate financial means and who have no need for liquidity in this investment. Because there is no public market for our shares, you will have difficulty selling your shares.

In consideration of these factors, we have established suitability standards for investors in this offering and subsequent purchasers of our shares. These suitability standards require that a purchaser of shares have either:

• a net worth of at least $250,000; or

• gross annual income of at least $70,000 and a net worth of at least $70,000.

In addition, the states listed below have established suitability requirements that are more stringent than ours and investors in these states are directed to the following special suitability standards:

• Kansas – It is recommended by the office of the Kansas Securities Commissioner that Kansas investors not invest, in the aggregate, more than 10% of their liquid net worth in this and similar direct participation investments. Liquid net worth is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.

• Kentucky, Massachusetts, Michigan, Pennsylvania, Oregon and Tennessee – Investors must have a liquid net worth of at least 10 times their investment in us.

• Iowa – Investors must have either (a) a net worth of $350,000 (exclusive of home, auto and furnishings) or (b) a gross annual income of $70,000 and a net worth of at least $100,000 (exclusive of home, auto and furnishings). In addition, shares will only be sold to Iowa residents that have a liquid net worth of at least 10 times their investment in us (exclusive of home, auto and furnishings).

• Nebraska – Investors must have either (a) a net worth of at least $100,000 (exclusive of home, auto and furnishings) and an annual income of $70,000, or (b) a net worth of $350,000 (exclusive of home, auto and furnishings). In addition, the total investment in us should not exceed 10% of the investor’s net worth (exclusive of home, auto and furnishings).

• Ohio and Alabama – Investors must have a liquid net worth of at least 10 times their investment in us and our affiliates.

In addition, because the minimum offering amount of $2 million was less than $50 million, Pennsylvania investors are cautioned to carefully evaluate our ability to fully accomplish our stated objectives and to inquire as to the current dollar volume of subscriptions.

For purposes of determining the suitability of an investor, net worth in all cases should be calculated excluding the value of an investor’s home, home furnishings and automobiles. In the case of sales to fiduciary accounts, these suitability standards must be met by the fiduciary account, by the person who directly or indirectly supplied the funds for the purchase of the shares if such person is the fiduciary or by the beneficiary of the account.

Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of shares in this offering must make every reasonable effort to determine that the purchase of shares in this offering is a suitable and appropriate investment for each stockholder based on information provided by the stockholder regarding the stockholder’s financial situation and investment objectives. See “Plan of Distribution—Suitability Standards” for a detailed discussion of the determinations regarding suitability that we require.

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TABLE OF CONTENTS

SUITABILITY STANDARDS	i
PROSPECTUS SUMMARY	1
RISK FACTORS	25
Risks Related to an Investment in Us	25
Risks Related to Conflicts of Interest	31
Risks Related to This Offering and Our Corporate Structure	34
Risks Related to Investments in Real Estate	40
Risks Related to Investments in Real Estate Related Debt Assets	53
Risks Associated with Debt Financing	59
Federal Income Tax Risks	61
Retirement Plan Risks	67
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	69
ESTIMATED USE OF PROCEEDS	70
MANAGEMENT	72
Board of Directors	72
Executive Officers and Directors	73
Board Committees	76
Compensation of Directors	76
Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents	77
Our Advisor	78
The Advisory Agreement	79
Initial Investment by Our Advisor	81
Other Affiliates	82
Management Decisions	86
MANAGEMENT COMPENSATION	87
STOCK OWNERSHIP	94
CONFLICTS OF INTEREST	95
Our Affiliates’ Interests in Other Resource Real Estate Programs	95
Receipt of Fees and Other Compensation by Our Advisor and its Affiliates	97
Fiduciary Duties Owed by Some of Our Affiliates to Our Advisor and Our Advisor’s Affiliates	99
Affiliated Dealer Manager	99
Affiliated Property Manager	99
Certain Conflict Resolution Measures	99
INVESTMENT OBJECTIVES AND POLICIES	106
Target Portfolio	106
Target Asset Classes	107
Discounted Real Estate Related Debt	107
REO	112
Value-Add Multifamily Rental Properties	113
Our Multifamily Focus	115
Multifamily Real Estate Acquisition Strategy	116
Real Estate Asset Management Strategy	118
Discounted Commercial Mortgage-Backed Securities	121
Other Possible Investments and Activities	122
Co-Investment Strategy	122
Tenant-in-Common Interests in Properties (TICs)	123
Disposition Policies	123
Borrowing Policies	124
Exit Strategy – Liquidation or Listing Policy	124
Charter-Imposed Investment Limitations	125

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Investment Limitations Under the Investment Company Act of 1940	126
Disclosure Policies with Respect to Future Probable Acquisitions	130
Changes in Investment Objectives and Policies	130
PRIOR PERFORMANCE SUMMARY	131
Acquisition Summary	132
Public Programs	132
Private Programs	136
Adverse Business Developments or Conditions	143
FEDERAL INCOME TAX CONSIDERATIONS	145
Recent Legislation	146
Taxation of Resource Real Estate Opportunity REIT, Inc.	146
Taxation of Stockholders	163
Backup Withholding and Information Reporting	169
Other Tax Considerations	170
ERISA CONSIDERATIONS	170
Prohibited Transactions	171
Plan Asset Considerations	171
Other Prohibited Transactions	174
Annual Valuation	174
DESCRIPTION OF SHARES	176
General	176
Common Stock	176
Convertible Stock	177
Preferred Stock	179
Distributions	179
Restriction on Ownership of Shares	180
Transfer Agent and Registrar	182
Meetings and Special Voting Requirements	182
Advance Notice for Stockholder Nominations for Directors and Proposals of New Business	183
Inspection of Books and Records	184
Control Share Acquisitions	184
Business Combinations	185
Subtitle 8	186
Tender Offer by Stockholders	186
Distribution Reinvestment Plan	187
Share Redemption Program	190
Restrictions on Roll-Up Transactions	195
THE OPERATING PARTNERSHIP AGREEMENT	197
General	197
Capital Contributions	197
Operations	197
Distributions and Allocations of Profits and Losses	198
Rights, Obligations and Powers of the General Partner	198
Exchange Rights	199
Change in General Partner	199
Transferability of Interests	200
Amendment of Limited Partnership Agreement	200
PLAN OF DISTRIBUTION	201
General	201
Compensation of Dealer Manager and Participating Broker-Dealers	201
Subscription Procedures	205

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Suitability Standards	206
Minimum Purchase Requirements	207
Investments through IRA Accounts	207
SUPPLEMENTAL SALES MATERIAL	207
LEGAL MATTERS	207
WHERE YOU CAN FIND MORE INFORMATION	208
Appendix A – Form of Subscription Agreement	A-1
Appendix B – Amended and Restated Distribution Reinvestment Plan	B-1

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus, including the information set forth in “Risk Factors,” for a more complete understanding of this offering. Except where the context suggests otherwise, the terms “we,” “us” and “our” refer to Resource Real Estate Opportunity REIT, Inc. and its subsidiaries; “Operating Partnership” refers to our operating partnership, Resource Real Estate Opportunity OP, LP; “advisor” refers to Resource Real Estate Opportunity Advisor, LLC; “Resource Real Estate Opportunity Manager” refers to our property manager, Resource Real Estate Opportunity Manager, LLC; “Resource Real Estate” refers to our sponsor, Resource Real Estate, Inc.; and “Resource America” refers to Resource America, Inc., the parent corporation of our sponsor.

What is Resource Real Estate Opportunity REIT, Inc.?

Resource Real Estate Opportunity REIT, Inc. is a recently formed Maryland corporation that intends to purchase a diversified portfolio of U.S. commercial real estate and real estate related debt that has been significantly discounted due to the effects of recent economic events and high levels of leverage on U.S. commercial real estate, including properties that may benefit from extensive renovations intended to increase their long-term values. We have a particular focus on operating multifamily assets, and we intend to target this asset class while also purchasing interests in other types of commercial property assets consistent with our investment objectives. Our targeted portfolio will consist of commercial real estate assets, principally: (i) non-performing or distressed loans, including but not limited to first- and second-priority mortgage loans, mezzanine loans, B-Notes and other loans; (ii) real estate owned by financial institutions (“REO”), usually as a result of foreclosure; (iii) value-add multifamily rental properties; (iv) discounted investment-grade commercial mortgage-backed securities; and (v) and other real estate related assets we purchase either directly or with a co-investor or joint venture partner. We anticipate holding approximately 55% of our total assets in categories (i) and (ii) listed above, 30% of our total assets in category (iii) listed above and 15% of our total assets in category (iv) listed above. If we are only able to raise an amount substantially less than our maximum offering, we intend to focus on categories (i) and (ii). Our mailing address is One Commerce Square, 2005 Market Street, 15th Floor, Philadelphia, Pennsylvania 19103. Our telephone number is (215) 231-7050, our fax number is (215) 640-6320 and our email address is info@resourcereit.com. We also maintain an Internet site at http://www.resourcereit.com at which there is additional information about us and our affiliates, but the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.

We were incorporated in the State of Maryland on June 3, 2009. From commencement of this offering through July 1, 2011, we had sold 3,962,432 shares in this offering for gross proceeds of $38.2 million, all of which were sold in the primary offering.

As of July 1, 2011, we owned three multifamily properties encompassing 623,000 rentable square feet. In addition, as of July 1, 2011, we owned two performing and four non-performing first mortgage loans. Because we have a limited portfolio of investments and, except as described in a supplement to this prospectus, we have not yet identified any additional assets to acquire, we are considered a blind pool.

Our external advisor, Resource Real Estate Opportunity Advisor, LLC, conducts our operations and manages our portfolio of real estate investments, all subject to the supervision of our board of directors. We have no paid employees.

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What is a REIT?

In general, a REIT is an entity that:

• combines the capital of many investors to acquire or provide financing for real estate investments;

• allows individual investors to invest in a professionally managed, large-scale, diversified real estate portfolio through the purchase of interests, typically shares, in the REIT;

• is required to pay distributions to investors of at least 90% of its annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain); and

• avoids the “double taxation” treatment of income that normally results from investments in a corporation because a REIT is not generally subject to federal corporate income taxes on that portion of its income distributed to its stockholders, provided certain income tax requirements are satisfied.

However, under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), REITs are subject to numerous organizational and operational requirements. If we fail to qualify for taxation as a REIT in any year after electing REIT status, our income will be taxed at regular corporate rates, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify. Even if we qualify as a REIT for federal income tax purposes, we may still be subject to state and local taxes on our income and property and to federal income and excise taxes on our undistributed income.

What are your competitive strengths?

We believe we distinguish ourselves from our competitors through the following competitive advantages:

• Extensive Experience in Discounted Real Estate Assets. Since 1991, Resource Real Estate, our sponsor, and its affiliates have been active in the discounted real estate asset market, acquiring assets with over $600 million in value. Historically, Resource Real Estate’s affiliates focused on the purchase of non-performing commercial real estate loans at discounts to their outstanding loan balances and the appraised value of their underlying properties. Resource Real Estate and its affiliates have a breadth of experience in the acquisition, ownership, management and resolution of discounted real estate assets. Furthermore, Resource Real Estate has recently formed joint ventures with a number of institutional investors and as a result, also has extensive experience acquiring, managing and resolving discounted real estate in the current economic cycle.

• Significant Experience in Multifamily Rental Properties. As of March 31, 2011, Resource Real Estate managed a portfolio of approximately $1.6 billion in aggregate principal amount of mortgage assets, discounted mortgage loans and related property interests, which includes a portfolio of multifamily rental properties consisting of over 14,000 multifamily units and other real estate assets located throughout the United States. Resource Real Estate and its over 400 employees provide our advisor with institutional knowledge and operational support necessary to underwrite, acquire, aggressively manage and dispose of multifamily rental properties.

• Proven Experience Sponsoring Publicly Traded REITs. Resource America, the parent company of our sponsor and a Nasdaq Global Select traded company (Nasdaq: REXI) that, as

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of March 31, 2011, managed over $13.7 billion of assets, has sponsored two New York Stock Exchange publicly traded REITs, Resource Capital Corp. (“Resource Capital”) in 2005 and RAIT Financial Trust, Inc. (“RAIT Financial”) in 1998. Resource Capital (NYSE: RSO) is externally managed by affiliates of our sponsor. Resource America sponsored RAIT Financial’s initial public offering in 1998 (NYSE: RAS) by creating the initial RAIT Financial entity, selling RAIT Financial its initial portfolio of assets, and retaining an initial 15% ownership interest and the right to appoint one member to its board of trustees; however, Resource America did not serve as the external manager or advisor of RAIT Financial and currently has no ownership interest in RAIT Financial.

• Unique Alignment of Management’s Interests with Stockholders. In order to more closely align our investment objectives and goals with those of our advisor, prior to the termination of our initial public offering, our advisor has agreed to invest 1% of the first $250,000,000 invested in us by non-affiliated investors, or up to $2,500,000.

• Long-standing Contacts in the Financial Services Industry. Resource Financial Institutions Group, Inc. (“Resource Financial”), an affiliate of our sponsor, is a specialized asset management company that invests in banks, thrifts and other financial services companies throughout the United States. As of March 31, 2011, Resource Financial and its affiliates managed $3.46 billion in bank investments. Resource Financial provides our advisor with several contacts in the financial services industry, including investment banks, brokerage firms, commercial banks and loan originators, that may be a source of appropriate real estate investments for us.

What are the market opportunities for Resource Real Estate Opportunity REIT?

We believe that the continued disruption in the commercial real estate and credit markets that began with the late 2007 economic recession and parallel credit crisis presents an attractive environment to acquire U.S. commercial real estate and real estate related debt.

Following years of unprecedented appreciation in commercial real estate values fueled by readily available and inexpensive credit, the commercial real estate market began a significant decline in late 2007 as a result of the massive contraction in the credit and securitization markets. This began a dramatic repricing process. The sudden contraction in available capital was exacerbated as financial institutions and other motivated sellers rotated out of real estate to de-lever their balance sheets in order to remain solvent or to meet regulatory capital requirements. As the broader economy entered recession in late 2007, commercial real estate fundamentals began to deteriorate, which placed additional pressure on commercial real estate values. Unemployment, which is usually a lagging indicator of overall macroeconomic conditions, rose dramatically and continues at high levels.

High levels of leverage in the multifamily sector of commercial real estate, and the management intensive nature of multifamily rental properties, create specific problems for multifamily borrowers who lack strong internal multifamily-specific asset and property management capabilities. The multifamily sector had a 30-day commercial mortgage-backed securities delinquency rate of 13.64% as of June 2011, according to TREPP, June 2011, the leading provider of CMBS and commercial mortgage information, analytics and technology to the global securities and investment management industries. In addition, Real Capital Analytics (“RCA”) reported that in May 2011 the total amount of distressed multifamily properties increased by $312 million, and as of June 2011, there was $36 billion of distressed multifamily assets in the United States. Furthermore, RCA reports that there was $319 billion of total distressed U.S. real estate as of June 2011, but that only $85.5 billion had been resolved as of June 2011. We believe that the default rate in the multifamily sector will remain higher than historical experience due to the combination of high amounts of leverage placed on properties and the intensity of asset property management required by

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multifamily operators to service their debt costs. We believe that Resource Real Estate’s extensive capabilities in managing multifamily properties will allow us to capitalize on the distress in the multifamily sector.

We believe that Resource Real Estate and its affiliates’ deep experience in investing in discounted and distressed real estate, coupled with Resource Real Estate and its affiliates’ extensive experience in underwriting and acquiring multifamily properties, asset and property management abilities and deep contacts in the banking industry should allow us to capitalize on these investment opportunities.

There is and will continue to be a vast inventory of commercial real estate related assets that needs to be recapitalized as part of the industry’s de-leveraging. We expect this process to take several years. According to figures reported in the New York Post, approximately $1.0 trillion of commercial real estate debt is set to mature during 2011 and 2012. We believe there are continuing significant opportunities for well-capitalized investors to acquire existing sub-performing and non-performing commercial mortgage loans, REO, properties that could benefit from significant renovations after years of limited capital investment and other commercial real estate related debt investments. We expect to identify and capitalize on what we believe to be mispricings and dislocations in the market, such as (i) existing commercial real estate debt instruments reaching maturity with no clear refinancing source as a result of insufficient capital or principal in excess of current real estate market values and (ii) resolution of structural issues associated with complex real estate debt products.

Specifically, we anticipate attractive opportunities to acquire whole mortgage loans, including performing, sub-performing and non-performing loans and loan portfolios, from financial institutions and government agencies. In particular, we believe that the Federal Deposit Insurance Corporation (“FDIC”) will provide attractive investment opportunities in mortgage loans through its liquidation of the assets of failed depository institutions for which it has been appointed receiver. According to the FDIC, as of June 29, 2011, 48 depository institutions have failed in 2011, with approximately $19 billion in combined assets. In 2009 and 2010, 140 and 158 depository institutions respectively failed, with approximately $266 billion in combined assets. The FDIC has begun disposing of failed banks’ assets primarily through open auctions, a process similar to that utilized during the Resolution Trust Corporation era of 1989 to 1995 and structured sales of pools of assets. We believe that our affiliate, Resource Financial, a management company that invests in banks, thrifts and other financial services companies, maintains deep contacts in the banking industry that will be a source of appropriate real estate investments for us.

While a number of multifamily buyers have exited the market, there remains a vast inventory of unrenovated properties built during the building boom in the 1980s. We believe that the large inventory of unrenovated multifamily properties combined with fewer buyers in the market will result in higher capitalization rates continuing to exceed their historical averages presenting a strong entry point to acquire assets in need of value-added renovations. Increases in rental demand over the next five years are expected on account of favorable trends among rental cohorts, including a resumption in growth in the population aged 20 to 29 (“echo boomers” or “Generation Y”) after two decades of decline. We believe that this combination of fewer multifamily buyers, the large inventory of unrenovated older multifamily properties and a growing 20 to 29 aged population, presents us with a significant opportunity to acquire older, unrenovated properties at higher than historical capitalization rates, renovate the properties and earn higher rents from renters in the Generation Y age cohort who have historically demanded greater finishes and amenities in products and services than earlier generations.

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Are there any risks involved in an investment in your shares?

Investing in our common stock involves a high degree of risk. You should carefully review the “Risk Factors” section of this prospectus beginning on page 25, which contains a detailed discussion of the material risks that you should consider before you invest in our common stock. Some of the more significant risks relating to an investment in our shares include the following:

• No public market currently exists for our shares of common stock, and we have no current plans to list our shares on an exchange. If you are able to sell your shares, you would likely have to sell them at a substantial discount from their public offering price.

• We established the offering price of our shares on an arbitrary basis. This price may not be indicative of the price at which our shares would trade if they were listed on an exchange or actively traded, and this price bears no relationship to the book or net value of our assets or to our expected operating income.

• We commenced operations in September 2010 and have a limited operating history. As of July 1, 2011, we owned two performing first mortgage loans, four non-performing first mortgage loans, and three multifamily properties. Because we have not identified any additional assets to acquire with proceeds from this offering, you will not have an opportunity to evaluate our investments before we make them, making an investment in us more speculative.

• We are dependent on our advisor to select investments and conduct our operations. Our advisor has a limited operating history and no previous experience operating a public company. This inexperience makes our future performance difficult to predict.

• Our executive officers and some of our directors are also officers, directors, managers or key professionals of our advisor, our dealer manager and other affiliated Resource Real Estate entities. As a result, they face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other programs sponsored by Resource Real Estate and conflicts in allocating time among us and these other programs. These conflicts could result in action or inaction that is not in the best interests of our stockholders.

• We pay substantial fees to and expenses of our advisor, its affiliates and participating broker-dealers, which payments increase the risk that you will not earn a profit on your investment. For a summary of these fees, see “Prospectus Summary—What are the fees that you pay to the advisor and its affiliates?”

• Our advisor and its affiliates receive fees in connection with transactions involving the acquisition and management of our investments. These fees are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us.

• There is no limit on the amount we can borrow to acquire a single real estate investment, but pursuant to our charter, we may not leverage our assets with debt financing such that our total liabilities would be in excess of 75% of the aggregate value of our assets unless a majority of our independent directors find substantial justification for borrowing a greater amount. Examples of such a substantial justification include obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the

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risk that we would become unable to meet our financial obligations as they became due. For purposes of the portfolio as a whole, based on current lending market conditions, we believe we will leverage our assets with debt financing that cause our total liabilities to be approximately 35% of the aggregate asset value prior to stabilizing our portfolio and 65% to 70% once it has been stabilized. If we hold distressed assets and stabilize them, we believe that we may be able to and we expect to increase this level of debt financing on such assets.

• Our charter prohibits the ownership of more than 9.8% of our common stock, unless exempted by our board of directors, which may inhibit transfers of our common stock and large investors from desiring to purchase your shares of common stock.

• In connection with the commencement of this offering, our advisor exchanged 4,500 shares of common stock for 45,000 shares of our convertible stock, which we may refer to as “convertible stock” or “promote shares,” and purchased 4,068 shares of our convertible stock that were not sold in our private offering. As of July 1, 2011, our advisor owned 49,063 shares of our convertible stock, outside investors owned a total of 937 shares of our convertible stock and a total of 50,000 shares of convertible stock were issued and outstanding. The convertible stock is non-voting, is not entitled to any distributions and is a separate class of stock from the common stock to be issued in this offering. Under limited circumstances, these shares may be converted into shares of our common stock, resulting in dilution of our stockholders’ interest in us. Generally, our convertible stock will convert into shares of common stock when one of two events occurs. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 10% cumulative, non-compounded, annual return at that price. Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold for our common stockholders. Our advisor can influence whether and when our common stock is listed for trading on a national securities exchange or our assets are liquidated, and their interests in our convertible stock could influence their judgment with respect to listing or liquidation.

• We may lack property diversification if we raise substantially less than the maximum offering amount.

• Our charter permits us to pay distributions from any source, including from offering proceeds, borrowings, sales of assets or waivers or deferrals of fees otherwise owed to our advisor. To the extent these distributions exceed our net income or net capital gain, a greater proportion of your distributions will generally represent a return of capital as opposed to current income or gain, as applicable. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

• We may experience adverse business developments or conditions similar to those affecting certain programs sponsored by our sponsor, which could limit our ability to make distributions and could decrease the value of your investment. For example, for 2007, Resource Real Estate Investors, L.P. had negative cash flow from operations of $206,885, and for 2006 and 2007, Resource Real Estate Investors II, L.P. had negative cash flow from operations of $680,056 and $42,097, respectively.

• Disruptions in the financial markets and sluggish economic conditions could adversely affect our ability to implement our business strategy and generate returns to you.

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• Our failure to qualify as a REIT for federal income tax purposes would reduce the amount of income we have available for distribution and limit our ability to make distributions to our stockholders.

• We may change our targeted investments without stockholder consent, which could adversely affect the value of our common stock and our ability to make distributions to you.

• Investments in non-performing real estate assets involve greater risks than investments in stabilized performing assets and make our future performance more difficult to predict. As of July 1, 2011, we owned four non-performing real estate assets.

What are your investment objectives?

Our principal investment objectives are to:

• preserve, protect and return your capital contribution;

• realize growth in the value of our investments;

• increase cash distributions to you through increased cash flow from operations or targeted asset sales; and

• enable you to realize a return of your investment by either liquidating our assets or listing our shares on a national securities exchange within three to six years after the termination of this primary offering.

See the “Investment Objectives and Policies” section of this prospectus for a more complete description of our investment policies and charter-imposed investment restrictions.

What is the role of the board of directors?

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. We have five members on our board of directors, three of whom are independent of our advisor and its affiliates. Our charter requires that a majority of our directors be independent of our advisor and creates a committee of our board consisting solely of all of our independent directors. This committee, which we call the conflicts committee, is responsible for reviewing the performance of our advisor and must approve other matters set forth in our charter. See “Conflicts of Interest—Certain Conflict Resolution Measures.” Our directors are elected annually by the stockholders.

Who is your advisor?

Resource Real Estate Opportunity Advisor, LLC is our advisor. Our advisor is a limited liability company that was formed in the State of Delaware on June 8, 2009. Our advisor has a limited operating history and no previous experience managing a public company. However, our advisor provides substantive advisory services to us and is supported by our sponsor, Resource Real Estate, Inc., and its personnel in providing such services to us. See below for a description of our sponsor, Resource Real Estate, Inc.

Will your advisor make an investment in us?

Yes. In order to more closely align our investment objectives and goals with those of our advisor, prior to the termination of this offering, our advisor will invest 1% of the first $250,000,000 invested in us

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by non-affiliated investors in this offering, or up to $2,500,000. To date, our advisor has invested $515,000 in us through the purchase of 20,000 shares of our common stock at $10.00 per share and 35,000 shares of our common stock at $9.00 per share. In connection with the commencement of this offering, our advisor exchanged 4,500 shares of common stock for 45,000 shares of our convertible stock and purchased 4,068 shares of our convertible stock that were not sold in our private offering. As of July 1, 2011, our advisor owned 49,063 shares of our convertible stock.

What does the advisor do?

Our advisor manages our day-to-day operations and our portfolio of real estate investments, and provides asset-management, marketing, investor relations and other administrative services on our behalf, all subject to the supervision of our board of directors. Our advisor caused us to enter into a management agreement with Resource Real Estate Opportunity Manager, our affiliate, to provide property management services, as applicable, for most, if not all, of the properties or other real estate related assets in each case where our advisor is able to control the operational management of such properties. Resource Real Estate Opportunity Manager may subcontract with an affiliate or third party to provide day-to-day property management, construction management or other property specific functions, as applicable, for the properties it manages.

Our sponsor, Resource Real Estate, and its team of real estate professionals, including Jonathan Z. Cohen, Alan F. Feldman and Kevin M. Finkel, acting through our advisor, make most of the decisions regarding the selection, negotiation, financing and disposition of real estate investments. A majority of our board of directors and a majority of the conflicts committee approves all proposed real estate property investments and certain significant real estate related debt investments.

What is the experience of your sponsor?

Resource Real Estate and its affiliates have a significant amount of experience in buying, managing, operating and disposing of discounted real estate investments and a number of relationships in the real estate and financial services markets that together put our advisor in a unique position to operate and manage our company. Specifically, our advisor believes that the following entities and factors highlight the resources that it may use to compete in the discounted real estate asset marketplace:

• Resource Real Estate and its affiliates have been active in the discounted real estate asset market since 1991, acquiring and disposing of assets representing over $600 million in value. Historically, Resource Real Estate’s affiliates focused on the purchase of non-performing commercial real estate loans at discounts to their outstanding loan balances and the appraised value of their underlying properties. As of March 31, 2011, Resource Real Estate and its affiliates have formed joint ventures with a number of institutional investors that have invested approximately $200.4 million in assets similar to those that we plan to acquire. As a result of many programs and products, Resource Real Estate has a breadth of experience in the acquisition, ownership, management and resolution of discounted real estate assets. Our advisor uses Resource Real Estate’s knowledge and experience in the discounted real estate asset marketplace to assist us in meeting our investment objectives.

• Resource Real Estate managed a portfolio of over $750 million in aggregate principal amount of mortgage assets, discounted mortgage loans and related property interests as of March 31, 2011, in addition to its $808.6 million portfolio of multifamily rental properties and other real estate assets.

• Resource Financial, an affiliate of our sponsor, is a specialized asset management company that invests in banks, thrifts and other financial services companies. As of March 31, 2011, Resource Financial and its affiliates managed $3.46 billion in bank investments.

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• Resource Real Estate Management, Inc., d/b/a “Resource Residential,” an affiliate of our sponsor, is a property management company that, as of March 31, 2011, managed over 50 multifamily rental properties for our sponsor in 14 states with over 14,000 units. It has over 400 employees. The senior managers and employees of Resource Residential, acting through Resource Real Estate Opportunity Manager, will assist in providing property management as well as construction management services to us.

Who is the parent of your sponsor?

Resource America is the parent corporation of our sponsor. Resource America is a publicly traded corporation listed on the Nasdaq Global Select Market under the symbol “REXI.” Resource America is a specialized asset management company that evaluates, originates, services and manages investment opportunities through its commercial finance, real estate and financial fund management operating segments. As of March 31, 2011, Resource America managed over $13.7 billion in assets.

Why is your sponsor focusing this program on multifamily rental property investments?

Our sponsor has focused on the multifamily sector, which includes student housing and senior residential, with its last 10 funds and focuses this program on multifamily rental property investments because apartments have traditionally produced the highest risk-adjusted investment returns compared to other property sectors. Over the past 30 years, apartments have produced higher returns with lower volatility than the other major real estate sectors, including office, retail industrial, hospitality and healthcare. Furthermore, multifamily rental properties have demonstrated returns during recessionary periods that are higher than those of other major property classes, and have been an effective inflation hedge due to the short term of the typical apartment lease, which is generally 12 months or less. Our sponsor also believes that some of the key factors for investing in multifamily rental properties include stable access to debt, due in part to the lending activities of government-sponsored entities, the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), lower cost of debt capital and the ability to support more debt with the same level of risk.

Our sponsor also has an affiliated property management subsidiary with experience in leasing, managing, and rehabilitating multifamily rental properties. We believe that, in general, the multifamily property management industry generally has not maintained pace with the increasing demands of multifamily residents for higher levels of customer services and the need to deploy more technology and modern sales and marketing techniques to acquire new residents. Therefore, in 2007, our sponsor introduced our “Experience-Based Management” (“EBM”) strategy through Resource Residential, our multifamily property management affiliate. Our EBM strategy offers multifamily property management that is based around the overall experience provided to potential and existing residents, in addition to the first-class services provided to them. We believe that the customer service leaders in the hospitality and retail industries provide applicable templates for the types of experiences and customer services that today’s renters demand. In addition, we believe revenue-enhancing and cost-cutting technologies can improve the overall operating efficiencies of our properties and contribute to stronger profitability.

What is your investment approach for this real estate program?

We seek to acquire assets at a discount to their perceived value and we may sell or finance them when market conditions warrant. With respect to discounted loans, we may either negotiate full or discounted payoffs with the borrowers, restructure the loans or acquire title to the underlying properties through receipt of a deed in lieu or through a foreclosure proceeding. With respect to value-add properties, selected REO properties and properties we acquire or control through foreclosure or restructuring, we expect to enhance their value by instituting significant renovations to update their appearance, aggressively

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market them and increase occupancy in order to realize significant capital appreciation as well as increased current income. Upon stabilization, we may finance or sell the properties. We expect to hold commercial mortgage-backed securities until their maturity, a beneficial selling opportunity or the earlier liquidation of our assets.

Will you use leverage?

We may use leverage for our acquisitions and may obtain such leverage in one of three ways: (1) REIT-level financing; (2) individual investment financing and (3) seller financing. Although there is no limit on the amount we can borrow to acquire a single real estate investment, we may not leverage our assets with debt financing such that our total liabilities would be in excess of 75% of the aggregate value of our assets unless a majority of our independent directors find substantial justification for borrowing a greater amount. Examples of such a substantial justification include obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the risk that we would become unable to meet our financial obligations as they became due. Based on current lending market conditions, we do not expect to leverage our assets so that our total liabilities exceed 35% of the aggregate value of our assets prior to stabilizing our portfolio and 65% to 70% once it has been stabilized. If we hold distressed assets and stabilize them, we believe that we may be able to and we expect to increase this level of debt financing on such assets.

How will you structure the ownership and operation of your assets?

We plan to own substantially all of our assets and conduct our operations through Resource Real Estate Opportunity OP, LP, which we refer to as our Operating Partnership in this prospectus. We are the sole general partner of our Operating Partnership and, as of the date of this prospectus, our wholly owned subsidiary, RRE Opportunity Holdings, LLC, is the sole limited partner of our Operating Partnership. We present our financial statements, operating partnership income, expenses, and depreciation on a consolidated basis with RRE Opportunity Holdings, LLC and our Operating Partnership. Neither subsidiary will file a federal income tax return. All items of income, gain, deduction (including depreciation), loss and credit flow through our Operating Partnership and RRE Opportunity Holdings, LLC to us as each of these subsidiary entities are disregarded for federal tax purposes. These tax items do not generally flow through us to the investors however. Rather, our net income and net capital gain effectively flows through us to the stockholders as and when dividends are paid to our stockholders. Because we plan to conduct substantially all of our operations through our Operating Partnership, we are considered an UPREIT.

What is an “UPREIT”?

UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” An UPREIT is a REIT that holds all or substantially all of its properties through a partnership in which the REIT holds a general partner or limited partner interest, approximately equal to the value of capital raised by the REIT through sales of its capital stock. Using an UPREIT structure may give us an advantage in acquiring properties from persons who may not otherwise sell their properties because of unfavorable tax results. Generally, a sale of property directly to a REIT is a taxable transaction to the selling property owner. In an UPREIT structure, a seller of a property who desires to defer taxable gain on the sale of his property may transfer the property to the UPREIT in exchange for limited partnership units in the partnership and defer taxation of gain until the seller later exchanges his limited partnership units on a one-for-one basis for REIT shares or for cash pursuant to the terms of the limited partnership agreement.

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What conflicts of interest does your advisor face?

Our advisor and its affiliates experience conflicts of interest in connection with the management of our business. All of our executive officers, our non-independent directors and our key real estate professionals face these conflicts because of their affiliation with our advisor and other Resource Real Estate-sponsored programs. Some of the material conflicts that our advisor and its affiliates face include the following:

• Our sponsor and its team of real estate professionals at our advisor must determine which investment opportunities to recommend to us or another Resource Real Estate-sponsored program or joint venture or affiliate of our sponsor;

• Our sponsor, Resource America, Resource Capital and our company employ many of the same real estate professionals and, from time to time, those individuals serve in their capacities at those other entities;

• Our sponsor and its team of real estate professionals at our advisor may structure the terms of joint ventures between us and other Resource Real Estate-sponsored programs;

• Our advisor and its affiliates must determine which property and leasing managers to retain and have retained Resource Real Estate Manager, an affiliate, to manage and lease some or all of our properties and to manage our real estate related debt investments;

• Our sponsor and its team of real estate professionals at our advisor and its affiliates (including our dealer manager, Chadwick Securities) have to allocate their time between us and other real estate programs and activities in which they are involved;

• Our advisor and its affiliates receive fees in connection with transactions involving the purchase, management and sale of our assets regardless of the quality of the asset acquired or the services provided to us;

• Our advisor and its affiliates, including our dealer manager, Chadwick Securities, also receive fees in connection with our offerings of equity securities;

• The negotiations of the advisory agreement, the dealer manager agreement and the management agreement (including the substantial fees our advisor and its affiliates receive thereunder) were not at arm’s length; and

• We may seek stockholder approval to internalize our management by acquiring assets and the key real estate professionals at our advisor and its affiliates for consideration that would be negotiated at that time. The payment of such consideration could result in dilution to your interest in us and could reduce the net income per share and funds from operations per share attributable to your investment. Additionally, in an internalization transaction, the real estate professionals at our advisor that become our employees may receive more compensation than they receive from our advisor or its affiliates. These possibilities may provide incentives to our advisor or these individuals to pursue an internalization transaction rather than an alternative strategy, even if such alternative strategy might otherwise be in our stockholders’ best interests.

See the “Conflicts of Interest” section of this prospectus for a detailed discussion of the various conflicts of interest relating to your investment, as well as the procedures that we have established to mitigate a number of these potential conflicts.

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What is the ownership structure of the company and the Resource Real Estate entities that perform service for you?

The following chart shows the ownership structure of the various Resource Real Estate entities that perform services for us as of July 1, 2011.

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What are the fees that you pay to the advisor and its affiliates?

Our advisor and its affiliates receive compensation and reimbursement for services relating to this offering and the investment and management of our assets. The most significant items of compensation are included in the table below. Selling commissions and dealer manager fees may vary for different categories of purchasers. This table assumes the shares are sold through distribution channels associated with the highest possible selling commissions and dealer manager fees and assumes a $9.50 price for each share sold through our distribution reinvestment plan. No selling commissions or dealer manager fees are payable on shares sold through our distribution reinvestment plan.

Form of Compensation	Determination of Amount	Estimated Amount for Maximum  Offering
Organization and Offering Stage
Selling Commissions	Up to 7.0% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers, except no selling commissions are payable on shares sold under the distribution reinvestment plan. Chadwick Securities, our dealer manager, reallows 100% of commissions earned to participating broker-dealers.	$52,500,000
Dealer Manager Fee	Up to 3.0% of gross offering proceeds, except no dealer manager fee is payable on shares sold under the distribution reinvestment plan. Chadwick Securities may reallow to any participating broker-dealer up to 1.0% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee. See “Plan of Distribution.”	$22,500,000
Other Organization and Offering Expenses	Pursuant to the terms of our advisory agreement, we reimburse our advisor for organization and offering expenses it may incur on our behalf, but only to the extent that such reimbursement does not cause organization and offering expenses (other than selling commissions and the dealer manager fee) to exceed 2.5% of gross offering proceeds as of the date of reimbursement. However, if we raise the maximum offering amount in the primary offering and under the distribution reinvestment plan, we expect organization and offering expenses (other than selling commissions and the dealer manager fee) to be $14,627,066 or 1.78% of gross offering proceeds. These organization and offering expenses include all actual expenses (other than selling commissions and the dealer manager fee) to be incurred on our behalf and paid by us in connection with the offering.	$14,627,066

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Form of Compensation	Determination of Amount	Estimated Amount for Maximum  Offering
Acquisition and Development Stage
Acquisition Fees	2.0% of the cost of investments acquired by us, or the amount funded by us to acquire loans, including acquisition expenses and any debt attributable to such investments. The computation of Acquisition Fees paid to the Advisor also includes amounts incurred or reserved for capital expenditures that are used to provide funds for capital improvements and repairs applied to any real property investment acquired where we plan to add value.	$19,822,291 (maximum offering assuming leverage of 35% of the cost of our investment)/ $51,537,956 (maximum offering assuming leverage of 75% of the cost of our investment)
Acquisition Expenses	Reimbursement for all out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not we ultimately acquire the property or the other real estate related debt investment.	Actual amounts are dependent upon acquisition activity and therefore cannot be determined at the present time.
Debt Financing Fee	0.5% of the amount of any debt financing obtained; provided, however, that the sum of the debt financing fee, the construction management fee paid to our property manager and its affiliates and the acquisition fees and expenses described above may not exceed 6.0% of the contract price of the property unless a majority of the board of directors (including all the members of the conflicts committee) not otherwise interested in the transaction determines that such fee is commercially competitive, fair and reasonable to us. In no event will the debt financing fee be paid more than once in respect of the same debt. For example, upon refinancing, our advisor would only receive 0.5% of the incremental amount of additional debt financing obtained in the refinancing.	Actual amounts are dependent upon the amount of any debt financed and upon other factors, such as whether the debt is incurred in connection with the acquisition of a property or subsequent to the acquisition and therefore cannot be determined at the present time.
Construction Management Fee	5.0% of actual aggregate cost to construct improvements, or to repair, rehab or reconstruct a property; provided, however, that the sum of the construction management fee paid to our property manager and its affiliates and the acquisition fee described above and acquisition expenses may not exceed 6.0% of the contract price of the property unless a majority of the board of directors (including all the members of the conflicts committee) not otherwise interested in the transaction determines that such fee is commercially competitive, fair and reasonable to us.	Actual amounts are dependent upon usual and customary construction management fees for particular projects and therefore the amount cannot be determined at the present time.

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Form of Compensation	Determination of Amount	Estimated Amount for Maximum  Offering
Operational Stage
Property Management/ Debt Servicing Fees	With respect to real property investments, 4.5% of the actual gross cash receipts from the operation of the property; provided that for properties that are less than 75% occupied, the property manager receives a minimum property management fee for the first 12 months of ownership in an amount equal to $40 per unit per month for multifamily rental properties or $0.05 per square foot per month for other types of properties. With respect to real estate related debt investments managed by our property manager or its affiliates, 2.75% of gross income paid on these investments. The fee attributable on our real estate related debt investments covers our property manager’s services in monitoring the performance of our real estate related debt investments, including (i) collecting amounts owed to us, (ii) reviewing on an as-needed basis the properties serving, directly or indirectly, as collateral for the real estate related debt investments, the owners of those properties and the markets in general and (iii) maintaining escrow accounts, monitoring advances, monitoring loan covenants, and reviewing insurance compliance.	Actual amounts are dependent upon gross revenues of specific properties and actual management fees or property management fees or will be dependent upon the total equity and debt capital we raise and the results of our operations and therefore cannot be determined at the present time.
Asset Management Fee	Monthly fee equal to one-twelfth of 1.0% of the higher of the cost or independently appraised value of each asset, without deduction for depreciation, bad debts or other non-cash reserves. For purposes of this calculation, “cost” equals the amount actually paid or budgeted (including acquisition fees and expenses) to purchase each asset we acquire, including any debt attributable to the asset, provided that, with respect to any properties we develop, construct or improve, cost includes the amount expended by us for the development, construction or improvement of an asset. For purposes of this calculation, “value” equals the value of an asset established by the most recent independent valuation report, if available. The asset management fee is based only on the portion of the cost or value attributable to our investment in an asset if we do not own all or a majority of an asset and do not manage or control the asset.	The actual amounts are dependent upon the total equity and debt capital we raise and the results of our operations; we cannot determine these amounts at the present time.

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Form of Compensation	Determination of Amount	Estimated Amount for Maximum  Offering
Other Operating Expenses	We reimburse the expenses incurred by our advisor in connection with its provision of services to us, including our allocable share of costs for advisor personnel and overhead, including allocable personnel salaries and other employment expenses. However, we do not reimburse our advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition fees or disposition fees.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.
Disposition Fees	For substantial assistance in connection with the sale of investments, we will pay our advisor or its affiliates the lesser of (i) one-half of the aggregate brokerage commission paid or, if none is paid, the amount that customarily would be paid at a market rate or (ii) 2.75% of the contract sales price of each real estate investment, loan, debt-related security, or other investment sold (including mortgage-backed securities or collateralized debt obligations issued by a subsidiary of ours as part of a securitization transaction). The conflicts committee will determine whether the advisor or its affiliate has provided substantial assistance to us in connection with the sale of an asset. We will not pay a disposition fee upon the maturity, prepayment or workout of a loan or other real estate related debt investment; however, if we take ownership of a property as a result of a workout or foreclosure of a loan or we provide substantial assistance during the course of a workout, we will pay a disposition fee upon the sale of such property or disposition of such loan or other real estate related debt investment.	Actual amounts are dependent upon aggregate asset value and therefore cannot be determined at the present time.

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Form of Compensation	Determination of Amount	Estimated Amount for Maximum  Offering
Common Stock Issuable Upon Conversion of Convertible Stock	Our convertible stock will be of no value unless our common stockholders realize or have an opportunity to realize a stated minimum return as a result of our cumulative distributions or the trading price of our shares on a national securities exchange. As a result, our convertible stock is economically similar to a back-end incentive fee, which many other non-traded REITs have agreed to pay to their external advisors. Our convertible stock will convert into shares of common stock on one of two events. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 10% cumulative, non-compounded, annual return at that price. Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold for our common stockholders. Each of these two events is a “Triggering Event.” For more information, see “Description of Shares—Convertible Stock.”	Actual amounts depend on the value of our company at the time the convertible stock converts or becomes convertible and therefore cannot be determined at the present time.

How many real estate investments do you currently own?

As of July 1, 2011, we owned three multifamily properties encompassing 623,000 rentable square feet. In addition, as of July 1, 2011, we owned two performing and four non-performing first mortgage loans. Because we have a limited portfolio of investments and, except as described in a supplement to this prospectus, we have not yet identified any additional assets to acquire, we are considered a blind pool. As acquisitions become probable, we will supplement this prospectus to provide information regarding the likely acquisition to the extent material to an investment decision with respect to our common stock. We will also describe material changes to our portfolio, including the closing of property acquisitions, by means of a supplement to this prospectus.

Will you acquire properties or other assets in joint ventures?

Probably. Among other reasons, joint venture investments permit us to own interests in large assets without unduly restricting the diversity of our portfolio. We may also want to acquire properties and other investments through joint ventures in order to diversify our portfolio by investment size, investment

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type or investment risk. In determining whether to invest in a particular joint venture, our advisor will evaluate the real estate assets that such joint venture owns or is being formed to own under the same criteria as our other investments. We may enter into joint ventures with affiliates of our advisor or with third parties.

What steps do you take to make sure you purchase environmentally compliant properties?

We attempt to obtain or review a Phase I environmental assessment of each property we purchase or with respect to a property underlying a real estate related debt investment that we purchase and, in our discretion, may obtain additional or alternative environmental assessments. In addition, we attempt to obtain a representation from the seller that, to its knowledge, the property is not contaminated with hazardous materials. We do not close the purchase of any property unless we are generally satisfied with the environmental status of the property.

If I buy shares, will I receive distributions and how often?

As of July 1, 2011, we have not declared any cash distributions. To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our common stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant. We will make distributions with respect to the shares of common stock in our sole discretion. No distributions will be made with respect to shares of convertible stock. Once we begin making distributions, we intend to pay distributions on a monthly basis based on daily record dates. We have paid stock distributions to our stockholders of record as of the close of business on February 28, 2011 and May 31, 2011, each time in the amount of 0.015 shares of our common stock, $0.01 par value per share, for every share held of record on such date. We may continue paying stock distributions in the future.

Generally, our policy is to pay cash distributions based on current and projected cash flow from operations after giving consideration to amounts excluded from cash flow from operations under GAAP but paid for out of offering proceeds, such as acquisition fees and acquisition expenses. We expect to have little, if any, cash flow from operations available for distribution until we make substantial investments. We expect that at least during the early stages of our development and from time to time during our operational stage, we may declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, to the extent permitted by Maryland law, we expect to use the proceeds from this offering or the proceeds from the issuance of securities in the future to pay distributions. We may borrow funds, issue new securities or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital. We may also fund such distributions from third-party borrowings or from advances from our advisor or sponsor or from our advisor’s deferral of its asset management fee, although we have no present intention to do so. If we fund distributions from borrowings, sales of assets or the net proceeds from this offering, we will have less funds available for the acquisition of real estate and real estate related assets and your overall return may be reduced. Further, to the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

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May I reinvest my distributions in shares of Resource Real Estate Opportunity REIT, Inc.?

Yes. We have adopted a distribution reinvestment plan. You may participate in our distribution reinvestment plan by checking the appropriate box on the subscription agreement or by filling out an enrollment form we will provide to you at your request. As of July 1, 2011, we have not declared any cash distributions and, accordingly, have not issued any shares under our distribution reinvestment plan.

The purchase price for shares purchased under the distribution reinvestment plan is currently $9.50. Once we establish an estimated value per share that is not based on the price to acquire a share in the primary offering, shares issued pursuant to our distribution reinvestment plan will be priced at the estimated value per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share not based on the price to acquire a share in the primary offering after the completion of our offering stage; however, the time frame before which we establish an estimated value per share may be different depending on regulatory requirements or if necessary to assist broker-dealers who sell shares in this offering. We will consider our offering stage complete when 18 months have passed since our last sale of shares in a public offering of equity securities, whether that last sale was in this initial public offering or a public follow-on offering. No selling commissions or dealer manager fees are payable on shares sold under our distribution reinvestment plan. We may amend or terminate the distribution reinvestment plan for any reason at any time upon 10 days’ written notice to the participants. For more information regarding the distribution reinvestment plan, see “Description of Shares—Distribution Reinvestment Plan.”

Will the distributions I receive be taxable as ordinary income?

Yes and No. Generally, distributions that you receive, including distributions that are reinvested pursuant to our distribution reinvestment plan, will be taxed as ordinary income to the extent they are from current or accumulated earnings and profits. Participants in our distribution reinvestment plan will also be treated for tax purposes as having received an additional distribution to the extent that they purchase shares under the distribution reinvestment plan at a discount to fair market value. As a result, participants in our distribution reinvestment plan may have tax liability with respect to their share of our taxable income, but they will not receive cash distributions to pay such liability.

As a REIT, we are only required to distribute 90% of our taxable income each year in order to maintain our REIT status. We expect that some portion of your distributions will not be subject to tax in the year in which it is received because depreciation expense reduces the amount of taxable income but does not reduce cash available for distribution. Because multifamily rental properties are depreciated over 27.5 years, versus 39 years for other types of commercial real estate properties, the amount of our taxable income will be reduced as compared to companies holding other types of commercial real estate properties. The portion of your distribution that is not subject to tax immediately is considered a return of capital for tax purposes and will reduce the tax basis of your investment. Distributions that constitute a return of capital, in effect, defer a portion of your tax until your investment is sold or we are liquidated, at which time you will be taxed at capital gains rates. However, because each investor’s tax considerations are different, we suggest that you consult with your tax advisor. You should also review the section of the prospectus entitled “Federal Income Tax Considerations.”

How will you use the proceeds raised in this offering?

We intend to use substantially all of the net proceeds from our primary offering of 75,000,000 shares to acquire a diversified portfolio of discounted U.S. commercial real estate assets, principally (i) non-performing or distressed loans, including but not limited to first- and second-priority mortgage

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loans, mezzanine loans, B-Notes and other loans, (ii) REO, (iii) value-add multifamily rental properties, (iv) discounted investment-grade commercial mortgage-backed securities and (v) other real estate related assets. Depending primarily upon the number of shares we sell in this offering and assuming a $10.00 purchase price for shares sold in the primary offering, we estimate that we will use 85.51% to 85.90% of the gross proceeds from the primary offering, or between $8.55 and $8.59 per share, for investments, assuming the mid-point range and maximum offering amounts, respectively. We intend to use the remainder to pay offering expenses, including selling commissions and the dealer manager fee, to maintain a working capital reserve and to pay a fee to our advisor for its services in connection with the selection and acquisition of our real estate investments. For more information regarding the use of proceeds, see “Estimated Use of Proceeds.”

What kind of offering is this?

We are offering up to 82,500,000 shares of common stock on a “best efforts” basis. We are offering 75,000,000 of these shares in our primary offering at $10 per share, with volume discounts available to investors who purchase more than $1,000,000 in shares through the same participating broker-dealer. Discounts are also available for investors who purchase shares through certain distribution channels. We are also offering up to 7,500,000 shares of common stock under our distribution reinvestment plan at a purchase price initially equal to $9.50 per share.

How does a “best efforts” offering work?

When shares are offered on a “best efforts” basis, the dealer manager will be required to use only its best efforts to sell the shares in the offering and has no firm commitment or obligation to purchase any of the shares. Therefore, we may sell substantially less than all of the shares that we are offering.

From commencement of this offering through July 1, 2011, we had sold approximately 3,962,432 shares in this offering for gross offering proceeds of approximately $38.2 million, all of which were sold in the primary offering.

How long will this offering last?

The termination date of our primary offering will be June 16, 2012, unless extended by one year to June 16, 2013. Should we determine to register a follow-on offering, as permitted by rules promulgated by the SEC, we may extend the offering up to an additional 180 days beyond June 16, 2013. If we continue our primary offering beyond two years from the date of this prospectus, we will provide that information in a prospectus supplement. We may continue to offer shares under our distribution reinvestment plan beyond two years from the date of this prospectus until we have sold 7,500,000 shares through the reinvestment of distributions. In many states, we will need to renew the registration statement or file a new registration statement to continue the offering beyond one year from the date of this prospectus. We may terminate this offering at any time.

If our board of directors determines that it is in our best interest, we may conduct additional offerings upon the termination of this offering. Our charter does not restrict our ability to conduct offerings in the future.

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Who can buy shares?

An investment in our shares is only suitable for persons who have adequate financial means and who will not need immediate liquidity from their investment. Residents of most states can buy shares in this offering provided that they have either (1) a net worth of at least $70,000 and an annual gross income of at least $70,000 or (2) a net worth of at least $250,000. For the purpose of determining suitability, net worth does not include an investor’s home, home furnishings or personal automobiles. The minimum suitability standards are more stringent for investors in certain states. See “Suitability Standards.”

Who might benefit from an investment in our shares?

An investment in our shares may be beneficial for you if you meet the minimum suitability standards described in this prospectus, seek to diversify your personal portfolio with a real estate-based investment, seek to preserve capital, seek to obtain the benefits of potential long-term capital appreciation, seek to receive current income and are able to hold your investment for a time period consistent with our liquidity strategy. On the other hand, we caution persons who require immediate liquidity or guaranteed income, or who seek a short-term investment, that an investment in our shares will not meet those needs.

Is there any minimum investment required?

Yes. We require a minimum investment of at least $2,500. After you have satisfied the minimum investment requirement, any additional purchases must be in increments of at least $100. The investment minimum for subsequent purchases does not apply to shares purchased pursuant to our distribution reinvestment plan.

Are there any special restrictions on the ownership or transfer of shares?

Yes. Our charter contains restrictions on the ownership of our shares that prevent any one person from owning more than 9.8% of our aggregate outstanding shares unless exempted by our board of directors. These restrictions are designed to enable us to comply with ownership restrictions imposed on REITs by the Internal Revenue Code. Our charter also limits your ability to sell your shares unless (i) the prospective purchaser meets the suitability standards in our charter regarding income or net worth and (ii) unless you are transferring all of your shares and the transfer complies with the minimum purchase requirements.

Are there any special considerations that apply to employee benefit plans subject to ERISA or other retirement plans that are investing in shares?

Yes. The section of this prospectus entitled “ERISA Considerations” describes the effect the purchase of shares will have on individual retirement accounts and retirement plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the Internal Revenue Code. ERISA is a federal law that regulates the operation of certain tax-advantaged retirement plans. Any retirement plan trustee or individual considering purchasing shares for a retirement plan or an individual retirement account should carefully read this section of the prospectus.

We may make some investments that generate “excess inclusion income” which, when passed through to our tax-exempt stockholders, can be taxed as unrelated business taxable income (“UBTI”) or, in certain circumstances, can result in a tax being imposed on us. Although we do not expect the amount of such income to be significant, there can be no assurance in this regard.

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May I make an investment through my IRA, SEP or other tax-deferred account?

Yes. You may make an investment through your individual retirement account (“IRA”), a simplified employee pension (“SEP”) plan or other tax-deferred account. In making these investment decisions, you should consider, at a minimum, (1) whether the investment is in accordance with the documents and instruments governing your IRA, plan or other account, (2) whether the investment satisfies the fiduciary requirements associated with your IRA, plan or other account, (3) whether the investment will generate UBTI to your IRA, plan or other account, (4) whether there is sufficient liquidity for such investment under your IRA, plan or other account, (5) the need to value the assets of your IRA, plan or other account annually or more frequently, and (6) whether the investment would constitute a prohibited transaction under applicable law.

How do I subscribe for shares?

If you choose to purchase shares in this offering, you need to complete and sign a subscription agreement (in the form attached to this prospectus as Appendix A) for a specific number of shares and pay for the shares at the time of your subscription.

If I buy shares in this offering, how may I later sell them?

Our board of directors has adopted a share redemption program that may enable you to sell your shares to us after you have held them for at least one year, subject to the significant conditions and limitations of the program. In its sole discretion, our board of directors could choose to amend, suspend or terminate the program upon 30 days’ notice and without stockholder approval. The purchase price for such shares redeemed under the redemption program will be as set forth below until we establish an estimated value per share of our common stock. We expect to establish an estimated value per share after the completion of our offering stage; however, the time frame before which we establish an estimated value per share may be different depending on regulatory requirements or if necessary to assist broker-dealers who sell shares in this offering. We will consider our offering stage complete when 18 months have passed without our having sold shares in a public offering of equity securities, whether that last sale was in this initial public offering or a public follow-on offering. Except for redemptions sought upon a stockholder’s death or qualifying disability or redemptions sought upon a stockholder’s confinement to a long-term care facility, the purchase price for shares redeemed under the redemption program will equal:

• prior to the time we establish an estimated value per share, the amount by which (a) the lesser of (1) 90% of the average gross price per share the original purchaser or purchasers of your shares paid to us, which we refer to as the “issue price,” for all of your shares (as adjusted for any stock combinations, splits, recapitalizations and the like with respect to our shares of common stock) or (2) 90% of the offering price of shares in our most recent primary offering, exceeds (b) the aggregate amount of net sale proceeds per share, if any, distributed to investors prior to the redemption date as a result of the sale of one or more of our investments; or

• after we establish an estimated value per share, the lesser of (1) 100% of the average issue price per share for all of your shares (as adjusted for any stock combinations, splits, recapitalizations and the like with respect to our shares of common stock) or (2) 90% of the estimated value per share, as determined by our advisor or another firm chosen for that purpose.

We intend to redeem shares quarterly under the program. We will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the

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effective date of redemption. Generally, the cash available for redemption will be limited to proceeds from our distribution reinvestment plan plus, if we had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year. These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. You will have no right to request redemption of your shares if the shares are listed for trading on a national securities exchange. For a complete discussion of our share redemption program, please see “Description of Shares—Share Redemption Program.”

When will the company seek to liquidate its assets or list its shares of common stock?

We anticipate providing our stockholders with a liquidity event or events by some combination of the following: (i) liquidating all, or substantially all, of our assets and distributing the net proceeds to our stockholders; or (ii) listing of our shares for trading on an exchange. Our board anticipates evaluating a liquidity event within three to six years after we terminate this primary offering, subject to then prevailing market conditions. If we do not begin the process of liquidating our assets or listing our shares within six years of the termination of this primary offering, upon the request of stockholders holding 10% or more of our outstanding shares of common stock, our charter requires that we hold a stockholder meeting to vote on a proposal for our orderly liquidation unless a majority of our board of directors and a majority of our independent directors vote to defer the meeting beyond the sixth anniversary of the termination of this offering. Prior to any stockholder meeting, our directors would evaluate whether to recommend the proposal to our stockholders and, if they so determine, would recommend the proposal and their reasons for doing so. The proposal would include information regarding appraisals of our portfolio. If our stockholders did not approve the proposal, we would obtain new appraisals and resubmit the proposal to our stockholders up to once every two years upon the written request of stockholders owning 10% of our outstanding common stock.

Once we commence liquidation, we would begin an orderly sale of our properties and other assets. The precise timing of such sales will depend on the prevailing real estate and financial markets, the economic conditions in the areas where our properties are located and the federal income tax consequences to our stockholders. In making the decision to liquidate or apply for listing of our shares, our directors will try to determine whether liquidating our assets or listing our shares will result in greater value for stockholders.

Will I be notified of how my investment is doing?

Yes, we will provide you with periodic updates on the performance of your investment in us, including:

• detailed quarterly dividend reports;

• an annual report;

• supplements to the prospectus, provided periodically; and

• three quarterly financial reports.

We will provide this information to you via one or more of the following methods, in our discretion and with your consent, if necessary:

• U.S. mail or other courier;

• facsimile;

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• electronic delivery; or

• posting on our web site at www.resourcereit.com.

To assist the Financial Industry Regulatory Authority (“FINRA”) members and their associated persons that participate in this offering of our common stock, we disclose in each annual report distributed to stockholders a per-share estimated value of our common stock, the method by which it was developed, and the date of the data used to develop the estimated value. Our advisor has indicated that it intends to use the most recent price paid to acquire a share in this offering (ignoring purchase price discounts for certain categories of purchasers) as its estimated per share value of our shares. However, this estimated value is likely to be higher than the price at which you could resell your shares because (1) our public offering involves the payment of underwriting compensation and other directed selling efforts, which payments and efforts are likely to produce a higher sales price than could otherwise be obtained, and (2) there is no public market for our shares. Moreover, this estimated value is likely to be higher than the amount you would receive per share if we were to liquidate at this time because of the up-front fees that we pay in connection with the issuance of our shares. Our advisor expects to continue to use the most recent public offering price for a share of our common stock as the estimated per share value reported in our annual reports on Form 10-K until we have completed our offering stage. We will consider our offering stage complete when 18 months have passed since our last sale of shares in a public offering of equity securities, whether that last sale was in this initial public offering or a public follow-on offering. (For purposes of this definition, we do not consider “public equity offerings” to include offerings on behalf of selling stockholders or offerings related to a distribution reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership).

After the 18-month period described above (or possibly sooner if our board so directs), we expect to publish an estimated value for a share of common stock. We expect such estimate will be based on estimates of the values of our assets net of our liabilities. Our board of directors will make decisions regarding who will perform valuations of our assets, such as our advisor or third parties, and the valuation methodology to be employed. We cannot predict these decisions at this time, however, we do not currently anticipate obtaining asset-by-asset appraisals prepared by appraisers certified by a Member of the Appraisal Institute or other trade organization that monitors appraisers.

When will I get my detailed tax information?

Your Form 1099-DIV tax information, if required, will be mailed by January 31 of each year.

Who can help answer my questions about the offering?

If you have more questions about the offering, or if you would like additional copies of this prospectus, you should contact your registered representative or contact:

Chadwick Securities, Inc.

2005 Market Street, 15th Floor

Philadelphia, Pennsylvania 19103 Telephone: (866) 469-0129

Fax: (866) 545-7693

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RISK FACTORS

An investment in our common stock involves various risks and uncertainties. You should carefully consider the following risk factors in conjunction with the other information contained in this prospectus before purchasing our common stock. The risks discussed in this prospectus could adversely affect our business, operating results, prospects and financial condition. This could cause the value of our common stock to decline and could cause you to lose all or part of your investment. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

Risks Related to an Investment in Us

There is no public trading market for your shares; therefore, it will be difficult for you to sell your shares.

There is no current public market for our shares and we currently have no plans to list our shares on a national securities exchange. Our charter limits your ability to transfer or sell your shares unless the prospective stockholder meets the applicable suitability and minimum purchase standards. Our charter also prohibits the ownership of more than 9.8% of our stock, unless exempted by our board of directors, which may inhibit large investors from desiring to purchase your shares. Moreover, our share redemption program includes numerous restrictions that limit your ability to sell your shares to us, and our board of directors may amend, suspend or terminate our share redemption program upon 30 days’ notice and without stockholder approval. We describe these restrictions in detail under “Description of Shares—Share Redemption Program.” Therefore, it will be difficult for you to sell your shares promptly or at all. If you are able to sell your shares, you would likely have to sell them at a substantial discount to their public offering price. It is also likely that your shares would not be accepted as the primary collateral for a loan. You should purchase our shares only as a long-term investment because of the illiquid nature of the shares.

If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.

Our ability to achieve our investment objectives and to pay distributions depends upon the performance of our advisor in the acquisition of our investments, including the determination of any financing arrangements. Competition from competing entities may reduce the number of suitable investment opportunities offered to us or increase the bargaining power of property owners seeking to sell. Additionally, disruptions and dislocations in the credit markets have materially impacted the cost and availability of debt to finance real estate acquisitions, which is a key component of our acquisition strategy. This lack of available debt could result in a further reduction of suitable investment opportunities and create a competitive advantage to other entities that have greater financial resources than we do. We are also subject to competition in seeking to acquire real estate related debt investments. We can give no assurance that our advisor will be successful in obtaining suitable investments on financially attractive terms or that, if our advisor makes investments on our behalf, our objectives will be achieved. If we, through our advisor, are unable to find suitable investments promptly upon receipt of offering proceeds, we will hold the proceeds from this offering in an interest-bearing account or invest the proceeds in short-term assets. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate. In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.

Disruptions in the financial markets and sluggish economic conditions could adversely impact our ability to implement our business strategy and generate returns to you.

In 2008 and 2009, the capital and credit markets experienced extreme volatility and disruption for nearly two years. While the capital and credit markets appear to have begun to recover, equity and debt

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capital available for investment in the commercial real estate market are unlikely to return to the levels experienced immediately before the credit crisis. Continued scarcity of capital is expected to result in fewer buyers seeking to acquire commercial properties, increases in cap rates and lower property values. Furthermore, sluggish economic conditions have negatively impacted commercial real estate fundamentals. As of the date of this prospectus, risks of defaults on loans and foreclosures on mortgages remain high, compared to historical experience. Financial market and economic conditions may remain sluggish; we cannot foresee when these conditions will stabilize or improve.

We intend to acquire a diversified portfolio of real estate and real estate related assets that has been significantly discounted. Current economic conditions greatly increase the risks of these investments. The value of collateral securing any loan investment we may make could decrease further. In addition, revenues on the properties and other assets underlying any loan investments we may make could decrease, making it more difficult for borrowers to meet their payment obligations to us. More generally, the risks arising from the current financial market and economic conditions are applicable to all of the investments we may make, including commercial real estate related debt.

A protracted economic downturn could have a negative impact on our portfolio. Borrowers often use increases in the value of their existing properties to support the purchase of or investment in additional properties. Although our discount and value-add investment strategies do not rely on precisely the same concepts, if real property or other real estate related asset values continue to decline after we acquire them, we may have a difficult time making new acquisitions or generating returns on your investment.

We expect to finance some of our investments in part with debt. As a result of the ongoing credit market turmoil, we may not be able to obtain debt financing on attractive terms. As such, we may be forced to use a greater proportion of our offering proceeds to finance our acquisitions, reducing the number of investments we would otherwise make. If the current debt market environment persists, we may modify our investment strategy in order to optimize our portfolio performance. Our options would include limiting or eliminating the use of debt and focusing on those investments that do not require the use of leverage to meet our portfolio goals.

All of the factors described above could adversely impact our ability to implement our business strategy and make distributions to our investors and could decrease the value of an investment in us.

If we raise substantial offering proceeds in a short period of time, we may not be able to invest all of the net offering proceeds promptly, which may cause our distributions and your investment returns to be lower than they otherwise would.

We could suffer from delays in locating suitable investments. The more money we raise in this offering, the more difficult it will be to invest the net offering proceeds promptly. Therefore, the large size of this offering increases the risk of delays in investing our net offering proceeds. Our reliance on our advisor to locate suitable investments for us at times when the management of our advisor is simultaneously seeking to locate suitable investments for other affiliated programs could also delay the investment of the proceeds of this offering. Delays we encounter in the selection, acquisition and development of income-producing properties would likely limit our ability to pay distributions to our stockholders and reduce our stockholders’ overall returns.

Because this is a blind pool offering, you will not have the opportunity to evaluate our investments before we make them, which makes your investment more speculative.

We will seek to invest substantially all of the offering proceeds available for investment from the primary offering, after the payment of fees and expenses, in the acquisition of or investment in interests in real estate and real estate related assets. However, because you will be unable to evaluate the economic merit of specific real estate projects before we invest in them, you will have to rely entirely on the ability of

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our advisor and board of directors to select suitable and successful investment opportunities and to implement policies regarding tenant or mortgagor creditworthiness. These factors increase the risk that your investment may not generate returns comparable to our competitors.

If we do not raise substantial funds, we will be limited in the number and type of investments we may make, and the value of your investment in us will fluctuate with the performance of the specific properties we acquire.

This offering is being made on a “best efforts” basis and no individual or firm has agreed to purchase any of our stock. The amount of proceeds we raise in this offering may be substantially less than the amount we would need to achieve a broadly diversified property portfolio. If we are unable to raise substantial funds, we will make fewer investments resulting in less diversification in terms of the type, location, number and size of investments that we make. In that case, the likelihood that any single asset’s performance would materially reduce our overall profitability will increase. We are not limited in the number or size of our investments or the percentage of net proceeds we may dedicate to a single investment. In addition, any inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, and our net income and the distributions we make to stockholders would be reduced.

We have a limited prior operating history and our sponsor, Resource Real Estate, has only limited experience operating a public company, which makes our future performance difficult to predict.

We commenced operations in September 2010 and we have a limited operating history. We were incorporated in the State of Maryland on June 3, 2009. As of July 1, 2011, we owned three multifamily properties, two performing, and four non-performing first mortgage loans. You should not assume that our performance will be similar to the past performance of other real estate investment programs sponsored by affiliates of our advisor. Although the parent of our sponsor, Resource America, has extensive public company experience by sponsoring two NYSE-listed REITs and our sponsor has experience sponsoring two public real estate funds, we are the first publicly offered blind-pool real estate investment program sponsored by our sponsor. For this reason, you should be especially cautious when drawing conclusions about our future performance and you should not assume that it will be similar to the prior performance of other programs sponsored by Resource America or Resource Real Estate. Our limited operating history and differences from other programs sponsored by Resource America or Resource Real Estate significantly increase the risk and uncertainty you face in making an investment in our shares.

Because we are dependent upon our advisor and its affiliates to conduct our operations, any adverse changes in the financial health of our advisor or its affiliates or our relationship with them could hinder our operating performance and the return on our stockholders’ investment.

We are dependent on our advisor to manage our operations and our portfolio of real estate assets. Our advisor has a limited operating history and it depends largely upon the fees and other compensation that it receives from us in connection with the purchase, management and sale of assets to conduct its operations. Any adverse changes in the financial condition of our advisor or our relationship with our advisor could hinder its ability to successfully manage our operations and our portfolio of investments.

Our ability to achieve our investment objectives and to conduct our operations is dependent upon the performance of our advisor, which is a subsidiary of our sponsor and its parent company, Resource America. Our sponsor’s business is sensitive to trends in the general economy, as well as the commercial real estate and credit markets. The current macroeconomic environment and accompanying credit crisis has negatively impacted the value of commercial real estate assets, contributing to a general slowdown in our sponsor’s industry, which our sponsor anticipates will continue during 2011. To the extent that any decline in our sponsor’s revenues and operating results impacts the performance of our advisor, our results of operations, and financial condition could also suffer.

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The loss of or the inability to hire additional or replacement key real estate and debt finance professionals at Resource Real Estate could delay or hinder implementation of our investment strategies, which could limit our ability to make distributions and decrease the value of your investment.

Our success depends to a significant degree upon the contributions of Messrs. Feldman and Finkel, each of whom would be difficult to replace. Neither we nor our advisor have employment agreements with these individuals. Messrs. Feldman and Finkel may not remain associated with Resource Real Estate. If either of these persons were to cease their association with us, our operating results could suffer. We do not intend to maintain key person life insurance on any person.

We believe that our future success depends, in large part, upon Resource Real Estate and its affiliates’ ability to retain highly skilled managerial, operational and marketing professionals. Competition for such professionals is intense, and Resource Real Estate and its affiliates may be unsuccessful in attracting and retaining such skilled individuals. If Resource Real Estate loses or is unable to obtain the services of highly skilled professionals, our ability to implement our investment strategies could be delayed or hindered and the value of your investment may decline.

Our ability to implement our investment strategy is dependent, in part, upon the ability of Chadwick Securities, our dealer manager, to successfully conduct this offering, which makes an investment in us more speculative.

We have retained Chadwick Securities, Inc., an affiliate of our advisor, to conduct this offering. The success of this offering, and our ability to implement our business strategy, is dependent upon the ability of Chadwick Securities to build and maintain a network of broker-dealers to sell our shares to their clients. If Chadwick Securities is not successful in establishing, operating and managing this network of broker-dealers, our ability to raise proceeds through this offering will be limited and we may not have adequate capital to implement our investment strategy. If we are unsuccessful in implementing our investment strategy, you could lose all or a part of your investment.

If we make distributions from sources other than our cash flow from operations, we will have less funds available for the acquisition of properties and your overall return may be reduced.

As of July 1, 2011, we have not declared any cash distributions. We will declare distributions when our board of directors determines we have sufficient cash flow. During our offering stage, we expect that we will fund any distributions from interest income on our debt investments, rental income from our real property investments, and to the extent we acquire investments with short maturities or investments that are close to maturity, we may fund distributions with the proceeds received at the maturity, payoff or settlement of those investments. Upon completion of our offering stage, we expect to fund distributions from interest and rental income on investments, the maturity, payoff or settlement of investments and from strategic sales of loans, debt securities, properties and other assets. Because we intend to fund distributions from cash flow, we do not expect our board of directors to declare distributions on a set monthly or quarterly basis. Rather, our board of directors will declare distributions from time to time based on cash flow from our investments and our investment activities.

Our organizational documents permit us to make distributions from any source. If we fund distributions from borrowings, sales of properties or the net proceeds from this offering, we will have less funds available for the acquisition of real estate and real estate related assets and your overall return may be reduced. Further, to the extent distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. There is no limit on the amount we can fund distributions from sources other than from cash flows from operations.

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The value of a share of our common stock has been diluted as a result of our payment of stock distributions and will be further diluted if we make additional stock distributions.

We have paid stock distributions to our stockholders of record as of the close of business on February 28, 2011 and May 31, 2011, each time in the amount of 0.015 shares of our common stock, $0.01 par value per share, for every share held of record on such date. We may pay such stock distributions in the future. We seek to purchase assets that may have limited operating cash flows. While our objective is to acquire assets that appreciate in value, there can be no assurance that assets we acquire will appreciate in value. Furthermore, we do not currently intend to change our $10.00 per share public offering price. Therefore, investors who purchase our shares early in this offering, as compared with later investors, will receive more shares for the same cash investment as a result of any stock distributions. Because they own more shares, upon a sale or liquidation of the company, these early investors will receive more sales proceeds or liquidating distributions relative to their invested capital compared to later investors. Furthermore, unless our assets appreciate in an amount sufficient to offset the dilutive effect of the prior stock distributions, the value per share for later investors purchasing our stock will be below the value per share of earlier investors.

Future interest rate increases in response to inflation may inhibit our ability to conduct our business and acquire or dispose of real property or real estate related debt investments at attractive prices and your overall return may be reduced.

While we expect a significant amount of our leases to be short-term multifamily leases that will not be affected by inflation, we will be exposed to inflation risk with respect to income from any long-term leases on real property and from related real estate debt investments as these may constitute a source of our cash flows from operations. Although inflation has been generally low in recent years, high inflation may in the future tighten credit and increase prices. Further, if interest rates rise, such as during an inflationary period, the cost of acquisition capital to purchasers may also rise, which could adversely impact our ability to dispose of our assets at attractive sales prices. Should we be required to acquire, hold or dispose of our assets during a period of inflation, our overall return may be reduced.

Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce your and our recovery against them if they negligently cause us to incur losses.

Maryland law provides that a director has no liability in that capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter provides that no independent director shall be liable to us or our stockholders for monetary damages and that we will generally indemnify them for losses unless they are grossly negligent or engage in willful misconduct. As a result, you and we may have more limited rights against our independent directors than might otherwise exist under common law, which could reduce our and your recovery from these persons if they act in a negligent manner. In addition, we may be obligated to fund the defense costs incurred by our independent directors (as well as by our other directors, officers, employees (if we ever have employees) and agents) in some cases, which would decrease the cash otherwise available for distributions to you. The SEC takes the position that indemnification against liabilities arising under the Securities Act is against public policy and unenforceable. See “Management—Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents” for a detailed discussion of the limited liability of our directors, officers, employees and other agents.

We may change our targeted investments, our policies and our operations without stockholder consent.

We expect to allocate a majority of our portfolio to investments in multifamily rental properties, which includes student housing and senior residential, and debt secured by multifamily rental properties,

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but we may also purchase investments in condominium, office, retail, industrial, mixed-use, hospitality and healthcare properties and other real estate asset classes throughout the United States. Also, except as described in this prospectus, we are not restricted as to the following:

• where we may acquire real estate investments in the United States;

• the percentage of our proceeds that may be invested in properties as compared with the percentage of our proceeds that we may invest in real estate related debt investments, commercial mortgage-backed securities or mortgage loans, each of which may be leveraged and will have differing risks and profit potential; or

• the percentage of our proceeds that may be invested in any one real estate investment (the greater the percentage of our subscription proceeds invested in one asset, the greater the potential adverse effect on us if that asset is unprofitable).

Though this is our current target portfolio, we may make adjustments to our target portfolio based on real estate market conditions and investment opportunities, and we may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this prospectus. A change in our targeted investments or investment guidelines could adversely affect the value of our common stock and our ability to make distributions to you.

Our board of directors determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under Maryland General Corporation Law and our charter, our stockholders have a right to vote only on limited matters. Our board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks you face as a stockholder.

Investing in mezzanine debt, B-Notes, commercial mortgage-backed securities or other subordinated debt involves greater risks of loss than senior loans secured by the same properties.

We may invest in mezzanine debt, B-Notes, commercial mortgage-backed securities and other subordinated debt. These types of investments carry a higher degree of risk of loss than senior secured debt investments, because in the event of default and foreclosure, holders of senior liens will be paid in full before subordinated investors and, depending on the value of the underlying collateral, there may not be sufficient assets to pay all or any part of amounts owed to subordinated investors. Moreover, mezzanine debt, B-Notes, commercial mortgage-backed securities and other subordinate debt investments may have higher loan-to-value ratios than conventional senior lien financing, resulting in less equity in the collateral and increasing the risk of loss of principal. If a borrower defaults or declares bankruptcy, we may be subject to agreements restricting or eliminating our rights as a creditor, including rights to call a default, foreclose on collateral, accelerate maturity or control decisions made in bankruptcy proceedings. In addition, the prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to economic downturns or individual issuer developments. An economic downturn, for example, could cause a decline in the price of lower credit quality securities because the ability of obligors of instruments underlying the securities to make principal and interest payments may be impaired.

We may experience adverse business developments or conditions similar to those affecting certain programs sponsored by our sponsor, which could limit our ability to make distributions and decrease the value of your investment.

Certain programs sponsored by our sponsor have experienced lower than originally expected cash flows from operations. The recession has made it significantly more difficult for multifamily property

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owners, including the multifamily real estate funds sponsored by our sponsor, to increase rental rates to planned levels and maintain occupancy rates during periods of unprecedented nationwide job losses. For 2004 and 2007, Resource Real Estate Investors, L.P. had negative cash flow from operations of $111,874 and $206,885, respectively. During 2005, 2007 and 2008, Resource Real Estate Investors, L.P. utilized $232,348, $541,776 and $82,252, respectively, from reserves to supplement cash flow from operations. For 2006 and 2007, Resource Real Estate Investors II, L.P. had negative cash flow from operations of $680,056 and $42,097, respectively. During 2006, 2007 and 2008, Resource Real Estate Investors II, L.P. utilized $774,457, $108,704 and $65,217, respectively, from reserves to supplement cash flow from operations. For Resource Real Estate Investors III, L.P., cash flow deficiencies occurred at one of the fund properties due to third-party property management issues and the delay in receiving tax refunds from tax appeals on two fund properties located in Texas. During 2007, Resource Real Estate Investors III, L.P. utilized $473,343 from reserves to supplement cash flow from operations. For Resource Real Estate Investors V, L.P., cash flow deficiencies have occurred at some of the properties in the fund due to third-party property management issues. For Resource Real Estate Investors 6, L.P., cash flow deficiencies have occurred due to a drop in occupancy at one of the fund properties due to sizable layoffs at a large employer located across the street from that property. Cash flow deficiencies are expected to continue also due to the recent restructuring of a subordinated debt investment held by the fund that was in default. Unforeseen circumstances have caused different programs to experience temporary cash flow deficiencies at various times. Similarly, unforeseen adverse business conditions may affect us and, as a result, your overall return may be reduced.

Risks Related to Conflicts of Interest

Resource Real Estate Opportunity Advisor and its affiliates, including all of our executive officers, some of our directors and other key real estate professionals face conflicts of interest caused by their compensation arrangements with us, which could result in actions that are not in the long-term best interests of our stockholders.

All of our executive officers and some of our directors are also officers, directors, managers or key professionals of our advisor, our dealer manager and other affiliated Resource Real Estate entities. Our advisor and its affiliates receive substantial fees from us. These fees could influence our advisor’s advice to us as well as the judgment of affiliates of our advisor. Among other matters, these compensation arrangements could affect their judgment with respect to:

• the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement, the dealer manager agreement and the management agreement;

• offerings of equity by us, which entitle Chadwick Securities to dealer manager fees and will likely entitle our advisor to increased acquisition and asset management fees;

• sales of properties and other investments, which may entitle our advisor to disposition fees and the possible issuance to our advisor of shares of our common stock through the conversion of our convertible stock;

• acquisitions of properties and investments in loans, which entitle our advisor to acquisition and asset management fees, and, in the case of acquisitions or investments from other Resource Real Estate-sponsored programs, might entitle affiliates of our advisor to disposition fees in connection with its services for the seller;

• borrowings to acquire properties and other investments, which borrowings will increase the acquisition and asset management fees payable to our advisor;

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• whether and when we seek to list our common stock on a national securities exchange, which listing could entitle our advisor to the issuance of shares of our common stock through the conversion of our convertible stock;

• whether we seek stockholder approval to internalize our management, which may entail significant payments to affiliates of our advisor; and

• whether and when we seek to sell the company or its assets, which sale could entitle our advisor to disposition fees and to the issuance of shares of our common stock through the conversion of our convertible stock.

The fees our advisor receives in connection with the acquisition and management of assets are based on the cost of the investment, and not based on the quality of the investment or the quality of the services rendered to us. This may influence our advisor to recommend riskier transactions to us.

Resource Real Estate Opportunity Advisor will face conflicts of interest relating to the acquisition of assets and such conflicts may not be resolved in our favor, which could limit our ability to make distributions and reduce your overall investment return.

We rely on our sponsor and other key real estate professionals at our advisor to identify suitable investment opportunities for us. The executive officers and several of the other key real estate professionals at our advisor are also the key real estate professionals at the advisors to other Resource Real Estate-sponsored programs and joint ventures. As such, Resource Real Estate-sponsored programs and joint ventures rely on many of the same real estate professionals as will future programs. Many investment opportunities that are suitable for us may also be suitable for other Resource Real Estate programs and joint ventures. When these real estate professionals direct an investment opportunity to any Resource Real Estate-sponsored program or joint venture, they, in their sole discretion, will offer the opportunity to the program or joint venture for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program or joint venture. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to purchase real estate or any significant asset related to real estate unless our advisor has recommended the investment to us. Thus, the real estate professionals of Resource Real Estate Opportunity Advisor could direct attractive investment opportunities to other entities. Such events could result in us investing in properties that provide less attractive returns, which may reduce our ability to make distributions to you. For a detailed description of the conflicts of interest that our advisor will face, see generally “Conflicts of Interest” and “Conflicts of Interest—Certain Conflict Resolution Measures.”

Resource Real Estate Opportunity Advisor will face conflicts of interest relating to joint ventures that we may form with affiliates of Resource Real Estate Opportunity Advisor, which conflicts could result in a disproportionate benefit to the other venture partners at our expense.

If approved by the unanimous vote of our conflicts committee, we may enter into joint venture agreements with other Resource Real Estate-sponsored programs or affiliated entities for the acquisition, development or improvement of properties or other investments. Our advisor and the advisors to the other Resource Real Estate-sponsored programs have the same executive officers and key employees; and these persons will face conflicts of interest in determining which Resource Real Estate program or investor should enter into any particular joint venture agreement. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the Resource Real Estate-affiliated co-venturer and in managing the joint venture. Any joint venture agreement or transaction between us and a Resource Real Estate-affiliated co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. The Resource Real Estate-affiliated co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. These co-venturers may thus benefit to our and your detriment.

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Resource Real Estate Opportunity Advisor, the real estate professionals assembled by our advisor, their affiliates and our officers face competing demands relating to their time, and this may cause our operations and your investment to suffer.

We rely on Resource Real Estate Opportunity Advisor, the real estate professionals our advisor has assembled and their affiliates and officers for the day-to-day operation of our business. Resource Real Estate Opportunity Advisor, its real estate professionals and affiliates, including our officers and employees, have interests in other Resource Real Estate programs and engage in other business activities. As a result of their interests in other Resource Real Estate programs and the fact that they have engaged in and they will continue to engage in other business activities, they face conflicts of interest in allocating their time among us, Resource Real Estate Opportunity Advisor and other Resource Real Estate-sponsored programs and other business activities in which they are involved. Should our advisor breach its fiduciary duty to us by inappropriately devoting insufficient time or resources to our business, the returns on our investments may suffer.

Our executive officers and some of our directors face conflicts of interest related to their positions in Resource Real Estate Opportunity Advisor and its affiliates, including our dealer manager, which could hinder our ability to implement our business strategy and to generate returns to you.

Our executive officers and some of our directors are also executive officers, directors, managers and key professionals of our advisor, our dealer manager and other affiliated Resource Real Estate entities. Their loyalties to these other entities could result in actions or inactions that breach their fiduciary duties to us and are detrimental to our business, which could harm the implementation of our business strategy and our investment and leasing opportunities. If we do not successfully implement our business strategy, we may be unable to generate the cash needed to make distributions to you and to maintain or increase the value of our assets.

Your investment will be diluted upon conversion of the convertible stock.

In connection with the commencement of this offering, our advisor exchanged 4,500 shares of common stock for 45,000 shares of our convertible stock and purchased 4,068 shares of our convertible stock that were not sold in our private offering. As of July 1, 2011, our advisor owned 49,063 shares of our convertible stock, outside investors owned a total of 937 shares of our convertible stock and a total of 50,000 shares of convertible stock were issued and outstanding. Under limited circumstances, these shares may be converted into shares of our common stock, resulting in dilution of our stockholders’ interest in us. Our convertible stock will convert into shares of common stock on one of two events. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 10% cumulative, non-compounded, annual return at that price. Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold for our common stockholders. Each of these two events is a “Triggering Event.” Upon a Triggering Event, our convertible stock will, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

• (A) the lesser of

^¡   (i) 25% of the amount, if any, by which

¡ (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

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¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, or

^¡   (ii) 15% of the amount, if any, by which

¡ (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

• (B) the value of the company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.

However, if our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to a Triggering Event, then upon a Triggering Event the holder of the convertible stock will be entitled to a prorated portion of the number of shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor. As a result, following conversion, the holder of the convertible stock will be entitled to a portion of amounts distributable to our stockholders, which such amounts distributable to the holder could be significant. See “Description of Shares—Convertible Stock.”

Our advisor can influence whether our common stock is listed for trading on a national securities exchange. Accordingly, our advisor can influence the conversion of the convertible stock issued to it and the resulting dilution of other stockholders’ interests.

Risks Related to This Offering and Our Corporate Structure

Our charter limits the number of shares a person may own, which may discourage a takeover that could otherwise result in a premium price to our stockholders.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements of the Internal Revenue Code, our charter prohibits a person from directly or constructively owning more than 9.8% of our outstanding shares, unless exempted by our board of directors. This restriction may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all, or substantially all, of our assets) that might provide a premium price for holders of our common stock.

Our charter permits our board of directors to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.

Our board of directors may increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued common stock or preferred stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of any such stock. Our board of directors could authorize the issuance of preferred stock with terms and conditions that could have priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock. Such preferred stock could also have the effect of delaying,

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deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all, or substantially all, of our assets) that might provide a premium price to holders of our common stock. A majority of our independent directors who do not have an interest in the transaction must approve any issuance of preferred stock.

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we or our subsidiaries become an unregistered investment company, we could not continue our business.

Neither we nor any of our subsidiaries intend to register as investment companies under the Investment Company Act. If we or our subsidiaries were obligated to register as investment companies, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

• limitations on capital structure;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

• compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an “investment company” is an issuer that:

• is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “Primarily Engaged Test”); and

• is engaged and or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets on an unconsolidated basis (the “40% Test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).

We believe that neither we nor our Operating Partnership meet either of the tests above. With respect to the 40% Test, all of the entities through which we and our Operating Partnership own our assets are wholly-owned subsidiaries that are not themselves investment companies and are not relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).

With respect to the Primarily Engaged Test, we and our Operating Partnership are holding companies. Through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership are primarily engaged in the non-investment company businesses of these subsidiaries.

We believe that most of the subsidiaries of our Operating Partnership may rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Any other subsidiaries of our Operating Partnership should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC Staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate” (“Qualifying Assets”); at least 80% of its assets in Qualifying Assets plus real estate-related assets

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(“Real Estate-Related Assets”); and no more than 20% of the value of its assets in other than Qualifying Assets and Real Estate-Related Assets (“Miscellaneous Assets”). To constitute a Qualifying Asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters.

If, however, the value of the subsidiaries of our Operating Partnership that must rely on Section 3(c)(1) or Section 3(c)(7) is greater than 40% of the value of the assets of our Operating Partnership, then we and our Operating Partnership may seek to rely on the exception from registration under Section 3(c)(6) if we and our Operating Partnership are “primarily engaged,” through majority-owned subsidiaries, in the business of purchasing or otherwise acquiring mortgages and other interests in real estate. The SEC Staff has issued little interpretive guidance with respect to Section 3(c)(6); however, it is our view that we and our Operating Partnership may rely on Section 3(c)(6) if 55% of the assets of our Operating Partnership consist of, and at least 55% of the income of our Operating Partnership is derived from, majority-owned subsidiaries that rely on Section 3(c)(5)(C).

To maintain compliance with the Investment Company Act, our subsidiaries may be unable to sell assets we would otherwise want them to sell and may need to sell assets we would otherwise wish them to retain. In addition, our subsidiaries may have to acquire additional assets that they might not otherwise have acquired or may have to forego opportunities to make investments that we would otherwise want them to make and would be important to our investment strategy. Moreover, the SEC may issue interpretations with respect to various types of assets that are contrary to our views and current SEC SEC staff interpretations are subject to change, which increases the risk of non-compliance and the risk that we may be forced to make adverse changes to our portfolio.

If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement and a court could appoint a receiver to take control of us and liquidate our business. For more information related to compliance with the Investment Company Act, see “Investment Objectives and Policies—Investment Limitations to Avoid Registration as an Investment Company.”

Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT or our exception from the definition of an investment company under the Investment Company Act.

If the market value or income potential of our qualifying real estate assets changes as compared to the market value or income potential of our non-qualifying assets, or if the market value or income potential of our assets that are considered “real estate-related assets” under the Investment Company Act or REIT qualification tests changes as compared to the market value or income potential of our assets that are not considered “real estate-related assets” under the Investment Company Act or REIT qualification tests, whether as a result of increased interest rates, prepayment rates or other factors, we may need to modify our investment portfolio in order to maintain our REIT qualification or exception from the definition of an investment company. If the decline in asset values or income occurs quickly, this may be especially difficult, if not impossible, to accomplish. This difficulty may be exacerbated by the illiquid nature of many of the assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.

You may not be able to sell your shares under our share redemption program and, if you are able to sell your shares under the program, you may not be able to recover the amount of your investment in our shares.

Our board of directors has approved the share redemption program, but may amend, suspend or terminate our share redemption program upon 30 days’ notice and without stockholder approval. Our board of directors may reject any request for redemption of shares. Further, there are many limitations on your

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ability to sell your shares pursuant to the share redemption program. Any stockholder requesting repurchase of their shares pursuant to our share redemption program will be required to certify to us that such stockholder acquired the shares by either (1) a purchase directly from us or (2) a transfer from the original investor by way of (i) a bona fide gift not for value to, or for the benefit of, a member of the stockholder’s immediate or extended family, (ii) a transfer to a custodian, trustee or other fiduciary for the account of the stockholder or his or her immediate or extended family in connection with an estate planning transaction, including by bequest or inheritance upon death or (iii) operation of law.

In addition, our share redemption program contains other restrictions and limitations. Shares will be redeemed on a quarterly basis, pro rata among all stockholders requesting redemption in such quarter, with a priority given to redemptions upon the death or qualifying disability of a stockholder or redemptions sought upon a stockholder’s confinement to a long-term care facility; next, to stockholders who demonstrate, in the discretion of our board of directors, another involuntary, exigent circumstance, such as bankruptcy; next, to stockholders subject to a mandatory distribution requirement under such stockholder’s IRA; and, finally, to other redemption requests. You must hold your shares for at least one year prior to seeking redemption under the share redemption program, except that our board of directors may waive this one-year holding requirement with respect to redemptions sought upon the qualifying death or disability of a stockholder or redemptions sought upon a stockholder’s confinement to a long-term care facility or for other exigent circumstances and that if a stockholder is redeeming all of his or her shares the board of directors may waive the one-year holding requirement with respect to shares purchased pursuant to the distribution reinvestment plan. We will not redeem more than 5% of the weighted average number of shares outstanding during the twelve-month period immediately prior to the date of redemption. Our board of directors will determine from time to time, and at least quarterly, whether we have sufficient excess cash to repurchase shares. Generally, the cash available for redemption will be limited to proceeds from our distribution reinvestment plan plus 1% of the operating cash flow from the previous fiscal year (to the extent positive).

Other than redemptions following the death or qualifying disability of a stockholder or redemptions sought upon a stockholder’s confinement to a long-term care facility, the purchase price for such shares we repurchase under our proposed redemption program will equal (1) prior to the time we establish an estimated value per shares or our common stock, the amount by which (a) the lesser of (i) 90% of the average issue price for all of your shares (as adjusted for any stock combinations, splits, recapitalizations and the like with respect to our common stock) or (ii) 90% of the offering price of shares in our most recent offering exceeds (b) the aggregate amount of net sale proceeds per share, if any, distributed to stockholders prior to the redemption date as a result of the sale of one or more of our investments; or (2) after we establish an estimated value per share of common stock, the lesser of (a) 100% of the average issue price per share for all of your shares (as adjusted for any stock combinations, splits, recapitalizations and the like with respect to our common stock) or (b) 90% of estimated value per share, as determined by our advisor or another firm chosen for that purpose. Accordingly, you may receive less by selling your shares back to us than you would receive if our investments were sold for their estimated values and such proceeds were distributed in our liquidation.

Therefore, in making a decision to purchase shares of our common stock, you should not assume that you will be able to sell any of your shares back to us pursuant to our share redemption program. For a more detailed description of the share redemption program, see “Description of Shares—Share Redemption Program.”

The offering price of our shares was established on an arbitrary basis; the actual value of your investment may be substantially less than what you pay.

We established the offering price of our shares on an arbitrary basis. The selling price of our shares bears no relationship to our book or asset values or to any other established criteria for valuing shares. Because the offering price is not based upon any independent valuation, the offering price may not

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be indicative of the proceeds that you would receive upon liquidation. Further, this estimated value is likely to be higher than the price at which you could resell your shares because (1) our offerings involve the payment of underwriting compensation and other directed selling efforts, which payments and efforts are likely to produce a higher sales price than could otherwise be obtained, and (2) there is no public market for our shares. Moreover, this estimated value is likely to be higher than the amount you would receive per share if we were to liquidate at this time because of the up-front fees that we pay in connection with the issuance of our shares.

Because the dealer manager is one of our affiliates, you do not have the benefit of an independent review of us or the prospectus customarily undertaken in underwritten offerings; the absence of an independent due diligence review increases the risks and uncertainty you face as a stockholder.

The dealer manager, Chadwick Securities, is one of our affiliates and will not make an independent review of us or this offering. Accordingly, you do not have the benefit of an independent review of the terms of this offering. Further, the due diligence investigation of us by the dealer manager cannot be considered to be an independent review and, therefore, may not be as meaningful as a review conducted by an unaffiliated broker-dealer.

Your interest in us will be diluted if we issue additional shares, which could reduce the overall value of your investment.

Potential investors in this offering do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 1,010,050,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock, 50,000 shares are designated as convertible stock and 10,000,000 are designated as preferred stock. Our board of directors may increase the number of authorized shares of capital stock without stockholder approval. After you purchase shares in this offering, our board may elect to (1) sell additional equity securities in future public or private offerings; (2) issue shares of our common stock upon the exercise of the options we may grant to our independent directors or to Resource Real Estate Opportunity Advisor or Resource Real Estate Opportunity Manager employees; (3) issue shares to our advisor, its successors or assigns, in payment of an outstanding obligation or as consideration in a related-party transaction; (4) issue shares of common stock upon the conversion of our convertible stock; or (5) issue shares of our common stock to sellers of properties we acquire in connection with an exchange of limited partnership interests of our Operating Partnership. To the extent we issue additional equity interests after you purchase shares in this offering, your percentage ownership interest in us will be diluted. Further, depending upon the terms of such transactions, most notably the offering price per share, which may be less than the price paid per share in any offering under this prospectus, and the value of our properties, existing stockholders may also experience a dilution in the book value of their investment in us.

Payment of fees to Resource Real Estate Opportunity Advisor and its affiliates reduces cash available for investment and distribution and increases the risk that you will not be able to recover the amount of your investment in our shares.

Resource Real Estate Opportunity Advisor and its affiliates perform services for us in connection with the selection and acquisition of our investments, the management and leasing of our properties and the administration of our other investments. We pay them substantial fees for these services, which results in immediate dilution to the value of your investment and will reduce the amount of cash available for investment or distribution to stockholders. Depending primarily upon the number of shares we sell in this offering and assuming a $10.00 purchase price for shares sold in the primary offering and a $9.50 purchase price for shares sold under the distribution reinvestment plan, we estimate that we will use 85.29% to 87.06% of our gross offering proceeds, or between $8.53 and $8.71 per share, for investments and the repurchase of shares of our common stock under our share redemption program.

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During the early stages of our operations or beyond, we may be unable to fully cover our declared distributions with current or future cash flow from operating activities and, as a result, we may be required to use alternative funding sources to make these distributions, which will reduce the funds available for investment and could be deemed a return of capital for tax purposes.

Although we have not yet set a cash distribution rate ,during the initial stages of this public offering or beyond we may set distribution rates at levels we believe we will be able to cover with anticipated future cash flows from operating activities. In order to make these initial cash distributions, we may be required to use alternative funding sources. Our charter permits us to pay distributions from any source, including from offering proceeds, borrowings, sales of assets or waivers or deferrals of fees otherwise owed to our advisor. Should we use offering proceeds at any time to fund distributions to our stockholders, the maximum amount available for our investments will be correspondingly reduced. To the extent these distributions exceed our net income or net capital gain, a greater proportion of your distributions will generally represent a return of capital as opposed to current income or gain, as applicable. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations. There is no assurance that we will declare or make distributions or do so at any particular rate.

If we are unable to obtain funding for future capital needs, cash distributions to our stockholders could be reduced and the value of our investments could decline.

If we need additional capital in the future to improve or maintain our properties or for any other reason, we may have to obtain financing from sources beyond our cash flow from operations, such as borrowings, sales of assets or future equity offerings. These sources of funding may not be available on attractive terms or at all. If we cannot procure additional funding for capital improvements, our investments may generate lower cash flows or decline in value, or both, which would limit our ability to make distributions to you and could reduce the value of your investment.

Our board of directors could opt into certain provisions of the Maryland General Corporation Law in the future, which may discourage others from trying to acquire control of us and may prevent our stockholders from receiving a premium price for their stock in connection with a business combination.

Under Maryland law, “business combinations” between a Maryland corporation and certain interested stockholders or affiliates of interested stockholders are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Also under Maryland law, control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, an officer of the corporation or an employee of the corporation who is also a director of the corporation are excluded from the vote on whether to accord voting rights to the control shares. Should our board opt into these provisions of Maryland law, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer. Similarly, provisions of Title 3, Subtitle 8 of the Maryland General Corporation Law could provide similar anti-takeover protection. For more information about the business combination, control share acquisition and Subtitle 8 provisions of Maryland law, see “Description of Shares—Business Combinations,” “Description of Shares—Control Share Acquisitions” and “Description of Shares—Subtitle 8.”

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Risks Related to Investments in Real Estate

Economic and regulatory changes that impact the real estate market generally may decrease the value of our investments and weaken our operating results.

The properties we acquire and their performance are subject to the risks typically associated with real estate, including:

• downturns in national, regional and local economic conditions;

• competition;

• adverse local conditions, such as oversupply or reduction in demand and changes in real estate zoning laws that may reduce the desirability of real estate in an area;

• vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;

• changes in the supply of or the demand for similar or competing properties in an area;

• changes in interest rates and the availability of permanent mortgage financing, which may render the sale of a property or loan difficult or unattractive;

• changes in governmental regulations, including those involving tax, real estate usage, environmental and zoning laws; and

• periods of high interest rates and tight money supply.

Any of the above factors, or a combination thereof, could result in a decrease in the value of our investments, which would have an adverse effect on our results of operations, reduce the cash available for distributions and the return on your investment.

We are subject to the risks associated with acquiring discounted real estate assets.

We are subject to the risks generally incident to the ownership of discounted real estate assets. Such assets may be purchased at a discount from historical cost due to substantial deferred maintenance, abandonment, undesirable locations or markets, or poorly structured financing of the real estate or debt instruments underlying the assets, which has since lowered their value. Further, the continuing instability in the financial markets has limited the availability of lines of credit and the degree to which people and entities have access to cash to pay rents or debt service on the underlying assets. Such illiquidity has the effect of increasing vacancies, increasing bankruptcies and weakening interest rates commercial entities can charge consumers, which can all decrease the value of already discounted real estate assets. Should conditions worsen, the continued inability of the underlying real estate assets to produce income may weaken our return on our investments, which in turn, may weaken your return on investment.

Further, irrespective of the instability the financial markets may have on the return produced by discounted real estate assets, the evolving efforts to correct the instability make the valuation of such assets highly unpredictable. Though we have purchased, and intend to continue to purchase, real estate assets at a discount from historical cost, the fluctuation in market conditions make judging the future performance of such assets difficult. There is a risk that we may not purchase real estate assets at absolute discounted rates and that such assets may continue to decline in value.

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Residents of multifamily rental properties or tenants of other property classes we intend to acquire as discounted real estate assets who have experienced personal financial problems or a downturn in their business may delay enforcement of our rights, and we may incur substantial costs attempting to protect our investment.

The discounted real estate assets may involve investments in commercial leases with residents or tenants who have experienced a downturn in their residential or business leases and with residents or tenants who have experienced difficulties with their personal financial situations such as a job loss, bankruptcy or bad credit rating, resulting in their failure to make timely rental payments or their default under their leases or debt instruments. In the event of any default by residents or tenants at our properties, we may experience delays in enforcing our rights and may incur substantial costs attempting to protect our investment.

The bankruptcy or insolvency of any resident or tenant also may adversely affect the income produced by our properties. If any resident or tenant becomes a debtor in a case under the U.S. Bankruptcy Code, our actions may be restricted by the bankruptcy court and our financial condition and results of operations could be adversely affected.

The operating costs of our properties will not necessarily decrease if our income decreases.

Certain expenses associated with ownership and operation of a property may be intentionally increased to enhance the short- and long-term success of the property in the form of capital gain and current income, such as:

• increased staffing levels;

• enhanced technology applications; and

• increased marketing efforts.

Certain expenses associated with the ownership and operation of a property are not necessarily reduced by events that adversely affect the income from the property, such as:

• real estate taxes;

• insurance costs; and

• maintenance costs.

For example, if the leased property loses tenants or rents are reduced, then those costs described in the preceding sentence are not necessarily reduced. As a result, our cost of owning and operating leased properties may, in the future, exceed the income the property generates even though the property’s income exceeded its costs at the time it was acquired. This would decrease the amount of cash available to us to distribute to you and could negatively affect your return on investment.

We will be subject to the risks associated with acquiring bank-owned properties, commonly referred to as REO (“real estate owned” by a bank after foreclosure).

We will be subject to the risks generally incident to the acquisition and ownership of REO. An investment in REO assets may be riskier than traditional real estate transactions. For example, such additional risks may include:

• REO assets often will require certain additional planned capital expenditures to repair and maintain the property in order to prepare the property for sale, due to the previous owners’ inadequate maintenance of the property;

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• REO assets may result in the purchaser discovering additional latent defects with the property requiring additional unplanned expenditures not initially budgeted for as part of the redevelopment and repositioning capital expenditures; and

• the timing and closing of an REO acquisition may be delayed and we may incur additional costs because of the bank’s lack of adequate staff assigned to the bank’s REO portfolio or the deliberate process of following the bank’s specific rules and requirements for obtaining its approval prior to closing the transaction.

The risks associated with REO may adversely affect our results of operations, reduce the cash available for distributions and the return on your investment.

We will compete with third parties in acquiring, managing and selling properties and other investments, which could reduce our profitability and the return on your investment.

We believe that the current market for properties that meet our investment objectives is extremely competitive and many of our competitors have greater resources than we do. We will compete with numerous other entities engaged in real estate investment activities, including individuals, corporations, banks and insurance company investment accounts, other REITs, real estate limited partnerships, the U.S. Government and other entities, to acquire, manage and sell real estate and real estate related assets. Many of our expected competitors enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investments may increase.

Competition with these entities may result in the following:

• greater demand for the acquisition of real estate and real estate related assets, which results in increased prices we must pay for our real estate and real estate related assets;

• delayed investment of our capital;

• decreased availability of financing to us; or

• reductions in the size or desirability of the potential tenant base for one or more properties that we lease.

If such events occur, you may experience a lower return on your investment.

Our joint venture partners could take actions that decrease the value of an investment to us and lower our stockholders’ overall return.

We may enter into joint ventures to acquire properties and other assets. We may also purchase and renovate properties in joint ventures or in partnerships, co-tenancies or other co-ownership arrangements. Such investments may involve risks not otherwise present with other methods of investment, including, for example, the following risks:

• that our co-venturer, co-tenant or partner in an investment could become insolvent or bankrupt;

• that such co-venturer, co-tenant or partner may at any time have economic or business interests or goals that are or that become inconsistent with our business interests or goals; or

• that such co-venturer, co-tenant or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives.

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Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce our returns on that investment and therefore your return on investment.

Properties that have significant vacancies, especially discounted real estate assets, may experience delays in leasing up or could be difficult to sell, which could diminish our return on these properties.

A property may incur vacancies either by the expiration of tenant leases or the continued default of tenants under their leases. Further, our potential investments in value-add multifamily rental properties or other types of discounted properties may have significant vacancies at the time of acquisition. If vacancies continue for a prolonged period of time beyond the expected lease-up stage that we anticipate will follow any redevelopment or repositioning efforts, we may suffer reduced revenues resulting in less cash available for distributions. In addition, the resale value of the property could be diminished because the market value of a particular property depends principally upon the value of the cash flow generated by the leases associated with that property. Such a reduction on the resale value of a property could also reduce your return on investment.

We may have difficulty re-leasing underperforming or discounted properties because of the location or reputation of the property.

The nature of discounted real estate assets carries the risk that the properties underlying certain real estate investments may be located in areas of slow, stagnant, or declining economic growth. Such areas may experience high levels of crime and unemployment. In addition to the risks these conditions impose on the current tenants and owners of properties underlying the real estate investments, these conditions may harm the reputation of the property making it difficult to attract future more productive tenants and owners to the areas where the properties are located. The inability to re-lease or re-sell property abandoned, foreclosed upon, or purchased in these areas may result in an unproductive use of our resources and could negatively affect our performance and your return on investment.

Because we rely on Resource Real Estate Opportunity Manager, its affiliates and third parties to manage the day-to-day affairs of any properties we acquire, should the staff of a particular property perform poorly, our operating results for that property will similarly be hindered and our net income may be reduced.

We depend upon the performance of our property managers to effectively manage our properties and real estate related assets. Rising vacancies across real estate properties have resulted in increased pressure on real estate investors and their property managers to maintain adequate occupancy levels. In order to do so, we may have to offer inducements, such as free rent and resident amenities, to compete for residents. Poor performance by those sales, leasing and other management staff members operating a particular property will necessarily translate into poor results of operations for that particular property. Should Resource Real Estate Opportunity Manager, its affiliates or third parties fail to identify problems in the day-to-day management of a particular property or fail to take the appropriate corrective action in a timely manner, our operating results may be hindered and our net income reduced.

If we are unable to sell a property for the price, on the terms or within the time frame we desire, it could limit our ability to pay cash distributions to you.

Many factors that are beyond our control affect the real estate market and could affect our ability to sell properties for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Further, before we can sell a property on the terms we want, it may be necessary to expend funds to correct defects or to make improvements. However, we can give no assurance that we will have the funds available to correct such defects or to make

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such improvements. We may be unable to sell our properties at a profit. Our inability to sell properties at the time and on the terms we want could reduce our cash flow and limit our ability to make distributions to you and could reduce the value of your investment.

Government entities, community associations and contractors may cause unforeseen delays and increase costs to redevelop and reposition value-add properties that we may acquire, which may reduce our net income and cash available for distributions to you.

We may seek to or be required to incur substantial capital obligations to redevelop or reposition existing properties that we acquire at a discount as a result of neglect of the previous owners or tenants of the properties and to sell the properties. Our advisor and its key real estate professionals will do their best to acquire properties that do not require excessive redevelopment or modifications and that do not contain hidden defects or problems. There could, however, be unknown and excessive costs, expenses and delays associated with a discounted property’s redevelopment, repositioning or value-add upgrades. We will be subject to risks relating to the uncertainties associated with rezoning for redevelopment and other concerns of governmental entities, community associations and our construction manager’s ability to control costs and to build in conformity with plans and the established timeframe. We will pay a construction management fee to a construction manager, which may be Resource Real Estate Opportunity Manager or its affiliates, if new capital improvements are required.

If we are unable to increase rental rates or sell the redeveloped property at a price consistent with our value-add projections due to local market or economic conditions to offset the cost of the redevelopment or repositioning the property, the return on your investment may suffer. To the extent we acquire discounted properties in major metropolitan areas where the local government has imposed rent controls, we may be prohibited from increasing the rental rates to a level sufficient to cover the particular property’s redevelopment costs and expenses.

Costs of responding to both known and previously undetected environmental contamination and hazardous conditions may decrease our cash flows and limit our ability to make distributions.

Real property and the operations conducted on real property are subject to federal, state and local laws and regulations relating to protection of the environment and human health. We could be subject to liability in the form of fines, penalties or damages for noncompliance with these laws and regulations. These laws and regulations generally govern wastewater discharges, air emissions, the operation and removal of underground and above-ground storage tanks, the use, storage, treatment, transportation and disposal of solid and hazardous materials, the remediation of contamination associated with the release or disposal of solid and hazardous materials, the presence of toxic building materials, and other health and safety-related concerns.

Some of these laws and regulations may impose joint and several liability on the tenants, current or previous owners or operators of real property for the costs to investigate or remediate contaminated properties, whether the contamination occurred prior to purchase, or whether the acts causing the contamination were legal. These costs could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Our tenants’ operations, the condition of properties at the time we buy them, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties.

Environmental laws also may impose liens on a property or restrictions on the manner in which a property may be used or businesses may be operated, and these restrictions may require substantial expenditures or prevent us from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances,

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including asbestos-containing materials and lead-based paint. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances.

The presence of hazardous substances, or the failure to properly manage or remediate these substances, may hinder our ability to sell, rent or pledge such property as collateral for future borrowings. Any material expenditures, fines, penalties, or damages we must pay will reduce our ability to make distributions and may reduce the value of your investment.

Properties acquired by us may have toxic mold that could result in substantial liabilities to us.

Litigation and concern about indoor exposure to certain types of toxic molds has been increasing as the public becomes aware that exposure to mold can cause a variety of health effects and symptoms, including allergic reactions. It is impossible to eliminate all mold and mold spores in the indoor environment. Although we will attempt to acquire properties and loans secured by properties that do not contain toxic mold, there can be no assurance that none of the properties acquired by us will contain toxic mold. The difficulty in discovering indoor toxic mold growth could lead to an increased risk of lawsuits by affected persons and the risk that the cost to remediate toxic mold will exceed the value of the property. There is a risk that we may acquire properties that contain toxic mold and such properties may negatively affect our performance and your return on investment.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our cash flows and the return on your investment.

There are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. Insurance risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases have begun to insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate coverage for such losses. If any of our properties incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions.

Our costs associated with and the risk of failing to comply with the Americans with Disabilities Act, the Fair Housing Act and other tax credit programs may adversely affect cash available for distributions.

Our properties are generally expected to be subject to the Americans with Disabilities Act of 1990, as amended. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. The Disabilities Act’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the Disabilities Act or place the burden on the seller or other third party to ensure compliance with such laws. However, we cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, our funds used for compliance with these laws may affect cash available for distributions and the amount of distributions to you.

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The multifamily rental properties we acquire must comply with Title III of the Disabilities Act, to the extent that such properties are “public accommodations” or “commercial facilities” as defined by the Disabilities Act. Compliance with the Disabilities Act could require removal of structural barriers to handicapped access in certain public areas of our apartment communities where such removal is readily achievable. The Disabilities Act does not, however, consider residential properties, such as multifamily rental properties, to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as the leasing office, are open to the public.

We also must comply with the Fair Housing Amendment Act of 1988 (“FHAA”), which requires that multifamily rental properties first occupied after March 13, 1991 be accessible to handicapped residents and visitors. Compliance with the FHAA could require removal of structural barriers to handicapped access in a community, including the interiors of apartment units covered under the FHAA. Recently there has been heightened scrutiny of multifamily rental properties for compliance with the requirements of the FHAA and the Disabilities Act and an increasing number of substantial enforcement actions and private lawsuits have been brought against multifamily rental properties to ensure compliance with these requirements. Noncompliance with the FHAA and the Disabilities Act could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation.

Certain of our properties may be subject to the low income housing tax credits, historic preservation tax credits or other similar tax credit rules at the federal, state or municipal level. The application of these tax credit rules is extremely complicated and noncompliance with these rules may have adverse consequences for us. Noncompliance with applicable tax regulations may result in the loss of future or other tax credits and the fractional recapture of these tax credits already taken. Accordingly, noncompliance with these tax credit rules and related restrictions may adversely affect our ability to distribute any cash to our investors.

Our properties may be dispersed geographically and across various markets and sectors.

We may acquire and operate properties in different locations throughout the United States and in different markets and sectors. The success of our properties will depend largely on our ability to hire various managers and service providers in each area, market and sector where the properties are located or situated. It may be more challenging to manage a diverse portfolio. Failure to meet such challenges could reduce the value of your investment. See “Investment Objectives and Policies—Real Estate Asset Management Strategy.”

A high concentration of our properties in a particular geographic area would magnify the effects of downturns in that geographic area.

We expect that our properties will be diverse according to geographic area. However, in the event that we have a concentration of properties in any particular geographic area, any adverse situation that disproportionately affects that geographic area would have a magnified adverse effect on our portfolio.

Newly constructed and existing multifamily rental properties or other properties that compete with any properties we may acquire in any particular location could adversely affect the operating results of our properties and our cash available for distribution.

We may acquire properties in locations that experience increases in construction of multifamily rental or other properties that compete with our properties. This increased competition and construction could:

• make it more difficult for us to find residents to lease units in our apartment communities;

• force us to lower our rental prices in order to lease units in our apartment communities; or

• substantially reduce our revenues and cash available for distribution.

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Our efforts to upgrade multifamily rental properties to increase occupancy and raise rental rates through redevelopment and repositioning may fail, which may reduce our net income and the cash available for distributions to you.

The success of our ability to upgrade any multifamily rental properties that we may acquire and realize capital gains and current income for you on these investments materially depends upon the status of the economy where the multifamily rental property is located. Our revenues will be lower if the rental market cannot bear the higher rental rate that accompanies the upgraded multifamily rental property due to job losses or other economic hardships. Should the local market be unable to substantiate a higher rental rate for a multifamily rental property that we upgraded, we may not realize the premium rental we had assumed by a given upgrade and we may realize reduced rental income or a reduced gain or even loss upon the sale of the property. These events could cause us to reduce the cash available for distributions.

A concentration of our investments in any one property sector may leave our profitability vulnerable to a downturn or slowdown in such sector.

At any one time, a majority of our investments are likely to be in the multifamily sector. Vacancy rates in multifamily rental properties and other commercial real estate properties may be related to jobless rates. As a result, we will be subject to risks inherent in investments in a single type of property. If our investments are substantially in any one property sector, then the potential effects on our revenues, and as a result, on cash available for distribution, resulting from increased jobless rates as well as a general downturn or slowdown in such property sector could be more pronounced than if we had more fully diversified our investments.

Increased competition and the increased affordability of single-family and multifamily homes and condominiums for sale or rent could limit our ability to retain residents, lease apartment units or increase or maintain rents.

Any multifamily rental property that we may acquire will most likely compete with numerous housing alternatives in attracting residents, including single-family and multifamily homes and condominiums. Due to the current recession, competitive housing in a particular area and the increasing affordability of single-family and multifamily homes and condominiums to buy caused by declining mortgage interest rates and generous federal and state government programs to promote home ownership could adversely affect our ability to fully occupy any multifamily rental properties we may acquire. Further, single-family homes and condominiums available for rent could also adversely affect our ability to retain our residents, lease apartment units and increase or maintain rental rates.

Short-term multifamily leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions.

We expect that substantially all of our apartment leases will be for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term or earlier in certain situations, such as when a resident loses his/her job, without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

If we acquire student housing properties as part of our value-add multifamily portfolio, these properties would be subject to an annual leasing cycle, short lease-up period, seasonal cash flows, changing university admission and housing policies and other risks inherent in the student housing industry.

Similar to multifamily rental properties, if we acquire student housing, we expect to generally lease such properties under short-term, 12-month leases, and in certain cases, under nine-month or shorter-term semester leases. As a result, we may experience significantly reduced cash flows during the summer

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months at properties leased under leases having terms shorter than 12 months. Student housing properties are also typically leased during a limited leasing season that usually begins in January and ends in August of each year. We are therefore highly dependent on the effectiveness of our marketing and leasing efforts and personnel during this season.

Changes in university admission policies or overall student enrollment levels could also adversely affect the investment return on student housing properties. For example, if a university reduces the number of student admissions or requires that a certain class of students, such as freshman, live in a university-owned facility, the demand for beds at our properties may be reduced and our occupancy rates may decline. We will also be required to form relationships directly or through third parties with colleges and universities for referrals of prospective student-residents or for mailing lists of prospective student-residents and their parents. Any failure to maintain good relationships with these colleges and universities could therefore have a material adverse effect on us. Federal and state laws require colleges to publish and distribute reports of on-campus crime statistics, which may result in negative publicity and media coverage associated with crimes occurring on or in the vicinity of our on-campus properties.

If we acquire student housing properties, we may face significant competition from university-owned on-campus student housing, from other off-campus student housing properties and from traditional multifamily housing located within close proximity to universities.

On-campus student housing has certain inherent advantages over off-campus student housing in terms of physical proximity to the university campus and integration of on-campus facilities into the academic community. Colleges and universities can generally avoid real estate taxes and borrow funds at lower interest rates than us and other private sector operators. Competition from university-owned on-campus housing could adversely affect the performance of any student housing properties we may acquire.

If we invest in senior residential properties as part of our value-add multifamily portfolio, we may incur liability for failing to comply with the FHAA and the Housing for Older Persons Act or certain state regulations.

Any senior residential properties we acquire will be required to qualify as housing for older persons and will be required to comply with the appropriate federal and state laws governing age and owner occupancy. Noncompliance with the FHAA and the Housing for Older Persons Act and certain state registration requirements could result in fines, awards of damages to private litigants, payment of attorneys’ fees and other substantial costs of remediation.

The condominium industry is subject to extensive regulation and other unique risks.

We may invest in condominium properties to convert the condominiums into multifamily rental units or market and sell the condominium units at discounted prices. These activities are subject to extensive laws and regulations of local, state and federal governments. These laws and regulations vary by municipality and state and their requirements can be burdensome and costly.

Further, condominium associations often serve as mini-governments in the form and manner by which they govern the activities and services impacting the residents of the condominium building. Our lack of control over any condominium association, where we own the building, could raise additional risks of undue delay or unexpected costs to sell the discounted condominium units or convert them into multifamily rental units. In addition, condominium buildings and their associations may also be subject to litigation from contractors, other condominium owners or other third parties and may be subject to other unknown liabilities not readily discoverable upon initial due diligence.

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Changing market conditions, especially in the greater metropolitan areas may adversely impact our ability to sell condominium units at expected prices, or at all, which could hinder our results of operations and reduce our net income.

If we acquire a condominium building for conversion or to sell units at a discount, there could be a significant amount of time before we can redevelop or reposition the condominium units available for conversion or sale. The market value of a condominium unit being redeveloped or repositioned can vary significantly during this time due to changing market conditions. If we acquire condominiums or attempt to convert multifamily or hotel properties into condominiums, lower prices of condominium units and sales activities in major metropolitan markets or other markets where these properties may be located could adversely affect our results of operations and net income. Although demand in major metropolitan geographic areas historically has been strong, increased purchase price appreciation may reduce the likelihood of consumers seeking to purchase new residences, which would likely harm our ability to sell units in residential condominium buildings. If the prices of condominium units or sales activity decline in the key markets in which we may operate, our costs may not decline at all or at the same rate and, as a result, our business, results of operations and financial condition would be adversely affected.

Condominium purchasers may be unwilling or unable to purchase condominium units at times when mortgage-financing costs are high or as credit quality declines.

The majority of our potential purchasers for discounted condominium units will finance their purchases through third-party lenders. In general, housing demand is adversely affected by increases in interest rates, demand for increased down payments and by decreases in the availability of mortgage financing as a result of declining customer credit quality or other issues. Further, there are additional constraints on certain government-sponsored entities, such as Fannie Mae and Freddie Mac, for potential condominium purchasers in projects where a substantial number of units remain unsold in a particular condominium project. Even though we closely monitor the mortgage market for prospective buyers for condominium units, if mortgage interest rates increase or the average down payment requirement increases, the ability or willingness of prospective buyers to finance condominium unit purchases may be adversely affected.

If we acquire condominium properties or mixed-use properties that combine hotel, multifamily or condominiums, a fire or other accident could occur in a single unit that causes the entire building to be uninhabitable.

We may experience greater risks in the condominium and mixed-use property investments because there could be a higher likelihood of an accident occurring in a building containing numerous individuals where we do not have the same ability to monitor or review the building as other property classes. A fire or other accident in a single unit could in turn cause the entire building to be uninhabitable. Even if there is insurance on the building, it may not be enough to cover all of the losses as a result of a fire or other accident.

If we acquire office, retail or certain other property types, the loss of anchor tenants for such properties could adversely affect our profitability.

If we acquire office properties or retail properties, we will be subject to the risk that significant tenants may be unable to make their lease payments or may decline to extend a lease upon its expiration. A lease termination by a tenant that occupies a large area of space in one of our office or retail properties (commonly referred to as an anchor tenant) could impact leases of other tenants. Other tenants may be entitled to modify the terms of their existing leases in the event of a lease termination by an anchor tenant or the closure of the business of an anchor tenant that leaves its space vacant, even if the anchor tenant continues to pay rent. Any such modifications or conditions could be unfavorable to us as the property

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owner and could decrease rents or expense recoveries. In the event of default by an anchor tenant, we may experience delays and costs in enforcing our rights as landlord to recover amounts due to us under the terms of our agreements with those parties.

If we acquire retail properties or mixed-use properties with a retail component, our investments may be affected by the economic downturn in the United States, which may continue to have an adverse impact on the retail industry generally. Slow or negative growth in the retail industry may result in defaults by retail tenants, which could have an adverse impact on our results of operations.

The retail industry is facing reductions in sales revenues and increased bankruptcies throughout the United States. Adverse economic conditions may result in an increase in distressed or bankrupt retail companies, which in turn could result in an increase in defaults by tenants at our commercial properties. Additionally, slow economic growth is likely to hinder new entrants into the retail market, which may make it difficult for us to fully lease our properties. Tenant defaults and decreased demand for retail space would have an adverse impact on the value of our retail properties and our results of operations.

Any retail tenants we may have will face competition from numerous retail channels, which may reduce our profitability and ability to pay distributions.

Retailers will face continued competition from discount or value retailers, factory outlet centers, wholesale clubs, mail order catalogues and operators, television shopping networks and shopping via the Internet. Such competition could adversely affect our tenants and, consequently, our revenues and funds available for distribution.

If we acquire certain office, retail, industrial or healthcare properties, we may enter into long-term leases with these tenants, which may not result in fair market lease rates over time.

We may enter into long-term leases with tenants of certain of our properties. Our long-term leases would likely provide for rent to increase over time. However, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of these long-term leases at levels such that even after contractual rental increases, the rent under our long-term leases is less than then-current market rental rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our income and cash available for distribution could be lower than if we did not enter into long-term leases.

If we invest in industrial properties or lease our properties to tenants that engage in industrial activities, the potential liability as a result of, and the cost of compliance with, environmental matters is greater than other property classes.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances.

We may invest in properties historically used for industrial, manufacturing and commercial purposes. Some of these properties are more likely to contain, or may have contained, underground storage tanks for the storage of petroleum products and other hazardous or toxic substances. All of these operations create a potential for the release of petroleum products or other hazardous or toxic substances.

Leasing properties to tenants that engage in industrial, manufacturing, and commercial activities will cause us to be subject to increased risk of liabilities under environmental laws and regulations. The presence of hazardous or toxic substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such property as collateral for future borrowings.

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The hospitality industry is seasonal, which may adversely affect the results of operations of any hospitality properties we may acquire.

The hospitality industry is seasonal in nature, and, as a result, any hotel, lodging or other resort properties we may acquire could be adversely affected by significant weather changes. To the extent we invest materially in the hospitality sector, the seasonality of the hospitality industry can be expected to cause quarterly fluctuations in our revenues. In addition, our earnings may be adversely affected by factors outside our control, such as extreme or unexpectedly mild weather conditions or natural disasters, terrorist attacks or alerts, outbreaks of contagious diseases and pandemics, airline strikes, economic factors and other considerations affecting travel.

If we acquire hospitality, healthcare or certain other types of properties, we will be dependent on the third-party managers of those properties.

In order to qualify as a REIT, we will generally not be able to operate any hospitality, healthcare or certain other types of properties that we acquire or participate in the decisions affecting the daily operations of these properties. Depending on the particular property, we may lease any hospitality or healthcare property we acquire to a TRS in which we may own up to a 100% interest. Our TRS will enter into management agreements with eligible independent contractors that are not our subsidiaries or otherwise controlled by us to manage properties, such as hotels. For example, independent hotel or assisted living center operators, under management agreements with one or more of our TRSs, will control the daily operations of those types of properties.

We will depend on these independent management companies to adequately operate our hospitality or healthcare properties as provided in the management agreements. We will not have the authority to require any hospitality or healthcare property to be operated in a particular manner or to govern any particular aspect of the daily operations of such properties (for instance, setting room rates for hotels). Thus, even if we believe our hospitality or healthcare properties are being operated inefficiently or in a manner that does not result in satisfactory occupancy rates, revenue per available room and average daily rates, we may not be able to force the management company to change its method of operation of these types of properties. We can only seek redress if a management company violates the terms of the applicable management agreement with the TRS, and then only to the extent of the remedies provided for under the terms of the management agreement. In the event that we need to replace any of our management companies, we may be required by the terms of the management agreement to pay substantial termination fees and may experience significant disruptions at affected properties such as hotels and assisted living facilities.

Poor general economic conditions and reductions in discretionary consumer spending may adversely impact the hospitality properties we may acquire and lower the return on your investment.

The operations of certain properties in which we may invest, such as limited or full service hotels, lodging facilities and all-inclusive resort properties, will depend upon a number of factors relating to discretionary consumer spending. Unfavorable local, regional or national economic developments or uncertainties regarding future economic prospects as a result of terrorist attacks, military activity or natural disasters could reduce consumer spending in the markets in which we own properties and adversely affect the operation of those properties. In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in expenditures on travel and other leisure activities. Certain of the classes of properties, such as hospitality, that we may acquire may be unable to maintain their profitability during periods of adverse economic conditions or low consumer confidence, which could in turn affect the ability of operators to make scheduled payments to us.

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If we acquire hospitality, healthcare or certain other types of properties, we may have to make significant capital expenditures to maintain them.

Hospitality and healthcare properties in particular may have an ongoing need for renovations and other capital improvements, including replacements of furniture, fixtures and equipment. Generally, we will be responsible for the costs of these capital improvements, which gives rise to the following risks:

• cost overruns and delays;

• renovations can be disruptive to operations and can displace revenue at the hospitality and healthcare properties, including revenue lost while rooms under renovation are out of service;

• the cost of funding renovations and the possibility that financing for these renovations may not be available on attractive terms; and

• the risk that the return on our investment in these capital improvements will not be what we expect.

If we have insufficient cash flow from operations to fund needed capital expenditures, then we will need to borrow to fund future capital improvements.

If we acquire healthcare properties, some tenants of medical office buildings and healthcare-related facilities will be subject to fraud and abuse laws, the violation of which by a tenant may jeopardize the tenant’s ability to make rent payments to us.

There are various federal and state laws prohibiting fraudulent and abusive business practices by healthcare providers who participate in, receive payments from or are in a position to make referrals in connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs. Any lease arrangements we may enter into with certain tenants could also be subject to these fraud and abuse laws concerning Medicare and Medicaid. Examples of these laws include the Federal Anti-Kickback Statute, the Federal Physician Self-Referral Prohibition, the False Claims Act, and the Civil Monetary Penalties Law.

These laws include penalties for violations that range from punitive sanctions, damage assessments, penalties, imprisonment, denial of Medicare and Medicaid payments and exclusion from the Medicare and Medicaid programs. Certain laws, such as the False Claims Act, allow for individuals to bring whistleblower actions on behalf of the government for violations thereof. Additionally, states in which the facilities are located may have similar fraud and abuse laws. Investigation by a federal or state governmental body for violation of fraud and abuse laws or imposition of any of these penalties upon one of our tenants could jeopardize that tenant’s ability to operate or to make rent payments, which may have a material adverse effect on our business, financial condition and results of operations and our ability to make cash distributions.

If we acquire healthcare properties, adverse trends in healthcare provider operations may negatively affect our lease revenues and our ability to make cash distributions.

The healthcare industry is currently experiencing:

• changes in the demand for and methods of delivering healthcare services;

• changes in third-party reimbursement policies;

• significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas;

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• continued pressure by private and governmental payors to reduce payments to providers of services; and

• increased scrutiny of billing, referral and other practices by federal and state authorities.

These factors may adversely affect the economic performance of some or all of our healthcare-related tenants and, in turn, reduce our lease revenues and our cash available for distribution.

Risks Related to Investments in Real Estate Related Debt Assets

Our investments in real estate related debt investments are subject to the risks typically associated with real estate.

Our investments in mortgage, mezzanine or other real estate loans will generally be directly or indirectly secured by a lien on real property (or the equity interests in an entity that owns real property) that, upon the occurrence of a default on the loan, could result in our acquiring ownership of the property. We will not know whether the values of the properties ultimately securing our loans will remain at the levels existing on the dates of origination of those loans. If the values of the underlying properties drop, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values could impact the values of our loan investments. Our investments in commercial mortgage-backed securities and other real estate related debt investments may be similarly affected by real estate property values. Therefore, our real estate related debt investments are subject to the risks typically associated with real estate, which are described above under the heading “—Risks Related to Investments in Real Estate.”

If we make or invest in mortgage, mezzanine, bridge or other real estate loans, our loans will be subject to interest rate fluctuations that will affect our returns as compared to market interest rates; accordingly, the value of our stockholders’ investment would be subject to fluctuations in interest rates.

If we make or invest in fixed rate, long-term loans and interest rates rise, the loans could yield a return that is lower than then-current market rates. If interest rates decrease, we will be adversely affected to the extent that loans are prepaid because we may not be able to reinvest the proceeds at as high of an interest rate. If we invest in variable-rate loans and interest rates decrease, our revenues will also decrease. For these reasons, if we invest in mortgage, mezzanine, bridge or other real estate loans, our returns on those loans and the value of our stockholders’ investment will be subject to fluctuations in interest rates.

Delays in liquidating defaulted mortgage loans could reduce our investment returns.

If we make or invest in mortgage loans and there are defaults under those mortgage loans, we may not be able to repossess and sell the underlying properties quickly. The resulting time delay could reduce the value of our investment in the defaulted mortgage loans. An action to foreclose on a property securing a mortgage loan is regulated by state statutes and regulations and is subject to many of the delays and expenses of other lawsuits if the defendant raises defenses or counterclaims. In the event of default by a mortgagor, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.

Government action may reduce recoveries on defaulted loans.

Legislative or regulatory initiatives by federal, state or local legislative bodies or administrative agencies, if enacted or adopted, could delay foreclosure, provide new defenses to foreclosure or otherwise impair our ability to foreclose on real estate related debt investments in default. Various jurisdictions have considered or are currently considering such actions, and the nature or extent of the limitation on foreclosure that may be enacted cannot be predicted. Bankruptcy courts could, if this legislation is enacted,

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reduce the amount of the principal balance on a mortgage loan that is secured by a lien on the mortgaged property, reduce the interest rate, extend the term to maturity or otherwise modify the terms of a bankrupt borrower’s mortgage loan.

Property owners filing for bankruptcy may adversely affect us.

The filing of a petition in bankruptcy automatically stops or “stays” any actions to enforce the terms of all debt of the debtor, including a mortgage loan. The length of the stay and the costs associated with it will generally have an adverse impact on our profitability. Further, the bankruptcy court may take other actions that prevent us from foreclosing on the property. Any bankruptcy proceeding will, at a minimum, delay us in achieving our investment objectives and may adversely affect our profitability.

The B-Notes in which we may invest may be subject to additional risks relating to the privately negotiated structure and terms of the transaction, which may result in losses to us.

We may invest in B-Notes. A B-Note is a mortgage loan typically (i) secured by a first mortgage on a single large commercial property or group of related properties and (ii) subordinated to an A-Note secured by the same first mortgage on the same collateral. As a result, if a borrower defaults, there may not be sufficient funds remaining for B-Note holders after payment to the A-Note holders. Since each transaction is privately negotiated, B-Notes can vary in their structural characteristics and risks. For example, the rights of holders of B-Notes to control the process following a borrower default may be limited in certain investments. We cannot predict the terms of each B-Note investment. Further, B-Notes typically are secured by a single property, and so reflect the increased risks associated with a single property compared to a pool of properties.

Our potential ownership of a B-Note with controlling class rights may, if the financing fails to perform according to its terms, cause us to pursue remedies, which may include foreclosure on, or modification of, the note. In some cases, however, the owner of the A-Note may be able to foreclose or modify the note against our wishes as owner of the B-Note. As a result, our economic and business interests may diverge from the interests of the owner of the A-Note. In this regard, B-Notes share certain credit characteristics with second mortgages, because both are subject to greater credit risk with respect to the underlying mortgage collateral than the first mortgage or A-Note.

Investment in non-conforming and non-investment-grade loans may involve increased risk of loss.

Loans we may acquire may not conform to conventional loan criteria applied by traditional lenders and may not be rated or may be rated as non-investment grade. Non-investment-grade ratings for these loans typically result from the overall leverage of the loans, the lack of a strong operating history for the properties underlying the loans, the borrowers’ credit history, the properties’ underlying cash flow or other factors. As a result, loans we acquire may have a higher risk of default and loss than conventional loans. Any loss we incur may reduce distributions to stockholders and adversely affect the value of our common stock.

Our investments in subordinated loans and subordinated commercial mortgage-backed securities may be subject to losses.

We may acquire subordinated loans and invest in subordinated commercial mortgage-backed securities. In the event a borrower defaults on a subordinated loan and lacks sufficient capacity to cure the default, we may suffer a loss of principal or interest. In the event a borrower declares bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. If a borrower defaults on our loan or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill periods”), and control decisions made in bankruptcy proceedings relating to borrowers.

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In general, losses on a mortgage loan included in a securitization will be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, and then by the “first loss” subordinated security holder. In the event of default and the exhaustion of any equity support, reserve fund, letter of credit and any classes of securities junior to those in which we invest, we may not be able to recover all of our investment in the securities we purchase. In addition, if the underlying mortgage portfolio has been overvalued by the originator, or if the values subsequently decline and, as a result, less collateral is available to satisfy interest and principal payments due on the related commercial mortgage-backed securities, the securities in which we invest may effectively become the “first loss” position behind the more senior securities, which may result in significant losses to us.

The commercial mortgage-backed securities in which we may invest are subject to the risks of default.

Commercial mortgage-backed securities are securities that evidence interests in, or are secured by, a single commercial mortgage loan or a pool of commercial mortgage loans. Accordingly, these securities are subject to all of the risks of the underlying mortgage loans.

The yields on the commercial mortgage-backed securities we may acquire depend on the timely payment of interest and principal due on the underlying mortgage loans. Mortgage loans on commercial properties often are structured so that a substantial portion of the loan principal is not amortized over the loan term but is payable at maturity (as a “balloon payment”), and repayment of the loan principal thus often depends upon the future availability of real estate financing from the existing or an alternative lender or upon the current value and salability of the real estate. Therefore, the unavailability of real estate financing or sale opportunities may lead to default.

In the event of a default, the trustee for the benefit of the holders of commercial mortgage-backed securities has recourse only to the underlying pool of mortgage loans and, if a loan is in default, to the mortgaged property securing such mortgage loan. After the trustee has exercised all of the rights of a lender under a defaulted mortgage loan and the related mortgaged property has been liquidated, no further remedy will be available. The owner of commercial mortgage-backed securities does not have a contractual relationship with the borrowers of the underlying commercial mortgage loans. The commercial mortgage-backed securities holder typically has no right directly to enforce compliance by the borrowers with the terms of the loan agreement, nor any rights of set-off against the borrower, nor will it have the right to object to certain changes to the underlying loan agreements, nor to move directly against the collateral supporting the related loans.

There will be conflicts of interest among the holders of various classes or tranches of commercial mortgage-backed securities, which in the event of default, pay off, extension or modification or liquidation could adversely impact us depending on whether we hold a senior class or the controlling class of commercial mortgage-backed securities.

The pooling and service agreements that we may enter into generally provide for allocation, among the various classes of commercial mortgage-backed securities, of collections on the underlying commercial mortgage loans, as well as losses and other shortfalls. Most such agreements provide that the underlying commercial mortgage loans are serviced by a master servicer and a special servicer. Subject to the standard for recoverability set forth in the related agreement, each series of commercial mortgage-backed securities generally provides for the servicer or other party to make advances of delinquent payments on the underlying commercial mortgage loans (which advances are intended as liquidity and not credit support) and also provides for the servicer or special servicer to make servicing advances as required. Typically, the agreements provide that the “controlling class” (generally, the most subordinate class then outstanding that has a principal balance at least equal to the minimum amount provided in such agreement) will have certain rights, including the right to appoint a representative, approve certain actions and appoint the special servicer. As part of our commercial mortgage-backed securities strategy, we

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generally expect to hold a senior class of commercial mortgage-backed securities, where the risk of loss for a default and liquidation of the assets may be minimal, but we will not have certain rights, such as appointment of the special servicer, and not hold the controlling class.

There are unique risks to investing in discounted commercial mortgage-backed securities that could adversely impact our return on these investments.

Because we intend to purchase the commercial mortgage-backed securities at a discount from its principal balance, if payments and other collections of principal on the mortgage loans in the trust occur at a rate slower than we anticipated at the time of our purchase, then our actual yield to maturity may be lower than assumed at the time of purchase. There can be no assurance that principal distributions on the mortgages underlying the commercial mortgage-backed securities will be made at any particular rate. Accordingly, the rate of payment of principal of the commercial mortgage-backed securities, and consequently, their actual maturities and weighted-average lives, may occur earlier or later than anticipated by investors, and the yields to maturity of the commercial mortgage-backed securities may be affected.

In addition, if the commercial mortgage-backed bond is forced to restructure, the special servicer is significantly limited in its workout ability because it will usually have a finite date by which a restructuring of the commercial mortgage-backed securities must take place as the loan cannot be extended beyond the final maturity date of the notes. Further, if the commercial mortgage-backed bond is restructured in a manner that harms the interests of the junior or controlling class holders, who may lose their entire investment, they may litigate. The costs and delay associated with litigation would adversely affect the return on our commercial mortgage-backed securities investment.

We may not control the special servicing of the mortgage loans included in the commercial mortgage-backed securities in which we may invest and, in such cases, the special servicer may take actions that could adversely affect our interests.

With respect to each series of the commercial mortgage-backed securities in which we may invest, overall control over the special servicing of the related underlying mortgage loans that are in default or as to which default is reasonably foreseeable may be held by a “controlling class,” which has the right to appoint the special servicer, which is often an affiliate of, or otherwise related to, the holders of the controlling class. The special servicer is responsible for servicing the troubled commercial mortgage loans and has the power to consent to amendments or waivers with respect to the loan or to institute foreclosure proceedings. The controlling class generally is either (i) the most junior class of certificates or (ii) the most subordinate class of interest in a particular mortgage loan, provided that in each case the principal balance of that class is not reduced to less than 25% of its initial principal balance as a result of actual realized losses and “appraisal reduction amounts.” We may not have the right to appoint the special servicer because we do not hold the controlling class. In connection with the servicing of the specially serviced mortgage loans, the related special servicer may, at the direction of the controlling class, grant waivers or consent to amendments, foreclose on the underlying commercial property or take actions with respect to the specially serviced mortgage loans that could reduce collections on the specially serviced mortgage loans or extend the maturity of such loans and adversely affect our interests. However, the special servicer is not permitted to take actions that are prohibited by law or violate the applicable servicing standard, which generally requires them to maximize the net present value of the loan for the benefit of all certificateholders, or the terms of the mortgage loan documents.

To the extent that we make investments in real estate related securities, a portion of those investments may be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions.

Certain of the real estate related securities that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the

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registration requirements of, or is otherwise in accordance with, those laws. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited. The mezzanine and certain of the other loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default.

Investments in non-performing real estate assets involve greater risks than investments in stabilized, performing assets and make our future performance more difficult to predict.

Traditional performance metrics of real estate assets are generally not as reliable for non-performing real estate assets as they are for performing real estate assets. Non-performing properties, for example, do not have stabilized occupancy rates. Similarly, non-performing loans do not have a consistent stream of loan servicing or interest payments. In addition, for non-performing loans, often there is greater uncertainty that the face amount of the note will be paid in full.

In addition, we may pursue more than one strategy to create value in a non-performing real estate investment. With respect to a property, these strategies may include development, redevelopment, or lease-up of such property. With respect to a loan, these strategies may include negotiating with the borrower for a reduced payoff, restructuring the terms of the loan or enforcing our rights as lender under the loan and foreclosing on the collateral securing the loan.

The factors described above make it challenging to evaluate non-performing investments. As of July 1, 2011, we owned four non-performing real estate assets.

Delays in restructuring or liquidating non-performing real estate securities could reduce the return on our stockholders’ investment.

Real estate securities may become non-performing after acquisition for a wide variety of reasons. Such non-performing real estate investments may require a substantial amount of workout negotiations or restructuring, which may entail, among other things, a substantial reduction in the interest rate and a substantial write-down of such loan or asset. However, even if a restructuring is successfully accomplished, upon maturity of such real estate security, replacement “takeout” financing may not be available. We may find it necessary or desirable to foreclose on some of the collateral securing one or more of our investments. Intercreditor provisions may substantially interfere with our ability to do so. Even if foreclosure is an option, the foreclosure process can be lengthy and expensive. Borrowers often resist foreclosure actions by asserting numerous claims, counterclaims and defenses, including, without limitation, lender liability claims and defenses, in an effort to prolong the foreclosure action. In some states, foreclosure actions can take up to several years or more to litigate. At any time during the foreclosure proceedings, the borrower may file for bankruptcy, which would have the effect of staying the foreclosure action and further delaying the foreclosure process. Foreclosure litigation tends to create a negative public image of the collateral property and may result in disrupting ongoing leasing and management of the property. Foreclosure actions by senior lenders may substantially affect the amount that we may earn or recover from an investment.

We depend on debtors for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders will be dependent upon the success and economic viability of such debtors.

The success of our real estate related debt investments such as loans and debt and derivative securities materially depend on the financial stability of the debtors underlying such investments. The inability of a single major debtor or a number of smaller debtors to meet their payment obligations could result in reduced revenue or losses. In the event of a debtor default or bankruptcy, we may experience

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delays in enforcing our rights as a creditor, and such rights may be subordinated to the rights of other creditors. These events could negatively affect the cash available for distribution to our stockholders and the value of our stockholders’ investment.

Prepayments can adversely affect the yields on our investments.

Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we are unable to invest the proceeds of such prepayments received, the yield on our portfolio will decline. Under certain interest rate and prepayment scenarios, we may fail to recoup fully our cost of acquisition of certain investments.

Our investments in real estate related debt securities and preferred and common equity securities will be subject to the specific risks relating to the particular issuer of the securities and may involve greater risk of loss than secured debt financings.

Subject to certain REIT asset and income tests, we may make equity investments in REITs and other real estate companies. We may target a public company that owns commercial real estate or real estate related assets when we believe its stock is trading at a discount to that company’s net asset value. We may eventually seek to acquire or gain a controlling interest in the companies that we target. We do not expect our non-controlling equity investments in other public companies to exceed 5% of the proceeds of this offering, assuming we sell the maximum offering amount, or to represent a substantial portion of our assets at any one time. We may also invest in debt securities and preferred equity securities issued by REITs and other real estate companies. Our investments in debt securities and preferred and common equity securities will involve special risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer. Issuers that are REITs and other real estate companies are subject to the inherent risks associated with real estate and real estate related debt investments. Furthermore, debt securities and preferred and common equity securities may involve greater risk of loss than secured debt financings due to a variety of factors, including that such investments are generally unsecured and may also be subordinated to other obligations of the issuer. As a result, investments in debt securities and preferred and common equity securities are subject to risks of (i) limited liquidity in the secondary trading market, (ii) substantial market price volatility resulting from changes in prevailing interest rates, (iii) subordination to the prior claims of banks and other senior lenders to the issuer, (iv) the operation of mandatory sinking fund or call/redemption provisions during periods of declining interest rates that could cause the issuer to reinvest redemption proceeds in lower yielding assets, (v) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations and (vi) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn. These risks may adversely affect the value of outstanding debt securities and preferred and common equity securities and the ability of the issuers thereof to make principal, interest or distribution payments to us.

Some of our portfolio investments will be carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.

Some of our portfolio investments will be in the form of securities that are recorded at fair value but have limited liquidity or are not publicly traded. The fair value of securities and other investments that have limited liquidity or are not publicly traded may not be readily determinable. We estimate the fair value of these investments on a quarterly basis. Because such valuations are inherently uncertain, because they may fluctuate over short periods of time, and because they may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. The value of our common stock could be lower than perceived at the time of your investment if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.

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Any credit ratings assigned to our investments will be subject to ongoing evaluations and revisions, and we cannot assure you that those ratings will not be downgraded.

Some of our investments may be rated by Moody’s Investors Service, Fitch Ratings or Standard & Poor’s. Any credit ratings on our investments are subject to ongoing evaluation by credit rating agencies, and we cannot assure you that any such ratings will not be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant. If rating agencies assign a lower-than-expected rating or reduce or withdraw, or indicate that they may reduce or withdraw, their ratings of our investments in the future, the value of these investments could significantly decline, which would adversely affect the value of our investment portfolio and could result in losses upon disposition or the failure of borrowers to satisfy their debt service obligations to us. In addition, changes to the methodology and assumptions in rating commercial mortgage-backed securities by rating agencies may decrease the amount or availability of new issue commercial mortgage-backed securities rated in the highest investment-grade rating category.

Risks Associated with Debt Financing

We may incur mortgage indebtedness and other borrowings, which increases our risk of loss due to foreclosure.

We may obtain lines of credit and long-term financing that may be secured by our properties and other assets. In some instances, we may acquire real properties by financing a portion of the price of the properties and mortgaging or pledging some or all of the properties purchased as security for that debt. We may also incur mortgage debt on properties that we already own in order to obtain funds to acquire additional properties. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends paid deduction and excluding net capital gain). We, however, can give you no assurance that we will be able to obtain such borrowings on satisfactory terms.

If we do mortgage a property and there is a shortfall between the cash flow from that property and the cash flow needed to service mortgage debt on that property, then the amount of cash available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, reducing the value of your investment. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure even though we would not necessarily receive any cash proceeds. We may give full or partial guaranties to lenders of mortgage debt on behalf of the entities that own our properties. When we give a guaranty on behalf of an entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single property could affect multiple properties.

We may also obtain recourse debt to finance our acquisitions and meet our REIT distribution requirements. If we have insufficient income to service our recourse debt obligations, our lenders could institute proceedings against us to foreclose upon our assets. If a lender successfully forecloses upon any of our assets, our ability to pay cash distributions to our stockholders will be limited and you could lose all or part of your investment.

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High mortgage interest rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our net income and the amount of cash distributions we can make.

If mortgage debt is unavailable at reasonable interest rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the loans become due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to you and may hinder our ability to raise more capital by issuing more stock or by borrowing more money.

We may not be able to access financing sources on attractive terms, which could adversely affect our ability to execute our business plan.

We may finance our assets over the long term through a variety of means, including credit facilities, issuance of commercial mortgage-backed securities, and other structured financings. Our ability to execute this strategy will depend on various conditions in the markets for financing in this manner that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long-term financing for our assets. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders and funds available for operations, as well as for future business opportunities.

Continued disruptions in the financial and real estate markets could adversely affect the multifamily property sector’s ability to obtain financing from Fannie Mae and Freddie Mac, which could adversely impact us.

Fannie Mae and Freddie Mac are major sources of financing for the multifamily sector. Since 2007, Fannie Mae and Freddie Mac have reported substantial losses and a need for significant amounts of additional capital. These losses coupled with the credit market’s poor perception of Fannie Mae and Freddie Mac, add to the considerable uncertainty surrounding the capital structure of both Fannie Mae and Freddie Mac. In response to the deteriorating financial condition of Fannie Mae and Freddie Mac and the recent credit market disruption, the U.S. Congress and Treasury undertook a series of actions to stabilize these government-sponsored enterprises and the financial markets. Pursuant to legislation enacted in 2008, the U.S. government placed both Fannie Mae and Freddie Mac under its conservatorship. Despite recent additional funding for both government-sponsored entities, the U.S. government has stated that it remains committed to reducing their portfolios. If new U.S. government regulations (i) heighten Fannie Mae’s and Freddie Mac’s underwriting standards, (ii) adversely affect interest rates and (iii) reduce the amount of capital they can make available to the multifamily sector, it could reduce or remove entirely a vital resource for multifamily financing. Any potential reduction in loans, guarantees and credit-enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector’s available financing and decrease the amount of available liquidity and credit that could be used to acquire and diversify our portfolio of multifamily assets.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property, discontinue insurance coverage or replace Resource Real Estate Opportunity Advisor as our advisor. These or other limitations may limit our flexibility and our ability to achieve our operating plans.

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Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.

We expect that we will incur additional indebtedness in the future. Increases in interest rates may increase our interest costs, which would reduce our cash flows and our ability to pay distributions. In addition, if we need to repay existing debt during periods of higher interest rates, we might have to sell one or more of our investments in order to repay the debt, which sale at that time might not permit realization of the maximum return on such investments.

We have broad authority to incur debt, and high debt levels could hinder our ability to make distributions and decrease the value of your investment.

Although, based on current lending market conditions, we do not expect to incur debt financing that would cause our total liabilities to exceed 35% of our total assets on a portfolio basis prior to the stabilization of our properties and 65% to 75% after such stabilization, our charter limits our leverage such that our total liabilities do not exceed 75% of the cost of our tangible assets (before deducting depreciation or other noncash reserves), and we may exceed this limit with the approval of the conflicts committee of our board of directors. High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants. These factors could limit the amount of cash we have available to distribute and could result in a decline in the value of your investment. See “Investment Objectives and Policies—Borrowing Policies.”

Federal Income Tax Risks

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.

Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Internal Revenue Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. For a discussion of the REIT qualification tests and other considerations relating to our election to be taxed as REIT, see “Federal Income Tax Considerations.”

You may have current tax liability on distributions you elect to reinvest in our common stock.

If you participate in our distribution reinvestment plan, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not a tax-free return of capital. In addition, you will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless you are a tax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the shares of common stock received. See “Description of Shares—Distribution Reinvestment Plan—Tax Consequences of Participation.”

Failure to qualify as a REIT would subject us to federal income tax, which would reduce the cash available for distribution to you.

We expect to operate in a manner that is intended to cause us to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2010. However, the federal income tax laws governing REITs are extremely complex, and interpretations of the federal income tax

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laws governing qualification as a REIT are limited. Qualifying as a REIT requires us to meet various tests regarding the nature of our assets and our income, the ownership of our outstanding stock, and the amount of our distributions on an ongoing basis. While we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, including the tax treatment of certain investments we may make, and the possibility of future changes in our circumstances, no assurance can be given that we will so qualify for any particular year. If we fail to qualify as a REIT in any calendar year and we do not qualify for certain statutory relief provisions, we would be required to pay federal income tax on our taxable income. We might need to borrow money or sell assets to pay that tax. Our payment of income tax would decrease the amount of our income available for distribution to you. Furthermore, if we fail to maintain our qualification as a REIT and we do not qualify for certain statutory relief provisions, we no longer would be required to distribute substantially all of our REIT taxable income to our stockholders. Unless our failure to qualify as a REIT were excused under federal tax laws, we would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to you.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

• In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.

• We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

• If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.

• If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries or the sale met certain “safe harbor” requirements under the Internal Revenue Code.

Our investments in debt instruments may cause us to recognize “phantom income” for federal income tax purposes even though no cash payments have been received on the debt instruments.

It is expected that we may acquire debt instruments in the secondary market for less than their face amount. The amount of such discount will generally be treated as “market discount” for federal income tax purposes. Moreover, pursuant to our involvement in public-private joint ventures, other similar programs recently announced by the federal government, or otherwise, we may acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under the applicable Treasury regulations, the modified debt may be considered to have been reissued to us in a debt-for-debt exchange with the borrower. This deemed reissuance may prevent the modified debt from qualifying as a good REIT asset if the underlying security has declined in value.

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In general, we will be required to accrue original issue discount on a debt instrument as taxable income in accordance with applicable federal income tax rules even though no cash payments may be received on such debt instrument.

In the event a borrower with respect to a particular debt instrument encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income. Similarly, we may be required to accrue interest income with respect to subordinate mortgage-backed securities at the stated rate regardless of when their corresponding cash payments are received.

As a result of these factors, there is a significant risk that we may recognize substantial taxable income in excess of cash available for distribution. In that event, we may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this “phantom income” is recognized.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income, subject to certain adjustments and excluding any net capital gain, in order for federal corporate income tax not to apply to earnings that we distribute. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

From time to time, we may generate taxable income greater than our net income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders (for example, where a borrower defers the payment of interest in cash pursuant to a contractual right or otherwise). If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce your overall return.

To qualify as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of your investment.

The “taxable mortgage pool” rules may increase the taxes that we or our stockholders incur and may limit the manner in which we conduct securitizations.

We may be deemed to be ourselves, or we may make investments in entities that own or are themselves deemed to be, taxable mortgage pools. Similarly, certain of our securitizations or other borrowings could be considered to result in the creation of a taxable mortgage pool for federal income tax purposes. As a REIT, provided that we own 100% of the equity interests in a taxable mortgage pool, we generally would not be adversely affected by the characterization of the securitization as a taxable

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mortgage pool. Certain categories of stockholders, however, such as foreign stockholders eligible for treaty or other benefits, stockholders with net operating losses, and certain tax-exempt stockholders that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our stock is owned by tax-exempt “disqualified organizations,” such as certain government-related entities that are not subject to tax on unrelated business income, we will incur a corporate-level tax on a portion of our income from the taxable mortgage pool. In that case, we are authorized to reduce and intend to reduce the amount of our distributions to any disqualified organization whose stock ownership gave rise to the tax by the amount of such tax paid by us that is attributable to such stockholder’s ownership. Moreover, we would generally be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for federal income tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions or other financing arrangements.

Potential characterization of distributions or gain on sale may be treated as unrelated business taxable income to tax-exempt investors.

If (1) all or a portion of our assets are subject to the rules relating to taxable mortgage pools, (2) we are a “pension-held REIT,” (3) a tax-exempt stockholder has incurred debt to purchase or hold our common stock, or (4) the residual interests in any real estate mortgage investment conduits (“REMICs”), we acquire (if any) generate “excess inclusion income,” then a portion of the distributions to and, in the case of a stockholder described in clause (3), gains realized on the sale of common stock by such tax-exempt stockholder may be subject to federal income tax as unrelated business taxable income under the Internal Revenue Code. See “Federal Income Tax Considerations—Taxation of Resource Real Estate Opportunity REIT, Inc.—Taxable Mortgage Pools.”

Classification of a securitization or financing arrangement we enter into as a taxable mortgage pool could subject us or certain of you to increased taxation.

We intend to structure our securitization and financing arrangements as to not create a taxable mortgage pool. However, if we have borrowings with two or more maturities and (1) those borrowings are secured by mortgages or mortgage-backed securities and (2) the payments made on the borrowings are related to the payments received on the underlying assets, then the borrowings and the pool of mortgages or mortgage-backed securities to which such borrowings relate may be classified as a taxable mortgage pool under the Internal Revenue Code. If any part of our investments were to be treated as a taxable mortgage pool, then our REIT status would not be impaired, provided we own 100% of such entity, but a portion of the taxable income we recognize may, under regulations to be issued by the Treasury Department, be characterized as “excess inclusion” income and allocated among our stockholders to the extent of and generally in proportion to the distributions we make to each stockholder. Any excess inclusion income would:

• not be allowed to be offset by a stockholder’s net operating losses;

• be subject to a tax as unrelated business income if a stockholder were a tax-exempt stockholder;

• be subject to the application of federal income tax withholding at the maximum rate (without reduction for any otherwise applicable income tax treaty) with respect to amounts allocable to foreign stockholders; and

• be taxable (at the highest corporate tax rate) to us, rather than to you, to the extent the excess inclusion income relates to stock held by disqualified organizations (generally, tax-exempt companies not subject to tax on unrelated business income, including governmental organizations).

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The tax on prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans that would be treated as sales for federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of assets, other than foreclosure property, deemed held primarily for sale to customers in the ordinary course of business where such sales do not qualify for a safe harbor under the Internal Revenue Code. We might be subject to this tax if we were to dispose of or securitize loans in a manner that was treated as a sale of the loans for federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans, and may limit the structures we utilize for our securitization transactions, even though the sales or structures might otherwise be beneficial to us.

It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through taxable REIT subsidiaries. However, to the extent that we engage in such activities through taxable REIT subsidiaries, the income associated with such activities may be subject to full corporate income tax.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To qualify as a REIT, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified REIT real estate assets, including certain mortgage loans and mortgage-backed securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries. See “Federal Income Tax Considerations—Taxation of Resource Real Estate Opportunity REIT, Inc.” If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Liquidation of assets may jeopardize our REIT qualification.

To qualify as a REIT, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

Characterization of any repurchase agreements we enter into to finance our investments as sales for tax purposes rather than as secured lending transactions would adversely affect our ability to qualify as a REIT.

We may enter into repurchase agreements with a variety of counterparties to achieve our desired amount of leverage for the assets in which we invest. When we enter into a repurchase agreement, we generally sell assets to our counterparty to the agreement and receive cash from the counterparty. The counterparty is obligated to resell the assets back to us at the end of the term of the transaction. We believe that for federal income tax purposes we will be treated as the owner of the assets that are the subject of repurchase agreements and that the repurchase agreements will be treated as secured lending transactions notwithstanding that such agreement may transfer record ownership of the assets to the counterparty during

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the term of the agreement. It is possible, however, that the IRS could successfully assert that we did not own these assets during the term of the repurchase agreements, in which case we could fail to qualify as a REIT if tax ownership of these assets was necessary for us to meet the income or asset tests discussed in “Federal Income Tax Considerations—Taxation of Resource Real Estate Opportunity REIT, Inc.”

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Internal Revenue Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate, inflation or currency risks will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges (i) interest rate risk on liabilities incurred to carry or acquire real estate or (ii) risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the REIT 75% or 95% gross income tests, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute nonqualifying income for purposes of both the REIT 75% and 95% gross income tests. See “Federal Income Tax Considerations—Income Tests—Derivatives and Hedging Transactions.” As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur.

Ownership limitations may restrict change of control or business combination opportunities in which you might receive a premium for your shares.

In order for us to qualify as a REIT for each taxable year after 2010, no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. “Individuals” for this purpose include natural persons, and certain other entities including private foundations. To preserve our REIT qualification, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or in number of shares, whichever is more restrictive, of any class or series of the outstanding shares of our capital stock. This ownership limitation could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

Our ownership of and relationship with our taxable REIT subsidiaries will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries. A taxable REIT subsidiary may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A corporation of which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary. Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more taxable REIT subsidiaries. A domestic taxable REIT subsidiary will pay federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to its parent REIT to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a taxable REIT subsidiary and its parent REIT that are not conducted on an arm’s-length basis. We cannot assure you that we will be able to comply with the 25% value limitation on ownership of taxable REIT subsidiary stock and securities on an ongoing basis so as to maintain REIT status or to avoid application of the 100% excise tax imposed on certain non-arm’s length transactions.

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The IRS may challenge our characterization of certain income from offshore taxable REIT subsidiaries.

We may form offshore corporate entities treated as taxable REIT subsidiaries. If we form such subsidiaries, we may receive certain “income inclusions” with respect to our equity investments in these entities. We intend to treat such income inclusions, to the extent matched by repatriations of cash in the same taxable year, as qualifying income for purposes of the 95% gross income test but not the 75% gross income test. See “Federal Income Tax Considerations—Taxation of Resource Real Estate Opportunity REIT—Income Tests.” Because there is no clear precedent with respect to the qualification of such income inclusions for purposes of the REIT gross income tests, no assurance can be given that the IRS will not assert a contrary position. If such income does not qualify for the 95% gross income test, we could be subject to a penalty tax or we could fail to qualify as a REIT, in both events only if such inclusions (along with certain other non-qualifying income) exceed 5% of our gross income.

We may be subject to adverse legislative or regulatory tax changes.

At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new federal income tax law, regulation or administrative interpretation, or any amendment to any existing federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in, or any new, federal income tax law, regulation or administrative interpretation.

Dividends payable by REITs do not qualify for the reduced tax rates.

Legislation enacted in 2003 and modified in 2005 and 2010 generally reduces the maximum tax rate for dividends payable to domestic stockholders that are individuals, trusts and estates to 15% (through 2012). Dividends payable by REITs, however, are generally not eligible for the reduced rates. Although this legislation does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates, to perceive investments in REITs to be relatively less attractive than investments in stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

Retirement Plan Risks

If you fail to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, you could be subject to criminal and civil penalties.

There are special considerations that apply to employee benefit plans subject to ERISA (such as profit-sharing, section 401(k) or pension plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA) that are investing in our shares. If you are investing the assets of such a plan or account in our common stock, you should satisfy yourself that:

• your investment is consistent with your fiduciary and other obligations under ERISA and the Internal Revenue Code;

• your investment is made in accordance with the documents and instruments governing your plan or IRA, including your plan’s or account’s investment policy;

• your investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code;

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• your investment in our shares, for which no trading market may exist, is consistent with the liquidity needs of the plan or IRA;

• your investment will not produce an unacceptable amount of “unrelated business taxable income” for the plan or IRA;

• you will be able to comply with the requirements under ERISA and the Internal Revenue Code to value the assets of the plan or IRA annually; and

• your investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

With respect to the annual valuation requirements described above, we expect to provide an estimated value for our shares annually. Until 18 months have passed without a sale in a public offering of our common stock, not including any offerings on behalf of selling stockholders or offerings related to any distribution reinvestment plan, employee benefit plan, or the issuance of shares upon redemption of interests in our Operating Partnership, we expect to use the gross offering price of a share of common stock in our most recent offering as the per share estimated value thereof.

This estimated value is not likely to reflect the proceeds you would receive upon our liquidation or upon the sale of your shares. Accordingly, we can make no claim whether such estimated value will or will not satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common shares. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties, and can subject the fiduciary to claims for damages or for equitable remedies, including liability for investment losses. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to the amount invested. Additionally, the investment transaction may be undone. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified as a tax-exempt account and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA owners should consult with counsel before making an investment in our common shares.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements in this prospectus constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will” and “would” or the negative of these terms or other comparable terminology.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Forward-looking statements we make in this prospectus are subject to various risks and uncertainties that could cause actual results to vary from our forward-looking statements, including:

• the factors described in this prospectus, including those set forth under the sections captioned “Risk Factors” and “Investment Objectives and Policies;”

• our future operating results;

• our business prospects;

• changes in our business strategy;

• availability, terms and deployment of capital;

• availability of qualified personnel;

• changes in our industry, interest rates, the debt securities market or the general economy;

• changes in governmental regulations, tax rates and similar matters;

• actions and initiatives of the U.S. government relating to discounted or troubled assets, including the establishment and impact of the PPIP, and the impact of these policies;

• availability of investment opportunities in real estate and real estate related assets;

• the degree and nature of our competition;

• the adequacy of our cash reserves and working capital; and

• the timing of cash flows, if any, from our investments.

Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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ESTIMATED USE OF PROCEEDS

The following table sets forth information about how we intend to use the proceeds raised in this offering assuming that we sell a mid-point range of 41,250,000 shares and the maximum of 82,500,000 shares, respectively, of common stock. Many of the amounts set forth below represent management’s best estimate since they cannot be precisely calculated at this time. Depending primarily upon the number of shares we sell in this offering and assuming a $10.00 purchase price for shares sold in the primary offering, we estimate that we will use 85.51% to 85.90% of the gross proceeds from the primary offering, or between $8.55 and $8.59 per share, for investments, assuming the mid-point range and maximum offering amounts, respectively, while the remainder of the gross proceeds from the primary offering will be used to pay offering expenses, including selling commissions and the dealer manager fee, to maintain a working capital reserve and, upon investment in properties and other assets, to pay a fee to our advisor for its services in connection with the selection and acquisition of our real estate investments.

We expect to use substantially all of the net proceeds from the sale of shares under our distribution reinvestment plan for general corporate purposes, including, but not limited to, the repurchase of shares under our share redemption program; capital expenditures, tenant improvement costs and leasing costs related to our investments in real estate properties; reserves required by any financings of our investments; future funding obligations under any real estate loan receivable we acquire; acquisition of assets, which would include payment of acquisition fees to our advisor; and the repayment of debt. We cannot predict with any certainty how much, if any, distribution reinvestment plan proceeds will be available for specific purposes. To the extent proceeds from our distribution reinvestment plan are used for investments in real estate, sales under our distribution reinvestment plan will result in greater fee income for our advisor because of acquisition fees. See “Management Compensation.”

	41,250,000 Shares
	Primary Offering (37,500,000 shares) ($10.00/share)				Div. Reinv. Plan (3,750,000 shares) ($9.50/share)
	$		%		$		%
Gross Offering Proceeds		375,000,000		100.00		35,625,000		100.00
Selling Commissions		26,250,000		7.00		0		0.00
Dealer Manager Fee		11,250,000		3.00		0		0.00
Other Organization and Offering Expenses(1)		8,533,770		2.28		289,500		0.81
Acquisition Fees(2)		6,413,554		1.71		0		0.00
Initial Working Capital Reserve(3)		1,875,000		0.50		0		0.00
Amount Available for Investment(4)		320,677,676		85.51		35,335,500		99.19

	82,500,000 Shares
	Primary Offering (75,000,000 shares) ($10.00/share)				Div. Reinv. Plan (7,500,000 shares) ($9.50/share)
	$		%		$		%
Gross Offering Proceeds		750,000,000		100.00		71,250,000		100.00
Selling Commissions		52,500,000		7.00		0		0.00
Dealer Manager Fee		22,500,000		3.00		0		0.00
Other Organization and Offering Expenses(1)		14,141,066		1.89		486,000		0.68
Acquisition Fees(2)		12,884,489		1.72		0		0.00
Initial Working Capital Reserve(3)		3,750,000		0.50		0		0.00
Amount Available for Investment(4)		644,224,445		85.90		70,764,000		99.32

(1) Includes all actual expenses (other than selling commissions and the dealer manager fee) to be incurred on our behalf and paid by us in connection with the offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and transfer agent, charges of our advisor for processing subscription agreements, reimbursement of the bona fide invoiced due diligence expenses of broker-dealers,

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amounts to reimburse our advisor for salaries of its employees and other costs in connection with preparing supplemental sales materials, our costs of conducting bona fide training and education meetings held by us, including the travel, meal and lodging costs of non-registered officers of the issuer and our advisor to attend such meetings, and cost reimbursement for non-registered officers and employees of the issuer and our advisor to attend retail seminars conducted by broker-dealers. Pursuant to the terms of our advisory agreement, our advisor has agreed to reimburse us to the extent other organization and offering expenses incurred by us exceed 2.5% of aggregate gross offering proceeds.

(2) This table assumes that we will use all net proceeds from the sale of shares under our distribution reinvestment plan to repurchase shares under our share redemption program. To the extent we use such net proceeds to invest in real estate, our advisor would earn the related acquisition fees.

For all investments, we will pay our advisor an acquisition fee equal to 2% of the cost of the investment, including acquisition expenses and any debt attributable to such investment. We may also incur customary third-party acquisition expenses in connection with the acquisition (or attempted acquisition) of a real estate investment. See note 4 below.

This table excludes debt proceeds. To the extent we fund our investments with debt, as we expect, the amount available for investment and the amount of acquisition fees will be proportionately greater. For example, if we raise the maximum offering amount and our debt financing is equal to 35% of the cost of our real estate investments, then acquisition fees would be $19,822,291. If we raise the maximum offering amount and our debt financing is such that it causes our total liabilities to be equal to 75% of the cost of our real estate investments, then acquisition fees would be $51,537,956.

(3) We may establish reserves for construction, redevelopment, maintenance and repairs of our real estate properties from gross offering proceeds, out of cash flow generated by operating properties or out of the net cash proceeds received by us from any sale or exchange of properties.

(4) We intend to use substantially all of the net proceeds from this offering of up to 75,000,000 shares to acquire a diversified portfolio of discounted U.S. commercial real estate assets (including fees, costs and reserves for construction, maintenance, redevelopment and repairs to our real estate properties), principally (i) non-performing or distressed loans, including but not limited to first- and second-priority mortgage loans, mezzanine loans, B-Notes and other loans, (ii) REO, (iii) value-add multifamily rental properties, (iv) discounted investment-grade commercial mortgage-backed securities and (v) other real estate related assets. We anticipate holding approximately 55% of our total assets in categories (i) and (ii) listed above, 30% of our total assets in category (iii) listed above and 15% of our total assets in category (iv) listed above. If we are only able to raise an amount substantially less than our maximum offering, we intend to focus on categories (i) and (ii).

Amount available for investment may be used to pay the acquisition price of investments as well as ancillary third-party acquisition expenses, such as legal fees and expenses, costs of appraisals, accounting fees and expenses, title insurance premiums and other closing costs and miscellaneous expenses relating to the acquisition of real estate investments. We estimate that these third-party costs would average 0.5% of the contract purchase prices of acquisitions. Until required in connection with investment in real estate, substantially all of the net proceeds of the offering and, thereafter, our working capital reserves, may be invested in short-term, highly liquid investments, including government obligations, bank certificates of deposit, short-term debt obligations and interest-bearing accounts or other authorized investments as determined by our board of directors. Amount available for investment may also include anticipated capital improvement expenditures and tenant leasing costs. To the extent offering proceeds are used to pay distributions in anticipation of future cash flow from operating activities, the amount available for investment will be correspondingly reduced. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations. See “Risks Related to This Offering and Our Corporate Structure.”

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MANAGEMENT

Board of Directors

We operate under the direction of our board of directors, the members of which are accountable to us and our stockholders as fiduciaries. The board is responsible for the management and control of our affairs. The board has retained our advisor, Resource Real Estate Opportunity Advisor, to manage our day-to-day operations and the acquisition and distribution of our real estate investments, subject to the board’s supervision. Because of the numerous conflicts of interest created by the relationships among us, our advisor and various affiliates, many of the responsibilities of the board have been delegated to a committee that consists solely of independent directors. This committee is the conflicts committee and is discussed below and under “Conflicts of Interest.”

Our charter provides that a majority of the directors must be independent directors. We have three independent directors. An “independent director” is a person who is not one of our officers or employees or an officer or employee of our advisor, the sponsor or its affiliates and has not been so for the previous two years and meets the other independence requirements set forth in our charter.

Each director will serve until the next annual meeting of stockholders and until his successor has been duly elected and qualified. The presence, in person or by proxy, of stockholders entitled to cast a majority of all the votes entitled to be cast at any stockholder meeting constitutes a quorum. With respect to the election of directors, each candidate nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election, then the nominee will not be elected.

Although our board of directors may increase or decrease the number of directors, a decrease may not have the effect of shortening the term of any incumbent director. Any director may resign at any time or may be removed with or without cause by the stockholders upon the affirmative vote of at least a majority of all the votes entitled to be cast at a meeting called for the purpose of the proposed removal. The notice of the meeting will indicate that the purpose, or one of the purposes, of the meeting is to determine if the director shall be removed.

Unless otherwise provided by Maryland law, the board of directors is responsible for selecting its own nominees and recommending them for election by the stockholders, provided that the conflicts committee nominates replacements for any vacancies among the independent director positions. Unless filled by a vote of the stockholders as permitted by Maryland General Corporation Law, a vacancy that results from the removal of a director will be filled by a vote of a majority of the remaining directors. Any vacancy on the board of directors for any other cause will be filled by a majority of the remaining directors, even if such majority is less than a quorum.

Our directors are accountable to us and our stockholders as fiduciaries. This means that our directors must perform their duties in good faith and in a manner each director believes to be in our and our stockholders’ best interests. Further, our directors must act with such care as a prudent person in a similar position would use under similar circumstances, including exercising reasonable inquiry when taking actions. However, our directors and executive officers are not required to devote all of their time to our business and must only devote such time to our affairs as their duties may require. We do not expect that our directors will be required to devote a substantial portion of their time to us in discharging their duties.

In addition to meetings of the various committees of the board, which committees we describe below, we expect our directors to hold at least four regular board meetings each year. Although we have no present intention to do so, our board has the authority to fix the compensation of all officers that it selects and may pay compensation to directors for services rendered to us in any other capacity.

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Our general investment and borrowing policies are set forth in this prospectus. Our directors may establish further written policies on investments and borrowings and monitor our administrative procedures, investment operations and performance to ensure that our executive officers and advisor follow these policies and that these policies continue to be in the best interests of our stockholders. Unless modified by our directors, we will follow the policies on investments and borrowings set forth in this prospectus.

Executive Officers and Directors

The following table sets forth information regarding our executive officers and directors. All of our executive officers are employees of Resource Real Estate, our sponsor. Neither we nor our advisor expect that we will have any employees, and our executive officers are not exclusively dedicated to our operations.

Name*	Age	Positions
Jonathan Z. Cohen	40	Chairman of the Board
Alan F. Feldman	47	Chief Executive Officer and Director
Kevin M. Finkel	39	Chief Operating Officer and President
Steven R. Saltzman	48	Chief Financial Officer, Senior Vice President and Treasurer
Shelle Weisbaum	50	Chief Legal Officer, Senior Vice President and Secretary
David E. Bloom	46	Senior Vice President
Gary Lichtenstein	63	Independent Director
Lee F. Shlifer	63	Independent Director
Thomas J. Ikeler	55	Independent Director

* The address of each executive officer and director listed is One Commerce Square, 2005 Market Street, 15th Floor, Philadelphia, PA 19103.

The biographical descriptions below set forth certain information with respect to our executive officers and directors. The board has identified specific attributes of each director that the board has determined qualify that person for service on the board.

Jonathan Z. Cohen has been our Chairman of the Board since October 2009 and one of our directors since our formation in June 2009. Mr. Cohen has also served as a Manager of our advisor since its formation in June 2009. In addition, Mr. Cohen has served as Chairman and a director of Resource Real Estate Management, LLC since August 2007. Mr. Cohen has been President since 2003 and Chief Executive Officer since May 2004 of Resource America and has also served as Chairman and a director of Resource Financial since February 2005. Mr. Cohen was Executive Vice President of Resource America from 2001 to 2003, Senior Vice President of Resource America from 1999 to 2001 and a Vice President from 1998 to 1999. Mr. Cohen also is Vice Chairman of Atlas Energy, Inc. (formerly Atlas America, Inc.) and Atlas Pipeline Partners GP, LLC. Mr. Cohen is the son of the Chairman of Resource America, Mr. Edward E. Cohen. Mr. Cohen received his Bachelor of Arts degree from the University of Pennsylvania, and his Juris Doctor degree from American University’s Washington College of Law.

The board of directors has determined that it is in the best interests of our company and our stockholders for Mr. Cohen, in light of his extensive company-specific operational, finance and market experience, his leadership abilities, and his expertise in the acquisition and ownership of discounted commercial real estate and real estate related debt, to serve as a director on the board of directors.

Alan F. Feldman has been our Chief Executive Officer and director since our formation in June 2009. Mr. Feldman has also served as the Chief Executive Officer and Manager of our advisor since its

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formation in June 2009. In addition, Mr. Feldman has served as a director and Chief Executive Officer of Resource Real Estate since May 2004, President and a director of Resource Real Estate Management, LLC since August 2007 and a Senior Vice President of Resource America since August 2002. From 1998 to 2002, Mr. Feldman was a Vice President at Lazard Freres & Co., an investment banking firm, specializing in real estate matters. From 1992 through 1998, Mr. Feldman was an Executive Vice President of the Pennsylvania Real Estate Investment Trust and its predecessor, The Rubin Organization. From 1990 to 1992, Mr. Feldman was a director at Strouse, Greenberg & Co., a regional full service real estate company. From 1986 through 1988, Mr. Feldman was an engineer at Squibb Corporation. Mr. Feldman received a Bachelor of Science degree and Master of Science degree from Tufts University, and a Master of Business Administration, Real Estate and Finance concentration degree from The Wharton School, University of Pennsylvania.

The board of directors has determined that it is in the best interests of our company and our stockholders for Mr. Feldman, in light of his day-to-day company-specific operational experience, significant finance and market experience, and his real estate investment trust experience, to serve as a director on the board of directors.

Kevin M. Finkel has been our Chief Operating Officer and President since our formation in June 2009. Mr. Finkel has also served as President and Manager of our advisor since its formation in June 2009. In addition, Mr. Finkel has served as Executive Vice President since January 2008 and Director of Acquisitions since May 2004 of Resource Real Estate. Mr. Finkel joined Resource America in November 2002, and has been a Vice President of Resource America since April 2006. Prior to joining Resource Capital, Mr. Finkel was an Associate at Lehman Brothers. Prior to working at Lehman Brothers, Mr. Finkel was an investment banker at Barclays Capital and Deutsche Bank Securities. Mr. Finkel received a Bachelor of Arts degree with Honors in Economics from the University of Pennsylvania, and a Master of Business Administration degree from the UCLA Anderson School of Management.

Steven R. Saltzman has been our Chief Financial Officer, Senior Vice President and Treasurer since our formation in June 2009. Mr. Saltzman has also served as Chief Financial Officer and Senior Vice President for our advisor since its formation in June 2009. In addition, Mr. Saltzman has served as Vice President and Controller of Resource Real Estate since May 2004 and Vice President of Finance of Resource Real Estate Management, LLC since August 2007. From 1999 to 2003, Mr. Saltzman was Controller at WP Realty, Inc., a regional developer and property manager specializing in community shopping centers. Mr. Saltzman began his real estate career in 1988 as a Property Controller at The Rubin Organization, a predecessor to the Pennsylvania Real Estate Investment Trust. Mr. Saltzman began his professional career at Price Waterhouse from 1985 to 1988. Mr. Saltzman earned a Bachelor of Science degree from The Wharton School, University of Pennsylvania. Mr. Saltzman is both a Certified Public Accountant and a Certified Management Accountant.

Shelle Weisbaum has been our Chief Legal Officer, Senior Vice President and Secretary since our formation in June 2009. Ms. Weisbaum has also served as Chief Legal Officer, Senior Vice President, Secretary and Treasurer of our advisor since its formation in June 2009. Ms. Weisbaum has also served as Vice President, General Counsel and Secretary of Resource Real Estate, Inc. and Vice President and Secretary of Resource Real Estate Management, LLC since August 2007. Ms. Weisbaum joined Resource Real Estate in October 2006 from Ledgewood, a Philadelphia-based law firm, where she practiced commercial real estate law from 1998 to 2006 as an associate and later a partner of the firm. Prior to Ledgewood, from 1987 to 1998, Ms. Weisbaum was Vice President and Assistant General Counsel at the Philadelphia Stock Exchange. Ms. Weisbaum received a Bachelor of Science degree in Business Administration from Boston University and a Juris Doctor degree from Temple University.

David E. Bloom has been our Senior Vice President since our formation in June 2009. Mr. Bloom has also served as the Senior Vice President of our advisor since its formation in June 2009. In addition, Mr. Bloom has served as President and a director of Resource Real Estate since May 2004, and as Senior

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Vice President of Resource America, a position he has held since September 2001. Mr. Bloom joined Resource America from Colony Capital, LLC, a Los Angeles-based real estate fund, where he was a Senior Vice President, as well as a Principal of Colony Capital Asia Pacific from 1999 to 2001. From 1998 to 1999, Mr. Bloom was a director at Sonnenblick-Goldman Company, a New York based real estate investment bank. From 1992 to 1998, Mr. Bloom practiced law in the real estate and corporate departments of Wilkie Farr & Gallagher in New York and Drinker Biddle & Reath in Philadelphia. Prior to practicing law, Mr. Bloom began his real estate career in 1987 as an Acquisitions and Development Associate with Strouse, Greenberg & Company, a regional full-service real estate company. Mr. Bloom received a Bachelor of Arts degree in American Public Policy from Ursinus College and a Juris Doctor degree from Rutgers University School of Law.

Gary Lichtenstein has been one of our directors since September 2009. Mr. Lichtenstein served as a partner of Grant Thornton LLP, a registered public accounting firm, from 1987 to July 2009. He worked at Grant Thornton LLP from 1974 to 1977 and served as a manager at Grant Thornton LLP from 1977 to 1987. Prior to joining Grant Thornton LLP, Mr. Lichtenstein served as an accountant for Soloway & von Rosen CPA from 1970 to 1974 and for Touche Ross Bailey & Smart from 1969 to 1970. Mr. Lichtenstein serves on the Executive Board and serves as Chairman elect of the Diabetes Association of Greater Cleveland. He received his Bachelor of Business Administration and his Juris Doctor degree from Cleveland State University.

The board of directors has determined that it is in the best interests of our company and our stockholders for Mr. Lichtenstein, in light of his public company accounting and financial reporting expertise, to serve as a director on the board of directors.

Lee Shlifer has been one of our directors since September 2009. Mr. Shlifer has served as Founder, President and broker for Signature Investment Realty, Inc., an investment brokerage and management/consulting firm that emphasizes the acquisition and management of multifamily apartment buildings, since 1985. Prior to founding Signature Investment Realty, Inc., he served as Vice President of Marketing for Spencer Industries from 1979 to 1981. In addition, Mr. Shlifer served as a psychotherapist for the Eastern Pennsylvania Psychiatric Institute from 1978 to 1979. Mr. Shlifer is a member of the Board of Directors of ELIT, a non-profit organization that operates schools in India and Pakistan to teach impoverished women basic computer skills. He received his Bachelor of Arts degree from the University of Pennsylvania and his Masters of Arts degree in Clinical Psychology from The New School for Social Research.

The board of directors has determined that it is in the best interests of our company and our stockholders for Mr. Shlifer, in light of his significant finance and real estate market experience and his expertise in the acquisition and management of multifamily apartment buildings, to serve as a director on the board of directors.

Thomas J. Ikeler has been one of our directors since September 2009. Mr. Ikeler has served as President of K2 Capital Advisors, LLC, a boutique advisory practice that assists real estate companies in selling or capitalizing existing assets and new acquisitions, since January 2009. From May 2005 to January 2009, Mr. Ikeler served as Managing Director of Jones Lang LaSalle, one of the largest global real estate service firms with 180 offices in 60 countries and over 36,000 employees, where he specialized in commercial property and multifamily equity and debt financing. From 1999 to May 2005, he served as Managing Director of Aegis Realty Consultants, the real estate banking affiliate of Berwind Property Group, which owns and operates more than 25,000 apartment units and 100 communities. From 1997 to 1999, Mr. Ikeler served as Vice President/Corporate Finance for Security Capital Group and Senior Vice President for a subsidiary. From 1994 to 1997, he established a real estate investment and advisory firm that targeted “off market” opportunities and advised institutional owners and operators of real estate, which included serving as lead outside advisor to RF&P Corporation, a private REIT owned by the Virginia Retirement System. He received his Bachelor of Arts degree from Bucknell University and his Master in Business Administration from Harvard University.

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The board of directors has determined that it is in the best interests of our company and our stockholders for Mr. Ikeler, in light of his significant experience in finance and real estate markets and his expertise in commercial property and multifamily equity and debt financing, to serve as a director on the board of directors.

Board Committees

Our board of directors has two standing committees, consisting solely of independent directors: the audit committee and the conflicts committee.

Audit Committee

Among other things, the audit committee will assist the board in overseeing:

• our accounting and financial reporting processes;

• the integrity and audits of our financial statements;

• our compliance with legal and regulatory requirements;

• the qualifications and independence of our independent auditors; and

• the performance of our internal and independent auditors.

The audit committee is also responsible for engaging independent public accountants, reviewing with the independent public accountants the plans and results of the audit engagement, and considering and approving the audit and non-audit services and fees provided by the independent public accountants. Mr. Lichtenstein serves as the chairman of our audit committee and serves as our audit committee financial expert as that term is defined by the SEC. Messrs. Ikeler and Shlifer are members of the audit committee and meet the financial literacy requirements of the SEC.

Conflicts Committee

In order to reduce or eliminate certain potential conflicts of interest, our charter creates a conflicts committee of our board of directors consisting solely of all of our independent directors, that is, all of our directors who are not affiliated with our advisor. Our charter authorizes the conflicts committee to act on any matter permitted under Maryland law. Both the board of directors and the conflicts committee must act upon those conflict-of-interest matters that cannot be delegated to a committee under Maryland law. Our charter also empowers the conflicts committee to retain its own legal and financial advisors. See “Conflicts of Interest—Certain Conflict Resolution Measures.”

Our charter requires that the conflicts committee discharge the board’s responsibilities relating to the nomination of independent directors and the compensation of our independent directors. Our conflicts committee also discharges the board’s responsibilities relating to the compensation of our executives. Subject to the limitations in our charter, the conflicts committee may also create stock-award plans. Mr. Shlifer serves as the chairman of the conflicts committee, and Messrs. Ikeler and Lichtenstein serve as members of the conflicts committee.

Compensation of Directors

Any member of our board of directors who is also an employee of our advisor or Resource Real Estate does not receive additional compensation for serving on our board of directors. Each independent

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director receives an annual retainer of $25,000. In addition, the chairman of our audit committee receives an additional annual retainer of $5,000. We pay independent directors for attending board and committee meetings as follows:

• $1,000 in cash for each board meeting attended;

• $1,000 in cash for each committee meeting attended, except that the chairman of the committee will be paid $2,000 for each meeting attended;

• $500 in cash for each teleconference meeting of the board; and

• $500 in cash for each teleconference meeting of any committee, except that the chairman of the committee will be paid $1,000 for each teleconference meeting of the committee.

We also reimburse our directors for their travel expenses incurred in connection with their attendance at board and committee meetings.

Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents

Our charter limits the liability of our directors and officers to us and our stockholders for monetary damages and requires us to indemnify our directors, officers, our advisor and its affiliates for losses they may incur by reason of their service in that capacity if all of the following conditions are met:

• the party seeking exculpation or indemnification has determined, in good faith, that the course of conduct that caused the loss or liability was in our best interests;

• the party seeking exculpation or indemnification was acting on our behalf or performing services for us;

• in the case of an independent director, the liability or loss was not the result of gross negligence or willful misconduct by the independent director;

• in the case of a non-independent director, Resource Real Estate Opportunity Advisor or one of its affiliates, the liability or loss was not the result of negligence or misconduct by the party seeking exculpation or indemnification; and

• the indemnification is recoverable only out of our net assets and not from the common stockholders.

The SEC takes the position that indemnification against liabilities arising under the Securities Act is against public policy and unenforceable. Furthermore, our charter prohibits the indemnification of our directors, our advisor, its affiliates or any person acting as a broker-dealer for liabilities arising from or out of a violation of state or federal securities laws, unless one or more of the following conditions are met:

• there has been a successful adjudication on the merits of each count involving alleged securities law violations;

• such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction; or

• a court of competent jurisdiction approves a settlement of the claims against the indemnitee and finds that indemnification of the settlement and the related costs should be made, and the

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court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which the securities were offered as to indemnification for violations of securities laws.

Our charter further provides that the advancement of funds to our directors and to our advisor and its affiliates for reasonable legal expenses and other costs incurred in advance of the final disposition of a proceeding for which indemnification is being sought is permissible only if all of the following conditions are satisfied: the proceeding relates to acts or omissions with respect to the performance of duties or services on our behalf; the legal proceeding was initiated by a third party who is not a common stockholder or, if by a common stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement; and the person seeking the advancement undertakes to repay the amount paid or reimbursed by us, together with the applicable legal rate of interest thereon, if it is ultimately determined that such person is not entitled to indemnification.

We have also purchased and maintain insurance on behalf of all of our directors and executive officers against liability asserted against or incurred by them in their official capacities with us, whether or not we are required or have the power to indemnify them against the same liability. We may incur significant costs to purchase this insurance on behalf of our directors and officers.

Our Advisor

Our advisor is Resource Real Estate Opportunity Advisor, LLC. Our advisor is a limited liability company that was formed in the State of Delaware on June 8, 2009. Our advisor has contractual and fiduciary responsibilities to us and our stockholders. All of our officers and some of our directors are also officers and managers of our advisor.

The directors and managers of our advisor are as follows:

Name	Positions
Alan F. Feldman	Chief Executive Officer and Manager
Kevin M. Finkel	President and Manager
Steven R. Saltzman	Chief Financial Officer and Senior Vice President
Shelle Weisbaum	Chief Legal Officer, Senior Vice President and Secretary
David E. Bloom	Senior Vice President
Jeffrey F. Brotman	Senior Vice President
Jonathan Z. Cohen	Manager

The background of Messrs. Feldman, Finkel, Saltzman, Bloom and Cohen and Ms. Weisbaum are described in the “Management—Executive Officers and Directors” section of this prospectus.

Jeffrey F. Brotman has been the Senior Vice President and Director of our advisor since its formation in 2009. Mr. Brotman was the Chairman of the Board of Directors of TRM Corporation (a publicly traded consumer services company) from September 2006 to September 2008 and was TRM’s President and Chief Executive Officer from March 2006 through June 2007. He also has been Executive Vice President of Resource America since June 2007. Mr. Brotman was a co-founder of Ledgewood, a Philadelphia-based law firm, and was affiliated with the firm from 1992 until June 2007, serving as its managing partner from 1995 until March 2006. Mr. Brotman is also a certified public accountant and an Adjunct Professor at the University of Pennsylvania Law School.

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The Advisory Agreement

Under the terms of the advisory agreement, our advisor must use its reasonable efforts to present to us investment opportunities that provide a continuing and suitable investment program for us consistent with our investment policies and objectives as adopted by our board of directors. Pursuant to the advisory agreement, our advisor manages our day-to-day operations, retains the property managers for our property investments (subject to the authority of our board of directors and officers) and performs other duties, including, but not limited to, the following:

• finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives;

• making certain real estate related debt investment decisions for us, subject to the limitations in our charter and the direction and oversight of our board of directors;

• structuring the terms and conditions of our investments, sales and joint ventures;

• acquiring properties and other investments on our behalf in compliance with our investment objectives and policies;

• arranging for financing and refinancing of properties and our other investments;

• entering into leases and service contracts for our real properties;

• supervising and evaluating each loan servicer’s and property manager’s performance;

• reviewing and analyzing the operating and capital budgets of properties underlying our investments and properties we may acquire;

• entering into service contracts for our loans;

• assisting us in obtaining insurance;

• generating an annual budget for us;

• reviewing and analyzing financial information for each of our assets and the overall portfolio;

• formulating and overseeing the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of our properties and other investments;

• performing investor-relations services;

• maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the IRS and other regulatory agencies;

• engaging and supervising the performance of our agents, including our registrar and transfer agent; and

• performing any other services reasonably requested by us.

See “Management Compensation” for a detailed discussion of the fees payable to our advisor under the advisory agreement. We also describe in that section our obligation to reimburse our advisor for

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organization and offering expenses, the costs of providing services to us (other than for services for which it earns acquisition or disposition fees for sales of properties or other investments) and payments made by our advisor in connection with potential investments, whether or not we ultimately acquire the investment.

On September 14, 2009, the advisory agreement became effective. The advisory agreement has a one-year term but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and us. It will be the duty of our board of directors to evaluate the performance of our advisor before entering into or renewing an advisory agreement. Our advisory agreement will automatically terminate upon any listing of our shares for trading on a national securities exchange. Additionally, either party may terminate the advisory agreement without cause or penalty upon 60 days’ written notice and, in such event, our advisor must cooperate with us and our directors in making an orderly transition of the advisory function. In the event that our advisory agreement with our advisor is not renewed or terminates (other than because of a material breach by our advisor) prior to the occurrence of one of the events that trigger the conversion of our convertible stock, the number of shares of common stock that our advisor will receive upon the occurrence of that triggering event will be prorated to account for the actual amount of time that the advisory agreement was effective. For more information regarding the terms of the advisory agreement, see “Management Compensation.”

Resource Real Estate, our sponsor, has agreed to guarantee the performance of our advisor’s services to be provided under the advisory agreement. Therefore, if our advisor fails to perform all or any of its obligations, duties, undertakings and covenants to provide services under the advisory agreement, upon written notice from us, our sponsor shall perform or cause to be performed such obligations, duties, undertakings and covenants. In addition, our advisor and its affiliates expect to engage in other business ventures, and, as a result, they will not dedicate their resources exclusively to our business. However, pursuant to the advisory agreement, our advisor must devote sufficient resources to our business to discharge its obligations to us. Our advisor may assign the advisory agreement to an affiliate upon our approval. We may assign or transfer the advisory agreement to a successor entity.

In September 2010, we renewed our advisory agreement with our advisor. The renewed advisory agreement is effective through September 14, 2011. At the time of the renewal, the terms of the renewed advisory agreement were identical to those of the advisory agreement that was previously in effect.

On January 11, 2011, we and our advisor entered into an amended and restated advisory agreement. In the amended and restated advisory agreement, we agreed to a payment structure for the consideration, if any, payable to our advisor (or an affiliate thereof) should we decide to internalize our management functions. We may internalize our management by acquiring our advisor or an affiliate thereof, whether by means of a merger, stock acquisition, or asset purchase (an “Internalization Transaction”), for consideration that would be negotiated and approved by our shareholders at that time. However, pursuant to the amended and restated advisory agreement, we may not pay consideration to acquire our advisor unless at least half of the consideration is payable in shares of our common stock and held in escrow by a third party and not released to our advisor (or an affiliate thereof) until:

• the average closing price of the shares of common stock over a five-day trading period on a national securities exchange equals a price that, when combined with prior distributions paid on the shares of common stock issued in a public offering prior to listing on a national securities exchange and outstanding at the time of the Internalization Transaction (the “Subject Shares”), equals the amount necessary for the holders of the Subject Shares to be deemed to have received in the aggregate the original issue price of the Subject Shares plus a 6% cumulative, non-compounded, annual return on the issue price of the Subject Shares, assuming for purposes of this calculation that the holders of the Subject Shares have received the trading price, or

• the consideration paid (or net sale proceeds distributed) to holders of the Subject Shares in an acquisition (whether by means of a merger, stock acquisition, asset purchase, or similar

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transaction) or from our dissolution, when combined with prior distributions paid on the Subject Shares, equals the amount necessary for the holders of the Subject Shares to have received in the aggregate the original issue price of the Subject Shares plus a 6% cumulative, non-compounded, annual return on the issue price of the Subject Shares.

The date that one of these thresholds is met is the “Initial Escrow Release Date.” In the event a recapitalization causes some of the Subject Shares to be exchanged or converted into securities that are not listed on a national securities exchange as of the Initial Escrow Release Date, then the shares to be released from escrow shall be reduced to reflect the percentage of Subject Shares (and their equivalents) that are then listed, with the remaining shares in escrow to be subsequently released in proportion to and as the remaining Subject Shares (and their equivalents) become listed.

Shares held in escrow pursuant to the foregoing shall be entitled to dividends like all other shares of our common stock; however, such dividends shall also be placed in escrow and not released until the above thresholds are reached. If the conditions to break escrow are not met within 10 years of the Internalization Transaction, all shares in the escrow account shall become authorized but unissued shares and all cash in the escrow account shall belong to us. Shares of common stock held in escrow shall be voted on any matter in which common stockholders are entitled to vote in the same proportion as all other shares of common stock that vote on the matter.

Initial Investment by Our Advisor

Our advisor has invested an aggregate of $515,000 in us through the purchase of 20,000 shares of our common stock at $10.00 per share (its “initial investment”) and 35,000 shares of our common stock at $9.00 per share. Our advisor may not sell any of the 20,000 shares related to its initial investment during the period it serves as our advisor. Our advisor currently has no options or warrants to acquire any shares; however, prior to the termination of this offering, our advisor will invest 1% of the first $250,000,000 invested in us by non-affiliated investors in this offering, or up to $2,500,000. Our advisor has agreed to abstain from voting any shares it acquires in any vote for the removal of directors or any vote regarding the approval or termination of any contract with our advisor or any of its affiliates. Our advisor is directly owned and controlled by Resource Real Estate, our sponsor. In the event the advisory agreement is terminated, the shares owned by our advisor would not be automatically redeemed. Our advisor would, however, be able to participate in the share redemption program, subject to all of the restrictions of the share redemption program applicable to all other common stockholders.

In addition, in connection with the commencement of this offering, our advisor exchanged 4,500 shares of common stock for 45,000 shares of our convertible stock and purchased 4,068 shares of our convertible stock that were not sold in our private offering. As of July 1, 2011, our advisor owned 49,063 shares of our convertible stock, outside investors owned a total of 937 shares of our convertible stock and a total of 50,000 shares of convertible stock were issued and outstanding. Our convertible stock will be of no value unless our common stockholders realize or have an opportunity to realize a stated minimum return as a result of our cumulative distributions or the trading price of our shares on a national securities exchange. As a result, our convertible stock is economically similar to a back-end incentive fee, which many other non-traded REITs have agreed to pay to their external advisors.

Under certain circumstances, these shares may be converted into shares of our common stock. No additional consideration is due upon the conversion of the convertible stock. Our convertible stock will convert into shares of common stock on one of two events. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 10% cumulative, non-compounded, annual return at that price.

Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on

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the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold for our common stockholders. Each of these two events is a “Triggering Event.” Upon a Triggering Event, our convertible stock will, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

• (A) the lesser of

^¡   (i) 25% of the amount, if any, by which

¡ (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, or

^¡   (ii) 15% of the amount, if any, by which

¡ (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

• (B) the value of the company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.

However, if our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to a Triggering Event, then upon a Triggering Event the holder of the convertible stock will be entitled to a prorated portion of the number of shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor. We believe that the convertible stock provides an incentive for our advisor to increase the overall return to our investors. The conversion of the convertible stock into common shares will result in an economic benefit for the holder of those shares and dilution of the other stockholders’ interests. See “Description of Shares—Convertible Stock.”

Other Affiliates

Our Sponsor

Resource Real Estate, Inc. is our sponsor and an affiliate of both our advisor and Resource Real Estate Opportunity Manager, which manages our real estate investments. Our advisor and Resource Real Estate are indirect subsidiaries of Resource America, Inc. Resource America is a specialized asset management company that evaluates, originates, services and manages investment opportunities through its commercial finance, real estate and financial fund management operating segments. As of March 31, 2011, Resource America and Resource Real Estate collectively managed a portfolio of over $13.7 billion of assets for their own account and for third-party investors. As of March 31, 2011, that portfolio included real estate investments valued at approximately $1.6 billion, which included over 14,000 multifamily residential units, including both equity and debt investments, and approximately 1.1 million square feet of

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office, retail and industrial space. Resource Real Estate and Resource America have, or had, a number of partnerships and joint ventures with institutional partners in which such partnerships or joint ventures acquire, hold, manage and sell real estate and real estate related debt investments. In addition to capital, Resource Real Estate or Resource America, as applicable, has provided one or more of the following services to each of these partnerships or joint ventures: asset management, property and construction management or acquisitions and disposition advice. Listed below are examples of such real estate related institutional capital partnerships that have been formed with Resource Real Estate:

• Two joint ventures with a privately held, registered investment advisor specializing in alternative investments to foundations, endowments, pension plans, insurance companies and other institutional investors. The joint ventures were formed to acquire discounted real estate and real estate related debt investments and Resource Real Estate provides acquisitions advice, asset, property and construction management and disposition services.

• A partnership with an institutional investment firm with over $8 billion in assets that invests funds for pension plans, unions, corporations, endowments, foundations, and charitable organizations. The partnership was formed to own five multifamily rental properties, three of which have since been sold, and Resource Real Estate provides acquisitions advice, asset, property and construction management and disposition services.

• A partnership with a private real estate investment firm with more than $250 million of equity under management and investments of over $750 million. The partnership was formed to acquire two value-add multifamily rental properties and Resource Real Estate provides acquisitions advice, asset, property and construction management and disposition services. Resource Real Estate sold its interest in the properties to its partner in April 2010.

• A joint venture with an international investment company with over 15€ billion of assets under management and who is one of Central Europe’s leading sponsors of international real estate funds. Resource America held mezzanine debt in connection with a $128 million office building majority owned by the institutional partner, and Resource America provides asset oversight management. The asset was sold in June 2010.

• A partnership with one of Washington, D.C.’s largest full-service real estate companies that owns and developed more than 80 buildings in the Washington, D.C. metropolitan area aggregating over 20 million square feet and $6 billion in current cost. The partnership was formed to own a $167 million office building in which Resource America owned a minority interest and provides asset oversight management. The asset was sold in June 2011.

Resource America and its affiliates have also purchased seven properties and then sold tenant-in-common interests in those properties while an affiliate manages these properties. With a different investment objective planned than most other investments, the tenant-in-common interests were sold to facilitate Section 1031 like-kind exchanges for investors to defer income taxes.

Resource Real Estate is a full-service real estate firm, which employs over 400 people throughout the United States. Resource Real Estate’s principal services and functions include acquisitions, asset management, loan management, property management, construction management, restructuring, finance and dispositions. As of March 31, 2011, Resource Real Estate’s portfolio of performing assets, distressed assets, REO and equity investments, valued at approximately $1.6 billion, encompasses assets in 14 states and includes over 50 individual assets. In addition to the current assets under management, Resource Real Estate managed 50 additional distressed real estate asset resolutions since 1991, representing over $600 million in value as of March 31, 2011. These included multifamily, office, retail and hotel classes of real estate assets. All references to Resource Real Estate throughout this prospectus include predecessor affiliates of Resource America involved in real estate.

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Resource Real Estate and its affiliates have significant experience in evaluating and investing in diverse asset classes, including commercial mortgage-backed securities, mortgages, leases, bank loans, equipment leases and trust preferred securities and has developed a disciplined credit culture that is the backbone of its financial services businesses. Resource Real Estate and its affiliates have been active in the discounted asset market since 1991. Historically, Resource Real Estate’s real estate operations focused on the purchase of non-performing commercial real estate loans at discounts to their outstanding loan balances and the appraised value of their underlying properties. As a result of many programs and products, Resource Real Estate and its affiliates have a breadth of knowledge and experience in the ownership, management and resolution of discounted assets. Our advisor intends to use this breadth of knowledge and experience in the discounted asset marketplace to assist us to meet our investment objectives.

Resource Real Estate and its affiliates have a significant amount of experience and a number of relationships in the real estate and financial services markets that together put our advisor in a unique position to operate and manage our company. Specifically, our advisor believes that the following entities and factors highlight the resources that our advisor may use to compete in the discounted real estate asset marketplace:

• Resource Real Estate managed a portfolio of over $750 million in aggregate principal amount of mortgage assets, discounted mortgage loans and related property interests as of March 31, 2011 in addition to its $808.6 million portfolio of multifamily properties and other real estate assets. Resource Real Estate will provide our advisor with institutional knowledge and operational support necessary to underwrite, acquire, manage and dispose of the discounted real estate investments we intend to acquire. As of March 31, 2011, Resource Real Estate also managed a portfolio of approximately $91.1 million of commercial mortgage-backed securities led by a portfolio management team with combined 35 years of experience in real estate structured finance at commercial real estate firms, commercial banks and insurance companies.

• Resource Real Estate Opportunity Manager, LLC, a wholly owned subsidiary of Resource Real Estate, is a Delaware limited liability company that was formed in 2009 for the purpose of managing real estate investments of our advisor and its affiliates either for their own account or for other real estate programs similar to us. Although Resource Real Estate Opportunity Manager is a relatively new company, its officers and directors and the employees of its affiliates have experience in managing real estate properties, such as the real estate investments we will acquire.

• Resource Residential, an affiliate of our sponsor, is a real estate property management company focused on providing the highest quality property management services to the residents of its multifamily properties managed by the company. As of March 31, 2011, Resource Residential managed apartment communities with an aggregate value of approximately $780.9 million, which included over 50 rental properties in 14 states with over 14,000 units. Resource Residential employs over 400 professionals whose main objective is to optimize the net operating income of the properties it manages.

• Resource Financial, an affiliate of our sponsor, is a specialized asset management company that focuses on equity and equity-linked securities or other equity or debt interests in banks, thrifts and other financial services entities located in the United States. Resource Financial will provide our advisor with several sources of contacts to the financial services industry, including investment banks, brokerage firms, commercial banks and loan originators. As of March 31, 2011, Resource Financial and its affiliates managed $3.46 billion in bank investments. Resource Financial bases its origination capability on relationships that its asset management professionals have developed with these sources over their professional careers,

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as well as its presence in the marketplace as sponsor, originator, holder or acquirer for investment entities or its own account. Our advisor believes Resource Financial and its affiliates will provide us with contacts that will source appropriate real estate investments for us.

Property Manager

We have engaged our property manager, Resource Real Estate Opportunity Manager, LLC, to manage and lease particular properties and manage our real estate related debt investments. Our property manager is a wholly owned subsidiary of Resource Real Estate. The officers and managers of our property manager are as follows:

Name	Positions
Alan F. Feldman	Chief Executive Officer and Manager
Kevin M. Finkel	President and Manager
Steven R. Saltzman	Chief Financial Officer and Senior Vice President
Shelle Weisbaum	Chief Legal Officer, Senior Vice President and Secretary
David E. Bloom	Senior Vice President
Jonathan Z. Cohen	Manager

For more information regarding the background and experience of Messrs. Feldman, Finkel, Saltzman, Bloom and Cohen and Ms. Weisbaum see “Management—Executive Officers and Directors.”

Dealer Manager

We have retained Chadwick Securities, Inc., an affiliate of our advisor, to conduct this offering. Chadwick Securities provides wholesaling, sales, promotional and marketing assistance services to us in connection with the distribution of the shares offered pursuant to this prospectus. The principal business of Chadwick Securities is participating in and facilitating the distribution of securities of programs sponsored by affiliates of Resource America, including Resource Real Estate-sponsored programs. This is the fifth offering in which Chadwick Securities has served as dealer manager for Resource Real Estate-sponsored programs.

Below is a brief description of the background and experience of the executive officers of Chadwick Securities.

Darshan V. Patel has been the President of Chadwick Securities, Inc. since 2004. Mr. Patel has also served as Chief Legal Officer and Secretary of Resource Capital Partners since 2002. Mr. Patel also is Vice President of Resource America since 2005, Chief Legal Officer of Resource Real Estate since 2004, and Associate General Counsel for Resource America since 2001. From 1998 to 2001, Mr. Patel was associated with the law firm of Berman, Paley, Goldstein & Kannry, practicing commercial litigation and real estate. From 1996 to 1998, Mr. Patel was associated with the law firm of Glynn & Associates, practicing litigation and real estate. Mr. Patel received a Bachelor of Arts degree from Boston University. He also received a Juris Doctor degree from American University’s Washington College of Law.

Donna Zanghi has been the Vice President of Chadwick Securities, Inc. since 2004. Ms. Zanghi has also been a Vice President of Resource America, Inc. since 2006 and an employee of Resource America, Inc. since 1995. Her primary duties relate to her position as Vice President and Chief Financial & Operations Principal (FINRA Series 27 license) for Chadwick Securities, Inc., a registered broker-dealer and a wholly owned subsidiary of Resource America, Inc. She also holds a Uniform Securities Agent (FINRA Series 63) license. Since November 1995, when she joined Resource America, Inc., she has

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worked in various corporate financial and accounting related capacities including Internal Auditor. She has also previously served as Controller and as Chief Financial Officer of several operating subsidiaries. She has been a Certified Public Accountant in Pennsylvania since 1986 and is currently a member of the Pennsylvania Institute of Certified Public Accountants. Prior to her joining the company, she was a Vice President and Controller of a privately held real estate company since May 1984, and prior thereto, from July 1980 until May 1984, she was an auditor for Arthur Andersen & Co. She holds a Masters in Business Administration degree from the University of Notre Dame and a Bachelor of Arts degree, Cum Laude, from Villanova University.

Management Decisions

Messrs. Cohen, Feldman and Finkel have the primary responsibility for the management decisions of our advisor. Our sponsor, Resource Real Estate, and its team of real estate professionals, including Messrs. Cohen, Feldman and Finkel, acting through our advisor, have the primary responsibility for the selection of investments, the negotiation for these investments, and the financing, asset-management and disposition decisions. A majority of our board of directors and a majority of the conflicts committee approves all proposed real estate property investments and certain significant real estate related debt investments.

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MANAGEMENT COMPENSATION

Although we have executive officers who manage our operations, we have no paid employees. Our advisor and the real estate professionals at our advisor manage our day-to-day affairs and our portfolio of real estate and real estate related debt investments, subject to the board’s supervision. The following table summarizes all of the compensation and fees that we pay to our advisor and its affiliates, including amounts to reimburse their costs in providing services. Selling commissions and dealer manager fees may vary for different categories of purchasers as described under “Plan of Distribution.” This table assumes the shares are sold through distribution channels associated with the highest possible selling commissions and dealer manager fees (with no discounts to any categories of purchasers) and assumes a $9.50 price for each share sold through our distribution reinvestment plan. No selling commissions or dealer manager fees are payable on shares sold through our distribution reinvestment plan.

Form of Compensation  and Recipient	Determination of Amount	Estimated Amount  for Maximum Offering(1)
Organization and Offering Stage
Selling Commissions – Chadwick Securities(2)	Up to 7.0% of gross offering proceeds before reallowance of commissions earned by participating broker-dealers, except no selling commissions are payable on shares sold under the distribution reinvestment plan. Chadwick Securities, our dealer manager, reallows 100% of commissions earned to participating broker-dealers.	$52,500,000
Dealer Manager Fee – Chadwick Securities(2)	Up to 3.0% of gross offering proceeds, except no dealer manager fee is payable on shares sold under the distribution reinvestment plan. Chadwick Securities may reallow to any participating broker-dealer up to 1.0% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee. See “Plan of Distribution.”	$22,500,000
Other Organization and Offering Expenses – Resource Real Estate Opportunity Advisor and Chadwick Securities(3)	Pursuant to the terms of our advisory agreement, we reimburse our advisor for organization and offering expenses it may incur on our behalf, but only to the extent that such reimbursement does not cause organization and offering expenses (other than selling commissions and the dealer manager fee) to exceed 2.5% of gross offering proceeds as of the date of reimbursement. However, if we raise the maximum offering amount in the primary offering and under the distribution reinvestment plan, we expect organization and offering expenses (other than selling commissions and the dealer manager fee) to be $14,627,066 or 1.78% of gross offering proceeds. These organization and offering expenses include all actual expenses (other than selling commissions and the dealer manager fee) to be incurred on our behalf and paid by us in connection with the offering.	$14,627,066

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Form of Compensation  and Recipient	Determination of Amount	Estimated Amount  for Maximum Offering(1)
Acquisition and Development Stage
Acquisition Fees – Resource Real Estate Opportunity Advisor or its affiliates(4)	2.0% of the cost of investments acquired by us, or the amount funded by us to acquire loans, including acquisition expenses and any debt attributable to such investments. The computation of Acquisition Fees paid to the Advisor also include amounts incurred or reserved for capital expenditures that are used to provide funds for capital improvements and repairs applied to any real property investment acquired where we plan to add value.	$19,822,291 (maximum offering assuming leverage of 35% of the cost of our investment)/ $51,537,956 (maximum offering assuming leverage of 75% of the cost of our investment)
Acquisition Expenses – Resource Real Estate Opportunity Advisor or its affiliates(4)	Reimbursement for all out-of-pocket expenses incurred in connection with the selection and acquisition of properties or other real estate related debt investments, whether or not we ultimately acquire the property or other real estate related debt investment.	Actual amounts are dependent upon acquisition activity and therefore cannot be determined at the present time.
Debt Financing Fee – Resource Real Estate Opportunity Advisor or its affiliates	0.5% of the amount of any debt financing obtained; provided, however, that the sum of the debt financing fee, the construction management fee paid to our property manager and its affiliates and the acquisition fees and expenses described above may not exceed 6.0% of the contract price of the property unless a majority of the board of directors (including all the members of the conflicts committee) not otherwise interested in the transaction determines that such fee is commercially competitive, fair and reasonable to us. In no event will the debt financing fee be paid more than once in respect of the same debt. For example, upon refinancing, our advisor would only receive 0.5% of the incremental amount of additional debt financing obtained in the refinancing.	Actual amounts are dependent upon the amount of any debt financed and upon many other factors, such as whether the debt is incurred in connection with the acquisition of a property or subsequent to the acquisition and therefore cannot be determined at the present time.
Construction Management Fee – Resource Real Estate Opportunity Manager or its affiliates	5.0% of actual aggregate cost to construct improvements, or to repair, rehab or reconstruct a property; provided, however, that the sum of the construction management fee paid to our property manager and its affiliates and the acquisition fee described above and acquisition expenses may not exceed 6.0% of the contract price of the property unless a majority of the board of directors (including all the members of the conflicts committee) not otherwise interested in the transaction determines that such fee is commercially competitive, fair and reasonable to us.	Actual amounts are dependent upon usual and customary construction management fees for particular projects and therefore the amount cannot be determined at the present time.

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Form of Compensation  and Recipient	Determination of Amount	Estimated Amount  for Maximum Offering(1)
Operational Stage
Property Management/Debt Servicing Fees – Resource Real Estate Opportunity Manager or its affiliates	With respect to real property investments, 4.5% of the actual gross cash receipts from the operation of the property; provided that for properties that are less than 75% occupied, the property manager receives a minimum property management fee for the first 12 months of ownership in an amount equal to $40 per unit per month for multifamily rental properties or $0.05 per square foot per month for other types of properties. With respect to real estate related debt investments managed by our property manager or its affiliates, 2.75% of gross income paid on these investments. The fee attributable on our real estate related debt investments covers our property manager’s services in monitoring the performance of our real estate related debt investments, including (i) collecting amounts owed to us, (ii) reviewing on an as-needed basis the properties serving, directly or indirectly, as collateral for the real estate related debt investments, the owners of those properties and the markets in general and (iii) maintaining escrow accounts, monitoring advances, monitoring loan covenants and reviewing insurance compliance. For properties or debt investments managed by third parties, the property manager receives the property management fee or debt servicing fee and pays the third party directly from that fee an amount for managing the property or debt investment. Our property manager or its affiliates do not collect both a fee for managing a debt investment and a separate fee for managing the real estate property underlying such debt investment for the same time period. Our property manager may, in its discretion, from time to time defer payment of and accrue all or any portion of these property management and debt servicing fees.	Actual amounts are dependent upon gross revenues of specific properties and actual management fees or property management fees or will be dependent upon the total equity and debt capital we raise and the results of our operations and therefore cannot be determined at the present time.

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Form of Compensation  and Recipient	Determination of Amount	Estimated Amount  for Maximum Offering(1)
Asset Management Fee – Resource Real Estate Opportunity Advisor or its affiliates(5)	Monthly fee equal to one-twelfth of 1.0% of the higher of the cost or independently appraised value of each asset, without deduction for depreciation, bad debts or other non-cash reserves. For purposes of this calculation, “cost” equals the amount actually paid or budgeted (including acquisition fees and expenses) to purchase each asset we acquire, including any debt attributable to the asset, provided that, with respect to any properties we develop, construct or improve, cost includes the amount expended by us for the development, construction or improvement of an asset. For purposes of this calculation, “value” equals the value of an asset established by the most recent independent valuation report, if available. The asset management fee is based only on the portion of the cost or value attributable to our investment in an asset if we do not own all or a majority of an asset and do not manage or control the asset.	The actual amounts are dependent upon the total equity and debt capital we raise and the results of our operations; we cannot determine these amounts at the present time.
Other Operating Expenses – Resource Real Estate Opportunity Advisor or its affiliates(6)	We reimburse the expenses incurred by our advisor in connection with its provision of services to us, including our allocable share of costs for advisor personnel and overhead, including allocable personnel salaries and other employment expenses. However, we do not reimburse our advisor or its affiliates for employee costs in connection with services for which our advisor earns acquisition fees or disposition fees.	Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.
Disposition Fees – Resource Real Estate Opportunity Advisor or its affiliates(7)	For substantial assistance in connection with the sale of investments, we pay our advisor or its affiliates the lesser of (i) one-half of the aggregate brokerage commission paid or, if none is paid, the amount that customarily would be paid at market rate or (ii) 2.75% of the contract sales price of each real estate investment, loan, debt-related security, or other investment sold (including mortgage-backed securities or collateralized debt obligations issued by a subsidiary of ours as part of a securitization transaction). The conflicts committee determines whether the advisor or its affiliate has provided substantial assistance to us in connection with the sale of an asset. We do not pay a disposition fee upon the maturity, prepayment or workout of a loan or other real estate related debt investment; however, if we take ownership of a property as a result of a workout or foreclosure of a loan or we provide substantial assistance during the course of a workout, we do pay a disposition fee upon the sale of such property or disposition of such loan or other real estate related debt investment.	Actual amounts are dependent upon aggregate asset value and therefore cannot be determined at the present time.

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Form of Compensation  and Recipient	Determination of Amount	Estimated Amount  for Maximum Offering(1)
Common Stock Issuable Upon Conversion of Convertible Stock – Resource Real Estate Opportunity Advisor	Our convertible stock will be of no value unless our common stockholders realize or have an opportunity to realize a stated minimum return as a result of our cumulative distributions or the trading price of our shares on a national securities exchange. As a result, our convertible stock is economically similar to a back-end incentive fee, which many other non-traded REITs have agreed to pay to their external advisors. Our convertible stock will convert into shares of common stock on one of two events. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 10% cumulative, non-compounded, annual return at that price. Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold for our common stockholders. Each of these two events is a “Triggering Event.” Upon a Triggering Event, our convertible stock will, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of •     (A) the lesser of ¡         (i) 25% of the amount, if any, by which ¡       (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds ¡       (2) the sum of the aggregate issue price of those outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, or	Actual amounts depend on the value of our company at the time the convertible stock converts or becomes convertible and therefore cannot be determined at the present time.

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Form of Compensation  and Recipient	Determination of Amount	Estimated Amount  for Maximum Offering(1)
	¡        (ii) 15% of the amount, if any, by which ¡       (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds ¡       (2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by •     (B) the value of the company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion. However, if our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to a Triggering Event, then upon a Triggering Event the holder of the convertible stock will be entitled to a prorated portion of the number of shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor.

(1) The estimated maximum dollar amounts are based on the sale of the maximum of 82,500,000 shares to the public, including 7,500,000 shares through our distribution reinvestment plan.

(2) All or a portion of the selling commissions are not charged with regard to shares sold to certain categories of purchasers. A reduced dealer manager fee is payable with respect to certain volume discount sales. See “Plan of Distribution.”

(3) These expenses include our legal, accounting, printing, mailing and filing fees, charges of our escrow holder, charges of our transfer agent, charges of our advisor for processing subscription agreements, reimbursement of bona fide invoiced due diligence expenses of broker-dealers, reimbursement of our advisor for salaries of its employees and other costs in connection with preparing supplemental sales materials, the issuer’s costs of conducting bona fide training and education meetings held by us, including travel, meal and lodging costs of non-registered officers of the issuer and our advisor to attend such meetings, and the issuer’s costs of attending retail seminars conducted by broker-dealers, including travel, meal and lodging costs for non-registered officers of the issuer and our advisor to attend such seminars.

After the termination of the primary offering and again after termination of the offering under our distribution reinvestment plan, our advisor has agreed, pursuant to the terms of our advisory agreement, to reimburse us to the extent total organization and offering expenses (other than selling commissions and the dealer manager fee) borne by us exceed 2.5% of the gross proceeds raised in the applicable offering.

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(4) Because the acquisition fees we pay our advisor are a percentage of the purchase price of an investment, this fee will be greater to the extent we fund acquisitions through (i) the incurrence of debt (which we expect, based on current market conditions, to represent approximately 35% of the purchase price of our investments if we sell the maximum number of shares offered hereby), (ii) retained cash flow from operations, (iii) issuances of equity in exchange for properties and other assets and (iv) proceeds from the sale of shares under our distribution reinvestment plan.

In addition to acquisition fees, we reimburse our advisor for amounts it pays to third parties in connection with the selection, acquisition or development of a property or acquisition of a loan, whether or not we ultimately acquire the property or the loan. Our charter limits our ability to make or purchase property or other investments if the total of all acquisition fees and expenses relating to the investment exceeds 6% of the contract purchase price or 6% of the total funds advanced, unless a majority of the directors, including all the members of the conflicts committee, not otherwise interested in the transaction, approve fees in excess of these limits based on a determination that the transaction is commercially competitive, fair and reasonable to us.

(5) The asset management fee is based on cost plus any amounts budgeted to develop, construct or improve the property. For example, if we purchase a value-add multifamily property that costs $2 million initially with the plan to invest another $1 million in the property to upgrade it, the total budgeted cost for this property would be $3 million for purposes of calculating the asset management fee.

(6) Commencing with the four fiscal quarters ended September 30, 2011, our advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of our assets during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including advisory fees, but excluding: (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that we do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property).

(7) Our charter limits the maximum amount of the disposition fees payable to the advisor and its affiliates to 3% of the contract sales price. To the extent this disposition fee is paid upon the sale of any assets other than real property, it counts against the limit on “total operating expenses” described in note 6 above.

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STOCK OWNERSHIP

The following table sets forth the beneficial ownership of our common stock as of July 1, 2011 for each person or group that holds more than 5% of our common stock, for each director and executive officer and for our directors and executive officers as a group. To our knowledge, each person that beneficially owns our shares has sole voting and dispositive power with regard to such shares.

Name of Beneficial Owner(1)	Number of Shares Beneficially Owned(2)	Percent of All Shares(3)
Resource Real Estate Opportunity Advisor, LLC	50,968	1%
Jonathan Z. Cohen, Chairman of the Board	62,246	1.2%
Alan F. Feldman, Chief Executive Officer and Director	56,119	1%
Kevin M. Finkel, Chief Operating Officer and President	50,968	1%
Steven R. Saltzman, Chief Financial Officer, Senior Vice President and Treasurer	—	—
Shelle Weisbaum, Chief Legal Officer, Senior Vice President and Secretary	—	—
David E. Bloom, Senior Vice President	—	—
Gary Lichtenstein, Independent Director	—	—
Lee F. Shlifer, Independent Director	—	—
Thomas J. Ikeler, Independent Director	—	—
All directors and officers as a group	67,397	1.3%

(1) The address for each beneficial owner is One Commerce Square, 2005 Market Street, Philadelphia, Pennsylvania 19103.

(2) As of July 1, 2011, Resource Real Estate Opportunity Advisor, LLC owned 50,968 shares of our outstanding stock which are deemed to be beneficially owned by Jonathan Z. Cohen, Alan F. Feldman and Kevin M. Finkel who control our advisor. In connection with the commencement of this offering, our advisor exchanged 4,500 shares of common stock for 45,000 shares of our convertible stock and purchased 4,068 shares of our convertible stock that were not sold in our private offering. As of July 1, 2011, our advisor owned 49,063 shares of our convertible stock. The actual number of shares of common stock which will be issuable upon conversion of the convertible stock, if any, is indeterminable at this time. Our advisor is owned and controlled by Resource Real Estate, Inc.

(3) Based on 5,241,659 shares of common stock outstanding as of July 1, 2011.

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CONFLICTS OF INTEREST

We are subject to various conflicts of interest arising out of our relationship with our advisor, Resource Real Estate Opportunity Advisor, and its affiliates, some of whom serve as our executive officers and directors. We discuss these conflicts below and conclude this section with a discussion of the corporate governance measures we have adopted to ameliorate some of the risks posed by these conflicts.

Our Affiliates’ Interests in Other Resource Real Estate Programs

General

All of our executive officers, some of our directors and other key real estate professionals at our advisor are also officers, directors, managers or key professionals at our advisor, our dealer manager and other Resource Real Estate entities that are the sponsors of other real estate programs, including programs that have investment objectives that are similar to ours. These individuals have legal and financial obligations with respect to those programs that are similar to their obligations to us, and we expect that they will organize other real estate partnerships and programs in the future.

Affiliates of our advisor have sponsored or co-sponsored the following real estate programs with investment objectives similar to ours:

1. SR Real Estate Investors, L.P.;

2. SR Real Estate Investors II, L.P.;

3. Resource Real Estate Investors, L.P.;

4. Resource Real Estate Investors II, L.P.;

5. Resource Real Estate Investors III, L.P.;

6. Resource Real Estate Investors IV, L.P.;

7. Resource Real Estate Investors V, L.P.;

8. Resource Real Estate Investors 6, L.P.;

9. Resource Real Estate Investors 7, L.P.; and

10. Resource Real Estate Opportunity Fund L.P.

Conflicts of interest may arise between us and the programs that have not yet been liquidated and between us and future programs. Specifically, we are not currently in direct competition with any of our sponsor’s prior programs to raise funds through an offering or to acquire assets. However, we may in the future compete with Resource Capital Corp. for capital and acquisition opportunities.

Allocation of Investment Opportunities

We rely on our advisor, and its executive officers and real estate professionals to identify suitable investment opportunities. Our advisor’s executive officers and real estate professionals are also key employees of Resource America and the advisors to other Resource Real Estate-sponsored programs. As such, the other Resource Real Estate-sponsored programs, especially those that are currently raising offering proceeds, if any, and Resource America rely on many of the same key real estate professionals for their investment opportunities. Many investment opportunities that are suitable for us may also be suitable

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for other Resource Real Estate programs or Resource America. When these real estate professionals direct an investment opportunity to any Resource Real Estate-sponsored program, they, in their sole discretion, will offer the opportunity to the program for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program. As a result, these Resource Real Estate professionals could direct attractive investment opportunities to other entities. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to purchase real estate or any significant asset related to real estate unless the advisor has recommended the investment to us. See “—Certain Conflict Resolution Measures.”

Joint Ventures with Affiliates

We may enter into joint venture agreements with other Resource Real Estate-sponsored programs or Resource America for the acquisition, development or improvement of properties or other investments. See “Investment Objectives and Policies—Co-Investment Strategy.” Our advisor and the advisors to the other Resource Real Estate-sponsored programs and affiliated entities, have the same executive officers and key employees, and these persons will face conflicts of interest in determining which Resource Real Estate program should enter into any particular joint venture agreement. These persons may also face a conflict in structuring the terms of the relationship between our interests and the interests of the Resource Real Estate-affiliated co-venturer and in managing the joint venture. Any joint venture agreement or transaction between us and a Resource Real Estate-affiliated co-venturer will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. The Resource Real Estate-affiliated co-venturer may have economic or business interests or goals that are or may become inconsistent with our business interests or goals. These co-venturers may thus benefit to our and your detriment. See “Risk Factors—Risks Related to Conflicts of Interest.”

Competition for Tenants and Others

Conflicts of interest may exist to the extent that we acquire properties in the same geographic areas where other Resource Real Estate programs or affiliated entities own properties. In such a case, a conflict could arise in the leasing of properties or apartment units in the event that we and another Resource Real Estate program or affiliated entity were to compete for the same tenants in negotiating leases, or a conflict could arise in connection with the resale of properties in the event that we and another Resource Real Estate program or affiliated entity were to attempt to sell similar properties at the same time. Conflicts of interest may also exist at such time as we or any of our affiliates managing property on our behalf seek to employ developers, contractors, building managers or other third parties. Our advisor and its affiliates, including the advisors of other Resource Real Estate programs and affiliated entities, seek to reduce conflicts that may arise with respect to properties available for sale or rent by making prospective purchasers or tenants aware of all such properties. Our advisor and the advisors of other Resource Real Estate programs and affiliated entities also seek to reduce conflicts relating to the employment of developers, contractors or building managers by making prospective service providers aware of all properties in need of their services. However, our advisor and the advisors of other Resource Real Estate programs and affiliated entities cannot fully avoid these conflicts because they may establish differing terms for resales or leasing of the various properties or differing compensation arrangements for service providers at different properties.

Allocation of Our Officers’ and Affiliates’ Time

We rely on our officers to operate and oversee our operations. As a result of our officers’ responsibilities and duties owed to other Resource Real Estate-sponsored programs and our sponsor’s parent, Resource America, our officers face conflicts of interest in allocating their time among us and other real estate programs and activities. Specifically, Messrs. Feldman, Finkel and Saltzman and Ms. Weisbaum intend to devote approximately 60% of their time to us and the other 40% to other Resource Real Estate-sponsored programs and Resource America, serving those other entities in substantially the same capacity

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as they serve us. Mr. Bloom intends to devote approximately 20% of his time to us, with the remaining 80% to other Resource Real Estate-sponsored programs and Resource America in a similar capacity as he serves us.

We also rely on our advisor, its affiliates and its key real estate professionals for the day-to-day operation of our business. Our advisor, its affiliates and its key real estate professionals have interests in other Resource Real Estate programs, and they have engaged in and they will continue to engage in other business activities. As a result, our advisor and its affiliates and key employees face conflicts of interest in allocating their time among us and other Resource Real Estate-sponsored programs and activities in which they are involved. However, our advisor believes that it and its affiliates have sufficient personnel to fully discharge their responsibilities to all of the Resource Real Estate programs and ventures in which they are involved.

Receipt of Fees and Other Compensation by Our Advisor and its Affiliates

Our advisor and its affiliates receive substantial fees from us, which fees were not negotiated at arm’s length. These fees could influence our advisor’s advice to us, as well as the judgment of affiliates of our advisor, some of whom also serve as our executive officers and directors and the key real estate professionals at our advisor. Among other matters, these compensation arrangements could affect their judgment with respect to:

• the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement, the dealer manager agreement and the management agreement;

• offerings of equity by us, which entitle Chadwick Securities to dealer manager fees and will likely entitle our advisor to increased acquisition and asset management fees;

• sales of properties and other investments, which entitle our advisor to disposition fees and the possible issuance to our advisor of shares of our common stock through the conversion of our convertible stock;

• acquisitions of properties and other investments, which entitle our advisor to acquisition, asset management fees and possibly property management fees and, in the case of acquisitions of investments from other Resource Real Estate-sponsored programs, might entitle affiliates of our advisor to disposition fees in connection with its services for the seller, which fees are based on the cost of the investment, including the amount budgeted for the development, construction, and improvement of each asset, and are not based on the quality of the investment or the quality of the services rendered to us, which may influence our advisor to accept a higher purchase price for those assets, recommend riskier transactions to us or purchase assets that may not be in the best interest of our stockholders;

• borrowings to acquire properties and other investments, which borrowings will increase the acquisition and asset management fees payable to our advisor as well as entitle the advisor to a debt financing fee;

• whether we seek stockholder approval to internalize our management, which may entail acquiring assets (such as office space, furnishings and technology costs) and negotiating compensation for key real estate professionals at our advisor and its affiliates that may result in these individuals receiving more compensation from us than they currently receive from our advisor and its affiliates, could result in diluting your interest in us, could reduce the net income per share and funds from operations per share attributable to your investment and may provide incentives to our advisor to pursue an internalization transaction rather than an alternative strategy;

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• whether and when we seek to list our common stock on a national securities exchange, which listing could entitle our advisor to the issuance of shares of our common stock through the conversion of our convertible stock and could provide benefits to our advisor and its affiliates over liquidation by seeking stockholder approval to internalize our management prior to listing; and

• whether and when we seek to sell the company or its assets, which sale could entitle our advisor to the issuance of shares of our common stock through the conversion of our convertible stock.

As of the date of this prospectus, we do not intend to purchase investments from other Resource Real Estate-sponsored programs or other affiliates. However, we may in the future enter into transactions, including acquisitions, with other Resource Real Estate-sponsored programs or other affiliates if an attractive opportunity presents itself and our conflicts committee unanimously approves the transaction as explained below under “—Certain Conflict Resolution Measures—Other Charter Provisions Relating to Conflicts of Interest—Our Acquisitions.”

In connection with the commencement of this offering, our advisor exchanged 4,500 shares of common stock for 45,000 shares of our convertible stock and purchased 4,068 shares of our convertible stock that were not sold in our private offering. As of July 1, 2011, our advisor owned 49,063 shares of our convertible stock, outside investors owned a total of 937 shares of our convertible stock and a total of 50,000 shares of convertible stock were issued and outstanding. Under limited circumstances, these shares may be converted into shares of our common stock, thereby resulting in dilution of the stockholders’ interest in us. Our convertible stock will convert into shares of common stock on one of two events. First, it will convert if we have paid distributions to common stockholders such that aggregate distributions are equal to 100% of the price at which we sold our outstanding shares of common stock plus an amount sufficient to produce a 10% cumulative, non-compounded, annual return at that price.

Alternatively, the convertible stock will convert if we list our shares of common stock on a national securities exchange and, on the 31st trading day after listing, the value of our company based on the average trading price of our shares of common stock since the listing, plus prior distributions, combine to meet the same 10% return threshold for our common stockholders. Each of these two events is a “Triggering Event.” Upon a Triggering Event, our convertible stock will, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

• (A) the lesser of

^¡   (i) 25% of the amount, if any, by which

¡ (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, or

^¡   (ii) 15% of the amount, if any, by which

¡ (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

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• (B) the value of the company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion.

However, if our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to a Triggering Event, then upon a Triggering Event the holder of the convertible stock will be entitled to a prorated portion of the number of shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor.

Our advisor can influence whether we terminate the advisory agreement or allow it to expire without renewal or whether our common shares are listed for trading on a national securities exchange. Accordingly, our advisor can influence both the conversion of the convertible stock issued to it and the resulting dilution of other stockholders’ interests. There will be no distributions paid on shares of convertible stock. For a description of the convertible stock, see “Description of Shares—Convertible Stock.”

Fiduciary Duties Owed by Some of Our Affiliates to Our Advisor and Our Advisor’s Affiliates

Our executive officers, some of our directors and the key real estate professionals at our advisor are also officers, directors, managers or key professionals for:

• Resource Real Estate Opportunity Advisor, our advisor;

• Resource Real Estate Opportunity Manager, one of our possible property managers;

• Chadwick Securities, our dealer manager; and

• other Resource Real Estate-sponsored programs.

As a result, their loyalties to each of these programs, their stockholders, members and limited partners may from time to time conflict with the fiduciary duties that they owe us.

Affiliated Dealer Manager

Since Chadwick Securities, our dealer manager, is an affiliate of our advisor, you do not have the benefit of an independent due diligence review and investigation of the type normally performed by an independent underwriter in connection with the offering of securities. See “Plan of Distribution.”

Affiliated Property Manager

Since properties and debt investments we acquire are managed by Resource Real Estate Opportunity Manager, we do not have the benefit of independent property management. See “Management—Other Affiliates.”

Certain Conflict Resolution Measures

Conflicts Committee

In order to reduce or eliminate certain potential conflicts of interest, our charter creates a conflicts committee of our board of directors composed of all of our independent directors. An “independent director” is a person who is not one of our officers or employees or an officer or employee of our advisor, the sponsor or its affiliates and has not been so for the previous two years and meets the other requirements set forth in our charter. Our charter authorizes the conflicts committee to act on any matter permitted under

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Maryland law. Both the board of directors and the conflicts committee must act upon those conflict-of-interest matters that cannot be delegated to a committee under Maryland law. Our charter also empowers the conflicts committee to retain its own legal and financial advisors. Among the matters we expect the conflicts committee to act upon are:

• the continuation, renewal or enforcement of our agreements with our advisor and its affiliates, including the advisory agreement and the dealer manager agreement;

• public offerings of securities;

• sales of real property;

• investments in real property;

• investments in assets other than real property if the value exceeds the lesser of (i) $10 million or (ii) 10% of the total assets of the company at the time of acquisition;

• establishment of investment guidelines with respect to investments in assets other than real property where the value is the lesser of (i) $10 million or (ii) 10% of the total assets of the company at the time of acquisition and the oversight of our advisor’s compliance with such guidelines;

• transactions with affiliates;

• compensation of our officers and directors who are affiliated with our advisor;

• whether and when we seek to list our shares of common stock on a national securities exchange;

• whether and when we seek to become self-managed, which decision could lead to our acquisition of entities affiliated with our advisor at a substantial price; and

• whether and when we seek to sell the company or substantially all of its assets.

A majority of our board of directors and a majority of the conflicts committee approves all proposed real estate property investments and certain significant real estate related debt investments as described above.

Allocation of Investment Opportunities

Many investment opportunities that are suitable for us may also be suitable for other Resource Real Estate-sponsored programs, including Resource Capital and Resource America. Our advisor and its affiliates share the same executive officers and key real estate professionals. When these Resource Real Estate professionals direct an investment opportunity to any Resource Real Estate-sponsored program, they, in their sole discretion, will have to determine the program for which the investment opportunity is most suitable based on the investment objectives, portfolio and criteria of each program. Our advisory agreement with our advisor requires that this determination be made in a manner that is fair without favoring any other Resource Real Estate-sponsored program. In determining the Resource Real Estate-sponsored program for which an investment opportunity would be most suitable, Resource Real Estate professionals considers the following factors:

• the investment objectives and criteria of each program;

• the cash requirements of each program;

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• the effect of the investment on the diversification of each program’s portfolio by type of investment, risk of investment, type of commercial property, geographic location of properties, and tenants of properties;

• the policy of each program relating to leverage;

• the anticipated cash flow of the property or asset to be acquired;

• the income tax effects of the purchase on each program;

• the size of the investment; and

• the amount of funds available to each program and the length of time such funds have been available for investment.

If a subsequent event or development, such as a delay in the closing of a property or investment or a delay in the construction of a property, causes any investment, in the opinion of the Resource Real Estate professionals, to be more appropriate for another Resource Real Estate program, they may offer the investment to another Resource Real Estate program. It may also be appropriate for our advisor to allocate a portion of an investment to us and another portion to other programs sponsored by affiliates of our advisor via a co-investment. See “Certain Conflict Resolution Measures—Resolution of Potential Conflicts of Interest in Allocation of Investment Opportunities” below.

Our advisory agreement requires that our advisor inform the conflicts committee each quarter of the investments that have been purchased by other Resource Real Estate programs for whom our advisor or one of its affiliates serves as an investment adviser so that the conflicts committee can evaluate whether we are receiving our fair share of opportunities. Our advisor’s success in generating investment opportunities for us and the fair allocation of opportunities among Resource Real Estate programs are important factors in the conflicts committee’s determination to continue or renew our arrangements with our advisor and its affiliates. The conflicts committee has a duty to ensure that favorable investment opportunities are not disproportionately allocated to other Resource Real Estate-sponsored programs. For so long as we are externally advised, our charter provides that it shall not be a proper purpose of the corporation for us to purchase real estate or any significant asset related to real estate unless the advisor has recommended the investment to us.

Resolution of Potential Conflicts of Interest in Allocation of Investment Opportunities

Our advisor is required to use commercially reasonable efforts to present a continuing and suitable investment program to us that is consistent with our investment policies and objectives, but neither our advisor nor its affiliates are obligated generally to present any particular investment opportunity to us even if the opportunity is of a character that, if presented to us, could be taken by us. Our advisor’s ultimate parent, Resource America, also invests in real estate and real estate related assets and sponsors other programs that do so. In the event that an investment is identified by our advisor or its affiliates that is appropriate both for us and Resource America or a program sponsored by Resource America, but the amount available is less than the amount sought by us and Resource America or the program sponsored by Resource America, the investment may be allocated among us and the other party in proportion to the relative amounts of the investment sought by each. If, however, the other party is Resource America (as opposed to a program sponsored by Resource America or Resource Capital), then we must be offered the opportunity to take a majority share of any proposed co-owned multifamily properties or debt related to multifamily properties. Such co-investments must be approved by the unanimous vote of our conflicts committee.

Our co-investment rights are subject to the availability of capital for investment. If the portion of the investment allocable to one of us would be too small or too large for it to be appropriate for one of us, either because of economic or market inefficiency, regulatory constraints, such as REIT qualification or

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exclusion from regulation under the Investment Company Act, or otherwise, that portion will be reallocated to the other party. In addition, rather than splitting an investment between us and a program sponsored by Resource America, it is also possible that opportunities will be allocated on an alternating basis with the view that, overall, we and programs sponsored by Resource America would be treated equitably.

An affiliate of our advisor is the external manager of Resource Capital, a publicly traded REIT sponsored by Resource America. Resource Capital invests in the following asset classes: commercial real estate related assets such as whole loans, A-Notes, B-Notes, mezzanine loans and mortgage-related securities, real estate, and commercial finance assets such as other asset-backed securities, senior secured corporate loans, equipment leases and notes, trust preferred securities, and debt tranches of collateralized debt obligations. Pursuant to the management agreement between Resource Capital and its external manager, Resource Capital’s manager and its affiliates are permitted to advise other programs; however, such other programs, if they are REITs, may not invest primarily in domestic mortgage-backed securities. Although Resource Capital’s manager need not offer Resource Capital the opportunity to participate in every investment that is consistent with Resource Capital’s investment objectives, its manager and its manager’s affiliates are contractually obligated to allocate investment opportunities that are suitable for both Resource Capital and other programs they sponsor on an equitable basis.

Resource Real Estate and our advisor may make exceptions to these general policies when other circumstances make application of the policies inequitable or uneconomic.

Other Charter Provisions Relating to Conflicts of Interest

In addition to the creation of the conflicts committee, our charter contains many other restrictions relating to conflicts of interest including the following:

Advisor Compensation. The conflicts committee evaluates at least annually whether the compensation that we contract to pay to our advisor and its affiliates is reasonable in relation to the nature and quality of services performed and whether such compensation is within the limits prescribed by the charter. The conflicts committee supervises the performance of our advisor and its affiliates and the compensation we pay to them to determine whether the provisions of our compensation arrangements are being carried out. This evaluation is based on the following factors as well as any other factors deemed relevant by the conflicts committee:

• the amount of the fees and any other compensation, including stock-based compensation, paid to our advisor and its affiliates in relation to the size, composition and performance of our investments;

• whether the expenses incurred by us are reasonable in light of our investment performance, net assets, net income and the fees and expenses of other comparable unaffiliated REITs;

• the success of our advisor in generating appropriate investment opportunities;

• the rates charged to other companies, including other REITs, by advisors performing similar services;

• additional revenues realized by our advisor and its affiliates through their relationship with us, including whether we pay them or they are paid by others with whom we do business;

• the quality and extent of service and advice furnished by our advisor and its affiliates;

• the performance of our investment portfolio; and

• the quality of our portfolio relative to the investments generated by our advisor and its affiliates for their own account and for their other clients.

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Under our charter, we can only pay our advisor a disposition fee in connection with the sale of a property or other asset if it provides a substantial amount of the services in the effort to sell the property or asset. In such circumstances, our charter authorizes us to pay to the advisor the following fee: (i) if a brokerage commission is paid to a person other than an affiliate of the sponsor, an amount up to one-half of the total brokerage commissions paid but in no event an amount that exceeds 3% of the sales price of such property or properties or (ii) if no brokerage commission is paid to a person other than an affiliate of the sponsor, an amount up to 3% of the sales price of such property or properties. Although our charter limits this commission to 3% of the sales price, our advisory agreement provides for a 2.75% fee. Any increase in this fee would require the approval of a majority of the members of our conflicts committee. Moreover, our charter also provides that the commission, when added to all other disposition fees paid to unaffiliated parties in connection with the sale, may not exceed the lesser of a competitive real estate commission or 6% of the sales price of the property or other asset. To the extent this disposition fee is paid upon the sale of any assets other than real property, it will count against the limit on “total operating expenses” described below. We do not intend to sell properties or other assets to affiliates. However, if we do sell an asset to an affiliate, our organizational documents would not prohibit us from paying our advisor a disposition fee. Before we sold an asset to an affiliate, our charter would require that the conflicts committee conclude, by a unanimous vote, that the transaction is fair and reasonable to us.

Our charter also requires that any gain from the sale of assets that we may pay our advisor or an entity affiliated with our advisor be reasonable. Such an interest in gain from the sale of assets is presumed reasonable if it does not exceed 15% of the balance of the net sale proceeds remaining after payment to common stockholders, in the aggregate, of an amount equal to 100% of the original issue price of the common stock, plus an amount equal to 6% of the original issue price of the common stock per year cumulative.

If we ever decided to become self-managed by acquiring entities affiliated with our advisor, our charter would require that the conflicts committee conclude, by a majority vote, that such internalization transaction is fair and reasonable to us and on terms and conditions no less favorable to us than those available from third parties.

Our charter also limits the amount of acquisition fees and acquisition expenses we can incur to a total of 6% of the contract purchase price for the property or, in the case of a loan, 6% of the funds advanced. This limit may only be exceeded if a majority of the directors (including all the members of the conflicts committee) not otherwise interested in the transaction approves the fees and expenses and finds the transaction to be commercially competitive, fair and reasonable to us. Although our charter permits combined acquisition fees and expenses to equal 6% of the purchase price, our advisory agreement limits the acquisition fee to 2% of the purchase price (including any acquisition expenses and any debt attributable to such investments). Any increase in the acquisition fee stipulated in the advisory agreement would require the approval of a majority of the directors (including all the members of the conflicts committee) not otherwise interested in the transaction.

Term of Advisory Agreement. Each contract for the services of our advisor may not exceed one year, although there is no limit on the number of times that we may retain a particular advisor. The conflicts committee or our advisor may terminate our advisory agreement with our advisor without cause or penalty on 60 days’ written notice.

Our Acquisitions. We will not purchase or lease properties in which our advisor, any of our directors or officers or any of their affiliates has an interest without a determination by the unanimous consent of the conflicts committee that such transaction is fair and reasonable to us and at a price to us no greater than the cost of the property to the affiliated seller or lessor, unless there is substantial justification for the excess amount. Generally, the purchase price that we will pay for any property will be based on the fair market value of the property as determined by a majority of our directors. In the cases where a majority of our independent directors require and in all cases in which the transaction is an acquisition or transfer by or from any of our directors or affiliates, we will obtain two third-party valuations by independent experts

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selected by our independent directors (at least one of which will be an appraisal of fair market value) and obtain a written opinion of legal counsel unaffiliated with us stating that the proposed transaction is permissible under the terms of our charter. We may obtain an appraisal in other cases; however, we will rely on our own independent analysis and not on appraisals in determining whether to invest in a particular property. Appraisals are estimates of value and may not always be reliable as measures of true worth or realizable value. As of the date of this prospectus, we do not intend to purchase investments from other Resource Real Estate-sponsored programs or other affiliates. However, we may in the future enter into transactions, including acquisitions, with other Resource Real Estate-sponsored programs or other affiliates if an attractive opportunity presents itself and our conflicts committee unanimously approves the transaction.

Mortgage Loans Involving Affiliates. Our charter prohibits us from investing in or making mortgage loans in which the transaction is with our advisor, our directors or officers or any of their affiliates, unless an independent expert appraises the underlying property. We must keep the appraisal for at least five years and make it available for inspection and duplication by any of our stockholders. In addition, we must obtain a mortgagee’s or owner’s title insurance policy or commitment as to the priority of the mortgage or the condition of the title. Our charter prohibits us from making or investing in any mortgage loans that are subordinate to any mortgage or equity interest of our advisor, our directors or officers or any of their affiliates.

Other Transactions Involving Affiliates. A majority of the board of directors (including all the members of the conflicts committee) not otherwise interested in the transaction must conclude that all other transactions, including joint ventures, between us and our sponsor, advisor, any of our officers or directors or any of their affiliates are fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties and, with respect to joint ventures, on substantially the same terms and conditions as those received by other joint ventures.

Limitation on Operating Expenses. Commencing with the four fiscal quarters ended September 30, 2011, our advisor must reimburse us the amount by which our aggregate total operating expenses for the four fiscal quarters then ended exceed the greater of 2% of our average invested assets or 25% of our net income, unless the conflicts committee has determined that such excess expenses were justified based on unusual and non-recurring factors. “Average invested assets” means the average monthly book value of our assets during the 12-month period before deducting depreciation, bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including advisory fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of our stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain from the sale of our assets; and (f) acquisition fees, acquisition expenses (including expenses relating to potential investments that we do not close), disposition fees on the resale of property and other expenses connected with the acquisition, disposition and ownership of real estate interests, loans or other property (other than disposition fees on the sale of assets other than real property), including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.

Issuance of Options and Warrants to Certain Affiliates. Until our shares of common stock are listed on a national securities exchange, we will not issue options or warrants to purchase our capital stock to our advisor, our directors, our sponsor or any of their affiliates, except on the same terms as such options or warrants are sold to the general public. We may issue options or warrants to persons other than our advisor, our directors, our sponsor and their affiliates prior to listing our common stock on a national securities exchange, but not at exercise prices less than the fair market value of the underlying securities on the date of grant and not for consideration (which may include services) that in the judgment of the conflicts committee has a market value less than the value of such option or warrant on the date of grant.

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Options or warrants issuable to the advisor, a director, the sponsors or any affiliate thereof shall not exceed an amount equal to 10% of the outstanding shares of common stock on the date of grant.

Repurchase of Our Shares. Our charter prohibits us from paying a fee to our sponsor, advisor or our directors or officers or any of their affiliates in connection with our repurchase of our capital stock.

Loans. We will not make any loans to the sponsor, our advisor or to our directors or officers or any of their affiliates (other than mortgage loans complying with the limitations described above). In addition, we will not borrow from these affiliates unless a majority of the board of directors (including all the members of the conflicts committee) not otherwise interested in the transaction approves the transaction as being fair, competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties. These restrictions on loans will only apply to advances of cash that are commonly viewed as loans, as determined by the board of directors. By way of example only, the prohibition on loans would not restrict advances of cash for legal expenses or other costs incurred as a result of any legal action for which indemnification is being sought nor would the prohibition limit our ability to advance reimbursable expenses incurred by directors or officers or our advisor or its affiliates.

Reports to Stockholders. Our charter requires that we prepare an annual report and deliver it to our common stockholders within 120 days after the end of each fiscal year. Our directors are required to take reasonable steps to ensure that the annual report complies with our charter provisions. Among the matters that must be included in the annual report or included in a proxy statement delivered with the annual report are:

• financial statements prepared in accordance with GAAP that are audited and reported on by independent certified public accountants;

• the ratio of the costs of raising capital during the year to the capital raised;

• the aggregate amount of advisory fees and the aggregate amount of other fees paid to our advisor and any affiliates of our advisor by us or third parties doing business with us during the year;

• our total operating expenses for the year stated as a percentage of our average invested assets and as a percentage of our net income;

• a report from the conflicts committee that our policies are in the best interests of our common stockholders and the basis for such determination; and

• a separately stated, full disclosure of all material terms, factors and circumstances surrounding any and all transactions involving us and our advisor, a director or any affiliate thereof during the year, which disclosure has been examined and commented upon in the report by the conflicts committee with regard to the fairness of such transactions.

Voting of Shares Owned by Affiliates. Before becoming a common stockholder, our advisor, our directors and officers and their affiliates must agree not to vote their shares regarding (i) the removal of any of these affiliates or (ii) any transaction between them and us.

Ratification of Charter Provisions. Our board of directors and the conflicts committee have reviewed and ratified our charter and bylaws by the vote of a majority of their respective members at the first joint meeting of the board of directors and the conflicts committee, as required by our charter.

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INVESTMENT OBJECTIVES AND POLICIES

Our principal investment approach is to purchase a diversified portfolio of U.S. commercial real estate and real estate related debt that has been significantly discounted due to the effects of recent economic events and high levels of leverage on U.S. commercial real estate, including properties that may benefit from extensive renovations that may increase their long-term values. Following years of unprecedented appreciation in commercial real estate values fueled by readily available and inexpensive credit, the commercial real estate market began a significant decline in late 2007 as a result of the massive contraction in the credit and securitization markets. We believe that this decline has produced an attractive environment to acquire commercial real estate and real estate related debt at significantly discounted prices. We have a particular focus on operating multifamily assets, and we intend to target this asset class while also purchasing interests in other types of commercial property assets consistent with our investment objectives.

Target Portfolio

Our target portfolio consists of the following:

• Discounted Real Estate Related Debt and REO. We intend to acquire (a) real estate related debt investments, including first- and second-priority mortgage loans, mezzanine loans, B-Notes, participation interests, and other loans, debt or securities related to or secured by real estate assets and (b) real estate owned (“REO”) by financial institutions, usually as a result of foreclosure, that has been significantly discounted due to the effects of economic events. The real estate related debt investments will typically include loans that are non-performing, distressed, on the verge of default, in default or in foreclosure proceedings. The REO will typically include real estate that has recently been acquired by the financial institutions through a foreclosure or similar proceeding and which the financial institution does not desire to or cannot keep on its books.

• Value-Add Multifamily Rental Properties. We intend to acquire Class B or B-, older, well-located multifamily rental properties that are in need of extensive exterior and interior renovations and updating in order to increase their long-term value as well as their cash flow. We will seek to improve these properties to a Class B+ level, maintaining their competitive price advantage over newer Class A apartments by using our Experience-Based Management (“EBM”) strategy.

• Discounted Commercial Mortgage-Backed Securities. We intend to acquire investment-grade commercial mortgage-backed securities at discounted values and hold the investments until the earlier of maturity or when opportunities arise to sell at higher prices in the secondary market.

Although the above outlines our target portfolio, we may make adjustments based on, among other things, prevailing real estate market conditions and the availability of attractive investment opportunities. We will not forego an attractive investment because it does not fit within our targeted asset class or portfolio composition. We may use the proceeds of this offering to purchase or invest in any type of real estate or real estate related debt investment that we determine is in the best interest of our stockholders, subject to the investment limitations set forth in our charter.

We may acquire interests in real estate in either of the two following manners:

• as the sole investor, by either paying cash or by financing the purchase with a loan from a third-party lender; or

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• as a joint venture partner under co-investment agreements with either (i) affiliates of our advisor, including affiliated investment programs, or (ii) institutional third parties.

Target Asset Classes

We may invest in a range of real estate assets if we believe we can enhance the property value and generate an attractive return for our stockholders. Classes of real estate in which we may invest include, in order of our expected focus, the following:

• Multifamily Rental Properties – Conventional multifamily rental properties, such as garden-style, mid-rise and high-rise properties, as well as student housing and senior residential (typically requiring at least one resident of each unit to be 55 or older);

• Condominium Properties – Failed condominium complexes that may be suitable as conversions to apartments or where individual condominium units may be sold at discounted, market-clearing prices;

• Office Properties – Multi- and single-tenant properties, single-level, mid- and high-rise properties, flex space and mixed-use properties, all capable of serving a variety of industries in both commercial business districts and suburban locations;

• Retail and Shopping Centers – Retail and shopping centers, including regional and super-regional facilities, indoor shopping malls, “big box” retail centers, outlet retailers, high street and “strip center” shopping plazas, offering a variety of products and services and a diverse tenant mix, and serving a range of demographic markets;

• Business and Industrial Parks – Manufacturing, warehouse and distribution facilities, single- and multi-tenant properties and mixed-use office/industrial parks, each of varying sizes and intensity levels, and serving a variety of potential tenants and proposed uses;

• Hospitality Properties – Limited-service, extended-stay and full-service lodging facilities, as well as all-inclusive resorts, which may be stand-alone facilities or complementary to one of our other asset classes; and

• Healthcare Properties – Independent-living/continuing-care retirement communities, assisted-living facilities, skilled nursing facilities, hospitals, long-term acute care hospitals and medical office buildings.

We have no present intention to engage in major new development projects, but we anticipate that we will participate actively in redeveloping or repositioning our acquisitions to enhance the value of the asset for our portfolio and to generate attractive returns for our stockholders. For purposes of these types of investments, we may utilize one of our to-be-formed taxable REIT subsidiaries (“TRSs”), which will be organized to allow us to maintain our REIT status.

Discounted Real Estate Related Debt

General

Resource Real Estate and its affiliates have an extensive history of investing in discounted and distressed commercial real estate debt that dates back to 1991, representing over $600 million in value. The officers and employees of Resource America and Resource Residential, affiliates of our advisor, have extensive experience in the acquisition, management (including workouts) and disposition of both

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non-performing and performing real estate related debt investments. In addition, in early 2005, Resource Real Estate formed a team dedicated to originating and acquiring commercial whole loans, mezzanine loans and B-Notes. Resource Real Estate’s acquisition, asset management and finance teams acquire, originate and manage those real estate related debt instruments. We expect to invest a majority of our assets in real estate related debt investments secured, directly or indirectly, by multifamily rental properties, a real estate sector where Resource Real Estate has extensive experience and managing capabilities.

When acquiring real estate related debt investments, we focus on acquiring first mortgages, second mortgages, mezzanine loans, B-Notes and other subordinate loans, with acquisition costs of between $5 million and $100 million each that are secured directly or indirectly by multifamily rental properties. Based on our advisor’s and its affiliates’ experience, we, or a third party we contract with, may invest in and service mortgages and other loan assets. We focus on acquiring non-performing, sub-performing and otherwise distressed loans at a discount to their unpaid balance. Once acquired, we may accept a discounted payoff from the borrowers, negotiate a workout of the loan terms with the borrowers, negotiate a deed in lieu of foreclosure, or foreclose on the investments to gain ownership of the underlying real estate and subsequently finance or sell the investments after the asset’s stabilization, if required, to optimize value.

The purchase price that we pay for any real estate related debt investment will be largely based on the fair market value of the underlying real estate as determined by a majority of our directors (including a majority of the conflicts committee). In the cases where a majority of our independent directors require, and in all cases in which the transaction is with any of our affiliates, we will obtain an appraisal of fair market value by an independent expert selected by our independent directors; however, we rely on our own independent analysis and not on appraisals in determining whether to invest in a particular asset.

We generally intend to hold our discounted real estate related debt investments, whether we continue to hold them as debt or convert them to equity via a foreclosure or deed in lieu of foreclosure, for two to six years, which we believe is the optimal period to enable us to capitalize on the potential for increased income and capital appreciation; however, economic and market conditions, and changes in REIT regulations, may cause us to adjust our expected holding period in order to maximize our potential returns. We cannot predict the various market conditions that will exist at any given time in the future. Because of this uncertainty, we cannot assure you that we will be able to sell our real estate related debt investments at a profit, which could adversely affect our ability to realize any potential appreciation on our investments.

Types of Real Estate Related Debt

First and Second Mortgages.  First mortgage loans are secured by first-priority mortgages or deeds of trust on real property and are senior to other creditors with respect to the underlying property. Although we have no present intention to do so, we may also invest in construction loans, which similarly are in a first-priority position. Second mortgage loans are secured by second-priority mortgages or deeds of trust on real property that are subject to prior mortgage indebtedness.

Mezzanine Loans.  We may invest in mezzanine loans that are secured by 100% of the equity securities of a special purpose vehicle that owns real estate encumbered by a first mortgage loan. The mezzanine loans may include provisions wherein we receive a stated interest rate on the loan as well as a preferred equity interest, such as a percentage of gross revenues or a percentage of the increase in the fair market value of the underlying property, payable on the earlier of the maturity of the loan or the refinancing or sale of the underlying property.

To protect and enhance returns in the event of premature payment, our mezzanine loans may have provisions such as prepayment lockouts, penalties and minimum profit hurdles. In addition, the mezzanine loans may include other collateral to secure our investment, including letters of credit, personal guarantees of the principals of the borrower or additional collateral unrelated to the underlying property.

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Subordinate Interests in Whole Loans (B-Notes).  We may also acquire subordinated interests in first mortgage real estate loans (whole loans) from third parties that are directly secured by a property, which are referred to in this prospectus as “B-Notes.” B-Notes are loans that are secured by a first mortgage, but are subordinated to a senior lien interest in the property, which is referred to in this prospectus as an “A-Note.” In addition to the interest payable on a B-Note, the borrower under the note may be charged fees or we may be entitled to receive additional income from payments by the borrower in excess of the price we paid to acquire the note. Otherwise, we, as a B- Note lender, will have the same obligations, collateral and borrower as the A-Note lender, but we typically will be subordinated in recovery to the A-Note lender if the borrower defaults.

We may also buy a whole loan and sell an A-Note to an unaffiliated party and we would retain a B-Note. In this case, we would keep any profit made from the sale of the A-Note.

Acquisition Strategy for Discounted Real Estate Related Debt

Acquisition Criteria.  When evaluating potential acquisitions and dispositions of mortgages or other loans, we generally consider the following criteria with respect to the borrower:

• acquisition price in relation to perceived asset value;

• potential value of the underlying properties;

• the balance sheet and any other financial statements of the borrower provided to us, which generally will have been reported on by nationally or regionally known accounting firms;

• the borrower’s experience;

• the borrower’s payment history;

• whether the borrower has any judgments or bankruptcies on its record;

• the borrower’s operating history; and

• recourse to the borrower, if any.

With respect to the property serving, directly or indirectly, as collateral for the loan, we generally consider the property’s:

• location;

• operating history;

• business plan;

• market position;

• occupancy trends; and

• functionality.

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With respect to structuring or evaluating the terms of a loan, including payment and collateral terms and conditions, we generally consider the borrower’s:

• equity;

• loan-to-value levels;

• debt service coverage ratio levels;

• legal structure and rights; and

• credit ratings.

Conditions to Closing Debt Investments

Our advisor performs a diligence review on each property underlying any mortgage, loan or other debt security that we purchase. We generally seek to condition our obligation to close the purchase of any debt investment on the delivery of certain documents from the seller. However, the information available to us at the time of making any particular investment decision may be limited and we may not have access to certain detailed due diligence information regarding any particular real estate asset. Specifically, the facts and circumstances surrounding certain distressed debt investments vary based on the prior individual or institutional owner, the scheduled timing or deadline for the sale and therefore, these circumstances do not always afford us the opportunity to perform as complete a diligence review as we would otherwise prefer and normally conduct for a non-distressed asset. See “Risk Factors—Risks Related to Investments in Real Estate.” Such documents are expected to include all documents listed below under “Conditions to Closing Real Estate Investments,” where available, and would also include for our real estate related debt investments:

• any default notices and correspondence;

• loan documents and files for the real estate related debt investment;

• underlying documents demonstrating the security of the loan, such as the mortgage, deed of trust, pledge of interests or other evidence of security;

• comprehensive interest rate, credit risk and liability assessments and documentation, as available; and

• such other loan documentation as may be appropriate.

Asset Management Strategy for Discounted Real Estate Related Debt

Once we acquire a real estate related debt investment that is non-performing, we employ, as applicable, one or more of the following asset management strategies:

• attempt to negotiate a full or discounted payoff of the loan with the borrower;

• attempt to negotiate a workout of the loan terms, which may include a forbearance agreement;

• attempt to acquire the underlying property via a deed in lieu of foreclosure; and

• commence foreclosure proceedings to acquire ownership of the underlying property.

If we acquire ownership of a property securing any discounted real estate related debt asset, we seek to stabilize the operations of the property through aggressive property management as well as to expend capital on required deferred maintenance or property improvements in an attempt to increase cash flow from the property and ultimately to refinance the property or sell the property should market conditions support a sales price that we believe optimizes the overall return for our investment in the asset.

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Experience Buying, Improving and Selling Discounted Real Estate Related Debt

In the past, our sponsor and its affiliates have also bought discounted real estate debt and disposed of it either in the form of debt or real property (subsequently obtained through foreclosure proceedings) for its own account through various credit and economic cycles. The table below sets forth details, as of March 31, 2011, about all such investments sold or otherwise disposed of by our sponsor or its affiliates in the last 10 years. All such investments were purchased as first mortgage loans on the underlying properties described below.

						Selling Price, Net of Closing Costs
Property	Location	Date of Sale		Years Held		Cash Received		Mortgage balance at time of sale(1)		Purchase money taken back by program(2)			Total		Total Acquisition Costs(3)		Net Cash(4)
1606 New Hampshire	Washington, DC		2001		6	$	1,634,569	$	686,716	$	(327,837	)	$	1,993,448	$	854,783	$	1,138,665
Philadelphia Stock Exchange	Philadelphia, PA		2001		3		20,248,435		42,104,704		3,190,884			65,544,023		58,250,000		7,294,023
Washington Square	West Chester, PA		2001		3		1,059,367		—		1,204,733			2,264,100		1,516,488		747,612
Crestwood Apartments	Bensalem, PA		2002		4		1,774,386		3,765,539		(873,317	)		4,666,608		4,234,558		432,050
Greenway Village	Berlin, NJ		2002		4		2,700,000		1,773,350		(1,933,399	)		2,539,951		2,507,625		32,326
Sheridan Building	Philadelphia, PA		2002		4		1,350,000		—		5,574,116			6,924,116		3,619,644		3,304,472
1212 South Michigan	Chicago, IL		2002		4		24,000,000		—		4,513,729			28,513,729		17,320,143		11,193,586
The Rittenhouse Project	Philadelphia, PA		2002		2		3,360,911		—		296,556			3,657,467		1,500,000		2,157,467
Treetops	Pittsburgh, PA		2003		11		5,057,544		—		(1,005,710	)		4,051,834		1,764,000		2,287,834
1301 Connecticut	Washington, DC		2003		8		6,652,107		5,747,001		3,155,475			15,554,583		8,000,000		7,554,583
Smythe Stores	Philadelphia, PA		2003		7		409,475		—		1,655,406			2,064,881		1,007,554		1,057,327
Mill Spring Apartments	Sharon Hills, PA		2003		7		776,126		—		1,729,490			2,505,616		2,528,976		(23,360	)
Lofts at Red Hill	Red Hill, PA		2003		6		262,700		—		233,083			495,783		400,000		95,783
Woodcrest Pavilion	Cherry Hill, NJ		2004		8		2,548,572		—		2,131,649			4,680,221		2,527,417		2,152,804
Crafts House Apartments	Philadelphia, PA		2004		8		900,000		986,852		(147,973	)		1,738,879		1,031,525		707,354
Axewood Office Complex	Ambler, PA		2004		7		1,300,000		—		2,011,004			3,311,004		2,478,919		832,085
Deerfield Beach Apartments	Pompano Beach, FL		2004		7		3,341,441		—		2,100,776			5,442,217		2,797,861		2,644,356
Countryside Village	Seabrook, NJ		2004		7		7,132,420		7,750,000		(3,985,965	)		10,896,456		7,374,894		3,521,562
The Loewy Building	Winston-Salem, NC		2004		7		3,089,753		1,308,994		753,698			5,152,445		3,050,369		2,102,076
Winthrop Square	New London, CT		2004		7		1,200,000		8,133,216		(4,431,588	)		4,901,628		4,760,894		140,734
NorthCal Property	Los Angeles, CA		2005		9		3,321,765		1,977,126		(841,023	)		4,457,868		2,005,000		2,452,868
The Granite Building	Pittsburgh, PA		2006		13		925,000		—		725,523			1,650,523		1,082,325		568,197
Malco Industrial Center	South Pasadena, CA		2006		11		2,373,861		2,273,000		(951,030	)		3,695,831		1,650,000		2,045,831
Locke Mill Plaza Condos	North Concord, NC		2006		11		68,308		3,000,000		(2,900,127	)		168,181		1,278,143		(1,109,962	)
Redick Hotel	Omaha, NE		2006		9		3,964,685		2,400,000		(3,091,988	)		3,272,697		3,545,421		(272,724	)
Alex. Brown Building	Baltimore, MD		2006		8		19,898,710		70,268,965		9,606,006			99,773,681		87,411,397		12,362,284
Pensacola Place	Chicago, IL		2006		8		9,000,000		10,000,000		3,843,965			22,843,965		18,114,910		4,729,055
1521 Locust Street	Philadelphia, PA		2007		10		2,411,720		—		999,470			3,411,189		1,582,088		1,829,101

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						Selling Price, Net of Closing Costs
Property	Location	Date of Sale		Years Held		Cash Received		Mortgage balance at time of sale(1)		Purchase money taken back by program(2)			Total		Total Acquisition Costs(3)		Net Cash(4)
Richmond Kmart	Richmond, VA		2007		10		946,433		—		3,893,773			4,840,205		3,961,430		878,775
Clemens Place	Hartford, CT		2009		11		8,897,089		11,940,000		5,769,155			26,606,244		14,548,344		12,057,900
St. Cloud	St Cloud, MN		2010		16		2,225,000		1,021,273		(2,030,210	)		1,216,063		818,263		397,800
Evening Star Building	Washington DC		2010		12		53,388,527		—		4,921,206			58,309,733		19,703,029		38,606,704
Waterford at Nevillewood	Presto, PA		2010		1		19,316,474		—		2,939,757			22,256,230		15,927,213		6,329,017
Mill Creek Terrace	Kansas City, MO		2010		1		10,256,915		—		(960,746	)		9,296,169		6,530,000		2,766,169
National Press Building	Washington DC		2011		12		16,595,307		—		27,886,841			44,482,148		6,797,750		37,684,398
Midwestern Mortgage Portfolio	Various		Various		4		30,180,593		4,972,839		(7,326,969	)		27,826,463		25,876,812		1,949,651

⁽¹⁾ Includes both financing secured through a mortgage, and financing obtained by selling a participation in the investment. If the investment does not have a mortgage balance at the time of sale, we did not foreclose on the property, but sold the debt investment.

⁽²⁾ Includes cash activity from operating activities funded by or distributed to the program as well as funds obtained through financing or sale of participations where applicable.

⁽³⁾  Includes all costs related to original purchase of first mortgage investment as well as any costs incurred to maintain the investment, including capital improvements and operating costs (e.g., real estate taxes).

⁽⁴⁾ Excess (deficiency) of property operating cash receipts, including sale proceeds, over cash expenditures.

REO

General

We expect to acquire commercial properties owned by banks, mortgage companies or other financial institutions following foreclosure and in which the mortgage loans or other lender liens no longer exist. We expect that the total acquisition cost for the equity interest in the commercial properties, will be at a significant discount to the amount of unpaid balance on the debt that was foreclosed upon for such commercial properties. We also expect to focus on multifamily rental properties, but may buy other classes of commercial REO. We may sell or refinance the real estate when market conditions warrant, which may be after stabilization, if required, or we may lease and operate the properties with the purpose of generating cash flow until our advisor determines that a disposition of the properties is in our best interest.

REO Acquisition Strategy

When evaluating potential acquisitions and dispositions of REO, we generally consider the property’s:

• location;

• operating history;

• business plan;

• market position;

• occupancy trends; and

• functionality.

Conditions to Closing REO Investments

See “Real Estate Asset Management Strategy—Conditions to Closing Real Estate Investments” below.

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REO Asset Management Strategy

We seek to stabilize the operations of REO property through aggressive property management and to expend capital on required deferred maintenance or property improvements in an attempt to increase cash flow from the property and ultimately to refinance the property or sell the property should market conditions support a sales price that we believe optimizes the overall return for our investment in the asset. Once we acquire an REO asset, we will hire Resource Real Estate Opportunity Manager as the property manager; however, in certain cases, Resource Real Estate Opportunity Manager may subcontract for certain property management services. The property manager is responsible for leasing and operating the properties. Resource Real Estate Opportunity Manager receives a property management fee and a construction management fee for its services, as applicable. Additionally, Resource Real Estate Opportunity Manager institutes its daily leasing rate optimization program, reviews the delinquency reports and takes action as necessary to assure that the tenants are paying their rents and implements an aggressive marketing program to decrease vacancies. All of these programs are designed to increase the near term cash flow potential as well as the longer-term value of the properties.

Value-Add Multifamily Rental Properties

General

Resource Real Estate has a dedicated acquisition team that includes personnel who have been integral to the acquisition of value-add properties for the multifamily funds offered by our sponsor over the past eight years. We intend to buy apartment properties with the potential for near-term capital appreciation. These assets generally are Class B or B- properties built in the 1970s and 1980s in cities demonstrating a stable multifamily supply and the ability to attract a young, creative and educated labor force. According to the U.S. Census Bureau, during the 20-year period from 1970 to 1989, over 9.3 million housing units were completed in the United States within structures containing five or more units, which is substantially higher than the approximately 5 million units completed between 1990 and 2009. Apartments completed between 1970 and 1989 are now 20 to 39 years old and many of these apartments have not had substantial renovations in their lifetimes. Therefore, we believe that there is a large inventory of unrenovated apartments built in the 1970s and 1980s to acquire and renovate as part of our value-add multifamily strategy.

We seek to acquire multifamily rental properties that are well-located in generally affluent, inner ring, in-fill communities across the United States. We seek properties where there is an opportunity to improve net operating income and overall property value by renovating the exterior of the property and the interior units, instituting quality property management by Resource Residential, and aggressively marketing the property to decrease vacancies, enhance the credit quality of the resident base and increase effective rental rates. Once acquired, we intend to implement our EBM strategy.

We generally intend to hold our value-added multifamily rental properties for two to six years, which we believe is the optimal period to enable us to capitalize on the potential for increased income and capital appreciation. However, economic and market conditions, and changes in REIT regulations, may cause us to adjust our expected holding period in order to maximize our potential returns. When acquiring 100% of the equity interests in properties, we expect to focus on properties with acquisition costs of between $5 million and $100 million each, including financing; however, when acquiring partial equity interests in properties, we expect that the total acquisition costs for 100% of the equity interests in each property by all of the co-owners, including us, will not exceed $100 million, including financing.

We may also invest in properties that have characteristics similar to multifamily rental properties such as condominiums, student housing, senior residential (typically requiring at least one resident of each unit to be 55 or older) or hotels. Some of the properties may include a certain portion of units as condominiums or a building (or a portion of a building) that serves as a hotel. In these cases, we may find

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an opportunity where the property’s value may be significantly increased if the condominiums are converted to apartments, the hotel is converted to apartments, or some other combination that involves a conversion of the current building’s use into an alternative, more attractive use.

Acquisition Strategy for Value-Add Multifamily Rental Properties

When evaluating potential acquisitions of value-add multifamily rental properties, we look for older, Class B and Class B- properties that are in need of some refurbishment to update them to be more attractive to today’s apartment resident. For each specific property we consider, among other items:

• location, construction quality, condition, design of the property and the redevelopment or repositioning required to add value;

• purchase price, expected cash-on-cash yield and overall expected internal rate of return;

• purchase price relative to historical and recent sales of similar properties in the market, including cap rate, price per unit and price per square foot;

• purchase price relative to replacement cost of the property;

• current and projected cash flow from the property and ability to increase cash flow; and

• potential for capital appreciation from any redevelopment or repositioning activity.

The properties we seek are often in need of:

• exterior renovations, such as new paint or siding, windows, pavement, signage and landscaping improvements;

• interior unit renovations, such as new carpet and flooring, interior paint with accent colors, cabinets, countertops, appliances and lighting fixtures, in order to make them more attractive to renters;

• amenity enhancements or additions, such as leasing centers, fitness centers, swimming pools, business centers, clubhouses, dog runs and tanning salons;

• security enhancements, such as controlled access, improved outdoor lighting, recorded or monitored security cameras, monitored security alarms in units, security patrols and courtesy law enforcement officers living on site; and

• rebranding of the property, including the renaming of the property.

We seek to improve these properties to a Class B+ level, maintaining their competitive price advantage over newer Class A apartments.

We consider Class A properties to be apartments built in the last five years with the highest level of common area and interior unit finishes such as slab granite kitchen and bathroom countertops, stone flooring such as travertine, oversized windows with glass transoms, attached garages, and 10-foot tall ceilings. Class B assets are generally well maintained, professionally managed apartments generally built over the period from six to 25 years ago and which have standard common area interior unit finishes, such as carpet and vinyl flooring, Formica countertops, detached garages and 8-foot tall ceilings. Class B- properties will often have original common area and interior unit finishes, such as older carpet and vinyl styles, older original appliances and brass lighting packages and hardware, and single-panel doors. An

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upgraded Class B+ property will have undergone recent upgrades and renovations to the common and interior finishes such as new Berber carpet and vinyl plank flooring, new Formica stone-like countertops, new wood cabinets, new stainless steel appliance packages, modern brushed chrome lighting packages and hardware and six panel doors. Class B+ properties generally maintain a rental price advantage over their Class A competitors.

Conditions to Closing Value-Add Multifamily Rental Properties

See “Real Estate Asset Management Strategy—Conditions to Closing Real Estate Investments” below.

Asset Management Strategy for Value-Add Multifamily Rental Properties

We have hired Resource Real Estate Opportunity Manager as the property manager for our value-add multifamily properties; however, in certain cases, Resource Real Estate Opportunity Manager may subcontract for certain property management services. The property manager is responsible for leasing and operating the properties. With respect to the value-add multifamily rental properties, Resource Real Estate Opportunity Manager formulates a renovation plan after consideration of the condition of the property, the neighborhood and the expected level of return that can be achieved from the renovations. Examples of renovations may include building a new clubhouse, painting or siding the exterior, and replacing carpeting and flooring, kitchen and bath appliances, kitchen cabinetry and lighting. Resource Real Estate Opportunity Manager receives a property management fee and a construction management fee for its services as applicable.

Our Multifamily Focus

Our sponsor and its affiliates have been investing in all major real estate asset classes over the last 20 years; however, our sponsor has focused specifically on the multifamily sector with its last 10 funds, and we expect to continue this focus as multifamily rental properties have traditionally produced the highest risk-adjusted investment returns compared to other property sectors. According to Torto Wheaton Research, over the past 30 years, multifamily rental properties have produced higher returns with lower volatility than the other major real estate sectors, which includes office, retail, industrial, mixed-use, hospitality and healthcare properties. Furthermore, multifamily rental properties have demonstrated returns during recessionary periods that are higher than those of other major property classes, and have been an effective inflation hedge due to the short term of the typical apartment lease, which is generally 12 months or less.

A recent publication entitled A Case for Investing in U.S. Apartments, Torto Wheaton Research^©, (March, 2009) elaborated on many of the reasons our sponsor has focused on the multifamily sector. The key factors for investing in multifamily rental properties are summarized below:

• a long track record of having the highest risk-adjusted investment returns compared to other property types; relatively more resilient during economic downturns, delivering higher returns than other property classes during recessionary periods;

• efficient cash distribution, due to relatively low capital expenditures and technical improvements;

• stable access to debt, due in part to the lending activities of Fannie Mae and Freddie Mac, government-sponsored enterprises, lower cost of debt capital and the ability to support more debt with the same level of risk;

• operating in a favorable, transparent and market-driven regulatory and taxation environment, with shorter leases than other property types, allowing quicker adjustment to changing market environments;

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• wide variation in terms of age, size, quality and location, creating a broad spectrum of opportunities and possible investment strategies, thereby providing greater liquidity than other sectors; 23,000 investment-grade apartment properties in the United States;

• market fundamentals expected to remain positive over the next five to seven years, with demand expected to expand and new supply expected to subside, creating conditions favorable for moderate rent and revenue growth in most locations;

• over a four-year period ending in 2008, the addition of about three million households to national rental demand as a result of new household formation, a declining homeownership rate and a subsequent increase in the propensity to rent for two significant cohorts – the “echo boomers” and foreign immigrants;

• expected increases in rental demand over the next five years on account of favorable trends among rental cohorts, including a resumption in growth in population aged 20 to 29 (“echo boomers” or “Generation Y”) after two decades of decline, which group has the highest propensity to rent; and

• apartments under-weighted in institutional real estate portfolios.

Multifamily Real Estate Acquisition Strategy

Cities with Strong Multifamily Real Estate Fundamentals

When evaluating potential acquisitions of investments in multifamily rental properties, we generally consider whether the market where the investment is located is one that has the potential for growth by analyzing (i) the apartment supply and demand, (ii) the employment situation and (iii) the demographic make-up of the area. Specifically, we consider the following with respect to both the overall market and the submarket:

• barriers to entry that would limit competition, such as zoning laws, physical barriers to new supply and local redevelopment or repositioning construction costs, among other factors;

• properties under development that could pose competition and the potential for the construction of new competing properties in the area;

• exposure to specific sectors of the economy and prospects for overall employment growth in the sectors of high exposure;

• employment and household growth and net migration of the relevant market’s population;

• tax and regulatory environment, specifically for any potential rent controls and landlord-tenant law, of the community in which the property is located;

• income levels and employment growth trends in relevant markets;

• educational levels of the relevant market’s population;

• occupancy and demand by residents for properties of a similar type in the vicinity;

• historical, current and forecasted effective rental rates and growth for properties of a similar type in the vicinity;

• historical, recent and expected sales metrics for sales of properties of a similar type in the vicinity, specifically cap rates, cost per unit and cost per square foot;

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• historic and potential for capital appreciation generally;

• likelihood of interest from institutional investors in the market;

• prospects for liquidity through sale, financing or refinancing of the property;

• synergy with existing operations in the area, if any; and

• typical terms of resident leases for multifamily rental properties and the potential for rent increases.

Cities that Attract a Young, Creative and Educated Workforce

When evaluating potential acquisitions of multifamily rental properties, we also look for cities that have a “buzz.” According to Richard Florida, author of The Rise of the Creative Class and How It’s Transforming Work, Leisure, Community and Everyday Life (Basic Books, 2002), these are cities that attract young, creative people such as doctors, lawyers, scientists, engineers, entrepreneurs and computer programmers in their mid 20’s to mid 30’s due to the cultural lifestyle and available jobs. Examples of such areas include Austin, Texas; San Francisco, California; and Raleigh-Durham, North Carolina.

We evaluate the prospects of a particular city to attract young, high-paid workers from the “echo boomer,” or “Gen Y,” demographic over the next 15 years. We believe that this demographic will be the most vital component of the demand for multifamily units over the next 15 years in the United States. We believe that the development of a large pool of young, educated workers from Gen Y will be the key to a city’s ability to attract new employers who rely upon this large and creative workforce and that a young creative workforce will attract jobs, not vice versa. In the United States, industries, from technology to entertainment, journalism to finance, high-end manufacturing to the arts, are becoming increasingly reliant upon a highly educated workforce as opposed to a less educated workforce that can only provide general manual labor in manufacturing or basic skills in the service sector of the economy. Because this fast-growing, highly educated and well-paid segment of the workforce are in such high demand from American companies, we believe that acquiring multifamily assets in cities with a preponderance of this demographic will position us to benefit from Gen Y’s demand for multifamily housing from all socioeconomic renter classes, including the service providers to the young, creative workforce.

We believe that this young and educated workforce will be attracted to cities that offer an environment strongly suited to their particular likings. Rather than measuring a city’s quality-of-life to this demographic by evaluating a city’s offerings of professional sports entertainment, symphonies, ballets, operas or museums, we evaluate what we believe that this demographic is demanding, a diverse array of cultural and recreational opportunities, such as the city’s music scene, ethnic and cultural diversity, outdoor recreation opportunities and the city’s nightlife. Rather than focusing on cities that are trying to attract this new demographic and jobs that come with them by building generic high-tech office parks or subsidizing professional sports teams, we look for cities that have a “buzz” and are attracting this creative demographic.

By investing in cities that attract the “creative class,” we believe that long-term job growth will be stronger and will assist in lifting incomes for renters in all classes, allowing rents to rise.

Cities Located within Megaregions

When evaluating potential acquisitions of multifamily rental properties, we also look for cities that are located within megaregions. Tim Gulden, a researcher at the University of Maryland’s Center for International and Security Studies defined a megaregion as a contiguous lighted area that includes at least one major city center and its metropolitan region when viewed from a satellite image and has annual

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estimated economic productivity of more than $100 billion. (See Megaregions: The Important of Place, Richard Florida (Harvard Business Review, March, 2008.)) An example of a megaregion would be the Boston-New York-Washington corridor, which would include, for example, cities and suburban areas in and around Philadelphia and Baltimore. What was previously thought of as cities, and then as regions, are now joining together in chains of regions, which are integrated economic areas whose scale dwarfs the economic units of the past.

Affluent Locations within Cities

As described in David Brooks’ book On Paradise Drive, How We Live Now (And Always Have) in the Future Tense (Simon & Schuster, 2004), most American cities have developed in rings that can be described in the following categories listed in their progressive order starting in the city center and then moving outward:

• Urban Core – the city center and central business district of a city where numerous entertainment offerings are located, such as restaurants, bars and theaters;

• “Crunchy” Suburbs – areas just outside the urban core where small pockets of gentrification have occurred in older sections of American cities, often attracting a bohemian demographic group;

• Moneyed Suburbs – inner-ring wealthy suburbs with older but very high-end single-family homes;

• Immigrant Enclaves – commercial areas with extensive inexpensive retail and fast food offerings and inexpensive housing options utilized by many first-generation immigrant groups;

• Suburbs – The expansive areas of post-war-constructed single-family housing, large shopping malls and newer office complexes; and

• Exurbs – The newest area of extensive housing developed largely during the 1990s and 2000s, which was previously farmland, forest or desert on the edge of cities.

We seek to acquire multifamily rental properties in and around the “moneyed suburbs,” including the outer portions of the “crunchy suburbs” and the inner portions of the suburbs. We believe that these areas offer greater long-term stability versus other areas of cities. In general, we seek to acquire properties in areas with high levels of average household income relative to the population of that city, and in areas that are in-fill with high barriers to entry for new multifamily developments.

Real Estate Asset Management Strategy

General

Our advisor’s investment approach includes active and aggressive management of each asset acquired. Our advisor believes that active management is critical to creating value. Prior to the purchase of an individual asset or portfolio, our asset managers work closely with our advisor’s acquisition and underwriting teams to develop an asset management strategy. This is a forecast of the action items to be taken and the capital needed to achieve the anticipated returns. Our advisor reviews asset management strategies weekly to anticipate changes or opportunities in the market during a given phase of a real estate cycle. Our asset management strategies are designed with a goal of realistic yet aggressive enhancement of value throughout the investment period.

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In an effort to keep an asset in compliance with our underwriting standards, our advisor’s acquisition team remains involved through the investment life cycle of the acquired asset and actively consults with our asset managers throughout the hold period. In addition, our advisor’s executive officers routinely review the operating performance of investments against projections, and provide the oversight necessary to detect and resolve issues as they arise.

Experience-Based Management Strategy

As of March 31, 2011, Resource Residential, a wholly owned subsidiary of our sponsor, is a multifamily property management company managed over 50 multifamily rental properties for our sponsor in 50 states with over 14,000 units. Resource Residential has over 400 employees separated into the following divisions: Operations, Revenue Management, Construction Management, Property Maintenance, Marketing, Training, Information Technology, Human Resources and Accounting. Resource Residential is headquartered in Philadelphia, Pennsylvania and has an office in Omaha, Nebraska. Furthermore, Resource Residential operates regional property management hubs in Tampa, Florida; Savannah, Georgia; Nashville, Tennessee; Cincinnati, Ohio; Detroit, Michigan; Kansas City, Missouri; Little Rock, Arkansas; Houston, Texas; and Phoenix, Arizona. The senior managers and employees of Resource Residential, acting through Resource Real Estate Opportunity Manager, assist in providing property management as well as construction management services to us.

We believe that, in general, the multifamily property management industry has not maintained pace with the increasing demands of multifamily residents for higher levels of customer services and the need to deploy more modern sales and marketing techniques to acquire new residents. Therefore, in 2007, our sponsor introduced our EBM strategy through Resource Residential. Our EBM strategy offers multifamily property management that is based around the overall experience provided to potential and existing renters, in addition to the first-class services provided to them. We believe that the customer service leaders in the hospitality and retail industries provide applicable templates for the types of experiences and customer services that today’s renters demand. Some of the notable property management initiatives include:

• A well planned “leasing experience” for potential renters that is provided by choreographing the visual experience in leasing centers and model apartments through architectural, lighting and design improvements, specifically chosen music and clean and fresh scents during the leasing process to increase sales closure rates; and

• Web-based leasing portals with real-time unit availability, pricing and virtual tours that allow prospective renters to lease apartments online. Furthermore, our web-based portals offer existing residents online options, such as the ability to pay rent with credit cards or direct withdrawals from their savings or checking accounts.

In addition, we believe revenue-enhancing and cost-cutting technologies can improve the overall operating efficiencies of our properties and contribute to stronger profitability. Two notable technologies that are utilized throughout our portfolio are:

• Revenue management utilizing yield-management software and a centralized revenue-management division to optimize daily rental rates based on evaluating hundreds of variables utilizing a quadratic program solver designed exclusively for multifamily rental properties. Yield-management software seeks to rent at higher effective rents during high demand periods, provide systematic forecasts of future demand, identify and react to softening markets, add discipline to unit pricing, drive consistency in pricing, embed corporate strategy into pricing, and enforce pricing policy compliance across the portfolio. When analyzing future demand, the forecast model considers items such as seasonality, recent demand levels, lease application lead times, traffic, differences by lease term, renewal demand behavior,

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future supply, early termination adjustments and unit type granularity. When analyzing pricing and profitability, the model also considers community exposure, lease velocity, demand and supply forecasts, lease expiration management, vacancy losses and the costs to ready a unit for re-leasing, demand for new or renewed leases, competitor rents, amenity upgrades and corporate strategy on one-time concessions versus a lower rent throughout a lease term; and

• Expense management utilizing an automated Purchase Order (“PO”) system which is linked to property-management software. Through the PO system, expenses are approved based on dollar amount and the variance from the budget by the regional manager, senior regional manager or president, if applicable.

We believe that in addition to our EBM strategy, the utilization of technology can generate significant additional revenue-enhancing options at our properties, including the ability to provide and charge for premium units and upgrade packages.

Conditions to Closing Real Estate Investments

Our advisor performs a diligence review on each property that we purchase. We generally seek to condition our obligation to close the purchase of any property on the delivery of certain documents from the seller. However, the information available to us at the time of making any particular investment decision may be limited and we may not have access to certain detailed due diligence information regarding any particular real estate asset. Specifically, the facts and circumstances surrounding certain REO and value-add investments vary based on the prior individual or institutional owner, the scheduled timing or deadline for a foreclosure or bank sale and other factors. Therefore, these circumstances do not always afford us the opportunity to perform as complete a diligence review as we would otherwise prefer and normally conduct for a stabilized, income-producing property. See “Risk Factors—Risks Related to Investments in Real Estate.” Such documents, where available, include, but are not limited to:

• any current or prior code violations;

• bank or other financial institution statements with bank deposit receivables for the last six months;

• business licenses, license fees, permits and permit bills;

• capital expenditure history through the current year to date, including detail of any exterior work;

• certificates of occupancy;

• contracts and service agreements, including equipment leases;

• correspondence with federal, state or municipal government offices, branches or agencies;

• detailed rent roll for the most recent month, including concessions, security deposits, waivers of material conditions or other special conditions, including updated rent rolls as appropriate;

• environmental, asbestos, soil, engineering reports, appraisals and wetland reports;

• form leases;

• general ledger for the past 12 months;

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• historical operating statements from ownership for the past three years, with month and year-to-date data for the last year and the current year;

• income tax returns with income schedules for the last three years;

• insurance invoices for the last two years and insurance losses, claims or other material correspondence regarding claims for the last five years;

• list of any pending litigation affecting either the property or the residents;

• monthly occupancy reports for the past two years;

• multifamily resident and other property class tenant leases;

• personal property inventory;

• personnel list, wages and benefits;

• plans and specifications, including as-built, architectural drawings and soil compaction studies;

• surveys;

• tax bills and assessment notices for the property and any personality for the past four years, including any correspondence relating to tax appeals and reassessments;

• tenant and vendor correspondence files;

• termite and other pest inspections reports;

• title commitment and recorded documents;

• unexpired warranties; and

• utility bills (gas, electric, water and sewer) for the past year, as well as the current year.

In order to be as thorough as reasonably possible in our due diligence, our advisor typically obtains additional third-party reports. We may obtain reports with respect to property condition, soils, mechanical- and electrical-plumbing, structural, roof, air quality and mold, radon, seismic, lease audit, net operating income audit and others. We generally do not purchase any property unless and until we obtain a new, or review a recent, Phase I environmental site assessment and are generally satisfied with the environmental status of the property. In certain instances where it is not feasible to obtain a Phase I environmental site assessment, we endeavor to obtain as much environmental information as necessary to make an informed decision.

Discounted Commercial Mortgage-Backed Securities

Resource Real Estate created a team dedicated to investing in and managing the firm’s commercial mortgage-backed securities portfolio in early 2007. Since that time, Resource Real Estate has purchased approximately $228 million, face value, of commercial mortgage-backed securities. The team responsible for the firm’s investments in the sector has a combined total of 35 years in the sector, as well as previous real estate debt and equity experience. Commercial mortgage-backed securities team members’ previous experience includes co-managing a $20 billion commercial mortgage-backed securities portfolio at a major pension fund, managing a commercial mortgage securitization program and conducting commercial mortgage-backed securities research at a major U.S. commercial bank.

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We may acquire debt obligations that represent claims to cash flows from pools of commercial mortgage loans from banks, broker-dealers and other financial institutions, which are referred to in this prospectus as commercial mortgage-backed securities, in the range of $1 million to $7 million, par value, per commercial mortgage-backed securities investment. These commercial mortgage-backed obligations allow the cash flow from a pool of mortgages to be segregated into different bonds offering different maturity, risk and return characteristics, which can be sold to investors with different investment objectives. We anticipate that we will purchase such securities obligations from a bank, broker-dealer or other financial institution at a discount because the sellers may be underperforming or the market for such securities is illiquid. We expect to hold these securities for approximately six years or less depending on the maturity date of the obligation.

Commercial Mortgage-Backed Securities Acquisition Strategy

When evaluating potential acquisitions of commercial mortgage-backed securities, we generally utilize the following strategy when acquiring, managing and deciding when to dispose of commercial mortgage-backed securities investments:

• utilize third-party software and research for analysis, including Trepp, LLC, Realpoint and Moody’s;

• maintain a proprietary database of over 100 of the most recent commercial mortgage-backed securities deals (those that are most likely to fit within our investment parameters) showing the merits of each deal;

• format and review loan-by-loan summary of each deal;

• analyze loan summaries for top 50 loans in each commercial mortgage-backed securities pool;

• apply conservative “stress cases” to each potential acquisition to assign default probabilities and loss severities based on analyzing loan-specific market and tenant health, value assumptions and cash flow sensitivities;

• review rating agency initial and surveillance commentary for each deal;

• track each purchased transaction monthly via remittance reports and servicer watchlists as well as market and deal-specific research published by each bank; and

• formulate hold/sell decisions based on market spreads and deal characteristics.

Other Possible Investments and Activities

We may make investments in real estate companies and other companies that hold real estate assets for the purpose of exercising control over and acquiring such company.

We may issue our securities, including units in our operating partnership, in exchange for real estate investments. We do not intend to make loans to other persons. We do not intend to underwrite securities of other issuers. Nor do we have any intention to engage in the purchase and sale of any types of investments other than direct or indirect interests in real estate and real estate related debt investments.

Co-Investment Strategy

Instead of acquiring full ownership of a debt or equity real estate investment, we may acquire partial, indirect interests in some of our debt or equity real estate investments by entering into co-investment agreements with other co-owners of the real estate investments, which may be independent

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third parties or affiliates of our advisor, including Resource America or investors in existing or new real estate investment programs sponsored by our advisor or its affiliates. Our ownership percentage of each of the new entities will generally be pro rata to the amount of money we apply to the purchase price (including financing, if applicable), and the acquisition, construction, development or renovation expenses, if any, of the real estate investment owned by the new entity relative to the total amounts applied, unless we and the other co-owners negotiate some other method of allocating the ownership of the real estate investment between us and the other co-owners.

Our co-investment partners may have business or economic objectives that are inconsistent with ours. Also, when more than one person controls a real estate investment, there may be a stalemate on decisions, including decisions regarding cash distributions, reserves, or a proposed sale or refinancing of the real estate investment, and the other parties to the co-investment agreement may have the right to make those decisions instead of us. If we co-invest with Resource America, we expect, in most cases, to have control of the co-investment and majority ownership.

Tenant-in-Common Interests in Properties (TICs)

Resource Real Estate has no current intention of syndicating tenant-in-common (“TIC”) investment programs; however, we retain the right to acquire TICs in the future. Therefore, instead of acquiring full equity ownership of a property, we may acquire TIC interests in properties that will be subject to certain agreements with one or more other TIC interest equity owners of the properties, which may be either affiliates of our advisor or independent third-party investors. Our investments may be in existing or new TIC investments advised by affiliates of our advisor, including Resource Real Estate. Under the TIC interest agreements, an owner of an undivided TIC interest in a property is generally obligated only for its share of expenses, and is entitled only to its share of income, from the property. Thus, as a TIC interest owner in a property, we would be required to pay only our share of expenses, including real estate taxes and management fees that will be payable to affiliates of our advisor, and generally will share all profits and losses generated by the property pro rata in proportion to our respective TIC interest. The TIC interest agreements will cover such areas as the:

• selling or refinancing of the property;

• managing the property;

• distributions of the property’s net revenues, if any; and

• operating the property, including leasing guidelines and rent levels.

We will not acquire TIC interests in a property unless Resource Real Estate Opportunity Manager or another affiliate of our advisor has asset management control over the property. See “Risk Factors.”

Disposition Policies

We are not required to hold a real estate investment for any particular minimum term before it is sold, refinanced or otherwise disposed of. After we have paid down any acquisition financing on a property, if and when the property has increased in value, we may refinance the property and distribute the proceeds, after fees, expenses and payment of other obligations and reserves, to our stockholders. The determination as to whether and when a particular real estate investment should be sold, refinanced or otherwise disposed of, will be made by our advisor after a consideration of relevant factors, including:

• performance of the real estate investment;

• market conditions;

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• the structure of the current financing and currently available refinancing;

• achieving our principal investment objectives;

• the potential for future capital appreciation;

• cash flow; and

• federal income tax considerations.

In addition, with respect to refinancing properties, our advisor will consider the amount of our initial cash investment and whether the property is subject to financing that comes due in a relatively short term.

For information regarding the disposition fees our advisor will receive upon the sale of our real estate investments, see “Management Compensation.”

Borrowing Policies

We intend to make equity investments with cash but intend to leverage strategically to enhance our returns. Although there is no limit on the amount we can borrow to acquire a single real estate investment, we may not leverage our assets with debt financing such that our total liabilities are in excess of 75% of the aggregate value of our assets unless a majority of our independent directors find substantial justification for borrowing a greater amount. Examples of such a substantial justification include obtaining funds for the following: (i) to repay existing obligations, (ii) to pay sufficient distributions to maintain REIT status, or (iii) to buy an asset where an exceptional acquisition opportunity presents itself and the terms of the debt agreement and the nature of the asset are such that the debt does not increase the risk that we would become unable to meet our financial obligations as they became due. On a total portfolio basis, however, based on current lending market conditions, we anticipate that we will not leverage our assets with debt financing such that our total liabilities are in excess of 35% of the aggregate value of our assets value prior to stabilizing our portfolio and 65% to 70% once it has been stabilized. If we hold distressed assets and stabilize them, we believe that we may be able to and we expect to increase this level of debt financing on such assets.

First, we may obtain REIT-level financing through a line of credit from third-party financial institutions or other commercial lenders. Our advisor anticipates that our assets will serve as collateral for this type of debt incurred to acquire real estate investments. We have not yet entered into negotiations or agreements with any lenders with respect to providing debt financing and therefore have no current sources of financing. Our REIT-level financing may be recourse financing.

In addition to debt financing at the REIT-level, we may also finance the acquisition costs of individual real estate investments, as well as the acquisition costs of all or a group of real estate investments acquired by us, by causing our subsidiaries to borrow directly from third-party financial institutions or other commercial lenders. Under these circumstances, our advisor anticipates that certain properties acquired will serve as collateral for the debt we incur to acquire those particular properties and that we will seek to obtain nonrecourse financing for the acquisition of the properties. However, there is no guarantee that our advisor will be successful in obtaining financing arrangements on a property-by-property basis and that the loans would be nonrecourse to us. Finally, we may also obtain seller financing with respect to specific assets that we acquire.

Exit Strategy – Liquidation or Listing Policy

We anticipate providing our stockholders with a liquidity event or events by some combination of the following: (i) liquidating all, or substantially all, of our assets and distributing the net proceeds to our stockholders or (ii) listing our shares for trading on an exchange. Our board anticipates evaluating a

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liquidity event within three to six years after we terminate this primary offering, subject to then prevailing market conditions. If we do not begin the process of liquidating our assets or listing our shares within six years of the termination of this primary offering, upon the request of stockholders holding 10% or more of our outstanding shares of common stock, our charter requires that we hold a stockholder meeting to vote on a proposal for our orderly liquidation unless a majority of our board of directors and a majority of our independent directors vote to defer the meeting beyond the sixth anniversary of the termination of this offering. Prior to any stockholder meeting, our directors would evaluate whether to recommend the proposal to our stockholders and, if they so determine, would recommend the proposal and their reasons for doing so. The proposal would include information regarding appraisals of our portfolio. If our stockholders did not approve the proposal, we would obtain new appraisals and resubmit the proposal to our stockholders up to once every two years upon the written request of stockholders owning 10% of our outstanding common stock.

Market conditions and other factors could cause us to delay the commencement of our liquidation or to delay the listing of our shares on a national securities exchange beyond six years from the termination of this offering. Once we commence liquidation, we would begin an orderly sale of our properties and other assets. We are under no obligation to conclude our liquidation within a set time because the precise timing of the sale of our assets will depend on the prevailing real estate and financial markets, the economic conditions in the areas in where our properties are located and federal income tax consequences to our stockholders, and we cannot assure you that we will be able to liquidate our assets. After commencing a liquidation, we would continue in existence until all of our assets are sold. In making the decision to liquidate or apply for listing of our shares, our directors will try to determine whether liquidating our assets or listing our share shares will result in greater value for stockholders.

Charter-Imposed Investment Limitations

Our charter places numerous limitations on us with respect to the manner in which we may invest our funds or issue securities. Pursuant to our charter, we will not:

• borrow if such debt cause our total liabilities to exceed 75% of the aggregate cost of tangible assets we own, unless approved by a majority of the conflicts committee;

• invest more than 10% of our total assets in unimproved property or mortgage loans on unimproved property, which we define as property not acquired for the purpose of producing rental or other operating income or on which there is no development or construction in progress or planned to commence within one year;

• make or invest in mortgage loans unless an appraisal is available concerning the underlying property, except for those mortgage loans insured or guaranteed by a government or government agency;

• make or invest in mortgage loans, including construction loans, on any one property if the aggregate amount of all mortgage loans on such property would exceed an amount equal to 85% of the appraised value of such property as determined by appraisal, unless substantial justification exists for exceeding such limit because of the presence of other underwriting criteria;

• make an investment if the related acquisition fees and expenses are not reasonable or exceed 6% of the contract purchase price for the asset, provided that the investment may be made if a majority of the directors (including all the members of the conflicts committee) not otherwise interested in the transaction determines that the transaction is commercially competitive, fair and reasonable to us;

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• acquire equity securities unless a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction approve such investment as being fair, competitive and commercially reasonable, provided that investments in equity securities in “publicly traded entities” that are otherwise approved by a majority of our directors (including a majority of our independent directors) shall be deemed fair, competitive and commercially reasonable if we acquire the equity securities through a trade that is effected in a recognized securities market (a “publicly traded entity” shall mean any entity having securities listed on a national securities exchange or included for quotation on an inter-dealer quotation system) and provided further that this limitation does not apply to (i) acquisitions effected through the purchase of all of the equity securities of an existing entity, (ii) the investment in wholly owned subsidiaries of ours or (iii) investments in asset-backed securities;

• invest in real estate contracts of sale, otherwise known as land sale contracts, unless the contract is in recordable form and is appropriately recorded in the chain of title;

• invest in commodities or commodity futures contracts, except for futures contracts when used solely for the purpose of hedging in connection with our ordinary business of investing in real estate assets and mortgages;

• issue equity securities on a deferred payment basis or other similar arrangement;

• issue debt securities in the absence of adequate cash flow to cover debt service unless the historical debt service coverage (in the most recently completed fiscal year), as adjusted for known changes, is sufficient to service that higher level of debt as determined by the board of directors or a duly authorized executive officer;

• issue equity securities that are assessable after we have received the consideration for which our board of directors authorized their issuance; or

• issue equity securities redeemable solely at the option of the holder, which restriction has no effect on our share redemption program or the ability of our Operating Partnership to issue redeemable partnership interests.

In addition, our charter includes many other investment limitations in connection with conflict-of-interest transactions, which limitations are described above under “Conflicts of Interest.” Our charter also includes restrictions on roll-up transactions, which are described under “Description of Shares.”

Investment Limitations Under the Investment Company Act of 1940

General

Neither we nor any of our subsidiaries intend to register as investment companies under the Investment Company Act. Under the relevant provisions of Section 3(a)(1) of the Investment Company Act, an investment company is any issuer that:

• is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities (the “primarily engaged test”); or

• is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of such issuer’s total assets on an unconsolidated basis (the “40%

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test”). “Investment securities” excludes U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) (relating to private investment companies).

We believe that neither we nor our Operating Partnership meet either of the tests above. With respect to the 40% test, all of the entities through which we and our Operating Partnership own our assets are wholly-owned subsidiaries that are not themselves investment companies and are not relying on the exceptions from the definition of investment company under Section 3(c)(1) or Section 3(c)(7).

With respect to the primarily engaged test, we and our Operating Partnership are holding companies. Through the majority-owned subsidiaries of our Operating Partnership, we and our Operating Partnership are primarily engaged in the non-investment company businesses of these subsidiaries.

We believe that most of the subsidiaries of our Operating Partnership may rely on Section 3(c)(5)(C) of the Investment Company Act for an exception from the definition of an investment company. (Any other subsidiaries of our Operating Partnership should be able to rely on the exceptions for private investment companies pursuant to Section 3(c)(1) and Section 3(c)(7) of the Investment Company Act.) As reflected in no-action letters, the SEC staff’s position on Section 3(c)(5)(C) generally requires that an issuer maintain at least 55% of its assets in “mortgages and other liens on and interests in real estate,” or qualifying assets; at least 80% of its assets in qualifying assets plus real estate-related assets; and no more than 20% of the value of its assets in other than qualifying assets and real estate-related assets, which we refer to as miscellaneous assets. To constitute a qualifying asset under this 55% requirement, a real estate interest must meet various criteria based on no-action letters.

If, however, the value of the subsidiaries of our Operating Partnership that must rely on Section 3(c)(1) or Section 3(c)(7) is greater than 40% of the value of the assets of our Operating Partnership, then we and our Operating Partnership may seek to rely on the exception from registration under Section 3(c)(6) if we and our Operating Partnership are “primarily engaged,” through majority-owned subsidiaries, in the business of purchasing or otherwise acquiring mortgages and other interests in real estate. The SEC staff has issued little interpretive guidance with respect to Section 3(c)(6); however, it is our view that we and our Operating Partnership may rely on Section 3(c)(6) if 55% of the assets of our Operating Partnership consist of, and at least 55% of the income of our Operating Partnership is derived from, majority-owned subsidiaries that rely on Section 3(c)(5)(C).

Regardless of whether we and our Operating Partnership must rely on Section 3(c)(6) to avoid registration as an investment company, we expect to limit the investments that we make, directly or indirectly, in assets that are not qualifying assets and in assets that are not real estate-related assets. We discuss below how we will treat our potential investments and our interests in the subsidiaries of our Operating Partnership that own them under the Investment Company Act.

Real Property

We will treat an investment in real property as a qualifying asset.

Mortgage Loans

We will treat a first mortgage loan as a qualifying asset provided that the loan is fully secured, i.e., the value of the real estate securing the loan is greater than or equal to the value of the note evidencing the loan. If the loan is not fully secured, the entire value of the loan will be classified as a real estate-related asset if 55% of the fair market value of the loan is secured by real estate. We will treat mortgage loans that are junior to a mortgage owned by another lender (“Second Mortgages”) as qualifying assets if the real property fully secures the Second Mortgage.

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Participations

A participation interest in a loan will be treated as a qualifying asset only if the interest is a participation in a mortgage loan, such as an A-Note or a B-Note, that meets the criteria recently set forth in an SEC no-action letter, that is:

• the note is a participation interest in a mortgage loan that is fully secured by real property;

• our subsidiary as note holder has the right to receive its proportionate share of the interest and the principal payments made on the mortgage loan by the borrower, and our subsidiary’s returns on the note are based on such payments;

• our subsidiary invests in the note only after performing the same type of due diligence and credit underwriting procedures that it would perform if it were underwriting the underlying mortgage loan;

• our subsidiary as note holder has approval rights in connection with any material decisions pertaining to the administration and servicing of the mortgage loan and with respect to any material modification to the mortgage loan agreements; and

• in the event that the mortgage loan becomes non-performing, our subsidiary as note holder has effective control over the remedies relating to the enforcement of the mortgage loan, including ultimate control of the foreclosure process, by having the right to: (a) appoint the special servicer to manage the resolution of the loan; (b) advise, direct or approve the actions of the special servicer; (c) terminate the special servicer at any time without cause; (d) cure the default so that the mortgage loan is no longer non-performing; and (e) with respect to a junior note, purchase the senior note at par plus accrued interest, thereby acquiring the entire mortgage loan.

If these conditions are not met, we will treat the note as a real estate-related asset.

Mezzanine Loans

We intend for a portion of our investments to consist of real estate loans secured by 100% of the equity securities of a special purpose entity that owns real estate (“Tier One Mezzanine Loans”). We will treat our Tier One Mezzanine Loans as qualifying assets when our subsidiary’s investment in the loan meets the criteria set forth in an SEC no-action letter, that is:

• the loan is made specifically and exclusively for the financing of real estate;

• the loan is underwritten based on the same considerations as a second mortgage and after our subsidiary performs a hands-on analysis of the property being financed;

• our subsidiary as lender exercises ongoing control rights over the management of the underlying property;

• our subsidiary as lender has the right to readily cure defaults or purchase the mortgage loan in the event of a default on the mortgage loan;

• the true measure of the collateral securing the loan is the property being financed and any incidental assets related to the ownership of the property; and

• our subsidiary as lender has the right to foreclose on the collateral and through its ownership of the property owning entity become the owner of the underlying property.

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Convertible Mortgages

A convertible mortgage is a mortgage loan coupled with an option to purchase the underlying real estate. Although the SEC staff has not taken a position with respect to convertible mortgages, we intend to treat a convertible mortgage as two assets: a mortgage and an option. We will value the mortgage as though the option did not exist and treat it as either a qualifying asset or a real estate-related asset according to the positions set forth above. We will assign the option an independent value and treat the option as a real estate-related asset.

Fund-Level or Corporate-Level Debt

If one of our subsidiaries provides financing to an entity that is primarily engaged in the real estate business, we intend to treat such loan as a miscellaneous asset in the absence of guidance from the SEC’s Division of Investment Management (whether formal or informal) that such loans may be treated as real estate-related assets depending on the nature of the business and assets of the borrower.

Other Real Estate-Related Loans

We will treat the other real estate-related loans described in this prospectus, i.e., bridge loans, wraparound mortgage loans, construction loans, pre-development loans, land loans, investments in distressed debt and loans on leasehold interests, as qualifying assets if such loans are fully secured by real estate. With respect to construction loans, we will treat only the amount outstanding at any given time as a qualifying asset if the value of the property securing the loan at that time exceeds the outstanding loan amount plus any amounts owed on loans senior or equal in priority to our construction loan.

Residential and Commercial Mortgage-Backed Securities

We intend for a portion of our investments to consist of discounted investment grade commercial mortgage-backed securities. We will treat a residential or commercial mortgage-backed security as a qualifying asset if the certificate represents all of the beneficial interests in a pool of mortgages, referred to as a “whole pool” certificate. However, we expect to treat a partial pool certificate as a real estate-related asset unless counsel advises us that the SEC’s Division of Investment Management has provided guidance (whether formal or informal) that a partial pool certificate may be treated as a qualifying asset and that our partial pool certificate meets the criteria stipulated by the SEC.

Joint Venture Interests

When measuring Section 3(c)(6) and Section 3(c)(5)(C) compliance, we will calculate asset values on an unconsolidated basis, which means that when assets are held through another entity, we will treat the value of our interest in the entity as follows:

1. If we own less than a majority of the voting securities of the entity, then we will treat the value of our interest in the entity as real estate-related assets if the entity engages in the real estate business, such as a REIT relying on Section 3(c)(5)(C), and otherwise as miscellaneous assets.

2. If we own a majority of the voting securities of the entity, then we will allocate the value of our interest in the entity among qualifying assets, real estate-related assets and miscellaneous assets in proportion to the entity’s ownership of qualifying assets, real estate-related assets and miscellaneous assets.

3. If we are the general partner or managing member of a entity, then (i) we will treat the value of our interest in the entity as in item 2 above if we are actively involved in the management and operation of the venture and our consent is required for all major decisions affecting the venture and (ii) we will treat the value of our interest in the entity as in item 1 above if we are not actively involved in the management and operation of the venture or our consent is not required for all major decisions affecting the venture.

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Absence of No-Action Relief

If certain of our subsidiaries fail to own a sufficient amount of qualifying assets or real estate-related assets, we could be characterized as an investment company. We have not sought a no-action letter from the SEC staff regarding how our investment strategy fits within the exceptions from registration under the Investment Company Act on which we and our subsidiaries intend to rely. To the extent that the SEC’s Division of Investment Management provides more specific or different guidance regarding the treatment of assets as qualifying assets or real estate-related assets, we may be required to adjust our investment strategy accordingly. Any additional guidance from the SEC’s Division of Investment Management could provide additional flexibility to us, or it could further inhibit our ability to pursue the investment strategy we have chosen.

Disclosure Policies with Respect to Future Probable Acquisitions

Affiliates of our advisor are continually evaluating various potential investments and engaging in discussions and negotiations with sellers, developers and potential tenants regarding the purchase and development of properties and other investments for us and other programs sponsored by Resource Real Estate. While this public offering is pending, if we believe that a reasonable probability exists that we will acquire a material asset, including assets the purchase price of which exceeds 10% of our total assets (based on our most recent balance sheet that gives effect to any previous acquisitions that were probable or completed since the date of the last balance sheet), this prospectus will be supplemented to disclose the probability of acquiring the asset. We expect that this will normally occur upon the satisfaction or expiration of major contingencies in the applicable purchase agreement, depending on the particular circumstances surrounding each potential investment. A supplement to this prospectus will describe any improvements proposed to be constructed thereon and other information that we consider appropriate for an understanding of the transaction. Further data will be made available after any pending acquisition is consummated, also by means of a supplement to this prospectus, if appropriate.

You should understand that the disclosure of any proposed acquisition cannot be relied upon as an assurance that we will ultimately consummate such acquisition or that the information provided concerning the proposed acquisition will not change between the date of the supplement and any actual purchase.

Changes in Investment Objectives and Policies

You will have no voting rights with respect to the establishment, implementation or alteration of the investment objectives and our policies, all of which are the responsibility of our board of directors and advisor. However, we will not make any changes in the investment objectives and policies that would constitute a fundamental change without filing a post-effective amendment with the SEC describing such change in investment objectives and policies.

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PRIOR PERFORMANCE SUMMARY

The information presented in this Prior Performance Summary and in the Prior Performance Tables contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus and in Part II of the registration statement represents the summary historical experience of real estate programs sponsored by (a) Resource Real Estate, our sponsor, through December 31, 2010, and (b) Resource America, our sponsor’s ultimate parent, through December 31, 2010. We define such a program as a fund in which passive investors pool their money and rely on the efforts of Resource Real Estate or Resource America and their affiliates to manage the fund and to acquire real estate that was not identified at the time of the commencement of the fund’s offering. Investors in our company should not assume that they will experience returns comparable to those experienced by investors in these prior real estate programs.

During the ten-year period ending December 31, 2010, Resource Real Estate sponsored eight real estate investment programs and co-sponsored two additional real estate investment programs with an unaffiliated third party. These ten programs were formed for the purpose of acquiring and operating commercial and residential real estate properties, primarily consisting of multifamily apartment properties as well as retail, office and industrial properties in the United States. All but two of the programs are private programs that have no public reporting requirements. All of the programs have investment objectives similar to our own. Since 1997, Resource America, Inc., the ultimate parent of Resource Real Estate, had sponsored two publicly traded REITs: Resource Capital (NYSE: RSO) in 2005 and RAIT Financial (NYSE: RAS) in 1998. Resource Capital is externally managed by affiliates of our sponsor. Resource America sponsored RAIT Financial’s initial public offering in 1998 by creating the initial RAIT Financial entity, selling RAIT Financial its initial portfolio of assets, retaining an initial 15% ownership interest and the right to appoint one member to its board of trustees; however, Resource America did not serve as the external manager or advisor of RAIT Financial and currently has no ownership interest in RAIT Financial. We do not include information regarding RAIT Financial in this summary or in the related prior performance tables because RAIT Financial was sponsored by Resource America more than 10 years ago.

From inception through December 31, 2010, the two public real estate programs sponsored by Resource Real Estate referenced above, Resource Real Estate Investors 6, L.P. and Resource Real Estate Investors 7, L.P., raised gross offering proceeds of $35,000,000 from 578 investors and $30,911,393 from 587 investors, respectively (excluding Resource Capital Partners’ investment). Through December 31, 2010, the public real estate programs purchased interests in ten real estate properties for a total investment of $111,600,000. All of the properties are multifamily residential and none of the properties were newly constructed when purchased. As of December 31, 2010, none of these interests in real estate properties had been sold.

From inception through December 31, 2010, the private programs sponsored by Resource Real Estate referenced above raised gross offering proceeds of $200,436,436 from 3,099 investors. As of December 31, 2010, the private programs held interests in 33 real estate properties for a total investment of $320,981,500. All of these 33 properties are multifamily residential and none of the properties were newly constructed when purchased. As of December 31, 2010, the private programs had sold five previously acquired real estate properties.

From inception through December 31, 2010, Resource Capital, a public real estate program sponsored by Resource America that invests in commercial real estate related assets such as whole loans, A-Notes, B-Notes, mezzanine loans and mortgage-related securities and commercial finance assets such as other asset-backed securities, senior secured corporate loans, equipment leases and notes, trust preferred securities, debt tranches of collateralized debt obligations, raised gross offering proceeds of $554.5 million from private and public investors. Through December 31, 2010, Resource Capital had a total of $808 million of capital commitments in commercial real estate related assets. As of December 31, 2010, eight of its real estate related investments had been paid off.

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Acquisition Summary

During the ten- and three-year periods ending December 31, 2010, Resource Real Estate and its affiliates sponsored or co-sponsored programs that acquired 48 properties and 14 properties, respectively, all of which were multifamily residential properties. Information regarding the location of each property is summarized below.

Public Programs
	Ten Year Period Ending December 31, 2010	Three Year Period Ending December 31, 2010
Location	No. of Properties	No. of Properties
Georgia	1	1
Maine	3	3
Texas	6	4
Total	10	8
Private Programs
Location	No. of Properties	No. of Properties
Arkansas	6	—
California	3	—
Georgia	3	—
Kansas	4	—
Kentucky	1	—
Missouri	1	1
New Mexico	3	—
North Carolina	1	—
Pennsylvania	1	—
Tennessee	3	2
Texas	12	3
Total	38	6
All Programs – Method of Financing at Acquisition	No. of Properties	No. of Properties
All debt	0	0
All cash	4	4
Combination of cash and debt	44	10
Total	48	14

For more detailed information regarding acquisitions, please see Table VI contained in Part II of the registration statement, which is not part of this supplement. We will provide a copy of Table VI to you upon written request and without charge.

Public Programs

Resource Real Estate Investors 6, L.P.

Resource Real Estate Investors 6, L.P., or RREI VI, is a Delaware limited partnership formed on July 26, 2007 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. RREI VI sold 3,508,814 units to 578 investors (excluding Resource Capital Partners’ investment) in a private placement offering, which began on October 1, 2007 and ended on May 19, 2008 and raised $35,000,000 (excluding Resource Capital Partners’ investment) of gross offering proceeds. Resource Real Estate has served as the sponsor and its affiliate has served as the manager of

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RREI VI since its inception. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, $994,019 of investment management fees due to Resource Capital Partners, Inc. has been accrued. In the RREI VI program, the investment management fees are required to be accrued until the investors receive the applicable priority return for the program. In addition, $412,940 of the property management fee has been accrued.

During 2008 RREI VI exceeded 500 security holders and had assets of more than $10,000,000, which combination triggered its obligation to file a registration statement with the SEC. The required Form 10 registration statement for RREI VI was timely filed on April 30, 2009. Pursuant to Section 12(g)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Form 10 went effective by lapse of time on June 29, 2009. RREI VI has a planned liquidation date of eight years from its offering commencement date with the possibility of two one-year extensions.

As of December 31, 2010, RREI VI had purchased five properties, amounting to a total investment by RREI VI of $60,300,000 (RREI VI’s purchase price, including RREI VI’s aggregate share of debt financing at acquisition). Of the five properties, three were in Texas and two were in Maine. As of December 31, 2010, none of these properties had been sold. The properties, which are described below, are all multifamily residential properties.

As of December 31, 2010, RREI VI owned interests in the following properties:

Property   Name	Ownership   Interest	Purchase   Date	Share of   Purchase   Price(1)	Share of   Acquisition   Costs(2)	Share of   Mortgage   Debt at Purchase		No. of   Units	Location
Memorial Towers	100.0%	12/18/07	$9,250,000	$311,000	$	7,400,000	112	Houston, TX
Villas of Henderson Pass	100.0%	12/27/07	$13,350,000	$376,000	$	10,800,000	228	San Antonio, TX
Foxcroft	100.0%	01/29/08	$12,000,000	$335,000	$	8,760,000	104	Scarborough, ME
Coach Lantern	100.0%	01/29/08	$10,800,000	$366,000	$	7,884,000	90	Scarborough, ME
Park Hill	100.0%	02/29/08	$14,900,000	$429,000	$	10,430,000	288	San Antonio, TX

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

As of December 31, 2010, RREI VI has purchased three subordinated notes, amounting to a total investment by RREI VI of $2,571,000. As of December 31, 2010, none of these notes had been sold. The notes, which are described below, are all secured by multifamily, residential properties.

Underlying   Property Name	Location	Ownership   Interest	Purchase   Date	Purchase   Price(1)	Face   Value	Maturity   Date	Interest   Rate
Acacia(2)	San Bernardino, CA	100.0%	2/11/07	$1,679,000	$2,000,000	8/11/16	10.27%
Hillwood(2)	Montgomery, AL	100.0%	2/5/07	$378,000	$400,000	1/8/17	10.97%
Southern Cove(2)	Las Vegas, NV	100.0%	2/5/07	$514,000	$500,000	5/8/17	12.75%

⁽¹⁾  Purchase price reflects discount and includes acquisition costs.

⁽²⁾  The subordinated note has been placed on non-accrual status.

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RREI VI is subject to upfront commissions, fees and expenses associated with its offering and it has fee arrangements with Resource Real Estate and its affiliates. Please see Table I, Experience in Raising and Investing Funds and Table II, Compensation to Sponsor contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

Upon request, prospective investors may obtain from us without charge copies of any public reports prepared in connection with RREI VI, including a copy of the most recent Annual Report on Form 10-K filed with the SEC. For a reasonable fee, we will also furnish upon request copies of the exhibits to the Form 10-K. In addition, the SEC maintains a web site at www.sec.gov that contains reports, proxy and other information that RREI VI files electronically with the SEC.

Resource Real Estate Investors 7, L.P.

Resource Real Estate Investors 7, L.P. (“RREI VII”) is a Delaware limited partnership formed on March 28, 2008 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. RREI VII issued 3,274,654 units to 587 investors in a private placement offering, which began on June 16, 2008 and ended on August 31, 2009 and raised $30,911,393 of gross offering proceeds (excluding investment by Resource Capital Partners). Resource Real Estate has served as the sponsor and its affiliate has served as the manager of RREI VII since its inception. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, $598,700 of investment management fees due to Resource Capital Partners, Inc. from RREI VII has been accrued. In the RREI VII program, the investment management fees are required to be accrued until the investors receive the applicable priority return for the program. In addition, $162,270 of the property management fee due to affiliates of our sponsor has been accrued.

As of December 31, 2010, RREI VII had purchased interests in five properties, amounting to an investment by RREI VII of $51,300,000 (RREI VII’s aggregate share of purchase price, including RREI VII’s aggregate share of debt financing at acquisition). Of the five properties, three were in Texas, one was in Maine and one was in Georgia. As of December 31, 2010, none of these properties had been sold. The properties, which are described below, are all multifamily residential properties.

As of December 31, 2010, RREI VII owned interests in the following properties:

Property   Name	Ownership   Interest	Purchase   Date	Share of   Purchase   Price(1)	Share of   Acquisition   Costs(2)	Share of   Mortgage   Debt at Purchase	No. of   Units	Location
Tamarlane(3)	100.0%	07/31/08	$12,250,000	$383,000	$9,925,000	115	Portland, ME
Bent Oaks	100.0%	12/10/08	$7,650,000	$252,000	$6,120,000	146	Austin, TX
Woodhollow	100.0%	12/12/08	$6,550,000	$215,000	$5,240,000	108	Austin, TX
Cape Cod	100.0%	12/10/08	$8,150,000	$257,000	$6,362,000	212	San Antonio, TX
Woodland Hills	100.0%	12/19/08	$16,700,000	$457,000	$13,590,000	228	Decatur, GA

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽³⁾  On April 23, 2008, an affiliate of our sponsor acquired 100% ownership interest in Tamarlane. On July 31, 2008, RREI VII acquired Tamarlane from this affiliate.

Upon request, prospective investors may obtain from us without charge copies of any public reports prepared in connection with RREI VII, including a copy of the most recent Annual Report on Form

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10-K filed with the SEC. For a reasonable fee, we will also furnish upon request copies of the exhibits to the Form 10-K. In addition, the SEC maintains a web site at www.sec.gov that contains reports, proxy and other information that RREI VII files electronically with the SEC.

Resource Capital Corp.

Resource Capital is a Maryland corporation that was formed on January 31, 2005 to invest in commercial real estate related assets such as whole loans, A-Notes, B-Notes, mezzanine loans and mortgage-related securities and commercial finance assets such as other asset-backed securities, senior secured corporate loans, equipment leases and notes, trust preferred securities, debt tranches of collateralized debt obligations. Resource Capital’s common stock has traded on the New York Stock Exchange since February 7, 2006. As of December 31, 2010, Resource Capital had 58,183,425 shares of stock outstanding and had no planned liquidation date. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, Resource Capital owned a total of $808 million in commercial real estate related assets as follows:

Types of Commercial Real Estate Related Assets(1)	Number of Assets	Unpaid Principal       Balance (2)	Weighted Average Annual Interest  Rate (3)
Whole Loans	25	$    441,706,175	4.18%
Mezzanine Loans	11	$    161,288,255	4.48%
B-Notes	4	$      57,613,056	5.62%
Commercial Mortgage Backed Securities	37	$    147,345,581	5.08%

⁽¹⁾  All of the properties underlying Resource Capital’s whole loans, mezzanine loans and B-Notes are rental properties located in various states including: Arizona, California, Colorado, Connecticut, Florida, Illinois, Indiana, Nevada, New Mexico, New York, Tennessee, Texas and Washington.

⁽²⁾  There are no assets in default other than a single mezzanine loan, which is secured by two office properties located Florida and Tennessee and has a principal unpaid balance of approximately $5,000,000.

⁽³⁾  The weighted average of the current annual interest rate was calculated by taking the sum of the product of the unpaid principal balance for each asset in a given class and the current annual interest rate for that asset and then dividing that subtotal by the total aggregate unpaid principal balance of the asset for that particular class.

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As of December 31, 2010, eight of Resource Capital’s previous real estate related investments, with original dollar amounts of $102,664,265, had been paid off. As of December 31, 2010, Resource Capital has disposed of its interest in the following real estate related investments:

Date	Investment	Total Dollar Amount Invested		Total Proceeds from Sale of Investment(1)
2006	Investment A-Agency RMBS Portfolio 1	$	125,380,429	$	124,189,742
2006	Investment B-Agency RMBS Portfolio 2	$	763,414,282	$	753,194,880
2007	Investment C-ABS/RMBS CDO Sale of Preference Equity 10% interest	$	2,700,000	$	5,000
2007	Investment C-ABS/RMBS CDO Sale of Preference Equity 90% interest	$	24,300,000	$	10
2007	Investment D-Self Originated Loan-50% interest	$	20,131,750	$	20,131,750
2007	Investment E-Self Originated Loan-50% interest	$	10,160,000	$	10,160,000
2007	Investment F-Self Originated Loan-50% interest	$	10,955,900	$	10,955,900
2008	Investment G-Purchased Security	$	10,000,000	$	8,000,000
2009	Investment H-Self Originated Loan-100% interest	$	16,290,200	$	7,758,000
2009	Investment I-Self Originated Loan-100% interest	$	13,550,000	$	5,895,000
2009	Investment J-Purchased Security	$	1,398,150	$	1,618,628
2009	Investment K-Purchased Security	$	320,000	$	290,000
2010	Investment L-Purchased Security	$	3,100,000	$	1,759,250
2010	Investment M-Purchased Mezzanine Loan	$	20,000,000	$	17,000,000
2010	Investment N-Purchased BNote	$	23,498,627	$	19,825,000
2010	Investment O-Purchased Security	$	5,000,000	$	4,351,563
2010	Investment P-Purchased Security	$	4,233,000	$	4,294,338
2010	Investment Q-Purchased Security	$	3,835,000	$	3,858,969

⁽¹⁾  All were loans or securities that were sold during the period indicated above.

Upon request, prospective investors may obtain from us without charge copies of any public reports prepared in connection with Resource Capital, including a copy of the most recent Annual Report on Form 10-K filed with the SEC. For a reasonable fee, we will also furnish upon request copies of the exhibits to the Form 10-K. In addition, the SEC maintains a web site at www.sec.gov that contains reports, proxy and other information that Resource Capital files electronically with the SEC.

Private Programs

Over the 10-year period ending December 31, 2010, Resource Real Estate and its affiliates sponsored eight private real estate investment programs (not including RREI VI and RREI VII, which were private programs but are now public reporting companies) and co-sponsored two additional private real estate investment programs. The first of these programs was formed in 2002. Each of the ten real estate programs described below has a planned liquidation date of eight years from its respective offering commencement dates with the possibility of two one-year extensions, except Resource Real Estate Opportunity Fund, which has a planned liquidation date of four years from its offering commencement date also with the possibility of two one-year extensions. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, no private program had liquidated all of its assets.

SR Real Estate Investors, L.P. and SR Real Estate Investors II, L.P.

SR Real Estate Investors, L.P. (“SR I”) is a Delaware limited partnership formed on October 9, 2002 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. SR Real Estate Investors II, L.P. (“SR II”) is a Delaware limited partnership formed on

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September 5, 2003 for the same purposes as SR I. Resource Real Estate was the co-sponsor of both programs and its affiliates have served as the manager of both programs since their inception. SR I issued 800 units to 156 investors in a private placement offering, which began on October 28, 2002 and ended on April 15, 2003 and raised $19,200,000 of gross offering proceeds (excluding the investment by Resource Capital Partners). SR II issued 782 units to 88 investors in a private placement offering, which began on September 15, 2003 and ended on May 31, 2004 and raised $4,050,000 of gross offering proceeds (excluding the investment by Resource Capital Partners). Resource Real Estate and Sage Real Estate Advisors have served as co-sponsors of SR I and SR II since their inceptions. On June 30, 2006, AR Real Estate Investors, LLC (“AR”) acquired 99.9% of the limited partnership interests of SR I and SR II. Effective July 1, 2006, SR I and SR II were consolidated into AR. Resource Capital Partners, Inc., an affiliate of the sponsor, is the managing member of AR and owns 10% of AR.

As of December 31, 2010, $808,658 of asset management fees due to Resource Capital Partners, Inc. has been accrued. In the AR program, the asset management fees are required to be accrued until the investors receive the applicable priority return for the program.

As of December 31, 2010, SR I and SR II (now AR) had acquired interests in six properties amounting to a total investment of $96,365,520. As of December 31, 2010, four of these properties had been sold. The properties, which are described below, are all multifamily residential properties. The two remaining properties are located in Texas and Pennsylvania.

As of December 31, 2010, AR owned interests in the following properties:

Property               Name	Ownership   Interest			Purchase   Date		Share of   Purchase   Price(1)		Share of   Acquisition   Costs(2)		Share of Mortgage Debt at   Purchase		No. of   Units			Location
Tanglewood Court		100.0	% (3)		06/18/03	$	36,200,000	$	1,051,000	$	32,500,000		634			Houston, TX
Nittany Pointe		100.0	%		03/31/03	$	14,750,000	$	310,000	$	12,750,000		624	(4)		Altoona, PA

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽³⁾  Tanglewood was originally owned 80% by AR and 20% by third parties. On February 29, 2008, AR acquired the 20% interest owned by the third parties.

⁽⁴⁾  Nittany Pointe is a student housing complex with 156 units containing 624 beds, which is rented per bed.

As of December 31, 2010, AR had sold its interests in the following properties:

Property Name	Date of     Purchase		Date of Sale		Ownership     Interest			Gain (Loss) on Sale
Summerview		06/22/04		07/15/05		51.6	%(1)	$	1,687,000
Chinoe Creek		05/12/03		06/22/09		100.0	%	$	203,000
Summit		12/16/08		12/09/09		100.0	%	$	105,653
Portland Courtyard		09/11/03		07/24/09		100.0	%	$	144,567

⁽¹⁾ Resource Real Estate Investors, L.P. owned 18%, an affiliated entity owned 20.4% and an unaffiliated entity owned 10%.

Resource Real Estate Investors, L.P.

Resource Real Estate Investors, L.P. (“RREI I”) is a Delaware limited partnership formed on January 30, 2004 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. RREI I issued 738,655 units to 135 investors in a private placement offering, which began on May 3, 2004 and ended on December 31, 2004 and raised $7,300,000 of gross

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offering proceeds (excluding the investment by Resource Capital Partners). Resource Real Estate has served as the sponsor and its affiliate has served as the manager of RREI I since its inception. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, $344,600 of investment management fees due to Resource Capital Partners, Inc. has been accrued. In the RREI I program, up to 50% of the investment management fees are required to be accrued until the investors receive the applicable priority return for the program. In addition, Resource Capital Partners, Inc. advanced $313,504 in 2008 and $129,283 in 2009 for distributions to investors in RREI I.

As of December 31, 2010, RREI I had purchased interests in four properties amounting to a total investment of $23,319,525. As of December 31, 2010, one of these properties has been sold. The properties, which are described below, are all multifamily residential properties. Of the four properties, two were in California, one was in North Carolina and one was in New Mexico.

As of December 31, 2010, RREI I owned interests in the following properties:

Property   Name	Ownership   Interest			Purchase     Date		Share of     Purchase     Price (1)		Share of     Acquisition     Costs (2)		Share of Mortgage Debt at     Purchase		No. of     Units			Location
Falls at Duraleigh(3)		51.0	%		12/21/04	$	9,307,500	$	192,000	$	7,905,000		396		Raleigh, NC
Avalon		90.0	%(5)		01/06/05	$	5,265,000	$	190,000	$	5,000,000		72	(4)	Los Angeles, CA
Sage Canyon		100.0	%		03/31/05	$	5,100,000	$	184,000	$	4,320,000		105		Albuquerque, NM

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽³⁾  Resource Real Estate Investors II, L.P., an affiliated private program owns the other 49%.

⁽⁴⁾  Avalon is a student housing complex with 15 units containing 72 beds, which is rented per bed.

⁽⁵⁾  An unaffiliated third party owns the other 10%.

As of December 31, 2010, RREI I had sold its interest in the following property:

Property Name	Date of     Purchase		Date of Sale		Ownership     Interest(1)			Gain (Loss) on Sale
Summerview		06/22/04		07/15/05		18.0	%	$	500,000

⁽¹⁾  SR I and SR II, now AR, owned 51.6%, an affiliated entity owned 20.4% and an unaffiliated entity owned 10%.

Resource Real Estate Investors II, L.P.

Resource Real Estate Investors II, L.P. (“RREI II”) is a Delaware limited partnership formed on February 3, 2005 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. RREI II issued 1,362,222 units to 270 investors in a private placement offering, which began on February 15, 2005 and ended on July 15, 2005 and raised $13,458,888 of gross offering proceeds (excluding the investment by Resource Capital Partners). Resource Real Estate has served as the sponsor and its affiliate has served as the manager of RREI II since its inception. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, $776,052 of investment management fees due to Resource Capital Partners, Inc. has been accrued. In the RREI II program, the investment management fees are required to

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be accrued until the investors receive the applicable priority return for the program. In addition, $635,435 of the property management fee due to affiliates of our sponsor has been accrued.

As of December 31, 2010, RREI II had purchased interests in seven properties, amounting to an investment by RREI II of $35,996,000 (RREI II’s aggregate share of purchase price, including RREI II’s aggregate share of debt financing at acquisition). Of the seven properties, four were in Arkansas, one was in New Mexico, one was in North Carolina and one was in Kansas. As of December 31, 2010, none of these properties had been sold. The properties, which are described below, are all multifamily residential properties.

As of December 31, 2010, RREI II owned interests in the following properties:

Property   Name	Ownership     Interest			Purchase     Date		Share of     Purchase     Price(1)		Share of     Acquisition     Costs(2)		Share of Mortgage Debt at     Purchase		No. of     Units		Location
Falls at Duraleigh(3)		49.0	%		12/21/04	$	8,942,000	$	184,000	$	7,595,000		396	Raleigh, NC
Cuestas		100.0	%		03/31/05	$	7,300,000	$	178,000	$	5,680,000		104	Las Cruces, NM
Oak Park(4)		25.3	%		06/30/05	$	8,004,000	$	63,000	$	6,079,000		511	Lenexa, KS
Berkley(5)		25.0	%		09/22/05	$	2,849,000	$	20,000	$	2,183,000		252	Little Rock, AR
Fairfield(5)		25.0	%		09/22/05	$	3,812,000	$	26,000	$	2,920,000		337	Little Rock, AR
Pleasant   Pointe(5)		25.0	%		09/22/05	$	2,703,000	$	19,000	$	2,070,000		259	Little Rock, AR
Valley Crossing(5)		25.0	%		09/22/05	$	2,386,000	$	16,000	$	1,827,000		211	Little Rock, AR

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽³⁾  Resource Real Estate Investors, L.P., an affiliated private program, owns the other 51%.

⁽⁴⁾  Unaffiliated tenant-in-common owners own the other 74.7%.

⁽⁵⁾  Unaffiliated tenant-in-common owners own the other 75%.

Resource Real Estate Investors III, L.P.

Resource Real Estate Investors III, L.P. (“RREI III”), is a Delaware limited partnership formed on July 19, 2005 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. RREI III issued 2,379,831 units to 422 investors in a private placement offering, which began on August 18, 2005 and ended on June 16, 2006 and raised $23,750,000 of gross offering proceeds (excluding the investment by Resource Capital Partners). Resource Real Estate has served as the sponsor and its affiliate has served as the manager of RREI III since its inception. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, $1,138,453 of investment management fees due to Resource Capital Partners, Inc. has been accrued. In the RREI III program, the investment management fees are required to be accrued until the investors receive the applicable priority return for the program. In addition, $857,547 of the property management fee due to affiliates of our sponsor has been accrued. Resource Capital Partners, Inc. advanced $41,579 in 2008 for distributions to investors in RREI III.

As of December 31, 2010, RREI III had purchased interests in six properties, amounting to an investment by RREI III of $61,800,000 (RREI III’s aggregate share of purchase price, including RREI III’s

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aggregate share of debt financing at acquisition). Of the six properties, three were in Texas, two were in Kansas and one was in Georgia. As of December 31, 2010, none of these properties have been sold. The properties, which are described below, are all multifamily residential properties.

As of December 31, 2010, RREI III owned interests in the following properties:

Property   Name	Ownership     Interest			Purchase     Date		Share of     Purchase     Price(1)		Share of   Acquisition   Costs(2)		Share of Mortgage Debt at Purchase		No. of     Units		Location
Highland Park(3)		25.0	%		11/30/05	$	6,006,000	$	40,000	$	4,880,000		370	Overland Park, KS
Lodge at Overland(3)		25.0	%		11/30/05	$	8,294,000	$	55,000	$	6,740,000		548	Overland Park, KS
Santa Fe		100.0	%		01/27/06	$	9,800,000	$	271,000	$	8,080,000		272	El Paso, TX
Foxglove		100.0	%		01/27/06	$	7,400,000	$	204,000	$	6,000,000		178	El Paso, TX
Howell Bridge		100.0	%		09/20/06	$	19,300,000	$	391,000	$	12,900,000		256	Duluth, GA
Grove at White Oak		100.0	%		09/28/06	$	11,000,000	$	295,000	$	9,000,000		156	Houston, TX

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽³⁾  Unaffiliated tenant-in-common owners own the other 75%.

Resource Real Estate Investors IV, L.P.

Resource Real Estate Investors IV, L.P. (“RREI IV”) is a Delaware limited partnership formed on May 26, 2006 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. RREI IV issued 2,834,940 units to 481 investors in a private placement offering, which began on July 17, 2006 and ended on December 31, 2006 and raised $28,268,716 of gross offering proceeds (excluding the investment by Resource Capital Partners). Resource Real Estate has served as the sponsor and its affiliate has served as the manager of RREI IV since its inception. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, $1,187,731 of investment management fees due to Resource Capital Partners, Inc. has been accrued. In the RREI IV program, the investment management fees are required to be accrued until the investors receive the applicable priority return for the program. In addition, $184,504 of the property management fee due to affiliates of our sponsor has been accrued.

As of December 31, 2010, RREI IV had purchased interests in six properties, amounting to an investment by RREI IV of $56,166,000 (RREI IV’s aggregate share of purchase price, including RREI IV’s aggregate share of debt financing at acquisition). Of the six properties, four were in Texas, one was in Kansas and one was in Tennessee. As of December 31, 2010, none of these properties had been sold. The properties, which are described below, are all multifamily residential properties.

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As of December 31, 2010, RREI IV owned interests in the following properties:

Property   Name	Ownership     Interest			Purchase     Date		Share of Purchase     Price(1)		Share of   Acquisition   Costs(2)		Share of Mortgage Debt at     Purchase			No. of     Units		Location
Regents Center(3)		21.0	%		03/31/06	$	7,770,000	$	45,000	$	5,050,500			424	Overland Park, KS
Heritage   Lake(4)		51.4	%		11/22/06	$	13,121,000	$	540,000	$	8,322,330			262	Knoxville, TN
Wyndham(5)		60.0	%		12/18/06	$	10,725,000	$	204,000	$	7,953,000	(6)		448	Houston, TX
Westchase Crossing(5)		60.0	%		12/18/06	$	8,775,000	$	166,000	$	6,507,000	(6)		366	Houston, TX
Wind Tree		100.0	%		02/28/07	$	8,925,000	$	285,000	$	7,140,000			256	El Paso, TX
Pear Tree		100.0	%		03/30/07	$	6,850,000	$	237,000	$	5,480,000			156	El Paso, TX

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽³⁾  Unaffiliated tenant-in-common owners own the other 79%.

⁽⁴⁾  Unaffiliated tenant-in-common owners own the other 48.6%.

⁽⁵⁾  Unaffiliated tenant-in-common owners own the other 40%.

⁽⁶⁾  The same mortgage loan is secured by both Westchase Crossing and Wyndham.

Resource Real Estate Investors V, L.P.

Resource Real Estate Investors V, L.P. (“RREI V”) is a Delaware limited partnership formed on January 26, 2007 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. RREI V issued 3,333,202 units to 491 investors in a private placement offering, which began on February 19, 2007 and ended on September 21, 2007 and raised $33,247,781 of gross offering proceeds (excluding investment by Resource Capital Partners). Resource Real Estate has served as the sponsor and its affiliate has served as the manager of RREI V since its inception. Please see Table III, Annual Operating Results of Prior Real Estate Programs contained in our Current Report on Form 8-K filed with the SEC on July 15, 2011 and incorporated by reference into this prospectus.

As of December 31, 2010, $1,118,596 of investment management fees due to Resource Capital Partners, Inc. has been accrued. In the RREI V program, the investment management fees are required to be accrued until the investors receive the applicable priority return for the program. In addition, $214,099 of the property management fee and $188,627 of debt management fees due to affiliates of our sponsor have been accrued.

As of December 31, 2010, RREI V had purchased interests in five properties, amounting to an investment by RREI V of $67,947,000 (RREI V’s aggregate share of purchase price, including RREI V’s aggregate share of debt financing at acquisition). Of the five properties, two were in Arkansas, two were in Georgia and one was in Texas. As of December 31, 2010, none of these properties had been sold. The properties, which are described below, are all multifamily residential properties.

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As of December 31, 2010, RREI V owned interests in the following properties:

Property   Name	Ownership     Interest			Purchase     Date		Share of Purchase Price(1)		Share of   Acquisition   Costs(2)		Share of Mortgage Debt at     Purchase			No. of     Units		Location
Chenal Lakes(3)		51.0	%		05/10/07	$	17,232,747	$	260,000	$	13,872,000	(4)		456	Little Rock, AR
Brightwaters(3)		51.0	%		05/10/07	$	8,114,253	$	122,000	$	6,528,000	(4)		256	Little Rock, AR
Magnolia Villas		100.0	%		06/28/07	$	11,300,000	$	341,000	$	9,040,000			144	Savannah, GA
West Wind Landing		100.0	%		06/28/07	$	18,600,000	$	489,000	$	14,880,000			192	Savannah, GA
Ryan’s Crossing		100.0	%		09/28/07	$	12,700,000	$	425,000	$	8,255,000			248	El Paso, TX

⁽¹⁾  Purchase price does not include acquisition costs.

⁽²⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽³⁾  Unaffiliated tenant-in-common owners own the other 49%.

⁽⁴⁾  The same mortgage loan is secured by both Chenal Lakes and Brightwater.

As of December 31, 2010, RREI V has purchased one subordinated note, amounting to a total investment by RREI V of $2,575,000. The note, which is described below, is secured by a multifamily, residential property and is still held by RREI V.

Underlying   Property Name	Location		Ownership   Interest			Purchase   Date		Purchase     Price(1)		Face Value		Maturity   Date		Interest     Rate
Morgan		Rockville, MD		100.0	%		6/12/07	$	2,575,000	$	2,550,000		01/11/12		10.75	%

⁽¹⁾  Purchase price includes acquisition costs.

Resource Real Estate Opportunity Fund L.P.

Resource Real Estate Opportunity Fund, L.P. (“Opportunity Fund”) is a Delaware limited partnership formed on December 23, 2008 to purchase, own, operate and subsequently sell all or a portion of a number of unspecified real estate investments. Opportunity Fund issued 4,168,912 units to 488 investors in a private placement offering, which began on January 19, 2009 and ended on December 31, 2009 and raised $41,398,677 of gross offering proceeds. Resource Real Estate has served as the sponsor and its affiliate has served as the manager of Opportunity Fund since its inception.

As of December 31, 2010, Opportunity Fund had acquired interests in six properties amounting to a total investment of $24,918,589. As of December 31, 2010, one of these properties had been sold. The properties, which are described below, are all multifamily residential properties.

As of December 31, 2010, Opportunity Fund owned interests in the following properties:

Property   Name	Ownership   Interest			Purchase   Date		Share of     Purchase     Price			Share of   Acquisition   Costs(1)		Share of Mortgage Debt at     Purchase		No. of     Units		Location
Wyndridge		100.0	%		9/29/09	$	9,500,000	(2)	$	259,222	$	9,500,000		568	Memphis, TN
Apache		100.0	%		1/27/10	$	3,800,000		$	135,843	$	—		296	Houston, TX
Waterstone		100.0	%		3/19/10	$	5,650,000		$	91,183	$	5,406,747		378	Memphis, TN
Parkgreen		100.0	%		3/31/10	$	4,452,650		$	56,162	$	—		307	Houston, TX
Parkway		100.0	%		3/31/10	$	5,047,350		$	63,340	$	—		348	Houston, TX

⁽¹⁾  Acquisition costs include property acquisition fees, legal costs, due diligence fees, transfer taxes, filing fees and other costs incurred in connection with the closing.

⁽²⁾  Purchase price does not include acquisition costs.

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As of December 31, 2010, Resource Real Estate Opportunity Fund L.P. had sold its interest in the following property:

Property Name	Date of     Purchase		Date of Sale		Ownership     Interest(1)			Gain (Loss) on Sale
Mill Creek		06/26/09		5/2010 - 10/2010		100.0	%	$	2,628,000

Adverse Business Developments or Conditions

Certain of our programs have experienced lower than originally expected cash flows from operations. The deep and long recession that began in the United States in December 2007 has made it significantly more difficult for multifamily property owners, including the multifamily real estate funds sponsored by our sponsor, to increase rental rates to planned levels and maintain occupancy rates during periods of unprecedented nationwide job losses. According to REIS, Inc., the vacancy rate for multifamily properties in the United States as of October 15, 2009 reached a 23-year high and was approaching record levels. In addition to the severe economic downturn, prior to the fourth quarter of 2007, Resource Real Estate exclusively hired third-party property managers to manage the day-to-day operations of the funds’ properties. We believe third-party property managers are generally less effective than in-house property managers due to the fact that they do not have the same compensation incentive to meet an owner’s goals and projections. By relying on third-party onsite property management, it took longer to stabilize occupancy in properties after acquisition than was expected. Starting in the fourth quarter of 2007, Resource Real Estate formed a new subsidiary, Resource Real Estate Management, Inc., d/b/a Resource Residential, to be the property manager of all of the properties owned by its funds in order to better control the performance of the properties. See “Investment Objectives and Policies—Real Estate Asset Management Strategy—Experienced-Based Multifamily Management Strategy.” Finally, operating cash flow available after distributions has been adversely affected by timing issues with rent collection and the payment of expenses such as real estate taxes under appeal, causing either excess or deficit cash flows after distributions for a given period.

The following lists adverse business developments for investment programs sponsored by our sponsor and its affiliates: Distributions in RREI I have been funded in prior years from a combination of operating cash flow, sale proceeds and reserves and advances from its general partner. For 2004 and 2007, RREI I had negative cash flow from operations of $111,874 and $206,885, respectively. During 2005, 2007 and 2008, RREI I utilized $232,348, $541,776 and $82,252, respectively, from reserves to supplement cash flow from operations. As of December 31, 2010, RREI I has received advances in the amount of $1,939,724 and has made cumulative distributions of $2,349,808. Distributions in RREI II have been funded from a combination of operating cash flow and reserves. For 2006 and 2007, RREI II had negative cash flow from operations of $680,056 and $42,097, respectively. During 2006, 2007 and 2008, RREI II utilized $774,457, $108,704 and $65,217, respectively, from reserves to supplement cash flow from operations. As of December 31, 2010, RREI II has received advances in the amount of $269,538 and has made cumulative distributions of $4,0467,343. Distributions in RREI III have been funded from a combination of operating cash flow and reserves and advances from its general partner. Cash flow deficiencies occurred at one of the fund properties due to third-party property management issue and the delay until 2009 in receiving 2007 and 2008 tax refunds from a tax appeal on one fund property located in Texas. During 2007, RREI III utilized $473,343 from reserves to supplement cash flow from operations. As of December 31, 2010, RREI III has received advances in the amount of $263,842 and has made cumulative distributions of $5,463,106. Distributions in RREI V have been funded from a combination of operating cash flow and reserves. Cash flow deficiencies have occurred at some of the properties in the fund due to third-party property management issues. As of December 31, 2010, RREI V has received advances of $371,900 and has made cumulative distributions of $6,249,786. Distributions in RREI VI have been funded from a combination of operating cash flow and reserves. Cash flow deficiencies occurred in 2008 and 2009 due to a drop in occupancy at one of the fund properties due to sizable layoffs at a large employer located across the street from that property. Cash flow deficiencies are expected to continue also

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due to defaults that occurred in connection with all three of the subordinated debt investments held by the fund. For the fiscal year ended December 31, 2010, Resource Capital Corp. had net income of $19.4 million primarily due to gains on the extinguishment of debt which were offset by increased provisions for loan and lease losses.

Excess operating cash flow after distributions may be retained by the program as reserves to fund anticipated and unanticipated future expenditures or to cover reductions in cash flow resulting from anticipated or unanticipated rent shortfalls. Subsequent to the quickening and deepening of the global and national economic contraction in late 2008, a more conservative distribution policy was enacted for many of our private and public programs. As a part of our more conservative distribution policies, monthly distributions were reduced to 3% for RRE IV, RRE V and RRE VI and to 1% for RRE I, RRE II and RRE III, effective as of April 2010. Excess cash flow after distributions each month is retained by each of those programs as reserves to cover anticipated and unanticipated property expenditures and reductions in cash flow. Where distributions are made that exceed the cash flow generated from operations of the programs, the distributions are made either from cash reserves held by the program to be used for distributions or loans from Resource Capital Partners, Inc. or its affiliates.

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FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material U.S. federal income tax consequences of an investment in our common stock. The law firm of DLA Piper LLP (US) has acted as our tax counsel and reviewed this summary. For purposes of this section under the heading “Federal Income Tax Considerations,” references to “Resource Real Estate Opportunity REIT, Inc.,” “we,” “our” and “us” mean only Resource Real Estate Opportunity REIT, Inc. and not its subsidiaries or other lower-tier entities, except as otherwise indicated. This summary is based upon the Internal Revenue Code, the regulations promulgated by the U.S. Treasury Department, rulings and other administrative pronouncements issued by the IRS, and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and do not currently expect to seek an advance ruling from the IRS regarding any matter discussed in this prospectus. The summary is also based upon the assumption that we and our subsidiaries and affiliates will operate in accordance with their applicable organizational documents. This summary is for general information only and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular investor in light of its investment or tax circumstances or to investors subject to special tax rules, such as:

• financial institutions;

• insurance companies;

• broker-dealers;

• regulated investment companies;

• partnerships and trusts;

• persons who hold our stock on behalf of other persons as nominees;

• persons who receive our stock through the exercise of employee stock options (if we ever have employees) or otherwise as compensation;

• persons holding our stock as part of a “straddle,” “hedge,” “conversion transaction,” “constructive ownership transaction,” “synthetic security” or other integrated investment;

• “S” corporations;

and, except to the extent discussed below:

• tax-exempt organizations; and

• foreign investors.

This summary assumes that investors will hold their common stock as a capital asset, which generally means as property held for investment.

The federal income tax treatment of holders of our common stock depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. In addition, the tax consequences to any particular stockholder of holding our common stock will depend on the stockholder’s particular tax circumstances. For example, a stockholder that is a partnership or trust that has issued an equity interest to certain types of tax-exempt organizations may be subject to a special entity-level tax if we make distributions attributable

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to “excess inclusion income.” See “—Taxation of Resource Real Estate Opportunity REIT, Inc.—Taxable Mortgage Pools and Excess Inclusion Income.” A similar tax may be payable by persons who hold our stock as nominees on behalf of tax-exempt organizations. You are urged to consult your tax advisor regarding the federal, state, local and foreign income and other tax consequences to you in light of your particular investment or tax circumstances of acquiring, holding, exchanging, or otherwise disposing of our common stock.

Recent Legislation

On March 18, 2010, the President signed into law the Hiring Incentives to Restore Employment Act of 2010 (the “HIRE Act”). The HIRE Act imposes a U.S. withholding tax at a 30% rate on dividends and proceeds of sale in respect of our common stock received by U.S. stockholders who own their shares through foreign accounts or foreign intermediaries and certain non-U.S. stockholders if certain disclosure requirements related to U.S. accounts or ownership are not satisfied. If payment of withholding taxes is required, non-U.S. stockholders that are otherwise eligible for an exemption from, or reduction of, U.S. withholding taxes with respect to such dividends and proceeds will be required to seek a refund from the IRS to obtain the benefit of such exemption or reduction. We will not pay any additional amounts in respect of any amounts withheld. These new withholding rules are generally effective for payments made after December 31, 2012.

On March 30, 2010, the President signed into law the Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”). The Reconciliation Act will require certain U.S. stockholders who are individuals, estates or trusts to pay a 3.8% Medicare tax on, among other things, dividends on and capital gains from the sale or other disposition of stock, subject to certain exceptions. This tax will apply for taxable years beginning after December 31, 2012. U.S. stockholders should consult their tax advisors regarding the effect, if any, of the Reconciliation Act on their ownership and disposition of our common stock.

Taxation of Resource Real Estate Opportunity REIT, Inc.

We intend to elect to be taxed as a REIT under Section 856 of the Internal Revenue Code, effective for our taxable year ended December 31, 2010. We believe that we have been organized and expect to operate in such a manner as to qualify for taxation as a REIT.

The law firm of DLA Piper LLP (US), acting as our tax counsel in connection with this offering, has rendered an opinion that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and that our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT for our taxable year ended December 31, 2010. It must be emphasized that the opinion of DLA Piper LLP (US) is based on various assumptions relating to our organization and operation and is conditioned upon fact-based representations and covenants made by our management regarding our organization, assets, and income, and the past, present and future conduct of our business operations. While we intend to operate so that we will qualify as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given by DLA Piper LLP (US) or by us that we will qualify as a REIT for any particular year. The opinion is expressed as of the date issued and will not cover subsequent periods. Counsel has no obligation to advise us or our stockholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. You should be aware that opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not challenge the conclusions set forth in such opinions.

Qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of stock and asset ownership, various

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qualification requirements imposed upon REITs by the Internal Revenue Code, the compliance with which will not be reviewed by DLA Piper LLP (US). Our ability to qualify as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.

Taxation of REITs in General

As indicated above, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Internal Revenue Code. The material qualification requirements are summarized below under “—Requirements for Qualification—General.” While we intend to operate so that we qualify as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we will be able to operate in accordance with the REIT requirements in the future. See “—Failure to Qualify.”

Provided that we qualify as a REIT, generally we will be entitled to a deduction for distributions that we pay to our stockholders and therefore will not be subject to federal corporate income tax on our taxable income that is currently distributed to our stockholders. This treatment substantially eliminates the “double taxation” at the corporate and stockholder levels that generally results from investment in a corporation. In general, the income that we generate is taxed only at the stockholder level upon distribution to our stockholders.

For tax years through 2012, most domestic stockholders that are individuals, trusts or estates will be taxed on corporate distributions at a maximum rate of 15% (the same as long-term capital gains). With limited exceptions, however, distributions from us or from other entities that are taxed as REITs are generally not eligible for this rate and will continue to be taxed at rates applicable to ordinary income, which will be as high as 35% through 2012. See “—Taxation of Stockholders—Taxation of Taxable Domestic Stockholders—Distributions.”

Any net operating losses and other tax attributes generally do not pass through to our stockholders, subject to special rules for certain items such as the capital gains that we recognize. See “—Taxation of Stockholders.”

If we qualify as a REIT, we will nonetheless be subject to federal tax in the following circumstances:

• We will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains.

• We may be subject to the “alternative minimum tax” on our items of tax preference, including any deductions of net operating losses.

• If we have net income from prohibited transactions, which are, in general, sales or other dispositions of inventory or property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax. See “—Prohibited Transactions” and “—Foreclosure Property” below.

• If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may thereby avoid the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the income from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 35%).

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• If we derive “excess inclusion income” from an interest in certain mortgage loan securitization structures (i.e., a “taxable mortgage pool” or a residual interest in a REMIC), we could be subject to corporate level federal income tax at a 35% rate to the extent that such income is allocable to specified types of tax-exempt stockholders known as “disqualified organizations” that are not subject to unrelated business income tax. See “—Taxable Mortgage Pools and Excess Inclusion Income” below. “Disqualified organizations” are any organization described in Section 860E(e)(5) of the Code, including: (i) the United States; (ii) any state or political subdivision of the United States; (iii) any foreign government; and (iv) certain other organizations.

• If we should fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because we satisfy other requirements, we will be subject to a 100% tax on an amount based on the magnitude of the failure, as adjusted to reflect the profit margin associated with our gross income.

• If we should violate the asset tests (other than certain de minimis violations) or other requirements applicable to REITs, as described below, and yet maintain our qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to an excise tax. In that case, the amount of the excise tax will be at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the amount of net income generated by the assets in question multiplied by the highest corporate tax rate (currently 35%) if that amount exceeds $50,000 per failure.

• If we should fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods, we would be subject to a nondeductible 4% excise tax on the excess of the required distribution over the sum of (i) the amounts that we actually distributed and (ii) the amounts we retained and upon which we paid income tax at the corporate level.

• We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “—Requirements for Qualification—General.”

• A 100% tax may be imposed on transactions between us and a TRS (as described below) that do not reflect arm’s-length terms.

• If we acquire appreciated assets from a corporation that is not a REIT (i.e., a corporation taxable under subchapter C of the Internal Revenue Code) in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the subchapter C corporation, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during the 10-year period following their acquisition from the subchapter C corporation.

• The earnings of our subsidiaries, including any subsidiary we may elect to treat as a TRS, are subject to federal corporate income tax to the extent that such subsidiaries are subchapter C corporations.

In addition, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state and local and foreign income, property and other taxes on our assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.

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Requirements for Qualification—General

The Internal Revenue Code defines a REIT as a corporation, trust or association:

(1) that is managed by one or more trustees or directors;

(2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

(3) that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT;

(4) that is neither a financial institution nor an insurance company subject to specific provisions of the Internal Revenue Code;

(5) the beneficial ownership of which is held by 100 or more persons;

(6) in which, during the last half of each taxable year, not more than 50% in value of the outstanding stock is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Internal Revenue Code to include specified tax-exempt entities);

(7) which elects to be taxed as a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements that must be met to elect and maintain REIT qualification; and

(8) which meets other tests described below, including with respect to the nature of its income and assets.

The Internal Revenue Code provides that conditions (1) through (4) must be met during the entire taxable year, and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year. Conditions (5) and (6) need not be met during a corporation’s initial tax year as a REIT (which, in our case, will be 2010). Our charter provides restrictions regarding the ownership and transfer of our shares, which are intended to assist us in satisfying the share ownership requirements described in conditions (5) and (6) above.

We believe that we will issue in this offering common stock with sufficient diversity of ownership to satisfy requirements 5 and 6. In addition, our charter restricts the ownership and transfer of our stock so that we should continue to satisfy these requirements. The provisions of our charter restricting the ownership and transfer of the common stock are described in “Description of Shares—Restrictions on Ownership of Shares.”

To monitor compliance with the share ownership requirements, we generally are required to maintain records regarding the actual ownership of our shares. To do so, we must demand written statements each year from the record holders of significant percentages of our stock pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include our distributions in their gross income). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. If you fail or refuse to comply with the demands, you will be required by Treasury regulations to submit a statement with your tax return disclosing your actual ownership of our shares and other information.

In addition, a corporation generally may not elect to become a REIT unless its taxable year is the calendar year. We intend to adopt December 31 as our year-end, and thereby satisfy this requirement.

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The Internal Revenue Code provides relief from violations of the REIT gross income requirements, as described below under “—Income Tests,” in cases where a violation is due to reasonable cause and not to willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation. In addition, certain provisions of the Internal Revenue Code extend similar relief in the case of certain violations of the REIT asset requirements (see “—Asset Tests” below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax. If we fail to satisfy any of the various REIT requirements, there can be no assurance that these relief provisions would be available to enable us to maintain our qualification as a REIT, and, if such relief provisions are available, the amount of any resultant penalty tax could be substantial.

Effect of Subsidiary Entities

Ownership of Partnership Interests.  An unincorporated domestic entity, such as a partnership, limited liability company, or trust that has a single owner generally is not treated as an entity separate from its parent for federal income tax purposes. An unincorporated domestic entity with two or more owners generally is treated as a partnership for federal income tax purposes. If we are a partner in an entity that is treated as a partnership for federal income tax purposes, Treasury regulations provide that we are deemed to own our proportionate share of the partnership’s assets, and to earn our proportionate share of the partnership’s income, for purposes of the asset and gross income tests applicable to REITs. Our proportionate share of a partnership’s assets and income is based on our capital interest in the partnership (except that for purposes of the 10% value test, our proportionate share of the partnership’s assets is based on our proportionate interest in the equity and certain debt securities issued by the partnership). In addition, the assets and gross income of the partnership are deemed to retain the same character in our hands. Thus, our proportionate share of the assets and items of income of any of our subsidiary partnerships will be treated as our assets and items of income for purposes of applying the REIT requirements. For any period of time that we own 100% of our Operating Partnership, all of our Operating Partnership’s assets and income will be deemed to be ours for federal income tax purposes.

Disregarded Subsidiaries.  If we own a corporate subsidiary that is a “qualified REIT subsidiary,” that subsidiary is generally disregarded for federal income tax purposes, and all of the subsidiary’s assets, liabilities and items of income, deduction and credit are treated as our assets, liabilities and items of income, deduction and credit, including for purposes of the gross income and asset tests applicable to REITs. A qualified REIT subsidiary is any corporation, other than a TRS (as described below), that is directly or indirectly wholly owned by a REIT. Thus, in applying the requirements described herein, any qualified REIT subsidiary that we own will be ignored, and all assets, liabilities, and items of income, deduction and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction and credit. If we own 100% of the equity interests in a CDO issuer or other securitization vehicle that is treated as a corporation for tax purposes, that CDO issuer or other securitization vehicle would be a qualified REIT subsidiary, unless we and the CDO issuer or other securitization vehicle jointly elect to treat the CDO issuer or other securitization vehicle as a TRS. It is anticipated that CDO financings we enter into, if any, will be treated as qualified REIT subsidiaries. Other entities that are wholly owned by us, including single member limited liability companies that have not elected to be taxed as corporations for federal income tax purposes, are also generally disregarded as separate entities for federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with any partnerships in which we hold an equity interest, are sometimes referred to herein as “pass-through subsidiaries.”

In the event that a disregarded subsidiary of ours ceases to be wholly owned—for example, if any equity interest in the subsidiary is acquired by a person other than us or another disregarded subsidiary of ours—the subsidiary’s separate existence would no longer be disregarded for federal income tax purposes. Instead, the subsidiary would have multiple owners and would be treated as either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our ability to

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satisfy the various asset and gross income requirements applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation. See “—Asset Tests” and “—Income Tests.”

Taxable Corporate Subsidiaries.  In the future we may jointly elect with any of our subsidiary corporations, whether or not wholly owned, to treat such subsidiary corporations as taxable REIT subsidiaries (“TRSs”). A REIT is permitted to own up to 100% of the stock of one or more TRSs. A TRS is a fully taxable corporation that may earn income that would not be qualifying income if earned directly by the parent REIT. The subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation with respect to which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. We generally may not own more than 10% of the securities of a taxable corporation, as measured by voting power or value, unless we and such corporation elect to treat such corporation as a TRS. Overall, no more than 25% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.

The separate existence of a TRS or other taxable corporation is not ignored for federal income tax purposes. Accordingly, a TRS or other taxable corporation generally would be subject to corporate income tax on its earnings, which may reduce the cash flow that we and our subsidiaries generate in the aggregate, and may reduce our ability to make distributions to our stockholders.

We are not treated as holding the assets of a TRS or other taxable subsidiary corporation or as receiving any income that the subsidiary earns. Rather, the stock issued by a taxable subsidiary to us is an asset in our hands, and we treat the distributions paid to us from such taxable subsidiary, if any, as income. This treatment can affect our income and asset test calculations, as described below. Because we do not include the assets and income of TRSs or other taxable subsidiary corporations in determining our compliance with the REIT requirements, we may use such entities to undertake indirectly activities that the REIT rules might otherwise preclude us from doing directly or through pass-through subsidiaries. For example, we may use TRSs or other taxable subsidiary corporations to conduct activities that give rise to certain categories of income such as management fees or activities that would be treated in our hands as prohibited transactions.

Certain restrictions imposed on TRSs are intended to ensure that such entities will be subject to appropriate levels of U.S. federal income taxation. First, a TRS with a debt-equity ratio in excess of 1.5 to 1 may not deduct interest payments made in any year to an affiliated REIT to the extent that such payments exceed, generally, 50% of the TRS’s adjusted taxable income for that year (although the TRS may carry forward to, and deduct in, a succeeding year the disallowed interest amount if the 50% test is satisfied in that year). In addition, if amounts are paid to a REIT or deducted by a TRS due to transactions between the REIT and a TRS that exceed the amount that would be paid to or deducted by a party in an arm’s-length transaction, the REIT generally will be subject to an excise tax equal to 100% of such excess. We intend to scrutinize all of our transactions with any of our subsidiaries that are treated as a TRS in an effort to ensure that we do not become subject to this excise tax; however, we cannot assure you that we will be successful in avoiding this excise tax.

We may own TRSs that are organized outside of the United States. For example, we may hold certain investments and instruments through TRSs to the extent that direct ownership by us could jeopardize our compliance with the REIT qualification requirements, and we may make TRS elections with respect to certain offshore issuers of CDOs or other instruments to the extent that we do not own 100% of the offshore issuer’s equity. Special rules apply in the case of income earned by a taxable subsidiary corporation that is organized outside of the United States. Depending upon the nature of the subsidiary’s income, the parent REIT may be required to include in its taxable income an amount equal to its share of the subsidiary’s income, without regard to whether, or when, such income is distributed by the subsidiary. See “—Income Tests” below. A TRS that is organized outside of the United States may, depending upon the nature of its operations, be subject to little or no federal income tax. There is a specific exemption from

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federal income tax for non-U.S. corporations that restrict their activities in the United States to trading stock and securities (or any activity closely related thereto) for their own account, whether such trading (or such other activity) is conducted by the corporation or its employees through a resident broker, commission agent, custodian or other agent. We currently expect that any offshore TRSs will rely on that exemption or otherwise operate in a manner so that they will generally not be subject to federal income tax on their net income at the entity level.

Income Tests

In order to qualify as a REIT, we must satisfy two gross income requirements on an annual basis. First, at least 75% of our gross income for each taxable year, excluding gross income from sales of inventory or dealer property in “prohibited transactions,” generally must be derived from investments relating to real property or mortgages on real property, including interest income derived from mortgage loans secured by real property (including certain types of mortgage-backed securities), “rents from real property,” distributions received from other REITs, and gains from the sale of real estate assets, any amount includible in gross income with respect to a regular or residual interest in a REMIC, unless less than 95% of the REMIC’s assets are real estate assets, in which case only a proportionate amount of such income will qualify, as well as specified income from temporary investments. Second, at least 95% of our gross income in each taxable year, excluding gross income from prohibited transactions and certain hedging transactions, must be derived from some combination of such income from investments in real property (i.e., income that qualifies under the 75% income test described above), as well as other distributions, interest, and gain from the sale or disposition of stock or securities, which need not have any relation to real property.

Gross income from the sale of inventory property is excluded from both the numerator and the denominator in both income tests. Income and gain from hedging transactions that we enter into to hedge indebtedness incurred or to be incurred to acquire or carry real estate assets will generally be excluded from both the numerator and the denominator for purposes of both gross income tests. We intend to monitor the amount of our non-qualifying income and manage our investment portfolio to comply at all times with the gross income tests but we cannot assure you that we will be successful in this effort.

The term “interest,” as defined for purposes of both gross income tests, generally excludes any amount that is based in whole or in part on the income or profits of any person. However, interest generally includes the following: (i) an amount that is based on a fixed percentage or percentages of gross receipts or sales and (ii) an amount that is based on the income or profits of a borrower where the borrower derives substantially all of its income from the real property securing the debt by leasing substantially all of its interest in the property, but only to the extent that the amounts received by the borrower would be qualifying “rents from real property” if received directly by a REIT.

If a loan contains a provision that entitles a REIT to a percentage of the borrower’s gain upon the sale of the real property securing the loan or a percentage of the appreciation in the property’s value as of a specific date, income attributable to that loan provision will be treated as gain from the sale of the property securing the loan, which generally is qualifying income for purposes of both gross income tests.

Interest on debt secured by a mortgage on real property or on interests in real property is generally qualifying income for purposes of the 75% gross income test. However, if the highest principal amount of a loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of the date the REIT agreed to originate or acquire the loan, a portion of the interest income from such loan will not be qualifying income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test. Note that a “significant modification” of a debt instrument will result in a new debt instrument which requires new tests of the value of the underlying real estate. The portion of the interest income that will not be qualifying income for purposes of the 75% gross

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income test will be equal to the portion of the principal amount of the loan that is not secured by real property (i.e., the amount by which the loan exceeds the value of the real estate that is security for the loan).

The IRS recently issued Revenue Procedure 2011-16, which addresses the treatment of modified mortgage loans and distressed debt for purposes of the REIT gross income and asset tests. Under existing Treasury Regulations, if a loan is secured by real property and other property and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property securing the loan as of (1) the date we agreed to acquire or originate the loan or (2) in the event of certain significant modifications, the date we modified the loan, then a portion of the interest income from such a loan will not be qualifying income for purposes of the 75% gross income test, but will be qualifying income for purposes of the 95% gross income test. Although the law is not entirely clear, a portion of the loan may not be treated as a qualifying “real estate asset” for purposes of the 75% asset test. The non-qualifying portion of such a loan would be subject to, among other requirements, the 10% value test.

Terms of debt obligations we may acquire may be modified to avoid foreclosure actions and for other reasons. If the terms of such loans are modified in a manner constituting a “significant modification,” such modification triggers a deemed exchange for tax purposes of the original loan for the modified loan. Revenue Procedure 2011-16 provides a safe harbor pursuant to which we will not be required to redetermine the fair market value of the real property securing certain of our loans for purposes of the REIT gross income and asset tests in connection with a loan modification that is (1) occasioned by a borrower default or (2) made at a time when we reasonably believe that the modification to the loan will substantially reduce a significant risk of default on the original loan. No assurance can be provided all of our loan modifications will qualify for the safe harbor in Revenue Procedure 2011-16. To the extent we significantly modify loans in a manner that does not qualify for that safe harbor, we will generally be required to redetermine the value of the real property securing the loan at the time it was significantly modified. In determining the value of the real property securing such a loan, we generally will not obtain third party appraisals, but rather will rely on internal valuations. No assurance can be provided that the IRS will not successfully challenge our internal valuations. If the terms of our debt instruments are significantly modified in a manner that does not qualify for the safe harbor in Revenue Procedure 2011-16 and the fair market value of the real property securing such loans has decreased significantly, we could fail the 75% gross income test, the 75% asset test and/or the 10% value test. Unless we qualified for relief under certain cure provisions in the Code, such failures could cause us to fail to qualify as a REIT.

As noted above, we and our subsidiaries have and may in the future acquire distressed debt. Revenue Procedure 2011-16 provides that the IRS will treat a distressed mortgage loan acquired by a REIT that is secured by real property and other property as producing in part non-qualifying income for the 75% gross income test. Specifically, Revenue Procedure 2011-16 indicates that interest income on a loan will be treated as qualifying income based on the ratio of (1) the fair market value of the real property securing the loan determined as of the date the REIT committed to acquire the loan and (2) the face amount of the loan (and not the purchase price or current value of the loan). The face amount of a distressed mortgage loan and other distressed debt will typically exceed the fair market value of the real property securing the debt on the date the REIT commits to acquire the debt. We believe that we will continue to invest in distressed debt in a manner consistent with complying with the 75% gross income test and maintaining our qualification as a REIT.

Interest, including original issue discount or market discount that we accrue on our real estate related debt investments generally will be qualifying income for purposes of both gross income tests. However, many of our investments will not be secured by mortgages on real property or interests in real property. Our interest income from those investments will be qualifying income for purposes of the 95% gross income test but not the 75% gross income test. In addition, as discussed above, if the fair market value of the real estate securing any of our investments is less than the principal amount of the underlying loan as of a certain testing date, a portion of the income from that investment will be qualifying income for purposes of the 95% gross income test but not the 75% gross income test.

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To the extent that the terms of a loan provide for contingent interest that is based on the cash proceeds realized upon the sale of the property securing the loan (a “shared appreciation provision”), income attributable to the participation feature will be treated as gain from sale of the underlying property, which generally will be qualifying income for purposes of both the 75% and 95% gross income tests provided that the real property is not held as inventory or dealer property or primarily for sale to customers in the ordinary course of business. To the extent that we derive interest income from a mortgage loan or income from the rental of real property (discussed below) where all or a portion of the amount of interest or rental income payable is contingent, such income generally will qualify for purposes of the gross income tests only if it is based upon the gross receipts or sales and not on the net income or profits of the borrower or lessee. This limitation does not apply, however, where the borrower or lessee leases substantially all of its interest in the property to tenants or subtenants to the extent that the rental income derived by the borrower or lessee, as the case may be, would qualify as rents from real property had we earned the income directly.

We and our subsidiaries may invest in mezzanine loans, which are loans secured by equity interests in an entity that directly or indirectly owns real property, rather than by a direct mortgage of the real property. The IRS has issued Revenue Procedure 2003-65, which provides a safe harbor applicable to mezzanine loans. Under the Revenue Procedure, if a mezzanine loan meets each of the requirements contained in the Revenue Procedure, (1) the mezzanine loan will be treated by the IRS as a real estate asset for purposes of the asset tests described below, and (2) interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the 75% income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We intend to structure any investments in mezzanine loans in a manner that generally complies with the various requirements applicable to our qualification as a REIT. However, the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor set forth in the Revenue Procedure, there can be no assurance that the IRS will not challenge the tax treatment of these loans.

We and our subsidiaries may also invest in REMICs, and we may invest in other types of commercial mortgage-backed securities. See below under “—Asset Tests” for a discussion of the effect of such investments on our qualification as a REIT.

We may also hold certain participation interests, including B-Notes, in mortgage loans and mezzanine loans originated by other lenders. B-Notes are interests in underlying loans created by virtue of participations or similar agreements to which the originator of the loans is a party, along with one or more participants. The borrower on the underlying loans is typically not a party to the participation agreement. The performance of this investment depends upon the performance of the underlying loans and, if the underlying borrower defaults, the participant typically has no recourse against the originator of the loans. The originator often retains a senior position in the underlying loans and grants junior participations which absorb losses first in the event of a default by the borrower. We generally expect to treat our participation interests as qualifying real estate assets for purposes of the REIT asset tests described below and interest that we derive from such investments as qualifying mortgage interest for purposes of the 75% income test. The appropriate treatment of participation interests for federal income tax purposes is not entirely certain, however, and no assurance can be given that the IRS will not challenge our treatment of our participation interests. In the event of a determination that such participation interests do not qualify as real estate assets, or that the income that we derive from such participation interests does not qualify as mortgage interest for purposes of the REIT asset and income tests, we could be subject to a penalty tax, or could fail to qualify as a REIT. See “—Taxation of REITs in General,” “—Requirements for Qualification—General,” “—Asset Tests” and “—Failure to Qualify.”

We may acquire debt instruments in the secondary market for less than their face amount. The amount of such discount will generally be treated as “market discount” for federal income tax purposes. Moreover, we may acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are “significant modifications” under the

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applicable Treasury regulations, the modified debt may be considered to have been reissued to us in a debt-for-debt exchange with the borrower. This deemed reissuance may prevent the modified debt from qualifying as a good REIT asset if the underlying security has declined in value. See the discussion of Revenue Procedure 2011-16 above.

In general, we will be required to accrue original issue discount on a debt instrument as taxable income in accordance with applicable federal income tax rules even though no cash payments may be received on such debt instrument. With respect to market discount, although generally we are not required to accrue the discount annually as taxable income (absent an election to do so), interest payments with respect to any debt incurred to purchase the investment may not be deductible and a portion of any gain realized on the disposition of the debt instrument may be treated as ordinary income rather than capital gain.

If we eventually collect less on a debt instrument than the amount we paid for it plus the market discount we had previously reported as income, there would potentially be an ordinary bad debt deduction (rather than capital loss) but this is not free from doubt, and may depend on the characteristics of the underlying obligation, and the amount of cash we collect on maturity, etc. Our ability to benefit from that bad debt deduction (or capital loss) would depend on our having taxable income (or capital gain) in that later taxable year. REITs may not carry back net operating losses, so this possible “income early, loss later” phenomenon could adversely affect us and our stockholders if it were persistent and in significant amounts.

Finally, in the event that any debt instruments acquired by us are delinquent as to mandatory principal and interest payments, or in the event a borrower with respect to a particular debt instrument acquired by us encounters financial difficulty rendering it unable to pay stated interest as due, we may nonetheless be required to continue to recognize the unpaid interest as taxable income. Similarly, we may be required to accrue interest income with respect to subordinate mortgage-backed securities at the stated rate regardless of whether corresponding cash payments are received.

Due to each of these potential timing differences between income recognition or expense deduction and cash receipts or disbursements, there is a significant risk that we may recognize substantial taxable income in excess of cash available for distribution. In that event, we may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this “phantom income” is recognized. See “—Annual Distribution Requirements.”

Rents received by us will qualify as “rents from real property” in satisfying the gross income requirements described above only if several conditions are met. If rent is partly attributable to personal property leased in connection with a lease of real property, the portion of the rent that is attributable to the personal property will not qualify as “rents from real property” unless it constitutes 15% or less of the total rent received under the lease. In addition, the amount of rent must not be based in whole or in part on the income or profits of any person. Amounts received as rent, however, generally will not be excluded from rents from real property solely by reason of being based on fixed percentages of gross receipts or sales. Moreover, for rents received to qualify as “rents from real property,” we generally must not operate or manage the property or furnish or render services to the tenants of such property, other than through an “independent contractor” from which we derive no revenue. We are permitted, however, to perform services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and which are not otherwise considered rendered to the occupant of the property. In addition, we may directly or indirectly provide noncustomary services to tenants of our properties without disqualifying all of the rent from the property if the payments for such services do not exceed 1% of the total gross income from the properties. For purposes of this test, we are deemed to have received income from such non-customary services in an amount at least 150% of the direct cost of providing the services. Moreover, we are generally permitted to provide services to tenants or others through a TRS without disqualifying the rental income received from tenants for purposes of the income tests. Also, rental income will qualify as

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rents from real property only to the extent that we do not directly or constructively hold a 10% or greater interest, as measured by vote or value, in the lessee’s equity.

We may directly or indirectly receive distributions from TRSs or other corporations that are not REITs or qualified REIT subsidiaries. These distributions generally are treated as dividend income to the extent of the earnings and profits of the distributing corporation. Such distributions will generally constitute qualifying income for purposes of the 95% gross income test, but not for purposes of the 75% gross income test. Any distributions that we receive from a REIT, however, will be qualifying income for purposes of both the 95% and 75% income tests.

We may receive various fees in connection with our operations relating to the origination or purchase of whole loans secured by first mortgages and other loans secured by real property. The fees will generally be qualifying income for purposes of both the 75% and 95% gross income tests if they are received in consideration for entering into an agreement to make a loan secured by real property and the fees are not determined by income and profits. Other fees generally are not qualifying income for purposes of either gross income test and will not be favorably counted for purposes of either gross income test. Any fees earned by any TRS will not be included for purposes of the gross income tests. We and our subsidiaries may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swap agreements, interest rate cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent provided by Treasury regulations, any income from a hedging transaction we entered into (1) in the normal course of our business primarily to manage risk of interest rate, inflation or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets, which is clearly identified as specified in Treasury regulations before the closing of the day on which it was acquired, originated, or entered into, including gain from the sale or disposition of such a transaction, and (2) primarily to manage risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests which is clearly identified as such before the closing of the day on which it was acquired, originated, or entered to, will not constitute gross income for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of the 75% or 95% gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT.

If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may still qualify as a REIT for such year if we are entitled to relief under applicable provisions of the Internal Revenue Code. These relief provisions will be generally available if (1) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (2) following our identification of the failure to meet the 75% or 95% gross income test for any taxable year, we file a schedule with the IRS setting forth each item of our gross income for purposes of the 75% or 95% gross income test for such taxable year in accordance with Treasury regulations yet to be issued. It is not possible to state whether we would be entitled to the benefit of these relief provisions in all circumstances. If these relief provisions are inapplicable to a particular set of circumstances, we will not qualify as a REIT. As discussed above under “—Taxation of REITs in General,” even where these relief provisions apply, the Internal Revenue Code imposes a tax based upon the amount by which we fail to satisfy the particular gross income test.

Asset Tests

At the close of each calendar quarter, we must also satisfy four tests relating to the nature of our assets. First, at least 75% of the value of our total assets must be represented by some combination of “real estate assets,” cash, cash items, U.S. government securities, and, under some circumstances, stock or debt instruments purchased with new capital. For this purpose, real estate assets include interests in real property, such as land, buildings, leasehold interests in real property, stock of other corporations that

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qualify as REITs, and some kinds of mortgage-backed securities and mortgage loans. Assets that do not qualify for purposes of the 75% test are subject to the additional asset tests described below.

Second, the value of any one issuer’s securities that we own may not exceed 5% of the value of our total assets.

Third, we may not own more than 10% of any one issuer’s outstanding securities, as measured by either voting power or value. The 5% and 10% asset tests do not apply to securities of TRSs and qualified REIT subsidiaries and the 10% asset test does not apply to “straight debt” having specified characteristics and to certain other securities described below. Solely for purposes of the 10% asset test, the determination of our interest in the assets of a partnership or limited liability company in which we own an interest will be based on our proportionate interest in any securities issued by the partnership or limited liability company, excluding for this purpose certain securities described in the Internal Revenue Code. Fourth, the aggregate value of all securities of taxable REIT subsidiaries that we hold may not exceed 25% of the value of our total assets.

Notwithstanding the general rule, as noted above, that for purposes of the REIT income and asset tests we are treated as owning our proportionate share of the underlying assets of a subsidiary partnership, if we hold indebtedness issued by a partnership, the indebtedness will be subject to, and may cause a violation of, the asset tests unless the indebtedness is a qualifying mortgage asset or other conditions are met. Similarly, although stock of another REIT is a qualifying asset for purposes of the REIT asset tests, any non-mortgage debt that is issued by another REIT may not so qualify (such debt, however, will not be treated as “securities” for purposes of the 10% asset test, as explained below).

We believe that most of the real estate related securities that we expect to hold will be qualifying assets for purposes of the 75% asset test. However, our investment in other asset-backed securities, bank loans and other instruments that are not secured by mortgages on real property will not be qualifying assets for purposes of the 75% asset test.

Revenue Procedure 2011-16 provides a safe harbor addressing the treatment of certain secured loans for purposes of the REIT asset tests. Pursuant to that safe harbor, the IRS will not challenge a REIT’s treatment of a loan as being, in part, a qualifying real estate asset in an amount equal to the lesser of (1) the fair market value of the real property securing the loan determined as of the date the REIT committed to acquire the loan or (2) the fair market value of the loan on the date of the relevant quarterly REIT asset testing date. Under the safe harbor, when the current value of a distressed debt exceeds the fair market value of the real property that secures the debt, determined as of the date we committed to acquire or originate the debt, the excess will be treated as a non-qualifying asset. This safe harbor will help us comply with the REIT asset tests immediately following the acquisition of distressed debt. It will be less helpful if the value of the distressed debt increases over time. Accordingly, under this safe harbor, an increasing portion of a distressed debt will be treated as a non-qualifying asset if the value of the distressed debt increases. We believe that we have and intend to continue to invest in distressed debt in a manner consistent with complying with the REIT asset tests and maintaining our qualification as a REIT.

Certain relief provisions are available to REITs to satisfy the asset requirements or to maintain REIT qualification notwithstanding certain violations of the asset and other requirements. One such provision allows a REIT which fails one or more of the asset requirements to nevertheless maintain its REIT qualification if (1) the REIT provides the IRS with a description of each asset causing the failure, (2) the failure is due to reasonable cause and not willful neglect, (3) the REIT pays a tax equal to the greater of (a) $50,000 per failure, and (b) the product of the net income generated by the assets that caused the failure multiplied by the highest applicable corporate tax rate (currently 35%), and (4) the REIT either disposes of the assets causing the failure within six months after the last day of the quarter in which it identifies the failure, or otherwise satisfies the relevant asset tests within that time frame.

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In the case of de minimis violations of the 10% and 5% asset tests, a REIT may maintain its qualification despite a violation of such requirements if (1) the value of the assets causing the violation does not exceed the lesser of 1% of the REIT’s total assets and $10,000,000, and (2) the REIT either disposes of the assets causing the failure within six months after the last day of the quarter in which it identifies the failure, or the relevant tests are otherwise satisfied within that time frame.

Certain securities will not cause a violation of the 10% asset test described above. Such securities include instruments that constitute “straight debt,” which includes, among other things, securities having certain contingency features. A security does not qualify as “straight debt” where a REIT (or a controlled TRS of the REIT) owns other securities of the same issuer which do not qualify as straight debt, unless the value of those other securities constitute, in the aggregate, 1% or less of the total value of that issuer’s outstanding securities. In addition to straight debt, the Internal Revenue Code provides that certain other securities will not violate the 10% asset test. Such securities include (1) any loan made to an individual or an estate, (2) certain rental agreements pursuant to which one or more payments are to be made in subsequent years (other than agreements between a REIT and certain persons related to the REIT under attribution rules), (3) any obligation to pay rents from real property, (4) securities issued by governmental entities that are not dependent in whole or in part on the profits of (or payments made by) a non-governmental entity, (5) any security (including debt securities) issued by another REIT, and (6) any debt instrument issued by a partnership if the partnership’s income is of a nature that it would satisfy the 75% gross income test described above under “—Income Tests.” In applying the 10% asset test, a debt security issued by a partnership is not taken into account to the extent, if any, of the REIT’s proportionate interest in the equity and certain debt securities issued by that partnership.

Any interests that we hold in a REMIC will generally qualify as real estate assets and income derived from REMIC interests will generally be treated as qualifying income for purposes of the REIT income tests described above. If less than 95% of the assets of a REMIC are real estate assets, however, then only a proportionate part of our interest in the REMIC and income derived from the interest qualifies for purposes of the REIT asset and income tests. If we hold a “residual interest” in a REMIC from which we derive “excess inclusion income,” we will be required to either distribute the excess inclusion income or pay tax on it (or a combination of the two), even though we may not receive the income in cash. To the extent that distributed excess inclusion income is allocable to a particular stockholder, the income (1) would not be allowed to be offset by any net operating losses otherwise available to the stockholder, (2) would be subject to tax as unrelated business taxable income in the hands of most types of stockholders that are otherwise generally exempt from federal income tax, and (3) would result in the application of U.S. federal income tax withholding at the maximum rate (30%), without reduction of any otherwise applicable income tax treaty, to the extent allocable to most types of foreign stockholders. Moreover, any excess inclusion income that we receive that is allocable to specified categories of tax-exempt investors which are not subject to unrelated business income tax, such as government entities, may be subject to corporate-level income tax in our hands, whether or not it is distributed. See “—Taxable Mortgage Pools and Excess Inclusion Income.”

To the extent that we hold mortgage participations or commercial mortgage-backed securities that do not represent REMIC interests, such assets may not qualify as real estate assets, and the income generated from them might not qualify for purposes of either or both of the REIT income tests, depending upon the circumstances and the specific structure of the investment.

We believe that our holdings of securities and other assets will comply with the foregoing REIT asset requirements, and we intend to monitor compliance on an ongoing basis. Certain mezzanine loans we make or acquire may qualify for the safe harbor in Revenue Procedure 2003-65 pursuant to which certain loans secured by a first priority security interest in ownership interests in a partnership or limited liability company will be treated as qualifying assets for purposes of the 75% real estate asset test and the 10% vote or value test. See “—Income Tests.” We may make some mezzanine loans that do not qualify for that safe harbor and that do not qualify as “straight debt” securities or for one of the other exclusions from the

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definition of “securities” for purposes of the 10% value test. We intend to make such investments in such a manner as not to fail the asset tests described above.

No independent appraisals will be obtained to support our conclusions as to the value of our total assets or the value of any particular security or securities. Moreover, values of some assets, including instruments issued in securitization transactions, may not be susceptible to a precise determination, and values are subject to change in the future. Furthermore, the proper classification of an instrument as debt or equity for federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT asset requirements. Accordingly, there can be no assurance that the IRS will not contend that our interests in our subsidiaries or in the securities of other issuers will not cause a violation of the REIT asset tests.

If we should fail to satisfy the asset tests at the end of a calendar quarter, such a failure would not cause us to lose our REIT qualification if we (1) satisfied the asset tests at the close of the preceding calendar quarter and (2) the discrepancy between the value of our assets and the asset requirements was not wholly or partly caused by an acquisition of non-qualifying assets, but instead arose from changes in the market value of our assets. If the condition described in (2) were not satisfied, we still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose or by making use of relief provisions described below.

Annual Distribution Requirements

In order to qualify as a REIT, we are required to make distributions, other than capital gain distributions, to our stockholders in an amount at least equal to:

(a) the sum of

(1) 90% of our “REIT taxable income,” computed without regard to our net capital gains and the dividends paid deduction, and

(2) 90% of our net income, if any, (after tax) from foreclosure property (as described below), minus

(b) the sum of specified items of non-cash income.

In addition, if we were to recognize “built-in-gain” (as defined below) on disposition of any assets acquired from a “C” corporation in a transaction in which our basis in the assets was determined by reference to the “C” corporation’s basis (for instance, if the assets were acquired in a tax-free reorganization), we would be required to distribute at least 90% of the built-in-gain recognized net of the tax we would pay on such gain. “Built-in-gain” is the excess of (a) the fair market value of an asset (measured at the time of acquisition) over (b) the basis of the asset (measured at the time of acquisition).

We generally must make these distributions in the taxable year to which they relate, or in the following taxable year if either (i) declared before we timely file our tax return for the year and if paid with or before the first regular distribution payment after such declaration; or (ii) declared in October, November or December of the taxable year, payable to stockholders of record on a specified day in any such month, and actually paid before the end of January of the following year. The distributions under clause (i) are taxable to the stockholders of our common stock in the year in which paid, and the distributions in clause (ii) are treated as paid on December 31 of the prior taxable year. In both instances, these distributions relate to our prior taxable year for purposes of the 90% distribution requirement.

In order for distributions to be counted for this purpose, and to provide a tax deduction for us, the distributions must not be “preferential dividends.” A distribution is not a preferential dividend if the

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distribution is (1) pro rata among all outstanding shares of stock within a particular class, and (2) in accordance with the preferences among different classes of stock as set forth in our organizational documents.

To the extent that we distribute at least 90%, but less than 100%, of our “REIT taxable income,” as adjusted, we will be subject to tax at ordinary corporate tax rates on the retained portion. We may elect to retain, rather than distribute, our net long-term capital gains and pay tax on such gains. In this case, we could elect for our stockholders to include their proportionate shares of such undistributed long-term capital gains in income, and to receive a corresponding credit for their share of the tax that we paid. Our stockholders would then increase their adjusted basis of their stock by the difference between (a) the amounts of capital gain distributions that we designated and that they include in their taxable income, minus (b) the tax that we paid on their behalf with respect to that income.

To the extent that we have available net operating losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. Such losses, however, will generally not affect the character, in the hands of our stockholders, of any distributions that are actually made as ordinary dividends or capital gains. See “—Taxation of Stockholders—Taxation of Taxable Domestic Stockholders—Distributions.”

If we should fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods, we would be subject to a non-deductible 4% excise tax on the excess of such required distribution over the sum of (x) the amounts actually distributed, plus (y) the amounts of income we retained and on which we have paid corporate income tax.

It is possible that, from time to time, we may not have sufficient cash to meet the distribution requirements due to timing differences between (a) our actual receipt of cash, including receipt of distributions from our subsidiaries, and (b) our inclusion of items in income for federal income tax purposes. Other potential sources of non-cash taxable income include:

• “residual interests” in REMICs or taxable mortgage pools;

• loans or mortgage-backed securities held as assets that are issued at a discount and require the accrual of taxable economic interest in advance of receipt in cash; and

• loans on which the borrower is permitted to defer cash payments of interest, and distressed loans on which we may be required to accrue taxable interest income even though the borrower is unable to make current servicing payments in cash.

In the event that such timing differences occur, in order to meet the distribution requirements, it might be necessary for us to arrange short-term, or possibly long-term, borrowings, or to pay distributions in the form of taxable in-kind distributions of property.

Failure to Qualify

If we fail to satisfy one or more requirements for REIT qualification other than the gross income or asset tests, we could avoid disqualification if our failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. Relief provisions are available for failures of the gross income tests and asset tests, as described above in “—Income Tests” and “—Asset Tests.”

If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions described above do not apply, we would be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. We cannot deduct distributions to stockholders in any year in which we are not a REIT, nor would we be required to make distributions in such a year. In this situation,

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to the extent of current and accumulated earnings and profits, distributions to domestic stockholders that are individuals, trusts and estates will generally be taxable at capital gains rates (through 2012). In addition, subject to the limitations of the Internal Revenue Code, corporate distributees may be eligible for the dividends received deduction. Unless we are entitled to relief under specific statutory provisions, we would also be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which we lost qualification. It is not possible to state whether, in all circumstances, we would be entitled to this statutory relief.

Prohibited Transactions

Net income that we derive from a prohibited transaction is subject to a 100% tax. The term “prohibited transaction” generally includes a sale or other disposition of property (other than foreclosure property, as discussed below) that is held primarily for sale to customers in the ordinary course of a trade or business. We intend to conduct our operations so that no asset that we own (or are treated as owning) will be treated as, or as having been, held for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. Whether property is held “primarily for sale to customers in the ordinary course of a trade or business” depends on the particular facts and circumstances. No assurance can be given that any property that we sell will not be treated as property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Internal Revenue Code that would prevent such treatment. The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will potentially be subject to tax in the hands of the corporation at regular corporate rates, nor does the tax apply to sales which qualify for a safe harbor as described in Section 857(b)(6) of the Internal Revenue Code.

Foreclosure Property

Foreclosure property is real property and any personal property incident to such real property (1) that we acquire as the result of having bid on the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after a default (or upon imminent default) on a lease of the property or a mortgage loan held by us and secured by the property, (2) for which we acquired the related loan or lease at a time when default was not imminent or anticipated, and (3) with respect to which we made a proper election to treat the property as foreclosure property. We generally will be subject to tax at the maximum corporate rate (currently 35%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property. To the extent that we receive any income from foreclosure property that does not qualify for purposes of the 75% gross income test, we intend to make an election to treat the related property as foreclosure property.

Derivatives and Hedging Transactions

We and our subsidiaries may enter into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap agreements, interest rate cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent provided by Treasury regulations, any income from a hedging transaction we entered into (1) in the normal course of our business primarily to manage risk of interest rate, inflation or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets, which is clearly identified as specified in Treasury regulations before the closing of the day on which it was acquired, originated, or entered into, including gain from the sale or disposition of such a transaction, and (2) primarily to manage risk of currency fluctuations with respect to any item of income or

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gain that would be qualifying income under the 75% or 95% income tests which is clearly identified as such before the closing of the day on which it was acquired, originated, or entered into, will not constitute gross income for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of the 75% or 95% gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT. We may conduct some or all of our hedging activities through our TRS or other corporate entity, the income from which may be subject to federal income tax, rather than by participating in the arrangements directly or through pass-through subsidiaries. No assurance can be given, however, that our hedging activities will not give rise to income that does not qualify for purposes of either or both of the REIT gross income tests, or that our hedging activities will not adversely affect our ability to satisfy the REIT qualification requirements.

Taxable Mortgage Pools and Excess Inclusion Income

An entity, or a portion of an entity, may be classified as a taxable mortgage pool, or TMP, under the Internal Revenue Code if:

• substantially all of its assets consist of debt obligations or interests in debt obligations;

• more than 50% of those debt obligations are real estate mortgages or interests in real estate mortgages as of specified testing dates;

• the entity has issued debt obligations (liabilities) that have two or more maturities; and

• the payments required to be made by the entity on its debt obligations (liabilities) “bear a relationship” to the payments to be received by the entity on the debt obligations that it holds as assets.

Under regulations issued by the U.S. Treasury Department, if less than 80% of the assets of an entity (or a portion of an entity) consist of debt obligations, these debt obligations are considered not to comprise “substantially all” of its assets, and therefore the entity would not be treated as a TMP. Our financing and securitization arrangements may give rise to TMPs with the consequences as described below.

Where an entity, or a portion of an entity, is classified as a TMP, it is generally treated as a taxable corporation for federal income tax purposes. In the case of a REIT, or a portion of a REIT, or a disregarded subsidiary of a REIT, that is a TMP, however, special rules apply. The TMP is not treated as a corporation that is subject to corporate income tax, and the TMP classification does not directly affect the tax qualification of the REIT. Rather, the consequences of the TMP classification would, in general, except as described below, be limited to the stockholders of the REIT.

A portion of the REIT’s income from the TMP, which might be noncash accrued income, could be treated as excess inclusion income. Section 860E(c) of the Code defines the term “excess inclusion” with respect to a residual interest in a REMIC. The IRS, however, has yet to issue guidance on the computation of excess inclusion income on equity interests in a TMP held by a REIT. Generally, however, excess inclusion income with respect to our investment in any TMP and any taxable year will equal the excess of (i) the amount of income we accrue on our investment in the TMP over (ii) the amount of income we would have accrued if our investment were a debt instrument having an issue price equal to the fair market value of our investment on the day we acquired it and a yield to maturity equal to 120% of the long-term applicable federal rate in effect on the date we acquired our interest. The term “applicable federal rate” refers to rates that are based on weighted average yields for treasury securities and are published monthly by the IRS for use in various tax calculations. If we undertake securitization transactions that are TMPs, the amount of excess inclusion income we recognize in any taxable year could represent a significant portion

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of our total taxable for that year. Under recently issued IRS guidance, the REIT’s excess inclusion income, including any excess inclusion income from a residual interest in a REMIC, must be allocated among its stockholders in proportion to distributions paid. We are required to notify our stockholders of the amount of “excess inclusion income” allocated to them. A stockholder’s share of our excess inclusion income:

• cannot be offset by any net operating losses otherwise available to the stockholder;

• is subject to tax as unrelated business taxable income in the hands of most types of stockholders that are otherwise generally exempt from federal income tax; and

• results in the application of U.S. federal income tax withholding at the maximum rate (30%), without reduction for any otherwise applicable income tax treaty or other exemption, to the extent allocable to most types of foreign stockholders.

See “—Taxation of Stockholders.” To the extent that excess inclusion income is allocated from a TMP to a tax-exempt stockholder of a REIT that is not subject to unrelated business income tax (such as a government entity), the REIT will be subject to tax on this income at the highest applicable corporate tax rate (currently 35%). In this case, we are authorized to reduce and intend to reduce distributions to such stockholders by the amount of such tax paid by the REIT that is attributable to such stockholder’s ownership. Treasury regulations provide that such a reduction in distributions does not give rise to a preferential dividend that could adversely affect the REIT’s compliance with its distribution requirements. See “—Annual Distribution Requirements.” The manner in which excess inclusion income is calculated, or would be allocated to stockholders, including allocations among shares of different classes of stock, remains unclear under current law. As required by IRS guidance, we intend to make such determinations using a reasonable method. Tax-exempt investors, foreign investors and taxpayers with net operating losses should carefully consider the tax consequences described above, and are urged to consult their tax advisors.

If a subsidiary partnership of ours that we do not wholly own, directly or through one or more disregarded entities, were a TMP, the foregoing rules would not apply. Rather, the partnership that is a TMP would be treated as a corporation for federal income tax purposes and potentially could be subject to corporate income tax or withholding tax. In addition, this characterization would alter our income and asset test calculations and could adversely affect our compliance with those requirements. We intend to monitor the structure of any TMPs (including whether a TRS election might be made in respect of any such TMP) in which we have an interest to ensure that they will not adversely affect our qualification as a REIT.

Taxation of Stockholders

Taxation of Taxable Domestic Stockholders

Distributions.  So long as we qualify as a REIT, the distributions that we make to our taxable domestic stockholders out of current or accumulated earnings and profits that we do not designate as capital gain distributions will generally be taken into account by stockholders as ordinary income and will not be eligible for the dividends received deduction for corporations. With limited exceptions, our distributions are not eligible for taxation at the preferential income tax rates (i.e., the 15% maximum federal rate through 2012) for qualified distributions received by domestic stockholders that are individuals, trusts and estates from taxable C corporations. Such stockholders, however, are taxed at the preferential rates on distributions designated by and received from REITs to the extent that the distributions are attributable to:

• income retained by the REIT in the prior taxable year on which the REIT was subject to corporate level income tax (less the amount of tax);

• distributions received by the REIT from TRSs or other taxable C corporations; or

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• income in the prior taxable year from the sales of “built-in gain” property acquired by the REIT from C corporations in carryover basis transactions (less the amount of corporate tax on such income).

Distributions that we designate as capital gain dividends will generally be taxed to our stockholders as long-term capital gains, to the extent that such distributions do not exceed our actual net capital gain for the taxable year, without regard to the period for which the stockholder that receives such distribution has held its stock. We may elect to retain and pay taxes on some or all of our net long-term capital gains, in which case provisions of the Internal Revenue Code will treat our stockholders as having received, solely for tax purposes, our undistributed capital gains, and the stockholders will receive a corresponding credit for taxes that we paid on such undistributed capital gains. See “—Taxation of Resource Real Estate Opportunity REIT, Inc.—Annual Distribution Requirements.” Corporate stockholders may be required to treat up to 20% of some capital gain distributions as ordinary income. Long-term capital gains are generally taxable at maximum federal rates of 15% (through 2012) in the case of stockholders that are individuals, trusts and estates, and 35% in the case of stockholders that are corporations. Capital gains attributable to the sale of depreciable real property held for more than 12 months are subject to a 25% maximum federal income tax rate for taxpayers who are taxed as individuals, to the extent of previously claimed depreciation deductions.

Distributions in excess of our current and accumulated earnings and profits will generally represent a return of capital and will not be taxable to a stockholder to the extent that the amount of such distributions do not exceed the adjusted basis of the stockholder’s shares in respect of which the distributions were made. Rather, the distribution will reduce the adjusted basis of the stockholder’s shares. To the extent that such distributions exceed the adjusted basis of a stockholder’s shares, the stockholder generally must include such distributions in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less. In addition, any distribution that we declare in October, November or December of any year and that is payable to a stockholder of record on a specified date in any such month will be treated as both paid by us and received by the stockholder on December 31 of such year, provided that we actually pay the distribution before the end of January of the following calendar year.

To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. See “—Taxation of Resource Real Estate Opportunity REIT, Inc. —Annual Distribution Requirements.” Such losses, however, are not passed through to stockholders and do not offset income of stockholders from other sources, nor would such losses affect the character of any distributions that we make, which are generally subject to tax in the hands of stockholders to the extent that we have current or accumulated earnings and profits.

If excess inclusion income from a taxable mortgage pool or REMIC residual interest is allocated to any stockholder, that income will be taxable in the hands of the stockholder and would not be offset by any net operating losses of the stockholder that would otherwise be available. See “Taxation of Resource Real Estate Opportunity REIT, Inc. —Taxable Mortgage Pools and Excess Inclusion Income.” As required by IRS guidance, we intend to notify our stockholders if a portion of a distribution paid by us is attributable to excess inclusion income.

Dispositions of Our Stock.  In general, capital gains recognized by individuals, trusts and estates upon the sale or disposition of our stock will be subject to a maximum federal income tax rate of 15% (through 2012) if the stock is held for more than one year, and will be taxed at ordinary income rates (of up to 35% through 2012) if the stock is held for one year or less. Gains recognized by stockholders that are corporations are subject to federal income tax at a maximum rate of 35%, whether or not such gains are classified as long-term capital gains. Capital losses recognized by a stockholder upon the disposition of our stock that was held for more than one year at the time of disposition will be considered long-term capital

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losses, and are generally available only to offset capital gain income of the stockholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of shares of our stock by a stockholder who has held the shares for six months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of distributions that we make that are required to be treated by the stockholder as long-term capital gain.

If an investor recognizes a loss upon a subsequent disposition of our stock or other securities in an amount that exceeds a prescribed threshold, it is possible that the provisions of Treasury regulations involving “reportable transactions” could apply, with a resulting requirement to separately disclose the loss-generating transaction to the IRS. These regulations, though directed towards “tax shelters,” are broadly written and apply to transactions that would not typically be considered tax shelters. The Internal Revenue Code imposes significant penalties for failure to comply with these requirements. You should consult your tax advisor concerning any possible disclosure obligation with respect to the receipt or disposition of our stock or securities or transactions that we might undertake directly or indirectly. Moreover, you should be aware that we and other participants in the transactions in which we are involved (including their advisors) might be subject to disclosure or other requirements pursuant to these regulations.

Passive Activity Losses and Investment Interest Limitations.  Distributions that we make and gain arising from the sale or exchange by a domestic stockholder of our stock will not be treated as passive activity income. As a result, stockholders will not be able to apply any “passive losses” against income or gain relating to our stock. To the extent that distributions we make do not constitute a return of capital, they will be treated as investment income for purposes of computing the investment interest limitation.

Medicare contribution tax.  For taxable years beginning after December 31, 2012, U.S. stockholders who are individuals, estates or certain trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (including dividends and gains from the disposition of our stock), or in the case of estates and trusts on their net investment income that is not distributed, in each case to the extent that their total adjusted income exceeds applicable thresholds.

Taxation of Foreign Stockholders

The following is a summary of certain U.S. federal income and estate tax consequences of the ownership and disposition of our stock applicable to non-U.S. holders. A “non-U.S. holder” is any person other than:

• a citizen or resident of the United States;

• a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, or of any state thereof, or the District of Columbia;

• an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of its source; or

• a trust if a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. fiduciaries have the authority to control all substantial decisions of the trust.

If a partnership, including for this purpose any entity that is treated as a partnership for U.S. federal income tax purposes, holds our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. An investor that is a

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partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the acquisition, ownership and disposition of our common stock.

The following discussion is based on current law, and is for general information only. It addresses only selected, and not all, aspects of U.S. federal income and estate taxation.

Ordinary Dividends.  The portion of distributions received by non-U.S. holders (1) that is payable out of our earnings and profits, (2) which is not attributable to our capital gains and (3) which is not effectively connected with a U.S. trade or business of the non-U.S. holder, will be subject to U.S. withholding tax at the rate of 30%, unless reduced or eliminated by treaty. Reduced treaty rates and other exemptions are not available to the extent that income is attributable to excess inclusion income allocable to the foreign stockholder. Accordingly, we will withhold at a rate of 30% on any portion of a distribution that is paid to a non-U.S. holder and attributable to that holder’s share of our excess inclusion income. See “—Taxation of Resource Real Estate Opportunity REIT, Inc. —Taxable Mortgage Pools and Excess Inclusion Income.” As required by IRS guidance, we intend to notify our stockholders if a portion of a distribution paid by us is attributable to excess inclusion income.

In general, non-U.S. holders will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of our stock. In cases where the dividend income from a non-U.S. holder’s investment in our stock is, or is treated as, effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business, the non-U.S. holder generally will be subject to U.S. federal income tax at graduated rates, in the same manner as domestic stockholders are taxed with respect to such distributions. Such income must generally be reported on a U.S. income tax return filed by or on behalf of the non-U.S. holder. The income may also be subject to the 30% branch profits tax in the case of a non-U.S. holder that is a corporation.

Non-Dividend Distributions.  Unless our stock constitutes a U.S. real property interest (a “USRPI”), distributions that we make that are not out of our earnings and profits will not be subject to U.S. income tax. If we cannot determine at the time a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to ordinary dividends. The non-U.S. holder may seek a refund from the IRS of any amounts withheld if it is subsequently determined that the distribution was, in fact, in excess of our current and accumulated earnings and profits. If our stock constitutes a USRPI, as described below, distributions that we make in excess of the sum of (a) the stockholder’s proportionate share of our earnings and profits, plus (b) the stockholder’s basis in its stock, will be taxed under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), at the rate of tax, including any applicable capital gains rates, that would apply to a domestic stockholder of the same type (e.g., an individual or a corporation, as the case may be), and the collection of the tax will be enforced by a refundable withholding at a rate of 10% of the amount by which the distribution exceeds the stockholder’s share of our earnings and profits.

Capital Gain Distributions.  Under FIRPTA, a distribution that we make to a non-U.S. holder, to the extent attributable to gains from dispositions of USRPIs that we held directly or through pass-through subsidiaries, or USRPI capital gains, will, except as described below, be considered effectively connected with a U.S. trade or business of the non-U.S. holder and will be subject to U.S. income tax at the rates applicable to U.S. individuals or corporations, without regard to whether we designate the distribution as a capital gain distribution. See above under “—Taxation of Foreign Stockholders—Ordinary Dividends,” for a discussion of the consequences of income that is effectively connected with a U.S. trade or business. In addition, we will generally be required to withhold tax equal to 35% of the amount of distributions to the extent the distributions constitute USRPI capital gains. Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of a non-U.S. holder that is a corporation. A distribution is not a USRPI capital gain if we held an interest in the underlying asset solely as a creditor. Capital gain distributions received by a non-U.S. holder that are attributable to dispositions of our assets other than USRPIs are not subject to U.S. federal income or withholding tax, unless (1) the gain is effectively

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connected with the non-U.S. holder’s U.S. trade or business, in which case the non-U.S. holder would be subject to the same treatment as U.S. holders with respect to such gain, or (2) the non-U.S. holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, in which case the non-U.S. holder will incur a 30% tax on his or her capital gains.

A capital gain distribution that would otherwise have been treated as a USRPI capital gain will not be so treated or be subject to FIRPTA, and generally will not be treated as income that is effectively connected with a U.S. trade or business, and instead will be treated in the same manner as an ordinary dividend (see “—Taxation of Foreign Stockholders—Ordinary Dividends”), if (1) the capital gain distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States, and (2) the recipient non-U.S. holder does not own more than 5% of that class of stock at any time during the year ending on the date on which the capital gain distribution is received. At the time you purchase shares in this offering, our shares will not be publicly traded and we can give you no assurance that our shares will ever be publicly traded on an established securities market. Therefore, these rules will not apply to our capital gain distributions.

Dispositions of Our Stock.  Unless our stock constitutes a USRPI, a sale of our stock by a non-U.S. holder generally will not be subject to U.S. taxation under FIRPTA. Our stock will not be treated as a USRPI if less than 50% of our assets throughout a prescribed testing period consist of interests in real property located within the United States, excluding, for this purpose, interests in real property solely in a capacity as a creditor.

Even if the foregoing 50% test is not met, our stock nonetheless will not constitute a USRPI if we are a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT, less than 50% of value of which is held directly or indirectly by non-U.S. holders at all times during a specified testing period. We believe that we will be a domestically-controlled qualified investment entity, and that a sale of our stock should not be subject to taxation under FIRPTA. If our stock constitutes a USRPI and we do not constitute a domestically controlled qualified investment entity, but our stock becomes “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, a non-U.S. holder’s sale of our stock nonetheless would not be subject to tax under FIRPTA as a sale of a USRPI, provided that the selling non-U.S. holder held 5% or less of the outstanding stock at all times during a specified testing period. However, as mentioned above, we can give you no assurance that our shares will ever be publicly traded on an established securities market.

If gain on the sale of our stock were subject to taxation under FIRPTA, the non-U.S. holder would be required to file a U.S. federal income tax return and would be subject to the same treatment as a U.S. stockholder with respect to such gain, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of non-resident alien individuals, and the purchaser of the stock could be required to withhold 10% of the purchase price and remit such amount to the IRS.

Gain from the sale of our stock that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. holder in two cases: (1) if the non-U.S. holder’s investment in our stock is effectively connected with a U.S. trade or business conducted by such non-U.S. holder, the non-U.S. holder will be subject to the same treatment as a U.S. stockholder with respect to such gain, or (2) if the non-U.S. holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, the nonresident alien individual will be subject to a 30% tax on the individual’s capital gain. In addition, even if we are a domestically controlled qualified investment entity, upon disposition of our stock, a non-U.S. holder may be treated as having gain from the sale or exchange of a USRPI if the non-U.S. holder (1) disposes of our common stock within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been treated as gain from the sale or exchange of a USRPI and (2) acquires, or enters into a contract or option to acquire, other shares of our common stock within 30 days after such ex-dividend date.

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Estate Tax.  If our stock is owned or treated as owned by an individual who is not a citizen or resident (as specially defined for U.S. federal estate tax purposes) of the United States at the time of such individual’s death, the stock will be includable in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise, and may therefore be subject to U.S. federal estate tax.

Information Reporting Requirements and Backup Withholding for Non-U.S. Stockholders.    Payments of dividends or of proceeds from the disposition of stock made to a non-U.S. holder may be subject to information reporting and backup withholding unless such holder establishes an exemption, for example, by properly certifying its non-U.S. status on an IRS Form W-8BEN or another appropriate version of IRS Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we have, or our paying agent has actual knowledge or reason to know, that a non-U.S. holder is a United States person. Backup withholding is not an additional tax. Rather, the United States income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may be obtained, provided that the required information is furnished to the IRS.

New legislation relating to foreign accounts.  On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act of 2010, which may impose withholding taxes on certain types of payments made to “foreign financial institutions” and certain other non-U.S. entities. Under this legislation, the failure to comply with additional certification, information reporting and other specified requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to U.S. stockholders who own the shares through foreign accounts or foreign intermediaries and certain non-U.S. stockholders. The legislation generally imposes a 30% withholding tax on dividends on, and gross proceeds from the sale or other disposition of our stock paid to a foreign financial institution or to a foreign non-financial entity, unless (i) the foreign financial institution undertakes certain diligence and reporting obligations or (ii) the foreign non-financial entity either certifies it does not have any substantial United States owners or furnishes identifying information regarding each substantial United States owner. If the payee is a foreign financial institution, it must enter into an agreement with the United States Treasury requiring, among other things, that it undertakes to identify accounts held by certain United States persons or United States-owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements. The legislation applies to payments made after December 31, 2012. Prospective investors should consult their tax advisors regarding this legislation.

Taxation of Tax-Exempt Stockholders

Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from federal income taxation. However, they may be subject to taxation on their unrelated business taxable income (“UBTI”). While some investments in real estate may generate UBTI, the IRS has ruled that dividend distributions from a REIT to a tax-exempt entity do not constitute UBTI. Based on that ruling, and provided that (1) a tax-exempt stockholder has not held our stock as “debt financed property” within the meaning of the Internal Revenue Code (i.e., where the acquisition or holding of the property is financed through a borrowing by the tax-exempt stockholder), and (2) our stock is not otherwise used in an unrelated trade or business, distributions that we make and income from the sale of our stock generally should not give rise to UBTI to a tax-exempt stockholder.

To the extent, however, that we are (or a part of us, or a disregarded subsidiary of ours, is) deemed to be a TMP, or if we hold residual interests in a REMIC, a portion of the distributions paid to a tax-exempt stockholder that is allocable to excess inclusion income may be treated as UBTI. We anticipate that our investments may generate excess inclusion income.

If excess inclusion income is allocable to some categories of tax-exempt stockholders that are not subject to UBTI, such as governmental investors, we will be subject to corporate level tax on such income,

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and, in that case, we are authorized to reduce and intend to reduce the amount of distributions to those stockholders whose ownership gave rise to the tax. See “—Taxation of Resource Real Estate Opportunity REIT, Inc. —Taxable Mortgage Pools and Excess Inclusion Income.” As required by IRS guidance, we intend to notify our stockholders if a portion of a distribution paid by us is attributable to excess inclusion income.

Tax-exempt stockholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code are subject to different UBTI rules, which generally require such stockholders to characterize distributions that we make as UBTI.

In certain circumstances, a pension trust that owns more than 10% of our stock could be required to treat a percentage of its distributions as UBTI, if we are a “pension-held REIT.” We will not be a pension-held REIT unless either (1) one pension trust owns more than 25% of the value of our stock, or (2) a group of pension trusts, each individually holding more than 10% of the value of our stock, collectively owns more than 50% of our stock. Certain restrictions on ownership and transfer of our stock should generally prevent a tax-exempt entity from owning more than 10% of the value of our stock and should generally prevent us from becoming a pension-held REIT.

Tax-exempt stockholders are urged to consult their tax advisors regarding the federal, state, local and foreign income and other tax consequences of owning our stock.

Backup Withholding and Information Reporting

We will report to our domestic stockholders and the IRS the amount of dividends paid during each calendar year and the amount of any tax withheld. Under the backup withholding rules, a domestic stockholder may be subject to backup withholding with respect to dividends paid unless the holder is a corporation or comes within other exempt categories and, when required, demonstrates this fact or provides a taxpayer identification number or social security number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A domestic stockholder that does not provide his or her correct taxpayer identification number or social security number may also be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. In addition, we may be required to withhold a portion of a capital gain distribution to any domestic stockholder who fails to certify its non-foreign status.

We must report annually to the IRS and to each non-U.S. stockholder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. stockholder resides under the provisions of an applicable income tax treaty. A non-U.S. stockholder may be subject to backup withholding unless applicable certification requirements are met.

Payment of the proceeds of a sale of our common stock within the U.S. is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is a non-U.S. stockholder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person) or the holder otherwise establishes an exemption. Payment of the proceeds of a sale of our common stock conducted through certain U.S. related financial intermediaries is subject to information reporting (but not backup withholding) unless the financial intermediary has documentary evidence in its records that the beneficial owner is a non-U.S. stockholder and specified conditions are met or an exemption is otherwise established. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such holder’s U.S. federal income tax liability provided the required information is furnished to the IRS.

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Other Tax Considerations

Legislative or Other Actions Affecting REITs

The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to the federal tax laws and interpretations thereof could adversely affect an investment in our stock.

State, Local and Foreign Taxes

We and our subsidiaries and stockholders may be subject to state, local or foreign taxation in various jurisdictions including those in which we or they transact business, own property or reside. We may own real property assets located in numerous jurisdictions, and may be required to file tax returns in some or all of those jurisdictions. Our state, local or foreign tax treatment and that of our stockholders may not conform to the federal income tax treatment discussed above. We may own foreign real estate assets and pay foreign property taxes, and dispositions of foreign property or operations involving, or investments in, foreign real estate assets may give rise to foreign income or other tax liability in amounts that could be substantial. Any foreign taxes that we incur do not pass through to stockholders as a credit against their U.S. federal income tax liability. Prospective investors should consult their tax advisors regarding the application and effect of state, local and foreign income and other tax laws on an investment in our stock.

ERISA CONSIDERATIONS

The following is a summary of some considerations associated with an investment in our shares by a qualified employee pension benefit plan or an IRA. This summary is based on provisions of ERISA and the Internal Revenue Code, each as amended through the date of this prospectus, and the relevant regulations, opinions and other authority issued by the Department of Labor and the IRS. We cannot assure you that there will not be adverse tax or labor decisions or legislative, regulatory or administrative changes that would significantly modify the statements expressed herein. Any such changes may apply to transactions entered into prior to the date of their enactment.

Each fiduciary of an employee pension benefit plan subject to ERISA (such as a profit sharing, Section 401(k) or pension plan) or any other retirement plan or account subject to Section 4975 of the Internal Revenue Code, such as an IRA, seeking to invest plan assets in our shares must, taking into account the facts and circumstances of each such plan or IRA (each, a “Benefit Plan”), consider, among other matters:

• whether the investment is consistent with the applicable provisions of ERISA and the Internal Revenue Code;

• whether, under the facts and circumstances pertaining to the Benefit Plan in question, the fiduciary’s responsibility to the plan has been satisfied;

• whether the investment will produce an unacceptable amount of UBTI to the Benefit Plan (see “Federal Income Tax Considerations—Taxation of Stockholders—Taxation of Tax-Exempt Stockholders”); and

• the need to value the assets of the Benefit Plan annually.

Under ERISA, a plan fiduciary’s responsibilities include the following duties:

• to act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits to them, as well as defraying reasonable expenses of plan administration;

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• to invest plan assets prudently;

• to diversify the investments of the plan, unless it is clearly prudent not to do so;

• to ensure sufficient liquidity for the plan;

• to ensure that plan investments are made in accordance with plan documents; and

• to consider whether an investment would constitute or give rise to a prohibited transaction under ERISA or the Internal Revenue Code.

ERISA also requires that, with certain exceptions, the assets of an employee benefit plan be held in trust and that the trustee, or a duly authorized named fiduciary or investment manager, have exclusive authority and discretion to manage and control the assets of the plan.

Prohibited Transactions

Generally, both ERISA and the Internal Revenue Code prohibit Benefit Plans from engaging in certain transactions involving plan assets with specified parties, such as sales or exchanges or leasing of property, loans or other extensions of credit, furnishing goods or services, or transfers to, or use of, plan assets. The specified parties are referred to as “parties-in-interest” under ERISA and as “disqualified persons” under the Internal Revenue Code. These definitions generally include both parties owning threshold percentage interests in an investment entity and “persons providing services” to the Benefit Plan, as well as employer sponsors of the Benefit Plan, fiduciaries and other individuals or entities affiliated with the foregoing. For this purpose, a person generally is a fiduciary with respect to a Benefit Plan if, among other things, the person has discretionary authority or control with respect to plan assets or provides investment advice for a fee with respect to plan assets. Under Department of Labor regulations, a person shall be deemed to be providing investment advice if that person renders advice as to the advisability of investing in our shares, and that person regularly provides investment advice to the Benefit Plan pursuant to a mutual agreement or understanding that such advice will serve as the primary basis for investment decisions, and that the advice will be individualized for the Benefit Plan based on its particular needs. Thus, if we are deemed to hold plan assets, our management could be characterized as fiduciaries with respect to such assets, and each would be deemed to be a party-in-interest under ERISA and a disqualified person under the Internal Revenue Code with respect to investing Benefit Plans. Whether or not we are deemed to hold plan assets, if we or our affiliates are affiliated with a Benefit Plan investor, we might be a disqualified person or party-in-interest with respect to such Benefit Plan investor, resulting in a prohibited transaction merely upon investment by such Benefit Plan in our shares.

Plan Asset Considerations

In order to determine whether an investment in our shares by a Benefit Plan creates or gives rise to the potential for either prohibited transactions or a commingling of assets as referred to above, a fiduciary must consider whether an investment in our shares will cause our assets to be treated as assets of the investing Benefit Plan. Neither ERISA nor the Internal Revenue Code defines the term “plan assets”; however, regulations promulgated by the Department of Labor provide guidelines as to whether, and under what circumstances, the underlying assets of an entity will be deemed to constitute assets of a Benefit Plan when the plan invests in that entity (Plan Assets Regulation). Under the Plan Assets Regulation, the assets of an entity in which a Benefit Plan makes an equity investment will generally be deemed to be assets of the Benefit Plan, unless one of the exceptions to this general rule applies.

In the event that our underlying assets were treated as the assets of investing Benefit Plans, our management would be treated as fiduciaries with respect to each Benefit Plan stockholder and an investment in our shares might constitute an ineffective delegation of fiduciary responsibility to Resource Real Estate Opportunity Advisor, our advisor, and expose the fiduciary of the Benefit Plan to co-fiduciary liability under ERISA for any breach by Resource Real Estate Opportunity Advisor of the fiduciary duties

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mandated under ERISA. Further, if our assets are deemed to be “plan assets,” an investment by an IRA in our shares might be deemed to result in an impermissible commingling of IRA assets with other property.

If our advisor or its affiliates were treated as fiduciaries with respect to Benefit Plan stockholders, the prohibited transaction restrictions of ERISA and the Internal Revenue Code would apply to any transaction involving our assets. These restrictions could, for example, require that we avoid transactions with persons that are affiliated with or related to us or our affiliates or require that we restructure our activities in order to obtain an administrative exemption from the prohibited transaction restrictions. Alternatively, we might have to provide Benefit Plan stockholders with the opportunity to sell their shares to us or we might dissolve.

If a prohibited transaction were to occur, the Internal Revenue Code imposes an excise tax equal to 15% of the amount involved and authorizes the IRS to impose an additional 100% excise tax if the prohibited transaction is not “corrected” in a timely manner. These taxes would be imposed on any disqualified person who participates in the prohibited transaction. In addition, our advisor and possibly other fiduciaries of Benefit Plan stockholders subject to ERISA who permitted the prohibited transaction to occur or who otherwise breached their fiduciary responsibilities (or a non-fiduciary participating in a prohibited transaction) could be required to restore to the Benefit Plan any profits they realized as a result of the transaction or breach and make good to the Benefit Plan any losses incurred by the Benefit Plan as a result of the transaction or breach. With respect to an IRA that invests in our shares, the occurrence of a prohibited transaction involving the individual who established the IRA, or his or her beneficiary, would cause the IRA to lose its tax-exempt status under Section 408(e)(2) of the Internal Revenue Code.

The Plan Assets Regulation provides that the underlying assets of an entity such as a REIT will be treated as assets of a Benefit Plan investing therein unless the entity satisfies one of the exceptions to the general rule. We believe that we will satisfy one or more of the exceptions described below.

Exception for “Publicly-Offered Securities.”  If a Benefit Plan acquires “publicly-offered securities,” the assets of the issuer of the securities will not be deemed to be “plan assets” under the Plan Assets Regulation. A publicly-offered security must be:

• either (i) part of a class of securities registered under the Exchange Act, or (ii) sold as part of a public offering registered under the Securities Act, and be part of a class of securities registered under the Exchange Act within a specified time period;

• part of a class of securities that is owned by 100 or more persons who are independent of the issuer and one another; and

• “freely transferable.”

Our shares are being sold as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act of 1933 and are part of a class that will be registered under the Securities Exchange Act of 1934 within the specified period. In addition, we have in excess of 100 independent stockholders.

Whether a security is “freely transferable” depends upon the particular facts and circumstances. The Plan Assets Regulation provides several examples of restrictions on transferability that, absent unusual circumstances, will not prevent the rights of ownership in question from being considered “freely transferable” if the minimum investment is $10,000 or less. Where the minimum investment in a public offering of securities is $10,000 or less, the presence of the following restrictions on transfer will not ordinarily affect a determination that such securities are “freely transferable”:

• any restriction on, or prohibition against, any transfer or assignment that would either result in a termination or reclassification of the entity for federal or state tax purposes or that would violate any state or federal statute, regulation, court order, judicial decree or rule of law;

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• any requirement that not less than a minimum number of shares or units of such security be transferred or assigned by any investor, provided that such requirement does not prevent transfer of all of the then remaining shares or units held by an investor;

• any prohibition against transfer or assignment of such security or rights in respect thereof to an ineligible or unsuitable investor; and

• any requirement that reasonable transfer or administrative fees be paid in connection with a transfer or assignment.

We have been structured with the intent to satisfy the “freely transferable” requirement set forth in the Plan Assets Regulation with respect to our shares, although there is no assurance that our shares will meet such requirement. Our shares are subject to certain restrictions on transfer intended to ensure that we continue to qualify for federal income tax treatment as a REIT and to comply with state securities laws and regulations with respect to investor suitability. The minimum investment in our shares is less than $10,000; thus, these restrictions should not cause the shares to be deemed not “freely transferable.”

Our common stock is held by 100 or more independent stockholders, and assuming that no other facts and circumstances other than those referred to in the preceding paragraphs exist that restrict transferability of shares of our common stock and the offering takes place as described in this prospectus, shares of our common stock should constitute “publicly-offered securities” and, accordingly, we believe that our underlying assets should not be considered “plan assets” under the Plan Assets Regulation.

Exception for Insignificant Participation by Benefit Plan Investors.  The Plan Assets Regulation provides that the assets of an entity will not be deemed to be the assets of a Benefit Plan if equity participation in the entity by employee benefit plans, including Benefit Plans, is not significant. The Plan Assets Regulation provides that equity participation in an entity by Benefit Plan investors is “significant” if at any time 25% or more of the value of any class of equity interest is held by Benefit Plan investors. The term “Benefit Plan investors” is defined for this purpose under ERISA Section 3(42) and includes any employee benefit plan subject to Part 4 of ERISA, any plan subject Section 4975 of the Code, and any entity whose underlying assets include plan assets by reasons of a plan’s investment in such entity. In calculating the value of a class of equity interests, the value of any equity interests held by us or any of our affiliates must be excluded. It is not clear whether we will qualify for this exception since we do expect to have equity participation by “Benefit Plan investors” that may be in excess of 25%, which would be deemed to be significant, as defined above.

Exception for Operating Companies.  The Plan Assets Regulation provides an exception with respect to securities issued by an operating company, which includes a “real estate operating company” or a “venture capital operating company.” Generally, we will be deemed to be a real estate operating company if during the relevant valuation periods at least 50% of our assets are invested in real estate that is managed or developed and with respect to which we have the right to participate substantially in management or development activities. To constitute a venture capital operating company, 50% or more of our assets must be invested in “venture capital investments” during the relevant valuation periods. A venture capital investment is an investment in an operating company, including a “real estate operating company,” as to which the investing entity has or obtains direct management rights. If an entity satisfies these requirements on the date it first makes a long-term investment (the “initial investment date”), or at any time during the entity’s first annual valuation period, it will be considered a real estate operating company or a venture capital operating company for the entire period beginning on the initial investment date and ending on the last day of the first annual valuation period. Although our initial real estate investments should enable us to qualify as a real estate operating company for the period prior to this offering, we cannot assure you that we will be a real estate operating company or a venture capital operating company in the future. As discussed above, we intend to rely instead on the “publicly-offered securities” exception.

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Other Prohibited Transactions

Regardless of whether the shares qualify for the “publicly-offered securities” exception of the Plan Assets Regulation, a prohibited transaction could occur if we, Resource Real Estate Opportunity Advisor, any selected broker-dealer or any of their affiliates is a fiduciary (within the meaning of Section 3(21) of ERISA) with respect to any Benefit Plan purchasing our shares. Accordingly, unless an administrative or statutory exemption applies, shares should not be purchased by a Benefit Plan with respect to which any of the above persons is a fiduciary. A person is a fiduciary with respect to a Benefit Plan under Section 3(21) of ERISA if, among other things, the person has discretionary authority or control with respect to the Benefit Plan or “plan assets” or provides investment advice for a fee with respect to “plan assets.” Under a regulation issued by the Department of Labor, a person shall be deemed to be providing investment advice if that person renders advice as to the advisability of investing in our shares and that person regularly provides investment advice to the Benefit Plan pursuant to a mutual agreement or understanding (written or otherwise) (1) that the advice will serve as the primary basis for investment decisions and (2) that the advice will be individualized for the Benefit Plan based on its particular needs.

Annual Valuation

A fiduciary of an employee benefit plan subject to ERISA is required to determine annually the fair market value of each asset of the plan as of the end of the plan’s fiscal year and to file a report reflecting that value with the Department of Labor. When the fair market value of any particular asset is not available, the fiduciary is required to make a good faith determination of that asset’s fair market value, assuming an orderly liquidation at the time the determination is made. In addition, a trustee or custodian of an IRA must provide an IRA participant with a statement of the value of the IRA each year. Failure to satisfy these requirements may result in penalties, damages or other sanctions.

Unless and until our shares are listed on a national securities exchange, we do not expect that a public market for our shares will develop. To date, neither the IRS nor the Department of Labor has promulgated regulations specifying how a plan fiduciary should determine the fair market value of shares when the fair market value of such shares is not determined in the marketplace.

To assist broker-dealers who participate in this offering, we expect to provide an estimated value for our shares annually. Until 18 months have passed without a sale in a public offering of our common stock, not including any offerings on behalf of selling stockholders or offerings related to any distribution reinvestment plan, employee benefit plan, or the issuance of shares upon redemption of interests in our Operating Partnership, we expect to use the gross offering price of a share of the common stock in our most recent offering as the per share estimated value thereof. This estimated value is not likely to reflect the proceeds you would receive upon our liquidation or upon the sale of your shares. Accordingly, we can make no assurances that such estimated value will satisfy the applicable annual valuation requirements under ERISA and the Internal Revenue Code. The Department of Labor or the Internal Revenue Service may determine that a plan fiduciary or an IRA custodian is required to take further steps to determine the value of our common shares. In the absence of an appropriate determination of value, a plan fiduciary or an IRA custodian may be subject to damages, penalties or other sanctions.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA and the Internal Revenue Code may result in the imposition of civil and criminal penalties, and can subject the fiduciary to claims for damages or for equitable remedies. In addition, if an investment in our shares constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the fiduciary or IRA owner who authorized or directed the investment may be subject to the imposition of excise taxes with respect to

the amount invested. In the case of a prohibited transaction involving an IRA owner, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subjected to tax. ERISA plan fiduciaries and IRA custodians should consult with counsel before making an investment in our common shares.

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After the 18-month period described above (or possibly sooner if our board so directs), we expect to publish an estimated value for a share of common stock. We expect such estimate will be based on estimates of the values of our assets net of our liabilities. Our board of directors will make decisions regarding who will perform valuations of our assets, such as our advisor or third parties, and the valuation methodology to be employed. We cannot predict these decisions at this time, however, we do not currently anticipate obtaining asset-by-asset appraisals prepared by appraisers certified by a Member of the Appraisal Institute or other trade organization that monitors appraisers. Our estimates may or may not be the amount of net proceeds that would result from an immediate sale of our properties. The estimated valuations should not be utilized for any purpose other than to assist plan fiduciaries in fulfilling their annual valuation and reporting responsibilities. Even after we no longer use the most recent offering price as the estimated value of our shares, you should be aware of the following:

• the estimated values may not be realized by us or by you upon liquidation (in part because estimated values do not necessarily indicate the price at which assets could be sold and because the estimates may not take in to account the expenses of selling our assets);

• you may not realize these values if you were to attempt to sell your shares; and

• the estimated values, or the method used to establish values, may not comply with the ERISA or IRA requirements described above.

The foregoing requirements of ERISA and the Internal Revenue Code are complex and subject to change. Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding an investment in our shares.

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DESCRIPTION OF SHARES

The following is a summary description of our capital stock. Copies of our charter and bylaws are filed as exhibits to the registration statement of which this prospectus is a part. See “Where You Can Find More Information.”

General

Our charter provides that we may issue up to 1,010,050,000 shares of capital stock, of which 1,000,000,000 shares are designated as common stock, par value $0.01 per share, 50,000 shares are designated as convertible stock, par value $0.01 per share and 10,000,000 shares are designated as preferred stock, par value $0.01 per share. As of July 1, 2011, we had 5,241,659 shares of our common stock outstanding, 50,000 shares of convertible stock outstanding and no shares of preferred stock outstanding. In addition, our board of directors may amend our charter to increase or decrease the amount of our authorized shares.

Common Stock

All shares of our common stock have equal rights as to earnings, assets, distributions and voting. We have received an opinion from DLA Piper LLP (US) that when the shares of our common stock are issued in the manner contemplated, they will be duly authorized, validly issued, fully paid and non-assessable. Distributions may be paid to the holders of our common stock, if and when authorized by our board of directors and declared by us out of funds legally available therefore, subject to any preferential rights of any preferred stock that we issue in the future. Holders of shares of our common stock do not have preemptive rights, which means that you will not have an automatic option to purchase any new shares that we issue, nor do holders of our shares have any preference, conversion, exchange, sinking fund, redemption or appraisal rights. In the event of our liquidation, dissolutions or winding up, each share of our common stock would be entitled to share ratably in all of our assets that are legally available for distribution after payment of or adequate provision for all our known debts and other liabilities and subject to any preferential rights of holders of preferred stock, if any preferred stock is outstanding at such time. Subject to our charter restrictions on the transfer and ownership of our common stock and except as may be specified otherwise in the terms of any class or series of our common stock, each share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of our directors. Except as provided with respect to any other class or series of stock, the holders of our common stock will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a majority of our outstanding common shares can elect all of our directors and holders of less than a majority of such shares will be unable to elect any director.

Our board of directors has authorized the issuance of shares of our capital stock without certificates. We expect that, until our shares are listed on a national securities exchange, we will not issue shares in certificated form. Information regarding restrictions on the transferability of our shares that, under Maryland law, would otherwise have been required to appear on our share certificates will instead be furnished to stockholders upon request and without charge. These requests should be delivered or mailed to: Resource Real Estate Opportunity REIT, Inc., c/o Resource Real Estate Opportunity Advisor, LLC, One Commerce Square, 2005 Market Street, Philadelphia, PA 19103.

We maintain a stock ledger that contains the name and address of each stockholder and the number of shares that the stockholder holds. With respect to uncertificated stock, we will continue to treat the stockholder registered on our stock ledger as the owner of the shares until the new owner delivers a properly executed form to us, which form we will provide to any registered holder upon request.

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Convertible Stock

Our authorized capital stock includes 50,000 shares of convertible stock, par value $0.01 per share. In connection with the commencement of this offering, we issued 45,000 of such shares to our advisor in exchange for 4,500 shares of common stock and our advisor purchased 4,068 shares of our convertible stock that were not sold in our private offering for $1.00 per share of convertible stock. No additional consideration is due upon the conversion of the convertible stock. As of July 1, 2011, our advisor owned 49,063 shares of our convertible stock, outside investors owned a total of 937 shares of our convertible stock and a total of 50,000 shares of convertible stock were issued and outstanding. There will be no distributions paid on shares of convertible stock. The conversion of the convertible stock into common shares will dilute the value of our shares of common stock.

With certain limited exceptions, shares of convertible stock shall not be entitled to vote on any matter, or to receive notice of, or to participate in, any meeting of stockholders of the company at which they are not entitled to vote. However, the affirmative vote of the holders of more than two-thirds of the outstanding shares of convertible stock is required (A) for the adoption of any amendment, alteration or repeal of a provision of the charter or (B) to effect or validate a consolidation with or merger of our company into another entity, that adversely changes the preferences, limitations or relative rights of the shares of convertible stock.

Upon the occurrence of (A) our making total distributions on the then outstanding shares of our common stock equal to the issue price of those shares (that is, the price paid for those shares) plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares; or (B) the listing of the shares of common stock for trading on a national securities exchange, each outstanding share of our convertible stock will convert into the number of shares of our common stock described below. Before we will be able to pay distributions to our stockholders equal to the aggregate issue price of our then outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares, we will need to sell a portion of our assets. Thus, the sale of one or more assets will be a practical prerequisite for conversion under clause (A) above.

Upon the occurrence of either such event, each share of convertible stock shall, unless our advisory agreement with our advisor has been terminated or not renewed on account of a material breach by our advisor, generally be converted into a number of shares of common stock equal to 1/50,000 of the quotient of:

• (A) the lesser of

^¡   (i) 25% of the amount, if any, by which

¡ (1) the value of the company (determined in accordance with the provisions of the charter and summarized in the following paragraph) as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 10% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, or

^¡   (ii) 15% of the amount, if any, by which

¡ (1) the value of the company as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds

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¡ (2) the sum of the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares as of the date of the event triggering the conversion, divided by

• (B) the value of the company divided by the number of outstanding shares of common stock, in each case, as of the date of the event triggering the conversion. In the case of conversion upon the listing of our shares, the conversion of the convertible stock will not occur until the 31st trading day after the date of such listing.

However, if our advisory agreement with our advisor expires without renewal or is terminated (other than because of a material breach by our advisor) prior to each such triggering event described in the foregoing paragraph (an “advisory agreement termination”), then upon either such triggering event the holder of the convertible stock will be entitled to a prorated portion of the number of shares of common stock determined by the foregoing calculation, where such proration is based on the percentage of time we were advised by our advisor.

As used above and in our charter, “value of the company” as of a specific date means our actual value as a going concern on the applicable date based on the difference between (A) the actual value of all of our assets as determined in good faith by our board, including a majority of the independent directors, and (B) all of our liabilities as set forth on our balance sheet for the period ended immediately prior to the determination date, provided that (1) if such value is being determined in connection with a change of control that establishes our net worth, then the value shall be the net worth established thereby and (2) if such value is being determined in connection with the listing of our common stock for trading on a national securities exchange, then the value shall be the number of outstanding shares of common stock multiplied by the closing price of a single share of common stock, averaged over a period of 30 trading days after the date of listing. If the holder of shares of convertible stock disagrees with the value determined by the board, then each of the holder of the convertible stock and us shall name one appraiser and the two named appraisers shall promptly agree in good faith to the appointment of one other appraiser whose determination of the value of the company shall be final and binding on the parties. The cost of such appraisal shall be shared evenly between us and our advisor.

By way of example only, the value of the 50,000 shares of convertible stock nine years after purchase, assuming a 15% cumulative, non-compounded annual return on the common stock (prior to the impact of the shares of convertible stock) would be $85,500,000 if we raise a total of $760,000,000 (at $10.00 per share) in this offering and in the private offering that concluded immediately preceding the commencement of this offering. There is no guaranty that we will sell this amount of shares of common stock, in which case, the value of the convertible stock would be lower. If the cumulative, non-compounded annual return on the shares of common stock is 10% or less, the value of the shares of convertible stock will be zero. In contrast to the above assumption of a 15% cumulative, non-compounded annual return, if the return were 11%, the value of our convertible stock would be $17,100,000.

Generally, for any given level of return on an investment in common stock, the more shares we sell, the greater the value of a share of convertible stock. The above example does not take into account the possibility that we may sell additional shares of common stock under our distribution reinvestment plan, and the example ignores the dollars that we received or will receive for the sale of the convertible stock. The example also does not take into account the possibility that we may sell common stock for less than $10.00 per share or the impact of redeeming common stock under our share redemption program; at any given level of return, both of these possibilities would reduce the value of our convertible stock. Further, the example does not take into account the fact that our common stock will be sold over a period of time. Instead, in preparing this example, we assumed that all shares will be sold at the same time, which assumption had the effect of increasing the value in the example above. Finally, it is important to note that the convertible stock would have no value or reduced value if we terminated our advisor prior to the conversion of the convertible stock.

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Our charter provides that if we:

• reclassify or otherwise recapitalize our outstanding common stock (except to change the par value, or to change from no par value to par value, or to subdivide or otherwise split or combine shares); or

• consolidate or merge with another entity in a transaction in which we are either (1) not the surviving entity or (2) the surviving entity but that results in a reclassification or recapitalization of our common stock (except to change the par value, or to change from no par value to par value, or to subdivide or otherwise split or combine shares),

then we or the successor or purchasing business entity must provide that the holder of each share of our convertible stock outstanding at the time one of the above events occurs will continue to have the right to convert the convertible stock upon an event triggering conversion. After one of the above transactions occurs, the convertible stock will be convertible into the kind and amount of stock and other securities and property received by the holders of common stock in the transaction that occurred, such that upon conversion, the holders of convertible stock will realize as nearly as possible the same economic rights and effects as described above in the description of the conversion of our convertible stock. This right will apply to successive reclassifications, recapitalizations, consolidations, and mergers until the convertible stock is converted.

Our board of directors will oversee the conversion of the convertible stock to ensure that any shares of common stock issuable in connection with the conversion is calculated in accordance with the terms of our charter and to evaluate the impact of the conversion on our REIT status. If, in the good faith judgment of our board, full conversion of the convertible stock would jeopardize our status as a REIT, then only such number of shares of convertible stock (or fraction of a share thereof) shall be converted into a number of shares of common stock such that our REIT status would not be jeopardized. The conversion of the remaining shares of convertible stock will be deferred until the earliest date after our board of directors determines that such conversion will not jeopardize our qualification as a REIT. Any such deferral will not otherwise alter the terms of the convertible stock.

Preferred Stock

Our charter authorizes our board of directors to designate and issue one or more classes or series of preferred stock without stockholder approval. A majority of our independent directors who do not have an interest in the transaction must approve any issuance of preferred stock. Our board of directors may determine the relative rights, preferences and privileges of each class or series of preferred stock so issued, which may be more beneficial than the rights, preferences and privileges attributable to our common stock. The issuance of preferred stock could have the effect of delaying or preventing a change in control. Our board of directors has no present plans to issue preferred stock but may do so at any time in the future without stockholder approval.

Distributions

We have not paid or declared any cash distributions as of July 1, 2011. It is unclear at this time whether, based largely on the composition of our current investment portfolio and the acquisition opportunities that we currently see in the market, any cash distributions will be declared during 2011. Once we begin making cash distributions, we intend to pay cash distributions on a monthly basis based on daily record dates. We may also make special stock distributions, as described further below.

To maintain our qualification as a REIT, we will be required to make aggregate annual distributions to our common stockholders of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

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Our board of directors will consider many factors before authorizing a cash distribution, including current and projected cash flow from operations, capital expenditure needs, general financial conditions and REIT qualification requirements. We expect to have little, if any, cash flow from operations available for cash distributions until we make substantial investments. It is possible that at least during the early stages of our development, and from time to time during our operational stage, we may declare cash distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, to the extent permitted by Maryland law, we expect to use the proceeds from this offering or the proceeds from the issuance of securities in the future to pay distributions. We may borrow funds, issue new securities or sell assets to make and cover our declared distributions, all or a portion of which could be deemed a return of capital. We may also fund such distributions from third-party borrowings or from advances from our advisor or sponsor or from our advisor’s deferral of its asset management fee, although we have no present intention to do so. If we fund cash distributions from borrowings, sales of assets or the net proceeds from this offering, we will have less funds available for the acquisition of real estate and real estate related assets and your overall return may be reduced. Further, to the extent cash distributions exceed cash flow from operations, a stockholder’s basis in our stock will be reduced and, to the extent distributions exceed a stockholder’s basis, the stockholder may recognize capital gain. Our organizational documents do not limit the amount of distributions we can fund from sources other than from cash flows from operations.

In addition to cash distributions, our board of directors has, and may in the future, declare special stock distributions. Although there are a number of factors that we will consider in connection with such a declaration, such stock distributions are most likely to continue to be declared if our board of directors believes that (i) our portfolio has appreciated in value from its aggregate acquisition cost or (ii) additional sales of common stock in this offering at the current offering price would dilute the value of a share to our then existing stockholders. Such a stock distribution would be intended to have the same effect as raising the price at which our shares of common stock are offered. We note that most of the investment opportunities that we are seeing in the market at this time are investments that are attractive more so because of their appreciation potential rather than because of their current yield. Especially in this environment and during an ongoing public offering, distributions in shares of our common stock may be in the long-term best interests of our stockholders.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders. We will make distributions with respect to the shares of common stock in our sole discretion. No distributions will be made with respect to the convertible stock.

Restriction on Ownership of Shares

Ownership Limit

To maintain our REIT qualification, not more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals (including certain entities treated as individuals under the Internal Revenue Code) during the last half of each taxable year. In addition, at least 100 persons who are independent of us and each other must beneficially own our outstanding shares for at least 335 days per 12-month taxable year or during a proportionate part of a shorter taxable year. Each of the requirements specified in the two preceding sentences shall not apply until after 2010, the first taxable year for which we will make an election to be taxed as a REIT. We may prohibit certain acquisitions and transfers of shares so as to ensure our continued qualification as a REIT under the Internal Revenue Code. However, we cannot assure you that this prohibition will be effective.

To help ensure that we meet these tests, our charter prohibits any person or group of persons from acquiring, directly or indirectly, beneficial ownership of more than 9.8% of our aggregate outstanding shares unless exempted by our board of directors. Our board of directors may waive this ownership limit

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with respect to a particular person if the board receives evidence that ownership in excess of the limit will not jeopardize our REIT status. For purposes of this provision, we treat corporations, partnerships and other entities as single persons.

This limitation does not apply to the holder(s) of our convertible stock or the common stock issued upon conversion of our convertible stock. However, our board of directors may defer the timing of the conversion of all or a portion of our convertible stock if it determines that full conversion could jeopardize our qualification as a REIT under then applicable federal income tax laws and regulation. Any such deferral will not otherwise alter the terms of the convertible stock, and such stock will convert at the earliest date after our board of directors determines that such conversion will not jeopardize our qualification as a REIT.

Any attempted transfer of our shares that, if effective, would result in a violation of our ownership limit or would result in our shares being owned by fewer than 100 persons will be null and void and will cause the number of shares causing the violation to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries. The prohibited transferee will not acquire any rights in the shares. The automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of the attempted transfer. We will designate a trustee of the trust that will not be affiliated with us or the prohibited transferee. We will also name one or more charitable organizations as a beneficiary of the share trust.

Shares held in trust will remain issued and outstanding shares and will be entitled to the same rights and privileges as all other shares of the same class or series. The prohibited transferee will not benefit economically from any of the shares held in trust, will not have any rights to dividends or distributions and will not have the right to vote or any other rights attributable to the shares held in the trust. The trustee will receive all dividends and distributions on the shares held in trust and will hold such dividends or distributions in trust for the benefit of the charitable beneficiary. The trustee may vote any shares held in trust.

Within 20 days of receiving notice from us that any of our shares have been transferred to the trust for the charitable beneficiary, the trustee will sell those shares to a person designated by the trustee whose ownership of the shares will not violate the above restrictions. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee and to the charitable beneficiary as follows. The prohibited transferee will receive the lesser of (i) the price paid by the prohibited transferee for the shares or, if the prohibited transferee did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction), the market price (as defined in our charter) of the shares on the day of the event causing the shares to be held in the trust and (ii) the price received by the trustee from the sale or other disposition of the shares. Any net sale proceeds in excess of the amount payable to the prohibited transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares have been transferred to the trust, the shares are sold by the prohibited transferee, then (i) the shares shall be deemed to have been sold on behalf of the trust and (ii) to the extent that the prohibited transferee received an amount for the shares that exceeds the amount he was entitled to receive, the excess shall be paid to the prohibited trustee upon demand.

In addition, shares held in the trust for the charitable beneficiary will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (ii) the market price on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited transferee.

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Any person who acquires or attempts to acquire shares in violation of the foregoing restrictions or who would have owned the shares that were transferred to any such trust must give us immediate written notice of such event, and any person who proposes or attempts to acquire or receive shares in violation of the foregoing restrictions must give us at least 15 days’ written notice prior to such transaction. In both cases, such persons shall provide to us such other information as we may request in order to determine the effect, if any, of such transfer on our status as a REIT.

The foregoing restrictions will continue to apply until our board of directors determines it is no longer in our best interest to continue to qualify as a REIT. The ownership limit does not apply to any underwriter in an offering of our shares or to a person or persons exempted from the ownership limit by our board of directors based upon appropriate assurances that our qualification as a REIT would not be jeopardized.

Within 30 days after the end of each taxable year, every owner of 5% or more of our outstanding capital stock will be asked to deliver to us a statement setting forth the number of shares owned directly or indirectly by such person and a description of how such person holds the shares. Each such owner shall also provide us with such additional information as we may request in order to determine the effect, if any, of his or her beneficial ownership on our status as a REIT and to ensure compliance with our ownership limit.

These restrictions could delay, defer or prevent a transaction or change in control of our company that might involve a premium price for our shares of common stock or otherwise be in the best interests of our stockholders.

Suitability Standards and Minimum Purchase Requirements

State securities laws and our charter require that purchasers of our common stock meet standards regarding (i) net worth or income and (ii) minimum purchase amounts. These standards are described above at “Suitability Standards” immediately following the cover page of this prospectus and below at “Plan of Distribution—Minimum Purchase Requirements.” Subsequent purchasers, i.e., potential purchasers of your shares, must also meet the net worth or income standards, and unless you are transferring all of your shares, you may not transfer your shares in a manner that causes you or your transferee to own fewer than the number of shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law. These suitability and minimum purchase requirements are applicable until our shares of common stock are listed on a national securities exchange, and these requirements may make it more difficult for you to sell your shares.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is DST Systems, Inc.

Meetings and Special Voting Requirements

An annual meeting of our stockholders will be held each year, at least 30 days after delivery of our annual report. Special meetings of stockholders may be called only upon the request of a majority of our directors, a majority of our independent directors, our chief executive officer, our president or upon the written request of stockholders holding at least 10% of the shares entitled to be cast on any issue proposed to be considered at the special meeting. Upon receipt of a written request of common stockholders holding at least 10% of the shares entitled to be cast stating the purpose of the special meeting, our secretary will provide all of our stockholders written notice of the meeting and the purpose of such meeting. The meeting must be held not less than 15 days or more than 60 days after the distribution of the notice of the meeting.

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The presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at any stockholder meeting constitutes a quorum. Unless otherwise provided by the Maryland General Corporation Law or our charter, the affirmative vote of a majority of all votes cast is necessary to take stockholder action. With respect to the election of directors, each candidate nominated for election to the board of directors must receive a majority of the votes present, in person or by proxy, in order to be elected. Therefore, if a nominee receives fewer “for” votes than “withhold” votes in an election, then the nominee will not be elected.

Our charter provides that the concurrence of the board is not required in order for the common stockholders to amend the charter, dissolve the corporation or remove directors. However, we have been advised that Section 2-604 and Section 3-403 of the Maryland General Corporation Law do require board approval in order to amend our charter or dissolve, respectively. Without the approval of a majority of the shares of common stock entitled to vote on the matter, the board of directors may not:

• amend the charter to adversely affect the rights, preferences and privileges of the common stockholders;

• amend charter provisions relating to director qualifications, fiduciary duties, liability and indemnification, conflicts of interest, investment policies or investment restrictions;

• cause our liquidation or dissolution after our initial investment in property;

• sell all or substantially all of our assets other than in the ordinary course of business; or

• cause our merger or reorganization.

The term of our advisory agreement with our advisor will end after one year but may be renewed for an unlimited number of successive one-year periods upon the mutual consent of our advisor and us. Our independent directors annually review our advisory agreement with our advisor. While the stockholders do not have the ability to vote to replace our advisor or to select a new advisor, stockholders do have the ability, by the affirmative vote of a majority of the shares entitled to vote on such matter, to remove a director from our board.

Advance Notice for Stockholder Nominations for Directors and Proposals of New Business

Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by stockholders may be made only:

• pursuant to our notice of the meeting;

• by the board of directors; or

• by a stockholder who gives notice of the nomination or proposal not less than 90 days prior to the first anniversary of the date of the mailing of the notice for the preceding year’s annual stockholders’ meeting.

Our bylaws contain a similar notice requirement in connection with nominations for directors at a special meeting of stockholders called for the purpose of electing one or more directors. Failure to comply with the notice provisions will make stockholders unable to nominate directors or propose new business. The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or

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desirable by our board of directors, to inform stockholders and make recommendations about such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders.

Inspection of Books and Records

As a part of our books and records, we maintain at our principal office an alphabetical list of the names of our common stockholders, along with their addresses and telephone numbers and the number of shares held by each of them. We update this stockholder list at least quarterly. Except as noted below, the list is available for inspection at our principal office by a common stockholder or his or her designated agent upon request of the stockholder and we will mail this list to any common stockholder within 10 days of receipt of his or her request. We may impose a reasonable charge for expenses incurred in reproducing such list. Stockholders, however, may not sell or use this list for a commercial purpose other than in the interest of the applicant as a stockholder relative to the affairs of our company. The purposes for which stockholders may request this list include matters relating to their voting rights. Each common stockholder who receives a copy of the stockholder list shall keep such list confidential and shall sign a confidentiality agreement to the effect that such stockholder will keep the stockholder list confidential and share such list only with its employees, representatives or agents who agree in writing to maintain the confidentiality of the stockholder list.

If our advisor or our board of directors neglects or refuses to exhibit, produce or mail a copy of the stockholder list as requested, our advisor or board, as the case may be, shall be liable to the common stockholder requesting the list for the costs, including attorneys’ fees, incurred by that stockholder for compelling the production of the stockholder list and any actual damages suffered by any common stockholder for the neglect or refusal to produce the list. It shall be a defense that the actual purpose and reason for the requests for inspection or for a copy of the stockholder list is not for a proper purpose but is instead for the purpose of securing such list of stockholders or other information for the purpose of selling such list or copies thereof, or of using the same for a commercial purpose other than in the interest of the applicant as a stockholder relative to the affairs of our company. We may require that the stockholder requesting the stockholder list represent that the request is not for a commercial purpose unrelated to the stockholder’s interest in our company. The remedies provided by our charter to stockholders requesting copies of the stockholder list are in addition to, and do not in any way limit, other remedies available to stockholders under federal law, or the law of any state. As the operations of both RRE Opportunity Holdings, LLC and our Operating Partnership will be conducted by us, an inspection of the our books and records would include an inspection of the books and records of RRE Opportunity Holdings, LLC and our Operating Partnership.

Control Share Acquisitions

The Maryland General Corporation Law provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, by officers or by directors who are employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock that, if aggregated with all other shares owned by the acquirer or with respect to which the acquirer has the right to vote or to direct the voting of (except solely by virtue of revocable proxy) would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting powers:

• one-tenth or more but less than one-third;

• one-third or more but less than a majority; or

• a majority or more of all voting power.

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Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means the acquisition of control shares, but does not include the acquisition of shares (i) under the laws of descent and distribution, (ii) under the satisfaction of a pledge or other security interest created in good faith and not for the purpose of circumventing this subtitle, or (iii) under a merger, consolidation, or share exchange effected under the control share acquisition statute if the corporation is a party to the merger, consolidation, or share exchange.

A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of the demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may repurchase for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to repurchase control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of these appraisal rights may not be less than the highest price per share paid in the control share acquisition.

The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of share of our stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future.

Business Combinations

Under the Maryland General Corporation Law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities. An interested stockholder is defined as:

• any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or

• an affiliate or associate of the corporation who, at any time within the two-year period before the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.

A person is not an interested stockholder under the statute if the board of directors approved in advance the transaction by which he or she otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

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After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

• 80% of the votes entitled to be cast by holders of outstanding voting stock of the corporation; and

• two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected, or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the Maryland General Corporation Law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. We have opted out of these provisions by resolution of our board of directors. However, our board of directors may, by resolution, opt in to the business combination statute in the future.

Subtitle 8

Subtitle 8 of Title 3 of the Maryland General Corporation Law permits a Maryland corporation with a class of equity securities registered under the Exchange Act, and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:

• a classified board,

• a two-thirds vote requirement for removing a director,

• a requirement that the number of directors be fixed only by vote of the directors,

• a requirement that a vacancy on the board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred, and

• a majority requirement for the calling of a special meeting of stockholders.

We have added provisions to our charter that prohibit us, until such time that our shares of common stock are listed on a national securities exchange, from electing to be subject to the provisions under Subtitle 8. Through provisions in our bylaws unrelated to Subtitle 8, we already vest in our board of directors the exclusive power to fix the number of directorships. Our bylaws may be amended by our stockholders or the board of directors.

Tender Offer by Stockholders

Our charter provides that any tender offer made by a stockholder, including any “mini-tender” offer, must comply with certain notice and disclosure requirements. These procedural requirements with respect to tender offers apply to any widespread solicitation for shares of our stock at firm prices for a limited time period.

In order for one of our stockholders to conduct a tender offer to another stockholder, our charter requires that the stockholder comply with Regulation 14D of the Exchange Act, and provide us with notice

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of such tender offer at least ten business days before initiating the tender offer. Pursuant to our charter, Regulation 14D would require any stockholder initiating a tender offer to provide:

• specific disclosure to stockholders focusing on the terms of the offer and information about the bidder;

• the ability to allow stockholders to withdraw tendered shares while the offer remains open;

• the right to have tendered shares accepted on a pro rata basis throughout the term of the offer if the offer is for less than all of our shares; and

• that all stockholders of the subject class of shares be treated equally.

In addition to the foregoing, there are certain ramifications to stockholders should they attempt to conduct a noncompliant tender offer. If any stockholder initiates a tender offer without complying with the provisions set forth above, in our sole discretion, we shall have the right to redeem such noncompliant stockholder’s shares and any shares acquired in such tender offer. The noncomplying stockholder shall also be responsible for all of our expenses in connection with that stockholder’s noncompliance.

Distribution Reinvestment Plan

We have adopted an amended and restated distribution reinvestment plan pursuant to which you may elect to have your dividends and other distributions reinvested in additional shares of our common stock. The following discussion summarizes the principal terms of this plan. Appendix B to this prospectus contains the full text of our distribution reinvestment plan as is currently in effect.

Eligibility

All of our common stockholders are eligible to participate in our distribution reinvestment plan; however, we may elect to deny your participation in the distribution reinvestment plan if you reside in a jurisdiction or foreign country where, in our judgment, the burden or expense of compliance with applicable securities laws makes your participation impracticable or inadvisable.

At any time prior to the listing of our shares on a national stock exchange, you must cease participation in our distribution reinvestment plan if you no longer meet the suitability standards or cannot make the other investor representations set forth in the then-current prospectus or in the subscription agreement. Participants must agree to notify us promptly when they no longer meet these standards. See the “Suitability Standards” section of this prospectus (immediately following the cover page) and the form of subscription agreement attached hereto as Appendix A.

Election to Participate

You may elect to participate in the distribution reinvestment plan by completing the subscription agreement or other approved enrollment form available from the dealer manager or a participating broker-dealer. Your participation in the distribution reinvestment plan will begin with the next distribution made after receipt of your enrollment form. You can choose to have all or a portion of your distributions reinvested through the distribution reinvestment plan; however, the distribution reinvestment plan requires you to designate at least 20% of your distributions for the purchase of additional shares of common stock. You may also change the percentage of your distributions that will be reinvested at any time by completing a new enrollment form or other form provided for that purpose. You must make any election to increase your level of participation through your participating broker-dealer or the dealer manager.

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Stock Purchases

Shares will be purchased under the distribution reinvestment plan on the monthly distribution payment dates. The purchase of fractional shares is a permissible and likely result of the reinvestment of distributions under the distribution reinvestment plan.

The purchase price for shares purchased under the distribution reinvestment plan will initially be $9.50 per share. Once we establish an estimated value per share that is not based on the price to acquire a share in the primary offering, shares issued pursuant to our distribution reinvestment plan will be priced at the estimated value per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share not based on the price to acquire a share in the primary offering after the completion of our offering stage; however, the time frame before which we establish an estimated value per share may be different depending on regulatory requirements or if necessary to assist broker-dealers who sell shares in this offering. We will consider our offering stage complete when 18 months have passed since our last sale of shares in a public offering of equity securities, whether that last sale was in this initial public offering or a public follow-on offering. (For purposes of this definition, we do not consider “public equity offerings” to include offerings on behalf of selling stockholders or offerings related to any distribution reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.)

Account Statements

You or your designee will receive a confirmation of your purchases under the distribution reinvestment plan no less than quarterly. Your confirmation will disclose the following information:

• each distribution reinvested for your account during the period;

• the date of the reinvestment;

• the number and price of the shares purchased by you; and

• the total number of shares in your account.

In addition, within 90 days after the end of each calendar year, we will provide you with an individualized report on your investment, including the purchase dates, purchase price, number of shares owned and the amount of distributions made in the prior year. We will also provide to all participants in the plan, without charge, all supplements to and updated versions of this prospectus, as required under applicable securities laws.

Notice to Participants

With respect to material changes, we may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports filed with the SEC and (b) in a separate mailing to the participants. With respect to immaterial changes, we may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports filed with the SEC, (b) in a separate mailing to the participants, or (c) on our web site.

Fees and Commissions and Use of Proceeds

No selling commissions or dealer manager fees will be payable on shares sold under the distribution reinvestment plan. We expect to use the net proceeds from the sale of shares under our distribution reinvestment plan for general corporate purposes, including, but not limited to, the following:

• the repurchase of shares under our share redemption program;

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• capital expenditures, tenant improvement costs and leasing costs related to our investments in real estate properties;

• reserves required by any financings of our investments;

• future funding obligations under any real estate loan receivable we acquire;

• acquisition of assets, which would include payment of acquisition fees to our advisor (see “Management Compensation”); and

• the repayment of debt.

We cannot predict with any certainty how much, if any, distribution reinvestment plan proceeds will be available for specific purposes.

Voting

You may vote all shares, including fractional shares that you acquire through the distribution reinvestment plan.

Tax Consequences of Participation

If you elect to participate in the distribution reinvestment plan and are subject to federal income taxation, you will incur a tax liability for distributions allocated to you even though you have elected not to receive the distributions in cash but rather to have the distributions withheld and reinvested pursuant to the distribution reinvestment plan. Specifically, you will be treated as if you have received the distribution from us in cash and then applied such distribution to the purchase of additional shares. In addition, to the extent you purchase shares through our distribution reinvestment plan at a discount to their fair market value, you will be treated for tax purposes as receiving an additional distribution equal to the amount of the discount.

You will be taxed on the amount of such distribution as a dividend to the extent such distribution is from current or accumulated earnings and profits, unless we have designated all or a portion of the distribution as a capital gain distribution. See “Federal Income Tax Considerations—Taxation of Stockholders.” We will withhold 28% of the amount of dividends or distributions paid if you fail to furnish a valid taxpayer identification number, fail to properly report interest or distributions or fail to certify that you are not subject to withholding.

Our distribution reinvestment plan clarifies that the plan will be interpreted consistently with certain Treasury Regulations (the “Regulations”), which generally allow issuers to defer cost-basis reporting for shares issued pursuant to their distribution reinvestment plans prior to January 1, 2012. We can give no assurance that the IRS will agree with our interpretation of the Regulations or will agree that our distribution reinvestment plan meets the requirements of the Regulations.

Termination of Participation

Once enrolled, you may continue to purchase shares under our distribution reinvestment plan until we have sold all of the shares registered in this offering, have terminated this offering or have terminated the distribution reinvestment plan. You may terminate your participation in the distribution reinvestment plan at any time by providing us with written notice. For your termination to be effective for a particular distribution, we must have received your notice of termination at least 10 business days prior to the last day of the fiscal period to which the distribution relates. If you participate in our share redemption program, you will not be terminated from participating in the distribution reinvestment plan. Any transfer of your

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shares will effect a termination of the participation of those shares in the distribution reinvestment plan. We will terminate your participation in the distribution reinvestment plan to the extent that a reinvestment of your distributions would cause you to violate the ownership limit contained in our charter, unless you have obtained an exemption from the ownership limit from our board of directors.

Amendment or Termination of Plan

We may amend or terminate the distribution reinvestment plan for any reason at any time upon 10 days’ written notice to the participants, except we may not amend the distribution reinvestment plan to remove the right of a stockholder to terminate participation in the plan. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (b) in a separate mailing to the participants.

Share Redemption Program

Our board of directors has adopted a share redemption program that may enable you to sell your shares to us after you have held them for at least one year, subject to the significant conditions and limitations of the program. In its sole discretion, our board of directors could choose to amend, suspend or terminate the program upon 30 days’ notice and without stockholder approval. We have no funds available for redemption under our share redemption program in 2011. If and when we do have funds available for redemption under our share redemption program, the purchase price for such shares redeemed will be as set forth below until we establish an estimated value per share of our common stock. We expect to establish an estimated value per share after the completion of our offering stage; however, the time frame before which we establish an estimated value per share may be different depending on regulatory requirements or if necessary to assist broker-dealers who sell shares in this offering. We will consider our offering stage complete when 18 months have passed without our having sold shares in a public offering of equity securities, whether that last sale was in this initial public offering or a public follow-on offering. We would report this redemption price to you in our annual report and the three quarterly reports that we publicly file with the SEC. (For purposes of this definition, we do not consider “public equity offerings” to include offerings on behalf of selling stockholders or offerings related to a distribution reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership).

Unless the shares are being redeemed in connection with a stockholder’s death or “qualifying disability” (as defined below) or redemptions sought upon a stockholder’s confinement to a long-term care facility (upon the conditions set forth below), the purchase price per share for shares redeemed under the redemption program will equal (1) prior to the time we establish an estimated value per share, the amount by which (a) the lesser of (i) 90% of the average gross price per share the original purchaser or purchasers of your shares paid to us, which we refer to as the “issue price,” for all of your shares (as adjusted for any stock combinations, splits, recapitalizations and the like with respect to our common stock) or (ii) 90% of the offering price of shares in our most recent public primary offering exceeds (b) the aggregate amount of net sale proceeds per share, if any, distributed to investors prior to the redemption date as a result of the sale of one or more of our investments, or (2) after we establish an estimated value per share, the lesser of (i) 100% of the average issue price per share for all of your shares (as adjusted for any stock combinations, splits, recapitalizations and the like with respect to our common stock) or (ii) 90% of the estimated value per share, as determined by our advisor or another firm chosen for that purpose.

In the event that you redeem all of your shares, any shares that you purchased pursuant to our distribution reinvestment plan may be excluded from the foregoing one-year holding period requirement, in the discretion of our board of directors. In addition, for purposes of the one-year holding period, limited partners of our Operating Partnership who exchange their limited partnership units for shares of our common stock will be deemed to have owned their shares as of the date they were issued their limited partnership units in our Operating Partnership. For a description of the exchange rights of the limited partners of our Operating Partnership, see “The Operating Partnership Agreement—Exchange Rights.”

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Subject to the limitations described in this prospectus and provided that the redemption request is made within 270 days of the event giving rise to the following special circumstances, we will also waive the one-year holding requirement (a) upon the request of the estate, heir or beneficiary of a deceased stockholder or (b) upon the qualifying disability of a stockholder or upon a stockholder’s confinement to a long-term care facility, provided that the condition causing such disability or need for long-term care was not preexisting on the date that such person became a stockholder. Our board of directors reserves the right in its sole discretion at any time to (1) waive the one-year holding period in the event of other exigent circumstances affecting a stockholder such as bankruptcy or a mandatory distribution requirement under a stockholder’s IRA, (2) reject any request for redemption, (3) change the purchase price for redemptions, or (4) otherwise amend the terms of our share redemption program.

In addition, and subject to the conditions and limitations described below, we will redeem shares at the prices described below upon the death of a stockholder who is a natural person, including shares held by such stockholder through a revocable grantor trust or an IRA or other retirement or profit-sharing plan, after receiving written notice from the estate of the stockholder, the recipient of the shares through bequest or inheritance, or, in the case of a revocable grantor trust, the trustee of such trust, who shall have the sole ability to request redemption on behalf of the trust. We must receive the written notice within 270 days after the death of the stockholder. If spouses are joint registered holders of shares, the request to redeem the shares may be made if either of the registered holders dies. If the stockholder is not a natural person, such as a trust other than a revocable grantor trust, partnership, corporation or other similar entity, these special redemption rights upon death do not apply.

Furthermore, and subject to the conditions and limitations described below, we will redeem shares at the prices described below held by a stockholder who is a natural person, including shares held by such stockholder through a revocable grantor trust or an IRA or other retirement or profit-sharing plan, with a qualifying disability or upon confinement to a long-term care facility, after receiving written notice from such stockholder, provided that the condition causing the qualifying disability was not preexisting on the date that the person became a stockholder or that the stockholder seeking redemption was not confined to a long-term care facility on the date the person became a stockholder. We must receive written notice within 270 days after the determination of such stockholder’s qualifying disability or, with respect to redemptions sought upon a stockholder’s confinement to a long-term care facility, within 270 days of the earlier of (1) the one-year anniversary of the stockholder’s admittance to the long-term care facility or (2) the date of the determination of the stockholder’s indefinite confinement to the long-term care facility by a licensed physician. If the stockholder is not a natural person, such as a trust (other than a revocable grantor trust), partnership, corporation or other similar entity, these special redemption rights do not apply.

In order for a disability to entitle a stockholder to the special redemption terms described above (a “qualifying disability”), (1) the stockholder would have to receive a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the shares to be redeemed, and (2) such determination of disability would have to be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder could be eligible to receive (the “applicable governmental agency”). The “applicable governmental agencies” would be limited to the following: (i) if the stockholder paid Social Security taxes and, therefore, could be eligible to receive Social Security disability benefits, then the applicable governmental agency would be the Social Security Administration or the agency charged with responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration; (ii) if the stockholder did not pay Social Security benefits and, therefore, could not be eligible to receive Social Security disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System (“CSRS”), then the applicable governmental agency would be the U.S. Office of Personnel Management or the agency charged with responsibility for administering CSRS benefits at that time if other than the Office of Personnel Management; or (iii) if the stockholder did not pay Social Security taxes and therefore could not be eligible to receive Social Security benefits but suffered a disability that resulted in the stockholder’s discharge from military service under conditions that were other than dishonorable

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and, therefore, could be eligible to receive military disability benefits, then the applicable governmental agency would be the Department of Veterans Affairs or the agency charged with the responsibility for administering military disability benefits at that time if other than the Department of Veterans Affairs.

Disability determinations by governmental agencies for purposes other than those listed above, including but not limited to worker’s compensation insurance, administration or enforcement of the Rehabilitation Act or Americans with Disabilities Act, or waiver of insurance premiums would not entitle a stockholder to the special redemption terms described above. Redemption requests following an award by the applicable governmental agency of disability benefits would have to be accompanied by (1) the investor’s initial application for disability benefits and (2) a Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Department of Veterans Affairs Administration record of disability-related discharge or such other documentation issued by the applicable governmental agency that we would deem acceptable and would demonstrate an award of the disability benefits.

We understand that the following disabilities do not entitle a worker to Social Security disability benefits:

• disabilities occurring after the legal retirement age;

• temporary disabilities; and

• disabilities that do not render a worker incapable of performing substantial gainful activity.

Therefore, such disabilities would not qualify for the special redemption terms, except in the limited circumstances when the investor would be awarded disability benefits by the other “applicable governmental agencies” described above. However, where a stockholder requests the redemption of his or her share due to a disability, and such stockholder does not have a “qualifying disability” under the terms described above, our board of directors may redeem the stockholder’s shares in its discretion on the special terms available for a qualifying disability.

With respect to redemptions sought upon a stockholder’s confinement to a long-term care facility, a “long-term care facility” shall mean an institution that: (1) either (a) is approved by Medicare as a provider of skilled nursing care or (b) is licensed as a skilled nursing home by the state or territory in which it is located (it must be within the United States, Puerto Rico, or U.S. Virgin Islands) and (2) meets all of the following requirements: (a) its main function is to provide skilled, intermediate or custodial nursing care; (b) it provides continuous room and board to three or more persons; (c) it is supervised by a registered nurse or licensed practical nurse; (d) it keeps daily medical records of all medication dispensed; and (e) its primary service is other than to provide housing for residents. Where a stockholder seeks redemption of his or her shares due to confinement to a long-term care facility, the stockholder must submit a written statement from a licensed physician certifying either (1) the stockholder’s continuous and continuing confinement to a long-term care facility over the course of the last year or (2) that the licensed physician has determined that the stockholder will be indefinitely confined to a long-term care facility. Notwithstanding the above, where a stockholder requests redemption of his or her shares due to confinement to a long-term care facility, and such stockholder does not meet the definition set forth above, our board of directors may redeem the stockholder’s shares in its discretion on the special terms available for confinement to a long-term care facility.

The purchase price per share for redemptions sought upon a stockholder’s death or qualifying disability or confinement to a long-term care facility (provided that the condition causing such qualifying disability was not preexisting on the date that such person became a stockholder or that the stockholder was not confined to a long-term care facility on the date the person became a stockholder), until we establish an estimated value per share of our common stock, will be equal to the amount by which (a) the average issue

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price per share for all of your shares (as adjusted for any stock combinations, splits, recapitalizations and the like with respect to the common stock) exceeds (b) the aggregate amount of net sale proceeds per share, if any, distributed to investors prior to the redemption date as a result of the sale of one or more of our investments. Thereafter, the purchase price will be the estimated value per share, as determined by our advisor or another firm chosen for that purpose.

Our share redemption program, including redemptions sought upon a stockholder’s death or disability or upon confinement of a stockholder to a long-term care facility, will be available only for stockholders who purchase their shares directly from us or the transferees mentioned below, and is not intended to provide liquidity to any stockholder who acquired his or her shares by purchase from another stockholder. In connection with a request for redemption, the stockholder or his or her estate, heir or beneficiary will be required to certify to us that the stockholder acquired the shares to be repurchased either (1) directly from us or (2) from the original investor by way of (i) a bona fide gift not for value to, or for the benefit of, a member of the investor’s immediate or extended family (including the investor’s spouse, parents, siblings, children or grandchildren and including relatives by marriage), (ii) through a transfer to a custodian, trustee or other fiduciary for the account of the investor or members of the investor’s immediate or extended family in connection with an estate planning transaction, including by bequest or inheritance upon death or (iii) operation of law.

We will generally engage a third party to conduct a Uniform Commercial Code (“UCC”) search to ensure that no liens or encumbrances are held against the shares presented for redemption. We will cover the cost for these searches. Shares that are not subject to liens or encumbrances will be eligible for redemption following the completion of the UCC search. We will not redeem shares that are subject to liens or other encumbrances until the stockholder presents evidence that such liens or encumbrances have been removed.

We intend to redeem shares quarterly under the program. We will not redeem in excess of 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the effective date of redemption. Our board of directors will determine at least quarterly whether we have sufficient excess cash to repurchase shares. Generally, the cash available for redemption will be limited to proceeds from our distribution reinvestment plan plus, if we had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year. We did not declare any cash distributions to our stockholders in 2010 and we did not have positive operating cash flow in 2010. Accordingly, because of this limitation, we have no funds available for redemption under our share redemption program in 2011.

Our board of directors, in its sole discretion, may suspend, terminate or amend our share redemption program without stockholder approval upon 30 days’ notice if it determines that such suspension, termination or amendment is in our best interest. Our board may also reduce the number of shares purchased under the share redemption program if it determines the funds otherwise available to fund our share redemption program are needed for other purposes. These limitations apply to all redemptions, including redemptions sought upon a stockholder’s death, qualifying disability or confinement to a long-term care facility. You will have no right to request redemption of your shares if the shares are listed for trading on a national securities exchange. See “Risk Factors—Risks Related to This Offering and Our Corporate Structure.”

A request for redemption may be withdrawn in whole or in part by a stockholder in writing at any time prior to redemption. We cannot guarantee that the funds set aside for the share redemption program will be sufficient to accommodate all requests made in any particular redemption period. If we cannot accommodate a redemption request due to the foregoing limitations, the stockholder or his or her estate, heir or beneficiary can (1) withdraw the request for redemption, or (2) ask that we honor the request at such time, if any, when the limitations no longer prevent redemption. Such pending requests will be honored among all requests for redemptions in any given redemption period, as follows: first, pro rata as to

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redemptions sought upon a stockholder’s death or disability or sought upon a stockholder’s confinement to a long-term care facility; next, pro rata as to redemptions to stockholders who demonstrate, in the discretion of our board of directors, another involuntary, exigent circumstance, such as bankruptcy; next, pro rata as to redemptions to stockholders subject to a mandatory distribution requirement under their IRAs; and, finally, pro rata as to other redemption requests. Our advisor and its affiliates will defer their own redemption requests, if any, until all other requests for redemption have been met.

In general, a stockholder or his estate, heir or beneficiary may present to us fewer than all of the shares then owned for redemption, except that the minimum number of shares that must be presented for redemption shall be at least 25% of the holder’s shares. However, as little as 10% of your shares may be presented for redemption if your redemption request is made within 270 days of the event giving rise to the special circumstances described in this sentence, where redemption is being requested (1) on behalf of a deceased stockholder; (2) by a stockholder with a qualifying disability, who is deemed by our board of directors to be permanently disabled or who is seeking redemption upon confinement to a long-term care facility; (3) by a stockholder due to other involuntary, exigent circumstances, such as bankruptcy; or (4) by a stockholder due to a mandatory distribution under such stockholder’s IRA; provided, however, that any future redemption request by such stockholder must present for redemption at least 25% of such stockholder’s remaining shares. Except in the case of redemptions due to a mandatory distribution under a stockholder’s IRA, we will treat a redemption request that would cause you to own fewer than 200 shares as a request to redeem all of your shares, and we will vary from pro rata treatment of redemptions as necessary to avoid having stockholders holding fewer than 200 shares. In the case of stockholders who undertake a series of partial redemptions, appropriate adjustments in the purchase price for the redeemed shares will be made so that the blended price per share for all redeemed shares is reflective of the issue price per share of all shares owned by such stockholder through the dates of each redemption.

A stockholder who wishes to have shares redeemed must mail or deliver to us a written request on a form provided by us and executed by the stockholder, its trustee or authorized agent. An estate, heir or beneficiary that wishes to have shares redeemed following the death of a stockholder must mail or deliver to us a written request on a form provided by us, including evidence acceptable to our board of directors of the death of the stockholder, and executed by the executor or executrix of the estate, the heir or beneficiary, or their trustee or authorized agent. A stockholder requesting the redemption of his or her shares due to a qualifying disability or confinement to a long-term care facility must mail or deliver to us a written request on a form provided by us, including the evidence and documentation described above, or evidence acceptable to our board of directors of the stockholder’s disability or confinement to a long-term care facility. If the shares are to be redeemed under the conditions outlined herein, we will forward the documents necessary to affect the redemption, including any signature guaranty we may require.

The effective date of any redemption will be the last day of the calendar month preceding the quarterly determination by our board of directors of the availability of funds for redemption. The shares approved for redemption will accrue no distributions after the effective date of redemption. In making the determination of the availability of funds for redemption, our board of directors will consider only properly completed redemption requests that we received on or before the last day of the calendar month preceding the determination of the availability of funds for redemption. Payment for the shares so approved for redemption, assuming sufficient funds for redemption and the satisfaction of all necessary conditions, will be made no later than 15 days after the date of our directors’ action to determine the shares approved for redemption.

Subject to the restrictions in our Operating Partnership’s limited partnership agreement and any other applicable agreement, we may cause our Operating Partnership to offer to its limited partners (other than our subsidiaries) a partnership unit redemption program equivalent to our share redemption program. Any units redeemed under the partnership unit redemption program will be redeemed upon terms substantially equivalent to the redemption terms of our share redemption program and will be treated as shares for purposes of calculating the annual limitation on the number of shares that may be redeemed under our share redemption program.

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Our share redemption program is only intended to provide interim liquidity for our stockholders until a secondary market develops for the shares. No such market presently exists, and we cannot assure you that any market for your shares will ever develop. The shares we purchase under the share redemption program will be cancelled. Neither our advisor, nor any member of our board of directors nor any of their affiliates will receive any fee on the repurchase of shares by us pursuant to the share redemption program. For a discussion of the tax treatment of redemptions, see “Federal Income Tax Considerations—Taxation of Stockholders.”

The foregoing provisions regarding the share redemption program in no way limit our ability to repurchase shares from stockholders by any other legally available means.

Restrictions on Roll-Up Transactions

A Roll-up Transaction is a transaction involving the acquisition, merger, conversion or consolidation, directly or indirectly, of us and the issuance of securities of an entity that is created or would survive after the successful completion of a Roll-up Transaction, which we refer to as a Roll-up Entity. This term does not include:

• a transaction involving our securities that have been for at least 12 months listed on a national securities exchange; or

• a transaction involving only our conversion into a trust or association if, as a consequence of the transaction, there will be no significant adverse change in the voting rights of our common stockholders, the term of our existence, the compensation to our advisor or our investment objectives.

In connection with any proposed Roll-up Transaction, an appraisal of all our assets will be obtained from a competent independent appraiser. Our assets will be appraised on a consistent basis, and the appraisal will be based on an evaluation of all relevant information and will indicate the value of our assets as of a date immediately preceding the announcement of the proposed Roll-up Transaction. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal will be filed with the SEC and, if applicable, the states in which registration of such securities is sought, as an exhibit to the registration statement for the offering. The appraisal will assume an orderly liquidation of assets over a 12-month period. The terms of the engagement of the independent appraiser will clearly state that the engagement is for our benefit and the benefit of our stockholders. A summary of the appraisal, indicating all material assumptions underlying the appraisal, will be included in a report to our stockholders in connection with any proposed Roll-up Transaction.

In connection with a proposed Roll-up Transaction, the person sponsoring the Roll-up Transaction must offer to our common stockholders who vote “no” on the proposal the choice of:

(1) accepting the securities of the Roll-up Entity offered in the proposed Roll-up Transaction; or

(2) one of the following:

(A) remaining as common stockholders of us and preserving their interests in us on the same terms and conditions as existed previously; or

(B) receiving cash in an amount equal to the stockholders’ pro rata share of the appraised value of our net assets.

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We are prohibited from participating in any proposed Roll-up Transaction:

• that would result in our common stockholders having democracy rights in a Roll-up Entity that are less than those provided in our charter and bylaws with respect to the election and removal of directors and the other voting rights of our common stockholders, annual and special meetings of common stockholders, the amendment of our charter and our dissolution;

• that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-up Entity, except to the minimum extent necessary to preserve the tax status of the Roll-up Entity, or that would limit the ability of an investor to exercise the voting rights of its securities of the Roll-up Entity on the basis of the number of shares of common stock that such investor has held in us;

• in which investors’ rights of access to the records of the Roll-up Entity would be less than those provided in our charter and described in the section of this prospectus entitled “Description of Shares—Meetings and Special Voting Requirements”; or

• in which any of the costs of the Roll-up Transaction would be borne by us if the Roll-up Transaction would not be approved by our common stockholders.

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THE OPERATING PARTNERSHIP AGREEMENT

General

Resource Real Estate Opportunity OP, LP, which we refer to as our Operating Partnership, is a Delaware limited partnership. We expect to own substantially all of our assets and conduct our operations through our Operating Partnership. We are the sole general partner of our Operating Partnership and, as of the date of this prospectus, our wholly owned subsidiary, RRE Opportunity Holdings, LLC, is the sole limited partner of our Operating Partnership. As the sole general partner, we have the exclusive power to manage and conduct the business of our Operating Partnership.

As we accept subscriptions for shares in this offering, we will transfer substantially all of the net proceeds of the offering to our Operating Partnership as a capital contribution in exchange for units of limited partnership interest that will be held by our wholly owned subsidiary, RRE Opportunity Holdings, LLC; however, we will be deemed to have made capital contributions in the amount of the gross offering proceeds received from investors. The Operating Partnership will be deemed to have simultaneously paid the selling commissions and other costs associated with the offering.

As a result of this structure, we are considered an UPREIT. An UPREIT is a structure that REITs often use to acquire real property from sellers on a tax-deferred basis because the sellers can generally accept partnership units and defer taxable gain otherwise required to be recognized by them upon the disposition of their properties. Such sellers may also desire to achieve diversity in their investment and other benefits afforded to stockholders in a REIT. For purposes of satisfying the asset and income tests for qualification as a REIT, the REIT’s proportionate share of the assets and income of our Operating Partnership will be deemed to be assets and income of the REIT.

If we ever decide to acquire properties in exchange for units of limited partnership interest in our Operating Partnership, we expect to amend and restate the partnership agreement to provide substantially as set forth below.

Capital Contributions

The partnership agreement requires us to contribute the proceeds of any offering of our shares of stock to our Operating Partnership as an additional capital contribution. If we did contribute additional capital to our Operating Partnership, we would receive additional partnership units and our percentage interest in our Operating Partnership would be increased on a proportionate basis based upon the amount of such additional capital contributions and the value of our Operating Partnership at the time of such contributions. We also expect that the partnership agreement would allow us to cause our Operating Partnership to issue partnership interests for less than their fair market value if we conclude in good faith that such issuance is in the best interest of our Operating Partnership and us. The Operating Partnership would also be able to issue preferred partnership interests in connection with acquisitions of property or otherwise. These preferred partnership interests could have priority over common partnership interests with respect to distributions from our Operating Partnership, including priority over the partnership interests that we would own as a limited partner. If our Operating Partnership would require additional funds at any time in excess of capital contributions made by us or from borrowing, we could borrow funds from a financial institution or other lender and lend such funds to our Operating Partnership on the same terms and conditions as are applicable to our borrowing of such funds.

Operations

The partnership agreement will provide that, so long as we remain qualified as a REIT, our Operating Partnership would be operated in a manner that would enable us to satisfy the requirements for being classified as a REIT for tax purposes. We would also have the power to take actions to ensure that our Operating Partnership would not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code. Classification as a publicly traded partnership could result in our Operating Partnership being taxed as a corporation, rather than as a partnership.

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Distributions and Allocations of Profits and Losses

The partnership agreement will provide that our Operating Partnership would distribute cash flow from operations to its partners in accordance with their respective percentage interests on at least a monthly basis in amounts that we determine. The effect of these distributions would be that a holder of one unit of limited partnership interest in our Operating Partnership would receive the same amount of annual cash flow distributions as the amount of annual distributions paid to the holder of one of our shares of common stock.

Similarly, the partnership agreement will provide that our Operating Partnership would allocate taxable income to its partners in accordance with their respective percentage interests. Subject to compliance with the provisions of Sections 704(b) and 704(c) of the Internal Revenue Code and the corresponding Treasury regulations, the effect of these allocations would be that a holder of one unit of limited partnership interest in our Operating Partnership would be allocated taxable income for each taxable year in an amount equal to the amount of taxable income to be recognized by a holder of one of our shares of common stock. Losses, if any, would generally be allocated among the partners in accordance with their respective percentage interests in our Operating Partnership. Losses could not be passed through to our stockholders.

Upon liquidation of our Operating Partnership, after payment of, or adequate provision for, debts and obligations of our Operating Partnership, including partner loans, any remaining assets of our Operating Partnership would be distributed to its partners in accordance with their respective positive capital account balances.

Rights, Obligations and Powers of the General Partner

We are the sole general partner of our Operating Partnership. As sole general partner, we generally would have complete and exclusive discretion to manage and control our Operating Partnership’s business and to make all decisions affecting its assets. Under the partnership agreement, we would also expect to have the authority to:

• acquire, purchase, own, operate, lease and dispose of any real property and any other assets;

• construct buildings and make other improvements on owned or leased properties;

• authorize, issue, sell, redeem or otherwise purchase any debt or other securities;

• borrow or loan money;

• make or revoke any tax election;

• maintain insurance coverage in amounts and types as we determine is necessary;

• retain employees or other service providers;

• form or acquire interests in joint ventures; and

• merge, consolidate or combine our Operating Partnership with another entity.

Under the partnership agreement, we expect that our Operating Partnership would pay all of the administrative and operating costs and expenses it incurs in acquiring and operating real properties. The Operating Partnership would also pay all of our administrative costs and expenses and such expenses would be treated as expenses of our Operating Partnership. Such expenses would include:

• all expenses relating to our formation and continuity of existence;

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• all expenses relating to the public offering and registration of our securities;

• all expenses associated with the preparation and filing of our periodic reports under federal, state or local laws or regulations;

• all expenses associated with our compliance with applicable laws, rules and regulations; and

• all of our other operating or administrative costs incurred in the ordinary course of business.

The only costs and expenses we could incur that our Operating Partnership would not reimburse would be costs and expenses relating to assets we may own outside of our Operating Partnership. We would pay the expenses relating to such assets directly.

Exchange Rights

We expect that the partnership agreement would also provide for exchange rights. We expect the limited partners of our Operating Partnership would have the right to cause our Operating Partnership to redeem their units of limited partnership interest for cash equal to the value of an equivalent number of our shares, or, at our option, we could purchase their units of limited partnership interest for cash or by issuing one share of our common stock for each unit redeemed. Limited partners, however, would not be able to exercise this exchange right if and to the extent that the delivery of our shares upon such exercise would:

• result in any person owning shares in excess of the ownership limit in our charter (unless exempted by our board of directors);

• result in our shares being owned by fewer than 100 persons;

• result in our shares being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code; or

• cause us to own 10% or more of the ownership interests in a tenant within the meaning of Section 856(d)(2)(B) of the Internal Revenue Code.

Furthermore, limited partners could exercise their exchange rights only after their units of limited partnership interest had been outstanding for one year. A limited partner could not deliver more than two exchange notices each calendar year and would not be able to exercise an exchange right for less than 1,000 units of limited partnership interest, unless such limited partner held less than 1,000 units. In that case, he would be required to exercise his exchange right for all of his units.

Change in General Partner

We generally would not be able to withdraw as the general partner of our Operating Partnership or transfer our general partnership interest in our Operating Partnership (unless we transferred our interest to a wholly owned subsidiary). The principal exception to this would be if we merged with another entity and (1) the holders of a majority of partnership units (including those we held) approved the transaction; (2) the limited partners received or had the right to receive an amount of cash, securities or other property equal in value to the amount they would have received if they had exercised their exchange rights immediately before such transaction; (3) we were the surviving entity and our stockholders did not receive cash, securities or other property in the transaction; or (4) the successor entity contributed substantially all of its assets to our Operating Partnership in return for an interest in our Operating Partnership and agreed to assume all obligations of the general partner of our Operating Partnership. If we voluntarily sought protection under bankruptcy or state insolvency laws, or if we were involuntarily placed under such protection for more than 90 days, we would be deemed to be automatically removed as the general partner. Otherwise, the limited partners would not have the right to remove us as general partner.

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Transferability of Interests

With certain exceptions, the limited partners would not be able to transfer their interests in our Operating Partnership, in whole or in part, without our written consent as the general partner.

Amendment of Limited Partnership Agreement

We expect amendments to the partnership agreement would require the consent of the holders of a majority of the partnership units including the partnership units we and our affiliates held. Additionally, we, as general partner, would be required to approve any amendment. We expect that certain amendments would have to be approved by a majority of the units held by third-party limited partners.

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PLAN OF DISTRIBUTION

General

We are publicly offering a maximum of 82,500,000 shares of our common stock on a “best efforts” basis through Chadwick Securities, Inc., our dealer manager. Because this is a “best efforts” offering, Chadwick Securities must use only its best efforts to sell the shares and has no firm commitment or obligation to purchase any of our shares. We are offering up to 75,000,000 shares of common stock in our primary offering at $10 per share, with discounts available for certain categories of purchasers as described below. Our board of directors may adjust the offering price of the primary offering shares during the course of the public offering by no more than 20% of the initial price. Any adjustment to the offering price would be effected by a supplement to this prospectus. We are also offering up to 7,500,000 shares pursuant to our distribution reinvestment plan at a purchase price initially equal to $9.50 per share. Once we establish an estimated value per share that is not based on the price to acquire a share in the primary offering, shares issued pursuant to our distribution reinvestment plan will be priced at the estimated value per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share not based on the price to acquire a share in the primary offering after the completion of our offering stage; however, the time frame before which we establish an estimated value per share may be different depending on regulatory requirements or if necessary to assist broker-dealers who sell shares in this offering. We will consider our offering stage complete when 18 months have passed since our last sale of shares in a public offering of equity securities, whether that last sale was in this initial public offering or a public follow-on offering. (For purposes of this definition, we do not consider “public equity offerings” to include offerings on behalf of selling stockholders or offerings related to any distribution reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.)

We currently expect our primary offering to last until June 16, 2012. If we have not sold all of the primary offering shares at that time, we may continue this offering until June 16, 2013. Under rules promulgated by the SEC, in some circumstances we could continue our primary offering up to an additional 180 days beyond June 16, 2013. If we decide to continue our primary offering beyond two years from the date of this prospectus, we will provide that information in a prospectus supplement. We may continue to offer shares under our distribution reinvestment plan beyond these dates until we have sold 7,500,000 shares through the reinvestment of distributions. In many states, we will need to renew the registration statement or file a new registration statement annually to continue the offering. We may terminate this offering at any time.

Our dealer manager, Chadwick Securities, registered as a broker-dealer with the SEC in April 2005, and this offering will be the fifth offering conducted by our dealer manager for Resource Real Estate-sponsored programs. Chadwick Securities is indirectly owned and controlled by Resource America and its principal business is to sell the securities of programs sponsored by affiliates of Resource America, including Resource Real Estate-sponsored programs. For additional information about our dealer manager, including information related to its affiliation with us and our advisor, see “Management—Other Affiliates—Dealer Manager,” and “Conflicts of Interest—Affiliated Dealer Manager” and “—Certain Conflict Resolution Measures.”

Compensation of Dealer Manager and Participating Broker-Dealers

Except as provided below, Chadwick Securities receives selling commissions of 7% of the gross offering proceeds for shares sold in our primary offering. The dealer manager receives a dealer manager fee of 3% of the gross offering proceeds for shares sold in our primary offering as compensation for acting as the dealer manager, except that a reduced dealer manager fee will be paid with respect to certain volume discount sales. We do not pay any selling commissions or dealer manager fees for shares sold under our distribution reinvestment plan. We also reimburse the dealer manager for bona fide invoiced due diligence expenses as described below.

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We expect the dealer manager to authorize other broker-dealers that are members of FINRA, which we refer to as participating broker-dealers, to sell our shares. Except as provided below, our dealer manager will reallow all of its selling commissions attributable to a participating broker-dealer.

We may sell shares at a discount to the primary offering price of $10.00 per share through the following distribution channels in the event that the investor:

• pays a broker a single fee, e.g., a percentage of assets under management, for investment advisory and broker services, which is frequently referred to as a “wrap fee”;

• has engaged the services of a registered investment adviser with whom the investor has agreed to pay compensation for investment advisory services or other financial or investment advice (other than a registered investment adviser that is also registered as a broker-dealer who does not have a fixed or “wrap fee” feature or other asset fee arrangement with the investor); or

• is investing through a bank acting as trustee or fiduciary.

If an investor purchases shares through one of these channels in our primary offering, we sell the shares at a 7% discount, or at $9.30 per share, reflecting that selling commissions are not paid in connection with such purchases. We will receive substantially the same net proceeds for sales of shares through these channels. Neither the dealer manager nor its affiliates will compensate any person engaged as an investment adviser by a potential investor as an inducement for such investment adviser to advise favorably for an investment in us.

The dealer manager may reallow to any participating broker-dealer up to 1.0% of the gross offering proceeds attributable to that participating broker-dealer as a marketing fee. The marketing fee paid to participating broker-dealers would be paid by the dealer manager out of its dealer manager fee. In addition to selling commissions and marketing fees, and subject to the limits described below, we may reimburse the dealer manager and broker-dealers for bona fide invoiced due diligence expenses. We estimate this reimbursement will be approximately $375,000.

The table and the discussion below sets forth the nature and estimated amount of all items viewed as “underwriting compensation” by FINRA, assuming we sell all of the shares offered hereby. To show the maximum amount of dealer manager and participating broker-dealer compensation that we may pay in this offering, this table assumes that all shares are sold through distribution channels associated with the highest possible selling commissions and dealer manager fees.

Dealer Manager and Participating Broker-Dealer Compensation
Selling commissions (maximum)	$	52,500,000
Dealer manager fee (maximum)		22,500,000
Total	$	75,000,000

Various registered representatives of broker-dealers who we expect to participate in this offering purchased shares of our common stock for their own account or the account of a family member in our private offering. Such registered representatives and their family members purchased a total of approximately $394,000 of shares of our common stock in connection with the private offering at a net effective purchase price of $9.30 per share. In addition, several of such registered representatives purchased a total of 34 “promote shares” for $1.00 per share pursuant to the terms of the private placement memorandum. Under limited circumstances, these shares may be converted into shares of our common stock. FINRA views these shares of common stock and promote shares as underwriting compensation and has attributed a compensation value to such purchases pursuant to the rules of FINRA.

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Under the rules of FINRA, total underwriting compensation in this offering, including selling commissions, the dealer manager fee and any additional expense reimbursements to our dealer manager and participating broker-dealers (excluding bona fide invoiced due diligence expenses), may not exceed 10% of our gross offering proceeds from our primary offering. In addition to the limits on underwriting compensation, FINRA and many states also limit our total organization and offering expenses to 15% of gross offering proceeds. After the termination of the primary offering and again after termination of the offering under our distribution reinvestment plan, our advisor has agreed, pursuant to the terms of our advisory agreement, to reimburse us to the extent that organization and offering expenses (other than selling commissions and the dealer manager fee) incurred by us exceed 2.5% of our gross proceeds from the applicable offering. However, we expect our total organization and offering expenses to be approximately 1.78% of our gross offering proceeds, assuming we raise the maximum offering amount. Organization and offering expenses include only actual expenses incurred on our behalf and paid by us in connection with the offering.

To the extent permitted by law and our charter, we will indemnify the participating broker-dealers and the dealer manager against some civil liabilities, including certain liabilities under the Securities Act and liabilities arising from breaches of our representations and warranties contained in the dealer manager agreement. See “Management—Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents.”

The dealer manager has agreed to sell up to 5% of the shares offered hereby in our primary offering, or up to 3,750,000 shares, to persons to be identified by us at a discount from the public offering price. We intend to use this “friends and family” program to sell shares to our directors, officers, business associates and others to the extent consistent with applicable laws and regulations. The purchase price for such shares is $9.00 per share, reflecting that selling commissions in the amount of $0.70 per share and the dealer manager fee in the amount of $0.30 per share are not payable in connection with such sales. The net proceeds to us from such sales made net of commissions and dealer manages fees will be substantially the same as the net proceeds we receive from other sales of shares.

We may sell shares to participating broker-dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives at a purchase price of $9.30 per share, reflecting that selling commissions in the amount of $0.70 per share will not be payable in consideration of the services rendered by such broker-dealers and representatives in the offering. For purposes of this discount, we consider a family member to be a spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in law or brother- or sister-in-law. The net proceeds to us from the sales of these shares will be substantially the same as the net proceeds we receive from other sales of shares.

We are offering volume discounts to investors who purchase $1,000,000 or more of shares through the same participating broker-dealer in our primary offering. The net proceeds to us from a sale eligible for a volume discount will be the same, but the selling commissions and dealer manager fees we will pay will be reduced. Because the dealer manager reallows all selling commissions, the amount of commissions participating broker-dealers receive for such sales will be reduced.

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The following table shows the discounted price per share and the reduced selling commissions and dealer manager fees payable for volume sales of our shares.

Dollar Volume Shares Purchased				Sales Commissions (Based on $10.00 Price Per Share)			Dealer Manager Fee (Based on $10.00 Price Per Share)			Price Per Share to Investor
$               0	to	$	999,999		7.0	%		3.0	%	$	10.00
$ 1,000,000	to	$	1,999,999		6.0	%		3.0	%	$	9.90
$ 2,000,000	to	$	2,999,999		5.0	%		3.0	%	$	9.80
$ 3,000,000	to	$	3,999,999		4.0	%		2.5	%	$	9.65
$ 4,000,000	to	$	9,999,999		3.0	%		2.0	%	$	9.50
$10,000,000	and above				2.0	%		2.0	%	$	9.40

We will apply the reduced selling price, selling commission and dealer manager fee to the entire purchase. All commission rates and dealer manager fees are calculated assuming a price per share of $10.00. For example, a purchase of 250,000 shares in a single transaction would result in a purchase price of $2,450,000 ($9.80 per share), selling commissions of $125,000 and dealer manager fees of $75,000.

To qualify for a volume discount as a result of multiple purchases of our shares you must use the same participating broker-dealer and you must mark the “Additional Investment” space on the subscription agreement. We are not responsible for failing to combine purchases if you fail to mark the “Additional Investment” space. Once you qualify for a volume discount, you will be eligible to receive the benefit of such discount for subsequent purchases of shares in our primary offering through the same participating broker-dealer. If a subsequent purchase entitles an investor to an increased reduction in sales commissions or the dealer manager fee, the volume discount will apply only to the current and future investments.

To the extent purchased through the same participating broker-dealer, the following persons may combine their purchases as a “single purchaser” for the purpose of qualifying for a volume discount:

• an individual, his or her spouse, their children under the age of 21 and all pension or trust funds established by each such individual;

• a corporation, partnership, association, joint-stock company, trust fund or any organized group of persons, whether incorporated or not;

• an employees’ trust, pension, profit-sharing or other employee benefit plan qualified under Section 401(a) of the Internal Revenue Code; and

• all commingled trust funds maintained by a given bank.

In the event a person wishes to have his or her order combined with others as a “single purchaser,” that person must request such treatment in writing at the time of subscription setting forth the basis for the discount and identifying the orders to be combined. Any request will be subject to our verification that the orders to be combined are made by a single purchaser. If the subscription agreements for the combined orders of a single purchaser are submitted at the same time, then the commissions payable and discounted share price will be allocated pro rata among the combined orders on the basis of the respective amounts being combined. Otherwise, the volume discount provisions will apply only to the order that qualifies the single purchaser for the volume discount and the subsequent orders of that single purchaser.

Only shares purchased in our primary offering are eligible for volume discounts. Shares purchased through our distribution reinvestment plan are not eligible for a volume discount nor do such shares count toward the threshold limits listed above that qualify you for the different discount levels.

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Volume discounts for California residents will be available in accordance with the foregoing table of uniform discount levels. However, with respect to California residents, no discounts will be allowed to any group of purchasers and no subscriptions may be aggregated as part of a combined order for purposes of determining the dollar amount of shares purchased.

Subscription Procedures

To purchase shares in this offering, you must complete and sign a subscription agreement (in the form attached to this prospectus as Appendix A) for a specific number of shares and pay for the shares at the time of your subscription. Checks should be made payable to “Resource Real Estate Opportunity REIT, Inc.” Subscriptions are effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. Subscription payments are deposited into a special account in our name under the joint authorization of the dealer manager and us until such time as we have accepted or rejected the subscriptions. We accept or reject subscriptions within 30 days of our receipt of such subscriptions and, if rejected, we return all funds to the rejected subscribers within 10 business days. If accepted, the funds are transferred into our general account. You will receive a confirmation of your purchase. We generally admit stockholders on a daily basis.

You are required to represent in the subscription agreement that you have received a copy of the final prospectus. In order to ensure that you have had sufficient time to review the final prospectus, we will not accept your subscription until at least five business days after your receipt of the final prospectus.

Investors who desire to purchase shares in this offering at regular intervals may be able to do so by electing to participate in the automatic investment program by completing an enrollment form that we will provide upon request. Alabama and Ohio investors are not eligible to participate in the automatic investment program. Only investors who have already met the minimum purchase requirement may participate in the automatic investment program. The minimum periodic investment is $100 per month. We will pay dealer manager fees and selling commissions in connection with sales under the automatic investment program to the same extent that we pay those fees and commissions on shares sold in this offering outside of the automatic investment program. If you elect to participate in both the automatic investment program and our distribution reinvestment plan, distributions earned from shares purchased pursuant to the automatic investment program will automatically be reinvested pursuant to the distribution reinvestment plan. For a discussion of the distribution reinvestment plan, see “Description of Shares—Distribution Reinvestment Plan.”

You will receive a confirmation of your purchases under the automatic investment program no less than quarterly. The confirmation will disclose the following information:

• the amount invested for your account during the period;

• the date of the investment;

• the number and price of the shares purchased by you; and

• the total number of shares in your account.

To qualify for a volume discount as a result of purchases under the automatic investment program, you must notify us in writing when you initially become eligible to receive a volume discount and at each time your purchase of shares through the program would qualify you for an additional reduction in the price of shares under the volume discount provisions described in this prospectus. For a discussion of volume discounts, see “—Compensation of Dealer Manager and Participating Broker-Dealers.”

You may terminate your participation in the automatic investment program at any time by providing us with written notice. If you elect to participate in the automatic investment program, you must

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agree that if at any time you fail to meet the minimum income and net worth standards established by us or cannot make the other investor representations or warranties set forth in the then current prospectus or in the subscription agreement relating to such investment, you will promptly notify us in writing of that fact and your participation in the plan will terminate. See the “Suitability Standards” section of this prospectus (immediately following the cover page) and the form of subscription agreement attached hereto as Appendix A.

Suitability Standards

Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of shares in this offering have the responsibility to make every reasonable effort to determine that your purchase of shares in this offering is a suitable and appropriate investment for you based on information provided by you regarding your financial situation and investment objectives. In making this determination, these persons have the responsibility to ascertain that you:

• meet the minimum income and net worth standards set forth under “Suitability Standards” immediately following the cover page of this prospectus;

• can reasonably benefit from an investment in our shares based on your overall investment objectives and portfolio structure;

• are able to bear the economic risk of the investment based on your overall financial situation;

• are in a financial position appropriate to enable you to realize to a significant extent the benefits described in this prospectus of an investment in our shares; and

• have apparent understanding of:

• the fundamental risks of the investment;

• the risk that you may lose your entire investment;

• the lack of liquidity of our shares;

• the restrictions on transferability of our shares;

• the background and qualifications of our sponsor and their affiliates; and

• the tax consequences of your investment.

Relevant information for this purpose will include at least your age, investment objectives, investment experience, income, net worth, financial situation and other investments as well as any other pertinent factors. Our sponsor, those selling shares on our behalf and participating broker-dealers and registered investment advisors recommending the purchase of shares in this offering must maintain, for a six-year period, records of the information used to determine that an investment in shares is suitable and appropriate for you.

Until our shares of common stock are listed on a national securities exchange, subsequent purchasers, i.e., potential purchasers of your shares, must also meet the net worth or income standards. See “Suitability Standards” (immediately following the cover page) for a detailed discussion of the determinations regarding suitability that we require.

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Minimum Purchase Requirements

You must initially invest at least $2,500 in our shares to be eligible to participate in this offering. In order to satisfy this minimum purchase requirement, unless otherwise prohibited by state law, a husband and wife may jointly contribute funds from their separate IRAs, provided that each such contribution is made in increments of $100. You should note that an investment in our shares will not, in itself, create a retirement plan and that, in order to create a retirement plan, you must comply with all applicable provisions of the Internal Revenue Code.

If you have satisfied the applicable minimum purchase requirement, any additional purchase must be in amounts of at least $100. The investment minimum for subsequent purchases does not apply to shares purchased pursuant to our distribution reinvestment plan.

Unless you are transferring all of your shares, you may not transfer your shares in a manner that causes you or your transferee to own fewer than the number of shares required to meet the minimum purchase requirements, except for the following transfers without consideration: transfers by gift, transfers by inheritance, intrafamily transfers, family dissolutions, transfers to affiliates and transfers by operation of law. These minimum purchase requirements are applicable until our shares of common stock are listed on a national securities exchange, and these requirements may make it more difficult for you to sell your shares.

Investments through IRA Accounts

Community National Bank has agreed to act as an IRA custodian for purchasers of our common stock who would like to purchase shares though an IRA account and desire to establish a new IRA account for that purpose. We pay the fees related to the establishment of investor accounts with a minimum investment of $5,000 with Community National Bank and the first-year annual IRA maintenance fee. Thereafter, investors are responsible for the annual IRA maintenance fees. Further information about custodial services is available through your broker or through our dealer manager.

SUPPLEMENTAL SALES MATERIAL

In addition to this prospectus, we may utilize additional sales materials in connection with the offering of the shares, although only when accompanied by or preceded by the delivery of this prospectus. These supplemental sales materials may include information relating to this offering, the past performance of Resource Real Estate-sponsored programs, property brochures and articles and publications concerning real estate. In certain jurisdictions, some or all of our supplemental sales materials may not be permitted.

We are offering shares only by means of this prospectus. Although the information contained in our supplemental sales materials will not conflict with any of the information contained in this prospectus, the supplemental materials do not purport to be complete and should not be considered a part of or as incorporated by reference in this prospectus or the registration statement of which this prospectus is a part.

LEGAL MATTERS

The validity of the shares of our common stock being offered hereby has been passed upon for us by DLA Piper LLP (US), Raleigh, North Carolina. DLA Piper LLP (US) has also reviewed the statements relating to certain federal income tax matters that are likely to be material to U.S. holders of our common stock under the caption “Federal Income Tax Considerations” and has passed upon our qualification as a REIT for federal income tax purposes.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-11 with the SEC with respect to the shares of our common stock to be issued in this offering. This prospectus is a part of that registration statement and, as permitted by SEC rules, does not include all of the information you can find in the registration statement or the exhibits to the registration statement. For additional information relating to us, we refer you to the registration statement and the exhibits to the registration statement. Statements contained in this prospectus as to the contents of any contract or document are necessarily summaries of such contract or document and in each instance, if we have filed the contract or document as an exhibit to the registration statement, we refer you to the copy of the contract or document filed as an exhibit to the registration statement.

We file annual, quarterly and special reports, proxy statements and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. The registration statement and any of these other filings with the SEC is available to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may read and copy any filed document at the SEC’s public reference room in Washington, D.C. at 100 F. Street, N.E., Room 1580, Washington, D.C. Please call the SEC at (800) SEC-0330 for further information about the public reference room.

There is additional information about us and our affiliates on our Internet site at http://www.resourcereit.com, but the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.

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APPENDIX A

FORM OF SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT is made and entered into between Resource Real Estate Opportunity REIT, Inc., a Maryland corporation (the “Company”) and the investor(s) whose signature appears below (collectively or individually, the “Investor”). All information required by the Subscription Agreement will remain confidential. The Investor will not be admitted as a stockholder until this Subscription Agreement has been accepted by the Company, which will be evidenced by the Company sending a confirmation of its acceptance. The Company may reject any subscription, in whole or in part, in its sole discretion. If you would like to participate in our Automatic Investment Program, please complete the attached enrollment form.¹

This Subscription Agreement may also be used by any current investor in the Company who desires to purchase additional shares of the Company’s common stock and who purchased his or her shares from the Company. For additional investments, please complete Sections 1, 3, 5 and 6 of this Subscription Agreement. The Company will pay distributions per your existing instructions. To make changes to your distribution payments, please complete the Account Update Form. Investors who did not acquire shares directly from the Company (e.g., who acquired shares through a transfer of ownership or transfer on death) and who wish to make additional investments must complete all Sections of this Subscription Agreement. Additional investments must be for at least $100.

For payment instructions, please see “Notice to Broker-Dealer/RIA” in Section 6 of this Subscription Agreement.

1.    INVESTMENT INFORMATION

State of Sale: ¨ ¨                  NAV Purchase @ $             per share

Investment Type:

¨    Initial Investment (Minimum Subscription: 250 shares ($2,500))

¨    Additional Investment (please complete the information below regarding the previous investment)

       Amount of previous investment no. 1: Date: 

       Investment name: SSN/Tax ID: 

       Amount of previous investment no. 2: Date: 

       Investment name: SSN/Tax ID: 

Amount of Subscription: $

Number of Shares of Common Stock:

2.    INVESTMENT TYPE (CHECK ONE)

Non-Qualified- ¨Tenants-in-Common⁽¹⁾                             ¨Joint Tenants with Right of Survivorship⁽¹⁾                            ¨Individual                             ¨Trust⁽²⁾ ¨ C Corporation⁽²⁾   ¨ S Corporation⁽²⁾   ¨ Community Property⁽¹⁾   ¨ Limited Liability Company⁽²⁾

                         ¨Partnership⁽²⁾ ¨ Other:  

                          ¨Uniform Gift to Minors Act: State  of  

                          ¨Uniform Transfer to Minors Act:  State of  

Qualified*-       ¨Traditional (Individual) IRA                             ¨Simple IRA ¨ Pension or Profit Sharing Plan⁽²⁾   ¨ KEOGH Plan⁽²⁾

                         ¨SEP IRA ¨ Other:  

                          ¨ROTH IRA

                          ¨Beneficial as Beneficiary for:     

¹  Ohio and Alabama residents are not eligible to participate in the Automatic Investment Program.

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2.    INVESTMENT TYPE (Continued)

Custodian Information – To be completed by custodian

Name of Custodian:	¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨
Address:	¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨
City, State, ZIP:	¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨
Telephone #:	¨¨¨— ¨ ¨ ¨—¨¨¨¨
Custodian Tax ID #:	¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨
Custodian Account #:	¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨

   * See “ERISA Considerations” in the prospectus of Resource Real Estate Opportunity REIT, Inc., as amended and supplemented as of the date hereof (the “Final Prospectus”) for a discussion of risks related to an investment in shares by certain tax-exempt or tax-deferred plans.

   ⁽¹⁾ All parties must sign.

   ⁽²⁾ Enclose supporting documents (see notes below).

NOTE TO CORPORATIONS:	Please attach a copy of the corporate resolution to purchase shares in the Company and articles of incorporation and by-laws, as amended.
NOTE TO PARTNERSHIPS:            NOTE TO TRUSTS:            NOTE TO ESTATES:            NOTE TO LIMITED LIABILITY COMPANIES:	Please attach a copy of the current partnership agreement, as amended. Please attach a copy of the instrument creating the trust, as amended. Please attach a copy of the will and current letters testamentary. Please attach a copy of the resolution to purchase and articles of organization and operating agreement, as amended.

3.     INVESTOR INFORMATION
Please note: Investor information is required for all registration types. If this is a custodial investment through an IRA or otherwise, the custodian must provide the information in the Custodian Information section in Section 3.
Investment Name	SSN/Tax ID	DOB
¨¨¨¨ ¨¨ ¨¨¨ ¨¨¨	¨¨¨¨ ¨¨ ¨¨	¨¨ —¨¨—¨¨¨ ¨
Investment Name	SSN/Tax ID	DOB
¨¨¨¨ ¨¨ ¨¨¨ ¨¨¨	¨¨¨¨ ¨¨ ¨¨	¨¨ —¨¨—¨¨¨ ¨

Street Address	City	State	Zip
¨¨¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨	¨¨¨¨ ¨¨ ¨¨¨	¨¨	¨¨¨¨ ¨
Mailing Address (if different than above)	City	State	Zip
¨¨¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨	¨¨¨¨ ¨¨ ¨¨¨	¨¨	¨¨¨¨ ¨

Phone (day)	Phone (evening)
¨¨¨— ¨¨¨—¨¨¨ ¨	¨¨¨— ¨¨¨—¨¨¨ ¨
Email
¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨

¨ US Citizen	¨ US Citizen residing outside of US	¨ Foreign citizen, country
(check one)	¨ Calendar Year Tax payer	¨Fiscal Year Taxpayer

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4.     DISTRIBUTION INFORMATION (CHOOSE ONE OR MORE OF THE FOLLOWING OPTIONS)

If you select more than one option you must indicate the percentage of your distribution to be applied to each and the sum of the allocations must equal 100%. A minimum of 20% is required for the Direct Reinvestment Plan.

	% of Distribution
¨ I prefer to participate in the Distribution Reinvestment Plan, as described in the Final Prospectus.*
¨ Send distributions via check to Investor’s home address (or for Qualified Plans to the address listed in Section 2).
¨ Send distributions via check to alternate payee listed here (not available for Qualified Plans without custodial approval).

Name:	¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨
Address:	¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨
City:	¨¨¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨     State: ¨¨	Zip Code: ¨¨ ¨¨¨
Account No.:	¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨

% of Distribution

¨  Direct Deposit (Attach Voided Check) I authorize the Company or its agent (collectively, Resource Real Estate) to deposit my distributions in the checking or savings account identified below. This authority will remain in force until I notify Resource Real Estate in writing to cancel it. In the event that Resource Real Estate deposits funds erroneously into my account, Resource Real Estate is authorized to debit my account for an amount not to exceed the amount of the erroneous deposit.

Financial Institution Name:	¨¨¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨        Checking  ¨	Savings ¨
ABA/Routing Number:	¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨
Account Number:	¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨

Signature of Account Owner:

X

*        If you elect to participate in the Distribution Reinvestment Plan, you agree that if at any time you fail to meet the minimum income and net worth standards established for the Company or cannot make the other investor representations or warranties set forth in the Final Prospectus or listed on page B-4 (item 5) of the Subscription Agreement relating to such investment, you will promptly notify the Company in writing of that fact.

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 5.   INVESTOR SIGNATURES (TO BE COMPLETED BY ALL INVESTORS)

Please carefully read and separately initial each of the representations below for items 1-5. Only sign items 6-8 if applicable. Except in the case of fiduciary accounts, you may not grant any person a power of attorney to make such representations on your behalf. In order to induce the Company to accept this subscription, I hereby represent and warrant to you as follows:

Initials
		1. I have received the Final Prospectus for the Company at least five business days before signing the Subscription Agreement.
(owner)	(co-owner, if any)
		2. I have (i) a minimum net worth (exclusive of home, home furnishings and personal automobiles) of at least $250,000 or (ii) a minimum net worth (as previously described) of at least $70,000 and a minimum annual gross income of at least $70,000, and, if applicable, I meet the higher net worth and gross income requirements imposed by my state of primary residence as set forth in the Final Prospectus under “Suitability Standards.” I will not purchase additional shares unless I meet the applicable suitability requirements set forth in the Final Prospectus at the time of purchase.
(owner)	(co-owner, if any)
		3. I acknowledge that there is no public market for the shares and, thus, my investment in shares is not liquid.
(owner)	(co-owner, if any)
		4. I am purchasing the shares for my own account.
(owner)	(co-owner, if any)
		5. I acknowledge that I will not be admitted as a stockholder until my investment has been accepted. The acceptance process includes, but is not limited to, reviewing the Subscription Agreement for completeness and signatures, conducting an Anti-Money Laundering check as required by the USA Patriot Act and payment of the full purchase price of the shares.
(owner)	(co-owner, if any)
		6. If I am a Kansas resident, I acknowledge that it is recommended by the office of the Kansas Securities Commission that Kansas investors not invest, in the aggregate, more than 10% of their liquid net worth in this and similar direct participation investments. Liquid net worth is defined as that portion of net worth that consists of cash, cash equivalents and readily marketable securities.
(owner)	(co-owner, if any)
		7. If I am an Iowa resident, I have (i) a minimum net worth (exclusive of home, home furnishings and personal automobiles) of at least $350,000 or (ii) a minimum net worth (as previously described) of at least $100,000 and a minimum annual gross income of at least $70,000.
(owner)	(co-owner, if any)
		8. If I am an Alabama resident, I have a liquid net worth of at least 10 times my investment in the Company and its affiliates.
(owner)	(co-owner, if any)

The Company will send you confirmation of your purchase upon acceptance of your subscription.

A-4

Taxpayer Identification Number Certification – Check the first box below pursuant to its instructions, unless you are a foreign investor or you are investing as a U.S. grantor trust.

Note: If there is a change in circumstances which makes any of the information provided by you in your certification below incorrect, then you are under a continuing obligation so long as you own shares in the Company to notify the Company and furnish the Company a new certificate within thirty (30) days of the change.

¨ Under penalties of perjury, I certify that:

(1) the number provided in my Subscription Agreement is my correct “TIN” (i.e., social security number or employer identification number);

(2) I am not subject to backup withholding because (a) I am exempt from backup withholding under §3406(g)(1) of the Internal Revenue Code and the related regulations, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and

(3) I am a U.S. person (which includes U.S. citizens, resident aliens, entities or associations formed in the U.S. or under U.S. law, and U.S. estates and trusts other than grantor trusts.)

Note: You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return.

¨ Foreign Investor. I have provided the Company with the appropriate Form W-8 certification or, if a joint account, each joint account owner has provided the Company the appropriate Form W-8 certification, and if any one of the joint account owners has not established foreign status, that joint account owner has provided the Company with a certified TIN.

¨ U.S. Grantor Trusts. Under penalties of perjury, I certify that:

(1) the trust designated as the Investor on my Subscription Agreement is a United States grantor trust which I can amend or revoke during my lifetime;

(2) under subpart E of subchapter J of the Internal Revenue Code (check only one of the boxes below):

(a) 100% of the trust is treated as owned by me;

(b) the trust is treated as owned in equal shares by me and my spouse; or

(c)         % of the trust is treated as owned by                     , and the remainder is treated as owned         % by me and         % by my spouse); and

(3) each grantor or other owner of any portion of the trust as certified by me in (2)(a), (b) or (c) above, has provided the Company with the appropriate Form W-8 or Form W-9 certification.

     Note: If you check the box in (2)(c), you must insert the information called for by the blanks.

The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required to avoid backup withholding.

X
Signature of Investor	Date
X
Signature of Joint Investor or, for Qualified Plans, of Custodian	Date

A-5

 6.    BROKER-DEALER AND/OR REGISTERED INVESTMENT ADVISOR

TO BE COMPLETED BY BROKER-DEALER OR REGISTERED INVESTMENT ADVISOR

(For Commission and Other Purposes)

The Investor’s registered representative (“Registered Representative”) of a participating broker-dealer (“Broker- Dealer”) or an authorized representative of the Investor’s Registered Investment Advisor (“Registered Investment Advisor”), as applicable, must sign below to complete the order. The Registered Representative hereby warrants that he or she and the Broker-Dealer are duly licensed and may lawfully sell shares of common stock in the state designated as the Investor’s legal residence. The Registered Investment Advisor represents that such advisor is either registered under the Investment Advisers Act of 1940 or exempt from registration. The Broker-Dealer or Registered Investment Advisor agrees to maintain records of the information used to determine that an investment in shares is suitable and appropriate for the Investor for a period of six years. The undersigned confirms by his or her signature that the Broker-Dealer or Registered Investment Advisor (i) has reasonable grounds to believe that the information and representations concerning the Investor identified herein are true, correct and complete in all respects; (ii) has discussed such Investor’s prospective purchase of shares with such Investor; (iii) has advised such Investor of all pertinent facts with regard to the liquidity and marketability of the shares and other fundamental risks related to the investment in the shares; (iv) has delivered the Final Prospectus to such Investor; (v) has reasonable grounds to believe that the Investor is purchasing these shares for his or her own account; and (vi) has reasonable grounds to believe that the purchase of shares is a suitable investment for such Investor, that such Investor meets the suitability standards applicable to such Investor as set forth in the Final Prospectus, and that such Investor is in a financial position to enable such Investor to realize the benefits of such an investment and to suffer any loss that may occur with respect thereto. I understand this Subscription Agreement is for Resource Real Estate Opportunity REIT, Inc.

Name of Registered Representative/authorized representative and	CRD/IARD Number (if applicable)	Financial Institution ID
X
Signature of Registered Representative/authorized representative		Branch ID
Registered Representative/Authorized Representative Office Address:		Rep ID
¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨¨

Phone Number:	Facsimile Number:
¨¨¨ — ¨¨¨ — ¨¨¨¨	¨¨¨ — ¨¨¨ —¨¨¨¨
E-mail Address:
¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨
Company Name (if other than Broker-Dealer or RIA Name)
¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨
Name of Broker-Dealer/RIA
¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨
Broker-Dealer CRD Number/RIA IARD Number
¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨
Broker-Dealer/RIA E-mail Address:
¨¨ ¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨¨ ¨¨

NOTICE TO BROKER-DEALER/RIA: Only original, completed copies of the Subscription Agreement can be accepted.

• Checks should be made payable to “Resource Real Estate Opportunity REIT, Inc.” and sent, together with Subscription Documents, completed and signed, to:

For Regular Mail:
Resource Real Estate, Inc. P.O.Box 219169 Kansas City, MO 64121 For Overnight Packages: Resource Real Estate, Inc. 430 West 7^th Street Kansas City, MO 64105 (866) 469-0129

• WIRES may be sent to:

UMB Bank, NA

1010 Grand Avenue

Kansas City, MO 64106

ABA# 101 000 695

Account #9871916375

Account Name: DST as Agent for Resource Real Estate, Inc. Universal Acct.

Reference: [investor name] Resource Real Estate Opportunity REIT, Inc.

A-6

APPENDIX B

AMENDED AND RESTATED

DISTRIBUTION REINVESTMENT PLAN

Resource Real Estate Opportunity REIT, Inc., a Maryland corporation (the “Company”), has adopted this amended and restated Distribution Reinvestment Plan (the “DRP”), the terms and conditions of which are set forth below. Capitalized terms shall have the same meaning as set forth in the Company’s charter unless otherwise defined herein.

1.    Number of Shares Issuable. The number of shares of Common Stock authorized for issuance under the DRP is 7,500,000.

2.    Participants. “Participants” are holders of the Company’s shares of Common Stock who elect to participate in the DRP.

3.    Distribution Reinvestment. The Company will apply that portion (as designated by a Participant and subject to the limitation described below) of the dividends and other distributions (“Distributions”) declared and paid in respect of a Participant’s shares of Common Stock to the purchase of additional shares of Common Stock for such Participant. Such shares will be sold through the broker-dealer and/or dealer manager through whom the Company sold the underlying shares to which the Distributions relate unless the Participant makes a new election through a different distribution channel. The Company will not pay selling commissions on shares of Common Stock purchased in the DRP.

4.    Procedures for Participation. Qualifying stockholders may elect to become a Participant by completing and executing the Subscription Agreement, an enrollment form or any other Company-approved authorization form as may be available from the dealer manager or participating broker-dealers. Participants must designate at least 20% of such Participant’s Distributions for the purchase of additional shares of Common Stock. To increase their participation, Participants must complete a new enrollment form and make the election through the dealer manager or the Participant’s broker-dealer, as applicable. Participation in the DRP will begin with the next Distribution payable after receipt of a Participant’s subscription, enrollment or authorization. Shares will be purchased under the DRP on the date that the Company makes a Distribution. Distributions will be paid monthly as authorized and declared by the Company’s board of directors.

5.    Purchase of Shares. Until completion of the Company’s offering stage, Participants will acquire Common Stock at a price of $9.50 per share. No later than 18 months after completion of the Company’s offering stage, Participants will acquire Common Stock at a price equal to the estimated value of the Company’s Common Stock, as estimated by the Company’s advisor or other firm chosen by the board of directors for that purpose; provided however, that the time frame before which an estimated value per share is established may be different depending on regulatory requirements or if necessary to assist broker dealers who sell shares in the Company’s offering. The Company’s offering stage will be complete when the Company is no longer publicly offering equity securities and has not done so for one year. For the purpose of determining when the Company’s offering stage is complete, public equity offerings do not include offerings on behalf of selling stockholders or offerings related to any distribution reinvestment plan, employee benefit plan or redemption of interests in Resource Real Estate Opportunity OP, LP, the Company’s operating partnership. Participants in the DRP may purchase fractional shares so that 100% of the Distributions will be used to acquire shares. However, a Participant will not be able to acquire shares under the DRP to the extent such purchase would cause it to exceed limits set forth in the Company’s charter, as amended.

6.    Taxation of Distributions. The reinvestment of Distributions in the DRP does not relieve Participants of any taxes that may be payable as a result of those Distributions and their reinvestment pursuant to the terms of this DRP.

7.    Treasury Regulation. Notwithstanding anything else to the contrary herein, pursuant to Treasury Regulation 1.1012-1(e)(6) (the “Regulation”), during the term of the DRP, at least 10% of every

B-1

Distribution that is a dividend under Section 316 of the Internal Revenue Code declared and paid with respect to the shares of the Participants subject to the DRP shall be reinvested in additional shares of Common Stock, applied on an aggregate basis with respect to all Participants. The DRP may reinvest other Distributions on stock, such as capital gain distributions, non-taxable returns of capital, and cash in lieu of fractional shares. This paragraph shall be interpreted consistently with the Regulation.

8.    Share Certificates. The shares issuable under the DRP shall be uncertificated until the board of directors determines otherwise.

9.    Voting of DRP Shares. In connection with any matter requiring the vote of the Company’s stockholders, each Participant will be entitled to vote all shares acquired by the Participant through the DRP.

10.    Reports. Within 90 days after the end of the calendar year, the Company shall provide each Participant with (i) an individualized report on the Participant’s investment, including the purchase date(s), purchase price and number of shares owned, as well as the amount of Distributions received during the prior year; and (ii) all material information regarding the DRP and the effect of reinvesting dividends, including the tax consequences thereof. The Company shall provide such information reasonably requested by the dealer manager or a participating broker-dealer, in order for the dealer manager or participating broker-dealer to meet its obligations to deliver written notification to Participants of the information required by Rule 10b-10(b) promulgated under the Securities Exchange Act of 1934.

11.    Termination by Participant. A Participant may terminate participation in the DRP at any time by delivering to the Company a written notice. To be effective for any Distribution, such notice must be received by the Company at least ten business days prior to the last day of the month to which the Distribution relates. Any transfer of shares by a Participant will terminate participation in the DRP with respect to the transferred shares. Upon termination of DRP participation, Distributions will be distributed to the stockholder in cash.

12.    Amendment or Termination of DRP by the Company. The Company may amend or terminate the DRP for any reason upon ten days’ written notice to the Participants, except the Company may not amend the DRP to remove the right of a Participant to terminate participation in the DRP. With respect to material changes, the Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports filed with the SEC, and (b) in a separate mailing to the Participants. With respect to immaterial changes, the Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports filed with the SEC, (b) in a separate mailing to the Participants, or (c) on the Company’s web site.

13.    Liability of the Company. The Company shall not be liable for any act done in good faith, or for any good faith omission to act.

14.    Governing Law. The DRP shall be governed by the laws of the State of Maryland.

B-2

We have not authorized any dealer, salesperson or other individual to give any information or to make any representations that are not contained in this prospectus. If any such information or statements are given or made, you should not rely upon such information or representation. This prospectus does not constitute an offer to sell any securities other than those to which this prospectus relates, or an offer to sell, or a solicitation of an offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful. This prospectus speaks as of the date set forth below. You should not assume that the delivery of this prospectus or that any sale made pursuant to this prospectus implies that the information contained in this prospectus will remain fully accurate as of any time subsequent to the date of this prospectus.

TABLE OF CONTENTS

	Page
Suitability Standards		i
Prospectus Summary		1
Risk Factors		25
Special Note Regarding Forward-Looking Statements		69
Estimated Use of Proceeds		70
Management		72
Management Compensation		87
Stock Ownership		94
Conflicts of Interest		95
Investment Objectives and Policies		106
Prior Performance Summary		131
Federal Income Tax Considerations		145
ERISA Considerations		170
Description of Shares		176
The Operating Partnership Agreement		197
Plan of Distribution		201
Supplemental Sales Material		207
Legal Matters		207
Where You Can Find More Information		208
Appendix A — Form of Subscription Agreement		A-1
Appendix B — Amended and Restated Distribution Reinvestment Plan		B-1

Our shares are not FDIC insured, may lose value and are not bank guaranteed. See “Risk Factors” beginning on page 25, to read about risks you should consider before buying shares of our common stock.

Maximum Offering of

82,500,000 Shares

of Common Stock

PROSPECTUS

CHADWICK SECURITIES, INC.

July 15, 2011

RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.

SUPPLEMENT NO. 8 DATED JANUARY 20, 2012

TO THE PROSPECTUS DATED JULY 15, 2011

This Supplement No. 8 supplements, and should be read in conjunction with, the prospectus of Resource Real Estate Opportunity REIT, Inc. dated July 15, 2011. This Supplement No. 8 supersedes and replaces all prior supplements to the prospectus. As used herein, the terms “we,” “our” and “us” refer to Resource Real Estate Opportunity REIT, Inc. and, as required by context, Resource Real Estate Opportunity OP, LP, which we refer to as our “Operating Partnership,” and to their subsidiaries. Unless otherwise defined in this Supplement No. 8, capitalized terms used have the same meanings as set forth in the prospectus. The purpose of this supplement is to disclose:

• the status of our public offering;

• information with respect to our investments;

• selected financial data;

• information about our distributions;

• information about our share redemption program;

• dilution information with respect to our shares;

• compensation to our advisor and its affiliates;

• experts information; and

• information incorporated by reference.

Status of Offering

We commenced this initial public offering of shares of our common stock on June 16, 2010. As of January 17, 2012, we had accepted aggregate gross offering proceeds of approximately $83.4 million related to the sale of approximately 8.4 million shares of stock, all of which were sold in this primary offering. As of January 17, 2012, approximately 66.6 million shares of our common stock remain available for sale in our primary offering, and 7.5 million shares of our common stock remain available for issuance under our distribution reinvestment plan. This offering will terminate on or before June 16, 2012 (unless extended by our board of directors for an additional year or as otherwise permitted by applicable securities law).

Prior to the commencement of this offering, we conducted a private placement offering to accredited investors of up to $50,000,000 in shares of common stock at $10.00 per share. The private placement offering terminated on June 9, 2010 and, as of that date, we had accepted aggregate gross offering proceeds of approximately $12.6 million related to the sale of 1,283,727 shares of common stock.

1

Investments Summary

Real Estate Investments

As of September 30, 2011, we owned four multifamily properties encompassing approximately 739,000 rentable square feet. We acquired these properties from third parties unaffiliated with us or our advisor. The following is a summary of our real estate properties as of September 30, 2011:

Multifamily Community Name	City and State	Number of Units			Date of Acquisition	Purchase Price (1)			Year of Construction		Average Unit Size (Sq. Ft.)		Physical Occupancy Rate (2)			Monthly Rental Revenue per Unit (3)
Iroquois Apartments	Philadelphia, PA		133	(4)	August 2, 2011 (5)	$	12,000,000	(6)		1961		878		91	%	$	966
Town Park	Birmingham, AL		270		March 2, 2011 (6)	$	6,250,000	(7)		1980		947		53	%	$	504
Arcadia at Westheimer	Houston, TX		404		October 5, 2010 (7)	$	7,800,000	(8)		1980		897		73	%	$	607
107th Avenue	Omaha, NE		5		August 26, 2010	$	250,000			1961		860		100	%	$	540

⁽¹⁾ Purchase price excludes closing costs and acquisition expenses.

⁽²⁾  Physical occupancy rate is defined as the units occupied as of September 30, 2011 divided by the total number of residential units. The physical occupancy rate for Iroquois Apartments is as of October 31, 2011.

⁽³⁾  Monthly rental revenue per unit has been calculated based on the leases in effect as of September 30, 2011, adjusted for any tenant concessions, such as free rent. Monthly rental revenue per unit only includes base rents for the occupied units, including affordable housing payments and subsidies; and does not include other charges for storage, parking, pets, cleaning, clubhouse or other miscellaneous amounts.

⁽⁴⁾ In addition to its apartment units, Iroquois Apartments contains five commercial spaces, two of which are occupied, and a number of antennae on the roof of the property that generate additional income.

⁽⁵⁾ Iroquois Apartments originally served as the collateral for a non-performing promissory note that we purchased on June 17, 2011. The contract purchase price for the note was $12.0 million, excluding closing costs. Upon acquiring the note, we contacted the borrower but were unsuccessful in any attempt to restructure the loan or negotiate a discounted payoff of the note. After these efforts proved unsuccessful, we scheduled a sheriff’s sale of Iroquois Apartments and, on August 2, 2011, we were the successful bidder at such sheriff’s sale and formally received title to the property.

⁽⁶⁾  Town Park (formerly known as Crestwood Crossings) originally served as collateral for two non-performing promissory notes that we purchased on December 21, 2010. The contract purchase price for the notes was $6.25 million, excluding closing costs. Upon acquiring the notes, we discussed with the borrower the possibility of a note restructuring or discounted payoff. After these efforts proved unsuccessful, we commenced foreclosure proceedings and, on March 2, 2011, formally received title to the property.

⁽⁷⁾  Arcadia at Westheimer originally served as the collateral for a non-performing promissory note that we purchased on September 3, 2010. The contract purchase price for the note was $7.8 million, excluding closing costs. Upon acquiring the note, we discussed with the borrower the possibility of a note restructuring or discounted payoff. After these efforts proved unsuccessful, we commenced foreclosure proceedings and, on October 5, 2010, formally received title to the property.

We believe that our multifamily communities are suitable for their intended purposes and adequately covered by insurance. There are a number of comparable properties located in the same submarkets that might compete with them. We have made significant renovations and improvements to Town Park and Arcadia at Westheimer. Approximately $1.4 million in offering proceeds was used to refurbish 53 down units and renovate the interiors of all other units at Town Park. In addition, approximately $3.5 million was allocated from offering proceeds for façade repairs and repainting, upgrades to the security system, HVAC replacement, electrical system upgrades and interior repairs at Arcadia at Westheimer. With the exception of routine interior renovations, which will continue over the next nine months, these renovations to Arcadia at Westheimer have been completed. We have also allocated approximately $3.0 million for façade repairs, common area renovations (including lobby, elevators, hallways, leasing center, etc.) and unit interior renovations at Iroquois Apartments over the next 18 months.

2

Real Estate-Related Investments

As of September 30, 2011, we owned four real estate loans receivable that we acquired from third parties unaffiliated with us or our advisor.

Loan Name Location of Related Property or Collateral	Date of Acquisition	Property Type	Loan Type	Payment Type	Purchase Price (1)		Outstanding Principal Balance		Contractual Interest Rate	Maturity Date	Purchase Price-to-Appraised Value (2)			Book Value as of September 30, 2011(3)
Cannery Note(4) Dayton, OH	May 13, 2011	Multifamily	Non-performing mortgage	(5)	$	7,100,000	$	13,900,000	(5)	(5)		100	%	$	7,100,000
Heatherwood Note(6) Detroit, MI	March 15, 2011	Multifamily	Non-performing mortgage	(5)	$	1,640,646	$	2,573,578	(5)	(5)		100	%	$	1,640,646
Peterson Note Kalamazoo, MI	March 15, 2011	Multifamily	Performing mortgage(7)	Principal and Interest	$	209,999	$	239,459	Five-year Constant Maturity Treasury Rate plus 2.75%	12/30/11		100	%	$	209,999
Trail Ridge Note Columbia City, IN	March 15, 2011	Multifamily	Performing mortgage	Principal and Interest	$	699,999	$	1,050,887	Federal Home Loan Bank Community Investment Program Rate plus 2.25%	10/28/21		100	%	$	699,999

⁽¹⁾  Purchase price represents the amount funded by us to acquire the loan and does not include closing costs and direct acquisition fees.

⁽²⁾  Purchase price-to-appraised value is the ratio of the amount funded by us to acquire the loan (excluding closing costs and direct acquisition fees) to the appraised value of the real estate that secures the loan based on appraisals used in connection with our acquisition of the loan. Appraisals are based on numerous estimates, judgments and assumptions that significantly affect the appraised value of the underlying property. The appraised value may not reflect the fair value of the property computed in accordance with the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification. Accordingly, the fair value of the assets recorded upon any foreclosure on the property may be substantially different than the appraised value. Different assumptions may materially change the appraised value of the property. In addition, the value of the property will change over time.

⁽³⁾ Book value of real estate loans receivable represents outstanding principal balance adjusted for unamortized acquisition discounts, acquisition fees, and direct acquisition costs.

⁽⁴⁾  On December 21, 2011, we entered into a settlement agreement with the borrower whereby the borrower will agree to a consensual foreclosure of the Cannery Note and pay all net cash flow from the property to us each month until the foreclosure is complete in exchange for our allowing the borrower to retain $150,000 in the property’s operating account upon the transfer of title to us.

⁽⁵⁾  We do not expect non-performing mortgages to perform in accordance with their contractual terms, including the repayment of the principal amount outstanding under the loans, the payment of interest at the stated amount on the face of the notes or the repayment of the loans upon their maturity dates. Thus, traditional loan metrics such as loan-to-value, principal and interest due, interest terms and maturity date are not useful measures for these investments.

⁽⁶⁾  On August 8, 2011, we were the successful bidder at a foreclosure sale of the property collateralizing the Heatherwood Note; however, we have not yet taken title to the property since the borrower’s redemption period has not yet terminated. Our motion to the court to appoint a receiver for the property was denied.

⁽⁷⁾  After acquisition, the borrower under the Peterson Note has defaulted by failing to pay the balance of the Peterson Note upon maturity. We are currently negotiating a forbearance agreement with the borrower under the Peterson Note.

Oberlin Note

On March 15, 2011, we acquired a non-performing promissory note secured by a mortgage encumbering a 32-unit apartment community located in Oberlin, Ohio (the “Oberlin Note”). The purchase price for the Oberlin Note was $578,903. The Oberlin Note matured on March 5, 2011 and was in default at the time of our acquisition. The outstanding balance on the Oberlin Note at the time of our acquisition was $919,787. On August 3, 2011, we entered into a forbearance agreement with the borrower, Oberlin Estate, Ltd. (the “Oberlin Borrower”) to allow the Oberlin Borrower more time to refinance the property. On September 23, 2011, the Oberlin Borrower paid off its obligations under the Oberlin Note by paying $850,294 to us. Net proceeds to us after fees and costs totaled $223,898.

3

Investment Activity Subsequent to September 30, 2011

Campus Club Note

On October 21, 2011, we, through a wholly owned subsidiary, purchased, at a discount, a non-performing promissory note (the “Campus Club Note”), secured by a first priority mortgage on a student housing community, from an unaffiliated seller, MSCI 2006-HQ10 Fletcher Avenue, LLC. The contract purchase price for the Campus Club Note was $8.3 million, excluding closing costs, and was funded with the proceeds from this offering. The contract purchase price was approximately 79% of the $10.5 million outstanding principal balance of the Campus Club Note (as of October 21, 2011). The Campus Club Note was originated in June 2006 in the original principal amount of $10.5 million. The borrower, ING US Students No. 14, LLC (the “Campus Club Borrower”), is in default on the Campus Club Note for failure to make payments since November 2009.

The Campus Club Note is secured by a mortgage encumbering the Campus Club Apartments (“Campus Club”), a 256-bed student housing community located in Tampa, Florida that services the University of South Florida. Campus Club was constructed in 2005. Campus Club is comprised of three buildings that contain a total of 64 four-bedroom suites and has an effective occupancy of 98.4%. Campus Club offers tenants amenities including a fitness center, clubhouse, pool, tanning salon, business center, and game room. The purchase price represents a 19% discount to our estimate of the replacement cost of the buildings if built today.

The Campus Club Borrower is not affiliated with us or our advisor. As of October 21, 2011, the outstanding loan balance on the Campus Club Note was approximately $10.5 million, plus unpaid interest and late fees.

Outstanding Debt Obligations

On December 2, 2011, we, through our Operating Partnership, entered into a secured revolving credit facility (the “Credit Facility”) with Bank of America, N.A. (“Bank of America”), as lender. Under the Credit Facility, we may borrow up to $25.0 million (the “Facility Amount”). Draws under the Credit Facility will be secured by those certain multifamily properties directly owned by our subsidiaries which we have elected to add to the borrowing base. The proceeds of the Credit Facility may be used by us for working capital, property improvements and other general corporate purposes.

The entire unpaid principal balance of all borrowings under the Credit Facility and all accrued and unpaid interest thereon will be due and payable in full on December 2, 2014, which date may be extended to December 2, 2015 subject to satisfaction of certain conditions and payment of an extension fee equal to 0.25% of the amount committed under the Credit Facility. We may borrow under the Credit Facility at a rate equal to LIBOR plus 3.0%. In addition, we incurred certain closing costs in connection with the Credit Facility, including a loan fee equal to 0.375% of the Facility Amount, which fee was payable to Bank of America. We will be required to make monthly interest-only payments once we draw upon the Credit Facility. We also may prepay the Credit Facility in whole or in part at any time without premium or penalty.

Our Operating Partnership’s obligations with respect to the Credit Facility are guaranteed by us, pursuant to the terms of a guaranty dated as of December 2, 2011 (the “Guaranty”). The Credit Facility and the Guaranty contain, among others, the following restrictive covenants:

• We must maintain a minimum tangible net worth equal to at least (i) 200% of the outstanding principal amount of the Credit Facility and (ii) $20 million.

• We must also maintain unencumbered liquid assets with a market value of not less than the greater of (i) $5 million or (ii) 20% of the outstanding principal amount of the Credit Facility.

• We may not incur any additional secured or unsecured debt without Bank of America’s prior written consent and approval, which consent and approval is not to be unreasonably withheld.

We are currently in compliance with all such covenants. Although we expect to remain in compliance with these covenants for the duration of the term of the Credit Facility, depending upon our future operating performance, capital raising success, property and financing transactions and general economic conditions, we cannot assure you that we will continue to be in compliance. As of January 17, 2012, we have not drawn any funds from the Credit Facility.

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Selected Financial Data

The following selected financial data should be read in conjunction with our consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, both incorporated by reference into this prospectus:

	As of September 30, 2011		As of December 31,
			2010		2009
Balance Sheet Data (in thousands)
Total assets	$	54,714	$	24,354	$	2,915
Total liabilities	$	5,757	$	5,131	$	2,830
Total stockholders’ equity	$	48,957	$	19,223	$	85

	For the Nine Months Ended September,						For the Year Ended December 31,			For the Period From June 3, 2009 (date of inception) to December 31,
	2011			2010			2010			2009
Operating Data (in thousands, except for per share amounts)
Rental income	$	2,343		$	3		$	243		$	—
Gain on payoff of loan held for investment		250			—			—			—
Interest income		115			32			41			1
		2,708			35			284			1
Total expenses		8,165			551			2,359			116
Interest expense – related party		(3	)		—			—			—
Net loss	$	(5,460	)	$	(516	)	$	(2,075	)	$	(115	)
Weighted average shares outstanding		4,510			852			1,163			N/M
Basic and diluted loss per share	$	(1.21	)	$	(0.61	)	$	(1.78	)		N/M

N/M Not Meaningful

	For the Nine Months Ended September 30,						For the Year Ended December 31,			From June 3, 2009 (date of inception) to December 31,
	2011			2010			2010			2011
Other data (in thousands)
Net cash (used in) provided by operating activities	$	(4,415	)	$	(869	)	$	(1,406	)	$	1
Net cash used in investing activities		(24,752	)		(8,223	)		(14,913	)		—
Net cash provided by financing activities		34,506			13,510			21,135			749

5

Distributions

During 2011, we paid four separate stock distributions to our stockholders of record at the close of business on February 28, 2011, May 31, 2011, August 31, 2011 and December 30, 2011. Each stock distribution consisted of 0.015 shares of our common stock, $0.01 par value per share, or 1.5% of each outstanding share of common stock.

We believe that these stock distributions should be tax-free transactions for U.S. federal income tax purposes under Section 305(a) of the Internal Revenue Code of 1986, as amended, and the adjusted tax basis of each share of “old” and “new” common stock should be computed by dividing the adjusted tax basis of the old common stock by the total number of shares, old and new. The holding period of the common stock received in such non-taxable distributions is expected to begin on the date the taxpayer acquired the common stock which is the date that the distribution was made. You should consult your own tax advisors regarding the tax consequences of these stock distributions.

Share Redemption Program

Our share redemption program contains numerous restrictions on your ability to redeem your shares. Generally, during each calendar year, the cash available for redemption will be limited to the proceeds from the sale of shares under our distribution reinvestment plan plus, if we had positive operating cash flow from the previous fiscal year, 1% of all operating cash flow from the previous fiscal year. This restriction may significantly limit your ability to have your shares redeemed pursuant to our share redemption program. We did not declare any cash distributions to our stockholders during 2010 and 2011, so we had no distribution reinvestment plan proceeds in 2010 and 2011. Also, we had negative operating cash flow in 2010 and 2011. Accordingly, because of the restrictions described above, we had no funds available for redemption under our share redemption program in 2011. It is unclear at this time whether we will have any funds available for redemption under our share redemption program in 2012.

On July 21, 2011, our board of directors adopted an amendment to our share redemption program. The amendment provides that any stock distributions we have issued, and may issue in the future, will be included in the “issue price” adjustment as it pertains to the determination of the purchase price per share for shares redeemed. The amendment also provides that the purchase price per share for shares redeemed after we establish an estimated value per share will equal the greater of (i) 90% of the average issue price per share for all of an investor’s shares (as adjusted for any stock distributions, stock combinations, splits, recapitalizations and the like with respect to our common stock) or (ii) 100% of the estimated value per share, as determined by our advisor or another firm chosen for that purpose.

Dilution of the Net Tangible Book Value of our Shares

In connection with this ongoing offering of shares of our common stock, we are providing information about our net tangible book value per share. Our net tangible book value per share is a rough approximation of value calculated simply as total book value of assets (exclusive of certain intangible items including deferred offering costs) minus total liabilities, divided by the total number of shares of common stock outstanding. It assumes that the value of real estate assets diminishes predictably over time as shown through the depreciation and amortization of real estate investments. Real estate values have historically risen or fallen with market conditions. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation of the company in accordance with our investment objectives. Our net tangible book value reflects dilution in the value of our common stock from the issue price as a result of (i) operating losses, which reflect accumulated depreciation and amortization of real estate investments, (ii) fees paid in connection with our public offering, including selling commissions and marketing fees re-allowed by our dealer manager to participating broker dealers, and (iii) stock distributions that we have made. As of September 30, 2011, our net tangible book value per share was $6.64. The offering price of shares under our primary offering (ignoring purchase price discounts for certain categories of purchasers) at September 30, 2011 was $10.00 per share.

Our offering price was not established on an independent basis and bears no relationship to the net value of our assets. Further, even without depreciation in the value of our assets, the other factors described above with respect to the dilution in the value of our common stock are likely to cause our offering price to be higher than the amount you would receive per share if we were to liquidate at this time.

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Compensation to our Advisor and its Affiliates

Summarized below are the fees earned by and expenses reimbursable to our advisor, the dealer manager and property manager and their affiliates for the nine months ended September 30, 2011 and the year ended December 31, 2010 and any related amounts payable as of September 30, 2011 and December 31, 2010 (amounts in thousands):

Type of Compensation	Incurred For the				Payable as of
	Nine Months Ended September 30, 2011		Year Ended December 31, 2010		September 30, 2011		December 31, 2010
Selling Commissions	$	2,963	$	805	$	18	$	13
Dealer Manager Fee	$	833	$	327	$	5	$	3
Reimbursement of Other Organization and Offering Expenses	$	1,008	$	262	$	2		—
Acquisition Fees & Expense Reimbursements	$	483	$	388		—		—
Asset Management Fee	$	213	$	29		—		—
General and Administrative Expenses	$	2,231	$	1,180	$	77		—
Property Management Fee	$	194	$	48	$	27		—
Total	$	7,925	$	3,039	$	129	$	16

Experts

The audited financial statements and schedules incorporated by reference in this prospectus and elsewhere in the registration statement have been so incorporated by reference in reliance upon the report of Grant Thornton LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing in giving said report.

Incorporation of Certain Information by Reference

We have elected to “incorporate by reference” certain information into this prospectus. By incorporating by reference, we are disclosing important information to you by referring you to documents we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is superseded by information contained in this prospectus. You can access documents that are incorporated by reference into this prospectus at our website at http://www.ResourceREIT.com (URL for documents: http://www.resourcereit.com/investor-relations.php). There is additional information about us and our advisor and its affiliates at the website, but unless specifically incorporated by reference herein as described in the paragraphs below, the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.

The following documents filed with the SEC are incorporated by reference in this prospectus (Commission File No. 333-160463), except for any document or portion thereof deemed to be “furnished” and not filed in accordance with SEC rules:

• Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed with the SEC on March 30, 2011;

• Quarterly Report on Form 10-Q for the three months ended March 31, 2011 filed with the SEC on May 13, 2011;

• Quarterly Report on Form 10-Q for the six months ended June 30, 2011 filed with the SEC on August 12, 2011;

• Quarterly Report on Form 10-Q for the nine months ended September 30, 2011 filed with the SEC on November 14, 2011;

• Current Report on Form 8-K filed with the SEC on December 8, 2011;

• Current Report on Form 8-K filed with the SEC on November 29, 2011;

• Current Report on Form 8-K filed with the SEC on October 25, 2011;

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• Current Report on Form 8-K filed with the SEC on October 11, 2011;

• Current Report on Form 8-K filed with the SEC on October 3, 2011;

• Current Report on Form 8-K filed with the SEC on August 5, 2011;

• Current Report on Form 8-K filed with the SEC on July 15, 2011;

• Current Report on Form 8-K filed with the SEC on June 21, 2011;

• Current Report on Form 8-K filed with the SEC on May 13, 2011;

• Current Report on Form 8-K filed with the SEC on May 10, 2011;

• Current Report on Form 8-K filed with the SEC on March 21, 2011;

• Current Report on Form 8-K filed with the SEC on January 14, 2011;

• Registration Statement on Form 8-A12G (Reg. No. 000-54369) filed April 28, 2011; and

• Definitive Proxy Statement in respect of our 2011 meeting of stockholders filed with the SEC on April 29, 2011.

We will provide to each person, including any beneficial owner, to whom this prospectus is delivered, upon request, a copy of any or all of the information that we have incorporated by reference into this prospectus but not delivered with this prospectus. To receive a free copy of any of the documents incorporated by reference in this prospectus, other than exhibits, unless they are specifically incorporated by reference in those documents, call or write us at:

Resource Securities, Inc.

One Commerce Square

2005 Market Street, 15th Floor

Philadelphia, PA 19103

Telephone: (866) 469-0129

Fax: (866) 545-7693

The information relating to us contained in this prospectus does not purport to be comprehensive and should be read together with the information contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.

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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 31. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses payable by Resource Real Estate Opportunity REIT, Inc. (the “Company”) in connection with the distribution of the securities being registered other than selling commissions and the dealer manager fee. All amounts are estimated except the SEC registration fee and FINRA filing fee.

Item	Amount
SEC registration fee	$	45,826
FINRA filing fee		75,500
Legal fees and expenses		2,000,000
Blue sky fees and expenses		104,000
Accounting fees and expenses		1,000,000
Sales and advertising expenses		1,807,000
Issuer costs regarding bona fide training and education meetings and retail seminars		316,000
Printing		2,202,750
Postage and delivery of materials		1,046,000
Transfer agent and escrow fees		451,000
Due diligence expenses		375,000
Telephone		107,250
Other expenses related to registration and offering of the securities*		5,096,740
Total	$	14,627,066

* Includes personnel costs of Resource Real Estate Opportunity Advisor, LLC or its affiliates for offering-related matters, including the preparation and distribution of investor reports and marketing materials.

Item 32. Sales to Special Parties

The Company’s directors and officers and (to the extent consistent with applicable laws and regulations) the employees of Resource Real Estate Opportunity Advisor, LLC and affiliated entities, business associates and others purchasing pursuant to the Company’s “friends and family” program, participating broker-dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives will be allowed to purchase shares in the Company’s primary offering at a discount from the public offering price. The purchase price for such shares will be $9.00 per share, reflecting the fact that selling commissions in the amount of $0.70 per share and the dealer manager fee in the amount of $0.30 per share will not be payable in connection with such sales. Under the terms of our friends and family program, we may offer up to 5% of the maximum aggregate primary offering, or up to 3,750,000 shares, of our common stock. The net proceeds to the Company from such sales made net of commissions will be substantially the same as the net proceeds the Company receives from other sales of shares in the primary offering.

Item 33. Recent Sales of Unregistered Securities

In connection with its organization, on June 17, 2009, the Company issued 20,000 shares of its common stock to Resource Real Estate Opportunity Advisor at a purchase price of $10.00 per share for an aggregate purchase price of $200,000. The Company issued these shares in a private transaction exempt from the registration requirements pursuant to Section 4(2) of the Securities Act of 1933.

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On September 15, 2009, the Company commenced a private placement offering to accredited investors of up to $50,000,000 in shares of common stock at $10.00 per share, with volume discounts available to investors who purchased more than $1,000,000 of shares through the same participating broker-dealer. Discounts were also available for other categories of investors. The minimum permitted purchase in the Company’s private placement offering was $2,500. In addition, for every 1,000 shares of common stock an eligible investor purchased in the Company’s private placement offering, the Company offered to sell such investor one share of convertible stock. The private placement offering terminated on June 9, 2010. The Company raised $12.6 million in its private placement offering.

Item 34. Indemnification of Directors and Officers

Subject to the significant conditions set forth below, the Company has included in its charter a provision limiting the liability of its directors and officers to the Company and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment as being material to the cause of action.

Subject to the significant conditions set forth below, the charter also provides that the Company shall indemnify a director, officer or the advisor or any of its affiliates against any and all losses or liabilities reasonably incurred by them (other than when sued by or in right of the Company) in connection with or by reason of any act or omission performed or omitted to be performed on behalf of the Company in such capacity.

Under the Company’s charter, the Company shall not indemnify a director, the advisor or any of the advisor’s affiliates (each an “Indemnitee”) for any liability or loss suffered by an Indemnitee, nor shall it exculpate an Indemnitee, unless all of the following conditions are met: (i) an Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company; (ii) the Indemnitee was acting on behalf of or performing services for the Company; (iii) such liability or loss was not the result of (A) negligence or misconduct by the Indemnitee, excluding an Independent Director, or (B) gross negligence or willful misconduct by an Independent Director; and (iv) such indemnification or agreement to hold harmless is recoverable only out of the Company’s net assets and not from its stockholders. Notwithstanding the foregoing, an Indemnitee shall not be indemnified by the Company for any losses, liability or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular Indemnitee; and (iii) a court of competent jurisdiction approves a settlement of the claims against a particular Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission (“SEC”) and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

The charter provides that the advancement of Company funds to an Indemnitee for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought is permissible only if (in addition to the procedures required by Maryland law) all of the following conditions are satisfied: (i) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; (ii) the legal action is initiated by a third party who is not a common stockholder or the legal action is initiated by a common stockholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; and (iii) the Indemnitee undertakes to repay the advanced funds to the Company, together with the applicable legal rate of interest thereon, if the Indemnitee is found not to be entitled to indemnification.

It is the position of the SEC that indemnification of directors and officers for liabilities arising under the Securities Act is against public policy and is unenforceable pursuant to Section 14 of the Securities Act.

The Company has also purchased and maintains insurance on behalf of all of its directors and executive officers against liability asserted against or incurred by them in their official capacities with the Company, whether or not the Company is required or has the power to indemnify them against the same liability.

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Item 35. Treatment of Proceeds from Stock Being Registered

Not applicable.

Item 36. Financial Statements and Exhibits

(a) Financial Statements.

The following financial statements are filed as part of this registration statement:

• The consolidated financial statements of the Company and the notes thereto as of December 31, 2010 (included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 and incorporated herein by reference);

• The consolidated financial statements of the Company (unaudited) and the notes thereto as of March 31, 2011 (included in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2011 and incorporated herein by reference);

• The consolidated financial statements of the Company (unaudited) and the notes thereto as of June 30, 2011 (included in the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2011 and incorporated herein by reference);

• The consolidated financial statements of the Company (unaudited) and the notes thereto as of September 30, 2011 (included in the Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2011 and incorporated herein by reference); and

• Prior performance tables (unaudited) as of the year ended December 31, 2010 (included in the Company’s Current Report on Form 8-K as filed on July 15, 2011 and incorporated herein by reference).

(b) Exhibits. The following exhibits are filed as part of this registration statement:

Ex.	Description
1.1	Dealer Manager Agreement, including Form of Selected Dealer Agreement and Form of Placement Agreement (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed August 13, 2010)
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed February 9, 2010)
3.2	Bylaws (incorporated by reference to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed February 9, 2010)
4.1	Form of Subscription Agreement, included as Appendix A to the prospectus
4.2	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates)(incorporated by reference to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed November 12, 2009)
4.3	Amended and Restated Distribution Reinvestment Plan, included as Appendix B to the prospectus
4.4	Amended and Restated Share Redemption Program (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 14, 2011)
4.5	Escrow Agreement (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed August 13, 2010)

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5.1	Opinion of DLA Piper LLP (US) re legality (incorporated by reference to Pre-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed May 27, 2010)
8.1	Opinion of DLA Piper LLP (US) re tax matters (incorporated by reference to Pre-Effective Amendment No. 3 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed February 9, 2010)
10.1	Third Amended and Restated Advisory Agreement (incorporated by reference to Post-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed March 3, 2011)
10.2	Management Agreement (incorporated by reference to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed September 15, 2009)
10.3	Loan Sale Agreement (Westhollow Apartments) between Bank of America, N.A. as successor by merger to LaSalle Bank National Association as Trustee for the Registered Holders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 2003-C3 and Resource Real Estate opportunity OP, LP., dated July 30, 2010 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 15, 2010)
10.4	Amendment to Loan and Sale Agreement, dated August 23, 2010, between Bank of America, N.A. as successor by merger to LaSalle Bank National Association as Trustee for the Registered Holders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 2003-C3 and Resource Real Estate opportunity OP, LP (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 15, 2010)
10.5	Reinstatement and Second Amendment to Loan and Sale Agreement (Westhollow Apartments), dated August 31, 2010 between Bank of America, N.A. as successor by merger to LaSalle Bank National Association as Trustee for the Registered Holders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 2003-C3 and Resource Real Estate Opportunity OP, LP (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 15, 2010)
10.6	Deed of Trust and Security Agreement (Westhollow Apartments), dated as of October 27, 2003 among Westhollow Landmark LP, as grantor, Jay C. Paxton, as trustee, and Deutsche Banc Mortgage Capital, L.L.C., as beneficiary (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 15, 2010)
10.7	Assignment and Assumption of Loan Sale Agreement (Westhollow Apartments), dated as of September 03, 2010, between Resource Real Estate Opportunity OP, LP as assignor and RRE Westhollow Holdings, LLC as assignee (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 15, 2010)
10.8	Mortgage Loan Sale Agreement (Crestwood Apartments) between Capmark Bank and RRE Crestwood Holdings, LLC dated December 15, 2010 (incorporated by reference to Post-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed March 3, 2011)
10.9	Loan Agreement (Crestwood Apartments) between Capmark Bank and CV Apartments, LLC dated November 30, 2007 (incorporated by reference to Post-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed March 3, 2011)
10.10	Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing (Crestwood Apartments) between Capmark Bank and CV Apartments, LLC dated November 30, 2007 (incorporated by reference to Post-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed March 3, 2011)
10.11	Loan Sale Agreement (Cannery) by and between the Secretary of Housing and Urban Development and Resource Real Estate Opportunity OP, LP dated May 4, 2011 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)

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10.12	Assignment of Mortgage (Cannery) by and between the Secretary of Housing and Urban Development and Resource Real Estate Opportunity OP, LP dated May 13, 2011 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)
10.13	Loan Purchase and Sale Agreement (Iroquois) by and between JPMorgan Chase Bank, N.A. and RRE Iroquois Holdings LLC dated June 17, 2011 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)
10.14	Assignment of Loan Documents (Iroquois) by JPMorgan Chase Bank, N.A. to and in favor of RRE Iroquois Holdings LLC dated June 17, 2011 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)
10.15	Promissory Note (Iroquois) between Washington Mutual Bank and Brookside Iroquois, LLC dated June 1, 2007 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)
10.16	Promissory Note (Iroquois) between RRE Iroquois Holdings, LLC and Resource Real Estate Opportunity Advisor, LLC dated June 17, 2011 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)
10.17	Promissory Note (Affiliate Loan) in favor of RRE Iroquois Holdings, LLC dated as of June 17, 2011 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)
10.18	Assignment of Mortgage and Pledge Agreement (Affiliate Loan) between RRE Iroquois Holdings, LLC and Resource Real Estate Opportunity Advisor, LLC dated June 17, 2011 (incorporated by reference to Post-Effective Amendment No. 5 to the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 15, 2011)
10.19	Agreement for Sale and Purchase of Loan (Campus Club) by and between MSCI 2006-HQ10 Fletcher Avenue, LLC and Resource Real Estate Opportunity OP, LP dated October 6, 2011
10.20	Assignment of Loan Documents by MSCI 2006-HQ10 Fletcher Avenue, LLC to RRE Campus Club Holdings, LLC dated October 21, 2011
10.21	Promissory Note (Campus Club) by ING US Students No. 14 LLC in favor of Morgan Stanley Mortgage Capital Inc. dated June 28, 2006
10.22	Mortgage and Security Agreement (Campus Club) by and between ING US Students No. 14 LLC and Morgan Stanley Mortgage Capital Inc. dated June 28, 2006
10.23	Loan Agreement (Revolving Credit Facility) by and between Resource Real Estate Opportunity OP, LP and Bank of America, N.A. dated December 2, 2011
10.24	Promissory Note (Revolving Credit Facility) by Resource Real Estate Opportunity OP, LP in favor of Bank of America, N.A. dated December 2, 2011
10.25	Guaranty Agreement (Revolving Credit Facility) by Resource Real Estate Opportunity REIT, Inc. in favor of Bank of America, N.A. dated December 2, 2011
21.1	Subsidiaries of the Company
23.1	Consent of DLA Piper LLP (US) (included in Exhibits 5.1 and 8.1)
23.2	Consent of Grant Thornton LLP
24.1	Power of Attorney (included on the signature page of Pre-Effective Amendment No. 2 to the Company’s Registration Statement filed on November 12, 2009 and included on the signature page of the Company’s Registration Statement on Form S-11 (No. 333-160463) filed July 7, 2009)

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Item 37. Undertakings

(a) The Company undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Act”); (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

(b) The Company undertakes (i) that, for the purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof, (ii) that all post-effective amendments will comply with the applicable forms, rules and regulations of the SEC in effect at the time such post-effective amendments are filed, and (iii) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(c) The Company undertakes that, for the purpose of determining liability under the Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(d) For the purpose of determining liability of the Company under the Act to any purchaser in the initial distribution of the securities, the Company undertakes that in a primary offering of securities pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the Company will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or prospectus of the Company relating to the offering required to be filed pursuant to Rule 424, (ii) any free writing prospectus relating to the offering prepared by or on behalf of the Company or used or referred to by the Company, (iii) the portion of any other free writing prospectus relating to the offering containing material information about the Company or its securities provided by or on behalf of the Company, and (iv) any other communication that is an offer in the offering made by the Company to the purchaser.

(e) The Company undertakes to send to each stockholder, at least on an annual basis, a detailed statement of any transaction with the Advisor or its affiliates, and of fees, commissions, compensation and other benefits paid or accrued to the Advisor or its affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.

(f) The Company undertakes to file a sticker supplement pursuant to Rule 424(c) under the Act during the distribution period describing each material property not identified in the prospectus at such time as there arises a reasonable probability that such property will be acquired and to consolidate all such stickers into a post-effective amendment filed at least once every three months with the information contained in such amendment provided simultaneously to the existing stockholders. Each sticker supplement will disclose all compensation and fees received by the Advisor and its affiliates in connection with any such acquisition. The post-effective amendment shall include audited financial statements meeting the requirements of Rule 3-14 of Regulation S-X only for the material properties acquired during the distribution period if such financial statements would be due under Items 2.01 and 9.01 of Form 8-K.

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(g) The Company undertakes to file, after the end of the distribution period, a current report on Form 8-K containing the financial statements and any additional information required by Rule 3-14 of Regulation S-X, to reflect each commitment (i.e., the signing of a binding purchase agreement) made after the end of the distribution period involving the use of 10% or more (on a cumulative basis) of the net proceeds of the offering and to provide the information contained in such report to the stockholders at least once each quarter after the distribution period of the offering has ended.

(h) The Company undertakes to provide to the stockholders the financial statements required by Form 10-K for the first full fiscal year of operations.

(i) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(j) The Company undertakes to provide to the dealer manager at the closings specified in the dealer manager agreement the following: (i) if the securities are certificated, certificates in such denominations and registered in such names as required by the dealer manager to permit prompt delivery to each purchaser or (ii) if the securities are not certificated, a written statement of the information required on certificates that is required to be delivered to stockholders to permit prompt delivery to each purchaser.

II-7

TABLE VI

(UNAUDITED)

ACQUISITIONS OF ASSETS BY PROGRAM

This Table presents summary information on real estate and real estate related investments since January 1, 2008 by Prior Real Estate Programs having somewhat similar investment objectives to those of Resource Real Estate Opportunity REIT, Inc. This table provides information regarding the general type and location of each property and the manner in which the properties were acquired. For real estate related investments, this table provides information regarding the total number of investments and the total dollar amount invested in the asset.

As of December 31, 2010

	Fund	Location	Type of Property	Number of Units		Total Square Feet of Units		Date of Purchase		Mortgage financing at date of purchase		Cash Down Payment		Contract price plus acquisition fee		Other cash expenditures expensed		Other cash expenditures capitalized		Total Acquisition cost
Foxcroft	R6	Scarborough, ME	Multi- Family		104		98,800		1/29/2008		8,760,000		3,994,000		12,385,971		—		1,756,103		14,142,074
Coach Lantern	R6	Scarborough, ME	Multi- Family		90		97,860		1/29/2008		7,884,000		3,583,000		11,152,891		—		1,874,611		13,027,502
Park Hill	R6	San Antonio, TX	Multi- Family		288		202,000		2/29/2008		10,430,000		5,695,000		15,385,087		—		3,123,159		18,508,246
Tamarlane	R7	Scarborough, ME	Multi- Family		115		101,801		7/31/2008		9,931,000		1,020,469		12,660,300		—		1,793,869		14,454,169
Bent Oaks	R7	Austin, TX	Multi- Family		146		105,993		12/10/2008		6,120,000		1,967,311		7,935,980		—		2,780,308		10,716,288
Cape Cod	R7	San Antonio, TX	Multi- Family		212		145,168		12/10/2008		6,362,000		2,179,635		8,448,135		—		2,690,308		11,138,443
Woodhollow	R7	Austin, TX	Multi- Family		108		96,840		12/12/2008		5,240,000		1,655,325		6,787,899		—		2,012,503		8,800,402
Woodland Hills	R7	Decatur, GA	Multi- Family		228		266,142		12/19/2008		13,590,000		3,914,770		17,288,951		—		3,762,607		21,051,558
Mill Creek Terrace	OPP	Kansas City, MO	Multi- Family		49		60,788		6/26/2009		—		6,530,000		6,564,982		—		393,115		6,958,097
Wyndridge Apartments	OPP	Memphis, TN	Multi- Family		568		527,464		9/29/2009		9,501,429		2,850,429		9,869,183		—		3,500,000		13,369,183
Apache	OPP	Houston, TX	Multi- Family		296		219,784		1/27/2010		—		3,800,000		3,908,300		—		2,544,865		6,453,165
Waterstone	OPP	Memphis, TN	Multi- Family		378		358,392		3/16/2010		5,406,747		1,622,024		5,706,209		—		2,078,255		7,784,464
Parkgreen	OPP	Houston, TX	Multi- Family		307		280,196		3/31/2010		—		4,452,650		4,430,413		—		1,950,342		6,380,755
Parkway	OPP	Houston, TX	Multi- Family		348		246,965		3/31/2010		—		5,047,350		5,022,143		—		2,210,832		7,232,975

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TABLE VI

(UNAUDITED)

ACQUISITION OF ASSETS BY PROGRAMS (cont’d)

Resource Capital Corp.

As of December 31, 2010

Year	Total Number of Investments		Total Dollar Amount Invested
2008		1	$	20,800,000
2009		—		—
2010		20		56,137,018

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this post-effective amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on the 20th day of January, 2012.

	RESOURCE REAL ESTATE OPPORTUNITY REIT, INC.
BY:	/s/ Alan F. Feldman
	Alan F. Feldman Chief Executive Officer and Director

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

	Name	Title	Date
* Jonathan Z. Cohen		Chairman of the Board	January 20, 2012
/s/ Alan F. Feldman Alan F. Feldman		Chief Executive Officer and Director (Principal Executive Officer)	January 20, 2012
* Steven R. Saltzman		Chief Financial Officer, Senior Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer)	January 20, 2012
* Gary Lichtenstein		Director	January 20, 2012
* Lee F. Shlifer		Director	January 20, 2012
* Thomas J. Ikeler		Director	January 20, 2012
* By:	/s/ Alan F. Feldman		January 20, 2012
Alan F. Feldman Chief Executive Officer and Director Attorney-in-Fact

EX-10.19

Exhibit 10.19

AGREEMENT FOR SALE AND PURCHASE OF LOAN

(ING US Students No. 14; Loan No. 700401153)

THIS AGREEMENT FOR SALE AND PURCHASE OF LOAN (“Agreement”) is entered as of the Effective Date (as defined below) between Seller and Buyer (as both defined below). Seller and Buyer hereby agree that Seller shall sell, assign, transfer and convey to Buyer and Buyer agrees to purchase and accept all of Seller’s right, title and interest in and to the Loan (as defined below) and the Foreclosure Judgment (if any), subject to the terms and conditions set forth in this Agreement. This Agreement consists of Part I and Part II. As used throughout this Agreement, the terms appearing below in quotation marks have the meanings indicated.

AGREEMENT FOR SALE AND PURCHASE OF LOAN—PART I

“Purchase Price”:	U.S. $8,300,000.00
“Buyer’s Broker”:	Signal Rock Real Estate Group, LLC / Mark Melhuish
“Finder’s Fee”:	A finder’s fee equal to an amount in U.S. Dollars calculated by multiplying the Purchase Price by .005
“Seller”:	MSCI2006-HQ10 FLETCHER AVENUE, LLC c/o LNR Partners, LLC 1601 Washington Avenue, Suite 700 Miami Beach, Florida 33139
Seller’s Notice Person:	Matthew Jewell
Seller’s Facsimile No.:	305-695-5119
	with a required copy to:
	Bilzin Sumberg Baena Price & Axelrod LLP 1450 Brickell Avenue, Suite 2300 Miami, Florida 33131-3456 Attn: Monica Cunill-Fals, Esquire Facsimile: 305-351-2213 Attn: Marjie C. Nealon, Esquire Facsimile: 305-351-2243
“Buyer”:	Resource Real Estate Opportunity OP, LP, a Delaware Limited Partnership by: Resource Real Estate Opportunity REIT, Inc., a Delaware Corporation, general partner 2005 Market St, 15th Floor Philadelphia, PA 19103
Buyer’s Notice Person:	Alan Feldman
Buyer’s Facsimile No.:	investments@resourcerei.com

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“Escrow Agent”:	Commerce Title Company of America, LLC
“Escrow Agent Notice Address”:	Commerce Title Company of America, LLC
	4975 Preston Park Blvd., Suite 450 Piano, Texas 75093 Attn: Yvette Cantu, Escrow Officer/Assistant Branch Manager Reference: ING US Students No. 14 Loan Sale/36340 Telephone No. (469) 241-1269 Facsimile No. (469) 241-1288
“Escrow Agent’s Wiring Instructions”:	JP Morgan Chase Bank, N.A. - Escrow Account
	2200 Ross Ave Dallas, TX 75201 ABA No. 021000021 Account Name: Commerce Title Company of America, LLC Escrow Account Account No. 838307247 Reference: Attn: Yvette Cantu/ING US Students No. 14 Loan Sale
“Effective Date”:	The date upon which this Agreement has been signed and delivered by both Seller and Buyer
“Confidentiality Agreement”:	That certain Confidentiality Agreement executed by the Buyer via the acceptance of the terms at www.auction.com prior to reviewing any Confidential Information in connection with the Loan
“Confidential Information”:	The term Confidential Information shall have the meaning ascribed to such term in the Confidentiality Agreement
“Cut-OffDate”:	The Cut-Off Date with respect to the Loan reflected in the Loan Information Schedule
“Principal Balance”:	The Outstanding Principal Balance with respect to the Loan reflected in the Loan Information Schedule
“Interest Paid To Date”:	The date to which interest has been paid with respect to the Loan as reflected in the Loan Information Schedule
“Escrows”:	The Escrow/Reserve/Suspense Balance with respect to the Loan reflected in the Loan Information Schedule
“Closing Date”:	Ten (10) Business Days after the Effective Date or such earlier date as agreed to in writing by Seller and Buyer

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“Original Lender”:	Morgan Stanley Mortgage Capital Inc., a New York corporation
“Borrower”:	ING US Students No. 14 LLC, a Delaware limited liability company
“Note”:	That certain Promissory Note dated as of June 28, 2006, in the original principal amount of $10,500,000.00 executed by Borrower in favor of Original Lender, and all amendments and renewals thereof
“Security Instrument”:	That certain Mortgage and Security Agreement executed by Borrower in favor of Original Lender dated as of June 28, 2006, recorded as Instrument No. 2006313158, in O.R. Book 16649, Page 1857 of the Public Records of Hillsborough County, Florida (the “Records”), and all amendments thereof
“Interested Person”:	The Master Servicer, the Special Servicer, the Depositor, the holder of any related Junior Indebtedness (with respect to any particular Mortgage Loan), a holder of 50% or more of the Controlling Class, the Operating Advisor, any Independent Contractor engaged by the Master Servicer or the Special Servicer pursuant to this Agreement, or any Person actually known to a Responsible Officer of the Trustee to be an Affiliate of any of them (as such terms are defined in the Pooling and Servicing Agreement dated as of November 1, 2006 for the Morgan Stanley Capital I Inc., Commercial Mortgage Pass- through Certificates, Series 2006-HQ10 (“PSA”))
“Applicable Bid Percentage”:	A percentage equal to 100 times the quotient arrived at by dividing the Purchase Price by the Principal Balance
“Option Assignor”:	LNR Securities Holdings, LLC, a Delaware limited liability company
“Assignment Agreement”:	That certain Assignment Agreement between Option Assignor and Buyer of even date herewith
“Purchase Option”:	The term Purchase Option as used in this Agreement shall have the same meaning ascribed to such term in the Assignment Agreement as it relates to the Loan (as defined below)
“Loan Information Schedule”:	The Loan Information Schedule attached hereto and incorporated herein in connection with the Loan, which Loan Information Schedule shall be updated by the Seller on or prior to the Closing Date

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THIS AGREEMENT CALLS FOR LIQUIDATED DAMAGES

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

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AGREEMENT FOR SALE AND PURCHASE OF LOAN—PART II

ARTICLE I

DEFINED TERMS

1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings:

(a) “Borrower Party” means Borrower and any other obligor, guarantor, or surety of, or any party liable for, the performance of the Loan.

(b) “Business Day” means any day other than a Saturday, Sunday, federal holiday or other day on which national banks are authorized or required to be closed for the conduct of regular banking business.

(c) “Buyer Party” means Buyer and its officers, directors, shareholders, general partners, limited partners, members, managers, agents, representatives, heirs, successors and assigns and their respective heirs, successors, and assigns.

(d) “Cash Management Agreement” means any cash management agreement, lockbox agreement, deposit account agreement, restricted account agreement, rent account agreement, central account agreement, clearing account agreement or other similar cash management related agreement with respect to the Loan.

(e) “Cash Management Accounts” means any active account established pursuant to a Cash Management Agreement.

(f) “Claim” means any claim, liability, proof of claim (including, without limitation, a proof of claim filed in bankruptcy proceedings), demand, complaint, summons, legal, equitable or administrative action, suit, proceeding, chose in action, damage, judgment, penalty or fine pertaining to the Loan.

(g) “Closing” means the execution and delivery of the Closing Documents, the payment of the balance of the Purchase Price and the consummation of the sale of the Loan pursuant to this Agreement.

(h) “Closing Documents” means all documents which, under the terms of this Agreement, are to be executed and delivered by Seller or Buyer or both at Closing.

(i) “Deposit” means an amount equal to ten and one half percent (10.5%) of the Purchase Price in U.S. Dollars.

(j) “Escrowed Funds” means (i) the Escrows, (ii) any other funds that are escrowed or deposited with any Seller Party by or on behalf of Borrower under the Loan Documents on account of real estate taxes, insurance premiums, insurance proceeds, repairs, improvements, commissions, tenant security deposits, reserves or any other purpose relating to the Loan or the Property, (iii) funds that are advanced by any Seller Party into an escrow account or any other account established pursuant to a Loan Document for any of the purposes described

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in (ii) above, (iv) funds that are held by any Seller Party or Receiver, if any, in a suspense account or in any other account relating to the Loan or the Property, which funds have not been applied to the Loan, and (v) the balance of funds advanced to the Receiver, if any, by any Seller Party with respect to the Loan or the Property.

(k) “Forced Placed Insurance” means any insurance forced placed by any Seller Party prior to Closing in connection with the Loan or relating to the Property or any portion thereof.

(1) “Foreclosure Action” means any pending foreclosure action with respect to the Security Instrument, whether judicial or non-judicial.

(m) “Foreclosure Judgment” means any final judgment in favor of Seller with respect to the Foreclosure Action, if any.

(n) “Governmental Authority” means any federal, state, county or municipal government, or political subdivision thereof, any governmental agency, authority, board, bureau, commission, department, instrumentality, or public body, or any court or administrative tribunal.

(o) “Hazardous Substances” means any dangerous, toxic or hazardous pollutant, chemical, waste or other substance, (i) which is required by a Legal Requirement to be treated or removed from the Property by the owner thereof, or (ii) the presence of which on the Property subjects a Borrower Party or the holder of the Loan or the Property to a Claim by any Person. Hazardous Substances include, without limitation, those substances classified as such for purposes of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as amended, and all other federal or state environmental laws and regulations now existing, include, without limitation friable asbestos and friable asbestos-containing materials, polychlorinated biphenyls and urea formaldehyde.

(p) “Insurance Refund” means any refund resulting from the cancellation or termination of any Forced Placed Insurance, regardless of whether such refund is received prior to or after Closing.

(q) “Insurance Proceeds” means any proceeds resulting from any Pre-Closing Insurance Claim, regardless of whether such proceeds are received prior to or after Closing.

(r) “Legal Requirements” means any applicable law, statute, ordinance, order, decree, directive, rule or regulation of any Governmental Authority.

(s) “Lender Contractual Requirement” means any legally enforceable obligation of the holder of the Loan to any Borrower Party or to another Person under any Loan Document.

(t) “Loan” means that certain loan made by Original Lender to or assumed by Borrower evidenced by the Note and secured by the Security Instrument and the other Loan Documents.

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(u) “Loan Documents” means the Note, the Security Instrument and any and all other documents executed by or assumed by any Borrower Party to evidence and/or secure the Note, and all amendments thereof.

(v) “Loan Files” means all material electronic and printed files and documents delivered to Buyer pertaining to the Loan which the Seller maintains as its primary source of information on the Loan, which includes the Loan Documents and to the extent available, title insurance policies, hazard insurance policies and casualty and liability insurance policies, but specifically excluding all Privileged Materials.

(w) “LOC” means any letter of credit delivered in connection with the Loan.

(x) “LOC Proceeds” means any proceeds received by any Seller Party as a result of the cashing of any LOC prior to Closing, regardless of whether such proceeds are received prior to or after Closing.

(y) “Party” means either, and “Parties” means both, Seller and Buyer.

(z) “Person” means an individual, corporation, partnership, joint venture, limited liability company, association, joint stock company, trust, unincorporated organization or governmental or municipal body or agency or political subdivision thereof, and its heirs, administrators, executors, successors and assigns (as applicable).

(aa) “Pre-Closing Amounts” means any Pre-Closing Payments, LOC Proceeds, Refund and Insurance Proceeds.

(bb) “Pre-Closing Insurance Claim” means any insurance claims made by any Seller Party prior to the Closing relating to, or in connection with the Loan, the Property or any portion thereof, but specifically excluding any pending title claims under any loan policy issued in connection with the Loan.

(cc) “Pre-Closing Payments” means any payment received by any Seller Party prior to Closing from or on behalf of Borrower or Receiver, if any, on account of the Loan or with respect to the Property or any portion thereof.

(dd) “Privileged Materials” means those materials which Seller has deemed inappropriate to release to Buyer, including, without limitation: (i) valuations and opinions regarding the Loan or the Property, (ii) attorney-client privileged communications and work product, (iii) legal conclusions of non-lawyers or summaries prepared by non-lawyers related to legal conclusions reached or expressed by lawyers, (iv) financial statements or other information subject to a written confidentiality obligation or restriction or (v) non-public information, the disclosure of which, in Seller’s reasonable discretion, could be in violation of any Legal Requirement or existing agreements.

(ee) “Property” means the real property and the personal property, if any, encumbered by the Security Instrument.

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(ff) “Real Estate Tax Refund” means any refund resulting from any real estate tax appeal, real estate tax reduction application, real estate tax reduction proceeding or real estate tax contest filed prior to the Closing Date with respect to the real estate taxes or the proposed real estate taxes in connection with the Property or any portion thereof, regardless of whether such refund is received prior to or after Closing.

(gg) “Receiver” means any receiver appointed with respect to the Property in the Foreclosure Action or the Receivership Action, if any.

(hh) “Receivership Action” means any pending receivership action, or request for a receiver in the Foreclosure Action, if any, with respect to the Property.

(ii) “Refund” means any Real Estate Tax Refund, any Insurance Refund and any other refund for overpayment by any Seller Party in connection with the Loan or the Property.

(jj) “Securities Act” means the federal Securities Act of 1933, as amended and any applicable state securities act, and all regulations promulgated thereunder.

(kk) “Seller Party” means Seller, Seller’s servicers (including, but not limited to, Special Servicer and Seller’s master servicer), and any subsidiary, affiliate or parent of Seller or of any of its servicers, and each of the foregoing parties’ respective predecessors in interest, and each and all of their respective past, present and future partners, members, officers, directors, managers, shareholders, partners, employees, agents, loan sale advisors, contractors, representatives, participants, certificateholders, trustees, heirs, and all of the respective successors and assigns of each of the foregoing.

(ll) “Special Servicer” means LNR Partners, Inc., a Florida corporation, which effectuated a statutory conversion to LNR Partners, LLC, a Florida limited liability company.

1.2 Other Defined Terms. Other capitalized terms contained in this Agreement shall have the meanings assigned to them in this Agreement.

ARTICLE II

CONDITION

2.1 Acknowledgement. Buyer does hereby acknowledge, represent, warrant and agree to and with Seller that (i) the Loan is in default and may be non-performing and pending proceedings with the United States Bankruptcy Code may have been filed by or against one or more of the Borrower Parties; (ii) Seller may be pursing resolution strategies with respect to the Loan including, without limitation, a workout or settlement; (iii) Buyer is expressly purchasing the Loan and the Foreclosure Judgment (if any) in its existing condition “AS IS, WHERE IS, AND WITH ALL FAULTS” with respect to all facts, circumstances, conditions and defects; and (iv) Seller has specifically bargained for the assumption by Buyer of all risk of adverse conditions with respect to the Loan and the Foreclosure Judgment (if any) and has structured the Purchase Price and other terms of this Agreement in consideration thereof.

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2.2 No Recourse or Seller Warranties or Representations. NOTWITHSTANDING ANY CONTRARY PROVISION IN THIS AGREEMENT, THE SALE OF THE LOAN AND THE FORECLOSURE JUDGMENT (IF ANY) TO BUYER UNDER THIS AGREEMENT SHALL BE WITHOUT RECOURSE, AND WITHOUT REPRESENTATION OR WARRANTY OF ANY NATURE BY ANY SELLER PARTY (EXCEPT TO THE EXTENT MADE IN SECTION 5.2 BELOW), AND BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT MADE UNDER SECTION 5.2 BELOW, NO SELLER PARTY HAS MADE, OR DOES MAKE, AND SPECIFICALLY DISCLAIMS, AND BUYER IS NOT RELYING ON ANY SELLER PARTY WITH RESPECT TO ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO: (A) THE LOAN OR THE FORECLOSURE JUDGMENT (IF ANY), (B) THE MARKETABILITY, VALUE, QUALITY OR CONDITION OF THE LOAN OR THE FORECLOSURE JUDGMENT (IF ANY); (C) THE VALIDITY, ENFORCEABILITY, OR COLLECTABILITY OF THE LOAN OR ANY OF THE LOAN DOCUMENTS OR THE FORECLOSURE JUDGMENT (IF ANY); (D) THE VALIDITY, PRIORITY, OR PERFECTION OF ANY LIENS CREATED BY THE LOAN DOCUMENTS OR THE FORECLOSURE JUDGMENT (IF ANY); (E) THE STATE OF TITLE, PRIORITY OF LIENS, ZONING, TAX CONSEQUENCES, PHYSICAL CONDITION, UTILITY CAPACITY OR COMMITMENT FOR UTILITY CAPACITY, OPERATING HISTORY OR PROJECTIONS, VALUATIONS, GOVERNMENTAL APPROVALS OR GOVERNMENTAL REGULATIONS, COMPLIANCE WITH SPECIFICATIONS, LOCATION, EXISTENCE OF OR COMPLIANCE BY ANY OF THE PROPERTY WITH ANY FRANCHISE, MANAGEMENT OR OPERATING AGREEMENT, ANY LIQUOR, USE OR OCCUPANCY PERMIT OR LICENSE, DESIGN, USE, QUALITY, DESCRIPTION, DURABILITY, OR QUALITY OF MATERIAL OR WORKMANSHIP WITH RESPECT TO OR PERTAINING IN ANY MANNER TO THE PROPERTY AND ALL IMPROVEMENTS LOCATED ON ANY OF THE PROPERTY; (F) THE COMPLIANCE BY ANY SELLER PARTY OR ANY PREDECESSOR TO SELLER OR SELLER PARTY WITH ANY AND ALL APPLICABLE FEDERAL, STATE OR LOCAL LAWS AND ALL RULES, REGULATIONS, OR ORDINANCES PROMULGATED PURSUANT THERETO, PERTAINING TO OR IN ANY MANNER RELATED TO THE LOAN, THE FORECLOSURE JUDGMENT (IF ANY) OR THE PROPERTY AND ANY STRUCTURES AND IMPROVEMENTS LOCATED ON THE PROPERTY, INCLUDING BUT NOT LIMITED TO THE AMERICANS WITH DISABILITIES ACT OF 1990 (AS SET FORTH IN CHAPTER 126 OF TITLE 42 OF THE UNITED STATES CODE) AND ALL REGULATIONS PROMULGATED THEREUNDER; (G) THE COMPLIANCE OF THE LOAN WITH ANY STATE OR FEDERAL USURY LAWS AND REGULATIONS APPLICABLE THERETO; (H) THE ACCURACY OR COMPLETENESS OF ANY INFORMATION, DATA, STATEMENTS, AMOUNTS OR SOURCES OF INFORMATION CONTAINED IN THE LOAN DOCUMENTS OR THE FORECLOSURE JUDGMENT (IF ANY); AND (I) ANY OTHER MATTERS PERTAINING TO THE LOAN, THE PROPERTY OR THE FORECLOSURE JUDGMENT (IF ANY). IN ADDITION, EACH SELLER PARTY EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE FOREGOING, NO SELLER PARTY MAKES OR HAS MADE ANY REPRESENTATION OR WARRANTY REGARDING THE PRESENCE OR ABSENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER OR ABOUT THE

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PROPERTY OR THE COMPLIANCE OR NONCOMPLIANCE OF THE PROPERTY WITH ANY LEGAL REQUIREMENT REGARDING HAZARDOUS SUBSTANCES, INCLUDING, WITHOUT LIMITATION, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT, THE SUPERFUND AMENDMENT AND REAUTHORIZATION ACT, THE RESOURCE CONSERVATION RECOVERY ACT, THE FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL ENVIRONMENTAL PESTICIDES ACT, THE CLEAN WATER ACT, THE CLEAN AIR ACT, ANY SO CALLED FEDERAL, STATE OR LOCAL “SUPERFUND” OR “SUPERLIEN” STATUTE, OR ANY OTHER STATUTE, LAW, ORDINANCE, CODE, RULE, REGULATION, ORDER OR DECREE REGULATING, RELATING TO OR IMPOSING LIABILITY (INCLUDING STRICT LIABILITY) OR STANDARDS OF CONDUCT CONCERNING ANY HAZARDOUS SUBSTANCES (COLLECTIVELY, THE “HAZARDOUS SUBSTANCE LAWS”). BUYER FURTHER ACKNOWLEDGES AND AGREES THAT BUYER HAS BEEN GIVEN THE OPPORTUNITY TO REVIEW THE LOAN DOCUMENTS, THE LOAN FILES AND THE FORECLOSURE JUDGMENT (IF ANY) AND OBTAIN ALL OTHER INFORMATION AND DOCUMENTATION AS BUYER DEEMS APPROPRIATE PRIOR TO THE EXECUTION OF THIS AGREEMENT AND, THEREFORE, BUYER WILL BE PURCHASING THE LOAN AND THE FORECLOSURE JUDGMENT (IF ANY) PURSUANT TO ITS INDEPENDENT EXAMINATION, STUDY, INSPECTION AND KNOWLEDGE OF THE LOAN, THE LOAN DOCUMENTS AND THE FORECLOSURE JUDGMENT (IF ANY), AND BUYER IS RELYING UPON ITS OWN DETERMINATION OF THE QUALITY, ENFORCEABILITY, TITLE VALUE AND CONDITION OF THE LOAN, THE PROPERTY AND THE FORECLOSURE JUDGMENT (IF ANY), AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY ANY SELLER PARTY. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED OR TO BE PROVIDED WITH RESPECT TO THE LOAN AND THE FORECLOSURE JUDGMENT (IF ANY) WAS OR WILL BE OBTAINED FROM A VARIETY OF SOURCES AND THAT NO SELLER PARTY HAS MADE OR WILL BE OBLIGATED TO MAKE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND NO SELLER PARTY MAKES ANY REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT NO SELLER PARTY HAS UNDERTAKEN TO CORRECT ANY MISINFORMATION OR OMISSIONS OF INFORMATION WHICH MIGHT BE NECESSARY TO MAKE ANY INFORMATION DISCLOSED TO BUYER NOT MISLEADING IN ANY RESPECT. BUYER UNDERSTANDS THAT THE PRIVILEGED MATERIALS COULD CONTAIN INFORMATION WHICH, IF KNOWN TO BUYER, COULD HAVE A MATERIAL IMPACT ON ITS DETERMINATION OF VALUE OF THE LOAN AND THE FORECLOSURE JUDGMENT (IF ANY) AS WELL AS ITS DECISION TO PURCHASE THE LOAN AND THE FORECLOSURE JUDGMENT (IF ANY). BUYER ACKNOWLEDGES THAT THE AMOUNT ULTIMATELY RECEIVED BY IT IN RESPECT OF THE LOAN AND THE FORECLOSURE JUDGMENT (IF ANY) MAY BE LESS THAN THE PURCHASE PRICE, AND BUYER SHALL HAVE NO RECOURSE TO SELLER FOR ANY SUCH DEFICIENCY. BUYER AGREES CLOSING UNDER THIS AGREEMENT SHALL CONSTITUTE AN ACKNOWLEDGMENT THAT THE LOAN AND THE FORECLOSURE JUDGMENT (IF ANY) WAS PURCHASED, AND WILL BE ACCEPTED AT CLOSING, WITHOUT REPRESENTATION OR WARRANTY (EXCEPT AS OUTLINED

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IN SECTION 5.2), EXPRESS OR IMPLIED AND OTHERWISE IN AN “AS IS”, “WHERE IS”, AND “WITH ALL FAULTS” CONDITION BASED SOLELY ON BUYER’S OWN INSPECTION, AND WITHOUT LIABILITY BY OR RECOURSE TO ANY SELLER PARTY. NO EVENT OR CONDITION SHALL ENTITLE BUYER TO HAVE THE LOAN OR FORECLOSURE JUDGMENT (IF ANY) REPURCHASED BY SELLER, EXCEPT AS OTHERWISE SPECIFIED IN THIS AGREEMENT.

ARTICLE III

PURCHASE PRICE AND EXPENSES

3.1 Deposit. Buyer shall pay the Deposit to Escrow Agent in good and immediately available funds by a single wire transfer in accordance with Escrow Agent’s Wiring Instructions no later than 2:00 p.m. Eastern Time on the first Business Day following the Effective Date. If Buyer fails to so pay the Deposit to Escrow Agent, then Seller, in its sole discretion, may (i) terminate this Agreement, in which event Seller and Buyer shall have no further duties, obligations or liabilities to each other hereunder, except for the Confidentiality Agreement which shall continue in full force and effect and any terms hereof which specifically survive termination, or (ii) pursue all remedies at law or in equity, including without limitation, the remedy of specific performance. Immediately upon the Effective Date, the Deposit shall be nonrefundable (i) unless Seller fails to comply with its obligations under this Agreement; or (ii) except as otherwise specifically provided in this Agreement. The Deposit shall be reflected as a credit against the Purchase Price on the Closing Statement (as defined below).

3.2 Balance of Purchase Price. Buyer shall pay the balance of the Purchase Price to Escrow Agent in good and immediately available funds by a single wire transfer in accordance with Escrow Agent’s Wiring Instructions no later than 2:00 p.m. Eastern Time on the Closing Date and Escrow Agent shall immediately upon Closing disburse in accordance with the Closing Statement. Buyer agrees that wired funds must be received in Escrow Agent’s account pursuant to the Escrow Agent’s Wiring Instructions prior to 2:00 p.m. Eastern Time on the Closing Date in order for Seller to receive the benefit of such funds. Accordingly, if wired funds are received after 2:00 p.m. Eastern Time on any day, they shall not be deemed received until the following Business Day. If Escrow Agent does not receive wired funds prior to 2:00 p.m. Eastern Time on the Closing Date and Seller elects not to exercise any of its default remedies, Buyer shall pay Seller $2,500.00 per day from the Closing Date until the wired funds are deemed to have been received. Except as provided in the last sentence of Section 3.1 above and the fourth sentence of this Section 3.2, Buyer shall not be entitled to any credits on the Closing Statement including, without limitation, any credit with respect to Escrowed Funds. In addition, Buyer acknowledges and agrees that it shall not be entitled to receive the Escrowed Funds after the Closing Date and that it shall be solely responsible for establishing and funding the Escrowed Funds under the Loan Documents upon Closing. Subject to Section 3.4 and notwithstanding Sections 3.6 and 3.7, if any principal payments are received by Seller from or on behalf of Borrower on account of the Loan after the Cut-Off Date and prior to Closing, the Purchase Price shall be adjusted to equal the then outstanding principal balance of the Loan (after application of said principal payments) multiplied by the Applicable Bid Percentage. Notwithstanding anything contained herein to the contrary, if, on the Closing Date, Borrower is a debtor in bankruptcy proceedings filed under the United States Bankruptcy Code (“Bankruptcy Proceedings”) and Special Servicer has actual knowledge of the Bankruptcy Proceedings, then the Purchase Price reflected in Part I of this

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Agreement shall be increased at Closing by the amount of the Escrows and Seller shall wire transfer the Escrows to Buyer within ten (10) Business Days of Closing. In addition, notwithstanding anything contained herein to the contrary, if, on the Closing Date, Borrower is not a debtor under any Bankruptcy Proceedings but the Escrows or any portion thereof are subject to a bankruptcy stay under any Bankruptcy Proceedings (the “Bankruptcy Stay”) and Special Servicer has actual knowledge of such Bankruptcy Stay, then the Purchase Price reflected in Part I of this Agreement shall be increased at Closing in an amount equal to the amount of the Escrows that is subject to the Bankruptcy Stay and Seller shall wire transfer the portion of the Escrows that is subject to the Bankruptcy Stay to Buyer within ten (10) Business Days of Closing.

3.3 Transfer Taxes and Expenses. Promptly following the Closing Date (but not later than the date payment is due under any applicable Legal Requirement), Buyer shall (a) pay all transfer, filing and recording fees, taxes, costs and expenses applicable to the assignment of the Loan to Buyer, including, without limitation, realty transfer, mortgage assignment, documentary and similar taxes payable in connection with the filing or recording of any Closing Documents (including without limitation such of the foregoing as may by custom or Legal Requirement be payable by a seller of loans and including without limitation any assignment, transfer or similar taxes due with respect to the Bid Assignment and the Deed (as both defined below), if applicable), (b) execute and file all tax returns, transfer reports, property registration statements and other forms relating to the foregoing as may be required by any Legal Requirement in connection with the filing or recording of any Closing Document and (c) provide Seller with evidence of such payment, execution and filing. In addition, Buyer shall pay for the title insurance premium for any title insurance policy or endorsement obtained by Buyer. Attorneys’ fees shall be borne by the Party incurring such fees. The provisions of this Section shall survive the Closing.

3.4 Payment of Loan. Notwithstanding anything contained in this Agreement to the contrary, if the Loan or the Foreclosure Judgment (if any) is paid in full prior to Closing, or the Seller accepts a discounted payoff of the Loan or the Foreclosure Judgment (if any) prior to Closing, or the holder of a purchase option under the Intercreditor Agreement (if any) exercises such purchase option prior to Closing, then the Deposit shall be refunded to Buyer promptly by Escrow Agent, this Agreement shall be rendered null and void, and the Confidentiality Agreement shall remain in full force and effect.

3.5 Foreclosure and Receivership. Seller has disclosed to Buyer and Buyer acknowledges the existence of any Foreclosure Action and/or Receivership Action. Seller shall not, without the written consent of Buyer, which consent shall not be unreasonably withheld or delayed, proceed with the Foreclosure Action or the Receivership Action except that Buyer’s consent shall not be required in the event that Seller is required by Legal Requirements to proceed with the Foreclosure Action or the Receivership Action to protect the collateral for the Loan (although the Seller shall not be obligated to do so). Notwithstanding anything contained herein to the contrary, (i) in the event that a foreclosure, a trustee’s sale or a similar sale is held with respect to the Foreclosure Action or the Receivership Action prior to the Closing Date and Seller is not the successful bidder at such foreclosure sale, then this Agreement shall terminate, in which event the Deposit shall be refunded to the Buyer promptly by Escrow Agent and Seller

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and Buyer shall have no further duties, obligations or liabilities to each other hereunder, except for the Confidentiality Agreement which shall remain in full force and effect and any terms hereof which specifically survive termination; and (ii) in the event that a foreclosure sale, a trustee’s sale or a similar sale is held with respect to the Foreclosure Action or Receivership Action prior to the Closing Date and Seller is the successful bidder at such sale, then at Buyer’s option to be exercised by providing notice to Seller no later than three (3) Business Days prior to the Closing Date, (x) Seller shall assign its bid to the Buyer on the Closing Date to the extent that title to the Property has not passed to Seller and is otherwise permitted under Legal Requirements (the “Bid Assignment”) and, if the Bid Assignment is not permitted under Legal Requirements or title has passed to the Seller, this Agreement shall be modified to reflect that, provided Buyer is not in default under this Agreement, Seller shall transfer its interests in the Property to Buyer for the Purchase Price on the Closing Date on an “AS IS, WHERE IS, AND WITH ALL FAULTS” basis with no representations, by special warranty deed (the “Deed”) and under such other terms and conditions as are contained in Seller’s standard form purchase and sale agreement and Buyer and Seller shall execute an amendment evidencing such modification, or (y) Buyer shall terminate this Agreement by giving written notice to Seller on or prior to the Closing Date in which case the Deposit shall be returned promptly by Escrow Agent to Buyer, and this Agreement shall terminate, in which event Seller and Buyer shall have no further duties, obligations or liabilities to each other hereunder, except for the Confidentiality Agreement which shall continue in full force and effect and any terms hereof which specifically survive termination. In the event that the Foreclosure Action or the Receivership Action is pending and a foreclosure sale is not held with respect to the Foreclosure Action prior to the Closing Date, Seller shall assign its rights with respect to the Foreclosure Action and Receivership Action, as applicable, and any Foreclosure Judgment to Buyer at Closing unless prohibited by Legal Requirements. If Seller is prohibited under Legal Requirements to assign its rights with respect to the Foreclosure Action or the Receivership Action, as applicable, Seller shall dismiss the Foreclosure Action and the Receivership Action without prejudice promptly after Closing. To the extent a Receiver has incurred and not yet paid any payables related to the Property or the operation thereof as of the Closing Date, Buyer and not Seller shall be responsible for the payment of any such payables. In addition, to the extent a Receiver is owed any fees or costs with respect to any Receivership Action that have not been paid as of the Closing Date, Buyer and not Seller shall be responsible for the payment of any such fees and costs. The provisions of this Section shall survive the Closing.

3.6 Pre-Closing Amounts. All Pre-Closing Amounts shall belong to the Seller without credit to Buyer at Closing and Buyer acknowledges and agrees that Buyer shall not be entitled to receive any Pre-Closing Amounts after Closing. To the extent that any Seller Party or Receiver, if any, receive any Pre-Closing Amounts after Closing, Seller shall use reasonable efforts to inform Buyer of same. To the extent that any Buyer Party or Receiver, if any, receives any Pre-Closing Amounts after Closing, Buyer shall cause such Buyer Party or Receiver, if applicable, to promptly deliver to Seller or Seller’s designee such Pre-Closing Amounts. The provisions of this Section shall survive the Closing.

3.7 Force Placed Insurance. To the extent that any Forced Placed Insurance exists, Seller shall have the right to immediately cancel or terminate such Forced Placed Insurance after Closing. The provisions of this Section shall survive the Closing.

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3.8 Cash Management Agreement. To the extent that a Cash Management Agreement exists and is active as of the Closing Date, Seller agrees to cooperate with Buyer, upon Buyer’s written request after Closing, in the transfer of any Cash Management Accounts to Buyer, to the extent transferrable. To the extent such Cash Management Accounts are not transferrable, Buyer shall promptly make arrangements for the establishment of any necessary new accounts (the “New Cash Management Accounts”) to replace the Cash Management Accounts. To the extent that any Pre-Closing Payments or LOC Proceeds are deposited in the Cash Management Accounts, such Pre-Closing Payments and LOC Proceeds shall belong to Seller without credit to Buyer and Buyer shall not be entitled to such Pre-Closing Payments or LOC Proceeds after Closing. All fees and costs associated with the Cash Management Accounts (including the transfer thereof) and the establishment of any New Cash Management Accounts shall be borne by Buyer. The provisions of this Section shall survive the Closing.

ARTICLE IV

CLOSING

4.1 Time and Place. Closing shall take place on the Closing Date or such earlier date as may be mutually acceptable to Seller and Buyer. Closing shall be held through escrow with the Escrow Agent.

4.2 Seller’s Delivery of Documents. On the Closing Date and upon Escrow Agent’s receipt of the balance of the Purchase Price, Seller shall deliver or cause to be delivered to Escrow Agent for delivery to Buyer the following:

(a) An executed Assignment of Mortgage in the form attached hereto as Exhibit B (the “Assignment of Security Instrument”);

(b) An executed Assignment of Assignment of Leases and Rents in the form attached hereto as Exhibit C (the “Assignment of Assignment of Leases and Rents”), to the extent applicable;

(c) If Seller is a trust, an executed Limited Power of Attorney authorizing Special Servicer to execute documents as attorney in fact for Seller (the “POA”);

(d) To the extent a Foreclosure Judgment exists, an executed assignment of the Foreclosure Judgment in the form attached to this Agreement (the “Assignment of Judgment”); and

(e) An executed closing statement reflecting all financial aspects of the transaction (“Closing Statement”).

In addition, on the Closing Date and upon Escrow Agent’s receipt of the balance of the Purchase Price, Seller shall deliver or cause to be delivered to Seller’s counsel for delivery to Buyer the following:

(a) An executed Assignment of Loan Documents with respect to the Loan in the form attached hereto as Exhibit A;

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(b) An executed Allonge to the Note in the form attached hereto as Exhibit D; and

(c) All original Loan Documents in the possession of Seller excluding Privileged Materials.

Notwithstanding anything to the contrary contained hereinabove, to the extent that Seller is required to deliver an Assignment of Judgment pursuant to the terms of this Agreement, the Assignment of Security Instrument and the Assignment of Assignment of Leases of Rents (to the extent applicable) shall be delivered by Seller to Seller’s counsel for delivery to Buyer after Closing in lieu of delivering the Assignment of Security Instrument and the Assignment of Assignment of Leases of Rents (to the extent applicable) to Escrow Agent.

In addition, Seller shall deliver or cause to be delivered to Borrower following the Closing an executed Notice of Assignment of the Loan to Borrower’s substantially in the form attached hereto as Exhibit E by Federal Express or other nationally recognized overnight courier service to the extent that Seller has a physical address for Borrower. To the extent that Seller has a P.O. Box address for Borrower, Seller shall deliver such notice by regular mail and shall attempt delivery by certified mail, return receipt requested.

4.3 Buyer’s Delivery of Documents. On the Closing Date, Buyer shall deliver or cause to be delivered to Escrow Agent for delivery to Seller the following:

(a) The balance of the Purchase Price as set forth in Section 3.2 hereof;

(b) An executed Closing Statement; and

(c) Any other documents required to be executed or delivered by Buyer to Seller pursuant to the terms of this Agreement.

Buyer hereby authorizes Escrow Agent to record or cause the recording of the Assignment of Security Instrument and the Assignment of Assignment of Leases of Rents (to the extent applicable) in the appropriate recording office or offices after Closing (the “Recording Office”) provided however that, to the extent Seller is required to deliver an Assignment of Judgment pursuant to the terms of this Agreement, Buyer hereby authorizes Escrow Agent to record or cause the recording of the Assignment of Judgment in the Recording Office in lieu of the Assignment of Security Instrument and the Assignment of Assignment of Leases of Rents (to the extent applicable).

After Closing, Buyer shall have the right to file and record with the appropriate office or offices UCC Assignments with respect to any UCC Financing Statement referred to in Schedule A of Exhibit A hereof reflecting the assignment of such UCC Financing Statement from Seller to Buyer. In addition, in the event that the Seller is a Person that is not a trust, Buyer shall have the right to file and record with the appropriate office or offices UCC Assignments with respect to any UCC Financing Statement referred to in Schedule A of Exhibit A hereof reflecting the assignment of such UCC Financing Statement to Seller to the extent not already filed and recorded.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

5.l Representations and Warranties of Buyer. In addition to and not in lieu of any other warranties, representations, or certifications made by Buyer to Seller in the Confidentiality Agreement, Buyer hereby represents and warrants to Seller as of the Effective Date and the Closing Date as follows:

(a) Authority. Buyer has all requisite power and authority to execute and deliver, and to perform all of its obligations under, this Agreement, the Confidentiality Agreement and all instruments and other documents executed and delivered by Buyer in connection herewith. The execution, delivery and performance of this Agreement by Buyer does not and will not require any consent or approval of any other person that has not been obtained or violate any provision of Buyer’s organizational documents.

(b) Enforcement. This Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms.

(c) Good Faith. Buyer, whether by itself or through its officers, directors, shareholders, partners, members, agents, representatives, employees, or parties in interest, has not (a) in any way colluded, conspired, connived, or agreed directly or indirectly with any Person in connection with the Loan or the Foreclosure Judgment (if any) to refrain from submitting an offer to purchase the Loan or the Foreclosure Judgment (if any) or (b) in any manner directly or indirectly sought by agreement, collusion, communication or conference with any other offeror or Person to fix the Purchase Price. The Purchase Price has not been disclosed by Buyer to any other party other than its counsel and a party entitled to examine confidential information on its behalf pursuant to the Confidentiality Agreement. Buyer has not communicated with any Borrower Party in connection with the Loan or the Foreclosure Judgment (if any).

(d) Interested Person. Buyer is not an Interested Person, any Borrower Party or an affiliate of any Borrower Party. Notwithstanding anything contained in this Agreement to the contrary, the representations and warranties in this subsection (d) shall survive the Closing.

(e) Prohibited Persons. Neither Buyer nor any of its respective officers, directors, shareholders, partners, managers, members or affiliates (including without limitation indirect holders of equity interests in Buyer) is or will be an entity or person (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”), (ii) whose name appears on the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”) most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf) (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO3224, (iv) is subject to sanctions of the United States government or is in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations relating to terrorism or money laundering, including, without limitation, EO13224 and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of

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2001, or (v) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i)—(v) above are herein referred to as a “Prohibited Person”). Buyer covenants and agrees that neither Buyer nor any of its respective officers, directors, shareholders, partners, managers, members or affiliates (including without limitation indirect holders of equity interests in Buyer) shall (aa) conduct any business, nor engage in any transaction or dealing, with any Prohibited Person, including, but not limited to, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Prohibited Person, or (bb) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in EO13224. Notwithstanding anything contained in this Agreement to the contrary, the representations and warranties in this subsection (e) shall survive the Closing.

(f) Confidentiality Agreement. Buyer has fully complied with all covenants, terms, and obligations set forth in the Confidentiality Agreement and is not aware of any circumstances which may lead to a breach thereof.

(g) FIRPTA. Buyer is a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.

(h) No Security. Without implying any characterization of the Loan or any of the Loan Documents, or any part thereof or interest therein, as a “security” within the meaning of the Securities Act or any other Legal Requirement, Buyer is not purchasing the Loan or the Loan Documents in contemplation of, or for resale in connection with, any distribution, private placement or public offering of the Loan or the Loan Documents or any part thereof or any interest therein, in a manner that would violate any Legal Requirement. Buyer is acquiring the Loan and the Loan Documents for its own account, in each case not with a view to the distribution of the Loan or the Loan Documents or any interest therein within the meaning of any Securities Act, unless such distribution shall be pursuant to an effective registration statement filed in accordance with any Securities Act, or an exemption thereto. Buyer acknowledges that: (i) neither the Loan nor any of the Loan Documents has been registered or qualified under any Securities Act, (ii) Seller does not intend to so register or qualify the Loan or any of the Loan Documents, and (iii) neither the Loan nor the Loan Documents may be subsequently transferred by Buyer except in conformity with Section 6.9 below. Buyer further acknowledges and agrees that: (a) neither the Note nor any of the other Loan Documents is a “security” within the meaning of the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the “Blue Sky” laws of any state or any rule or regulation promulgated pursuant to any of the foregoing, (b) that neither the federal nor any state securities laws apply to the transactions contemplated hereby, (c) that the Buyer is not relying on, and will not seek the protections afforded by, any federal or state securities law, (d) the Buyer is motivated by commercial purposes and not investment purposes in its purchase of the Note and the other Loan Documents, and (e) the objective of the Buyer’s purchase of the Note and the other Loan Documents is to acquire any underlying real estate Collateral and not for investment in the Note or any other Loan Document itself. Notwithstanding anything contained in this Agreement to the contrary, the representations and warranties in this subsection (h) shall survive the Closing.

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(i) Accredited Investor. Buyer is (i) an “accredited investor”, (ii) an institution that qualifies as an “accredited investor”, or (iii) a “qualified institutional buyer,” as each of such terms are defined by the Securities Act of 1933, as amended, or the rules and regulations thereunder. Buyer (i) is a substantial, sophisticated purchaser having such knowledge and experience in financial and business matters, and in particular in matters relating to the purchase, sale, origination or ownership of mortgage notes, loan documents and loans including but not limited to, notes, loan documents and loans comparable to the Note, the other Loan Documents and the Loan, (ii) is capable of evaluating the merits and risks of investment in mortgage notes, loan documents and loans, including but not limited to, notes, loan documents and loans comparable to the Note, the other Loan Documents and the Loan, and (iii) understands and is able to bear the economic risks of such a purchase including, without limitation, a total loss of investment and the risk that it might be required to hold the Note and the other Loan Documents for an indefinite period of time. Buyer further represents and warrants that Buyer has, whether individually or with the assistance of professional advisors selected by Buyer, if any, the experience and capability of understanding the complexities and risks associated with purchasing the Note and the other Loan Documents. Notwithstanding anything contained in this Agreement to the contrary, the representations and warranties in this subsection (i) shall survive the Closing.

(j) No Transfers of Interest. To the extent that Buyer is an entity, none of the beneficial interests in Buyer have been assigned or otherwise transferred directly or indirectly between the Effective Date and Closing. Notwithstanding anything contained in this Agreement to the contrary, the representations and warranties in this subsection (j) shall survive the Closing.

5.2 Representations and Warranties of Seller. Seller hereby represents and warrants to Buyer as of the Effective Date and the Closing Date (except as otherwise set forth below) as follows:

(a) Authority. Seller has all requisite power and authority to execute and deliver, and to perform all of its obligations under this Agreement and the Closing Documents to be executed and delivered by Seller. The execution, delivery and performance of this Agreement by (i) Seller have been duly authorized by all necessary action on the part of Seller, (ii) do not and will not require any consent or approval of any other Person that has not been obtained or waived, (iii) do not and will not violate any provision of Seller’s organizational documents or any material provisions of any other agreement to which Seller is bound, and (iv) do not and will not conflict with any provision of any Legal Requirements to which Seller is subject.

(b) Enforcement. This Agreement constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms.

(c) Title to Foreclosure Judgment and Loan. To the extent that a Foreclosure Judgment exists, (a) Seller has good title to and is the sole owner of the Foreclosure Judgment, free and clear of all liens, claims, encumbrances and other charges whatsoever, and (b) at the time of the entry of the Foreclosure Judgment, Seller had good title to and was the sole owner of the Loan, free and clear of all liens, claims, encumbrances and other charges whatsoever except as otherwise provided in the Intercreditor Agreement (if any). To the extent that a Foreclosure Judgment does not exist, Seller has good title to and is the sole owner of the Loan, free and clear of all liens, claims, encumbrances and other charges whatsoever except as otherwise provided in the Intercreditor Agreement (if any).

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(d) Outstanding Principal Balance and Interest Paid To Date. The outstanding Principal Balance of the Loan and the Interest Paid To Date as set forth on the Loan Information Schedule are true and correct in all material respects as of the Cut-Off Date. To the extent that Seller receives any principal or interest payments from or on behalf of Borrower on account of the Loan after the Cut-Off Date and prior to Closing, Seller shall update the outstanding Principal Balance of the Loan and the Interest Paid To Date, as applicable, on the Loan Information Schedule and provide such updated Loan Information Schedule to Buyer on the Closing Date.

(e) No Modification. To the best of Seller’s knowledge and except as reflected in the Loan Files or as modified or affected by the Foreclosure Judgment (if any) or merged into the Foreclosure Judgment (if any), (a) copies of the Loan Documents delivered to Buyer have not been modified by Seller and will not be modified or amended by Seller prior to Closing, and (b) the Security Instrument has not been satisfied or canceled by Seller.

5.3 Survival of Representations and Warranties. Except as otherwise specified in this Agreement, Buyer’s and Seller’s representations and warranties under this Agreement shall survive the Closing for a period of three (3) months and any action or Claim thereon shall be instituted within such three (3) month period. For the avoidance of doubt, if any representation, warranty or other provision in this Agreement survives the Closing pursuant to the express terms thereof, such representation, warranty or provision shall survive the Closing without being subject to the three (3) month limitation in the preceding sentence.

ARTICLE VI

POST CLOSING OBLIGATIONS

6.1 Release of Seller Party. Buyer shall not accept a release of liability from any Borrower Party or grant a release of liability to any Borrower Party with respect to the Loan or the Foreclosure Judgment (if any), unless Buyer shall have used commercially reasonable efforts to obtain the simultaneous release of Seller and Seller Party from all Claims which Borrower Party could have against Seller and/or Seller Party with respect to the Loan and the Foreclosure Judgment (if any) prior to the date of such release.

6.2 Notice of Claim. Buyer shall forthwith notify Seller of any Claim or threatened Claim affecting any of the Loan or the Foreclosure Judgment (if any) where Seller or any Seller Party is named a party to such proceedings.

6.3 IRS Reporting. Buyer shall submit Internal Revenue Service Form 1098 and 1099 Information Returns for the Loan for the entire year of the year in which the Closing Date occurs, and Seller will make commercially reasonable efforts to provide necessary data for same.

6.4 Buyer’s Duties Regarding Litigation. If the Loan or Foreclosure Judgment (if any) is or becomes subject to any claim, action, order, lawsuit or other proceeding, administrative or otherwise, including but not limited to, the Foreclosure Action, the

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Receivership Action, or other foreclosure or similar action or any bankruptcy filed by or against any Borrower Party (collectively, “Litigation”), Buyer shall accept the Loan and the Foreclosure Judgment (if any) subject to such Litigation without any reduction to the Purchase Price. In such event, Buyer shall within ten (10) Business Days after the Closing Date provide Seller and the attorney(s) representing Seller in each such Litigation with the name of the attorney(s) selected by Buyer to represent Buyer’s interests in such Litigation. Buyer shall, within ten (10) Business Days after the Closing Date, notify the Receiver (if any), the applicable court and all counsel of record that ownership of the Loan and the Foreclosure Judgment (if any) was transferred from Seller to Buyer. Buyer shall have its attorney file appropriate pleadings with all applicable courts within ten (10) Business Days after the Closing Date substituting Buyer’s attomey(s) for Seller’s attorney(s), removing Seller as a party to all Litigation and substituting Buyer as the real party in interest in all such Litigation. To the extent a bond has been posted in any Litigation on behalf of the Seller (the “Seller’s Bond”), Buyer shall cause the Seller’s Bond to be released and substitute in a replacement bond at Buyer’s sole cost and expense in form and substance acceptable to the applicable court simultaneously with the substitution of Buyer as the real party in interest as provided above. To the extent that a Foreclosure Judgment exists, Buyer shall within five (5) Business Days after the Closing Date file the Assignment of Judgment with the applicable clerk of the court where the Foreclosure Action is filed. Seller shall have the right to notify the attorney(s) representing its interests to cease participating in all Litigation upon the Closing Date or any date thereafter. Seller may proceed unilaterally to have such matter dismissed without prejudice in the event such substitution of parties and counsel is not so effectuated by Buyer within said ten (10) Business Days. In addition, Buyer agrees that until such time as such substitution of parties and counsel is effected by Buyer, Seller’s counsel may, but is not obligated to, file pleadings (including, without limitation, answers, affirmative defenses and motions) and postpone hearings and foreclosure sales, all at Buyer’s sole cost and expense, Furthermore, if Buyer fails to comply with its obligations under this Section, Seller and Seller’s counsel may, but are not obligated to, take such further actions as they deem necessary to effectuate the provisions of this Section. To the extent that Seller has engaged a trustee and/or ordered a trustee sale guarantee in connection with the Foreclosure Action (“TSG”), Buyer agrees that it shall be solely responsible for any fees and charges including trustee fees and the TSG fee due to the title company and not paid prior to Closing. Buyer acknowledges that its failure to comply with the provisions of this Section may affect Buyer’s rights in any such Litigation including, without limitation, dismissal with prejudice and the running of any statute of limitations if any such action or other legal proceeding is dismissed. Buyer shall reimburse and indemnify Seller and Seller’s counsel for any reasonable costs and legal fees incurred by Seller or Seller’s counsel in connection with such proceeding from and after the Closing Date, including, without limitation, any reasonable fees and costs incurred by Seller or Seller’s counsel in connection with Buyer’s failure to comply with the above requirements. Without limitation to the foregoing, Buyer agrees to take all actions necessary to timely file evidence of the assignment and transfer of the Loan hereunder with the appropriate bankruptcy court in cases in which Seller has filed proofs of claim. To the extent that Seller has filed any proofs of claim with respect to any pending bankruptcy case involving the Loan, Seller shall execute and deliver to Buyer at Closing an Assignment of Claim in the form attached hereto as Exhibit F.

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6.5 Compliance With Laws. From and after Closing, Buyer assumes and shall undertake, comply with and discharge all Legal Requirements and all Lender Contractual Requirements pertaining to the Loan and the Foreclosure Judgment (if any) arising on or after the Closing Date (including, without limitation Legal Requirements pertaining to unfair credit collection practices or to the length of time loan documents and loan files are to be retained by lenders) to the extent non-compliance or non-performance could result in a Claim against any Seller Party. Without limitation to the foregoing, Buyer covenants and agrees that it shall comply, to the extent noncompliance could result in a Claim against Seller, in all respects with all applicable federal and state laws and regulations governing or otherwise pertaining in any manner to the servicing, collection or enforcement of the Loan or the Foreclosure Judgment (if any), including but not limited to, compliance with the following: (i) the Federal Fair Debt Collection Practices Act (15 U.S.C.A. §1691 et seq. as amended) and any state statute equivalent thereto and the Fair Credit Reporting Act (15 U.S.C.A. §1681 et seq. as amended), (ii) the Depository Institutions Deregulation and Monetary Control Act of 1980, as amended, (12 U.S.C.A. §1735f-7), (iii) the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq. as amended) and Regulation B promulgated thereunder (12 CFR Part §202), (iv) all terms, conditions and requirements of any federal or state guaranty provided under applicable federal or state law and applicable regulations thereunder or pursuant to any private mortgage insurance contract to the extent the Loan or the Foreclosure Judgment (if any) is subject to such a federal or state guaranty or private mortgage insurance contract, and/or (v) all applicable state or federal usury laws and regulations promulgated pursuant thereto.

6.6 Servicing Obligations. The Loan and the Foreclosure Judgment (if any) shall be sold and conveyed to Buyer on a servicing-released basis. As of the Closing Date, all rights, obligations, liabilities and responsibilities with respect to the servicing of the Loan shall pass to and be assumed by Buyer, and Seller Party shall be discharged from all liability therefor. Seller Party shall have no obligation to perform any servicing activities with respect to the Loan or the Foreclosure Judgment (if any) from and after the Closing Date. Seller Party shall use reasonable efforts to inform Buyer of material events which occur with respect to the Loan or the Foreclosure Judgment (if any) after the Effective Date. Buyer shall be bound by all actions taken by Seller Party with respect to the Loan and the Foreclosure Judgment (if any) prior to the Closing Date. Buyer shall take no action to communicate with any Borrower Party or to enforce or otherwise service or manage the Loan or the Foreclosure Judgment (if any) until after the Closing Date. In no event shall Buyer be deemed a third party beneficiary of any servicing contract or agreement between Seller and any Seller Party, and in no event shall Seller Party be deemed a fiduciary for the benefit of Buyer with respect to the Loan or the Foreclosure Judgment (if any).

6.7 Loan Subject to Litigation between Borrower and Seller. In the event the Loan or the Foreclosure Judgment (if any) becomes subject to litigation between any Borrower Party and Seller after the Closing Date but before any of the documents transferring the Loan and Foreclosure Judgment (if any) to Buyer have been recorded or filed, and Seller is unable to compromise, settle or cause Seller to be dismissed as a defendant in the lawsuit within sixty (60) days after commencement of such lawsuit, Seller may, in its sole discretion, and without obligation to do so, repurchase the Loan and the Foreclosure Judgment (if any) by giving a written notice to Buyer in which case the Purchase Price, less any payments on account of the

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principal of the Loan or the Foreclosure Judgment (if any) received by Buyer, shall be returned by Seller to Buyer and neither Party shall have any further obligations hereunder, except that the Confidentiality Agreement shall continue in full force and effect. As between Seller and Buyer, the Loan or Foreclosure Judgment (if any) so repurchased by Seller shall not be deemed to have been transferred and assigned to Buyer. Buyer shall cancel, void and return any proposed transfer documents to Seller in connection with the Loan and the Foreclosure Judgment (if any) repurchased hereunder.

6.8 Environmental Indemnity. Nothing in this Agreement or any documents delivered pursuant to this Agreement will prejudice Seller from seeking the benefit of any environmental indemnity delivered by any indemnitor in connection with the Loan to the extent permitted by applicable law and provided further that the rights of the then holder of the Loan are not reduced or impaired in any material respect.

6.9 No Further Transfer. Notwithstanding anything contained in the Closing Documents to the contrary, Buyer shall not, following Closing, assign or otherwise transfer any of the Loan Documents (including, without limitation, the Note) to a Person who is not an “accredited investor” within the meaning of the Securities Act of 1933, as amended, without Seller’s prior written consent, which consent may be granted or denied in Seller’s sole and absolute discretion for any reason, provided however that nothing contained herein shall prohibit (a) Buyer from collaterally assigning the Note and the other Loan Documents to a Qualified Lender (as defined below) immediately after Closing (“Collateral Assignment”), or (b) a Qualified Lender that received the Collateral Assignment from exercising its rights under the Collateral Assignment by foreclosure or otherwise. Notwithstanding the foregoing provision, Buyer acknowledges and agrees that Buyer’s obligation to close under this Agreement is not conditioned on financing. The term “Qualified Lender” shall mean and refer to a commercial bank or financial institution that provides financing to the Buyer for the transaction contemplated in this Agreement. Any transfer or assignment in violation of this Section 6.9 shall be null and void.

6.10 Survival. The provisions in this Article VI shall survive the Closing.

ARTICLE VII

DEFAULT

7.1 Seller’s Default. If Seller defaults in its obligation to complete Closing or fails to perform any material obligation under this Agreement, and fails to cure such default or failure promptly after written notice from Buyer prior to the time fixed for Closing in this Agreement, then Buyer shall have the right, as Buyer’s sole right and remedy, to either terminate this Agreement by giving written notice thereof to Seller prior to the Closing Date, whereupon Escrow Agent shall promptly refund the Deposit to Buyer, or Buyer may pursue an action for specific performance against Seller. Buyer waives all other rights and remedies. After Closing, except for those representations and warranties that survive the Closing by the terms of this Agreement, no Seller Party shall have any liability, responsibility or obligation to any Buyer Party with respect to this Agreement, the Loan, the Loan Documents or the Foreclosure Judgment (if any). Buyer waives all such liability, responsibility obligations of and all recourse against any Seller Party.

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7.2 Buyer’s Default. If for any reason, without fault of Seller, Buyer fails to pay the balance of the Purchase Price to consummate the purchase of the Loan and the Foreclosure Judgment (if any) upon the terms and conditions provided in this Agreement, or fails to comply with any other obligation under this Agreement, or fails to comply with any obligation under the Assignment Agreement or the Confidentiality Agreement, Seller may terminate this Agreement and Escrow Agent shall promptly release the Deposit to Seller, as Seller’s sole right and remedy under this Agreement, which is hereby stipulated as Seller’s liquidated damages, it being understood and agreed that it is difficult to estimate or otherwise determine the total amount of damages that would be incurred by Seller should Buyer default in its obligations under this Agreement.

7.3 Buyer’s Indemnity. Following Closing, Buyer shall indemnify, protect and hold harmless each Seller Party from and against all Claims, losses, costs and expenses (including without limitation reasonable legal fees and expenses) incurred by any Seller Party as a result of the breach of any Buyer’s representations or warranties under Article V or Buyer’s failure to observe or perform any of its agreements or obligations under Article VI or Buyer’s failure to observe or perform any other agreements or obligations under this Agreement which survive Closing pursuant to the terms thereof. The provisions in this Section shall survive the Closing.

ARTICLE VIII

BROKERAGE

Each Party represents and warrants one to the other that except as may be hereinafter set forth, neither of them has contracted with any broker or auction company in connection with the negotiations of the terms of this Agreement or the execution thereof. Seller and Buyer hereby agree to indemnify and to hold each other harmless against any loss, expense or liability with respect to any claims for commissions, finder’s fees, brokerage fees or auction fees arising from or out of any breach of the foregoing representation and warranty. Seller has advised Buyer that Option Assignor or an authorized agent for Option Assignor has contracted with Auction.com, LLC (f/k/a Real Estate Disposition, LLC), as its auction company (“Service Provider”) pursuant to a separate written agreement, and Buyer agrees that it shall be responsible for payment of the Buyer’s Premium (as defined in the Assignment Agreement) to be delivered to Service Provider at Closing as reflected in the Assignment Agreement. To the extent that a Buyer’s Broker is identified in Part I of this Agreement, (i) Buyer has disclosed to Seller that it has contracted with Buyer’s Broker, and (ii) Seller agrees to pay Buyer’s Broker the Finder’s Fee if Closing occurs under this Agreement and the Assignment Agreement provided, however, that in no event shall Seller be obligated to pay Buyer’s Broker the Finder’s Fee if (a) the Buyer is a Borrower Party or an affiliate of any Borrower Party, (b) the Buyer’s Broker is a Borrower Party or an affiliate of any Borrower Party, or (c) Buyer’s Broker is affiliated with the Buyer. Buyer agrees that, in the event that (a) the Buyer is a Borrower Party or an affiliate of any Borrower Party, (b) the Buyer’s Broker is a Borrower Party or an affiliate of any Borrower Party, or (c) Buyer’s Broker is affiliated with the Buyer, Buyer shall be solely responsible for paying Buyer’s Broker the Finder’s Fee at Closing. The provisions of this Article shall survive the Closing and termination of this Agreement.

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ARTICLE IX

NO JOINT VENTURE

Buyer acknowledges and agrees that neither Seller nor any other Seller Party is a venturer, co-venturer, insurer, guarantor or partner of Buyer in Buyer’s purchase or resale of the Loan or the Foreclosure Judgment (if any), and that Seller Party shall bear no liability whatsoever resulting from or arising out of Buyer’s ownership and/or resale of the Loan or the Foreclosure Judgment (if any). The provisions of this Article shall survive the Closing.

ARTICLE X

ESCROW TERMS

The Escrow Agent shall hold the Deposit in escrow on the following terms and conditions:

(a) The Escrow Agent shall deliver the Deposit to Seller or Buyer, as the case may be, in accordance with the provisions of this Agreement.

(b) Any notice to or demand upon the Escrow Agent shall be in writing and shall be sufficient only if received by the Escrow Agent within the applicable time periods set forth in this Agreement. Notices to or demands upon the Escrow Agent shall be sent by personal delivery, facsimile transmission or nationally recognized overnight courier service for next day delivery to the Escrow Agent Notice Address set forth in Part I of this Agreement. Notices from the Escrow Agent to Seller or Buyer shall be delivered to them in accordance with Section 11.1 of this Agreement.

(c) If Escrow Agent receives notice signed by either Party advising that litigation between the Parties over entitlement to the Deposit has been commenced, the Escrow Agent shall, on demand of either Party, deposit the Deposit with the clerk of the court in which such litigation is pending. If at any time the Escrow Agent is uncertain of its duties under this Agreement or if the Escrow Agent for any other reason is no longer willing to serve as escrow agent, the Escrow Agent may, on notice to the Parties, take such affirmative steps as it may, at its option, elect in order to terminate its duties as the Escrow Agent, including, but not limited to, the deposit of the Deposit with a court of competent jurisdiction and the commencement of an action for interpleader, the reasonable costs of which shall be borne by the losing Party. Upon Escrow Agent taking such described action, Escrow Agent shall be released of and from all liability under this Agreement as escrow agent. Escrow Agent may resign at any time upon ten (10) days’ prior written notice to the Parties. If a successor escrow agent is not appointed within this ten (10) day period, Escrow Agent may either (x) transfer the Deposit or any documents held by Escrow Agent to First American Title Insurance Company (in which case the Parties agree to split the payment of any escrow charges imposed by such substitute escrow agent) or (y) petition any court of competent jurisdiction (the “Court”) to name a successor escrow agent. Escrow Agent shall be fully relieved of all liability under this Agreement to all Parties upon the transfer of the Deposit and documents held by Escrow Agent to the successor escrow agent designated by the Parties, named in (x) above or appointed by the Court.

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(d) The Escrow Agent shall not incur any liability in acting upon any signature, notice, demand, request, waiver, consent, receipt or other paper or document believed by the Escrow Agent to be genuine. The Escrow Agent may assume that any person purporting to give it any notice on behalf of any Party in accordance with the provisions of this Agreement has been duly authorized to do so, or is otherwise acting or failing to act under this Section.

(e) The provisions of this Article shall create no right in any person, firm or corporation other than the Parties and their respective successors and permitted assigns and no third party shall have the right to enforce or benefit from the terms of this Article.

(f) Buyer acknowledges and agrees that it shall be solely responsible for payment of the following at Closing: (a) Escrow Agent’s escrow fee, which escrow fee shall be no less than $2,000.00 and no more than $6,000.00 provided however that (i) if the Purchase Price is less than $5,000,000.00, the escrow fee shall be $2,000.00, (ii) if the Purchase Price is between $5,000,000.00 and $20,000,000.00, the escrow fee shall be $4,000.00, and (iii) if the Purchase Price is more than $20,000,000.00, the escrow fee shall be $6,000.00, (b) all recording fees and charges with respect to the recording by Escrow Agent of the Assignment of Security Instrument, the Assignment of Assignment of Leases and Rents, Assignment of Judgment and the POA, as applicable, (c) the cost of a non-insured title report prepared by Escrow Agent (“Non-Insured Title Report”), the cost of which shall be no less than $250.00 and no more than $750.00 as determined by Escrow Agent. Buyer further acknowledges and agrees that, irrespective of the delivery of the Non-Insured Title Report from Escrow Agent to Buyer, (i) neither Escrow Agent nor any Seller Party is making any representations or warranties whatsoever with respect to the Non-Insured Title Report or the contents therein including, without limitation, any representations or warranties with respect to the validity, priority or perfection of any liens created by the Loan Documents or the Foreclosure Judgment (if any), the state of title, the priority of liens or the status of real estate taxes, and (ii) neither Escrow Agent nor any Seller Party shall have any liability whatsoever with respect to the Non-Insured Title Report or the contents therein.

(g) Notwithstanding anything in this Agreement or at law to the contrary, Escrow Agent shall not be liable for: (i) any acts taken in good faith but only for its intentional misconduct or gross negligence; (ii) any loss or impairment of funds in the course of collection or on deposit in a financial institution arising out of failure, insolvency or suspension of such financial institution; (iii) expiration of any time limit or other consequence of delay unless a properly executed written instruction, accepted by Escrow Agent, has instructed Escrow Agent to comply with such time limit; (iv) default, error, action or omission of any Party; (v) compliance with any legal process, subpoena, writ, order, judgment or decree, whether issued with or without jurisdiction and whether subsequently vacated, modified, set aside or reversed; or (vi) any legal effect, insufficiency or undesirability of any instrument deposited with or delivered by Escrow Agent or exchanged by the Parties whether or not Escrow Agent prepared such instrument.

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ARTICLE XI

MISCELLANEOUS

11.1 Notices. All notices or deliveries required or permitted in this Agreement shall be in writing and may be given either by personal delivery, by facsimile transmission or by nationally recognized overnight courier service for next day delivery addressed to Buyer or to Seller at the applicable address set forth in Part I of this Agreement, or such other address or facsimile number as either Party may hereafter designate by notice to the other Party, making specific reference to this Section of the Agreement. Notice given by personal delivery in accordance herewith shall be effective upon delivery at the address of the addressee. Notice given by overnight courier in accordance herewith shall be effective on the date of the first attempted delivery of the overnight courier. Notice by facsimile transmission shall be effective upon delivery and verification of communication between transmitting facilities.

11.2 Severability. If any provision of this Agreement or any Closing Document shall for any reason be held invalid or unenforceable, the invalidity or unenforceability of any such provision shall in no way affect the validity or enforceability of any other provision of this Agreement or any Closing Document, provided, however, if the invalidity or unenforceability of any provision shall materially deprive either Party of the economic benefit intended to be conferred by this Agreement or any Closing Document, the Parties shall negotiate in good faith to restructure this Agreement in a manner whereby the economic effect is as nearly as possible the same as the economic effect of this Agreement prior to such invalidity or unenforceability

11.3 Joint Undertaking. In addition to the obligations expressly required to be performed under this Agreement by Seller and Buyer, each Party agrees to cooperate with the other and to perform such other acts and to execute, acknowledge and deliver before and after Closing, such other instruments, documents and material as a Party may reasonably request and as shall be necessary in order to effect the consummation of the transactions contemplated under this Agreement; provided that no such other instrument, document or material shall either extend or enlarge the obligations of the non-requesting Party beyond the express undertakings of this Agreement or shall require or could require the non-requesting Party to make any payment or to incur any material expense (including without limitation material legal fees), unless the requesting Party shall promptly reimburse the non-requesting Party.

11.4 Entire Agreement, Except for the Confidentiality Agreement which shall survive the execution and delivery hereof, this Agreement constitutes the entire agreement between the Parties with respect to the subject matter of this Agreement, and supersedes all prior or contemporaneous agreements, representations or warranties of the Parties. No alteration, amendment, modification or waiver of any of the terms or provisions hereof, and no future representation or warranty by either Party with respect to this transaction, shall be valid or enforceable unless the same be in writing and signed by the Party against whom enforcement of same is sought.

11.5 Counterparts and Electronic Signatures, This Agreement and the Closing Statement may be executed in multiple counterparts by the Parties hereto, All counterparts so executed shall constitute one agreement binding upon all parties, notwithstanding that all parties are not signatories to the original or the same counterpart. Each counterpart shall be deemed an

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original all of which shall constitute one agreement to be valid as of the date of this Agreement. Facsimile, documents executed, scanned and transmitted electronically and electronic signatures shall be deemed original signatures for purposes of this Agreement and all matters related thereto, with such facsimile, scanned and electronic signatures having the same legal effect as original signatures. The Parties agree that this Agreement and any other document necessary for the consummation of the transaction contemplated by this Agreement may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, Title 15, United States Code, Sections 7001 et seq., the Uniform Electronic Transaction Act and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on the Parties as if such document was physically executed and Buyer hereby consents to the use of any third party electronic signature capture service providers as may be chosen by Seller or Service Provider.

11.6 Legal Counsel and Joint Authorship. Each of the Parties has received independent legal advice from attorneys of its choice with respect to the advisability of making and executing this Agreement and the Closing Documents or waived its right to do so. Buyer hereby acknowledges that Seller’s counsel is not representing the Buyer or any interests of Buyer in connection with this Agreement or any other matter and that Seller’s counsel has informed Buyer that Buyer should consult with an attorney of Buyer’s choice prior to the execution of this Agreement. In the event of any dispute or controversy regarding authorship of this Agreement or the Closing Documents, the Parties shall be conclusively deemed to be the joint authors of this Agreement and the Closing Documents and no provision of this Agreement or the Closing Documents shall be interpreted against a Party by reason of authorship.

11.7 Assignment. This Agreement and the terms, covenants, conditions, provisions, obligations, undertakings, rights and benefits hereof, including the exhibits hereto, shall be binding upon, and shall inure to the benefit of, the Parties and their respective heirs, executors, administrators, representatives, successors, and assigns; provided, however, it is understood and agreed that Buyer shall not assign, transfer or otherwise dispose of this Agreement or any rights or interests hereunder without first obtaining the prior written consent of Seller, which consent may be withheld by Seller for any reason whatsoever. Any attempted assignment, transfer or other disposition of this Agreement shall be null and void. Notwithstanding the foregoing or any other provision in this Agreement to the contrary, Buyer shall have a one time right to assign this Agreement to a Buyer Affiliate (as defined below) without Seller’s consent so long as (i) Buyer has provided Seller and Escrow Agent with prior written notice of Buyer’s intent to assign to Buyer Affiliate, (ii) the assignment to Buyer Affiliate occurs no later than five (5) Business Days prior to Closing, (iii) Buyer assigns the Deposit and the Assignment Agreement to Buyer Affiliate, (iv) Buyer Affiliate executes an agreement wherein the Buyer Affiliate assumes the obligations of the Buyer under this Agreement, the Assignment Agreement and the Confidentiality Agreement, (v) Buyer and Buyer Affiliate represent and warrant to Seller in writing, which representation and warranty shall survive Closing, that (a) to the extent that Buyer is an individual, Buyer Affiliate is wholly owned and controlled directly by the Buyer, or (b) to the extent that Buyer is an entity, Buyer Affiliate is wholly owned and controlled directly and identically as the Buyer on the Effective Date, such that the party or parties that directly own and control the interests in the Buyer as of the Effective Date shall be identical to the party or parties that directly own and control the interests in the Buyer Affiliate with such party or parties owning the same percentage interests and holding the same or equivalent managerial position in

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the Buyer Affiliate as such party or parties own and hold in the Buyer as of the Effective Date, (vi) Buyer acknowledges in writing that it remains liable under this Agreement, the Assignment Agreement and the Confidentiality Agreement notwithstanding the assignment to Buyer Affiliate, and (vii) Buyer Affiliate shall, at Closing, pay Seller’s counsel $500.00 for any revisions that are necessary to the Closing Documents as a result of the assignment. The term “Buyer Affiliate” as used herein shall mean (a) to the extent that the Buyer is an individual, an entity that is wholly owned and controlled directly by the Buyer, or (b) to the extent that Buyer is an entity, an entity that is wholly owned and controlled directly and identically as the Buyer on the Effective Date (the “New Entity”) such that the party or parties that directly own and control the interests in the Buyer as of the Effective Date shall be identical to the party or parties that directly own and control the interests in the New Entity with such party or parties owning the same percentage interests and holding the same or equivalent managerial position in the New Entity as such party or parties own and held in the Buyer as of the Effective Date. By way of example only, assume Buyer is a limited liability company and A, B, C and D each own and control directly a 25% membership interest in Buyer and A is the manager of Buyer. In such example, in order for an entity to qualify as a “Buyer Affiliate”, A, B, C and D would each have to own and control directly a 25% interest in such entity and A would have to serve as the manager (if the entity was an limited liability company) or such other equivalent capacity (if the entity was an entity other than a limited liability company) of such entity.

11.8 No Obligation Of Seller After Closing. Buyer expressly acknowledges and agrees that Seller has no obligation with respect to the Loan or the Foreclosure Judgment (if any) which survives Closing, except as specifically set forth in this Agreement. The provisions of this Section shall survive the Closing.

11.9 Recording. This Agreement shall not be recorded and Buyer agrees that recording same constitutes a default by Buyer under this Agreement.

11.10 Time of the Essence. Seller and Buyer expressly agree that time is of the essence with respect to this Agreement.

11.11 Governing Law. TO THE EXTENT NOT CONTROLLED BY FEDERAL LAW, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED (WITHOUT REGARD TO CONFLICTS OF LAW). THIS AGREEMENT IS PERFORMABLE IN THE STATE IN WHICH THE PROPERTY IS LOCATED, AND ALL DISPUTES AND MATTERS WHATSOEVER ARISING UNDER, IN CONNECTION WITH OR INCIDENT TO THIS AGREEMENT SHALL BE LITIGATED, IF AT ALL, IN AND BEFORE A COURT LOCATED IN THE COUNTY IN WHICH THE PROPERTY IS LOCATED, TO THE EXCLUSION OF THE COURTS OF ANY OTHER STATE OR COUNTY.

11.12 Attorneys’ Fees. If either Party defaults in the performance of any of its obligations under this Agreement or if any dispute arises between the Parties hereto concerning the meaning or interpretation of any provision of this Agreement, then the defaulting Party or the Party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in enforcing or establishing its rights under this Agreement, including, without limitation, court costs (including costs of any trial or appeal therefrom) and reasonable attorneys’ fees and disbursements. This provision shall survive the Closing.

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11.13 Holidays. Wherever this Agreement provides for a date, day or period of time on or prior to which action or events are to occur or not occur, and if such date, day or last day of such period of time falls on a day which is not a Business Day or is not a business day in the state in which the Property is located, then the same shall be deemed to fall on the immediately following Business Day.

11.14 No Third Party Beneficiary. Other than provisions of this Agreement dealing with the Seller Party, the provisions of this Agreement are not intended to benefit any Person not a Party.

11.15 Submission of Drafts. The submission of a draft, or a marked up draft, of this Agreement by one Party to another is not intended by either Party to be an offer to enter into a legally binding agreement with respect to the purchase and sale of the Loan and the Foreclosure Judgment (if any). The Parties shall be legally bound with respect to the purchase and sale of the Loan and the Foreclosure Judgment (if any) pursuant to the terms of this Agreement only if and when the Parties have fully executed and delivered to each other a counterpart of this Agreement.

11.16 Simultaneous Closing. Notwithstanding anything contained in this Agreement to the contrary, the Assignment Agreement and this Agreement shall be closed simultaneously. In the event the Assignment Agreement is terminated by Option Assignor, this Agreement shall automatically terminate whereupon the Deposit shall be refunded to the Buyer promptly by Escrow Agent unless Buyer is in default under any provision of this Agreement, the Assignment Agreement or the Confidentiality Agreement, in which event Escrow Agent shall promptly release the Deposit to Seller in accordance with Section 7.2 above, whereupon this Agreement shall be rendered null and void and the Confidentiality Agreement shall remain in full force and effect. Similarly, in the event this Agreement is terminated, the Assignment Agreement shall automatically terminate whereupon the Deposit shall be refunded to the Buyer promptly by Escrow Agent unless Buyer is in default under any provision of this Agreement, the Assignment Agreement or the Confidentiality Agreement, in which event Escrow Agent shall promptly release the Deposit to Seller in accordance with Section 7.2 above, whereupon the Assignment Agreement shall be rendered null and void and the Confidentiality Agreement shall remain in full force and effect.

11.17 Intentionally Deleted.

11.18 Merger of Loan and Loan Documents into Foreclosure Judgment (if any). Notwithstanding anything contained in this Agreement or the Assignment Agreement to the contrary, to the extent that a Foreclosure Judgment exists, Buyer acknowledges that (i) the Loan and the Loan Documents may have merged with the Foreclosure Judgment and that Buyer is assuming all risk with respect to the same, (ii) all references in this Agreement or the Assignment Agreement including, without limitation, all closing documents delivered by Seller or Option Assignor to Buyer pursuant to the terms of this Agreement and the Assignment Agreement, respectively (collectively, the “Loan Assignment Documents”) with respect to the

25

Loan, the Note, the Security Instrument and/or the Loan Documents are made only to the extent that the Loan and the Loan Documents have not merged with the Foreclosure Judgment, and (iii) Buyer, by its acceptance of the Loan Assignment Documents at Closing, acknowledges and agrees that the Loan Assignment Documents are made only to the extent that the Loan Documents have not merged with the Foreclosure Judgment. Notwithstanding the foregoing, it is Seller’s intention to assign to Buyer any and all interests that it may have in the Loan Documents and Seller hereby acknowledges and agrees that once Closing occurs, it shall not retain any interest in the Loan Documents and, to the extent that any reversionary rights arise as a result of an appeal of the Foreclosure Judgment, Seller hereby assigns the same to Buyer. This provision shall survive the Closing.

11.19 Borrower Party Release.

(a) To the extent that any Borrower Party or an affiliate of any Borrower Party is affiliated, directly or indirectly, with Buyer or Buyer Affiliate (if any), each Borrower Party and any Master Tenant (as defined below) shall execute and deliver to Seller the Joinder by Borrower Party attached hereto (the “Borrower Party Joinder”) simultaneously with the execution by Buyer of this Agreement thereby acknowledging and agreeing as follows: (A) for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Borrower Party and Master Tenant (if any) absolutely and irrevocably waives, releases and forever discharges Seller Party from any and all representations, warranties, agreements, liabilities, obligations, expenses, damages, actions, inactions, claims, counterclaims, set offs demands and causes of action of any nature whatsoever, at law or in equity, known or unknown which such Borrower Party now has or hereafter can, shall or may have the right to assert by reason of any matter or cause arising out of or relating to: (i) the Loan, (ii) the administration of the Loan or any Cash Management Accounts, (iii) the Loan Documents (including, without limitation, any Cash Management Agreement), (iv) the indebtedness under the Loan Documents, (v) any other agreements or transactions between any Borrower Party and any Seller Party relating to the Loan, the Loan Documents (including, without limitation, any Cash Management Agreement) or the Property, and (vi) the Property or its operation (all of the foregoing collectively, “Borrower Party Claims”), including, without limitation, any and all Borrower Party Claims which are presently unknown, unsuspected, unanticipated or undisclosed (all of the foregoing shall be referred to as the “Borrower Party Release”); (B) to the extent that any claim, counterclaim, action, lawsuit or other proceeding, administrative or otherwise, has been filed by any Borrower Party or Master Tenant (if any) against any Seller Party relating to the Loan, the Loan Documents or the Property (“Borrower Claim”), such Borrower Party and Master Tenant, as applicable, shall withdraw and dismiss the Borrower Claim with prejudice prior to or at Closing and shall provide Seller with evidence of the same at or prior to Closing (the “Dismissal of Borrower Claim”); (C) each Borrower Party and Master Tenant (if any) shall, upon request by any Seller Party, execute and deliver to such Seller Party a separate document at or after Closing confirming the terms of this Section 11.19 (including, without limitation, the Borrower Party Release and the Dismissal of Borrower Claim); and (D) each Borrower Party and Master Tenant (if any) acknowledges and agrees that, notwithstanding anything contained in this Agreement, any other agreement executed in connection with the transaction contemplated in this Agreement or in the Closing Documents, neither Master Tenant (if any) nor any Borrower Party shall be entitled to rely on any of the representations or warranties in this Agreement.

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(b) By executing this Agreement, (A) Buyer represents and warrants to Seller that neither Buyer nor Buyer Affiliate (if any) is a Borrower Party, (B) Buyer acknowledges and agrees that, if any Borrower Party or an affiliate of any Borrower Party is affiliated, directly or indirectly, with Buyer or Buyer Affiliate (if any), (i) neither Buyer nor Buyer Affiliate (if any) shall be entitled to rely on the representations or warranties contained in subsections (d) and (e) in Section 5.2 of this Agreement notwithstanding anything to the contrary in this Agreement, in any other agreement executed in connection with the transaction contemplated in this Agreement or in the Closing Documents, and (ii) this Agreement and any other agreement executed in connection with the transaction contemplated in this Agreement (the “Other Agreement”) shall not be effective unless each Borrower Party and Master Tenant (if any) shall have executed and delivered to Seller the Borrower Party Joinder notwithstanding anything to the contrary in this Agreement or in any Other Agreement, (C) to the extent that each Borrower Party and Master Tenant (if any) have not executed and delivered to Seller the Borrower Party Joinder simultaneously with the execution of this Agreement by Buyer, Buyer represents and warrants to Seller that neither Buyer nor Buyer Affiliate (if any) is affiliated, directly or indirectly, with any Borrower Party or any affiliate of any Borrower Party, (D) notwithstanding anything to the contrary contained in this Agreement (including, without limitation, (B)(ii) above in this subsection (b) of Section 11.19), in the event that each Borrower Party and Master Tenant (if any) have not executed and delivered to Seller the Borrower Party Joinder simultaneously with the execution of this Agreement by Buyer and Seller discovers prior to Closing that any Borrower Party or an affiliate of any Borrower Party is affiliated, directly or indirectly, with Buyer or Buyer Affiliate (if any), Escrow Agent shall be entitled to immediately release the Deposit to Seller, Seller shall have the right to retain such Deposit without providing the Borrower or any other party with any credit under the Loan or the Loan Documents, and neither Seller nor Option Assignor shall have any obligation under this Agreement or any Other Agreement, respectively, (E) without limiting any other provision in this Agreement, in the event that each Borrower Party and Master Tenant (if any) have not executed and delivered to Seller the Borrower Party Joinder simultaneously with the execution of this Agreement by Buyer and Seller discovers after Closing that any Borrower Party or an affiliate of any Borrower Party is affiliated, directly or indirectly, with Buyer or Buyer Affiliate (if any), Buyer acknowledges and agrees that (i) Buyer shall cause each Borrower Party and Master Tenant (if any) to immediately execute and deliver to Seller the Borrower Party Joinder including, without limitation, a Borrower Party Release and the Dismissal of Borrower Claim, and (ii) Buyer shall be solely responsible for any Borrower Party Claims (including, without limitation, any Borrower Claim) and any and all liability therefor, and Buyer shall indemnify and hold Seller Party harmless as a result of any such Borrower Party Claims (including, without limitation, any Borrower Claim) and liability provided that nothing contained herein shall limit Seller’s remedies at law or in equity including, without limitation, the remedy of damages for fraud or misrepresentation. The term “Master Tenant” as used herein shall mean the tenant under the master lease or operating lease, if any, with respect to the Property to the extent that such tenant is an affiliate of any Borrower Party.

(c) To the extent that each Borrower Party and Master Tenant (if any) shall have executed and delivered to Seller the Borrower Party Joinder simultaneously with the execution by Buyer of this Agreement: (i) Buyer has disclosed to Seller that Buyer is affiliated with the Borrower Party, (ii) the last sentence of subsection (c) in Section 5.1 of this Agreement is hereby deleted in its entirety, (iii) subsection (d) in Section 5.1 of this Agreement is hereby amended to

27

read as follows: “Buyer is neither an Interested Party nor the Borrower”, (iv) to the extent that the term “Borrower” is included in the definition of Interested Party in Part I of this Agreement, such term shall be deemed deleted for purposes of the representation in subsection (d) of Section 5.1 of this Agreement, and (v) subsection (A) in subsection (b) of Section 11.19 of this Agreement is hereby amended to read as follows: “Buyer represents and warrants to Seller that neither Buyer nor Buyer Affiliate (if any) is the Borrower”.

(d) The provisions of this Section 11.19 shall survive the Closing and the termination of this Agreement.

11.20 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES, IRREVOCABLY AND UNCONDITIONALLY, TRIAL BY JURY IN ANY ACTION BROUGHT ON, UNDER OR BY VIRTUE OF OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY OF THE DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT, THE LOAN, THE LOAN DOCUMENTS, THE PROPERTY OR ANY CLAIMS, DEFENSES, RIGHTS OF SET-OFF OR OTHER ACTIONS PERTAINING TO ANY OF THE FOREGOING.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

28

IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement.

Signed, sealed and delivered in the presence of:

SELLER:
MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company
By:	LNR Partners, LLC, a Florida limited liability company, its manager

Signature:	/s/    Adriana Sera	By:	/s/    Isaac Pesin
Print Name:	Adriana Sera	Name:	Isaac Pesin
		Title:	Vice President
Signature:	/s/    Nulise Santana
Print Name:	Nulise Santana
		Dated:	10/6/11

	BUYER:
Signed, sealed and delivered in the presence of:		Resource Real Estate Opportunity OP, LP,
		a Delaware limited partnership
		By: Resource Real Estate Opportunity REIT,
		Inc., a Delware corporation, general partner
		DocuSigned by:
Signature:	By:	/s/    Alan Feldman
Print Name:	Name: Alan Feldman
	Title: Chief Executive Officer
Signature:
Print Name:	Dated: 10/6/2011

EXECUTION BY ESCROW AGENT

The Escrow Agent executes this Agreement for the sole purposes of acknowledging its agreement to serve as Escrow Agent in accordance with the terms of the Agreement,

COMMERCE TITLE COMPANY OF AMERICA, LLC
By:	/s/    Yvette Cantu
Name:	Yvette Cantu
Title:	Commercial Notes Manager
Date:	10/6/11

JOINDER BY BORROWER PARTY

The undersigned join herein for the purpose of acknowledging and agreeing to the terms and conditions set forth in Section 11.19 of the Agreement for Sale and Purchase of Loan (the “Loan Sale Agreement”) to which this Joinder by Borrower Party (the “Joinder”) is attached. The undersigned hereby represent and warrant to Seller that the Person signing on behalf of the Borrower, the Guarantor (to the extent that the Guarantor is an entity) and the Master Tenant (if any) has the requisite power and authority to execute and deliver the attached on behalf of the Borrower, the Guarantor and the Master Tenant, as applicable. All capitalized terms in this Joinder shall have the meaning ascribed to such term in the Loan Sale Agreement.

Signed, sealed and delivered in the presence of:	BORROWER:
Signature:	By:
Print Name:	Name:
	Title:
Signature:
Print Name:	Dated:
Signed, sealed and delivered in the presence of:	GUARANTOR:
Signature:
Print Name:
Signature:	Dated:
Print Name:
Signed, sealed and delivered in the presence of:	MASTER TENANT:
Signature:	By:
Print Name:	Name:
	Title:
Signature:
Print Name:	Dated:

LOAN INFORMATION SCHEDULE

SEE ATTACHED INCORPORATED

HEREIN BY REFERENCE

Southeast Note Sale

EXHIBIT A

ASSIGNMENT OF LOAN DOCUMENTS

(ING US Students No. 14; Loan No. 700401153)

MSC1 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company (“Assignor”), whose address is c/o LNR Partners, LLC, 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby assigns, transfers, sets over and conveys to                 , a                                 (“Assignee”), whose address is                 ,                 ,                 ,                 all Assignor’s right, title and interest in and to the documents described on Schedule A attached hereto, as the same may have been assigned, amended, supplemented, restated or modified.

TO HAVE AND TO HOLD the same unto Assignee and its successors and assigns forever.

This Assignment is made without recourse or representation or warranty, express, implied or by operation of law, of any kind and nature whatsoever.

The foregoing paragraph shall not impair Assignor’s representations and warranties pursuant to Section 5.2 of the Agreement for Sale and Purchase of Loan dated                 , 2011 between the Assignor and Assignee.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

IN WITNESS WHEREOF, Assignor has duly executed this Assignment as of                 , 2011, to be effective as of                 , 2011.

	MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company
	By:	LNR Partners, LLC, a Florida limited liability company, its manager
Signature:		By:
Print Name:		Name:
		Title:
Signature:
Print Name:

STATE OF FLORIDA	)
	) SS.:
COUNTY OF MIAMI-DADE	)

The foregoing instrument was acknowledged before me this             day of             , 2011, by                             as                         of LNR Partners, LLC, a Florida limited liability company, successor by statutory conversion to LNR Partners, Inc., a Florida corporation, on behalf of said entity as the manager of MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company. He is             personally known to me or            has produced a Florida driver’s license as identification.

My Commission Expires:
	Print Name:
[NOTARIAL SEAL]	NOTARY SEAL:
	Serial No., if any:

SCHEDULE A

1. Promissory Note dated as of June 28, 2006, in the original principal amount of $10,500,000.00 made by ING US Students No. 14 LLC, a Delaware limited liability company (“Borrower”), to Morgan Stanley Mortgage Capital Inc., a New York corporation (“Original Lender”).

2. Mortgage and Security Agreement executed by Borrower in favor of Original Lender dated as of June 28, 2006, recorded as Instrument No. 2006313158, in O.R. Book 16649, Page 1857, in the Public Records of Hillsborough County, Florida (“Records”).

3. Assignment of Leases and Rents executed by Borrower in favor of Original Lender dated as of June 28, 2006, recorded as Instrument No. 2006313159, in O.R. Book 16649, Page 1918 in the Records.

4. UCC Financing Statement reflecting Borrower, as debtor, recorded as Instrument No. 2006313160, in O.R. Book 16649, Page 1934 of the Records, as amended and/or assigned.

5. UCC Financing Statement reflecting Borrower, as debtor, filed under File No. 6229392 6 with the Delaware Secretary of State, as amended and/or assigned.

6. Guaranty of Recourse Obligations of Borrower dated as of June 28, 2006, executed by ING US Community Living Fund Inc., a Maryland corporation (“Guarantor”) in favor of Original Lender.

7. Environmental Indemnity Agreement dated as of June 28, 2006, executed by Borrower and Guarantor in favor of Original Lender.

8. Conditional Assignment of Management Agreement dated as of June 28, 2006, executed by Borrower in favor of Original Lender, and acknowledged and agreed to by Housing Trust Management Group, Inc., a Florida corporation.

9. Reserve and Security Agreement dated as of June 28, 2006, executed by Borrower in favor of Original Lender.

EXHIBIT B

(Space above is for Recorder’s use)

Recorded By:

And When Recorded Mail To:

ASSIGNMENT OF MORTGAGE

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company (“Assignor”), whose address is c/o LNR Partners, LLC, 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby assigns, transfers, sets over and conveys to                          , a                                                           (“Assignee”), whose address is                             ,                             ,                                                          , all Assignor’s right, title and interest in and to the Mortgage and Security Agreement (the “Security Instrument”) executed by ING US Students No, 14 LLC, a Delaware limited liability company, in favor of Morgan Stanley Mortgage Capital Inc., a New York corporation, dated as of June 28, 2006, recorded as Instrument No. 2006313158, in O.R. Book 16649, Page 1857 of the Public Records of Hillsborough County, Florida (the “Records”), as assigned pursuant to that certain

Assignment of Mortgage and Security Agreement recorded as Instrument No. 2007057012, in O.R. Book 17417, Page 826 in the Records, and as further assigned pursuant to that certain Assignment of Mortgage and Security Agreement and Other Loan Documents recorded as Instrument No. 2010315779, in O.R. Book 20089, Page 1591 in the Records, all as the same may have been assigned, amended, supplemented, restated or modified.

The Security Instrument relates to the real property described in Schedule A attached hereto.

TO HAVE AND TO HOLD the same unto Assignee and its successors and assigns forever.

This Assignment is made without recourse or representation or warranty, express, implied or by operation of law, of any kind and nature whatsoever.

The foregoing paragraph shall not impair Assignor’s representations and warranties pursuant to Section 5.2 of the Agreement for Sale and Purchase of Loan dated                         , 2011 between the Assignor and Assignee.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

2

IN WITNESS WHEREOF, Assignor has duly executed this Assignment on                         , 2011, to be effective as of                         , 2011.

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company
By:	LNR Partners, LLC, a Florida limited liability company, its manager

Signature:	By:
Print Name:	Name:
	Title:

Signature:

Print Name:

STATE OF FLORIDA	)
	)SS.:
COUNTY OF MIAMI-DADE	)

The foregoing instrument was acknowledged before me this             day of                         , 2011, by                             as                         of LNR Partners, LLC, a Florida limited liability company, successor by statutory conversion to LNR Partners, Inc., a Florida corporation, on behalf of said entity as the manager of MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company. He is          personally known to me or          has produced a Florida driver’s license as identification.

My Commission Expires:
	Print Name:

[NOTARIAL SEAL]	NOTARY SEAL:
	Serial No., if any:

SCHEDULE A

LEGAL DESCRIPTION

PARCEL I: (FEE SIMPLE)

A PARCEL OF LAND LYING IN THE SOUTH 660 FEET OF THE NORTH 710 FEET OF THE EAST 660 FEET OF THE WEST 685 FEET OF THE NORTHEAST  ¹/4 OF SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH COUNTY, FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCE AT THE NORTHWEST CORNER OF THE NORTHEAST 1/4 OF SAID SECTION 10; THENCE SOUTH 00°03’27” WEST, ALONG THE WEST BOUNDARY LINE OF THE NORTHEAST OF SAID SECTION 10,50.00 FEET TO A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE EXTENDED; THENCE SOUTH 89°59’33” EAST, ALONG SAID SOUTH RIGHT-OF-WAY LINE AND EXTENSION THEREOF, 50.00 FEET, SOUTH OF AND PARALLEL TO THE NORTH BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 274.49 FEET TO THE POINT OF BEGINNING; THENCE CONTINUE ALONG SAID SOUTH RIGHT-OF-WAY LINE SOUTH 89°59’33” EAST, 50.00 FEET SOUTH OF AND PARALLEL TO SAID NORTH BOUNDARY LINE, 210.51 FEET; THENCE LEAVE SAID SOUTH RIGHT-OF-WAY LINE, SOUTH 00°03’27” WEST 100.00 FEET; THENCE NORTH 89°59’33” WEST, 12.50 FEET; THENCE SOUTH 00°03’27” WEST, 120.00 FEET; THENCE NORTH 89°59’33” WEST, 227.50 FEET; TO A POINT 245.00 FEET EAST OF THE WEST BOUNDARY LINE OF THE NORTHEAST 1/4 OF SAID SECTION 10; THENCE NORTH 00°03’27” EAST 245.00 FEET EAST OF AND PARALLEL TO THE SAID WEST BOUNDARY LINE, 166.67 FEET; THENCE NORTH 45°03’27” EAST, 26.00 FEET TO THE POINT OF A CURVE TO THE LEFT, SAID CURVE HAVING FOR ITS ELEMENTS A RADIUS OF 18,50 FEET A CHORD BEARING AND DISTANCE OF NORTH 22°33’27” EAST, 14.16 FEET, THENCE ALONG THE ARC OF SAID CURVE, 14.53 FEET TO A POINT OF REVERSE CURVATURE TO THE RIGHT, SAID CURVE HAVING FOR ITS ELEMENTS A RADIUS OF 45.00 FEET, A CHORD BEARING AND DISTANCE OF NORTH 14°36’39” EAST, 22.62 FEET, THENCE ALONG THE ARC OF SAID CURVE, 22.86 FEET, TO A POINT ON THE SAID SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE AND THE POINT OF BEGINNING.

(ALSO KNOWN AS LOT 1 OF 56TH AND FLETCHER OFFICE PARK, A PLATTED SUBDIVISION WITH NO IMPROVEMENTS, SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH, FLORIDA AS RECORDED IN PLAT BOOK 108 AT PAGE 155 OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.)

AND

A PARCEL OF LAND LYING IN THE SOUTH 660 FEET OF THE NORTH 710 FEET OF THE EAST 660 FEET OF THE WEST 685 FEET OF THE NORTHEAST  ¹/4 OF SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH COUNTY, FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCE AT THE NORTHWEST CORNER OF THE NORTHEAST  ¹/4 OF SAID SECTION 10; THENCE SOUTH 00°03’27” WEST, ALONG THE WEST BOUNDARY LINE OF THE NORTHEAST ¹/4 OF SAID SECTION 10,50.00 FEET TO A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE EXTENDED; THENCE SOUTH 89°59’33” EAST, ALONG SAID SOUTH RIGHT-OF-WAY LINE AND EXTENSION THEREOF, 50.00 FEET SOUTH OF AND PARALLEL TO THE NORTH BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10,485.00 FEET TO THE POINT OF BEGINNING; THENCE CONTINUE ALONG SAID SOUTH RIGHT-OF-WAY LINE SOUTH 89°59’33” EAST, 50.00 FEET SOUTH OF AND PARALLEL TO SAID NORTH BOUNDARY LINE, 200.00 FEET; THENCE LEAVE SAID SOUTH RIGHT-OF-WAY LINE, SOUTH 00°03’27 WEST, ALONG A LINE 685.00 FEET EAST OF AND PARALLEL TO THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 660.00 FEET; THENCE NORTH 89°59’33” WEST, 320.00 FEET; THENCE NORTH 00°03’27” EAST 440.00 FEET; THENCE SOUTH 89°59’33” EAST, 107.50 FEET; THENCE NORTH 00°83’27” EAST, 120.00 FEET; THENCE SOUTH 89°59’33” EAST, 12.50 FEET; THENCE NORTH 00°03’27” EAST 100.00 FEET TO THE POINT OF BEGINNING.

(ALSO KNOWN AS LOT 4 OF 56TH AND FLETCHER OFFICE PARK, A PLATTED SUBDIVISION WITH NO IMPROVEMENTS, SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH, FLORIDA AS RECORDED IN PLAT BOOK 108 AT PAGE 155 OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.)

TAX PARCEL ID 36514-0000

PARCEL II: (EASEMENT)

EASEMENT RIGHTS FOR INGRESS, EGRESS UTILITY AND DRAINAGE SERVICES RECORDED IN OFFICIAL RECORDS BOOK 11189, PAGE 636 AND AS AMENDED TO ALSO INCLUDE SIDEWALK AND DUMPSTER EASEMENTS IN O.R. BOOK 14312, PAGE 593 AND AS SET FORTH ON THE PLAT RECORDED IN PLAT BOOK 108, PAGES 155 THROUGH 160, OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.

PARCEL III: (EASEMENT)

EASEMENT RIGHTS FOR ACCESS AND SANITARY SEWER AS SET FORTH IN THAT CERTAIN GRANT OF EASEMENT RECORDED IN O.R. BOOK 8847, PAGE 552.

2

EXHIBIT C

(Space above is for Recorder’s use)

Recorded By:

And When Recorded Mail To:

ASSIGNMENT OF ASSIGNMENT OF LEASES AND RENTS

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company (“Assignor”), whose address is c/o LNR Partners, LLC, 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby assigns, transfers, sets over and conveys to                             , a                                                           (“Assignee”), whose address is                             ,                             ,                             , all

Assignor’s right, title and interest in and to the Assignment of Leases and Rents (the “ALR”) executed by ING US Students No. 14 LLC, a Delaware limited liability company, in favor of Morgan Stanley Mortgage Capital Inc., a New York corporation dated as of June 28, 2006, recorded as Instrument No. 2006313159, in O.R. Book 16649, Page 1918 of the Public Records of Hillsborough County, Florida (the “Records”), as assigned pursuant to that certain Assignment of Assignment of Leases and Rents recorded as Instrument No. 2007057013, in O,R. Book 17417, Page 831 in the Records, and as further assigned pursuant to that certain Assignment of Assignment of Leases and Rents recorded as Instrument No. 2010315780, in O.R. Book 20089, Page 1597 in the Records, all as the same may have been assigned, amended, supplemented, restated or modified.

The ALR relates to the real property described in Schedule A attached hereto.

TO HAVE AND TO HOLD the same unto Assignee and its successors and assigns forever.

This Assignment is made without recourse or representation or warranty, express, implied or by operation of law, of any kind and nature whatsoever.

The foregoing paragraph shall not impair Assignor’s representations and warranties pursuant to Section 5.2 of the Agreement for Sale and Purchase of Loan dated         , 2011 between the Assignor and Assignee.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

2

IN WITNESS WHEREOF, Assignor has duly executed this Assignment on                         , 2011, to be effective as of                         , 2011.

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company
By:	LNR Partners, LLC, a Florida limited liability company, its manager

Signature:	By:
Print Name:	Name:
	Title:

Signature:

Print Name:

STATE OF FLORIDA	)
	)SS.:
COUNTY OF MIAMI-DADE	)

The foregoing instrument was acknowledged before me this          day of                 , 2011,by                              as                              of LNR Partners, LLC, a Florida limited liability company, successor by statutory conversion to LNR Partners, Inc., a Florida corporation, on behalf of said entity as the manager of MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company. He is                  personally known to me or has                  produced a Florida driver’s license as identification.

My Commission Expires:
	Print Name:
[NOTARIAL SEAL]	NOTARY SEAL:
	Serial No., if any:

SCHEDULE A

LEGAL DESCRIPTION

PARCEL I: (FEE SIMPLE)

A PARCEL OF LAND LYING IN THE SOUTH 660 FEET OF THE NORTH 710 FEET OF THE EAST 660 FEET OF THE WEST 685 FEET OF THE NORTHEAST  ¹/4 OF SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH COUNTY, FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCE AT THE NORTHWEST CORNER OF THE NORTHEAST  ¹/4 OF SAID SECTION 10; THENCE SOUTH 00°03’27” WEST, ALONG THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10,50.00 FEET TO A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE EXTENDED; THENCE SOUTH 89°59’33” EAST, ALONG SAID SOUTH RIGHT-OF-WAY LINE AND EXTENSION THEREOF, 50.00 FEET SOUTH OF AND PARALLEL TO THE NORTH BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 274.49 FEET TO THE POINT OF BEGINNING; THENCE CONTINUE ALONG SAID SOUTH RIGHT-OF-WAY LINE SOUTH 89°59’33” EAST, 50.00 FEET SOUTH OF AND PARALLEL TO SAID NORTH BOUNDARY LINE, 210.51 FEET; THENCE LEAVE SAID SOUTH RIGHT-OF-WAY LINE, SOUTH 00°03’27” WEST 100.00 FEET; THENCE NORTH 89°59’33” WEST, 12.50 FEET; THENCE SOUTH 00°03’27” WEST, 120.00 FEET; THENCE NORTH 89°59’33” WEST, 227.50 FEET; TO A POINT 245.00 FEET EAST OF THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10; THENCE - NORTH 00°03’27” EAST 245.00 FEET EAST OF AND PARALLEL TO THE SAID WEST BOUNDARY LINE, 166.67 FEET; THENCE NORTH 45°03’27” EAST, 26.00 FEET TO THE POINT OF A CURVE TO THE LEFT, SAID CURVE HAVING FOR ITS ELEMENTS A RADIUS OF 18.50 FEET A CHORD BEARING AND DISTANCE OF NORTH 22°33’27” EAST, 14.16 FEET, THENCE ALONG THE ARC OF SAID CURVE, 14.53 FEET TO A POINT OF REVERSE CURVATURE TO THE RIGHT, SAID CURVE HAVING FOR ITS ELEMENTS A RADIUS OF 45.00 FEET, A CHORD BEARING AND DISTANCE OF NORTH 14°36’39” EAST, 22.62 FEET, THENCE ALONG THE ARC OF SAID CURVE, 22,86 FEET, TO A POINT ON THE SAID SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE AND THE POINT OF BEGINNING.

(ALSO KNOWN AS LOT 1 OF 56TH AND FLETCHER OFFICE PARK, A PLATTED SUBDIVISION WITH NO IMPROVEMENTS, SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH, FLORIDA AS RECORDED IN PLAT BOOK 108 AT PAGE 155 OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.)

AND

A PARCEL OF LAND LYING IN THE SOUTH 660 FEET OF THE NORTH 710 FEET OF THE EAST 660 FEET OF THE WEST 685 FEET OF THE NORTHEAST  ¹/4 OF

SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH COUNTY, FLORIDA; BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCE AT THE NORTHWEST CORNER OF THE NORTHEAST  ¹/4 OF SAID SECTION 10; THENCE. SOUTH 00°03’27” WEST, ALONG THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 50.00 FEET TO A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE EXTENDED; THENCE SOUTH 89°59’33” EAST, ALONG SAID SOUTH RIGHT-OF-WAY LINE AND EXTENSION THEREOF, 50,00 FEET SOUTH OF AND. PARALLEL TO THE NORTH BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10,485.00 FEET TO THE POINT OF BEGINNING; THENCE CONTINUE ALONG SAID SOUTH RIGHT-OF-WAY LINE SOUTH 89°59’33” EAST, 50.00 FEET SOUTH OF AND PARALLEL TO SAID NORTH BOUNDARY LINE, 200.00.FEET; THENCE LEAVE SAID SOUTH RIGHT-OF-WAY LINE, SOUTH 00°03’27” WEST, ALONG A LINE 685.00 FEET EAST OF AND PARALLEL TO THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 660.00 FEET; THENCE NORTH 89°59’33” WEST, 320.00 FEET; THENCE NORTH 00°03’27” EAST 440.00 FEET; THENCE SOUTH 89°59’33” EAST, 107.50 FEET; THENCE NORTH 00°03’27” EAST, 120.00 FEET; THENCE SOUTH 89°59’33” EAST, 12.50 FEET; THENCE NORTH 00°03’27” EAST 100.00 FEET TO THE POINT OF BEGINNING.

(ALSO KNOWN AS LOT 4 OF 56TH AND FLETCHER OFFICE PARK, A PLATTED SUBDIVISION WITH NO IMPROVEMENTS, SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH, FLORIDA AS RECORDED IN PLAT BOOK 108 AT PAGE 155 OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.)

TAX PARCEL ID 36514-0000

PARCEL II: (EASEMENT)

EASEMENT RIGHTS FOR INGRESS, EGRESS UTILITY AND DRAINAGE SERVICES RECORDED IN OFFICIAL RECORDS BOOK 11189, PAGE 636 AND AS AMENDED TO ALSO INCLUDE SIDEWALK AND DUMPSTER EASEMENTS IN O.R. BOOK 14312, PAGE 593 AND AS SET FORTH ON THE PLAT RECORDED IN PLAT BOOK 108, PAGES 155 THROUGH 160, OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.

PARCEL III: (EASEMENT)

EASEMENT RIGHTS FOR ACCESS AND SANITARY SEWER AS SET FORTH IN THAT CERTAIN GRANT OF EASEMENT RECORDED IN O.R. BOOK 8847, PAGE 552.

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EXHIBIT D

ALLONGE

THIS ALLONGE is made to that certain Promissory Note dated as of June 28, 2006, in the original principal amount of $10,500,000.00 made by ING US Students No. 14 LLC, a Delaware limited liability company, to Morgan Stanley Mortgage Capital Inc., a New York corporation.

Pay to the order of ,                            , a                                                         (“Assignee”), without recourse or representation or warranty, express, implied or by operation of law, of any kind and nature whatsoever.

The foregoing paragraph shall not impair the representations and warranties of the undersigned pursuant to Section 5.2 of the Agreement for Sale and Purchase of Loan dated                             , 2011 between the undersigned and Assignee.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

[SIGNATURE PAGE TO ALLONGE]

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company
By:	LNR Partners, LLC, a Florida limited liability company, its manager
	By:
	Name:
	Title:

EXHIBIT E

NOTICE OF ASSIGNMENT OF LOAN

                            , 2011

ING US Students No. 14 LLC

c/o Rabil Properties, LLC

345 George St., Level 6

Sydney, NSW 2000 Australia

Re: Loan in original principal amount of $10,500,000.00 made to ING US Students No. 14 LLC, a Delaware limited liability company, by Morgan Stanley Mortgage Capital Inc., a New York corporation

Dear Sir or Madam;

Please be advised that we have sold the above referenced Loan to                                          and that, from and after the date of this notice, all payments under your Loan should be mailed to:

Telephone No.                                                                  

Attn:                                                                                   

Thank you for your attention in this matter.

ATTENTION TO ANY DEBTOR IN BANKRUPTCY: Please be advised that, anything contained in this letter to the contrary notwithstanding, in the event that the borrower under the Loan has filed for protection under the United States Bankruptcy Code or any similar state law (collectively, “Insolvency Laws”), this letter constitutes neither a demand for payment of the Loan nor a notice of personal liability to nor action against any recipient hereof who might have received a discharge of the Loan in accordance with applicable Insolvency Laws or who might be subject to the automatic stay of Section 362 of the United States Bankruptcy Code, or other similar Insolvency Law.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

[SIGNATURE PAGE TO NOTICE OF ASSIGNMENT OF LOAN]

Sincerely,

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company
By:	LNR Partners, LLC, a Florida limited liability company, its manager
	By:
	Name:
	Title:

EXHIBIT F

ASSIGNMENT OF CLAIM

MSCI 2006-HQ10 FLETCHER AVENUE, LLC (“Assignor”), whose address is c/o LNR Partners, LLC, 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby assigns, transfers, sets over and conveys to                         (“Assignee”), whose address is                        , all Assignor’s right, title and interest in and to that certain claim no.                          (the “Claim”) with respect to Bankruptcy Case No.                        , filed with the United States Bankruptcy Court for the                        .

TO HAVE AND TO HOLD the same unto Assignee and to the successors and assigns of Assignee forever.

This Assignment of Claim is made without recourse or representation or warranty, express, implied or by operation of law, of any kind and nature whatsoever.

The foregoing paragraph shall not impair the representations and warranties of the undersigned pursuant to Section 5.2 of the Agreement for Sale and Purchase of Loan dated, 2011 between the Assignor and Assignee.

Assignor hereby waives any notice or hearing requirements imposed by Rule 3001 of the Bankruptcy Rules, and stipulates that an order may be entered recognizing the assignment of the Claim as an unconditional assignment and Assignee as the valid owner of the Claim.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

IN WITNESS WHEREOF, Assignor has duly executed this Assignment of Claim on                 , 2011, to be effective as of                     , 2011.

	MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a
	Florida limited liability company
	By:	LNR Partners, LLC, a Florida limited liability company, its manager
Signature:		By:
Print Name:		Name:
		Title:
Signature:
Print Name:

ASSIGNMENT AGREEMENT

(ING US Students No. 14; Loan No. 700401153)

THIS ASSIGNMENT AGREEMENT (this “Agreement”) is entered into as of the Effective Date (as defined below) between LNR Securities Holdings, LLC, a Delaware limited liability company (“Assignor”), with an address of c/o LNR Partners, LLC, 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139, Attn: Matthew Jewell and Resource Real Estate Opportunity OP, LP, a Delaware Limited Partnership(“Assignee”), with an address of 2005 Market Street, 15th Floor, Philadelphia, PA, 19103 The term “Effective Date” as used in this Agreement shall mean the date upon which this Agreement has been executed and delivered by both Assignor and Assignee. The term “PSA” as used in this Agreement shall mean that certain Pooling and Servicing Agreement dated as of November 1, 2006 for the Morgan Stanley Capital I Inc., Commercial Mortgage Pass-through Certificates, Series 2006-HQ10. The term “Loan Sale Agreement” shall mean that certain Agreement for Sale and Purchase of Loan by and between MSCI 2006-HQ10 FLETCHER AVENUE, LLC and Assignee of even date herewith with respect to the Subject Loan (as defined in Exhibit A). All capitalized terms not defined in this Agreement shall have the meaning ascribed to such terms in the Loan Sale Agreement.

RECITALS:

A. Assignor is the Controlling Class Option Holder under the PSA and has the right, in accordance with Section 9.36 of the PSA, to purchase certain loans including, without limitation, the Subject Loan as more particularly described in Exhibit A attached hereto (the “Purchase Option”).

B. Assignor is the current owner and holder of the Purchase Option and Assignor has the right to assign the Purchase Option with respect to the Subject Loan in accordance with Section 9.36 of the PSA.

C. Assignor desires to assign the Purchase Option with respect to the Subject Loan to Assignee and Assignee desires to accept such assignment in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows:

1. Recitals. The above recitals are true and correct and are incorporated in this Agreement by reference.

2. Assignment. On the Closing Date and simultaneously with the closing of the Loan Sale Agreement, Assignor shall assign to Assignee all of Assignor’s right, title and interest in and to the Purchase Option with respect to the Subject Loan.

3. Closing Documents. On the Closing Date, Assignor shall deliver to Escrow Agent an original or copy of Assignment and Acceptance of Purchase Option with respect to the Subject Loan executed by Assignor in the form attached hereto as Exhibit B (the “Assignment and Acceptance”) and Assignee shall deliver to Escrow Agent an original Assignment and Acceptance executed by Assignee together with an original written notice executed by Assignee in the form attached hereto as Exhibit C (the “Exercise Notice”). Immediately, prior to the closing of this Agreement and the Loan Sale Agreement, provided that Assignee has performed all of its obligations under this Agreement and the Loan Sale Agreement and is ready, able and willing to close this Agreement and the Loan Sale Agreement, Escrow Agent shall deliver or cause the delivery of the Exercise Notice together with a copy of the fully executed Assignment and Acceptance to the addressee(s) thereof. Upon the closing of this Agreement and the Loan Sale Agreement, Escrow Agent shall deliver one fully executed copy of the Assignment and Acceptance to each of Assignor and Assignee.

4. Closing Expenses. Assignee hereby covenants and agrees that it shall be responsible for paying at the closing of this Agreement and the Loan Sale Agreement: (i) an amount equal to five percent (5%) of the Purchase Price representing the Buyer’s Premium to Service Provider (the “Buyer’s Premium”); and (ii) $2,500.00, representing Assignor’s attorney fee and expenses in connection with this Agreement to Bilzin Sumberg Baena Price & Axelrod LLP with respect to the Subject Loan. The provisions of this paragraph shall survive the Closing.

5. Closing. This Agreement and the Loan Sale Agreement shall close simultaneously on the Closing Date. In the event that this Agreement and the Loan Sale Agreement do not close simultaneously on the Closing Date, Assignor shall have the right at its sole option to terminate this Agreement by providing Assignee with written notice of the same. In addition, in the event Assignee defaults under this Agreement or the Loan Sale Agreement, or the Subject Loan is reinstated by or on behalf of the Borrower, Assignor shall have the right at its sole option to terminate this Agreement by providing Assignee with written notice of the same.

6. Assignor. Assignor represents and warrants to Assignee that Assignor is a limited liability company validly existing and in good standing under the laws of the State of Delaware and has all necessary power and authority to enter into this Agreement. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will constitute a violation of or be in conflict with or constitute a default under any term or provision of any agreement, instrument or lease to which Assignor is a party.

7. Assignee. Assignee represents and warrants to Assignor that Assignee is a limited partnership validly existing and in good standing under the laws of the State of Delaware and has all necessary power and authority to enter into this Agreement. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will constitute a violation of or be in conflict with or constitute a default under any term or provision of any agreement, instrument or lease to which Assignee is a party. Assignee further acknowledges and agrees that: (a) the Purchase Option is not a “security” within the meaning of the Securities Act of 1933, as amended, the Exchange Act of 1934, as amended, the “Blue Sky” laws of any state or any rule or regulation promulgated pursuant to

2

any of the foregoing, (b) that neither the federal nor any state securities laws apply to the transactions contemplated hereby, (c) that the Assignee is not relying on, and will not seek the protections afforded by, any federal or state securities law, (d) the Assignee is motivated by commercial purposes and not investment purposes in its agreement to accept and acceptance of the assignment of the Purchase Option, and (e) the objective of Assignee’s agreement to accept and acceptance of the assignment of the Purchase Option is to acquire any underlying real estate Collateral under the Loan and not for investment in the Purchase Option itself. Notwithstanding anything contained in this Agreement to the contrary, the representations and warranties in the preceding sentence shall survive the Closing.

8. Miscellaneous.

(a) This Agreement and the terms, covenants, conditions, provisions, obligations, undertakings, rights and benefits hereof, including the exhibits hereto, shall be binding upon, and shall inure to the benefit of, the undersigned parties and their respective successors and assigns; provided, however, it is understood and agreed that, except as otherwise permitted or required under the Loan Sale Agreement, Assignee shall not assign, transfer or otherwise dispose of this Agreement or any rights or interests under this Agreement without first obtaining the prior written consent of Assignor, which consent may be withheld by Assignor for any reason whatsoever in Assignor’s sole and absolute discretion, and any attempted assignment, transfer or other disposition of this Agreement shall be null and void and shall constitute a default under the Loan Sale Agreement. Notwithstanding anything contained in the Assignment and Acceptance or in the Notice of Exercise to the contrary, Assignee acknowledges and agrees that the Notice of Exercise executed by the Assignee is irrevocable upon delivery by Escrow Agent via facsimile or otherwise to the addressee(s) thereof and Assignee shall have no right to assign or otherwise transfer directly or indirectly after Closing the Purchase Option as the Purchase Option shall have been exercised at Closing.

(b) This Agreement shall not be recorded and Assignee agrees that recording the same constitutes a default by Assignee under this Agreement and the Loan Sale Agreement.

(c) Assignor and Assignee expressly agree that time is of the essence with respect to this Agreement.

(d) This Agreement, together with all the Exhibits attached hereto, constitutes the entire agreement between the parties hereto.

(e) This Agreement may be executed in multiple counterparts by the parties hereto. All counterparts so executed shall constitute one agreement binding upon all parties, notwithstanding that all parties are not signatories to the original or the same counterpart. Each counterpart shall be deemed an original all of which shall constitute one agreement to be valid as of the date of this Agreement. Facsimile, documents executed, scanned and transmitted electronically and electronic signatures shall be deemed original signatures for purposes of this Agreement and all matters related thereto, with such facsimile, scanned and electronic signatures having the same legal effect as original signatures. The parties hereto agree that this Agreement and any other document necessary for the consummation of the transaction contemplated by this Agreement may be accepted, executed or agreed to through the use of an

3

electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, Title 15, United States Code, Sections 7001 et seq., the Uniform Electronic Transaction Act and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on the parties hereto as if such document was physically executed and Assignee hereby consents to the use of any third party electronic signature capture service providers as may be chosen by Assignor or Service Provider.

(f) No amendment to this Agreement shall be binding on either of the parties to this Agreement unless such amendment is in writing and executed by both parties hereto.

(g) This Agreement and all transactions pursuant to this Agreement shall be governed by the laws of the State of New York. Venue shall be in New York, New York.

(h) If any term, covenant, or condition of this Agreement is held to be invalid or unenforceable in any respect, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid or unenforceable provision had never been contained in this Agreement.

(i) Each of the parties has received independent legal advice from attorneys of its choice with respect to the advisability of making and executing this Agreement or waived its right to do so. Assignee hereby acknowledges that Assignor’s counsel is not representing the Assignee or any interests of Assignee in connection with this Agreement or any other matter and that Assignor’s counsel has informed Assignee that Assignee should consult with an attorney of Assignee’s choice prior to the execution of this Agreement. In the event of any dispute or controversy regarding authorship of this Agreement or the Closing Documents, the Parties shall be conclusively deemed to be the joint authors of this Agreement and the Closing Documents and no provision of this Agreement or the Closing Documents shall be interpreted against a Party by reason of authorship.

(j) THE PARTIES HERETO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT. THIS WAIVER IS A MATERIAL INDUCEMENT FOR ASSIGNOR TO ENTER INTO THIS AGREEMENT.

4

IN WITNESS WHEREOF, Assignor and Assignee have signed counterparts of this Agreement, each of which shall be deemed to be an original document, as of the date set forth above.

Witnesses:	ASSIGNOR:
	LNR SECURITIES HOLDINGS, LLC, a Delaware limited liability company

Signature:	/s/    Adriana Sera	By:	/s/    Isaac Pesin
Print Name:	Adriana Sera	Name:	Isaac Pesin
		Title:	Vice President

Signature:	/s/    Nulise Santana
Print Name:	Nulise Santana	Dated:	10/6/11

Witnesses:	ASSIGNEE:
	Resource Real Estate Opportunity OP, LP, a Delaware limited partnership By: Resource Real Estate Opportunity REIT, Inc., a Delaware corporation, general partner

	Docu Signed by:
Signature:	By:	/s/ Alan Feldman
Print Name:	Name:	Alan Feldman
	Title:	Chief Executive Officer

Signature:
Print Name:	Dated:	10/6/2011

EXHIBIT A

That certain mortgage/deed of trust loan originally made by Morgan Stanley Mortgage Capital Inc., a New York corporation to ING US Students No. 14 LLC, a Delaware limited liability company, in the original principal amount of $10,500,000.00 (the “Subject Loan”).

EXHIBIT B

ASSIGNMENT AND ACCEPTANCE OF PURCHASE OPTION

(ING US Students No. 14; Loan No. 700401153)

THIS ASSIGNMENT AND ACCEPTANCE OF PURCHASE OPTION (this “Assignment”) is made as of this ,                     2011 (the “Effective Date”), by and between LNR Securities Holdings, LLC, a Delaware limited liability company (“Assignor”), with an address of c/o LNR Partners, LLC, 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139, Attn: Matthew Jewell and                     ,                     a                     (“Assignee”), with an address of                                         ,                                    ,                                     . The term “PSA” as used in this Agreement shall mean that certain Pooling and Servicing Agreement dated as of November 1, 2006 for the Morgan Stanley Capital I Inc., Commercial Mortgage Pass-through Certificates, Series 2006-HQ10.

RECITALS:

A. Assignor is the Controlling Class Option Holder under the PSA and has the right, in accordance with Section 9.36 of the PSA, to purchase certain loans including, without limitation, the Subject Loan as more particularly described in Schedule A attached hereto (the “Purchase Option”).

B. Assignor is the current owner and holder of the Purchase Option and Assignor has the right to assign the Purchase Option with respect to the Subject Loan in accordance with Section 9.36 of the PSA.

C. Assignor desires to assign the Purchase Option with respect to the Subject Loan to Assignee and Assignee desires to accept such assignment as more particularly set forth below.

NOW, THEREFORE, in consideration of the mutual agreements set forth in this Assignment, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged by each of the parties hereto, Assignor and Assignee do hereby agree as follows:

1. Recitals. The above recitals are true and are incorporated in this Assignment by reference.

2. Assignment. Assignor hereby gives, grants, bargains, sells, conveys, transfers and sets over unto Assignee as of the Effective Date, all of Assignor’s right, title and interest in and to the Purchase Option with respect to the Subject Loan.

3. Acceptance. Assignee hereby accepts the assignment of all of Assignor’s right, title and interest in and to the Purchase Option with respect to the Subject Loan.

4. Counterparts. This Assignment may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date first written above, to be effective on                                                      , 2011.

Witnesses:	ASSIGNOR:
	LNR SECURITIES HOLDINGS, LLC, a Delaware limited liability company

Signature:	By:
Print Name:	Name:
	Title:

Signature:                                                          

Print Name:                                                        

STATE OF FLORIDA	)
	) SS:
COUNTY OF MIAMI-DADE	)

The foregoing instrument was acknowledged, sworn to and subscribed before me this             day of                     , 2011, by                     , as                         of LNR SECURITIES HOLDINGS, LLC, a Delaware limited liability company, on behalf of said company. He/She is personally known to me or has produced a driver’s license as identification.

	Sign Name:
	Print Name:
My Commission Expires:	NOTARY PUBLIC
	Serial No. (none, if blank):

Witnesses:	ASSIGNEE:
	,	a
	.

Signature:	By:
Print Name:	Name:
	Title:

Signature:                                                     

Print Name:                                                  

STATE OF	)
	) SS:
COUNTY OF	)

The foregoing instrument was acknowledged, sworn to and subscribed before me this             day of                , 2011, by                        , as                         of                        , a on behalf of said                                    . He/She is personally known to me or has produced a driver’s license as identification.

	Sign Name:
	Print Name:
My Commission Expires:	NOTARY PUBLIC
	Serial No. (none, if blank):                        .

EXHIBIT C

EXERCISE NOTICE

(ING US Students No. 14 LLC; Loan No. 700401153)

                    , 2011

LNR Partners, LLC

1601 Washington Avenue, Suite 700

Miami Beach, Florida 33139

Attn: Larry Golinsky

Fax No. (305) 695-5601

U.S. Bank, National Association

Attn: Steve Orlandino

540 West Madison Street, Suite 1802

IL4-540-18-02

Chicago, Illinois 60661

Fax No. (312) 453-6195

Wells Fargo Commercial Mortgage

Attn: Heather Dennis

1901 Harrison Street, 7th Floor

Oakland, California 94612

Fax No. (510) 446-3652

Re: Exercise of Purchase Option with respect to Subject Loan as more particularly described in Schedule A attached hereto (the “Purchased Option”)

The undersigned is the owner and holder of the Purchase Option with respect to the Subject Loan as assignee of LNR Securities Holdings, LLC, a Delaware limited liability company (the “Option Assignor”) under that certain Pooling and Servicing Agreement dated as of November 1, 2006 for the Morgan Stanley Capital I Inc., Commercial Mortgage Pass-through Certificates, Series 2006-HQ10 (the “PSA”). A copy of the fully executed Assignment and Acceptance of Purchase Option is attached hereto for your reference.

This letter shall serve as notice that the undersigned hereby exercises the Purchase Option with respect to the Subject Loan in accordance with Section 9.36 of the PSA at a cash price of $8,300,000.00. The undersigned is not affiliated with the Option Assignor or LNR Partners, LLC.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

SCHEDULE A

That certain mortgage/deed of trust loan originally made by Morgan Stanley Mortgage Capital Inc., a New York corporation to ING US Students No. 14 LLC, a Delaware limited liability company, in the original principal amount of $10,500,000.00 (the “Subject Loan”).

[SIGNATURE PAGE TO EXERCISE NOTICE]

Thank you for your attention in this matter.

                            , a                             

                                     .

By:                                                          

Name:                                                     

Title:                                                       

SCHEDULE A

That certain mortgage/deed of trust loan originally made by Morgan Stanley Mortgage Capital Inc., a New York corporation to ING US Students No. 14 LLC, a Delaware limited liability company, in the original principal amount of $10,500,000.00 (the “Subject Loan”).

EX-10.20

Exhibit 10.20

ASSIGNMENT OF LOAN DOCUMENTS

(ING US Students No. 14; Loan No. 700401153)

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company (“Assignor”), whose address is c/o LNR Partners, LLC, 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby assigns, transfers, sets over and conveys to RRE CAMPUS CLUB HOLDINGS, LLC, a Delaware limited liability company (“Assignee”), whose address is Navy Yard Corporate Center, One Crescent Drive, Suite 203, Philadelphia, Pennsylvania 19112, all Assignor’s right, title and interest in and to the documents described on Schedule A attached hereto, as the same may have been assigned, amended, supplemented, restated or modified.

TO HAVE AND TO HOLD the same unto Assignee and its successors and assigns forever.

This Assignment is made without recourse or representation or warranty, express, implied or by operation of law, of any kind and nature whatsoever.

The foregoing paragraph shall not impair Assignor’s representations and warranties pursuant to Section 5.2 of the Agreement for Sale and Purchase of Loan dated October 6, 2011 between the Assignor and Resource Real Estate Opportunity OP, LP, a Delaware limited partnership (“RREO OP, LP”), as assigned by RREO OP, LP to Assignee.

[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]

IN WITNESS WHEREOF, Assignor has duly executed this Assignment as of Sept. 23, 2011, to be effective as of Oct. 21, 2011.

MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company
By:	LNR Partners, LLC, a Florida limited liability company, its manager

Signature:	/s/    Adriana Sera	By:	/s/    Isaac Pesin
Print Name:	Adriana Sera	Name:	Isaac Pesin
		Title:	Vice President
Signature:	/s/    Nulise Santana
Print Name:	Nulise Santana

STATE OF FLORIDA	)
	) SS.:
COUNTY OF MIAMI-DADE	)

The foregoing instrument was acknowledged before me this 23 day of September. 2011, by Isaac Pesin as VP of LNR Partners, LLC, a Florida limited liability company, successor by statutory conversion to LNR Partners, Inc., a Florida corporation, on behalf of said entity as the manager of MSCI 2006-HQ10 FLETCHER AVENUE, LLC, a Florida limited liability company. He is     X     personally known to me or              has produced a Florida driver’s license as identification.

My Commission Expires: 5/17/12	/s/    Ciney Torres
	Print Name:	Ciney Torres
[NOTARIAL SEAL]	NOTARY SEAL:
	Serial No., if any:

SCHEDULE A

1. Promissory Note dated as of June 28, 2006, in the original principal amount of $10,500,000.00 made by ING US Students No. 14 LLC, a Delaware limited liability company (“Borrower”), to Morgan Stanley Mortgage Capital Inc., a New York corporation (“Original Lender”).

2. Mortgage and Security Agreement executed by Borrower in favor of Original Lender dated as of June 28, 2006, recorded as Instrument No. 2006313158, in O.R. Book 16649, Page 1857, in the Public Records of Hillsborough County, Florida (“Records”).

3. Assignment of Mortgage and Security Agreement from Original Lender to Lender No. 2 recorded as Instrument No. 2007057012, in O.R. Book 17417, Page 826 in the Records.

4. Assignment of Mortgage and Security Agreement and Other Loan Documents from BOA to Seller recorded as Instrument No. 2010315779, in O.R. Book 20089, Page 1591 in the Records.

5. Assignment of Leases and Rents executed by Borrower in favor of Original Lender dated as of June 28, 2006, recorded as Instrument No. 2006313159, in O.R. Book 16649, Page 1918 in the Records.

6. Assignment of Assignment of Leases and Rents from Original Lender to Lender No. 2 recorded as Instrument No. 2007057013, in O.R. Book 17417, Page 831 in the Records

7. Assignment of Assignment of Leases and Rents from BOA to Seller recorded as Instrument No. 2010315780, in O.R. Book 20089, Page 1597 in the Records.

8. UCC Financing Statement reflecting Borrower, as debtor, recorded as Instrument No. 2006313160, in O.R. Book 16649, Page 1934 of the Records, as amended and/or assigned.

9. UCC Financing Statement reflecting Borrower, as debtor, filed under File No. 6229392 6 with the Delaware Secretary of State, as amended and/or assigned.

10. Guaranty of Recourse Obligations of Borrower dated as of June 28, 2006, executed by ING US Community Living Fund Inc., a Maryland corporation (“Guarantor”) in favor of Original Lender.

11. Environmental Indemnity Agreement dated as of June 28, 2006, executed by Borrower and Guarantor in favor of Original Lender.

12. Conditional Assignment of Management Agreement dated as of June 28, 2006, executed by Borrower in favor of Original Lender, and acknowledged and agreed to by Housing Trust Management Group, Inc., a Florida corporation.

13. Reserve and Security Agreement dated as of June 28, 2006, executed by Borrower in favor of Original Lender.

EX-10.21

Exhibit 10.21

Loan No. 06-26162

PROMISSORY NOTE

$10,500,000.00 June 28, 2006

FOR VALUE RECEIVED ING US STUDENTS NO. 14 LLC, a Delaware limited liability company, as maker, having its principal place of business at c/o ING Real Estate Investment Management, Level 6, 345 George Street, Sydney NSW 2000, Australia (“Borrower”), hereby unconditionally promises to pay to the order of MORGAN STANLEY MORTGAGE CAPITAL INC., a New York corporation, as payee, having an address at 1221 Avenue of the Americas, New York, New York 10020 (“Lender”), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of TEN MILLION FIVE HUNDRED AND NO/100 Dollars ($10,500,000.00), in lawful money of the United States of America with interest thereon to be computed from the date of this Note at the Applicable Interest Rate (defined below) in accordance with the terms of this Note.

ARTICLE I

PAYMENT TERMS

Borrower agrees to pay sums under this Note in installments as follows:

(a) on the date hereof, a payment of interest only with respect to the period commencing on the date hereof and ending on, and including, the last day of the month in which this Note is executed;

(b) a payment of interest only (each, an “I/O Payment”), accruing at a rate equal to the Applicable Interest Rate, shall be paid on the first day of August, 2006 and on the first day of each calendar month thereafter up to and including the first day of July, 2011 (each, an “Interest Only Payment Date”);

(c) a constant payment of $64,173.03 (the “P & I Monthly Payment”, and together with the I/O Payments, the “Monthly Payment”) (which payment is based on a 30 year amortization period commencing on July, 2011) on the first day of August, 2011 and on the first day of each calendar month thereafter up to and including the first day of June, 2016 (each, a “P&I Payment Date”; and together with the Interest Only Payment Date, a “Payment Date”); each of the payments to be applied as follows: (i) first, to the payment of interest computed at the Applicable Interest Rate; and (ii) the balance toward the reduction of the principal sum; and

(d) the balance of the principal sum and all interest thereon on the first day of July, 2016 (the “Maturity Date”).

ARTICLE II

INTEREST

The interest rate on this Note is Six and eighteen hundredths percent (6.18%) per annum (the “Applicable Interest Rate”). Interest on the principal sum of this Note shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) a daily rate based on a three hundred sixty (360) day year (that is, the Applicable Interest Rate or the Default Rate, as then applicable, divided by 360) by (c) the outstanding principal balance.

ARTICLE III

DEFAULT AND ACCELERATION

Borrower covenants and agrees that if (a) any payment required hereunder (other than the payment due on the Maturity Date) is not paid prior to the fifth (5th) day after the same is due, or (b) the entire Debt (defined below) is not paid on or before the Maturity Date or (c) any other Event of Default (as defined in the Security Instrument (defined below)) shall occur, then at the option of Lender (i) the whole of the principal sum of this Note, (ii) interest, default interest, late charges and other sums, as provided in this Note, the Security Instrument or the Other Security Documents (as defined in the Security Instrument), (iii) all other monies agreed or provided to be paid by Borrower in this Note, the Security Instrument or the Other Security Documents, (iv) all sums advanced pursuant to the Security Instrument to protect and preserve the Property (defined below) and the lien and the security interest created thereby, and (v) all sums advanced and costs and expenses incurred by Lender in connection with the Debt or any part thereof, any renewal, extension, or change of or substitution for the Debt or any part thereof, or the acquisition or perfection of the security therefor, whether made or incurred at the request of Borrower or Lender (all the sums referred to in (i) through (v) above shall collectively be referred to as the “Debt”) shall without notice become immediately due and payable. Whenever any payment to be made under this Note or under any other Loan (as defined in the Security Instrument) document shall be stated to be due on a day which is not a Business Day (hereinafter defined), the due date thereof shall be the Business Day immediately preceding such day. For purposes hereof, the term “Business Day” shall mean any day other than a Saturday, Sunday or any other day on which banks in New York, New York are not open for business.

ARTICLE IV

DEFAULT INTEREST

Borrower agrees that upon the occurrence of an Event of Default, Lender shall be entitled to receive and Borrower shall pay interest on the entire unpaid principal sum at a per annum rate equal to the lesser of (a) five percent (5%) plus the Applicable Interest Rate or (b) the maximum interest rate which Borrower may by law pay (the “Default Rate”). The Default Rate shall be computed from the occurrence of the default giving rise to such Event of Default (without regard to any notice or grace period) until the earlier of the date upon which the Event

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of Default is cured or the date upon which the Debt is paid in full. Interest calculated at the Default Rate shall be deemed part of the Debt and shall be deemed secured by the Security Instrument. This clause, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default.

ARTICLE V

LATE CHARGE

If any monthly installment payable under this Note is not paid prior to the fifth (5th) day after the applicable Payment Date, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law to defray the expenses incurred by Lender in handling and processing the delinquent payment and to compensate Lender for the loss of the use of the delinquent payment and the amount shall be secured by the Security Instrument and the Other Security Documents.

ARTICLE VI

PREPAYMENT; DEFEASANCE

(a) The principal balance of this Note may not be prepaid in whole or in part except as expressly permitted pursuant hereto.

(b) Subject to compliance with and satisfaction of the terms and conditions of this Article 6 and provided that no Event of Default exists, Borrower may elect to obtain a release (the “Release”) of the Property from the lien of the Security Instrument on any Payment Date after the Lockout Period Expiration Date (defined below) by delivering to Lender, as security for the payment of all interest and principal due and to become due pursuant to this Note through the Maturity Date, plus the principal balance of this Note scheduled to be outstanding on the Maturity Date, Defeasance Collateral (defined below) sufficient to generate Scheduled Defeasance Payments (defined below) (the Release and the delivery of the Defeasance Collateral, a “Defeasance”).

(c) As a condition precedent to a Defeasance, and prior to any Release, Borrower shall have complied with all of the following:

(i) Borrower shall provide not less than sixty (60) days prior written notice to Lender specifying a Payment Date upon which it intends to effect a Defeasance hereunder (the “Defeasance Date”).

(ii) All accrued and unpaid interest on the principal balance of this Note to and including the Defeasance Date, the scheduled amortization payment due on such Defeasance Date, and all other sums then due under this Note, the Security Instrument and the Other Security Documents, shall be paid in full on or prior to the Defeasance Date.

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(iii) Borrower shall execute and deliver to Lender any and all certificates, opinions, documents or instruments reasonably required by Lender in connection with the Defeasance and Release, including, without limitation, a pledge and security agreement reasonably satisfactory to Lender creating a first priority lien on the Defeasance Collateral (a “Defeasance Security Agreement”). This Note shall thereafter be secured by the Defeasance Collateral delivered in connection with the Defeasance. After Defeasance, this Note cannot be prepaid in whole or in part or be the subject of any further Defeasance.

(iv) Borrower shall have delivered to Lender an opinion of Borrower’s counsel that would be satisfactory to a prudent lender stating (A) that the Defeasance Collateral and the proceeds thereof have been duly and validly assigned and delivered to Lender and that Lender has a valid, perfected, first priority lien and security interest in the Defeasance Collateral delivered by Borrower and the proceeds thereof, (B) that if the holder of this Note shall at the time of the Release be a REMIC (defined below), (1) the Defeasance Collateral has been validly assigned to the REMIC Trust which holds this Note (the “REMIC Trust”), (2) the Defeasance has been effected in accordance with the requirements of Treasury Regulation 1.860(g)-2(a)(8) (as such regulation may be amended or substituted from time to time) and will not be treated as an exchange pursuant to Section 1001 of the IRS Code and (3) the tax qualification and status of the REMIC Trust as a REMIC will not be adversely affected or impaired as a result of the Defeasance and (C) that the delivery of the Defeasance Collateral and the grant of a security interest therein to Lender shall not constitute an avoidable preference under Section 547 of the U.S. Bankruptcy Code or applicable state law. The term “REMIC” shall mean a “real estate mortgage investment conduit” within the meaning of Section 860D of the IRS Code. The term “IRS Code” shall mean the United States Internal Revenue Code of 1986, as amended, and the related Treasury Department regulations, including temporary regulations.

(v) Borrower shall have delivered to Lender written confirmation from the Rating-Agencies (defined in the Security Instrument) that such Defeasance will not result in a withdrawal, downgrade or qualification of the then current ratings by the applicable Rating Agencies of the Securities or Participations (each as defined in the Security Instrument). If required by the Rating Agencies, Borrower shall, at Borrower’s expense, also deliver or cause to be delivered a non-consolidation opinion with respect to the Defeasance Obligor (as defined below), if any, in form and substance that would be satisfactory to a prudent lender.

(vi) Borrower shall have delivered to Lender a certificate given by Borrower’s independent certified public accountant certifying that the Defeasance Collateral shall generate the Scheduled Defeasance Payments.

(d) In connection with any Defeasance hereunder, Borrower shall transfer and assign all obligations, rights and duties under and to this Note and the Defeasance Security Agreement together with the pledged Defeasance Collateral to a newly created successor entity (which entity shall be a single purpose, bankruptcy remote entity) designated by Lender in its sole discretion (the “Defeasance Obligor”). Such Defeasance Obligor shall assume the obligations under the

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Note and any Defeasance Security Agreement and shall be bound by and obligated under Sections 3.1, 7.2, 7.4 (a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the Security Instrument; provided, however, that all references therein to “Property” or “Personal Property” shall be deemed to refer only to the Defeasance Collateral delivered to Lender, and Borrower shall be relieved of its obligations under such documents and, except with respect to any provisions therein which by their terms expressly survive payment of the Debt in full, the Other Security Documents. Borrower shall pay $1,000 to any such Defeasance Obligor as consideration for assuming such obligations.

(e) The following terms shall have the meaning set forth below:

(i) The term “Defeasance Collateral” as used herein shall mean direct, non-

callable and non-redeemable obligations of the United States of America for the payment of which its full faith and credit is pledged, each of which shall be duly endorsed by the holder thereof as directed by Lender or accompanied by a written instrument of transfer in form and substance wholly satisfactory to Lender (including, without limitation, such instruments as may be required by the depository institution holding such securities or by the issuer thereof, as the case may be, to effectuate book-entry transfers and pledges through the book-entry facilities of such institution) in order to perfect upon the delivery of the Defeasance Collateral a first priority security interest therein in favor of the Lender in conformity with all applicable state and federal laws governing the granting of such security interests. Borrower shall authorize and direct that the payments received from such obligations shall be made directly to Lender or Lender’s designee and applied to satisfy the obligations of Borrower or, if applicable, the Defeasance Obligor, under this Note.

(ii) The term “Scheduled Defeasance Payments” as used herein shall mean the scheduled payments of interest and principal in accordance with the terms of the Defeasance Collateral (without consideration of any reinvestment of interest therefrom), providing for payments prior, but as close as possible, to all successive Payment Dates after the Defeasance Date through and including the Maturity Date, and in amounts equal to or greater than the scheduled payments of interest and principal due under this Note, including the principal balance of this Note scheduled to be outstanding on the Maturity Date.

(iii) The term “Lockout Period Expiration Date” shall mean the date which is the earlier of (A) the second anniversary of the date that is the “startup day,” within the meaning of Section 860G(a) (9) of the IRS Code, of a REMIC that holds this Note or (B) the fifth anniversary of the first day of the first full calendar month following the date of this Note.

(f) Upon Borrower’s compliance with all of the conditions to Defeasance and a Release set forth in this Article 6, Lender shall release the Property from the lien of the Security Instrument and the Other Security Documents. All costs and expenses of Lender, third parties and the Rating Agencies incurred in connection with the Defeasance and Release, including, without limitation, the cost of establishing the Defeasance Obligor and Lender’s counsel’s fees and expenses, shall be paid by Borrower simultaneously with the delivery of the Release documentation. Any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection with the Defeasance shall be paid by Borrower simultaneously with the occurrence of any Defeasance.

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(g) If a Default Prepayment (defined below) occurs, Borrower shall pay to Lender the entire Debt, including, without limitation, an amount (the “Default Consideration”) equal to the greater of (i) the amount (if any) which when added to the then outstanding principal amount of this Note will be sufficient to purchase Defeasance Collateral providing the required Scheduled Defeasance Payments assuming Defeasance would be permitted hereunder, or (ii) one percent (1%) of the Default Prepayment. For purposes of this Note, the term “Default Prepayment” shall mean a prepayment of the principal amount of this Note made after the occurrence of any Event of Default or an acceleration of the Maturity Date under any circumstances, including, without limitation, a prepayment occurring in connection with reinstatement of the Security Instrument provided by statute under foreclosure proceedings or exercise of a power of sale, any statutory right of redemption exercised by Borrower or any other party having a statutory right to redeem or prevent foreclosure, any sale in foreclosure or under exercise of a power of sale or otherwise.

(h) Notwithstanding anything to the contrary herein, Borrower may prepay the principal balance of this Note in whole, without premium or penalty, on any Payment Date during the three (3) months prior to the Maturity Date. In addition, Borrower shall prepay without premium or penalty the principal balance of this Note in an amount equal to any insurance proceeds or condemnation awards which Lender elects to have applied to the Debt pursuant to Sections 3.6 and 3.7 of the Security Instrument or the amount required by Lender due to changes in tax and debt credit pursuant to Section 7.3 (a) or (b) of the Security Instrument (provided, however, that in the event any such prepayment pursuant to this sentence shall be made on a date other than a Payment Date, the amount so prepaid shall include all interest which would have accrued on such amount through the next Payment Date). In each instance of prepayment permitted under this subparagraph (h), Borrower shall be required to pay all other sums due hereunder, and no principal amount repaid may be reborrowed.

ARTICLE VII

SECURITY

This Note is secured by that certain Mortgage and Security Agreement dated the date hereof in the principal sum of $10,500,000.00 given by Borrower to (or for the benefit of) Lender covering the fee estate of Borrower in certain premises located in the County of Hillsborough, State of Florida, and other property, as more particularly described therein (collectively, the “Property”) and intended to be duly recorded in said County (the “Security Instrument”), and by the Other Security Documents.

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ARTICLE VIII

LOAN CHARGES

This Note, the Security Instrument and the Other Security Documents are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by applicable law to contract or agree to pay. If by the terms of this Note, the Security Instrument and the Other Security Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of such maximum rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the Debt, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Note until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Debt for so long as the Debt is outstanding.

ARTICLE IX

WAIVERS

Borrower and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest and non-payment and all other notices of any kind, except for notices expressly provided for in this Note, the Security Instrument or the Other Security Documents. No release of any security for the Debt or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Security Instrument or the Other Security Documents made by agreement between Lender or any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, and any other person or entity who may become liable for the payment of all or any part of the Debt, under this Note, the Security Instrument or the Other Security Documents. No notice to or demand on Borrower shall be deemed to be a waiver of the obligation of Borrower or of the right of Lender to take further action without further notice or demand as provided for in this Note, the Security Instrument or the Other Security Documents. If Borrower is a partnership, corporation or limited liability company, the agreements contained herein shall remain in full force and effect, notwithstanding any changes in the individuals or entities comprising the Borrower, and the term “Borrower,” as used herein, shall include any alternate or successor entity, but any predecessor entity, and its partners or members, as the case may be, shall not thereby be released from any liability. (Nothing in the foregoing sentence shall be construed as a consent to, or a waiver of, any prohibition or restriction on transfers of interests in Borrower which may be set forth in the Security Instrument or any Other Security Document.)

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ARTICLE X

WAIVER OF TRIAL BY JURY

BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE, THIS NOTE, THE SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

ARTICLE XI

EXCULPATION

(a) Notwithstanding anything to the contrary contained in this Note, the Security Instrument or any Other Security Document (but subject to the provisions of subsections (b), (c) and (d) of this Article 11), Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in this Note or the Security Instrument by any action or proceeding wherein a money judgment or any deficiency judgment or other judgment establishing any personal liability shall be sought against Borrower or any principal, director, officer, employee, beneficiary, shareholder, partner, member, trustee, agent or affiliate of Borrower or any person owning, directly or indirectly, any legal or beneficial interest in Borrower, or any successors or assigns of any of the foregoing (collectively, the “Exculpated Parties”), except that Lender may bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Lender to enforce and realize upon this Note, the Security Instrument, the Other Security Documents, and the interest in the Property, the Rents (as defined in the Security Instrument) and any other collateral given to Lender to secure this Note; provided, however, subject to the provisions of subsections (b), (c) and (d) of this Article 11, that any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Property, in the Rents and in any other collateral given to Lender to secure this Note. Lender, by accepting this Note and the Security Instrument, agrees that it shall not, except as otherwise provided in this Article 11, sue for, seek or demand any deficiency judgment against Borrower or any of the Exculpated Parties, in any such action or proceeding, under or by reason of or under or in connection with this Note, the Security Instrument or the Other Security Documents. The provisions of this Article 11 shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by this Note, the Security Instrument or the Other Security Documents delivered to Lender; (ii) impair the right of Lender to name Borrower as a party defendant in any action or suit for judicial foreclosure and sale under the Security Instrument; (iii) affect the validity or enforceability of any indemnity, guaranty, master lease or similar instrument made in connection with this Note, the Security Instrument, or the Other Security Documents; (iv) impair the right of Lender to obtain the appointment of a receiver; (v) impair the

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enforcement of the Assignment of Leases and Rents executed in connection herewith; (vi) impair the right of Lender to enforce the provisions of Section 12.2 of the Security Instrument or of Section 3.12(e) of the Security Instrument; or (vii) impair the right of Lender to obtain a deficiency judgment or other judgment on the Note against Borrower if necessary to fully realize the security granted by the Security Instrument or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Property.

(b) Notwithstanding the provisions of this Article 11 to the contrary, Borrower shall be personally liable to Lender for the Losses (as defined in the Security Instrument) Lender incurs due to: (i) fraud or intentional misrepresentation by Borrower or any of the Exculpated Parties in connection with the Loan; (ii) the gross negligence or willful misconduct of Borrower; (iii) the removal or disposal of any portion of the Property after an Event of Default; (iv) Borrower’s misapplication, misappropriation or conversion of Rents received by Borrower after the occurrence of an Event of Default; (v) Borrower’s misapplication, misappropriation or conversion of tenant security deposits or Rents collected in advance; (vi) the misapplication, misappropriation or conversion of insurance proceeds or condemnation awards; (vii) Personal Property (as defined in the Security Instrument) taken from the Property by or on behalf of Borrower or any of the Exculpated Parties and not replaced with Personal Property of the same utility and of the same or greater value; (viii) any act of arson by Borrower or any of the Exculpated Parties; (ix) any fees or commissions paid by Borrower after the occurrence of an Event of Default to any Exculpated Party in violation of the terms of this Note, the Security Instrument or the Other Security Documents; (x) failure to pay charges for labor or materials or other charges that can create liens on any portion of the Property, unless otherwise bonded by Borrower; (xi) any security deposits, advance deposits or any other deposits collected with respect to the Property not being delivered to Lender upon a foreclosure of the Property or action in lieu thereof, except to the extent any such security deposits were applied in accordance with the terms and conditions of any of the Leases (as defined in the Security Instrument) prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof; (xii) any failure by Borrower to permit on-site inspections of the Property as required by the Security Instrument and/or the Other Security Documents; (xiii) upon Borrower’s default under the terms of the Security Instrument, any failure of Borrower to appoint a new property manager upon the request of Lender as required by the terms of the Security Instrument and/or the Other Security Documents and/or (xiv) except as otherwise agreed by the Borrower and Lender in writing, Borrower’s breach of, or failure to comply with, the representations, warranties and covenants contained in Articles 5.8(b), 5.19 and/or 12 of the Security Instrument.

(c) Notwithstanding the foregoing, the agreement of Lender not to pursue recourse liability as set forth in subsection (a) above SHALL BECOME NULL AND VOID and shall be of no further force and effect and the Debt shall be fully recourse to Borrower in the event that: (i) the first full monthly payment of principal and interest under this Note is not paid when due; (ii) Borrower fails to provide financial information to Lender as required by Section 3.12 of the Security Instrument or fails to comply with any provision of Section 4.2 of the Security Instrument; (iii) Borrower defaults under Article 8 of the Security Instrument; (iv) Borrower files a voluntary petition under the U.S. Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (v) an affiliate, officer, director or representative which controls Borrower, directly or indirectly, files, or joins in the filing of, an involuntary petition against Borrower under the U.S. Bankruptcy Code or any other Federal or state bankruptcy or

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insolvency law, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower from any person or entity; (vi) Borrower files an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other person or entity under the U.S. Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or solicits or causes to be solicited petitioning creditors for any involuntary petition from any person or entity; (vii) any affiliate, officer, director or representative which controls Borrower consents to or acquiesces in or joins in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Property; or (viii) Borrower makes an assignment for the benefit of creditors, or admits, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due.

(d) Nothing herein shall be deemed to be a waiver of any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provision of the U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness secured by the Security Instrument or to require that all collateral shall continue to secure all of the indebtedness owing to Lender in accordance with this Note, the Security Instrument and the Other Security Documents.

ARTICLE XII

AUTHORITY

Borrower (and the undersigned representative of Borrower, if any) represents that Borrower has full power, authority and legal right to execute and deliver this Note, the Security Instrument and the Other Security Documents and that this Note, the Security Instrument and the Other Security Documents constitute valid and binding obligations of Borrower.

ARTICLE XIII

GOVERNING LAW

This Note shall be governed, construed, applied and enforced in accordance with the laws of the state in which the Property is located.

ARTICLE XIV

NOTICES

All notices required or permitted hereunder shall be given as provided in the Security Instrument.

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ARTICLE XV

INCORPORATION BY REFERENCE

All of the terms, covenants and conditions contained in the Security Instrument and the Other Security Documents are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein.

ARTICLE XVI

MISCELLANEOUS

(a) Wherever pursuant to this Note it is provided that Borrower pay any costs and expenses, such costs and expenses shall include, but not be limited to, reasonable legal fees and disbursements of Lender, whether with respect to retained firms, the reimbursement for the expenses of in-house staff, or otherwise. Borrower shall pay to Lender on demand any and all expenses, including legal expenses and reasonable attorneys’ fees, incurred or paid by Lender in enforcing this Note, whether or not any legal proceeding is commenced hereunder, together with interest thereon at the Default Rate from the date paid or incurred by Lender until such expenses are paid by Borrower.

(b) This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

(c) If Borrower consists of more than one person or party, the obligations and liabilities of each person or party shall be joint and several.

(d) Whenever used, the singular number shall include the plural, the plural number shall include the singular, and the words “Lender” and “Borrower” shall include their respective successors, assigns, heirs, executors and administrators.

[NO FURTHER TEXT ON THIS PAGE]

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IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year first above written.

BORROWER:
ING US STUDENTS NO. 14 LLC, a Delaware limited liability company
By:	ING US Students No. 14 Manager LLC, a Delaware limited liability company, its sole member

By.	/s/    Albert Rabil
Name:	Albert Rabil
Title:	Vice President

ALLONGE ENDORSEMENT TO PROMISSORY NOTE

ENDORSEMENT OF PROMISSORY NOTE

DATED JUNE 28; 2006

ING US STUDENTS NO. 14 LLC

Pay to the order of                                                      , a                                                       having an address at____________________________________________ , without recourse to the undersigned and without representations, warranties or covenants, express or implied, by the undersigned, except as set forth in that certain _____________________________ of even date herewith made by and between Morgan Stanley Mortgage Capital Inc. and _____________________.

MORGAN STANLEY MORTGAGE CAPITAL INC., a New York corporation
By:
	Name: Title:

EX-10.22

Exhibit 10.22

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL

TO:

Cadwalader, Wickersham & Taft

LLP

227 West Trade Street

Charlotte, North Carolina 28202

Attention: Richard Madden, Esq

(SPACE ABOVE THIS LINE FOR RECORDER'S USE)

MSMC Loan No. 06-26162

ING US STUDENTS NO.14 LLC, as mortgagor

(Borrower)

to

MORGAN STANLEY MORTGAGE CAPITAL INC., as mortgagee

(Lender)

MORTGAGE AND

SECURITY AGREEMENT

Dated: June 28, 2006

Location: Hillsborough County, Florida

PREPARED BY AND UPON

RECORDATION RETURN TO:

Cadwalader, Wickersham & Taft LLP

227 West Trade Street, Suite 2400

Charlotte, North Carolina 28202

Attention: Richard Madden, Esq.

TABLE OF CONTENTS

	Page
ARTICLE I
GRANTS OF SECURITY
Section 1.1 Property Mortgaged		1
Section 1.2 Assignument of Leascs and Ronts		3
Section 1.3 Security Agreement		3
Section 1.4 Pledge of Monies Held		4
Section 1.5 Conditions to Grant		4
ARTICLE II
DEBT AND OBLIGATIONS SECURED
Section 2.1 Debt		4
Section 2.2 Other Obligations		4
Section 2.3 Debt and Other Obligations		5
Section 2.4 Payments		5
ARTICLE III
BORROWER COVENANTS
Section 3.1 Payment of Debt		5
Section 3.2 Incorporation by Reference		5
Section 3.3 Insurance		5
Section 3.4 Payment of Taxes, etc		8
Section 3.5 Escrow Fund		9
Section 3.6 Condemnation		9
Section 3.7 Restoration After Casually/Condemnation		10
Section 3.8 Leases and Rents		13
Section 3.9 Maintenance and Use of Property		15
Section 3.10 Waste		15
Section 3.11 Compliance With Laws		15
Section 3.12 Books and Records		16
Section 3.13 Payment For Labor and Materials		18
Section 3.14 Performance of Other Agreements		18
Section 3.15 Change of Name, Identity or Structure		18
Section 3.16 Existence		19
Section 3.17 Management		19
Section 3.18 ERISA		19

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ARTICLE IV
SPECIAL COVENANTS
Section 4.1 Property Use	20
Section 4.2 Single Purpose Entity	20
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Warranty of Title	23
Section 5.2 Legal Status and Authority	23
Section 5.3 Validity of Documents	23
Section 5.4 Litigation	24
Section 5.5 Status of Property	24
Section 5.6 No Foreign Person	25
Section 5.7 Separate Tax Lot	25
Section 5.8 Leases	25
Section 5.9 Financial Condition	26
Section 5.10 Business Purposes	26
Section 5.11 Taxes	26
Section 5.12 Mailing Address	27
Section 5.13 No Change in Facts or Circumstances	27
Section 5.14 Disclosure	27
Section 5.16 Illegal Activity	27
Section 5.17 Regulations T,U and X.	27
Section 5.18 No Plan Assets	27
Section 5.19 No Breach of Fiduciary Duty	27
ARTICLE VI
OBLIGATIONS AND RELIANCE
Section 6.1 Relationship of Borrower and Lender	28
Section 6.2 No Reliance on Lender	28
Section 6.3 No Lender Obligations	28
Section 6.4 Reliance	28
ARTICLE VII
FURTHER ASSURANCES
Section 7.1 Recording of Security Instrument, etc.	29
Section 7.2 Further Acts, etc.	29
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws	30

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Section 7.4 Estoppel Certificates	30
Section 7.5 Flood Insurance	31
Section 7.6 Replacement Documents	31
ARTICLE VIII
DUE ON SALE/ENCUMBRANCE
Section 8.1 No Sale/Encumbrance	31
Section 8.2 Sale/Encumbrance Defined	32
Section 8.3 Lender’s Rights	33
Section 8.4 Permitted One Time Transfer	33
ARTICLE IX
PREPAYMENT
Section 9.1 Prepayment	36
ARTICLE X
DEFAULT
Section 10.1Events of Default	36
ARTICLE XI
RIGHTS AND REMEDIES
Section 11.1 Remedies	38
Section 11.2 Application of Proceeds	40
Section 11.3 Right to Cure Defaults	40
Section 11.4 Actions and Proceedings	41
Section 11.5 Recovery of Sums Required To Be Paid	41
Section 11.6 Examination of Books and Records	41
Section 11.7 Other Rights, etc	41
Section 11.8 Right to Release Any Portion of the Property	42
Section 11.9 Violation of Laws	42
Section 11.10 Right of Entry	42
Section 11.11 Subrogation	42
ARTICLE XII
ENVIRONMENTAL MATTERS
Section 12.1 Environmental Representations and Warranties	42

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Section 12.2 Environmental Covenants	43
Section 12.3 Lender’s Rights	44
Section 12.4 Operations and Maintenance Programs	44
ARTICLE XIII
INDEMNIFICATIONS
Section 13.1 General Indemnification	45
Section 13.2 Mortgage and/or Intangible Tax	46
Section 13.3 Duty to Defend; Attorneys’ Fees and other Fees and Expenses	46
Section 13.4 Environmental Indemnity	46
ARTICLE XIV
WAIVERS
Section 14.1 Waiver of Counterclaim	46
Section 14.2 Marshalling and Other Matters	46
Section 14.3 Waiver of Notice	46
Section 14.4 Waiver of Statute of Limitions	47
Section 14.5 Sole Discretion of Lender	47
Section 14.6 WAIVER OF TRIAL BY JURY	47
ARTICLE XV
EXCULPATION
Section 15.1 Exculpation	47
ARTICLE XVI
NOTICES
Section 16.1 Notices	47
ARTICLE XVII
APPLICABLE LAW
Section 17.1 Choice of Law	48
Section 17.2 Provisions Subject to Applicable Law	48

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ARTICLE XVIII
SECONDARY MARKET	48
Section 18.1 Transfer of Loan	48
Section 18.2 Cooperation
ARTICLE XIX
COSTS
Section 19.1 Performance at Borrower’s Expense	49
Section 19.2 Legal Fees for Enforcement	49
ARTICLE XX
DEFINITIONS
Section 20.1 General Definitions	49
Section 20.2 Headings,etc	50
ARTICLE XXI
MISCELLANEOUS PROVISIONS
Section 21.1 No Oral Change	50
Section 21.2 Liability	50
Section 21.3 Inapplicate Provisions	50
Section 21.4 Duplicate Originals; Countreparts	50
Section 21.5 Number and Gender	50
ARTICLE XXII
SPECIAL FLORIDA PROVISIONS
Section 22.1 Principles of Construction	51
Section 22.2 Assignment	51
Section 22.3 Future Advances	50

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THIS MORTGAGE AND SECURITY AGREEMENT (the “Security Instrument”) is made as of the 28^th day of June, 2006, by ING US STUDENTS NO. 14 LLC, a Delaware limited liability company, having its principal place of business at c/o ING Real Estate Investment Management, Level 6, 345 George Street, Sydney NSW 2000, Australia, as mortgagor (“Borrower”) to MORGAN STANLEY MORTGAGE CAPITAL INC., a New York corporation, having an address at 1221 Avenue of the Americas, New York, New York 10020, as mortgagee (“Lender”).

RECITALS:

Borrower by its promissory note of even date herewith given to Lender is indebted to Lender in the principal sum of TEN MILLION FIVE HUNDRED AND 00/100 DOLLARS ($10,500,000.00) (the “Loan Amount”) in lawful money of the United States of America (the note together with all extensions, renewals, modifications, substitutions and amendments thereof shall collectively be referred to as the “Note”), with interest from the date thereof at the rates set forth in the Note, principal and interest to be payable in accordance with the terms and conditions provided in the Note.

Borrower desires to secure the payment of the Debt (as defined in Article 2) and the performance of all of its obligations under the Note and the Other Obligations (as defined in Article 2).

ARTICLE I

GRANTS OF SECURITY

Section 1.1 Property Mortgaged. Borrower does hereby irrevocably mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to Lender, and grant a security interest to Lender in, the following property, rights, interests and estates now owned, or hereafter acquired by Borrower (collectively, the “Property”):

(a) Land. The real property described in Exhibit A attached hereto and made a part hereof (the “Land”);

(b) Additional Land. All additional lands, estates and development rights hereafter acquired by Borrower for use in connection with the Land and the development of the Land and all additional lands and estates therein which may, from time to time, by supplemental mortgage or otherwise be expressly made subject to the lien of this Security Instrument;

(c) Improvements. The buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located on the Land (the “Improvements”);

(d) Easements. All easements, rights-of-way or use, rights, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, and all estates, rights, titles, interests, privileges, liberties,

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servitudes, tenements, hereditaments and appurtenances of any nature whatsoever, in any way now or hereafter belonging, relating or pertaining to the Land and the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Land, to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtesy and rights of curtesy, property, possession, claim and demand whatsoever, both at law and in equity, of Borrower of, in and to the Land and the Improvements and every part and parcel thereof, with the appurtenances thereto;

(e) Fixtures and Personal Property. All machinery, equipment, fixtures (including, but not limited to, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures) and other property of every kind and nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, and usable in connection with the present or future operation and occupancy of the Land and the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Land and the Improvements, or appurtenant thereto, or usable in connection with the present or future operation and occupancy of the Land and the Improvements (collectively, the “Personal Property”), and the right, title and interest of Borrower in and to any of the Personal Properly which may be subject to any security interests, as defined in the Uniform Commercial Code, as adopted and enacted by the state or states where any of the Properly is located (the “Uniform Commercial Code”), and all proceeds and products of the above;

(f) Leases and Rents. All leases, subleases and other agreements affecting the use, enjoyment or occupancy of the Land and/or the Improvements heretofore or hereafter entered into and all extensions, amendments and modifications thereto, whether before or after the filing by or against Borrower of any petition for relief under 11 U.S.C. §101 el seq., as the same may be amended from time to time (the “Bankruptcy Code”) (the “Leases”) and all right, title and interest of Borrower, its successors and assigns therein and thereunder, including, without limitation, any guaranties of the lessees’ obligations thereunder, cash or securities deposited thereunder to secure the performance by the lessees of their obligations thereunder and all rents, additional rents, early termination fees and payments and other termination fees and payments, revenues, issues and profits (including all oil and gas or other mineral royalties and bonuses) from the Land and the Improvements, whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (the “Rents”) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt;

(g) Insurance Proceeds. All proceeds of and any unearned premiums on any insurance policies covering the Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Property;

(h) Condemnation Awards. All awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property, whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of the right), or for a change of grade, or for any other injury to or decrease in the value of the Property;

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(i) Tax Certiorari. All refunds, rebates or credits in connection with a reduction in real estate taxes and assessments charged against the Property as a result of tax certiorari or any applications or proceedings for reduction;

(j) Conversion. All proceeds of the conversion, voluntary or involuntary, of any of the foregoing including, without limitation, proceeds of insurance and condemnation awards, into cash or liquidation claims;

(k) Rights. The right, in the name and on behalf of Borrower, to appear in and defend any action or proceeding brought with respect to the Property and to commence any action or proceeding to protect the interest of Lender in the Property;

(1) Agreements. All agreements, contracts, certificates, instruments, franchises, permits, licenses, plans, specifications and other documents, now or hereafter entered into, and all rights therein and thereto, respecting or pertaining to the use, occupation, construction, management or operation of the Land and any part thereof and any Improvements or respecting any business or activity conducted on the Land and any part thereof and all right, title and interest of Borrower therein and thereunder, including, without limitation, the right, upon the occurrence and during the continuance of an Event of Default (defined below), to receive and collect any sums payable to Borrower thereunder;

(m) Intangibles. All trade names, trademarks, servicemarks, logos, copyrights, goodwill, books and records and all other general intangibles relating to or used in connection with the operation of the Property; and

(n) Other Rights. Any and all other rights of Borrower in and to the items set forth in Subsections (a) through (m) above.

Section 1.2 Assignment of Leases and Rents. Borrower hereby absolutely and unconditionally assigns to Lender Borrower’s right, title and interest in and to all current and future Leases and Rents; it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Nevertheless, subject to the terms of this Section 1.2 and Section 3.8, Lender grants to Borrower a revocable license to collect and receive the Rents. Borrower shall hold a portion of the Rents sufficient to discharge all current sums due on the Debt for use in the payment of such sums.

Section 1.3 Security Agreement. This Security Instrument is both a real property mortgage and a “security agreement” within the meaning of the Uniform Commercial Code. The Properly includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Borrower in the Property. By executing and delivering this Security Instrument, Borrower hereby grants to Lender, as security for the Obligations (defined in Section 2.3), a security interest in the Personal Property to the full extent that the Personal Property may be subject to the Uniform Commercial Code.

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Section 1.4 Pledge of Monies Held. Borrower hereby pledges to Lender any and all monies now or hereafter held by Lender, including, without limitation, any sums deposited in the Escrow Fund (as defined in Section 3.5), Net Proceeds (as defined in Section 3.7) and condemnation awards or payments described in Section 3.6, as additional security for the Obligations until expended or applied as provided in this Security Instrument.

Section 1.5 Conditions to Grant. TO HAVE AND TO HOLD the above granted and described Property unto and to the use and benefit of Lender, and for the successors and assigns of Lender, forever; PROVIDED, HOWEVER, these presents are upon the express condition that, if Borrower shall well and truly pay to Lender the Debt at the time and in the manner provided in the Note and this Security Instrument, shall well and truly perform the Other Obligations as set forth in this Security Instrument and shall well and truly abide by and comply with each and every covenant and condition set forth herein and in the Note, these presents and the estate hereby granted shall cease, terminate and be void.

ARTICLE II

DEBT AND OBLIGATIONS SECURED

Section 2.1 Debt. This Security Instrument and the grants, assignments and transfers made in Article 1 are given for the purpose of securing the payment of the following, in such order of priority as Lender may determine in its sole discretion (the “Debt”):

(a) the indebtedness evidenced by the Note in lawful money of the United States of America;

(b) interest, default interest, late charges and other sums, as provided in the Note, this Security Instrument or the Other Security Documents (defined below);

(c) the Default Consideration (as defined in the Note), if any;

(d) all other moneys agreed or provided to be paid by Borrower in the Note, this Security Instrument or the Other Security Documents;

(e) all sums advanced pursuant to this Security Instrument to protect and preserve the Property and the lien and the security interest created hereby; and

(f) all sums advanced and costs and expenses incurred by Lender in connection with the Debt or any part thereof, any renewal, extension, or change of or substitution for the Debt or any part thereof, or the acquisition or perfection of the security therefor, whether made or incurred at the request of Borrower or Lender.

Section 2.2 Other Obligations. This Security Instrument and the grants, assignments and transfers made in Article 1 are also given for the purpose of securing the performance of the following (the “Other Obligations”):

(a) all other obligations of Borrower contained herein;

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(b) each obligation of Borrower contained in the Note and in the Other Security Documents; and

(c) each obligation of Borrower contained in any renewal, extension, amendment, modification, consolidation, change of, or substitution or replacement for, all or any part of the Note, this Security Instrument or the Other Security Documents.

Section 2.3 Debt and Other Obligations. Borrower’s obligations for the payment of the Debt and the performance of the Other Obligations shall be referred to collectively below as the “Obligations.”

Section 2.4 Payments. Unless payments are made in the required amount in immediately available funds at the place where the Note is payable, remittances in payment of all or any part of the Debt shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by Lender in funds immediately available at the place where the Note is payable (or any other place as Lender, in Lender’s sole discretion, may have established by delivery of written notice thereof to Borrower) and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by Lender of any payment in an amount less than the amount then due shall be deemed an acceptance on account only, and the failure to pay the entire amount then due shall be and continue to be an Event of Default.

ARTICLE III

BORROWER COVENANTS

Borrower covenants and agrees that:

Section 3.1 Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the Note and in this Security Instrument.

Section 3.2 Incorporation bv Reference. All the covenants, conditions and agreements contained in (a) the Note and (b) all and any of the documents other than the Note or this Security Instrument now or hereafter executed by Borrower and/or others and by or in favor of Lender, which wholly or partially secure or guaranty payment of the Note (the “Other Security Documents”), are hereby made a part of this Security Instrument to the same extent and with the same force as if fully set forth herein.

Section 3.3 Insurance.

(a) Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Property providing at least the following coverages:

(i) Property Insurance. Insurance with respect to the Improvements and building equipment insuring against any peril now or hereafter included within the classification “All Risks of Physical Loss” in amounts at all times sufficient to prevent

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Lender from becoming a co-insurer within the terms of the applicable policies and under applicable law, but in any event such insurance shall be maintained in an amount which, after application of deductible, shall be equal to the full insurable value of the Improvements and building equipment, the term “full insurable value” to mean the actual replacement cost of the Improvements and building equipment (without taking into account any depreciation, and exclusive of excavations, footings and foundations, landscaping and paving) determined annually by an insurer, a recognized independent insurance broker or an independent appraiser selected and paid by Borrower and in no event less than the coverage required pursuant to the terms of any Lease;

(ii) Liability Insurance. Comprehensive general liability insurance, including bodily injury, death and property damage liability, insurance against any and all claims, including all legal liability to the extent insurable and imposed upon Lender and all court costs and attorneys’ fees and expenses, arising out of or connected with the possession, use, leasing, operation, maintenance or condition of the Property in such amounts as are generally available at commercially reasonable premiums and are generally required by institutional lenders for properties comparable to the Property but in any event for a combined single limit of at least $5,000,000;

(iii) Workers’ Compensation Insurance. Statutory workers’ compensation insurance with respect to any work on or about the Property;

(iv) Business Interruption Insurance. Business income insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above for a period commencing at the time of loss for such length of time as it takes to repair or replace with the exercise of due diligence and dispatch; (C) containing an extended period of indemnity endorsement which provides that after the physical toss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of eighteen (18) months from the date that the Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to one hundred percent (100%) of the projected gross income from the Property for a period from the date of loss to a date (assuming total destruction) which is eighteen (18) months from the date that the Property is repaired or replaced and operations are resumed. The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrower’s reasonable estimate of the gross income from the Property for the succeeding eighteen (18) month period, based upon the assumption that no casualty has or will occur. All proceeds payable to Lender pursuant to this subsection shall be held by Lender and shall be applied to the obligations secured by the Loan documents from time to time due and payable hereunder and under the Note and the Other Security Documents and otherwise as determined by Lender in its sole discretion; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan documents on the respective dates of payment provided for herein and in the Note and the Other Security Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance;

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(v) Boiler and Machinery Insurance, Broad form boiler and machinery insurance (without exclusion for explosion) covering all boilers or other pressure vessels, machinery, and equipment located in, on or about the Property and insurance against loss of occupancy or use arising from any breakdown in such amounts as are generally required by institutional lenders for properties comparable to the Property;

(vi) Flood Insurance. If required by Subsection 5.5(j) hereof, flood insurance in an amount at least equal to the lesser of (A) the principal balance of the Note, or (B) the maximum limit of coverage available for the Property under the National Flood Insurance Act of 1968, The Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended;

(vii) Builder’s Risk Insurance. At all times during which structural construction, repairs or alterations arc being made with respect to the Improvements (A) owner’s contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in Subsection 3.3(a)(i) written in a so-called builder’s risk completed value form (I) on a non-reporting basis, (2) against all risks insured against pursuant to Subsection 3,3(a)(i), (3) including permission to occupy the Property, and (4) with an agreed amount endorsement waiving co-insurance provisions; and

(viii) Other Insurance. Such other insurance with respect to the Property against loss or damage of the kinds from time to time customarily insured against and in such amounts as are required by institutional lenders for properties comparable to the Property.

The comprehensive all risk insurance and business income insurance policies required under subsections (i) and (iv) above shall be required to cover perils of terrorism and acts of terrorism (for the amounts set forth in subsections (i) and (iv) above and with deductibles no greater than those provided in subsections (i) and (iv) above),

(b) All insurance provided for in Subsection 3.3(a) hereof shall be obtained under valid and enforceable policies (the “Policies” or in the singular, the “Policy”), and shall be issued by one or more domestic primary insuren(s) having (i) a general policy rating of A or better and a financial class of VI or better by A.M. Best Company, Inc. (or if a rating of A.M. Best Company Inc. is no longer available, a similar rating from a similar or successor service) and (ii) a claims paying ability rating by a credit rating agency approved by Lender (a “Rating Agency”) of not less than AA by Standard & Poor’s Ratings Services or such comparable rating by such other Rating Agency. All insurers providing insurance required by this Security Instrument shall be authorized to issue insurance in the state in which the Property is located. The Policy referred to in Subsection 3.3(a)(ii) above shall name Lender as an additional named insured and the Policies referred to in Subsection 3.3(a)(i), (iv), (v), (vi) and (vii), and as applicable (viii), above shall provide that all proceeds be payable to Lender as set forth in Section 3.7 hereof. The Policies referred to in Subsections 3.3(a)(i), (v), (vi) and (vii) shall also contain: (i) a standard “non-contributory mortgagee” endorsement or its equivalent relating, inter alia, to recovery by Lender notwithstanding the negligent or willful acts or omission of Lender; (ii) to the extent available at commercially reasonable rates, a waiver of subrogation

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endorsement as to Lender; and (iii) an endorsement providing for a deductible per loss of an amount not more than that which is customarily maintained by prudent owners of similar properties in the general vicinity of the Property, but in no event in excess of $10,000. The Policy referred to in Subsection 3.3(a)(i) above shall provide coverage for contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements together with an “Ordinance or Law Coverage” or “Enforcement” endorsement if any of the Improvements or the use of the Property shall at any time constitute legal nonconforming structures or uses. All Policies shall contain (i) a provision that such Policies shall not be cancelled or terminated, nor shall they expire, without at least thirty (30) days’ prior written notice to Lender in each instance; and (ii) include effective waivers by the insurer of all claims for Insurance Premiums (defined below) against any loss payees, additional insureds and named insureds (other than Borrower). Certificates of insurance with respect to all renewal and replacement Policies shall be delivered to Lender not less than twenty (20) days prior to the expiration date of any of the Policies required to be maintained hereunder, which certificates shall bear notations evidencing payment of applicable premiums (the “Insurance Premiums”). Originals or certificates of such replacement Policies shall be delivered to Lender promptly after Borrower’s receipt thereof but in any case within thirty (30) days after the effective date thereof. If Borrower fails to maintain and deliver to Lender the original Policies or certificates of insurance required by this Security Instrument, upon ten (10) days’ prior notice to Borrower, Lender may procure such insurance at Borrower’s sole cost and expense.

(c) Borrower shall comply with all insurance requirements and shall not bring or keep or permit to be brought or kept any article upon any of the Property or cause or permit any condition to exist thereon which would be prohibited by an insurance requirement, or would invalidate the insurance coverage required hereunder to be maintained by Borrower on or with respect to any part of the Property pursuant to this Section 3.3.

Section 3.4 Payment of Taxes, etc.

(a) Borrower shall promptly pay all taxes, assessments, water rates, sewer rents, governmental impositions, and other charges, including without limitation vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Land, now or hereafter levied or assessed or imposed against the Property or any part thereof (the “Taxes”), all ground rents, maintenance charges and similar charges, now or hereafter levied or assessed or imposed against the Property or any part thereof (the “Other Charges”), and all charges for utility services provided to the Property as same become due and payable. Borrower will deliver to Lender, promptly upon Lender’s request, evidence satisfactory to Lender that the Taxes, Other Charges and utility service charges have been so paid or arc not then delinquent. Borrower shall not suffer and shall promptly cause to be paid and discharged any lien or charge whatsoever which may be or become a lien or charge against the Property. Except to the extent sums sufficient to pay all Taxes and Other Charges have been deposited with Lender in accordance with the terms of this Security Instrument, Borrower shall furnish to Lender paid receipts for the payment of the Taxes and Other Charges prior to the date the same shall become delinquent.

(b) After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any of the Taxes,

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provided that (i) no Event of Default has occurred and is continuing under the Note, this Security Instrument or any of the Other Security Documents, (ii) Borrower is permitted to do so under the provisions of any other mortgage, deed of trust or deed to secure debt affecting the Property, (iii) such proceeding shall suspend the collection of the Taxes from Borrower and from the Property or Borrower shall have paid all of the Taxes under protest, (iv) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder, (v) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost, and (vi) Borrower shall have deposited with Lender adequate reserves for the payment of the Taxes, together with all interest and penalties thereon, unless Borrower has paid all of the Taxes under protest, or Borrower shall have furnished the security as may be required in the proceeding, or as may be reasonably requested by Lender to insure the payment of any contested Taxes, together with all interest and penalties thereon, taking into consideration the amount in the Escrow Fund available for payment of Taxes.

Section 3.5 Escrow Fund.

(a) In addition to the initial deposits with respect to Taxes and Insurance Premiums made by Borrower to Lender on the date hereof to be held by Lender in escrow, Borrower shall pay to Lender on the first day of each calendar month (a) one-twelfth of an amount which would be sufficient to pay the Taxes payable, or estimated by Lender to be payable, during the next ensuing twelve (12) months and (b) one-twelfth of an amount which would be sufficient to pay the Insurance Premiums due for the renewal of the coverage afforded by the Policies upon the expiration thereof (the amounts in (a) and (b) above shall be called the “Escrow Fund”). Borrower agrees to notify Lender immediately of any changes to the amounts, schedules and instructions for payment of any Taxes and Insurance Premiums of which it has or obtains knowledge and authorizes Lender or its agent to obtain the bills for Taxes directly from the appropriate taxing authority. The Escrow Fund and the payments of interest or principal or both, payable pursuant to the Note shall be added together and shall be paid as an aggregate sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow Fund and no Event of Default exists, Lender shall be obligated to pay the Taxes and Insurance Premiums as they become due on their respective due dates on behalf of Borrower by applying the Escrow Fund to the payments of such Taxes and Insurance Premiums required to be made by Borrower pursuant to Sections 3.3 and 3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof, Lender shall, in its discretion, return any excess to Borrower or credit such excess against future payments to be made to the Escrow Fund. In allocating such excess, Lender may deal with the person shown on the records of Lender to be the owner of the Property. If the Escrow Fund is not sufficient to pay the items set forth in (a) and (b) above, Borrower shall promptly pay to Lender, upon demand, an amount which Lender shall reasonably estimate as sufficient to make up the deficiency. The Escrow Fund shall not constitute a trust fund and may be commingled with other monies held by Lender. Unless otherwise required by Applicable Laws (defined in Section 3.11), no earnings or interest on the Escrow Fund shall be payable to Borrower.

Section 3.6 Condemnation. Borrower shall promptly give Lender notice of the actual or threatened commencement of any condemnation or eminent domain proceeding and shall deliver to Lender copies of any and all papers served in connection with such proceedings.

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Notwithstanding any taking by any public or quasi-public authority through eminent domain or otherwise (including but not limited to any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Security Instrument and the Debt shall not be reduced until any award or payment therefor shall have been actually received and applied by Lender, after the deduction of expenses of collection, to the reduction or discharge of the Debt. Borrower shall cause the award or payment made in any condemnation or eminent domain proceeding, which is payable to Borrower, to be paid directly to Lender. Lender shall not be limited to the interest paid on the award by the condemning authority but shall be entitled to receive out of the award interest at the rate or rates provided herein or in the Note. Lender may apply any award or payment to the reduction or discharge of the Debt whether or not then due and payable. If the Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the award or payment, Lender shall have the right, whether or not a deficiency judgment on the Note (to the extent permitted in the Note or herein) shall have been sought, recovered or denied, to receive the award or payment, or a portion thereof sufficient to pay the Debt.

Section 3.7 Restoration After Casualty/Condemnation. In the event of a casualty or a taking by eminent domain, the following provisions shall apply in connection with the Restoration (defined below) of the Property:

(a) If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, or if the Property or any portion thereof is taken by the power of eminent domain Borrower shall give prompt notice of such damage or taking to Lender and shall promptly commence and diligently prosecute the completion of the repair and restoration of the Property as nearly as possible to the condition the Property was in immediately prior to such fire or other casualty or taking, with such alterations as may be approved by Lender (the “Restoration”).

(b) The term “Net Proceeds” for purposes of this Section 3.7 shall mean: (i) the net amount of all insurance proceeds under the Policies carried pursuant to Subsections 3.3(a)(i), (iv), (v), (vi), (vii) and (viii) of this Security Instrument as a result of such damage or destruction, after deduction of Lender’s reasonable costs and expenses (including, but not limited to reasonable counsel fees), if any, in collecting the same, or(ii) the net amount of all awards and payments received by Lender with respect to a taking referenced in Section 3.6 of this Security Instrument, after deduction of Lender’s reasonable costs and expenses (including, but not limited to reasonable counsel fees), if any, in collecting the same, whichever the case may be. If (i) the Net Proceeds do not exceed $50,000 (the “Net Proceeds Availability Threshold”); (ii) the costs of completing the Restoration as reasonably estimated by Borrower shall be less than or equal to the Net Proceeds; (iii) no Event of Default shall have occurred and be continuing under the Note, this Security Instrument or any of the Other Security Documents; (iv) the Property and the use. thereof after the Restoration will be in compliance with, and permitted under, all applicable zoning laws, ordinances, rules and regulations (including, without limitation, all applicable Environmental Laws (defined in Section 12.1); (v) (A) in the event that the Net Proceeds are insurance proceeds, less than twenty-five percent (25%) of the total floor area of the Improvements has been damaged or destroyed, or rendered unusable as a result of such fire or other casualty; or (B) in the event that the Net Proceeds are condemnation awards,

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less than 25% of the Land constituting the Property is taken, such Land that is taken is located along the perimeter or periphery of the Property, no portion of the Improvements is located in such Lands, and such taking does not materially impair access to the Property; and (vi) Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note which will be incurred with respect to the Property as a result of the occurrence of any such fire or other casualty or taking, whichever the case may be, will be covered out of (1) the Net Proceeds, or (2) other funds of Borrower, then the Net Proceeds will be disbursed directly to Borrower.

(c) If the Net Proceeds are greater than the Net Proceeds Availability Threshold or Borrower is not otherwise entitled to have the Net Proceeds disbursed directly to Borrower pursuant to Subsection 3.7(b), such Net Proceeds shall be forthwith paid to Lender to be held by Lender in a segregated account to be made available to Borrower for the Restoration in accordance with the provisions of this Subsection 3.7(c).

The Net Proceeds held by Lender pursuant to this Subsection 3.7(c) shall be made available to Borrower for payment or reimbursement of Borrower’s expenses in connection with the Restoration, subject to the following conditions:

(i) no Event of Default shall have occurred and be continuing under the Note, this Security Instrument or any of the Other Security Documents;

(ii) Lender shall, within a reasonable period of time prior to request for initial disbursement, be furnished with an estimate of the cost of the Restoration accompanied by an independent architect’s certification as to such costs and appropriate plans and specifications for the Restoration, such plans and specifications and cost estimates to be subject to Lender’s approval, not to be unreasonably withheld or delayed;

(iii) the Net Proceeds, together with any cash or cash equivalent deposited by Borrower with Lender, are sufficient to cover the cost of the Restoration as such costs are certified by the independent architect;

(iv) Net Proceeds are less than the then outstanding principal balance of the Note;

(v) (A) in the event that the Net Proceeds are insurance proceeds, less than twenty-five percent (25%) of the total floor area of the Improvements has been damaged or destroyed, or rendered unusable as a result of such fire or other casualty; or (B) in the event that the Net Proceeds are condemnation awards, less than 25% of the Land constituting the Property is taken, such Land that is taken is located along the perimeter or periphery of the Property, no portion of the Improvements is located in such Lands and such taking does not materially impair access to the Property;

(vi) Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note which will be incurred with respect to the Property as a result of the occurrence of any such fire or other casualty or taking, whichever the case may be, will be covered out of (1) the Net Proceeds, or (2) other funds of Borrower;

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(vii) Lender shall be satisfied that, upon the completion of the Restoration, the net cash flow of the Property will be restored to a level sufficient to cover all carrying costs and operating expenses of the Property, including, without limitation, debt service on the Note and all required replacement reserves, reserves for tenant improvements and leasing commissions;

(viii) the Restoration can reasonably be completed on or before the earliest to occur of (A) six (6) months prior to the Maturity Date (as defined in the Note), (B) the earliest date required for such completion under the terms of any Major Leases (defined below) and (C) such time as may be required under applicable zoning law, ordinance, rule or regulation in order to repair and restore the Property to as nearly as possible the condition it was in immediately prior to such fire or other casualty or to such taking, as applicable; and

(ix) the Property and the use thereof after the Restoration will be in compliance with, and permitted under, all applicable zoning laws, ordinances, rules and regulations (including, without limitation, all applicable Environmental Laws (defined in Section 12.1).

(d) The Net Proceeds held by Lender until disbursed in accordance with the provisions of this Section 3.7 shall constitute additional security for the Obligations. The Net Proceeds (other than the Net Proceeds paid under the Policy described in Subsection 3.3(a)(iv) which shall be applied by Lender pursuant to and in accordance with the provisions of Subsection 3.3(a)(iv)) shall be disbursed by Lender to, or as directed by, Borrower, in an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration less customary retainage from time to time during the course of the Restoration, not more frequently than once per month, upon receipt of evidence satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Property arising out of the Restoration which have not either been fully bonded and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company insuring the lien of this Security Instrument. Final payment shall be made after submission to Lender of all licenses, permits, certificates of occupancy and other required approvals of governmental authorization having jurisdiction and Casually Consultant’s (as defined below) certification that the Restoration has been fully completed.

(e) Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration. The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to prior review and acceptance by Lender and an independent consulting engineer selected by Lender (the “Casualty Consultant”), such acceptance not to be unreasonably withheld or delayed. All costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including, without limitation, reasonable counsel fees and disbursements and the Casualty Consultant’s fees, shall be paid by Borrower.

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(f) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the reasonable opinion of Lender, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 3.7 shall constitute additional security for the Obligations.

(g) Except upon the occurrence and continuance of an Event of Default, Borrower shall settle any insurance claims with respect to the Net Proceeds which in the aggregate are less than the Net Proceeds Availability Threshold. Lender shall have the right to participate in and reasonably approve any settlement for insurance claims with respect to the Net Proceeds which in the aggregate are greater than the Net Proceeds Availability Threshold. If an Event of Default shall have occurred and be continuing, Borrower hereby irrevocably empowers Lender, in the name of Borrower as its true and lawful attorney-in-fact, to file and prosecute such claim and to collect and to make receipt for any such payment. If the Net Proceeds are received by Borrower, such Net Proceeds shall, until the completion of the related work, be held in trust for Lender and shall be segregated from other funds of Borrower to be used to pay for the cost of the Restoration in accordance with the terms hereof.

(h) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after (i) the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 3.7, and (ii) the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full and all required permits. licenses, certificates of occupancy and other required approvals of governmental authorities having jurisdiction have been issued, shall be remitted by Lender to Borrower, provided no Event of Default shall have occurred and shall be continuing under the Note, this Security Instrument or any of the Other Security Documents.

(i) All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Subsection 3.7(h) shall be retained and applied by Lender toward the payment of the Debt whether or not then due and payable in such order, priority and proportions as Lender in its discretion shall deem proper or, at the discretion of Lender, the same shall be paid, either in whole or in part, to Borrower. If Lender shall receive and retain Net Proceeds, the lien of this Security Instrument shall be reduced only by the amount received and retained by Lender and actually applied by Lender in reduction of the Debt.

Section 3.8 Leases and Rents.

(a) Borrower may enter into a proposed Lease (including the renewal or extension of an existing Lease (“a Renewal Lease”)) without the prior written consent of Lender, provided such proposed Lease or Renewal Lease (i) provides for rental rates and terms comparable to existing local market rates and terms (taking into account the type and quality of

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the tenant) as of the date such Lease is executed by Borrower (unless, in the case of a Renewal Lease, the rent payable during such renewal, or a formula or other method to compute such rent, is provided for in the original Lease), (ii) is an arms-length transaction with a bona fide, independent third party tenant, (iii) does not have a materially adverse effect on the value of the Property taken as a whole, (iv) is subject and subordinate to the Security Instrument and the lessee thereunder agrees to attom to Lender, and (v) is written on the standard form of lease approved by Lender. All proposed Leases which do not satisfy the requirements set forth in this Subsection 3.8(a) shall be subject to the prior approval of Lender and its counsel, at Borrower’s expense. Borrower shall promptly deliver to Lender copies of all Leases which are entered into pursuant to this Subsection together with Borrower’s certification that it has satisfied all of the conditions of this Subsection.

(b) Borrower (i) shall observe and perform all the obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to impair the value of any of the Leases as security for the Debt; (ii) upon request, shall promptly send copies to Lender of all notices of default which Borrower shall send or receive thereunder; (iii) shall enforce all of the material terms, covenants and conditions contained in the Leases upon the part of the tenant thereunder to be observed or performed, (iv) shall not collect any of the Rents more than one (1) month in advance (except security deposits shall not be deemed Rents collected in advance); (v) shall not execute any other assignment of the lessor’s interest in any of the Leases or the Rents; and (vi) shall not consent to any assignment of or subletting under any Leases not in accordance with their terms, without the prior written consent of Lender, not to be unreasonably withheld.

(c) Borrower may, without the consent of Lender, amend, modify or waive the provisions of any Lease or terminate, reduce rents under, accept a surrender of space under, or shorten the term of, any Lease (including any guaranty, letter of credit or other credit support with respect thereto) provided that such action (taking into account, in the case of a termination, reduction in rent, surrender of space or shortening of term, the planned alternative use of the affected space) does not have a materially adverse effect on the value of the Property taken as a whole, and provided that such Lease, as amended, modified or waived, is otherwise in compliance with the requirements of this Security Instrument and any subordinate agreement binding upon Lender with respect to such Lease. A termination of a Lease with a tenant who is in default beyond applicable notice and grace periods shall not be considered an action which has a materially adverse effect on the value of the Property taken as a whole. Any amendment, modification, waiver, termination, rent reduction, space surrender or term shortening which does not satisfy the requirements set forth in this Subsection shall be subject to the prior approval of Lender and its counsel, at Borrower’s expense. Borrower shall promptly deliver to Lender copies of amendments, modifications and waivers which are entered into pursuant to this Subsection together with Borrower’s certification that it has satisfied all of the conditions of this Subsection.

(d) Notwithstanding anything contained herein to the contrary, Borrower shall not,’without the prior written consent of Lender, enter into, renew, extend, amend, modify, waive any provisions of, terminate, reduce rents under, accept a surrender of space under, or shorten the term of, any Major Lease. The term “Major Lease” shall mean any Lease of non-residential space at the Property.

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Section 3.9 Maintenance and Use of Property. Borrower shall cause the Property to be maintained in a good and safe condition and repair. The Improvements and the Personal Property shall not be removed, demolished or materially altered (except for normal replacement of the Personal Property) without the consent of Lender. Borrower shall promptly repair, replace or rebuild any part of the Property which may be destroyed by any casualty, or become damaged, worn or dilapidated or which may be affected by any proceeding of the character referred to in Section 3.6 hereof and shall complete and pay for any structure at any time in the process of construction or repair on the Land. Borrower shall not initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of the Property or any part thereof. If under applicable zoning provisions the use of all or any portion of the Property is or shall become a nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or the nonconforming Improvement to be abandoned without the express written consent of Lender.

Section 3.10 Waste. Borrower shall not commit or suffer any waste of the Property or make any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take any action that might invalidate or give cause for cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair the value of the Property or the security of this Security Instrument. Borrower will not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Land, regardless of the depth thereof or the method of mining or extraction thereof.

Section 3.11 Compliance With Laws.

(a) Borrower shall promptly comply with all existing and future federal, stale and local laws, orders, ordinances, governmental rules and regulations or court orders affecting Borrower, the Property, or the use thereof, including, without limitation, Prescribed Laws (collectively, “Applicable Laws”). The term “Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act), (b) Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, (c) the International Emergency Economic Power Act, 50 U.S.C. §1701 et. seq. and (d) all other legal requirements relating to money laundering or terrorism.

(b) Borrower shall from time to time, upon Lender’s request, provide Lender with evidence reasonably satisfactory to Lender that each of Borrower and the Property complies with all Applicable Laws or is exempt from compliance with Applicable Laws.

(c) Notwithstanding any provisions sel forth herein or in any document regarding Lender’s approval of alterations of the Property, Borrower shall not alter the Property in any manner which would materially increase Borrower’s responsibilities for compliance with Applicable Laws without the prior written approval of Lender. Lender’s approval of the plans, specifications, or working drawings for alterations of the Property shall create no responsibility

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or liability on behalf of Lender for their completeness, design, sufficiency or their compliance with Applicable Laws. The foregoing shall apply to tenant improvements constructed by Borrower or by any of its tenants. Lender may condition any such approval upon receipt of a certificate of compliance with Applicable Laws from an independent architect, engineer, or other person reasonably acceptable to Lender.

(d) Borrower shall give prompt notice to Lender of the receipt by Borrower of any notice related to a violation of any Applicable Laws and of the commencement of any proceedings or investigations which relate to compliance with Applicable Laws.

(e) After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the Applicable Laws affecting the Property, provided that (i) no Event of Default has occurred and is continuing under the Note, this Security Instrument or any of the Other Security Documents; (ii) Borrower is permitted to do so under the provisions of any other mortgage, deed of trust or deed to secure debt affecting the Property; (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower or the Property is subject and shall not constitute a default thereunder; (iv) neither the Property, any part thereof or interest therein, any of the tenants or occupants thereof, nor Borrower shall be affected in any material adverse way as a result of such proceeding; (v) non-compliance with the Applicable Laws shall not impose civil or criminal liability on Borrower or Lender; and (vi) Borrower shall have furnished to Lender all other items reasonably requested by Lender.

Section 3.12 Books and Records.

(a) Borrower and any Guarantors (defined in Subsection 10.1(e)) and Indemnitor(s) (defined in Section 13.4), if any, shall keep adequate books and records of account in accordance with generally accepted accounting principles (“GAAP”), or in accordance with other methods acceptable to Lender in its sole discretion, consistently applied and furnish to Lender:

(i) monthly, or if the Loan (defined below) has been securitized or sold as a whole loan by Lender, quarterly and annual certified rent rolls signed and dated by Borrower, detailing the names of all tenants of the Improvements, the portion of Improvements occupied by each tenant, the base rent and any other charges payable under each Lease and the term of each Lease, including the expiration date, the extent to which any tenant is in default under any Lease, and any other information as is reasonably required by Lender, within twenty (20) days after the end of each calendar month, thirty (30) days after the end of each fiscal quarter or sixty (60) days after the close of each fiscal year of Borrower, as applicable;

(ii) on a monthly basis, operating statements of the Property for the immediately preceding month (and for previous periods if required by Lender), or if the Loan has been securitized or sold as a whole loan by Lender, quarterly and annual operating statements of the Property, all of which shall be prepared and certified by Borrower in the form required by Lender, detailing the revenues received, the expenses

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incurred and the net operating income before and after debt service (principal and interest) and major capital improvements for each month and containing appropriate year to date information, within twenty (20) days after the end of each calendar month, thirty (30) days after the end of each fiscal quarter or sixty (60) days after the close of each fiscal year of Borrower, as applicable;

(iii) an annual operating statement of the Property detailing the total revenues received, total expenses incurred, total cost of all capital improvements, total debt service and total cash flow, to be prepared and certified by Borrower in the form required by Lender, or if reasonably required by Lender, but exercisable by Lender only after an Event of Default, an audited annual operating statement prepared and certified by an independent certified public accountant reasonably acceptable to Lender, within sixty (60) days after the close of each fiscal year of Borrower;

(iv) quarterly and annual balance sheet and profit and loss statements of Borrower in the form required by Lender, prepared and certified by the Borrower, or if reasonably required by Lender, but exercisable by Lender only after an Event of Default, audited financial statements prepared by an independent certified public accountant acceptable to Lender, within thirty (30) days after the end of each fiscal quarter or sixty (60) days after the close of each fiscal year of Borrower;

(v) an annual operating budget presented on a monthly basis consistent with the annual operating statement described above for the Property, including cash flow projections for the upcoming year, and all proposed capital replacements and improvements at least fifteen (15) days prior to the start of each fiscal year; and

(vi) for any Guarantors and any Indemnitor(s), a statement of the net worth and liquidity of each Guarantor and/or Indemnitor, certified by the respective Guarantor and/or Indemnitor.

(b) Upon request from Lender, Borrower shall furnish in a timely manner to Lender:

(i) a property management report for the Property, showing the number of inquiries made and/or rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender, in reasonable detail and certified by Borrower (or an officer, general partner, member or principal of Borrower if Borrower is not an individual) under penalty of perjury to be true and complete, but no more frequently than quarterly; and

(ii) an accounting of all security deposits held in connection with any Lease of any part of the Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to obtain information regarding such accounts directly from such financial institutions.

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(c) Borrower shall furnish Lender with such other additional financial or management information (including State and Federal tax returns) as may, from time to time, be reasonably required by Lender in form and substance reasonably satisfactory to Lender.

(d) Borrower, any Guarantor and any Indemnitor shall furnish to Lender and its agents convenient facilities for the examination and audit of any such books and records.

(e) Borrower acknowledges the importance to Lender of the timely delivery of each of the items required by this Section 3.12 (each, a “Required Financial Item” and collectively, the “Required Financial Items”). In the event Borrower fails to deliver to Lender any of the Required Financial Items within the time frame specified herein (each such event, a “Reporting Failure”), in addition to constituting an Event of Default hereunder and without limiting Lender’s other rights and remedies with respect to the occurrence of such an Event of Default, Borrower shall pay to Lender the sum of $1,000.00 per occurrence for each Reporting Failure. It shall constitute a further Event of Default hereunder if any such payment is not received by Lender within thirty (30) days of the date on which such payment is demanded by Lender, and Lender shall be entitled to the exercise of all of its rights and remedies provided hereunder.

(f) In the event that two (2) Reporting Failures occur during any twelve (12) month period during the term of the Loan, Borrower agrees to establish a lockbox and lockbox account pursuant to Lender’s requirements, each in the name of Lender, and to execute Lender’s standard form Cash Management Agreement, together with any documentation ancillary thereto as required by Lender, including, without limitation, a lockbox agreement with a bank acceptable to Lender, signature cards and letters to tenants, credit card companies and other account receivable counterparties directing them to pay all rents, receivables and other sums directly to the lockbox account.

Section 3.13 Payment For Labor and Materials. Borrower will promptly pay when due all bills and costs for labor, materials, and specifically fabricated materials incurred in connection with the Property and never permit to exist in respect of the Property or any part thereof any lien or security interest, even though inferior to the liens and the security interests hereof, and in any event never permit to be created or exist in respect of the Property or any part thereof any other or additional lien or security interest other than the liens or security interests hereof, except for the Permitted Exceptions (defined below).

Section3.14 Performance of Other Agreements. Borrower shall observe and perform each and every term to be observed or performed by Borrower pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Property, or given by Borrower to Lender for the purpose of further securing an Obligation secured hereby and any amendments, modifications or changes thereto.

Section 3.15 Change of Name, Identity or Structure. Except as may be permitted under Article 8 hereof, Borrower will not change Borrower’s name, identity (including its trade name or names) or, if not an individual, Borrower’s corporate, partnership or other structure without first (a) notifying the Lender of such change in writing at least thirty (30) days prior to the effective date of such change, (b) taking all action required by Lender for the purpose

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of perfecting or protecting the lien and security interest of Lender and (c) in the case of a change in Borrower’s structure, without first obtaining the prior written consent of the Lender. Borrower shall promptly notify Lender in writing of any change in its organizational identification number. If Borrower does not now have an organizational identification number and later obtains one, Borrower shall promptly notify Lender in writing of such organizational identification number.

Section 3.16 Existence. Borrower will continuously maintain (a) its existence and shall not dissolve or permit its dissolution, (b) its rights to do business in the state where the Property is located and (c) its franchises and trade names, if any.

Section 3.17 Management. he management of the Property shall be by either: (a) Borrower or an entity affiliated with Borrower approved by Lender for so long as Borrower or said affiliated entity is managing the Property in a first class manner; or (b) a professional property management company approved by Lender. Such management by an affiliated entity or a professional property management company shall be pursuant to a written agreement approved by Lender. In no event shall any manager be removed or replaced or the terms of any management agreement modified or amended without the prior written consent of Lender. In the event of default hereunder or under any management contract then in effect, which default is not cured within any applicable grace or cure period, Lender shall have the right to immediately terminate, or to direct Borrower to immediately terminate, such management contract and to retain, or to direct Borrower to retain, a new management agent approved by Lender. All Rents generated by or derived from the Property shall first be utilized solely for current expenses directly attributable to the ownership and operation of the Property, including, without limitation, current expenses relating to Borrower’s liabilities and obligations with respect to the Note, this Security Instrument and the Other Security Documents, and none of the Rents generated by or derived from the Property shall be diverted by Borrower and utilized for any other purpose unless all such current expenses attributable to the ownership and operation of the Property have been fully paid and satisfied.

Section 3.18 ERISA. Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Security Instrument or the Other Security Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Borrower shall deliver to Lender such certifications or other evidence from lime to time throughout the term of the Loan, as requested by Lender in its sole discretion, that (A) Borrower is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (B) Borrower is not subject to any state statute regulating investments of, or fiduciary obligations with respect to, governmental plans; and (C) one or more of the following circumstances is true:

(i) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

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(ii) Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower is held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(0(2); or

(iii) Borrower qualifies as an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).

ARTICLE IV

SPECIAL COVENANTS

Borrower covenants and agrees that:

Section 4.1 Property Use. The Property shall be used only for student housing and retail uses, and for no other use, without the prior written consent of Lender, which consent shall not be unreasonably withheld.

Section 4.2 Single Purpose Entity. It has not, to the best of its knowledge, since the date of its formation and shall not:

(a) fail to be organized solely for the purpose of (i) acquiring, developing, owning, managing or operating the Property, (ii) entering into this Security Agreement and the documents related hereto, and (iii) engaging in any activity that is incidental, necessary or appropriate to accomplish the foregoing;

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

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

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

(e) fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its organization or formation, and qualification to do business in the state where the Property is located, if applicable, or without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of Borrower’s Partnership Agreement, Articles or Certificate of Incorporation, Articles of Organization, Certificate of Formation, Operating Agreement or similar organizational documents, as the case may be;

(f) own, form or acquire any subsidiary or make any investment in, any person or entity;

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(g) commingle its assets with the assets of any of its members, general partners, affiliates, principals or of any other person or entity nor fail to hold all of its assets in its own name;

(h) without Lender’s prior consent, which shall be given or withheld in Lender’s sole discretion, incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Debt, except for trade payables in the ordinary course of its business of owning and operating the Property, provided that such debt is not evidenced by a note and is paid when due;

(i) become insolvent or fail to pay its debts and liabilities from its assets as the same shall become due;

(j) fail to maintain its records, books of account and bank accounts separate and apart from those of the members, partners, principals and affiliates of Borrower, the affiliates of a member, partner or principal of Borrower, and any other person or entity or fail to maintain such books and records in the ordinary course of its business;

(k) enter into any contract or agreement with any member, general partner, principal or affiliate of Borrower, Guarantor or Indemnitor, or any member, general partner, principal or affiliate thereof, except upon terms and conditions that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arms-length basis with third parties other than any member, general partner, principal or affiliate of Borrower, Guarantor or Indemnitor, or any member, general partner, principal or affiliate thereof;

(1) seek the dissolution or winding up in whole, or in part, of Borrower;

(m) fail to correct any known misunderstandings regarding the separate identity of Borrower from any member, general partner, principal or affiliate thereof or any other person;

(n) guaranty or become obligated for the debts of any other person or entity or hold out its credit as being able to satisfy the debts of another person or entity;

(o) make any loans or advances to any third party, including any member, general partner, principal or affiliate of Borrower, or any member, general partner, principal or affiliate thereof, nor buy or hold evidence of indebtedness issued by any other person or entity (other than cash or investment grade securities);

(p) fail to file its own tax returns nor file a consolidated federal income tax return with any other entity, unless required by law;

(q) fail to hold itself out to the public as a legal entity separate and distinct from any other entity or person, fail to conduct its business solely in its own name, mislead others as to the identity with which such other party is transacting business, or suggest that Borrower is responsible for the debts of any third party (including any member, general partner, principal or affiliate of Borrower, or any member, general partner, principal or affiliate thereof);

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(r) (intentionally omitted);

(s) share any common logo with or materially hold itself out as, or be legally considered, a department or division of (i) any general partner, principal, member or affiliate of Borrower, (ii) any affiliate of a general partner, principal or member of Borrower, or (iii) any other person or entity;

(t) fail to maintain separate financial statements and accounting records, showing its assets and liabilities separate and apart from those of any other person or entity;

(u) have its assets listed on the financial statement of any other entity;

(v) fail to observe all applicable organizational formalities;

(w) fail to pay the salaries of its own employees (if any) from its own funds;

(x) fail to maintain a sufficient number of employees in light of its contemplated business operations;

(y) fail to allocate fairly and reasonably any overhead expenses that are shared with an affiliate, including paying for office space and services performed by any employee of an affiliate;

(z) fail lo use separate invoices or checks bearing its own name;

(aa) pledge its assets for the benefit of any other person or entity, other than in connection with the loan secured hereby;

(bb) acquire the obligations or securities of any member, general partner, principal or affiliate of Borrower, Guarantor or Indemnitor, or any member, general partner, principal or affiliate thereof;

(cc) fail to maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other entity;

(dd) have any obligation to indemnify its partners, officers, directors or members, as the case may be, or have such an obligation only if it is fully subordinated to the Debt and will not constitute a claim against it in the event that cash flow in excess of the amount required to pay the Debt is insufficient to pay such obligation;

(ee) fail, to the fullest extent permitted by law, to consider the interests of its creditors in connection with all actions if such entity is a corporation;

(ff) have any of its obligations guaranteed by any member, general partner, principal or affiliate except Guarantor or Indemnitor;

(gg) if Borrower is a single member limited liability company, fail to be organized in the State of Delaware; or

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(hh) if Borrower is a single member limited liability company, fail to have a springing member which, upon the dissolution of the sole member of Borrower or the withdrawal or the disassociation of such sole member from Borrower, shall immediately become the sole member of Borrower.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Lender that:

Section 5.1 Warranty of Title. Borrower has good title to the Property and has the right to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey the same and that Borrower possesses an unencumbered fee simple absolute estate in the Land and the Improvements and that it owns the Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions shown in the title insurance policy insuring the lien of this Security Instrument (the “Permitted Exceptions”), Borrower shall forever warrant, defend and preserve the title and the validity and priority of the lien of this Security Instrument and shall forever warrant and defend the same to Lender against the claims of all persons whomsoever.

Section 5.2 Legal Status and Authority. (a) Borrower (i) is duly organized, validly existing and in good standing under the laws of its state of organization or incorporation; (ii) is duly qualified to transact business and is in good standing in the state where the Property is located; (iii) has all necessary approvals, governmental and otherwise, and full power and authority to own, operate and lease the Property; and (iv) is in compliance with all Prescribed Laws. Borrower (and the undersigned representative of Borrower, if any) has full power, authority and legal right to execute this Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey the Property pursuant to the terms hereof and to keep and observe all of the terms of this Security Instrument on Borrower’s part to be performed.

(b) Borrower’s exact legal name is correctly set forth in the first paragraph of this Security Instrument. Borrower is an organization of the type specified in the first paragraph of this Security Instrument. Borrower is incorporated in or organized under the laws of the state specified in the first paragraph of this Security Instrument. Borrower’s principal place of business and chief executive office, and the place where Borrower keeps its books and records, including recorded data of any kind or nature, regardless of the medium or recording, including software, writings, plans, specifications and schematics, has been for the preceding four (4) months (or, if less than four (4) months, the entire period of the existence of Borrower) and will continue to be the address of Borrower set forth in the first paragraph of this Security Instrument (unless Borrower notifies Lender in writing at least thirty (30) days prior to the date of such change). Borrower’s organizational identification number, if any, assigned by the state of incorporation or organization is 4137860.

Section 5.3 Validity of Documents. (a) The execution, delivery and performance of the Note, this Security Instrument and the Other Security Documents and the borrowing evidenced by the Note (i) are within the power and authority of Borrower; (ii) have been authorized by all requisite organizational action; (iii) have received all necessary approvals

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and consents, corporate, governmental or otherwise; (iv) to the best of Borrower’s knowledge, will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a material default under any provision of law, any order or judgment of any court or governmental authority, the articles of incorporation, by-laws, partnership or trust agreement, articles of organization, operating agreement, or other governing instrument of Borrower, or any indenture, agreement or other instrument to which Borrower is a party or by which it or any of its assets or the Property is or may be bound or affected; (v) will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of its assets, except the lien and security interest created hereby; and (vi) to the best of Borrower’s knowledge, will not require any authorization or license from, or any filing with, any governmental or other body (except for the recordation of this Security Instrument in appropriate land records in the State where the Property is located and except for Uniform Commercial Code filings relating to the security interest created hereby); and (b) to the best knowledge of Borrower, the Note, this Security Instrument and the Other Security Documents constitute the legal, valid and binding obligations of Borrower.

Section 5.4 Litigation. Except as previously disclosed to Lender in writing, there is no action, suit or proceeding, judicial, administrative or otherwise (including any condemnation or similar proceeding), pending or, to the best of Borrower’s knowledge, threatened or contemplated against Borrower, a Guarantor, if any, an Indemnitor, if any, or against or affecting the Property that (a) has not been disclosed to Lender by Borrower in writing, and has a material adverse affect on the Property or Borrower’s, any Guarantor’s or any Indemnitor’s ability to perform its obligations under the Note, this Security Instrument or the Other Security Documents, or (b) is not adequately covered by insurance, each as determined by Lender in its reasonable discretion.

Section 5.5 Status of Property.

(a) Borrower has obtained all necessary certificates, licenses and other approvals, governmental and otherwise, necessary for the operation of the Property and the conduct of its business and all required zoning, building code, land use, environmental and other similar permits or approvals, all of which are in full force and effect as of the date hereof and not subject to revocation, suspension, forfeiture or modification.

(b) The Property and the present and contemplated use and occupancy thereof are in full compliance with all applicable zoning ordinances, building codes, land use laws, Environmental Laws, Prescribed Laws and other similar laws.

(c) The Property is served by all utilities required for the current or contemplated use thereof. All utility service is provided by public utilities and the Property has accepted or is equipped to accept such utility service.

(d) All public roads and streets necessary for service of and access to the Property for the current or contemplated use thereof have been completed, are serviceable and all-weather and are physically and legally open for use by the public.

(e) The Property is served by public water and sewer systems.

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(f) The Property is free from damage caused by fire or other casualty.

(g) All costs and expenses of any and all labor, materials, supplies and equipment used in the construction of the Improvements have been paid in full or sufficiently bonded.

(h) Borrower has paid in full for, and is the owner of, all furnishings, fixtures and equipment (other than tenants’ property) used in connection with the operation of the Property, free and clear of any and alt security interests, liens or encumbrances, except the lien and security interest created hereby.

(i) To the best of Borrower’s knowledge, all liquid and solid waste disposal, septic and sewer systems located on the Property are in a good and safe condition and repair and in compliance with all Applicable Laws.

(j) No portion of the Improvements is located in an area identified by the Secretary of Housing and Urban Development or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Improvements is located within such area, Borrower has obtained and will maintain the insurance prescribed in Section 3.3 hereof.

(k) All the Improvements lie within the boundaries of the Land.

Section 5.6 No Foreign Person. Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended and the related Treasury Department regulations.

Section 5.7 Separate Tax Lot. The Property is assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a part of such lot or lots, and no other land or improvements is assessed and taxed together with the Property or any portion thereof.

Section 5.8 Leases. (a) Except as disclosed in the rent roll for the Property delivered to and approved by Lender in writing prior to the date hereof, (i) Borrower is the sole owner of the entire lessor’s interest in the Leases; (ii) the Leases are valid and enforceable and in full force and effect; (iii) all of the Leases are arms-length agreements with bona fide, independent third parties; (iv) no party under any Lease is in default; (v) all Rents due have been paid in full; (vi) the terms of all alterations, modifications and amendments to the Leases are reflected in the certified rent roll or certified summary of leases delivered to and approved by Lender; (vii) none of the Rents reserved in the Leases have been assigned or otherwise pledged or hypothecated; (viii) none of the Rents have been collected for more than one (1) month in advance (except a security deposit shall not be deemed rent collected in advance); (ix) except as previously disclosed to Lender in writing, the premises demised under the Leases have been completed and the tenants under the Leases have accepted the same and have taken possession of the same on a rent-paying basis; (x) to the best of Borrower’s knowledge, there exist no offsets or defenses to the payment of any portion of the Rents and Borrower has no monetary obligation to any tenant under any Lease; (xi) Borrower has received no written notice from any tenant challenging the validity or enforceability of any Lease; (xii) there are no agreements with the

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tenants under the Leases other than expressly set forth in each Lease; (xiii) the Leases are valid and enforceable against Borrower and the tenants set forth therein; (xiv) no Lease contains an option to purchase, right of first refusal to purchase, or any other similar provision; (xv) no person or entity has any possessory interest in, or right to occupy, the Property except under and pursuant to a Lease; (xvi) each Lease is subordinate to this Security Instrument, either pursuant to its terms or a recordable subordination agreement; (xvii) no Lease has the benefit of a non-disturbance agreement that would be considered unacceptable to prudent institutional lenders, (xviii) all security deposits relating to the Leases reflected on the certified rent roll delivered to Lender have been collected by Borrower; and (xix) no brokerage commissions or finders fees are due and payable regarding any Lease.

(b) Notwithstanding anything contained herein to the contrary, Borrower shall not willfully withhold from Lender any information regarding renewal, extension, amendment, modification, waiver of provisions of, termination, rental reduction of, surrender of space of, or shortening of the term of, any Lease during the term of the Loan. Except as otherwise disclosed to Lender in writing, Borrower further covenants and agrees that all tenants at the Property as of the date hereof are in physical occupancy of the premises demised under their Leases, are paying full rent under their Leases, and, with respect to the commercial tenants and except as otherwise disclosed to Lender in writing, have not exercised any right to “go dark” that they may have under the provisions of their Leases. Borrower further agrees to provide Lender with written notice of a tenant “going dark” under such tenant’s lease within five (5) business days after such tenant “goes dark” and Borrower’s failure to provide such notice shall constitute an Event of Default under this Security Instrument.

Section 5.9 Financial Condition. (a) (i) Borrower is solvent, and no bankruptcy, reorganization, insolvency or similar proceeding under any state or federal law with respect to Borrower has been initiated, and (ii) Borrower has received reasonably equivalent value for the granting of this Security Instrument.

(b) No petition in bankruptcy has ever been filed by or against Borrower, any Guarantor, any Indemnitor or any related entity, or any principal, general partner or member thereof, in the last seven (7) years, and neither Borrower, any Guarantor, any Indemnitor nor any related entity, or any principal, general partner or member thereof, in the last seven (7) years has ever made any assignment for the benefit of creditors or taken advantage of any insolvency act or any act for the benefit of debtors.

Section 5.10 Business Purposes. The loan evidenced by the Note secured by the Security Instrument and the Other Security Documents (the “Loan”) is solely for the business purpose of Borrower, and is not for personal, family, household, or agricultural purposes.

Section 5.11 Taxes. Borrower has filed all federal, state, county, municipal, and city income and other tax returns required to have been filed by it and has paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by them. Borrower does not know of any basis for any additional assessment in respect of any such taxes and related liabilities for prior years. Borrower confirms that its federal tax identification number is: 20-4648003.

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Section 5.12 Mailing Address. Borrower’s mailing address, as set forth in the opening paragraph hereof or as changed in accordance with the provisions hereof, is true and correct.

Section 5.13 No Change in Facts or Circumstances. To the best of Borrower’s knowledge, all information in the application for the Loan submitted to Lender (the “Loan Application”) and in all financing statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan Application or in satisfaction of the terms thereof, are accurate, complete and correct in all respects. To the best of Borrower’s knowledge, there has been no adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading.

Section 5.14 Disclosure. Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially misleading.

Section 5.15 Third Party Representations. To the best of Borrower’s knowledge, each of the representations and the warranties made by each Guarantor and Indemnitor herein or in any Other Security Document(s) is true and correct in all material respects.

Section 5.16 Illegal Activity. No portion of the Property has been or will be purchased, improved, equipped or furnished with proceeds of any illegal activity and to the best of Borrower’s knowledge, there arc no illegal activities or activities relating to controlled substance at the Property.

Section 5.17 Regulations T. U and X. Borrower does not own any “margin stock” as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System (12 CFR Part 221), as amended. Borrower will not use any part of the proceeds from the loan to be made under this Security Instrument (a) directly or indirectly, to purchase or carry any such stock or to reduce or retire any Obligations originally incurred to purchase any such stock within the meaning of such Regulation, (b) so as to involve Borrower in a violation of Regulation T, U or X of such Board (12 CFR Parts 220, 221 and 224), as amended, or (c) for any other purpose not permitted by Section 7 of the Securities Exchange Act of 1934, as amended, or any of the rules and regulations respecting the extension of credit promulgated thereunder.

Section 5.18 No Plan Assets. As of the date hereof and throughout the term of the loan (a) Borrower is not and will not be an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, (b) none of the assets of Borrower constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, (c) Borrower is not and will not be a “governmental plan” within the meaning of Section 3(32) of ERISA, and (d) transactions by or with Borrower are not and will not be subject to any state statute regulating investments of, or fiduciary obligations with respect to, governmental plans.

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Section 5.19 No Breach of Fiduciary Duty. To the best of Borrower’s knowledge, no person or entity currently owning a direct or indirect membership or partnership interest in Borrower (nor any past or current affiliate of such person or entity), has breached any fiduciary duty owed by such person or entity to any other person or entity now or previously owning a direct or indirect membership or partnership interest in Borrower or any prior owner of the Property.

ARTICLE VI

OBLIGATIONS AND RELIANCE

Section 6.1 Relationship of Borrower and Lender. The relationship between Borrower and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with Borrower, and no term or condition of any of the Note, this Security Instrument and the Other Security Documents shall be construed so as to deem the relationship between Borrower and Lender to be other than that of debtor and creditor.

Section 6.2 No Reliance on Lender. The members, general partners, principals and (if Borrower is a trust) beneficial owners of Borrower arc experienced in the ownership and operation of properties similar to the Property, and Borrower and Lender are relying solely upon such expertise and business plan in connection with the ownership and operation of the Property. Borrower is not relying on Lender’s expertise, business acumen or advice in connection with the Property.

Section 6.3 No Lender Obligations. Notwithstanding the provisions of Subsections 1.1(f) and (l)or Section 1.2, Lender is not undertaking the performance of (i)any obligations under the Leases; or (ii) any obligations with respect to such agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and other documents. By accepting or approving anything required to be observed, performed or fulfilled or to be given to Lender pursuant to this Security Instrument, the Note or the Other Security Documents, including without limitation, any officer’s certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Lender shall not be deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation with respect thereto by Lender.

Section 6.4 Reliance. Borrower recognizes and acknowledges that in accepting the Note, this Security Instrument and the Other Security Documents, Lender is expressly and primarily relying on the truth and accuracy of the warranties and representations set forth in Article 5 and Article 12 without any obligation to investigate the Property and notwithstanding any investigation of the Property by Lender, that such reliance existed on the part of Lender prior to the date hereof; that the warranties and representations are a material inducement to Lender in accepting the Note, this Security Instrument and the Other Security Documents; and that Lender would not be willing to make the Loan and accept this Security Instrument in the absence of the warranties and representations as set forth in Article 5 and Article 12.

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ARTICLE VII

FURTHER ASSURANCES

Section 7.1 Recording of Security Instrument, etc. Borrower forthwith upon the execution and delivery of this Security Instrument and thereafter, from time to time, will cause this Security Instrument and any of the Other Security Documents creating a lien or security interest or evidencing the lien hereof upon the Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect and perfect the lien or security interest hereof upon, and the interest of Lender in, the Property. Borrower will pay all taxes, filing, registration or recording fees, and all expenses incident to the preparation, execution, acknowledgment and/or recording of the Note, this Security Instrument, the Other Security Documents, any note or deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property and any instrument of further assurance, and any modification or amendment of the foregoing documents, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Security Instrument, any deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property or any instrument of further assurance, and any modification or amendment of the foregoing documents, except where prohibited by law so to do.

Section 7.2 Further Acts. etc. Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, deeds of trust, mortgages, assignments, notices of assignments, transfers and assurances as Lender shall, from time to time, reasonably require, for the better assuring, conveying, assigning, transferring, and confirming unto Lender the Property and rights hereby deeded, mortgaged, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Security Instrument or for filing, registering or recording this Security Instrument, or for complying with all Applicable Laws. Borrower, on demand, will execute and deliver and hereby authorizes Lender, following 10 days’ notice to Borrower, to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements (including, without limitation, initial financing statements, amendments thereto and continuation statements) with or without the signature of Borrower as authorized by applicable law, chattel mortgages or other instruments, to evidence more effectively the security interest of Lender in the Property. Borrower also ratifies its authorization for Lender to have filed any like initial financing statements, amendments thereto and continuation statements, if filed prior to the date of this Security Instrument. Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender pursuant to this Section 7.2. To the extent not prohibited by applicable law, Borrower hereby ratifies all acts Lender has lawfully done in the past or shall lawfully do or cause to be done in the future by virtue of such power of attorney.

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Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws.

(a) If any law is enacted or adopted or amended after the date of this Security Instrument which deducts the Debt from the value of the Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Lender’s interest in the Property, Borrower will pay the tax, with interest and penalties thereon, if any. If Lender is advised by counsel chosen by it that the payment of tax by Borrower would be unlawful or taxable to Lender or unenforceable or provide the basis for a defense of usury, then Lender shall have the option, exercisable by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable.

(b) Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against the Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Property, or any part thereof, for real estate tax purposes by reason of this Security Instrument or the Debt. If such claim, credit or deduction shall be required by law, Lender shall have the option, exercisable by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable.

(c) If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, this Security Instrument, or any of the Other Security Documents or impose any other tax or charge on the same, Borrower will pay for the same, with interest and penalties thereon, if any.

Section 7.4 Estoppel Certificates.

(a) After request by Lender, Borrower, within ten (10) days, shall furnish Lender or any proposed assignee with a statement, duly acknowledged and certified, setting forth (i) the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest of the Note, (iv) the terms of payment and maturity date of the Note, (v) the date installments of interest and/or principal were last paid, (vi) that, except as provided in such statement, there are no defaults or events which with the passage of time or the giving of notice or both, would constitute an event of default under the Note or the Security Instrument, (vii) that the Note and this Security Instrument are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification, (viii) whether any offsets or defenses exist against the obligations secured hereby and, if any are alleged to exist, a detailed description thereof, (ix) that all Leases are in full force and effect and (provided the Property is not a residential multifamily property) have not been modified (or if modified, setting forth all modifications), (x) the date to which the Rents thereunder have been paid pursuant to the Leases, (xi) whether or not, to the best knowledge of Borrower, any of the lessees under the Leases are in default under the Leases, and, if any of the lessees are in default, setting forth the specific nature of all such defaults, (xii) the amount of security deposits held by Borrower under each Lease and that such amounts are consistent with the amounts required under each Lease, and (xiii) as to any other matters reasonably requested by Lender and reasonably related to the Leases, the obligations secured hereby, the Property or this Security Instrument.

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(b) Borrower shall use its best efforts to deliver to Lender, promptly upon request, duly executed estoppel certificates from any one or more lessees as required by Lender attesting to such facts regarding the Lease as Lender may require, including but not limited to attestations that each Lease covered thereby is in full force and effect with no defaults thereunder on the part of any party, that none of the Rents have been paid more than one month in advance, and that the lessee claims no defense or offset against the full and timely performance of its obligations under the Lease.

(c) Upon any transfer or proposed transfer contemplated by Section 18.1 hereof, at Lender’s request, Borrower, any Guarantors and any Indemnitor(s) shall provide an estoppel certificate to the Investor (defined in Section 18.1) or any prospective Investor in such form, substance and detail as Lender, such Investor or prospective Investor may reasonably require.

(d) After request by Borrower, not to exceed one (1) request per year, Lender, within ten (10) days, shall furnish Borrower or any proposed assignee with a statement, duly acknowledged and certified, setting forth (i) the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest of the Note, (iv) the terms of payment and maturity date of the Note, (v) the date installments of interest and/or principal were last paid, and (vi) that, except as provided in such statement, there are no Events of Default under the Note or Security Agreement.

Section 7.5 Flood Insurance. After Lender’s request, Borrower shall deliver evidence satisfactory to Lender that no portion of the Improvements is situated in a federally designated “special flood hazard area” or if it is, that Borrower has obtained insurance meeting the requirements of Section 3.3(a)(vi).

Section 7.6 Replacement Documents. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any Other Security Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or Other Security Document, Borrower will issue, in lieu thereof, a replacement Note or Other Security Document, dated the date of such lost, stolen, destroyed or mutilated Note or Other Security Document in the same principal amount thereof and otherwise of like tenor.

ARTICLE VIII

DUE ON SALE/ENCUMBRANCE

Section 8.1 No Sale/Encumbrance. Borrower agrees that Borrower shall not, without the prior written consent of Lender, sell, convey, mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer the Property or any part thereof or any interest therein or any direct or indirect interest in Borrower or permit the Property or any part thereof or any interest therein or any direct or indirect interest in Borrower to be sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise transferred, other than pursuant to Leases of space in the Improvements to tenants in accordance with the provisions of Section 3.8. Notwithstanding the foregoing provisions of this Section 8.1 to the contrary,

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transfers of ownership interests in ING Real Estate Community Living Fund, an Australian Property Trust, and a publicly traded company, are not prohibited under this Section 8.1 and shall not require the consent of Lender, provided said ING Real Estate Community Living Fund remains a publicly traded company. In addition, interests in ING US Community Living Fund Inc. may be transferred to a Permitted Transferee without the prior consent of Lender if required by order or judgment of any court or governmental authority. “Permitted Transferee” shall mean any of the following: (a) a pension fund, pension trust or pension account that immediately prior to such transfer owns, directly or indirectly, total gross real estate assets of at least $1,000,000,000; (b) a pension fund advisor who (i) immediately prior to such transfer, controls, directly or indirectly, at least $1,000,000,000 of total gross real estate assets and (ii) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (a) of this definition; (c) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (i) with a net worth, determined as of a date no more than six (6) months prior to the date of the transfer of at least $500,000,000 and (ii) which, immediately prior to such transfer, controls, directly or indirectly, total gross real estate assets of at least $1,000,000,000; (d) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) with, immediately prior to such transfer, a combined capital and surplus of at least $500,000,000; (e) any Person who (i) owns or operates at least twenty (20) Class A multifamily properties totaling no less than 5,000,000 square feet (exclusive of the Property), (ii) has a net worth, determined as of a date no more than six (6) months prior to the date of such transfer, of at least $500,000,000 and (iii) immediately prior to such transfer, controls, directly or indirectly, total gross real estate assets of at least $1,000,000,000, provided such Person is reasonably acceptable to Lender based upon, among other things, its credit history and general reputation; or (f) any Person in which more than fifty percent (50%) of the ownership interests are owned directly or indirectly by any of the entities listed in subsections (c) through (e) of this definition of “Permitted Transferee”, or any combination of more than one such entity, and which is controlled directly or indirectly by such entity or entities; in each event (i) with respect to which Lender shall have received information satisfactory to it confirming that neither the proposed Permitted Transferee nor any affiliate of the proposed Permitted Transferee is on Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, or would, if such Person assumes the Loan or obtains an interest in Borrower, cause Lender to be in violation of legal requirements and (ii) with respect to which such Person and its property manager shall have sufficient experience in the ownership and management of properties similar to the Property, as determined by Lender in its reasonable discretion, and Lender shall have been provided with reasonable evidence thereof (and Lender reserves the right to approve the proposed transferee without approving the substitution of the property manager). “Person” shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any other entity, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

Section 8.2 Sale/Encumbrance Defined. A sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning of this Article 8 shall be deemed to include, but not be limited to, (a) an installment sales agreement wherein Borrower

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agrees to sell the Property or any part thereof for a price to be paid in installments; (b) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rents; (c) if Borrower, any Guarantor, any Indemnitor, or any general or limited partner or member of Borrower, any Guarantor or any Indemnitor is a corporation, any merger, consolidation or voluntary or involuntary sale, conveyance, transfer or pledge of such corporation’s stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise) or the creation or issuance of new stock in one or a series of transactions by which an aggregate of more than 10% of such corporation’s stock shall be vested in a party or parties who are not now stockholders; (d) if Borrower, any Guarantor or any Indemnitor or any general or limited partner or member of Borrower, any Guarantor or any Indemnitor is a limited or general partnership or joint venture, the change, removal or resignation of a general partner or the transfer or pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest or the voluntary or involuntary sale, conveyance, transfer or pledge of limited partnership interests (or the limited partnership interests of any limited partnership directly or indirectly controlling such limited partnership by operation of law or otherwise); and (e) if Borrower, any Guarantor, any Indemnitor or any general or limited partner or member of Borrower, any Guarantor or any Indemnitor is a limited liability company, the change, removal or resignation of a managing member (or if no managing member, any member or non-member manager) or the transfer of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest or the voluntary or involuntary sale, conveyance, transfer or pledge of membership interests (or the membership interests of any limited liability company directly or indirectly controlling such limited liability company by operation of law or otherwise).

Section 8.3 Lender’s Rights. Lender reserves the right to condition the consent required hereunder upon a modification of the terms hereof and on assumption of the Note, this Security Instrument and the Other Security Documents as so modified by the proposed transferee, payment of a transfer fee equal to one-half of one percent (0.5%) of the then outstanding principal balance of the Note, and all of Lender’s expenses incurred in connection with such transfer, the approval by a Rating Agency of the proposed transferee, the proposed transferee’s continued compliance with the covenants set forth in this Security Instrument, including, without limitation, the covenants in Section 4.2 hereof, or such other conditions as Lender shall determine in its sole discretion to be in the interest of Lender. All of Lender’s expenses incurred shall be payable by Borrower whether or not Lender consents to the transfer. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Borrower’s sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property without Lender’s consent. This provision shall apply to every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property regardless of whether voluntary or not, or whether or not Lender has consented to any previous sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property.

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Section 8.4 Permitted One Time Transfer. Notwithstanding the foregoing provisions of this Section, Lender shall not unreasonably withhold consent to a one time sale, conveyance or transfer of the Property in its entirety (hereinafter, “Sale”) after the first anniversary of the first day of the first calendar month after the date hereof (or the date hereof if dated the first day of a calendar month) and with respect to such Sale, Lender shall not require a modification of the material economic terms hereof (other than a corresponding increase in Borrower’s deposits into the Escrow Fund with respect to Taxes in the event such Sale results in an increase in the real property tax assessment by the applicable taxing authority), to any person or entity provided that each of the following terms and conditions are satisfied:

(i) no default after the expiration of notice or grace periods is then continuing hereunder, under the Note or under any of the Other Security Documents;

(ii) Borrower gives Lender written notice of the terms of such prospective Sale not less than thirty (30) days before the date on which such Sale is scheduled to close and, concurrently therewith, gives Lender all such information concerning the proposed transferee of the Property (hereinafter, “Buyer”) as Lender would reasonably require in evaluating an initial extension of credit to a borrower and pays to Lender a non-refundable application fee in the amount of $2,500.00. Lender shall have the right to approve or disapprove the proposed Buyer, such approval not to be unreasonably withheld. In determining whether to give or withhold its approval of the proposed Buyer, Lender shall consider the Buyer’s experience and track record in owning and operating facilities similar to the Property, the Buyer’s financial strength, the Buyer’s general business standing and the Buyer’s relationships and experience with contractors, vendors, tenants, lenders and other business entities; provided, however, that, notwithstanding Lender’s agreement to consider the foregoing factors in determining whether to give or withhold such approval, such approval shall be given or withheld based on what Lender determines to be commercially reasonable and, if given, may be given subject to such conditions as Lender may deem reasonably appropriate;

(iii) Borrower pays Lender, concurrently with the closing of such Sale, a non- refundable assumption fee in an amount equal to all out-of-pocket costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by Lender in connection with the Sale plus an amount equal to one percent (1.0%) of the then outstanding principal balance of the Note. Borrower also pays, concurrently with the closing of such Sale, all costs and expenses of all third parties and Rating Agencies in connection with the Sale;

(iv) Buyer assumes and agrees to pay the indebtedness secured hereby as and when due subject to the provisions of Article 11 of the Note and, prior to or concurrently with the closing of such Sale, the Buyer executes, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate said assumption;

(v) Borrower and the Buyer execute, without any cost or expense to Lender, new financing statements or financing statement amendments and any additional documents reasonably requested by Lender;

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(vi) Borrower delivers to Lender, without any cost or expense to Lender, such endorsements to Lender’s title insurance policy, hazard insurance endorsements or certificates and other similar materials as Lender may deem necessary at the time of the Sale, all in form and substance satisfactory to Lender, including, without limitation, an endorsement or endorsements to Lender’s title insurance policy insuring the Hen of this Security Instrument insuring that fee simple title to the Property is vested in the Buyer;

(vii) Buyer shall furnish, if the Buyer is a corporation, partnership or other entity, all appropriate papers evidencing the Buyer’s capacity and good standing, and the qualification of the signers to execute the assumption of the indebtedness secured hereby, which papers shall include certified copies of all documents relating to the organization and formation of the Buyer and of the entities, if any, which are partners or members of the Buyer. The Buyer and such constituent partners, members or shareholders of Buyer (as the case may be), as Lender shall require, shall be single purpose entities which satisfy the requirements of Article IV hereof and the requirements of the Rating Agencies, and whose formation documents shall be approved by counsel to Lender;

(viii) Buyer shall assume the obligations of Borrower under any management agreements pertaining to the Property or assign to Lender as additional security any new management agreement entered into in connection with such Sale;

(ix) Buyer shall furnish an opinion of counsel satisfactory to Lender and its counsel (A) that the Buyer’s formation documents provide for the matters described in subparagraph (vii) above, (B) that the assumption of the indebtedness evidenced hereby has been duly authorized, executed and delivered, and that the Note, this Security Instrument, the assumption agreement and the Other Security Documents are valid, binding and enforceable against the Buyer in accordance with their terms, (C) that the Buyer and any entity which is a controlling stockholder, member or general partner of Buyer, have been duly organized, and are in existence and good standing, (D) if required by Lender, that the assets of the Buyer will not be consolidated with the assets of any other entity having an interest in, or affiliation with, the Buyer, in the event of bankruptcy or insolvency of any such entity, and (E) wilh respect to such other matters as Lender may reasonably request;

(x) Lender shall have received confirmation in writing from the Rating Agencies that rate the Securities or Participations (as defined in Section 18.1) to the effect that the Sale will not result in a qualification, downgrade or withdrawal of any rating initially assigned or then currently assigned or to be assigned to the Securities or Participations, as applicable; and

(xi) Borrower’s obligations under the contract of sale pursuant to which the Sale is proposed to occur shall expressly be subject to the satisfaction of the terms and conditions of this Section 8.4.

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ARTICLE IX

PREPAYMENT

Section 9.1 Prepayment. The Debt may not be prepaid in whole or in part except in strict accordance with the express terms and conditions of the Note.

ARTICLE X

DEFAULT

Section 10.1 Events of Default. The occurrence of any one or more of the following events shall constitute an “Event of Default”:

(a) if any portion of the Debt (other than the payment due on the Maturity Date (as defined in the Note)) is not paid prior to the fifth (5th) day after the same is due or if the entire Debt is not paid on or before the Maturity Date; provided, however, if (1) any monthly installment of principal and/or interest due under the Note, or (2) any monthly deposit into the any reserves or escrow accounts due under this Security Instrument, is not paid prior to the fifth (5th) day after the same is due (Lender, however, agreeing that notwithstanding that such failure to pay the monthly debt service installment or monthly reserve or escrow deposit within such time period shall be an Event of Default for all purposes under this Security Instrument, including, without limitation, the collection of late payment charges, default interest and special servicing fees, Lender shall provide Borrower with five (5) days prior written notice of acceleration of the Loan as a result of such Event of Default (the “Acceleration Notice Period”), during which 5-day period (provided that no other Event of Default has occurred) Borrower shall have the ability to make such payment in full and if such payment is made in full within such 5-day period, Lender shall accept such payment and no Event of Default shall thereafter be deemed to exist with respect to such payment);

(b) if any of the Taxes or Other Charges is not paid when the same is due and payable except to the extent sums sufficient to pay such Taxes and Other Charges have been deposited with Lender in accordance with the terms of this Security Instrument;

(c) if the Policies arc not kept in full force and effect, or if the Policies are not delivered to Lender upon request;

(d) if Borrower violates or does not comply with any of the provisions of Section 3.12, Section 4.2 or Article 8;

(e) if any representation or warranty of Borrower, any Indemnitor or any person guaranteeing payment of the Debt or any portion thereof or performance by Borrower of any of the terms of this Security Instrument (a “Guarantor”), or any member, general partner, principal or beneficial owner of any of the foregoing, made herein or in the Environmental Indemnity (defined below) or in any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material respect when made;

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(f) if (i) Borrower or any managing member or general partner of Borrower, or any Guarantor or Indemnitor shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any managing member or general partner of Borrower, or any Guarantor or Indemnitor shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Borrower or any managing member or general partner of Borrower, or any Guarantor or Indemnitor any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against the Borrower or any managing member or general partner of Borrower, or any Guarantor or Indemnitor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the Borrower or any managing member or general partner of Borrower, or any Guarantor or Indemnitor shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any managing member or general partner of Borrower, or any Guarantor or Indemnitor shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due;

(g) if Borrower shall be in default beyond applicable notice and grace periods under any other mortgage, deed of trust, deed to secure debt or other security agreement covering any part of the Property whether it be superior or junior in lien to this Security Instrument;

(h) if the Property becomes subject to any mechanic’s, materialman’s or other lien other than a lien for local real estate taxes and assessments not then due and payable and the lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of thirty (30) days;

(i) if any federal tax lien is filed against Borrower, any member or general partner of Borrower, any Guarantor, any Indemnitor or the Property and same is not discharged of record within thirty (30) days after same is filed;

(j) if any default occurs under any guaranty or indemnity executed in connection herewith (including the Environmental Indemnity, defined in Section 13.4) and such default continues after the expiration of applicable grace periods, if any;

(k) if Borrower shall fail to comply with the covenants as to Prescribed Laws set forth in Section 3.11 hereof;

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(l) if Borrower shall fail to deliver to Lender, within ten (10) days after request by Lender, the estoppel certificates required pursuant to Section 7.4; or

(m) if any default occurs under any other term, covenant or condition of the Note, this Security Instrument or the Other Security Documents and such default continues (i) in the case of any default which can be cured by the payment of a sum of money, for more than ten (10) days after notice from Lender or (ii) in the case of any other such default, for thirty (30) days after notice from Lender, provided that if such default cannot reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure such default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of ninety (90) days.

ARTICLE XI

RIGHTS AND REMEDIES

Section 11.1 Remedies. Upon the occurrence of any Event of Default, Borrower agrees that Lender may take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Borrower and in and to the Property, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Lender may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Lender:

(a) declare the entire unpaid Debt to be immediately due and payable;

(b) institute proceedings, judicial or otherwise, for the complete foreclosure of this Security Instrument under any applicable provision of law in which case the Property or any interest therein may be sold for cash or upon credit in one or more parcels or in several interests or portions and in any order or manner;

(c) with or without entry, to the extent permitted and pursuant to the procedures provided by applicable law, institute proceedings for the partial foreclosure of this Security Instrument for the portion of the Debt then due and payable, subject to the continuing lien and security interest of this Security Instrument for the balance of the Debt not then due, unimpaired and without loss of priority;

(d) sell for cash or upon credit the Property or any part thereof and all estate, claim, demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, in one or more parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law;

(e) subject to the provisions of Article 11 of the Note, institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained herein, in the Note or in the Other Security Documents;

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(f) subject to the provisions of Article 11 of the Note, recover judgment on the Note either before, during or after any proceedings for the enforcement of this Security Instrument or the Other Security Documents;

(g) apply for the appointment of a receiver, trustee, liquidator or conservator of the Property, without notice and without regard for the adequacy of the security for the Debt and without regard for the solvency of Borrower, any Guarantor, Indemnitor or of any person, firm or other entity liable for the payment of the Debt;

(h) subject to any applicable law, the license granted to Borrower under Section 1.2 shall automatically be revoked and Lender may enter into or upon the Property, either personally or by its agents, nominees or attorneys and dispossess Borrower and its agents and servants therefrom, without liability for trespass, damages or otherwise and exclude Borrower and its agents or servants wholly therefrom, and take possession of all books, records and accounts relating thereto and Borrower agrees to surrender possession of the Property and of such books, records and accounts to Lender upon demand, and thereupon Lender may (i) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Property and conduct the business thereat; (ii) complete any construction on the Property in such manner and form as Lender deems advisable; (iii) make alterations, additions, renewals, replacements and improvements to or on the Property; (iv) exercise all rights and powers of Borrower with respect to the Property, whether in the name of Borrower or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents of the Property and every part thereof; (v) require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Property as may be occupied by Borrower; (vi) require Borrower to vacate and surrender possession of the Property to Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings or otherwise; and (vii) apply the receipts from the Property to the payment of the Debt, in such order, priority and proportions as Lender shall deem appropriate in its sole discretion after deducting therefrom all expenses (including reasonable attorneys’ fees) incurred in connection with the aforesaid operations and all amounts necessary to pay the Taxes, Other Charges, insurance and other expenses in connection with the Property, as well as just and reasonable compensation for the services of Lender, its counsel, agents and employees;

(i) exercise any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing: (i) the right to take possession of the Personal Property or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Personal Property, and (ii) request Borrower at its expense to assemble the Personal Property and make it available to Lender at a convenient place acceptable to Lender. Any notice of sale, disposition or other intended action by Lender with respect to the Personal Property sent to Borrower in accordance with the provisions hereof at least five (5) days prior to such action, shall constitute commercially reasonable notice to Borrower;

(j) apply any sums then deposited in the Escrow Fund and any other sums held in escrow or otherwise by Lender in accordance with the terms of this Security Instrument or any Other Security Document to the payment of the following items in any order in its sole

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discretion: (i) Taxes and Other Charges; (ii) Insurance Premiums; (iii) interest on the unpaid principal balance of the Note; (iv) amortization of the unpaid principal balance of the Note; (v) all other sums payable pursuant to the Note, this Security Instrument and the Other Security Documents, including without limitation advances made by Lender pursuant to the terms of this Security Instrument;

(k) surrender the Policies maintained pursuant to Article 3 hereof, collect the unearned Insurance Premiums and apply such sums as a credit on the Debt in such priority and proportion as Lender in its discretion shall deem proper, and in connection therewith, Borrower hereby appoints Lender as agent and attorney-in-fact (which is coupled with an interest and is therefore irrevocable) for Borrower to collect such Insurance Premiums;

(l) apply the undisbursed balance of any Net Proceeds Deficiency deposit, together with interest thereon, to the payment of the Debt in such order, priority and proportions as Lender shall deem to be appropriate in its discretion; or

(m) pursue such other remedies as Lender may have under applicable law.

In the event of a sale, by foreclosure, power of sale, or otherwise, of less than all of the Property, this Security Instrument shall continue as a lien and security interest on the remaining portion of the Property unimpaired and without loss of priority. Notwithstanding the provisions of this Section 11.1 to the contrary, if any Event of Default as described in clause (i) or (ii) of Subsection 10.1(f) shall occur, the entire unpaid Debt shall be automatically due and payable, without any further notice, demand or other action by Lender.

Section 11.2 Application of Proceeds. The purchase money, proceeds and avails of any disposition of the Property, or any part thereof, or any other sums collected by Lender pursuant to the Note, this Security Instrument or the Other Security Documents, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper.

Section 11.3 Right to Cure Defaults. Upon the occurrence of any Event of Default or if Borrower fails to make any payment or to do any act as herein provided, Lender may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, make or do the same in such manner and to such extent as Lender may deem necessary to protect the security hereof. Lender is authorized to enter upon the Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Property or to foreclose this Security Instrument or collect the Debt. The cost and expense of any cure hereunder (including reasonable attorneys’ fees to the extent permitted by law), with interest as provided in this Section 11.3, shall constitute a portion of the Debt and shall be due and payable to Lender upon demand. All such costs and expenses incurred by Lender in remedying such Event of Default or such failed payment or act or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate (as defined in the Note), for the period after notice from Lender that such cost or expense was incurred to the date of payment to Lender. All such costs and expenses incurred by Lender together with interest thereon calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured by this Security Instrument and the Other Security Documents and shall be immediately due and payable upon demand by Lender therefor.

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Section 11.4 Actions and Proceedings.  Lender has the right to appear in and defend any action or proceeding brought with respect to the Property and, after the occurrence and during the continuance of an Event of Default, to bring any action or proceeding, in the name and on behalf of Borrower, which Lender, in its discretion, decides should be brought to protect its interest in the Property.

Section 11.5 Recovery of Sums Required To Be Paid.  Lender shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Lender thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Borrower existing at the time such earlier action was commenced.

Section 11.6 Examination of Books and Records.  Lender, its agents, accountants and attorneys shall have the right, upon prior written notice to Borrower if no Event of Default exists, to examine and audit, during reasonable business hours, the records, books, management and other papers of Borrower and its affiliates or of any Guarantor or Indemnitor which pertain to their financial condition or the income, expenses and operation of the Property, at the Property or at any office regularly maintained by Borrower, its affiliates or any Guarantor or Indemnitor where the books and records are located. Lender and its agents shall have the right to make copies and extracts from the foregoing records and other papers.

Section 11.7 Other Rights. etc. (a) The failure of Lender to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Security Instrument. Borrower shall not be relieved of Borrower’s obligations hereunder by reason of (i) the failure of Lender to comply with any request of Borrower, any Guarantor or any Indemnitor to take any action to foreclose this Security Instrument or otherwise enforce any of the provisions hereof or of the Note or the Other Security Documents, (ii) the release, regardless of consideration, of the whole or any part of the Property, or of any person liable for the Debt or any portion thereof, or (iii) any agreement or stipulation by Lender extending the time of payment or otherwise modifying or supplementing the terms of the Note, this Security Instrument or the Other Security Documents,

(b) It is agreed that the risk of loss or damage to the Property is on Borrower, and Lender shall have no liability whatsoever for decline in value of the Property, for failure to maintain the Policies, or for failure to determine whether insurance in force is adequate as to the amount of risks insured. Possession by Lender shall not be deemed an election of judicial relief, if any such possession is requested or obtained, with respect to any Property or collateral not in Lender’s possession.

(c) Lender may resort for the payment of the Debt to any other security held by Lender in such order and manner as Lender, in its discretion, may elect. Lender may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Lender thereafter to foreclose this Security Instrument. The rights of

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Lender under this Security Instrument shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity.

Section 11.8 Right to Release Any Portion of the Property. Lender may release any portion of the Property for such consideration as Lender may require without, as to the remainder of the Property, in any way impairing or affecting the lien or priority of this Security Instrument, or improving the position of any subordinate lienholder with respect thereto, except to the extent that the obligations hereunder shall have been reduced by the actual monetary consideration, if any, received by Lender for such release, and may accept by assignment, pledge or otherwise any other property in place thereof as Lender may require without being accountable for so doing to any other lienholder. This Security Instrument shall continue as a lien and security interest in the remaining portion of the Property.

Section 11.9 Violation of Laws. If the Property is not in compliance with Applicable Laws, Lender may impose additional requirements upon Borrower in connection herewith including, without limitation, monetary reserves or financial equivalents.

Section 11.10 Right of Entry. Lender and its agents shall have the right to enter and inspect the Property at all reasonable times.

Section 11.11 Subrogation. lf any or all of the proceeds of the Note have been used to extinguish, extend or renew any indebtedness heretofore existing against the Property, then, to the extent of the funds so used, Lender shall be subrogated to all of the rights, claims, liens, titles, and interests existing against the Property heretofore held by, or in favor of, the holder of such indebtedness and such former rights, claims, liens, titles, and interests, if any, are not waived but rather are continued in full force and effect in favor of Lender and are merged with the lien and security interest created herein as cumulative security for the repayment of the Debt, the performance and discharge of Borrower’s obligations hereunder, under the Note and the Other Security Documents and the performance and discharge of the Other Obligations.

ARTICLE XII

ENVIRONMENTAL MATTERS

Section 12.1 Environmental Representations and Warranties. Borrower represents and warrants, based upon an environmental site assessment of the Property and information that Borrower knows or should reasonably have known, that: (a) there are no Hazardous Materials (defined below) or underground storage tanks in, on, or under the Property, except those that are both (i) in compliance with Environmental Laws (defined below) and with permits issued pursuant thereto (if such permits are required), if any, and (ii) either (A) in amounts not in excess of that necessary to operate the Property or (B) fully disclosed to and approved by Lender in writing pursuant to the written reports resulting from the environmental site assessments of the Property delivered to Lender (the “Environmental Report”); (b) there are no past, present or threatened Releases (defined below) of Hazardous Materials in violation of

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any Environmental Law and which would require remediation by a governmental authority in, on, under or from the Property except as described in the Environmental Report; (c) there is no threat of any Release of Hazardous Materials migrating to the Property except as described in the Environmental Report; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property except as described in the Environmental Report; (e) Borrower does not know of, and has not received, any written or oral notice or other communication from any person or entity (including but not limited to a governmental entity) relating to Hazardous Materials in, on, under or from the Property, (f) Borrower has truthfully and fully provided to Lender, in writing, any and all information relating to environmental conditions in, on, under or from the Property known to Borrower or contained in Borrower’s files and records, including but not limited to any reports relating to Hazardous Materials in, on, under or migrating to or from the Property and/or to the environmental condition of the Property; (g) the Property currently displays no evidence of water infiltration or water damage; (h) there are no prior or current complaints by tenants at the Property regarding water infiltration or water damage or leaks or odors related thereto, and (i) the Property currently displays no conspicuous evidence of the growth of Microbial Matter. “Environmental Law” means any present federal, state and local laws, statutes, ordinances, rules, regulations, standards, policies and other government directives or requirements, as well as common law, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act, that apply to Borrower or the Property and relate to Hazardous Materials and/or Microbial Matter. “Hazardous Materials” shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls (“PCBs”) and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Property is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now defined as a “hazardous substance,” “hazardous material”, hazardous waste”, toxic substance”, “toxic pollutant”, “contaminant”, or pollutant” within the meaning of any Environmental Law. “Release” of any Hazardous Materials includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials. “Microbial Matter” shall mean fungi or bacterial matter which reproduces through the release of spores or the splitting of cells, including, but not limited to, mold, mildew and viruses, whether or not such Microbial Matter is living.

Section 12.2 Environmental Covenants. Borrower covenants and agrees that so long as Borrower owns, manages, is in possession of, or otherwise controls the operation of the Property: (a) all uses and operations on or of the Property, whether by Borrower or any other person or entity, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (b) there shall be no Releases of Hazardous Materials in, on, under or from the Property; (c) there shall be no Hazardous Materials in, on, or under the Property, except those that are both (i) in compliance with all Environmental Laws and with permits issued pursuant thereto, if and to the extent required, and (ii) (A) in amounts not in excess of that necessary to operate the Property or (B) fully disclosed to and approved by Lender in writing; (d) Borrower shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to

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any Environmental Law, whether due to any act or omission of Borrower or any other person or entity (the “Environmental Liens”); (e) Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 12.3 below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (f) Borrower shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any reasonable written request of Lender, upon Lender’s reasonable belief that the Property is not in full compliance with all Environmental Laws, and share with Lender the reports and other results thereof, and Lender and other Indemnified Parties shall be entitled lo rely on such reports and other results thereof; (g) Borrower shall, at its sole cost and expense, comply with all reasonable written requests of Lender to (i) reasonably effectuate remediation of any Hazardous Materials in, on, under or from the Property; and (ii) comply with any Environmental Law; (h) Borrower shall not allow any tenant or other user of the Property to violate any Environmental Law; (i) Borrower shall immediately notify Lender in writing after it has become aware of (A) any presence or Release or threatened Releases of Hazardous Materials in, on, under, from or migrating towards the Property; (B) any non-compliance with any Environmental Laws related in any way to the Property; (C) any actual or potential Environmental Lien; (D) any required or proposed remediation of environmental conditions relating to the Property; and (E) any written or oral notice or other communication of which Borrower becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to Hazardous Materials; (j) Borrower shall undertake any course of action recommended by the Environmental Protection Agency to prevent the growth of Microbial Matter; (k) Borrower shall comply with any and all local, state or federal laws, legislation, guidelines or statutes at any time in effect with respect to Microbial Matter; (I) upon Lender’s reasonable request (not more frequently than once per calendar year), Borrower shall engage an engineering consultant reasonably acceptable to Lender to conduct (and such consultant shall conduct) an inspection for water damage at the Property; (m) upon Lender’s reasonable request (not more frequently than once per calendar year), Borrower shall engage an environmental consultant reasonably acceptable to Lender to conduct (and such consultant shall conduct) an inspection for evidence of the growth of Microbial Matter at the Property; and (n) Borrower shall immediately adopt a remediation plan reasonably acceptable to Lender with respect to any water damage or Microbial Matter identified as a result of such environmental and/or engineering inspections.

Section 12.3 Lender’s Rights. Lender and any other person or entity designated by Lender, including but not limited to any representative of a governmental entity, and any environmental consultant, and any receiver appointed by any court of competent jurisdiction, shall, after reasonable notice to Borrower, have the right, but not the obligation, to enter upon the Property at all reasonable times lo assess any and all aspects of the environmental condition of the Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lender’s sole discretion) and taking samples of soil, groundwater or other water, air, or building materials, and conducting other invasive testing. Borrower shall cooperate with and provide access lo Lender and any such person or entity designated by Lender.

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Section 12.4 Operations and Maintenance Programs. Where recommended by the Environmental Report or as a result of any other environmental assessment or audit of the Property, Borrower shall establish and comply with an operations and maintenance program with respect to the Property, in form and substance reasonably acceptable to Lender, prepared by an environmental consultant reasonably acceptable to Lender, which program shall address any asbestos containing material or lead based paint that may now or in the future be detected at or on the Property. Without limiting the generality of the preceding sentence, Lender may require (a) periodic notices or reports to Lender in form, substance and at such intervals as Lender may specify, (b) an amendment to such operations and maintenance program to address changing circumstances, laws or other matters, (c) at Borrower’s sole expense, supplemental examination of the Property by consultants specified by Lender, (d) access to the Property by Lender, its agents or servicer, to review and assess the environmental condition of the Property and Borrower’s compliance with any operations and maintenance program, and (e) variation of the operations and maintenance program in response to the reports provided by any such consultants.

ARTICLE XIII

INDEMNIFICATIONS

Section 13.1 General Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties (defined below) from and against any and all Losses (defined below) imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (b) any use, nonusc or condition in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; (d) any failure of the Property to be in compliance with any Applicable Laws; (e) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease; or (f) the payment of any commission, charge or brokerage fee to anyone which may be payable in connection with the funding of the Loan evidenced by the Note and secured by this Security Instrument. Any amounts payable to Lender by reason of the application of this Section 13.1 shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Lender until paid.

The term “Losses” shall mean any and all claims, suils, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to attorneys’ fees and other costs of defense). The term “Indemnified Parties” shall mean (a) Lender, (b) any prior owner or holder of the Note, (c) any servicer or prior servicer of the Loan, (d) the officers, directors, shareholders, partners, members, employees and trustees of any of the foregoing, and (e) the heirs, legal representatives, successors and assigns of each of the foregoing.

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Section 13.2 Mortgage and/or Intangible Tax. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Security Instrument, the Note or any of the Other Security Documents.

Section 13.3 Duty to Defend; Attorneys’ Fees and Other Fees and Expenses. Upon written request by any Indemnified Party, Borrower shall defend such Indemnified Party (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals approved by the Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may, in their sole discretion, engage their own attorneys and other professionals to defend or assist them, and, at the option of Indemnified Parties, their attorneys shall control the resolution of any claim or proceeding. Upon demand, Borrower shall pay or, in the sole discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith.

Section 13.4 Environmental Indemnity. Simultaneously with this Security Instrument, Borrower and any other person(s) or entity(ies) identified therein (collectively, the “Indemnitors”) have executed and delivered that certain environmental indemnity agreement dated the date hereof to Lender (the “Environmental Indemnity”).

ARTICLE XIV

WAIVERS

Section 14.1 Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way connected with this Security Instrument, the Note, any of the Other Security Documents, or the Obligations.

Section 14.2 Marshalling and Other Matters. Borrower hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, slay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Property or any part thereof or any interest therein. Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Security Instrument on behalf of Borrower, and on behalf of each and every person acquiring any interest in or title to the Property subsequent to the date of this Security Instrument and on behalf of all persons to the extent permitted by Applicable Laws.

Section 14.3 Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except (a) with respect to matters for which this Security Instrument specifically and expressly provides for the giving of notice by Lender to Borrower and (b) with respect to matters for which Lender is required by Applicable Laws to give notice, and Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Security Instrument does not specifically and expressly provide for the giving of notice by Lender to Borrower.

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Section 14.4 Waiver of Statute of Limitations. Borrower hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to payment of the Debt or performance of its Other Obligations.

Section 14.5 Sole Discretion of Lender. Wherever pursuant to this Security Instrument (a) Lender exercises any right given to it to approve or disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole discretion of Lender, except as may be otherwise expressly and specifically provided herein.

Section 14.6 WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

ARTICLE XV

EXCULPATION

Section 15.1 Exculpation. The provisions of Article 11 of the Note are hereby incorporated by reference to the fullest extent as if the text of such Article were set forth in its entirety herein.

ARTICLE XVI

NOTICES

Section 16.1 Notices. All notices or other written communications hereunder shall be deemed to have been properly given (i) upon delivery, if delivered in person or by facsimile transmission with receipt acknowledged by the recipient thereof and confirmed by telephone by sender, (ii) one (1) Business Day (defined below) after having been deposited for overnight delivery with any reputable overnight courier service, or (iii) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the U.S. Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed to Borrower or Lender, as the case may be, at the addresses set forth on the first page of this Security Instrument or addressed as such party may from time to time designate by written notice to the other parties.

Notices to Borrower shall be addressed to the attention of ING Real Estate Investment Management. Borrower’s telephone number is (011) 61 290 331 007 and facsimile number is (011) 61 290 331 059.

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Either party by notice lo the other may designate additional or different addresses for subsequent notices or communications.

For purposes of this Subsection, “Business Day” shall mean a day on which commercial banks are not authorized or required by law to close in New York, New York.

ARTICLE XVII

APPLICABLE LAW

Section 17.1 Choice of Law. This Security Instrument shall be governed, construed, applied and enforced in accordance with the laws of the state in which the Property is located.

Section 17.2 Provisions Subject to Applicable Law. All rights, powers and remedies provided in this Security Instrument may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law and are intended to be limited to the extent necessary so that they will not render this Security Instrument invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any Applicable Laws.

ARTICLE XVIII

SECONDARY MARKET

Section 18.1 Transfer of Loan. Lender may, at any time, sell, transfer or assign the Note, this Security Instrument and the Other Security Documents, and any or all servicing rights with respect thereto, or grant participations therein (the “Participations”) or issue mortgage pass- through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the “Securities”). Lender may forward to each purchaser, transferee, assignee, servicer, participant, or investor in such Participations or Securities (collectively, the “Investor”) or any Rating Agency rating such Securities, each prospective Investor, and any organization maintaining databases on the underwriting and performance of commercial mortgage loans, all documents and information which Lender now has or may hereafter acquire relating to the Debt and to Borrower, any Guarantor, any Indemnitor(s) and the Property, whether furnished by Borrower, any Guarantor, any Indemnitor(s) or otherwise, as Lender determines necessary or desirable. Borrower irrevocably waives any and all rights it may have under Applicable Laws to prohibit such disclosure, including but not limited to any right of privacy.

Section 18.2 Cooperation. Borrower, any Guarantor and any Indemnitor agree to cooperate with Lender in connection with any transfer made or any Securities created pursuant to this Article XVIII, including, without limitation, the taking, or refraining from taking, of such action as may be necessary to satisfy all of the conditions of any Investor, the delivery of an estoppel certificate required in accordance with Subsection 7.4(c) hereof and such other documents as may be reasonably requested by Lender and the execution of amendments to the Note, this Security Instrument and Other Security Documents and Borrower’s organizational

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documents as reasonably requested by Lender. Borrower shall also furnish and Borrower, any Guarantor and any Indemnitor consent to Lender furnishing to such Investors or such prospective Investors or such Rating Agency any and all information concerning the Property, the Leases, the financial condition of Borrower, any Guarantor and any Indemnitor as may be requested by Lender, any Investor, any prospective Investor or any Rating Agency in connection with any sale, transfer or Participations or Securities.

ARTICLE XIX

COSTS

Section 19.1 Performance at Borrower’s Expense. Borrower acknowledges and confirms that Lender shall impose certain administrative processing and/or commitment fees in connection with (a) the extension, renewal, modification, amendment and termination of the Loan, (b) the release or substitution of collateral therefor, (c) obtaining certain consents, waivers and approvals with respect to the Property, or (d) the review of any Lease or proposed Lease or the preparation or review of any subordination, non-disturbance agreement (the occurrence of any of the above shall be called an “Event”). Borrower further acknowledges and confirms that it shall be responsible for the payment of all costs of reappraisal of the Property or any part thereof, whether required by law, regulation, Lender or any governmental or quasi-governmental authority. Borrower hereby acknowledges and agrees to pay, immediately, with or without demand, all such fees (as the same may be increased or decreased from time to time), and any additional fees of a similar type or nature which may be imposed by Lender from time to time, upon the occurrence of any Event or otherwise. Wherever it is provided for herein that Borrower pay any costs and expenses, such costs and expenses shall include, but not be limited to, all reasonable legal fees and disbursements of Lender, whether with respect to retained firms, the reimbursement for the expenses of in-house staff or otherwise.

Section 19.2 Legal Fees for Enforcement. (a) Borrower shall pay all reasonable legal fees incurred by Lender in connection with (i) the preparation of the Note, this Security Instrument and the Other Security Documents and (ii) the items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender on demand any and all expenses, including legal expenses and attorneys’ fees, incurred or paid by Lender in protecting its interest in the Property or in collecting any amount payable hereunder or in enforcing its rights hereunder with respect to the Property, whether or not any legal proceeding is commenced hereunder or thereunder, together with interest thereon at the Default Rate from the date paid or incurred by Lender until such expenses are paid by Borrower, including, without limitation, all costs and expenses in connection with any “special servicing” of the Loan.

ARTICLE XX

DEFINITIONS

Section 20.1 General Definitions. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Security Instrument may be used interchangeably in singular or plural form and the word “Borrower”

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shall mean “each Borrower and any subsequent owner or owners of the Property or any part thereof or any interest therein,” the word “Lender” shall mean “Lender and any subsequent holder of the Note,” the word “Note” shall mean “the Note and any other evidence of indebtedness secured by this Security Instrument,” the word “person” shall include an individual, corporation, partnership, limited liability company, trust, unincorporated association, government, governmental authority, and any other entity, the word “Property” shall include any portion of the Property and any interest therein, and the phrases “attorneys’ fees” and “counsel fees” shall include any and all attorneys’, paralegal and law clerk fees and disbursements, including, but not limited to, fees and disbursements at the pre-trial, trial and appellate levels incurred or paid by Lender in protecting its interest in the Property, the Leases and the Rents and enforcing its rights hereunder.

Section 20.2 Headings. etc. The headings and captions of various Articles and Sections of this Security Instrument are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.

ARTICLE XXI

MISCELLANEOUS PROVISIONS

Section 21.1 No Oral Change. This Security Instrument, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

Section 21.2 Liability. If Borrower consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several. This Security Instrument shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever.

Section 21.3 Inapplicable Provisions.  If any term, covenant or condition of the Note or this Security Instrument is held to be invalid, illegal or unenforceable in any respect, the Note and this Security Instrument shall be construed without such provision.

Section 21.4 Duplicate Originals: Counterparts. This Security Instrument may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Security Instrument may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Security Instrument. The failure of any party hereto to execute this Security Instrument, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder.

Section 21.5 Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa.

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ARTICLE XXII

SPECIAL FLORIDA PROVISIONS

Section 22.1 Principles of Construction. In the event of any inconsistencies between the terms and conditions of this Article XXII and the terms and conditions of this Security Instrument, the terms and conditions of this Article XXII shall control and be binding.

Section 22.2 Assignment. Borrower may request that this Security Instrument be assigned by Lender to a designee of Borrower upon payment in full and discharge of all of Borrower’s obligations under the Note and the other Loan documents. Such assignments shall be made without recourse, representation or warranty. In addition, Borrower may effectuate a Defeasance (as defined in the Note) in a manner which will permit the assignment of the Note and Defeasance Security Agreement (as defined in the Note) (the “Assignment”) to a new lender providing a portion of the funds necessary to acquire the Defeasance Collateral (as defined in the Note).

Section 22.3 Future Advances. Borrower acknowledges that the intent hereof to secure payment of the Debt and the performance of all obligations under the Note and the Other Obligations whether the entire amount shall have been advanced to the Borrower on the date hereof, or at a later date, and to secure any other amount or amounts that may be added to the indebtedness secured hereby under the terms of this Security Instrument. The total amount of the principal indebtedness secured hereby may decrease or increase from time to time, but the total unpaid balance so secured at any one time shall not exceed an amount equal to Twenty One Million and No/100 Dollars ($21,000,000.00)] in principal plus interest thereon and any disbursements made for the payment of taxes, levies, or insurance on the property with interest thereon. This Security Instrument shall secure any and all additional or further monies which may be advanced by Lender to the Borrower after the date hereof, which future advances of money, if made, may be evidenced by a note or notes executed by the Borrower to the Lender bearing such rate of interest and with such maturities as shall be determined from time to time, but any and all such future advances secured by this Security Instrument shall be made not more than twenty (20) years after the date hereof. Nothing herein contained shall be deemed an obligation on the part of the Lender to make any future advances.

[NO FURTHER TEXT ON THIS PACE]

-51-

IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by Borrower the day and year first above written.

BORROWER:
ING US STUDENTS NO. 14 LLC, a Delaware limited liability company
By:	ING US Students No. 14 Manager LLC, a Delaware limited liability company, its sole member
	By:	/s/    Albert Rabil
	Name:	Albert Rabil
	Tital:	Voice President

ACKNOWLEDGEMENTS

STATE OF Connecticut

COUNTY OF Hanford

The foregoing instrument was acknowledged before me this 26^th day of June, 2006, by Albert Rabil, the Vice President of ING US Students No. 14 Manager LLC, a Delaware limited liability company, the sole member of ING US Students No. 14 LLC, a Delaware limited liability company. He is personally known to me or has furnished Driver’s license as identification.

/s/    SAMUEL L. MOLINARI

Notary Public

My Commission Expires:

April 30, 2008

[SEAL]

SAMUEL L. MOLINARI

NOTARY PUBLIC

MY COMMISSION EXPIRES APR. 30, 2008

EXHIBIT A

Legal Description

PARCEL I: (FEE SIMPLE)

A PARCEL OF LAND LYING IN THE SOUTH 660 FEET OF THE NORTH 710 FEET OF THE EAST 660 FEET OF THE WEST 685 FEET OF THE NORTHEAST  ¹/4, OF SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH COUNTY, FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCE AT THE NORTHWEST CORNER OF THE NORTHEAST  ¹/4 OF SAID SECTION 10; THENCE SOUTH 00°03*27” WEST, ALONG THE WEST BOUNDARY LINE OF THE NORTHEAST ¹/4 OF SAID SECTION 10, 50.00 FEET TO A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE EXTENDED; THENCE SOUTH 89°59’33” EAST, ALONG SAID SOUTH RIGHT-OF-WAY LINE AND EXTENSION THEREOF, 50.00 FEET SOUTH OF AND PARALLEL TO THE NORTH BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 274.49 FEET TO THE POINT OF BEGINNING; THENCE CONTINUE ALONG SAID SOUTH RIGHT-OF-WAY LINE SOUTH 89°59’33” EAST, 50.00 FEET SOUTH OF AND PARALLEL TO SAID NORTH BOUNDARY LINE, 210.51 FEET; THENCE LEAVE SAID SOUTH RIGHT-OF-WAY LINE, SOUTH 00°03’27” WEST 100.00 FEET; THENCE NORTH 89°59’33” WEST, 12.50 FEET; THENCE SOUTH 00°03’27” WEST, 120.00 FEET; THENCE NORTH 89°59’33” WEST, 227.50 FEET; TO A POINT 245.00 FEET EAST OF THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10; THENCE NORTH 00°03’27” EAST 245.00 FEET EAST OF AND PARALLEL TO THE SAID WEST BOUNDARY LINE, 166.67 FEET; THENCE NORTH 45°03’27” EAST, 26.00 FEET TO THE POINT OF A CURVE TO THE LEFT, SAID CURVE HAVING FOR ITS ELEMENTS A RADIUS OF 18.50 FEET A CHORD BEARING AND DISTANCE OF NORTH 22°33’27” EAST, 14.16 FEET, THENCE ALONG THE ARC OF SAID CURVE, 14.53 FEET TO A POINT OF REVERSE CURVATURE TO THE RIGHT, SAID CURVE HAVING FOR ITS ELEMENTS A RADIUS OF 45.00 FEET, A CHORD BEARING AND DISTANCE OF NORTH 14°36’39” EAST, 22.62 FEET, THENCE ALONG THE ARC OF SAID CURVE, 22.86 FEET, TO A POINT ON THE SAID SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE AND THE POINT OF BEGINNING.

(ALSO KNOWN AS LOT 1 OF 56TH AND FLETCHER OFFICE PARK, A PLATTED SUBDIVISION WITH NO IMPROVEMENTS, SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH, FLORIDA AS RECORDED IN PLAT BOOK 108 AT PAGE 155 OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.)

AND

A PARCEL OF LAND LYING IN THE SOUTH 660 FEET OF THE NORTH 710 FEET OF THE EAST 660 FEET OF THE WEST 685 FEET OF THE NORTHEAST  ¹/4 OF

SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH COUNTY, FLORIDA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCE AT THE NORTHWEST CORNER OF THE NORTHEAST  ¹/4 OF SAID SECTION 10; THENCE SOUTH 00°03’27” WEST, ALONG THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 50.00 FEET TO A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF FLETCHER AVENUE EXTENDED; THENCE SOUTH 89°59’33” EAST, ALONG SAID SOUTH RIGHT-OF-WAY LINE AND EXTENSION THEREOF, 50.00 FEET SOUTH OF AND PARALLEL TO THE NORTH BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 485.00 FEET TO THE POINT OF BEGINNING; THENCE CONTINUE ALONG SAID SOUTH RIGHT-OF-WAY LINE SOUTH 89°59*33” EAST, 50.00 FEET SOUTH OF AND PARALLEL TO SAID NORTH BOUNDARY LINE, 200.00 FEET; THENCE LEAVE SAID SOUTH RIGHT-OF-WAY LINE, SOUTH 00°03’27” WEST, ALONG A LINE 685.00 FEET EAST OF AND PARALLEL TO THE WEST BOUNDARY LINE OF THE NORTHEAST  ¹/4 OF SAID SECTION 10, 660.00 FEET; THENCE NORTH 89°59’33” WEST, 320.00 FEET; THENCE NORTH 00°03’27” EAST 440.00 FEET; THENCE SOUTH 89°59’33” EAST, 107.50 FEET; THENCE NORTH 00°03’27” EAST, 120.00 FEET; THENCE SOUTH 89°59’33” EAST, 12.50 FEET; THENCE NORTH 00°03’27” EAST 100.00 FEET TO THE POINT OF BEGINNING.

(ALSO KNOWN AS LOT 4 OF 56TH AND FLETCHER OFFICE PARK, A PLATTED SUBDIVISION WITH NO IMPROVEMENTS, SECTION 10, TOWNSHIP 28 SOUTH, RANGE 19 EAST, HILLSBOROUGH, FLORIDA AS RECORDED IN PLAT BOOK 108 AT PAGE 155 OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.)

TAX PARCEL ID 36514-0000

PARCEL U: (EASEMENT)

EASEMENT RIGHTS FOR INGRESS, EGRESS UTILITY AND DRAINAGE SERVICES RECORDED IN OFFICIAL RECORDS BOOK 11189, PAGE 636 AND AS AMENDED TO ALSO INCLUDE SIDEWALK AND DUMPSTER EASEMENTS IN O.R. BOOK 14312, PAGE 593 AND AS SET FORTH ON THE PLAT RECORDED IN PLAT BOOK 108, PAGES 155 THROUGH 160, OF THE PUBLIC RECORDS OF HILLSBOROUGH COUNTY, FLORIDA.

PARCEL III: (EASEMENT)

EASEMENT RIGHTS FOR ACCESS AND SANITARY SEWER AS SET FORTH IN THAT CERTAIN GRANT OF EASEMENT RECORDED IN O.R, BOOK 8847, PAGE 552.

EX-10.23

Exhibit 10.23

LOAN AGREEMENT

by and between

RESOURCE REAL ESTATE OPPORTUNITY OP, LP,

a Delaware limited partnership,

as Borrower

and

Bank of America, N.A.,

a national banking association,

as Lender,

Table of Contents

ARTICLE I GENERAL INFORMATION		1
Section 1.1.	Conditions to Closing	1
Section 1.2.	Schedules	1
Section 1.3.	Defined Terms	1
ARTICLE II TERMS OF THE LOAN		2
Section 2.1.	The Loan	2
Section 2.2.	Loan Advances	7
Section 2.3.	Automatic Deduction	12
Section 2.4.	Liability of Lender	13
Section 2.5	Loan Fees	13
ARTICLE III REPRESENTATIONS AND WARRANTIES		13
Section 3.1.	Organization, Power and Authority of Borrower; Loan Documents	13
Section 3.2.	Other Documents; Laws	14
Section 3.3.	Taxes	14
Section 3.4.	Legal Actions	14
Section 3.5.	Nature of Loan	14
Section 3.6.	Trade Names	14
Section 3.7.	Financial Statements	14
Section 3.8.	No Material Adverse Change	14
Section 3.9.	ERISA and Prohibited Transactions	15
Section 3.10.	Compliance with Laws and Zoning and Other Requirements; Encroachments	15
Section 3.11.	Certificates of Occupancy	15
Section 3.12.	Utilities; Roads; Access	15
Section 3.13.	Other Liens	16
Section 3.14.	No Defaults	16
Section 3.15.	Draw Requests	16
ARTICLE IV AFFIRMATIVE COVENANTS AND AGREEMENTS		16
Section 4.1.	Compliance with Laws; Use of Proceeds; Construction of Improvements	16
Section 4.2.	Inspections; Cooperation	17
Section 4.3.	Payment and Performance of Contractual Obligations	17
Section 4.4.	Insurance	17
Section 4.5.	Adjustment of Condemnation and Insurance Claims	19
Section 4.6.	Utilization of Net Proceeds	20
Section 4.7.	Management	22
Section 4.8.	Books and Records; Financial Statements; Tax Returns	22
Section 4.9.	Estoppel Certificates	24
Section 4.10.	Taxes; Tax Receipts	24

i

Section 4.11.	Lender’s Rights to Pay and Perform	24
Section 4.12.	Reimbursement; Interest	24
Section 4.13.	Notification by Borrower	25
Section 4.14.	Indemnification by Borrower	25
Section 4.15.	Fees and Expenses	25
Section 4.16.	Appraisals	25
Section 4.17.	Leasing and Tenant Matters	26
Section 4.18.	Preservation of Rights	26
Section 4.19.	Income from Property	26
Section 4.20.	Representations and Warranties	26
Section 4.21.	Deposit Accounts; Principal Depository	26
Section 4.22.	Tax and Insurance Reserve Deposits	27
Section 4.23.	Swap Contracts	27
Section 4.24.	Financial Covenants	27
Section 4.25.	No other Assets or Liabilities	27
Section 4.26.	Limitation of Liability of Opportunity OP	27
Section 4.27.	Limitation of Liability of Borrower which is an Owner of an Eligible Property	28
ARTICLE V NEGATIVE COVENANTS		29
Section 5.1.	Conditional Sales	29
Section 5.2.	Insurance Policies and Bonds	29
Section 5.3.	Commingling	29
Section 5.4.	Additional Debt	29
ARTICLE VI EVENTS OF DEFAULT		29
Section 6.1.	Payment Default	29
Section 6.2.	Default Under Other Loan Documents	30
Section 6.3.	Accuracy of Information; Representations and Warranties	30
Section 6.4.	Deposits	30
Section 6.5.	Insurance Obligations	30
Section 6.6.	Other Obligations	30
Section 6.7.	Intentionally Omitted	31
Section 6.8.	Lapse of Permits or Approvals	31
Section 6.9.	Mechanic’s Lien	31
Section 6.10.	Bankruptcy	31
Section 6.11.	Appointment of Receiver, Trustee, Liquidator	31
Section 6.12.	Inability to Pay Debts	31
Section 6.13.	Judgment	31
Section 6.14.	Dissolution; Change in Business Status	32
Section 6.15.	Default Under Other Indebtedness	32
Section 6.16.	Change in Ownership	32
Section 6.17.	Material Adverse Change	32
ARTICLE VII REMEDIES ON DEFAULT		33
Section 7.1.	Remedies on Default	33
Section 7.2.	No Release or Waiver; Remedies Cumulative and Concurrent	36

ii

ARTICLE VIII MISCELLANEOUS		36
Section 8.1.	Further Assurances; Authorization to File Documents	36
Section 8.2.	No Warranty by Lender	36
Section 8.3.	Standard of Conduct of Lender	37
Section 8.4.	No Partnership	37
Section 8.5.	Severability	37
Section 8.6.	Notices	37
Section 8.7.	Permitted Successors and Assigns; Disclosure of Information	39
Section 8.8.	Modification; Waiver	40
Section 8.9.	Third Parties; Benefit	40
Section 8.10.	Rules of Construction/Joint and Several Liability of Borrower	40
Section 8.11.	Counterparts	41
Section 8.12.	Publicity	41
Section 8.13.	Governing Law	41
Section 8.14.	Time of Essence	41
Section 8.15.	Electronic Transmission of Data	41
Section 8.16.	Forum	41
Section 8.17.	WAIVER OF JURY TRIAL	42
Section 8.18.	USA Patriot Act Notice	42
Section 8.19.	Entire Agreement	42
Section 8.20.	Release of Eligible Property	43
Section 8.21.	NO RIGHT TO CURE AN EVENT OF DEFAULT OR LENDER’S OBLIGATION TO ACCEPT ANY CURE	44

iii

Schedules to Term Loan Agreement

Schedule 1	Definitions
Schedule 2	Improvements
Schedule 3	Form of Draw Request
Schedule 3.4	Claims
Schedule 4	Leasing and Tenant Matters
Schedule 4.21	Deposit Accounts
Schedule 5	Tax and Insurance Reserve Deposits
Schedule 6	Intentionally Omitted
Schedule 7	Swap Contracts
Schedule 8	Financial Covenants

iv

LOAN AGREEMENT

This Loan Agreement (this “Agreement”) is made as of the                  day of December, 2011, by and between Resource Real Estate Opportunity OP, LP, a Delaware limited partnership (“Opportunity OP”) and Bank of America, N.A., a national banking association (“Lender”).

RECITALS

Opportunity OP has applied to Lender for a loan for the purpose of financing the real property owned by entities of which Opportunity OP owns one hundred percent (100%) of the equity interests and which will be added as a co-borrower under this Agreement and which real properties owned by any such co-borrower will serve as security for the loan. The proceeds of the loan, where approved by Lender, may be used to make certain improvements to each of such properties and the payment of costs as approved by Lender. Lender has agreed to make the loan on the terms and conditions set forth in this Agreement and in the other documents evidencing and securing the loan.

Now, therefore, in consideration of the premises, with the intent to be legally bound and in further consideration of the mutual covenants and agreements herein set forth, the parties covenant and agree as follows:

AGREEMENTS

Article I

General Information.

Section 1.1. Conditions to Closing.

The conditions precedent to closing the Loan and recording of any Mortgage are set forth in the Closing Checklist and in this Agreement.

Section 1.2. Schedules.

The Schedules attached to this Agreement are incorporated herein and made a part hereof.

Section 1.3. Defined Terms.

Capitalized terms in this Agreement shall have the meanings ascribed to such terms in the Preamble hereto, in Schedule 1 or as otherwise set forth in this Agreement.

PAGE 1

Article II

Terms of the Loan.

Section 2.1. The Loan.

(a)(i) Lender hereby establishes for the benefit of Borrower, a credit facility up to the amount of the Loan Amount. Subject to all of the terms, covenants and conditions of this Agreement, Lender agrees, from time to time, until the Maturity Date (as the same may be extended pursuant to Section 1A of the Note), to make incremental advances of proceeds of the Loan (each of which an “Advance”) to a Borrower which is a limited liability company, all of whose membership interests are owned by Opportunity OP, owns an Eligible Property free and clear of any and all liens and encumbrances (other than Permitted Encumbrances) and which is added to the Collateral Pool for the purpose of (A) paying the closing costs for and with respect to each Advance hereunder, as approved by Lender in its sole discretion, and (B) financing an Eligible Property being contributed to the Collateral Pool and where approved by Lender in its sole discretion, paying for interest on the Loan attributable to Advances with respect to such Eligible Property, the cost of improvements to such Eligible Property and paying for costs approved by Lender to effectuate the increased and improved leasing of such Eligible Property (which in the sole discretion of Lender may include operating deficits), all in accordance with the terms of this Agreement and the Budget for such Eligible Property. The proceeds of the Loan advanced to such Borrower shall only be used by such Borrower for the forgoing purposes; provided, however, in no event, at any time, shall the aggregate amount of any and all such Advances outstanding under this facility, exceed the Loan Amount. Interest shall accrue and be payable in arrears only on sums advanced hereunder for the period of time outstanding. The proceeds of the Loan shall not be used for any purpose other than as provided for herein. Notwithstanding anything to the contrary in this Agreement, no Advances of proceeds of the Loan shall be made except in connection with and secured by an Eligible Property which is part of the Collateral Pool and then only in accordance with all of the terms, covenants and conditions of this Agreement.

(ii) The Loan is a revolving credit facility whereby principal sums repaid from time to time may be re-borrowed subject to all of the terms and conditions of this Agreement as to a re-borrowing specifically and as to Advances generally. Borrower acknowledges that Advances of proceeds of the Loan are tied to specific Eligible Properties which are part of the Collateral Pool and accordingly, any reduction in the outstanding principal amount of the Loan shall be made for, on behalf of and attributable to a specific Eligible Property which is part of the Collateral Pool. Accordingly, in the event a re-borrowing is requested by a Borrower after a principal payment is made, any such Advance which is a re-borrowing shall not exceed the amount repaid and shall be made only to, for and with respect to the specific Eligible Property which is part of the Collateral Pool and to which the prior principal payment was made for, on behalf of and attributable and then only to the Borrower owning such Eligible Property which is part of the Collateral Pool. Additionally, no re-borrowing Advance of proceeds will be made as to any Eligible Property which is released pursuant to Section 8.20 below. No re-borrowing, individually or in the aggregate, as to a specific Eligible Property which is part of the Collateral Pool, shall exceed the original sum budgeted and advanced for such Eligible Property which is part of the Collateral Pool. A request for a re-borrowing by the Borrower which is the owner of the Eligible Property which is part of the Collateral Pool and to which such payment and re-borrowing pertain, shall submit a draw request pursuant to Section 2.2 and any such requested re-borrowing Advance and such Eligible Property to which the same pertains must, on a current basis, meet and satisfy, as determined by Lender, all of the conditions under and pursuant to this Agreement for an initial Advance made for and with respect to such Eligible Property which is part of the Collateral Pool.

PAGE 2

(b) Subject to the terms, covenants and conditions of this Agreement, from time to time upon the written request of Borrower, Lender shall advance Loan proceeds to or for the benefit of a Borrower which is the owner of an Eligible Property added to the Collateral Pool, provided however, Borrower and Lender agree that the proceeds of the Loan advanced to or for the benefit of such Borrower, net of closing costs approved by Lender, will be advanced directly to such owning Borrower (or, from time to time, through a title company for the benefit of one or more Borrowers) for and with respect to the Eligible Property owned by such Borrower, in such amount as meets the requirements of this Agreement.

(c) Except as permitted pursuant to Section 2.1(d) below, in no event shall the aggregate amount of Loan proceeds advanced and outstanding with respect to an Eligible Property which is added to the Collateral Pool, at the time of the making of an Advance with respect to such Eligible Property (inclusive of the Advance to be made), exceed the lesser of (i) a Loan-to-Cost Ratio (as hereinafter defined) of not more than 50% and (ii) a Loan-to-Value Ratio (as hereinafter defined) of not more than 50%. In no event shall the aggregate outstanding amount of all Advances with respect to any individual Eligible Property at any time during the term of the Loan exceed $12,500,000.00. For purposes of this Section 2.1(c), Section 2.1(d) and elsewhere in this Agreement, the term “Loan-to-Cost Ratio” shall mean and be calculated as follows: the amount of all Advances for such Eligible Property added to the Collateral Pool, divided by the aggregate of the actual and verified “Ownership Costs” (as hereinafter defined) incurred by the Borrower owning such Eligible Property and which Ownership Costs are approved by Lender, in the exercise of its sole discretion. Nothing in this Section 2.1(c) is intended to limit the provisions of Section 2.2(a) below and Lender’s discretion as to the approval of any Eligible Property to be admitted to the Collateral Pool and the amount to be advanced in connection therewith.

For purposes hereof, “Ownership Costs” shall mean those costs incurred by the Borrower owning such Eligible Property for the acquisition of the Eligible Property and achieving “Stabilization” (as hereinafter defined) of the Eligible Property, all as approved by Lender, in its sole discretion.

For purposes hereof, “Stabilization” shall mean the point at which a multi-family income-producing real estate project is expected to achieve under competent management after exposure for leasing in the open market for a reasonable period of time at terms and conditions comparable to competitive offerings, all as determined by Lender in its sole discretion. At the option of Lender, Lender’s determination of Stabilization may be based on the appraisal first obtained by Lender in connection with such Eligible Property being first added to the Collateral Pool, an update of such first obtained appraisal or a newly obtained appraisal, in any and all events, meeting all applicable regulatory requirements, taking into account current market conditions, including vacancy factors, estimated lease-up periods, discount rates, and rental rates and concessions, as accepted by Lender in its sole discretion. Any appraisal, including any updated appraisal, used to determine Stabilization pursuant to this Agreement shall meet all applicable regulatory requirements, shall be satisfactory to Lender in all respects in its sole discretion, and shall be obtained at the sole cost and expense of Borrower.

(d) Provided all of the other terms, covenants and conditions for an Advance are satisfied, at such time as an Eligible Property which is part of the Collateral Pool achieves Stabilization, as determined by Lender in the exercise of its sole discretion, Lender, in the

PAGE 3

exercise of its sole discretion, upon the request of Opportunity OP or the Borrower which owns such Eligible Property, may make an additional Advance in an amount which is the lesser of (i) such amount which when added to the sum of all Advances made with respect to such Eligible Property will not, in the sole judgment of Lender, equal a total indebtedness for such Eligible Property in excess of a Loan-to-Value Ratio of 65%, all as determined by Lender in its sole discretion, (ii) such amount which when added to the sum of all Advances made with respect to such Eligible Property will not, in the sole judgment of Lender, equal a total indebtedness for such Eligible Property in excess of a Loan-to-Cost Ratio of 75%, all as determined by Lender in its sole discretion or (iii) such amount which when added to the sum of all Advances made with respect to such Eligible Property will not, in the sole judgment of Lender, equal a total indebtedness for such Eligible Property that exceeds a Debt Service Coverage Ratio of 1.5 to 1.0, all as determined by Lender in its sole discretion. In no event shall the aggregate outstanding principal amount of all Advances, inclusive of any additional Advance made pursuant to this Section 2.1(d), made to a particular Borrower with respect to its corresponding Eligible Property which is added to the Collateral Pool, exceed $12,500,000.00. In addition to all other terms, covenants and conditions for an Advance being satisfied pursuant to this Agreement, as a condition for an additional Advance to be made pursuant to this Section 2(d), the following terms, covenants and conditions must be satisfied, to the sole determination and satisfaction of Lender, at or before the making of such additional Advance under this Section 2(d):

(i) an amendment to the Mortgage encumbering the Eligible Property which is part of the Collateral Pool and to which the additional Advance pertains is entered into by the Borrower which owns such Eligible Property and is recorded in the public office where the Mortgage was recorded, which amendment shall add to the sums secured by the Mortgage the amount of the additional Advance and shall otherwise contain and set forth such terms and conditions as required by Lender;

(ii) an endorsement to the Mortgagee’s policy of title insurance issued with respect to the Mortgage encumbering the Eligible Property which is part of the Collateral Pool and to which the additional Advance pertains is issued which increases the amount of the same by the amount of the additional Advance, dates such policy to the date of the recording of the amendment referred to in (i) above and sets forth that the insured instrument under such policy is the Mortgage as so amended by the amendment, all without any additional exceptions or objections to title being raised;

(iii) the Borrower and the Guarantor shall execute and deliver such other documents or instruments as Lender may reasonably require in order to evidence and/or secure such additional Advance and confirm and evidence their liability with respect to the same, including, without limitation, any amendments or modifications of any or all of the Loan Documents, all in such form and content as Lender shall so require; and

(iv) the Borrower who owns the Eligible Property which is part of the Collateral Pool and to which the additional Advance pertains shall execute and deliver a Mortgage (the “Collateral Mortgage”) which shall be recorded as a second lien, junior only to the lien of the existing Mortgage, as modified pursuant to (i) above and any encumbrances to title permitted by Lender in connection with the existing Mortgage, executed by such Borrower and securing the Advances made to the Borrower for the Eligible Property, and which Collateral

PAGE 4

Mortgage shall secure and be collateral for any and all other Advances of the Loan made to any or all of the other Borrowers. Title insurance shall not be required to be obtained with respect to such Collateral Mortgage. The Collateral Mortgage shall be in such form and on such terms and conditions as Lender shall so require. The amount specified in such Collateral Mortgage secured thereby shall not exceed 95% of the “as is” or “as stabilized” appraised value of the Eligible Property, as elected by Lender. The appraised value of the Property shall be based upon a current appraisal prepared by a third-party appraiser acceptable to, and engaged directly by, Lender. The appraisal shall be satisfactory to Lender in all respects, as reviewed, adjusted and approved by Lender but paid for by Borrower. In the event Lender used an appraisal in determining whether a Property which is part of the Collateral Pool has reached Stabilization and for which an additional Advance is made pursuant to this Section 2.1(d), Lender shall use such appraisal in determining the amount of the Collateral Mortgage; and

(v) Borrower shall pay any and all costs and/or expenses for or in connection with the making of such additional Advance and the recording of the Collateral Mortgage, including without limitation, the costs and/or expenses in connection with any of the items listed above in (i) through and including (iv) as well as the reasonable attorney’s fees and costs of Lender’s legal counsel.

For purposes of Sections 2.1(c) and 2.1(d) and elsewhere in this Agreement, the following terms have the following meanings:

“Loan-to-Value Ratio” means the total amount of the Advances made with respect to a specific Eligible Property which is part of the Collateral Pool, divided by the appraised “As-Is” value of the Eligible Property The appraised “As-Is” value of the Property shall be based upon a current appraisal prepared by a third-party appraiser acceptable to, and engaged directly by, Lender. The appraisal shall be satisfactory to Lender in all respects, as reviewed, adjusted and approved by Lender but paid for by Borrower.

“Debt Service Coverage Ratio” means, as of any Determination Date, for the applicable Calculation Period the ratio, as determined by Lender, of Net Operating Income to Debt Service.

“Actual Operating Revenue” means, with respect to any period of time, all income, computed on an annualized basis in accordance with generally accepted accounting principles, collected from the ownership and operation of the Eligible Property from whatever source (other than any source affiliated with Borrower or any Guarantor), including Rents, utility charges, escalations, service fees or charges, license fees, parking fees, and other required pass-throughs, but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds from tenants, uncollectible accounts, sales of furniture, fixtures and equipment, interest income, Condemnation Awards, Insurance Proceeds (other than business interruption or other loss of income insurance), unforfeited security deposits, utility and other similar deposits, income from tenants not paying rent, income from tenants in bankruptcy, and non-recurring or extraordinary income, including lease termination payments. Actual Operating Revenue shall be net of rent concessions and credits. Actual Operating Revenue shall be subject to appropriate seasonal and other adjustments in Lender’s reasonable discretion.

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“Assumed Interest Rate” means the annual yield payable on the last day of the applicable Calculation Period on ten (10) year United States Treasury obligations in amounts approximating the Net Commitment Amount at the inception of the Calculation Period, provided, however, that the Assumed Interest Rate shall be not less than seven percent (7%) per annum.

“Calculation Period” means the three (3) month period ending on any Determination Date.

“Debt Service” means the higher of (a) the actual principal (if any) and interest payable under the Loan during the applicable Calculation Period and applicable to the subject Eligible Property, or (b) the payments of principal and interest that would have been payable under a hypothetical loan during the Calculation Period with respect to the Eligible Property, assuming (i) an initial loan balance equal to the Net Commitment Amount at the inception of the Calculation Period, (ii) an interest rate equal to the Assumed Interest Rate, and (iii) amortization of the aggregate principal indebtedness over a thirty (30) year amortization period.

“Determination Date” means any date as of which Lender makes a determination regarding Borrower’s satisfaction or failure to satisfy the Debt Service Coverage Ratio requirement as described herein.

“Net Commitment Amount” means, as of any date, the total obtained by adding the amount of the outstanding principal balance of the Loan advanced specifically for and attributable to an Eligible Property, to the amount of the available undisbursed Loan proceeds.

“Net Operating Income” means, with respect to any period of time, the amount obtained by subtracting actual Operating Expenses from Actual Operating Revenue as such amount may be adjusted by Lender in its reasonable discretion based on Lender’s underwriting standards, including adjustments for vacancy allowance and other concessions. As used herein, “vacancy allowance” means an allowance for reductions in potential income attributable to vacancies, tenant turnover, and nonpayment of rent.

“Operating Expenses” means, with respect to any period of time, the total of all expenses actually paid or payable, computed on an annualized basis in accordance with generally accepted accounting principles, of whatever kind relating to the ownership, operation, maintenance or management of the Property, including utilities, ordinary repairs and maintenance, insurance premiums, ground rents, if any, license fees, Taxes, advertising expenses, payroll and related taxes, management fees equal to the greater of 3% of Actual Operating Revenue or the management fees actually paid under any management agreement, operational equipment or other lease payments as approved by Lender, and capital reserve payments or deposits, but specifically excluding depreciation and amortization, income taxes, debt service on the Loan, any item of expense that would otherwise be covered by the provisions hereof but which is paid by any tenant under such tenant’s Lease or other agreement provided such reimbursement by tenant is not included in the calculation of Actual Operating Revenue. Operating Expenses shall be subject to appropriate seasonal and other adjustments in Lender’s reasonable discretion. Any expense which in accordance with accrual basis income tax accounting is depreciated or amortized over a period which exceeds one (1) year shall be treated as an expense, for the purposes of the foregoing calculations, ratably over the period of depreciation or amortization.

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Section 2.2. Loan Advances.

(a) Advances shall be made only with respect to an Eligible Property which is added to the Collateral Pool and in any and all events, Lender shall be satisfied, in the exercise of its sole judgment and discretion with the Eligible Property. In any and all events, only a real property which has been fully improved and is being legally used as a residential rental multi-family property can be an Eligible Property and added to the Collateral Pool. Notwithstanding anything to the contrary in this Agreement, Borrower acknowledges and agrees that whether an individual Eligible Property is added to the Collateral Pool and the aggregate amount of the proceeds of the Loan which Lender approves to be advanced with respect to the same are within Lender’s sole discretion. Additionally, Lender may require an additional covenant, as specified below, regarding the Debt Service Coverage Ratio (as defined in this Agreement) with respect to an Eligible Property, which may not be applicable to any or all of the other Eligible Properties within the Collateral Pool. The additional covenant will be set to measure the actual performance of the Eligible Property on a going forward basis compared to the Borrower’s projections for the same, which projections were submitted to and approved by Lender at the time the Eligible Property was admitted to the Collateral Pool. The additional covenant shall require such Eligible Property to have a Debt Service Coverage Ratio of at least 1.25 to 1.00 measured on the 1st day after 18 full calendar months have elapsed from the date that the Eligible Property was admitted to the Collateral Pool.

(b) Lender shall not be required to make any Advance hereunder until the pre-closing requirements, all other conditions and all other requirements set forth in this Agreement have been completed and fulfilled to satisfaction of Lender, at Borrower’s sole cost and expense. In no event shall Lender be obligated to make an Advance if an Event of Default has occurred and is continuing.

(c) On or prior to the date of the making of an Advance (including the initial Advance) of the Loan, Borrower shall provide to Lender each of the following, in form and substance acceptable to the Lender for each Eligible Property which is being added to the Collateral Pool by a the owner of the same who is being added as a Borrower pursuant to the terms of to this Agreement:

(i) A written draw request for an Advance in a specific amount and written authorization and instructions for the funding of the same to the Borrower which will receive the same.

(ii) A policy of title insurance insuring the lien of the Mortgage as a first lien in an amount equal to the allocated portion of such Advance for each such Eligible Property, with such coverages and endorsements, and in such form and content, as Lender shall require and as may be available under law from a title insurance company as is acceptable to Lender.

(iii) Four (4) copies of a current, certified Survey of each such Eligible Property, which shall be prepared in accordance with the Lender’s requirements therefor.

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(iv) An environmental assessment or report for each such Eligible Property, in form and substance satisfactory to the Lender and addressed to the Lender.

(v) A physical condition report for each such Eligible Property addressed to Lender and completed by a consultant acceptable to Lender and attesting to the structural integrity and useful lives of the components of the existing improvements.

(vi) Certificates of insurance indicating that all insurance required by Lender as set forth in Section 4.4 hereof, from time to time, and satisfactory as to coverage, limits, deductibles and companies, are in place.

(vii) A copy of the Organizational Documents of the Borrower owning such Eligible Property, certified as true, correct and complete by an officer or authorized signatory of such Borrower, together with (i) a current certificate of good standing from the jurisdiction in which such Borrower is organized (and from the jurisdiction in which its Eligible Property is located, if different from the jurisdiction in which such Borrower is organized), and (ii) resolutions and/or consents of those parties necessary to authorize the transaction contemplated hereby.

(viii) The most current available financial statements of all Borrowers and Guarantor, signed and certified as true, correct and complete by either an officer or authorized signatory of the same, which are to be satisfactory to Lender in form and substance and a certificate, in form and substance satisfactory to Lender, from the Chief Financial Officer or Chief Executive Officer of Guarantor certifying to Guarantor’s compliance with the financial covenants set forth on Schedule 8.

(ix) Information satisfactory to Lender that each such Eligible Property is in compliance with all applicable zoning regulations.

(x) A flood zone certification from a consultant acceptable to the Lender indicating that such Eligible Property is not located in a flood plain or any other flood-prone area as designated by any governmental agency; provided, however, that if any Eligible Property is so located and flood insurance is required by law, Borrower shall provide proof of flood insurance to the Lender.

(xi) Property tax information with respect to each Eligible Property satisfactory to Lender.

(xii) A true, complete and correct rent roll for the Eligible Property and a true, correct and complete copy of the form of lease being used at the Eligible Property, both of which must be acceptable to Lender in its sole discretion in form and content. Borrower acknowledges that without limiting any other term, covenant or condition for an Advance based on an Eligible Property being part of the Collateral Pool, the tenancy at such Eligible Property must be as set forth on the rent roll approved by Lender with all leases (unless otherwise specified on the approved rent roll) being in full force and effect, with the tenants listed thereon having accepted possession and paying full and all rent and all other sums due and payable under their leases as are set forth on the rent roll and for the term of the leases, as set forth on the rent roll.

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(xiii) An appraisal with respect to each such Eligible Property in form and substance satisfactory to Lender.

(xiv) Copy of the Swap Contract, if applicable.

(xv) The Budget, Plans and Specifications, Project Schedule, Construction Contracts (including the identity of all Contractors) and all permits with respect to any and all construction of Improvements with respect to the Eligible Property achieving Stabilization, are delivered to and approved by Lender in the exercise of its sole discretion. In the case of permits, the same shall be issued, final and non-appealable, without any appeal having been filed and pending. In the case of the Budget, if the total cost exceeds the amount of all Advances to be made with respect to such Eligible Property in order for the same to achieve Stabilization, then Borrower shall demonstrate to Lender that it has the necessary funds on hand and available and prior to Lender making any Advance, Borrower shall demonstrate to Lender’s satisfaction, in the exercise of Lender’s sole discretion, that Borrower has first paid for all costs in excess of the amount of the Advance and that the amount of the Advance shall be sufficient to pay for the remaining costs which will be incurred and/or need to be paid in order for the Eligible Property to achieve Stabilization. In connection with the construction of Improvements, in addition to Lender first approving any and all Contractors, Lender shall also approve of the Architect, in the exercise of Lender’s sole discretion.

(xvi) All such other agreements, documents, instruments, certificates and/or exhibits which may be required, in the Lender’s judgment, including market data on the locale of the Eligible Property, to assure compliance with the requirements of this Agreement and to enable Lender to determine, in the exercise of its sole discretion, that such Eligible Property satisfies its underwriting requirements for residential rental multi-family properties , an Advance and to be part of the Collateral Pool.

(d) On or prior to the date of closing and, as applicable, the making of any Advance (including the initial Advance) under the Loan, the following documents shall be executed and delivered to Lender, in quantity, form and substance acceptable to the Lender and to its counsel, to evidence and secure the Loan:

(i) This Agreement executed by Opportunity OP at the closing of the Loan.

(ii) The Note executed by Opportunity OP at the closing of the Loan. In the case of a new entity which is to become a Borrower and thereby adding an Eligible Property to the Collateral Pool, an allonge to the Note, in form and content as required by Lender and its counsel whereby such new entity shall join in the Note and this Agreement as a Borrower thereunder and hereunder.

(iii) A Mortgage executed by each added Borrower that owns an Eligible Property to the Collateral Pool to secure the obligations of such Borrower under this Agreement, the Note and the other Loan Documents. The amount of each such Mortgage shall be in the amount of the Advances to be received by such Borrower with respect to the Eligible Property owned by it and being added to the Collateral Pool.

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(iv) A security agreement (which may be incorporated within the Mortgage), which creates a first priority security interest in all equipment and in all of such Borrower’s intangible property relating to such Eligible Property, perfected by appropriate Uniform Commercial Code Financing Statements naming such Borrower, as debtor, and Lender, as Secured Party.

(v) The Assignments of Leases and Rents from each Borrower executing a Mortgage.

(vi) The Guaranty executed by Guarantor at the closing of the Loan. At such time as an additional Borrower is added and an Eligible Property is added to the Collateral Pool, Guarantor shall execute and deliver such consent, acknowledgement and confirmation of its liability with respect to the same and any and all Mortgages and other Loan Documents as Lender shall require

(vii) An Environmental Indemnity with respect to each Eligible Property executed by the Borrower owning such Eligible Property, Opportunity OP and Guarantor.

(viii) A current written opinion from outside counsel of Borrower and the Guarantor in form and substance reasonably acceptable to the Lender, addressed to the Lender at the closing of the Loan and as each Eligible Property is added to the Collateral Pool.

(ix) The Assignment from Opportunity OP in favor of Lender with respect to each Borrower as each Eligible Property is added to the Collateral Pool.

(x) The Assignment and Subordination of Property Management Agreement with respect to each Management Agreement and the Eligible Property which is added to the Collateral Pool and a subordination agreement executed by Guarantor and Advisor with respect to the payment of fees and any other sums by Guarantor to Advisor pursuant to the Advisory Agreement with respect to any Eligible Property which is added to the Collateral Pool upon the occurrence and during the continuance of an Event of Default under this Agreement or any of the other Loan Documents.

(xi) The Assignment of Contracts and the Contractor’s Consent and Certificate from any and all Contractors and the Architect’s Consent and Certificate from the Architect, to the extent there is any Construction of Improvements at such Eligible Property.

(xii) Such other Loan Documents or other documents as the Lender may, in the exercise of its reasonable judgment, require to evidence and secure the Loan.

The Lender may designate which of the Loan Documents are to be filed and/or placed of record, the order of filing and/or recording thereof, and the offices in which the same are to be filed and/or recorded. Borrower shall pay all filing, documentary, recording and/or registration taxes and/or fees, if any, due upon the Loan Documents.

(e) A Property shall be an “Eligible Property” and added to the Collateral Pool if such Property meets the following requirements, as determined by Lender in its sole discretion, and provided that Lender shall have the right to reject any Property proposed by

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Borrower as an Eligible Property to be included in the Collateral Pool for any or no reason. Borrower acknowledges and agrees that no Property will be added to the Collateral Pool after May 31, 2014, provided, in the event an Eligible Property is added to the Collateral Pool on or prior to May 31, 2014, Advances for the same may be made after May 31, 2014 provided the approval of such Eligible Property and addition to the Collateral Pool provides for the making of such Advances as part of the Budget for the same and all other terms, covenants and conditions of this Agreement for the making of any or all such Advances are satisfied pursuant to this Agreement. Borrower acknowledges and agrees that notwithstanding anything to the contrary, in no event shall Lender make an additional Advance pursuant to Section 2.1(d) after May 31, 2014.

(i) Such Property shall (i) be lawfully zoned, used and occupied as a residential multi-family rental property; (ii) owned in fee by an entity which is wholly owned by Opportunity OP and which entity owns no other assets or is engaged in any other business other than the ownership and operation of such Property and (iii) meet all of Lender’s underwriting and due diligence criteria in the exercise of Lender’s sole discretion, including, without limitation, those pertaining to environmental matters, market criteria, rental rates and physical condition. Borrower acknowledges and agrees that in order to be considered by Lender to be an Eligible Property and added to the Collateral Pool, Borrower shall submit to Lender a submission package including such information as Lender may require, from time to time, including, without limitation, a full description of the Property, a cash flow projection at acquisition and Stabilization, a plan to achieve Stabilization, including the Budget and Project Schedule.

(ii) All of the conditions set forth in Section 2.2(c) above as may pertain to the entity desiring to become a Borrower hereunder and owning the Property or to the Property which is being considered to be added to the Collateral Pool shall be satisfied as determined by Lender.

(iii) All of the documents listed in Section 2.2(d) shall be executed and delivered as they pertain to such new Borrower, Guarantor, Opportunity OP and/or the Property and all of the other requirements and conditions to qualify such Property as an Eligible Property to be added to the Collateral Pool required under or pursuant to this Agreement shall be satisfied, as determined by Lender in the exercise of Lender’s sole discretion.

(f) No Advance shall constitute a waiver of any condition precedent to the agreement of Lender to make any future Advance. All conditions precedent to the obligation of Lender to make any Advance are imposed hereby solely for the benefit of Lender, and no other party may require satisfaction of any such condition precedent or shall be entitled to assume that Lender will make or refuse to make any Advance in the absence of strict compliance with such condition precedent. Lender, in its sole discretion, may waive any requirement of this Agreement for any Advance. Notwithstanding anything to the contrary contained herein, in the event that Lender has made an Advance and then determines that a condition precedent to such Advance required to be satisfied was, in fact, not satisfied, upon the request of Lender, Borrower agrees to cooperate with Lender and use good faith efforts to satisfy any such requirement to extent such requirement can then be satisfied, provided, however, under no circumstances shall Borrower be required to prepay such Advance nor shall such failure to satisfy such requirement constitute an Event of Default unless Borrower ceases to cooperate with Lender or ceases to use good faith efforts to satisfy such requirement.

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(g) As a condition to the making of any Advance of proceeds of the Loan, Guarantor shall demonstrate to Lender’s satisfaction, in the exercise of Lender’s sole judgment, that Guarantor has, on a consolidated basis, a “Minimum Tangible Net Worth” (as such term is defined in Schedule 8 attached hereto) equal to at least Twenty Million and No/100 Dollars ($20,000,000.00).

(h) Advances for Interest Payments Pursuant to the Budget. In the event the Budget for a specific Eligible Property which is part of the Collateral Pool includes an amount allocated to the payment of interest accrued and due and payable with respect to Advances made for such Eligible Property, Lender shall be entitled, even during such periods as an Event of Default has occurred and is continuing, to make periodic advances to pay interest as and when it becomes due. Borrower hereby irrevocably authorizes Lender to make any interest payment on Borrower’s behalf by debiting the interest reserves in the amount of the payment and applying the debited amount to accrued and unpaid interest on the Loan. If and when revenues are derived from an Eligible Property in amounts sufficient to pay all or any portion of the interest on the Loan attributable to such Eligible Property, revenues will be used to pay such interest, and Lender, at its sole option, may restrict or prohibit future disbursements of the Loan for the payment of interest.

Section 2.3. Automatic Deduction.

(a) Throughout the term of the Loan, Opportunity OP shall maintain a Checking Account in good standing with Lender, in addition to each Borrower that owns an Eligible Property which is part of the Collateral Pool who shall maintain a Checking Account with respect to its Eligible Property as such Eligible Property’s operating account. Each Borrower hereby grants to Lender a security interest in the Checking Account, and any other accounts and deposit accounts from which such Borrower may from time to time authorize Lender to debit payments due on the Loan, for the purpose of securing the Obligations.

(b) Borrower agrees that monthly payments on the Note will be deducted automatically on their due dates from the Checking Account. Lender is hereby authorized to apply the amounts so debited to Borrower’s obligations under the Loan. Notwithstanding the foregoing, Lender will not automatically deduct the principal payment at maturity from the Checking Account.

(c) Lender will debit the Checking Account on the dates the payments become due. If a due date does not fall on a Banking Day, Lender will debit the Checking Account on the first Banking Day following the due date.

(d) Borrower shall maintain sufficient funds in the Checking Account on the dates Lender enters debits authorized by this Agreement. If there are insufficient funds in the Checking Account on the date Lender enters any debit authorized by this Agreement, without limiting Lender’s other remedies in such an event, the debit will be reversed in whole or in part, in Lender’s sole and absolute discretion, and such amount not debited shall be deemed to be unpaid and shall be immediately due and payable in accordance with the terms of the Note.

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Section 2.4. Liability of Lender.

Lender shall in no event be responsible or liable to any Person other than Borrower or Guarantor for the disbursement of or failure to disburse the Loan proceeds or any part thereof and no Person other than Borrower or Guarantor shall have any right or claim against Lender under this Agreement or the other Loan Documents.

Section 2.5 Loan Fees.

(a) At the execution and delivery of this Agreement by Lender and Borrower, Borrower shall pay to Lender a fee in an amount equal to 37.5 basis points times the Loan Amount. Such sum shall be due and payable regardless of whether or not any Advances are made under or pursuant to this Agreement .

(b) Contemporaneous with each Eligible Property being added to the Collateral Pool, Lender shall be paid a fee applicable to such Eligible Property so added equal to 37.5 basis points times the amount, in total, budgeted to be advanced for such Eligible Property so added, but not including any amount attributable to an increase pursuant to Section 2.1(d) above, the fee for which is covered pursuant to Section 2.5(c) below.

(c) In the event an additional Advance, pursuant to Section 2.1(d) above, is made with respect to an Eligible Property which is part of the Collateral Pool which achieves Stabilization, contemporaneous with such additional Advance being made, Lender shall be paid a fee equal to 37.5 basis points times the amount of such additional Advance.

Article III

Representations and Warranties.

Each Borrower makes the following representations and warranties to Lender as of the date hereof and as of the date of each Advance hereunder:

Section 3.1. Organization, Power and Authority of Borrower; Loan Documents.

Opportunity OP (a) is a limited partnership organized, existing and in good standing under the laws of the state of Delaware in which it is organized and is duly qualified to do business and in good standing in any other state where the nature of Opportunity OP’s business or property requires it to be qualified to do business, and (b) has the power, authority and legal right to own its property and carry on the business now being conducted by it and to engage in the transactions contemplated by the Loan Documents.

The Loan Documents to which Borrower is a party have been duly executed and delivered by such Borrower, and the execution and delivery of, and the carrying out of the transactions contemplated by, such Loan Documents, and the performance and observance of the terms and conditions thereof, have been duly authorized by all necessary organizational action by and on behalf of such Borrower. The Loan Documents to which each Borrower is a party constitute the valid and legally binding obligations of such Borrower and are fully enforceable against such Borrower in accordance with their respective terms, except to the extent that such enforceability may be limited by laws generally affecting the enforcement of creditors’ rights.

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Section 3.2. Other Documents; Laws.

The execution and performance of the Loan Documents to which each Borrower is a party and the consummation of the transactions contemplated thereby will not conflict with, result in any breach of, or constitute a default under, the organizational documents of such Borrower, or any contract, agreement, document or other instrument to which each Borrower is a party or by which such Borrower or any of its properties may be bound or affected, and such actions do not and will not violate or contravene any Law to which such Borrower is subject.

Section 3.3. Taxes.

Each Borrower has filed all federal, state, county and municipal Tax returns required to have been filed by such Borrower and has paid all Taxes which have become due pursuant to such returns or pursuant to any Tax assessments received by Borrower.

Section 3.4. Legal Actions.

Except as set forth on Schedule 3.4, there are no Claims or investigations by or before any court or Governmental Authority, pending, or to the best of each Borrower’s knowledge and belief, threatened against or affecting such Borrower, such Borrower’s business or any of the Properties. Each Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Authority affecting such Borrower or the Properties.

Section 3.5. Nature of Loan.

Each Borrower is a business or commercial organization. The Loan is being obtained solely for business or investment purposes, and will not be used for personal, family, household or agricultural purposes.

Section 3.6. Trade Names.

Each Borrower conducts its business solely under the name set forth in the Preamble to this Agreement and makes use of no trade names in connection therewith, unless such trade names have been previously disclosed to Lender in writing.

Section 3.7. Financial Statements.

The financial statements heretofore delivered by Borrower and Guarantor to Lender are true and correct in all respects, have been prepared in accordance with sound accounting principles consistently applied, and fairly present the respective financial conditions of the subjects thereof as of the respective dates thereof.

Section 3.8. No Material Adverse Change.

No material adverse change has occurred in the financial conditions reflected in the financial statements of any Borrower or Guarantor since the respective dates of such statements, and no material additional liabilities have been incurred by any Borrower which owns an Eligible Property which is part of the Collateral Pool since the dates of such statements other than the borrowings contemplated herein or as approved in writing by Lender.

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Section 3.9. ERISA and Prohibited Transactions.

As of the date hereof and throughout the term of the Loan: (a) Borrower is not and will not be (i) an “employee benefit plan,” as defined in Section 3(3) of ERISA, (ii) a “governmental plan” within the meaning of Section 3(32) of ERISA, or (iii) a “plan” within the meaning of Section 4975(e) of the Code; (b) the assets of Borrower do not and will not constitute “plan assets” within the meaning of the United States Department of Labor Regulations set forth in Section 2510.3-101 of Title 29 of the Code of Federal Regulations; (c) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of fiduciaries with respect to governmental plans; and (d) Borrower will not engage in any transaction that would cause any Obligation or any action taken or to be taken hereunder (or the exercise by Lender of any of its rights under the Mortgage or any of the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA or Section 4975 of the Code. Borrower agrees to deliver to Lender such certifications or other evidence of compliance with the provisions of this Section as Lender may from time to time reasonably request.

Section 3.10. Compliance with Laws and Zoning and Other Requirements; Encroachments.

To Borrower’s knowledge, Borrower is in compliance with the requirements of all applicable Laws. To Borrower’s knowledge, the use of each of the Eligible Properties complies with applicable zoning ordinances, regulations and restrictive covenants affecting the same. To Borrower’s knowledge, all use and other requirements of any Governmental Authority having jurisdiction over any Eligible Property have been satisfied. To Borrower’s knowledge, no violation of any Law exists with respect to any Eligible Property. To Borrower’s knowledge or as set forth on the survey of the Eligible Property delivered to Lender, the Improvements are constructed entirely on the Land and do not encroach upon any easement or right-of-way, or upon the land of others. To Borrower’s knowledge or as otherwise set forth on the survey of the Eligible Property delivered to Lender or in any reports regarding the Eligible Property delivered to Lender, the Improvements comply with all applicable building restriction lines and set-backs, however established, and are in strict compliance with all applicable use or other restrictions and the provisions of all applicable agreements, declarations and covenants and all applicable zoning and subdivision ordinances and regulations.

Section 3.11. Certificates of Occupancy.

All certificates of occupancy and other permits and licenses necessary or required in connection with the use and occupancy of the Improvements have been validly issued.

Section 3.12. Utilities; Roads; Access.

All utility services necessary for the operation of the Improvements for their intended purposes have been fully installed, including telephone service, cable television, water supply, storm and sanitary sewer facilities, natural gas and electric facilities, including cabling for telephonic and data communication, and the capacity to send and receive wireless communication. All roads and other accesses necessary to serve the Land and Improvements have been completed, are serviceable in all weather, and where required by the appropriate Governmental Authority, have been dedicated to and formally accepted by such Governmental Authority.

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Section 3.13. Other Liens.

Except for contracts for labor, materials and services furnished or to be furnished in connection with any construction at the Eligible Property in connection with achieving Stabilization which has been approved by Lender, Borrower has made no contract or arrangement of any kind the performance of which by the other party thereto would give rise to a lien on any Eligible Property.

Section 3.14. No Defaults.

There is no Default or Event of Default under any of the Loan Documents, and there is no default or event of default under any material contract, agreement or other document related to the operation of the Improvements or any contract for labor, materials or services to be furnished in connection with any Eligible Property in connection with achieving Stabilization.

Section 3.15. Draw Requests.

Each draw request or other request for an Advance hereunder and each receipt of the funds requested thereby shall constitute Borrower’s affirmation that Borrower’s representations and warranties set forth in this Agreement are true and correct as of the date of the draw request or other request for an Advance and, unless Lender is notified to the contrary prior to the disbursement of the Advance requested, will be so on the date of the disbursement. Without limiting the generality of the forgoing, where the proceeds of any such Advance are to be used in connection with an Eligible Property achieving Stabilization, such draw request shall constitute Borrower’s representation and warranty that any and all such proceeds shall be used to pay for the costs and items set forth in, and otherwise in accordance with, the Budget; that the balance of the unfunded portion of the Loan to be Advanced in accordance with the Budget is sufficient to pay all such costs (including, without limitation, all costs of constructing or making and completing any and all Improvements, construction or work) in order for the Eligible Property to achieve Stabilization in accordance with the Project Schedule; the Plans and Specifications are complete and adequate for the Construction of the Improvements and have been approved by all Governmental Authorities having or claiming jurisdiction over the Eligible Property; and all building, construction and other permits necessary or required in connection with the Construction of the Improvements have been validly issued and are final and unappealable (without any appeal having been filed).

Article IV

Affirmative Covenants and Agreements.

Borrower covenants as of the date hereof and until such time as all Obligations shall be paid and performed in full, that:

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Section 4.1. Compliance with Laws; Use of Proceeds; Construction of Improvements.

Borrower shall comply with all Laws and all orders, writs, injunctions, decrees and demands of any court or any Governmental Authority affecting Borrower or the Eligible Property owned by any Borrower. Borrower shall use all proceeds of the Loan for business purposes which are not in contravention of any Law or any Loan Document. In addition to all other terms, covenants, agreements, conditions, representations and warranties with respect to the Construction of Improvements set forth in this Agreement and/or in any of the other Loan Documents, any and all Improvements shall be constructed in accordance with the terms of Schedule 2.

Section 4.2. Inspections; Cooperation.

Borrower shall permit representatives of Lender, including, without limitation, any Construction Consultant, to enter upon the Land during normal business hours, except that entry may be had at any time during an emergency or in connection with the same, to inspect the Improvements and any and all materials to be used in connection with any construction at the Eligible Property, including any construction in connection with achieving Stabilization, to examine all detailed plans and shop drawings and similar materials as well as all books and records of Borrower (regardless of where maintained) and all supporting vouchers and data and to make copies and extracts therefrom and to discuss the affairs, finances and accounts pertaining to the Loan and the Improvements with representatives of Borrower. Borrower shall at all times cooperate and use its best efforts to cause each and every one of its contractors, subcontractors and material suppliers to cooperate with the representatives of Lender in connection with or in aid of the performance of Lender’s functions under this Agreement. Except in the event of an emergency, Lender shall give Borrower at least twenty-four hours’ notice by telephone in each instance before entering upon the Land and/or exercising any other rights granted in this Section. The cost of any and all such inspections by Lender or any representative of Lender, including any Construction Consultant, shall be paid for by Borrower.

Section 4.3. Payment and Performance of Contractual Obligations.

Borrower shall perform in a timely manner all of its obligations under any and all contracts and agreements related to any construction activities at the Eligible Property or the maintenance or operation of the Improvements, and Borrower will pay when due all bills for services or labor performed and materials supplied in connection with such construction, maintenance and/or operation. Within sixty (60) days after the filing of any mechanic’s lien or other lien or encumbrance against the Eligible Property, Borrower will promptly discharge the same by payment or filing a bond or otherwise as permitted by Law. So long as Lender’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Lender in its sole and absolute discretion, Borrower shall have the right to contest in good faith any claim, lien or encumbrance, provided that Borrower does so diligently and without prejudice to Lender or delay in achieving Stabilization.

Section 4.4. Insurance.

Borrower shall maintain the following insurance at its sole cost and expense:

(a) Insurance against Casualty to the Eligible Property under a policy or policies covering such risks as are presently included in “special form” (also known as “all risk”) coverage, including such risks as are ordinarily insured against by similar businesses, but in any

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event including fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke, vandalism, malicious mischief and acts of terrorism. Such insurance shall name Lender as mortgagee and loss payee. Unless otherwise agreed in writing by Lender, such insurance shall be for the full insurable value of the Eligible Property on a replacement cost basis, with a deductible amount, if any, satisfactory to Lender. No policy of insurance shall be written such that the proceeds thereof will produce less than the minimum coverage required by this Section by reason of co-insurance provisions or otherwise. The term “full insurable value” means one hundred percent (100%) of the actual replacement cost of the Eligible Property, including tenant improvements (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items).

(b) Comprehensive (also known as commercial) general liability insurance on an “occurrence” basis against claims for “personal injury” liability and liability for death, bodily injury and damage to property, products and completed operations, in limits satisfactory to Lender with respect to any one occurrence and the aggregate of all occurrences during any given annual policy period. Such insurance shall name Lender as an additional insured.

(c) Workers’ compensation insurance for all employees of Borrower in such amount as is required by Law and including employer’s liability insurance, if required by Lender.

(d) During any period of construction of improvements, Borrower shall maintain, or cause others to maintain, such insurance as may be required by Lender of the type customarily carried in the case of similar construction for one hundred percent (100%) of the full replacement cost of materials stored at or upon the Eligible Property. During any period of other construction upon the Eligible Property, Borrower shall maintain, or cause others to maintain, builder’s risk insurance (non-reporting form) of the type customarily carried in the case of similar construction for one hundred percent (100%) of the full replacement cost of work in place and materials stored at or upon the Property.

(e) If at any time any portion of any structure on an Eligible Property is insurable against Casualty by flood and is located in a Special Flood Hazard Area under the Flood Disaster Protection Act of 1973, as amended, a flood insurance policy on the structure and Borrower owned contents in form and amount acceptable to Lender but in no amount less than the amount sufficient to meet the requirements of applicable Law as such requirements may from time to time be in effect.

(f) Loss of rental value insurance or business interruption insurance in an amount equal to twelve (12) months of the projected gross income of the Eligible Property and an extended period of indemnity endorsement providing an additional twelve (12) months’ loss of rental value or business interruption insurance after the Property has been restored or until the projected gross income returns to the level that existed prior to the loss, whichever is first to occur.

(g) Such other and further insurance as may be required from time to time by Lender in order to comply with regular requirements and practices of Lender in similar transactions including, if required by Lender, boiler and machinery insurance, pollution liability insurance, wind insurance and earthquake insurance, so long as any such insurance is generally available at commercially reasonable premiums as determined by Lender from time to time.

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Each policy of insurance (i) shall be issued by one or more insurance companies each of which must have an A.M. Best Company financial and performance rating of A-IX or better and are qualified or authorized by the Laws of the State to assume the risks covered by such policy, (ii) with respect to the insurance described under the preceding Subsections (a), (d), (e) and (f), shall have attached thereto standard non-contributing, non-reporting mortgagee clauses in favor of and entitling Lender without contribution to collect any and all proceeds payable under such insurance, either as sole payee or as joint payee with Borrower, (iii) shall provide that such policy shall not be canceled or modified for nonpayment of premiums without at least ten (10) days prior written notice to Lender, or for any other reason without at least thirty (30) days prior written notice to Lender, and (iv) shall provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Borrower which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment. Borrower shall promptly pay all premiums when due on such insurance and, not less than ten (10) days prior to the expiration dates of each such policy, Borrower will deliver to Lender acceptable evidence of insurance, such as a renewal policy or policies marked “premium paid” or other evidence satisfactory to Lender reflecting that all required insurance is current and in force. Borrower will immediately give Notice to Lender of any cancellation of, or change in, any insurance policy. Lender shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (A) the existence, nonexistence, form or legal sufficiency thereof, (B) the solvency of any insurer, or (C) the payment of losses. Borrower may satisfy any insurance requirement hereunder by providing one or more “blanket” insurance policies, subject to Lender’s approval in each instance as to limits, coverages, forms, deductibles, inception and expiration dates, and cancellation provisions.

Section 4.5. Adjustment of Condemnation and Insurance Claims.

Borrower shall give prompt Notice to Lender of any Casualty or any Condemnation or threatened Condemnation. Lender is authorized, at its sole and absolute option, to commence, appear in and prosecute, in its own or Borrower’s name, any action or proceeding relating to any Condemnation or Casualty, and to make proof of loss for and to settle or compromise any Claim in connection therewith. In the event that Borrower is entitled to the receipt of such proceeds to use the same for repair and restoration pursuant to Section 4.6 below and the amount of such Claim does not exceed $500,000.00, then Borrower shall be entitled, after prior written notice to Lender, to make proof of loss for and to settle or compromise such claim and receive the proceeds thereof, not to exceed $500,000.00. Borrower covenants to use any and all such proceeds received by it pursuant hereto to pay for the costs of repair and restoration of the Property and any balance remaining shall be used to prepay the outstanding balance of the Loan. Except as otherwise provided herein, Lender shall have the right to receive all Condemnation Awards and Insurance Proceeds, and may deduct therefrom all of its Expenses. However, so long as no Event of Default has occurred and is continuing and Borrower is diligently pursuing its rights and remedies with respect to a Claim, Lender will obtain Borrower’s written consent (which consent shall not be unreasonably withheld or delayed) before making proof of loss for or settling or compromising such Claim. Borrower agrees to diligently assert its rights and remedies with respect to each Claim and to promptly pursue the settlement and compromise of each Claim subject to Lender’s approval, which approval shall not be unreasonably withheld or

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delayed. If, prior to the receipt by Lender of any Condemnation Award or Insurance Proceeds, the Eligible Property shall have been sold at sheriff’s, trustee’s or other execution sale pursuant to the provisions of the Mortgage or a judgment under the Note, Lender shall have the right to receive such funds (a) to the extent of any deficiency found to be due upon such sale with interest thereon (whether or not a deficiency judgment on the Mortgage shall have been sought or recovered or denied), and (b) to the extent necessary to reimburse Lender for its Expenses. If any Condemnation Awards or Insurance Proceeds are paid to Borrower, Borrower shall receive the same in trust for Lender. Within ten (10) days after Borrower’s receipt of any Condemnation Awards or Insurance Proceeds, except with respect to a Claim to which Borrower is entitled to receive the Proceeds as aforesaid, Borrower shall deliver such awards or proceeds to Lender in the form in which they were received, together with any endorsements or documents that may be necessary to effectively negotiate or transfer the same to Lender. Borrower agrees to execute and deliver from time to time, upon the request of Lender, such further instruments or documents as may be requested by Lender to confirm the grant and assignment to Lender of any Condemnation Awards or Insurance Proceeds.

Section 4.6. Utilization of Net Proceeds.

(a) Subject as hereinafter provided in Section 4.6(b) below, Net Proceeds must be utilized either for payment of the Obligations or for the restoration of the Eligible Property, as determined by Lender in the exercise of its sole discretion.

(b) Lender shall allow Borrower to apply the Net Proceeds to restoration as permitted pursuant to the terms hereof, including but not limited to Section 4.6(c), in accordance with the following terms and conditions and provided the same are fully satisfied and complied with, as determined by Lender in the exercise of its sole discretion:

(i) the cost of such repair and restoration shall not exceed $500,000.00;

(ii) prior to commencement of restoration and from time to time during restoration, Lender may require Borrower to deposit additional monies with Lender in amounts which, in Lender’s judgment, are sufficient to defray all costs to be incurred to complete the restoration and all costs associated therewith, including labor, materials, architectural and design fees and expenses and contractor’s fees and expenses (and Borrower shall make all such deposits when and as required by Lender), and Lender shall have first approved a budget and cost breakdown for the restoration, together with a disbursement schedule, in detail satisfactory to Lender;

(iii) prior to commencement of restoration and disbursement of any amount of the proceeds, from time to time, Borrower shall demonstrate to the satisfaction of Lender that the Borrower has the financial ability during the period of restoration, to continue to make monthly principal and/or interest payments (as the case may be) under the Note and the Swap Contract as the same become due, and to continue to pay the carrying costs of the Property (including, without limitation, taxes and insurance payments) as the same become due;

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(iv) prior to commencement of restoration and disbursement of any amount of the proceeds, the contracts, contractors, plans and specifications for the restoration shall have been approved by Lender in its reasonable discretion and all governmental authorities having jurisdiction, with all permits for the same having been issued;

(v) all restoration work shall be done under fixed price contracts and Borrower shall have executed and delivered to Lender an assignment of all such contracts, with contractor’s consent and acknowledgment attached thereto, all in form and content as required by Lender;

(vi) at the time of any disbursement, no Event of Default shall have occurred and be continuing or Default shall exist and no mechanics’ or materialmen’s liens shall have been filed and remain undischarged;

(vii) disbursements from the Restoration Fund shall be made in the manner at such times and in accordance with Lender’s customary requirements for construction loans and disbursement of loan proceeds with respect to the construction of multifamily projects and improvements;

(viii) Borrower will pay the cost of Lender’s inspecting architect or engineer and the cost of any reasonable attorney’s fees and disbursements incurred by Lender in connection with such restoration;

(ix) Lender shall have the option to retain up to ten percent (10%) of the cost of all work until the restoration is completed, as determined by Lender’s inspector, and all occupancy permits therefor have been issued;

(x) any amount of the proceeds remaining upon completion of restoration shall be applied to any part of the Obligations and in any order (notwithstanding that any of the Obligations may not then be otherwise due and payable);

(xi) Borrower provides evidence satisfactory to the Lender that construction of the Improvements can be completed no later than six (6) months prior to the Maturity Date; and

(xii) Prior to commencement of restoration, unless otherwise approved by Lender in its sole discretion, Borrower has demonstrated to Lender that all of the Improvements at the Property can be repaired and restored, as a matter of right, to exactly as existed before any and all such condemnation, damage or destruction, including, without limitation, without loss of the total number of apartment units, change in composition of 1, 2 and/or 3 bedroom units, loss of parking or any other aspect of the Improvements.

(c) If Net Proceeds are to be utilized for the restoration of the Eligible Property, the Net Proceeds, together with any other funds deposited with Lender for that purpose, must be deposited in a Borrower’s Deposit Account, which shall be an interest-bearing account, with all accrued interest to become part of Borrower’s deposit. Borrower agrees that it

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shall include all interest and earnings on any such deposit as its income (and, if Borrower is a partnership or other pass-through entity, the income of its partners, members or beneficiaries, as the case may be), and shall be the owner of all funds on deposit in the Borrower’s Deposit Account for federal and applicable state and local tax purposes. Lender shall have the exclusive right to manage and control all funds in the Borrower’s Deposit Account, but Lender shall have no fiduciary duty with respect to such funds. Thereafter, Lender will advance the deposited funds from time to time to Borrower for the payment of costs of restoration of the Eligible Property upon presentation of evidence acceptable to Lender that such restoration has been completed satisfactorily and lien-free. Any account fees and charges may be deducted from the balance, if any, in the Borrower’s Deposit Account. Borrower grants to Lender a security interest in the Borrower’s Deposit Account and all funds hereafter deposited to such deposit account, and any proceeds thereof, as security for the Obligations. Such security interest shall be governed by the Uniform Commercial Code of the State, and Lender shall have available to it all of the rights and remedies available to a secured party thereunder. The Borrower’s Deposit Account may be established and held in such name or names as Lender shall deem appropriate, including in the name of Lender. Borrower hereby constitutes and appoints Lender and any officer or agent of Lender its true and lawful attorneys-in-fact with full power of substitution to open the Borrower’s Deposit Account and to do any and every act that Borrower might do on its own behalf to fulfill the terms of this Section 4.6. To the extent permitted by Law, Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. It is understood and agreed that this power of attorney, which shall be deemed to be a power coupled with an interest, cannot be revoked.

Section 4.7. Management.

Borrower at all times shall provide for the competent and responsible management and operation of the Eligible Property. At all times, Borrower shall cause the Eligible Property to be managed by an Approved Manager pursuant to a Management Agreement first approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed. All Management Agreements shall be terminable upon thirty (30) days’ written notice without penalty or charge (except for unpaid accrued management fees) and shall be subject to an Assignment and Subordination of Property Management Agreement. The Existing Management Agreements are hereby approved by Lender provided that as to each Eligible Property which is added to the Collateral Pool, an Assignment and Subordination of Property Management Agreement must be executed and delivered to Lender at the time such Eligible Property is added.

Section 4.8. Books and Records; Financial Statements; Tax Returns.

Borrower shall provide or cause to be provided to Lender all of the following:

(a) Financial Statements of each Borrower, and if a Borrower is a partnership, of each general partner of such Borrower: (A) for each fiscal year of such reporting party, as soon as reasonably practicable and in any event within one hundred twenty (120) days after the close of each fiscal year, and (B) for each fiscal quarter of such reporting party, as soon as reasonably practicable and in any event within sixty (60) days after the close of each fiscal quarter.

(b) Financial Statements of each Guarantor, (A) for each fiscal year of such reporting party, as soon as reasonably practicable and in any event within one hundred twenty (120) days after the close of each fiscal year and (B) for each fiscal quarter of such reporting party, as soon as reasonably practicable and in any event within sixty (60) days after the close of each fiscal quarter.

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(c) A certificate from the Chief Financial Officer or Chief Executive Officer of Guarantor certifying to Guarantor’s compliance with the financial covenants set forth on Schedule 8 and applicable to Guarantor, which certificate, in form and substance satisfactory to Lender, shall be delivered to Lender within sixty (60) days after the close of each fiscal quarter.

(d) Prior to the beginning of each fiscal year of Borrower, a capital and operating budget for the Eligible Property of such Borrower; and for each month (and for the fiscal year through the end of that month) (A) property operating statements which include all income and expenses in connection with each Eligible Property, (B) rent rolls, and (C) a current leasing status report (including tenants’ names, occupied tenant space, lease terms, rents, vacant space and proposed rents), including in each case a comparison to the budget, as soon as reasonably practicable but in any event within forty-five (45) days after the end of each such month, certified in writing as true and correct by a representative of Borrower satisfactory to Lender. Items provided under this paragraph shall be in form and detail satisfactory to Lender.

(e) Copies of filed federal income tax returns and any extensions thereof, of Borrower, each Guarantor for each taxable year (with all K-1s and other forms and supporting schedules attached if an individual), within thirty (30) days after filing the same.

(f) From time to time promptly after Lender’s request, such additional information, reports and statements respecting the Property and the Improvements, or the business operations and financial condition of each reporting party, as Lender may reasonably request.

Borrower will keep and maintain full and accurate books and records administered in accordance with sound accounting principles, consistently applied, showing in detail the earnings and expenses of each of the Eligible Properties and the operation thereof. All Financial Statements shall be in form and detail satisfactory to Lender and shall contain or be attached to the signed and dated written certification of the reporting party in form specified by Lender to certify that the Financial Statements are furnished to Lender in connection with the extension of credit by Lender and constitute a true and correct statement of the reporting party’s financial position. All certifications and signatures on behalf of corporations, partnerships, limited liability companies or other entities shall be by a representative of the reporting party satisfactory to Lender. All Financial Statements for a reporting party who is an individual shall be on Lender’s then-current personal financial statement form or in another form satisfactory to Lender. All fiscal year-end Financial Statements of Guarantor shall be audited and certified, without any qualification or exception not acceptable to Lender, by independent certified public accountants acceptable to Lender, and shall contain all reports and disclosures required by generally accepted accounting principles for a fair presentation. All fiscal year-end Financial Statements of Borrower may be prepared by the reporting party. All quarterly Financial Statements may be prepared by the applicable reporting party and shall include a minimum of a balance sheet, income statement, and statement of cash flow. Borrower shall provide, upon Lender’s request, convenient facilities for the audit and verification of any such statement. Additionally, Borrower will provide Lender at Borrower’s expense with all evidence that Lender may from time to time reasonably request as to compliance with all provisions of the Loan Documents. Borrower shall promptly notify Lender of any event or condition that could reasonably be expected to have a material adverse change in the financial condition of Borrower, of Guarantor (if known by Borrower), or in the construction progress of the Improvements.

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Section 4.9. Estoppel Certificates.

Within ten (10) days after any request by Lender or a proposed assignee or purchaser of the Loan or any interest therein, Borrower shall certify in writing to Lender, or to such proposed assignee or purchaser, the then unpaid balance of the Loan and whether Borrower claims any right of defense or setoff to the payment or performance of any of the Obligations, and if Borrower claims any such right of defense or setoff, Borrower shall give a detailed written description of such claimed right.

Section 4.10. Taxes; Tax Receipts.

Borrower shall pay and discharge all Taxes prior to the date on which penalties are attached thereto unless and to the extent only that such Taxes are contested in accordance with the terms of the Mortgage. If Borrower fails, following written demand, to provide Lender the tax receipts required under the Mortgage, without limiting any other remedies available to Lender, Lender may, at Borrower’s sole expense, obtain and enter into a tax services contract with respect to any or all of the Eligible Properties with a tax reporting agency satisfactory to Lender.

Section 4.11. Lender’s Rights to Pay and Perform.

If, after any required notice, Borrower fails to promptly pay or perform any of the Obligations within any applicable grace or cure periods, Lender, without Notice to or demand upon Borrower, and without waiving or releasing any Obligation or Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of Borrower and any amounts advanced by Lender in connection therewith shall be deemed to be obligatory advances secured by the Note and the other Loan Documents. Lender may enter upon any or all of the Eligible Properties for that purpose and take all action thereon as Lender considers necessary or appropriate.

Section 4.12. Reimbursement; Interest.

If Lender shall incur any Expenses or pay any Claims by reason of the Loan or the rights and remedies provided under the Loan Documents (regardless of whether or not any of the Loan Documents expressly provide for an indemnification by Borrower against such Claims), Lender’s payment of such Expenses and Claims shall constitute obligatory advances to Borrower which shall be paid by Borrower to Lender on demand, together with interest thereon from the date incurred until paid in full at the rate of interest then applicable to the Loan under the terms of the Note and shall have lien priority as of the recording of the Mortgage. Each advance shall be secured by the Mortgage and the other Loan Documents as fully as if made to Borrower, regardless of the disposition thereof by the party or parties to whom such advance is made. Notwithstanding the foregoing, however, in any action or proceeding to foreclose the Mortgage or to recover or collect the Obligations, the provisions of Law governing the recovery of costs, disbursements and allowances shall prevail unaffected by this Section

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Section 4.13. Notification by Borrower.

Borrower will promptly give Notice to Lender of the occurrence of any Default or Event of Default hereunder or under any of the other Loan Documents. Borrower will also promptly give Notice to Lender of any claim of a default by Borrower, or any claim by Borrower of a default by any other party, under any property management contract or any Lease.

Section 4.14. Indemnification by Borrower.

Borrower agrees to indemnify Lender and to hold Lender harmless from and against, and to defend Lender by counsel approved by Lender against, any and all Claims directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with any Eligible Property or the Loan, including any Claim arising out of or resulting from (a) any construction activity at any Eligible Property, including any defective workmanship or materials; (b) any failure by Borrower to comply with the requirements of any Laws or to comply with any agreement that applies or pertains to any Eligible Property, including any agreement with a broker or “finder” in connection with the Loan or other financing of any Eligible Property; (c) any failure by Borrower to observe and perform any of the obligations imposed upon the landlord under any of the Leases; (d) any other Default or Event of Default hereunder or under any of the other Loan Documents; or (e) any assertion or allegation that Lender is liable for any act or omission of Borrower or any other Person in connection with the ownership, financing, leasing, operation or sale of any Eligible Property; provided, however, that Borrower shall not be obligated to indemnify Lender with respect to any Claim arising solely from the gross negligence or willful misconduct of Lender. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, assignment or conveyance in lieu thereof and any other action by Lender to enforce the rights and remedies of Lender hereunder or under the other Loan Documents.

Section 4.15. Fees and Expenses.

Borrower shall pay all fees, charges, costs and expenses required to satisfy the conditions of the Loan Documents. Without limitation of the foregoing, Borrower will pay, when due, and if paid by Lender will reimburse Lender on demand for, all fees and expenses of any construction consultant (if any), the title insurer, environmental engineers, appraisers, surveyors and Lender’s counsel in connection with the closing, administration, modification or any “workout” of the Loan, or the enforcement of Lender’s rights and remedies under any of the Loan Documents.

Section 4.16. Appraisals.

Lender may obtain from time to time an appraisal of all or any part of any Eligible Property, prepared in accordance with written instructions from Lender, from a third-party appraiser satisfactory to, and engaged directly by, Lender. The cost of one such appraisal obtained by Lender in each calendar year and the cost of each such appraisal, including any costs for internal

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review thereof, obtained by Lender following the occurrence and during the continuance of an Event of Default shall be borne by Borrower and shall be paid by Borrower on demand. The terms hereof shall not be in limitation of any other provision of this Agreement providing for an appraisal of any Eligible Property or Borrower’s obligation to pay the cost thereof.

Section 4.17. Leasing and Tenant Matters.

Borrower shall comply with the terms and conditions of Schedule 4 in connection with the leasing of space within the Improvements.

Section 4.18. Preservation of Rights.

Each Borrower shall obtain, preserve and maintain in good standing, as applicable, all rights, privileges and franchises necessary or desirable for the operation of each Eligible Property and the conduct of each Borrower’s business thereon or therefrom.

Section 4.19. Income from Property.

Borrower shall first apply all income derived from the Eligible Property, including all income from Leases, to pay costs and expenses associated with the ownership, maintenance, operation and leasing of the Eligible Properties, including all amounts then required to be paid under the Loan Documents, before using or applying such income for any other purpose. No such income shall be distributed or paid to any member, partner, shareholder or, if Borrower is a trust, to any beneficiary or trustee, unless and until all such costs and expenses which are then due shall have been paid in full.

Section 4.20. Representations and Warranties.

Borrower shall take all actions and shall do all things necessary or desirable to cause all of Borrower’s representations and warranties in this Agreement to be true and correct in all material respects at all times.

Section 4.21. Deposit Accounts; Principal Depository.

Except for the deposit accounts set forth on Schedule 4.21 attached hereto, as the same may be updated as to additional or new Borrowers being added to this Agreement, each Borrower who is an owner of an Eligible Property shall maintain with Lender all deposit accounts related to such Eligible Property, including all operating accounts, any reserve or escrow accounts, any accounts from which Borrower may from time to time authorize Lender or Swap Counterparty to debit payments due on the Loan and any Swap Contracts, and any lockbox, cash management or other account into which tenants are required from time to time to pay rent. Borrower hereby grants to Lender a security interest in the foregoing accounts and deposit accounts with Lender.

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Section 4.22. Tax and Insurance Reserve Deposits.

If required by Lender, at any time, upon the occurrence of an Event of Default, Borrower shall make monthly payments in an amount estimated by Lender to pay installments of real property Taxes and insurance premiums for insurance required to be maintained by Borrower under the Loan Documents, pursuant to the terms and conditions of Schedule 5.

Section 4.23. Swap Contracts.

In the event that Borrower shall elect to enter into a Swap Contract with Swap Counterparty, Borrower shall comply with the terms and conditions of Schedule 7 with respect to all Swap Contracts.

Section 4.24. Financial Covenants

Guarantor shall comply with the terms and conditions of Schedule 8 with respect to financial covenants as described therein.

Section 4.25. No other Assets or Liabilities

No Borrower which owns an Eligible Property shall (i) own any asset other than the Eligible Property which is included in the Collateral Pool or (ii) engage in any other business or activity other than such ownership and operation of the Eligible Property which is included in the Collateral Pool. No Borrower shall incur any liabilities, obligations, indebtedness or the like, regardless of whether the same is current, contingent or otherwise, except trade debt incurred in the ordinary course of the ownership and operation of an Eligible Property which is payable in thirty (30) days or less.

Section 4.26. Limitation of Liability of Opportunity OP

(a) Except as set forth in subsection 4.26(b) below, the liability of Opportunity OP under and pursuant to this Agreement, the Note and the other Loan Documents to which it is a party is limited to the “Collateral” (as that term is defined in the Assignment to be executed by Opportunity OP with respect to its ownership interest in any additional Borrower which owns an Eligible Property which is added to the Collateral Pool) and no recourse shall be taken against any other assets of Opportunity OP.

(b) Notwithstanding the limitation of liability of Opportunity OP set forth in subsection 4.26(a) above, the liability of Opportunity OP shall not be limited to the Collateral and recourse may be had against any and all other assets of Opportunity OP in the event that any of the following events occur, and Opportunity OP hereby unconditionally and irrevocably, without any limitation on the recourse that can be taken against any and all assets of Opportunity OP, covenants and agrees to protect, defend, indemnify and hold harmless Lender for, from and against, any and all losses, damages or liability which may be suffered or incurred by, imposed on or awarded against Lender as a result of:

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(i) Fraud in connection with the construction, leasing or operation of any of the Eligible Properties, the making or disbursement of the Loan, or any certificates or documents provided in connection therewith;

(ii) Material misrepresentation or breach of warranty in connection with the construction, leasing or operation of any Eligible Property, the making or disbursement of the Loan, or any certificates or documents provided in connection therewith;

(iii) After the occurrence of an Event of Default, distributions to the members, partners or shareholders of Borrower or Guarantor (or to any beneficiary or trustee if Borrower or Guarantor is a trust) of any Rents, security deposits, or other income arising with respect to any Eligible Property which is part of the Collateral Pool or in the event any such distribution is made which results in an Event of Default occurring;

(iv) The misapplication by Borrower of any Insurance Proceeds or Condemnation Awards attributable to any Eligible Property ;

(v) Any filing by Borrower or Guarantor of a bankruptcy petition, or the making by Borrower or Guarantor of an assignment for the benefit of creditors, or the appointment of a receiver of any property of Borrower or Guarantor in any action initiated by, or consented to by, Borrower or Guarantor; or

(vi) Any acts of Borrower or Guarantor taken in bad faith with the intent to hinder, delay or interfere with the exercise by Lender of any rights and remedies under the Loan Documents after the occurrence of an Event of Default.

(c) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of Opportunity OP hereunder shall in no event exceed the amount which under applicable federal and state laws relate to the insolvency of debtors.

Section 4.27. Limitation of Liability of Borrower which is an Owner of an Eligible Property.

Subject to section 2.1(d)(iv) with respect to the liability of a Borrower under and pursuant to a Collateral Mortgage and except for liability pursuant to a Collateral Mortgage, with respect to the unpaid and outstanding aggregate principal amount of Advances of the Loan, from time to time, a Borrower which is the owner of an Eligible Property which is part of the Collateral Pool, shall be liable for the amount of such principal which has been advanced to such Borrower with respect to such Eligible Property. Nothing herein shall limit such Borrower’s liability, jointly and severally, with all Borrowers for all other sums due and payable under this Agreement, the Note and all of the other Loan Documents.

Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Borrower which is an owner of an Eligible Property shall in no event exceed the amount which under applicable federal and state laws relate to the insolvency of debtors.

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Article V

Negative Covenants.

Borrower covenants as of the date hereof and until such time as all Obligations shall be paid and performed in full, that:

Section 5.1. Conditional Sales.

Borrower shall not incorporate in the Improvements any property acquired under a conditional sales contract or lease or as to which the vendor retains title or a security interest, without the prior written consent of Lender.

Section 5.2. Insurance Policies and Bonds.

Borrower shall not do or permit to be done anything that would affect the coverage or indemnities provided for pursuant to the provisions of any insurance policy, performance bond, labor and material payment bond or any other bond given in connection with any construction at the Property, including any construction of tenant improvements.

Section 5.3. Commingling.

No Borrower shall commingle its funds and other assets with those of any other Borrower or any Affiliate of it or any other Borrower or any other Person.

Section 5.4. Additional Debt.

No Borrower which is the owner of an Eligible Property which is part of the Collateral Pool shall incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (a) the Loan, and (b) advances or trade debt or accrued expenses incurred in the ordinary course of business of operating the Eligible Property owned by it. No other debt may be secured by the Eligible Property, whether senior, subordinate or pari passu.

Article VI

Events of Default.

The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Agreement:

Section 6.1. Payment Default.

Borrower fails to pay as and when first due any Obligation under this Agreement and such failure continues uncured for ten (10) days after the date such amount is first due and payable, except no such ten (10) day cure period shall be applicable at the maturity of such Obligation or by earlier acceleration.

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Section 6.2. Default Under Other Loan Documents.

An Event of Default (as defined therein) occurs under the Note or the Mortgage or any other Loan Document, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any term, obligation or agreement contained in any of the Loan Documents (within any applicable grace or cure period).

Section 6.3. Accuracy of Information; Representations and Warranties.

Any information contained in any financial statement, schedule, report or any other document delivered by Borrower, Guarantor or any other Person to Lender in connection with the Loan proves at any time not to be in all respects true and accurate, or Borrower, Guarantor or any other Person shall have failed to state any material fact or any fact necessary to make such information not misleading, or any representation or warranty contained in this Agreement or in any other Loan Document or other document, certificate or opinion delivered to Lender in connection with the Loan, proves at any time to be incorrect or misleading in any material respect either on the date when made or on the date when reaffirmed pursuant to the terms of this Agreement.

Section 6.4. Deposits.

Borrower fails to deposit funds with Lender, in the amount requested by Lender, pursuant to the provisions of Section 4.6, within ten (10) days from the effective date of a Notice from Lender requesting such deposit, or Borrower fails to deliver to Lender any Condemnation Awards or Insurance Proceeds within ten (10) days after Borrower’s receipt thereof.

Section 6.5. Insurance Obligations.

Borrower fails to promptly perform or comply with any of the covenants contained in the Loan Documents with respect to maintaining insurance, including the covenants contained in Section 4.4.

Section 6.6. Other Obligations.

Borrower fails to promptly perform or comply with any of the Obligations set forth in this Agreement (other than those expressly described in other Sections of this Article VI), and such failure continues uncured for a period of thirty (30) days after Notice from Lender to Borrower, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Borrower commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Borrower causes such failure to be cured no later than ninety (90) days after the date of such Notice from Lender.

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Section 6.7. Intentionally Omitted.

Section 6.8. Lapse of Permits or Approvals.

Any permit, license, certificate or approval that a Borrower is required to obtain with respect to any construction activities which are part of a Borrower’s plan for Stabilization at any of the Eligible Properties or the operation or leasing of any of the Eligible Properties lapses or ceases to be in full force and effect (which in the case of any such construction activities occurs prior to substantial completion of the same) and such permit, license, certificate or approval is not reinstated or re-issued within the shorter of (i) sixty (60) days, subject to reasonable extension as agreed to by Lender provided the same has been applied for within such original sixty (60) days, or (ii) the time period required by law, court order, administrative body or the like.

Section 6.9. Mechanic’s Lien.

A lien for the performance of work or the supply of materials filed against any of the Eligible Properties, or any stop notice served on Borrower, any contractor of Borrower, or Lender, remains unsatisfied or unbonded for a period of thirty (30) days after the date of filing or service.

Section 6.10. Bankruptcy.

Borrower, any general partner of Borrower or any Guarantor files a bankruptcy petition or makes a general assignment for the benefit of creditors, or a bankruptcy petition is filed against Borrower, any general partner of Borrower or any Guarantor and such involuntary bankruptcy petition continues undismissed for a period of ninety (90) days after the filing thereof.

Section 6.11. Appointment of Receiver, Trustee, Liquidator.

Borrower, any general partner of Borrower or any Guarantor applies for or consents in writing to the appointment of a receiver, trustee or liquidator of Borrower, any general partner of Borrower, any Guarantor, any Eligible Property, or all or substantially all of the other assets of Borrower, any general partner of Borrower or any Guarantor, or an order, judgment or decree is entered by any court of competent jurisdiction on the application of a creditor appointing a receiver, trustee or liquidator of Borrower, any general partner of Borrower, any Guarantor, any Eligible Property, or all or substantially all of the other assets of Borrower, any general partner of Borrower or any Guarantor.

Section 6.12. Inability to Pay Debts.

Borrower, any general partner of Borrower or any Guarantor becomes unable or admits in writing its inability or fails generally to pay its debts as they become due.

Section 6.13. Judgment.

A final nonappealable judgment for the payment of money involving more than $250,000.00 is entered against any one Borrower or any Guarantor, and such Borrower or such Guarantor fails to discharge the same, or causes it to be discharged or bonded off to Lender’s satisfaction, within thirty (30) days from the date of the entry of such judgment.

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Section 6.14. Dissolution; Change in Business Status.

Unless the written consent of Lender is previously obtained, all or substantially all of the business assets of Borrower, any general partner of Borrower or any Guarantor are sold, Borrower, any general partner of Borrower or any Guarantor is dissolved, or there occurs any change in the form of business entity through which Borrower, any general partner of Borrower or any Guarantor presently conducts its business or any merger or consolidation involving Borrower, any general partner of Borrower or any Guarantor. Notwithstanding anything to the contrary, nothing in this Section 6.14 is intended to limit the right of any Borrower who is the owner of an Eligible Property to have the same released from the Collateral Pool and released from the lien of the corresponding Mortgage pursuant to Section 8.20 below.

Section 6.15. Default Under Other Indebtedness.

Borrower or any Guarantor fails to pay any indebtedness (other than the Loan) owed by Borrower or such Guarantor to Lender when and as due and payable (whether by acceleration or otherwise).

Section 6.16. Change in Ownership.

(a) Without the prior written consent of Lender (which consent may be granted in Lender’s sole discretion), Operating OP ceases to own 100% of all of the membership interests (or other equity interests) in each Borrower which is the fee simple owner of an Eligible Property which is in the Collateral Pool.

(b) Without the prior written consent of Lender (which consent may be granted in Lender’s sole discretion), Guarantor ceases to be the sole general partner of Opportunity OP and the sole member of RRE Opportunity Holdings, LLC, a Delaware limited liability company, which is the sole limited partner of Opportunity OP.

(c) Without the prior written consent of Lender ((which consent may be granted in Lender’s sole discretion), Resource America, Inc. ceases to own a controlling interest in Resource Real Estate Holdings, Inc.; Resource Real Estate Holdings, Inc. ceases to own a controlling interest in Resource Real Estate, Inc.; or Resource Real Estate, Inc. ceases to own a controlling interest in Resource Real Estate Opportunity Advisor, LLC.

Section 6.17. Material Adverse Change.

In the reasonable opinion of Lender, the prospect of payment or performance of all or any part of the Obligations has been impaired because of a material adverse change in the financial condition, results of operations, business or properties of Borrower, Guarantor or any other Person liable for the payment or performance of any of the Obligations or any of the Eligible Properties.

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Article VII

Remedies on Default.

Section 7.1. Remedies on Default.

Upon the happening of any Event of Default, Lender shall have the right, in addition to any other rights or remedies available to Lender under the Mortgage or any of the other Loan Documents or under applicable Law, to exercise any one or more of the following rights and remedies:

(a) Lender may accelerate all of Borrower’s Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, acceleration or intention to accelerate, presentment or demand for payment, protest or notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Borrower).

BORROWER DOES HEREBY AUTHORIZE AND EMPOWER THE PROTHONOTARY, CLERK OF COURT OR ANY ATTORNEY OF ANY COURT OF RECORD OF THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AFTER AN EVENT OF DEFAULT TO APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWER AND IN FAVOR OF LENDER, ITS SUCCESSORS OR ASSIGNS, AS OF ANY TERM, PAST, PRESENT OR FUTURE, WITH OR WITHOUT DECLARATION, FOR EACH AND ALL OF THE FOLLOWING:

(i) THE UNPAID PRINCIPAL SUM EVIDENCED BY THE NOTE WITH ALL OF THE ACCRUED AND UNPAID INTEREST THEREON, WHETHER BASIC INTEREST, DEFAULT INTEREST AT THE DEFAULT RATE, OR BOTH, AS HEREIN PROVIDED;

(ii) ALL OTHER SUMS AS ARE DUE AND PAYABLE TO LENDER UNDER THE TERMS OF THE NOTE OR UNDER THE TERMS OF ANY OF THE OTHER LOAN DOCUMENTS, WHETHER BY ACCELERATION OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ALL PREPAYMENT PREMIUMS PAYABLE UNDER THE NOTE;

(iii) THE AGGREGATE OF ALL SUMS EXPENDED BY LENDER AT ANY TIME AND FROM TIME TO TIME, WHETHER PERMITTED UNDER THE TERMS OF THE LOAN DOCUMENTS, PERMITTED BY LAW, OR PERMITTED BY STATUTE, (i) TO EXTINGUISH OR KEEP CURRENT, AS THE CASE MAY BE, ENCUMBRANCES AND LIENS ON THE PROPERTY, (ii) TO PRESERVE, PROTECT, DEFEND AND MAINTAIN ANY ELIGIBLE PROPERTY, INCLUDING WITHOUT LIMITATION, ALL SUMS ADVANCED OR EXPENDED FOR THE ERECTION, CONSTRUCTION, ALTERATION OR REPAIR OF IMPROVEMENTS CONSTITUTING PART OF THE ELIGIBLE PROPERTY, TO PRESERVE, RESTORE AND MAINTAIN THE ELIGIBLE PROPERTY, TO PAY REAL ESTATE TAXES, TO PAY INSURANCE PREMIUMS OF ANY NATURE BENEFITTING OR RELATING TO THE PROPERTY, TO PAY CONDOMINIUM, CO-OPERATIVE, RECIPROCAL EASEMENT OBLIGATIONS, RESTRICTIVE COVENANT MAINTENANCE OBLIGATIONS, AND OTHER SIMILAR FEES AND CHARGES, AND TO PAY ANY OTHER LIENABLE EXPENSES CHARGEABLE AGAINST THE ELIGIBLE PROPERTY, (iii) TO PRESERVE, PROTECT, DEFEND AND MAINTAIN THE LIEN PRIORITY OF ANY MORTGAGE ON ANY ELIGIBLE PROPERTY, AND/OR (iv) DUE TO AN EVENT OF DEFAULT UNDER THE NOTE OR UNDER ANY OF THE OTHER LOAN DOCUMENTS; AND

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(iv) THE COSTS OF SUIT AND REASONABLE ATTORNEY’S FEES IN AN AMOUNT NOT LESS THAN $25,000, WITH RELEASE OF ALL ERRORS AND ON WHICH JUDGMENT LENDER MAY ISSUE OR CAUSE TO BE ISSUED AN EXECUTION OR EXECUTIONS, WAIVING APPRAISEMENT AS TO ANY PROPERTY LEVIED UPON BY VIRTUE OF ANY SUCH EXECUTION, ANY RIGHT TO A HEARING BEFORE EXECUTION ON ANY SUCH JUDGMENT, AND ALL EXEMPTION FROM LEVY AND SALE OF ANY PROPERTY WHICH NOW OR HEREAFTER IS EXEMPT UNDER ANY ACT OF THE STATE WHEREIN THE JUDGMENT IS ENTERED. NO SINGLE EXERCISE OF THIS WARRANT AND POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THIS POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE STRICKEN, VACATED, REMOVED OR OTHERWISE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID, BUT THIS POWER SHALL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS LENDER SHALL ELECT UNTIL THE NOTE AND ALL SUMS DUE HEREUNDER SHALL BE PAID IN FULL, AND BORROWER HAS PERFORMED ALL OF THE OTHER PROVISIONS HEREUNDER AND/OR UNDER THE TERMS OF THE OTHER LOAN DOCUMENTS. BORROWER HEREBY AUTHORIZES LENDER TO RE-ASSESS DAMAGES FROM TIME TO TIME AND AS OFTEN AS LENDER DEEMS NECESSARY SO THAT ANY AND ALL JUDGMENTS CONFESSED HEREUNDER SHALL INCLUDE ALL SUMS LISTED UNDER SUBPARAGRAPHS (A) THROUGH (D) ABOVE AS THE SAME ARE INCURRED FROM TIME TO TIME, EVEN AFTER ENTRY OF JUDGMENT UNDER THIS WARRANT OF ATTORNEY.

(b) Lender may apply to any court of competent jurisdiction for, and obtain appointment of, a receiver for any or all of the Eligible Properties, as a matter of strict right and without notice, to collect the rents, issues and profits due and coming due from the Eligible Property and the Improvements, both prior to and during the pendency of any foreclosure suit, if any, without regard to the value of the Eligible Property or to the solvency of Borrower or any other person liable for the debt secured hereby, and regardless of whether Lender has an adequate remedy at law.

(c) Lender may set off the amounts due Lender under the Loan Documents against any and all accounts, credits, money, securities or other property of Borrower now or hereafter on deposit with, held by or in the possession of Lender to the credit or for the account of Borrower, without notice to or the consent of Borrower.

(d) Lender may enter into possession of any Eligible Property and perform any and all work and labor necessary to complete any construction at the Eligible Property, including any construction of improvements to achieve Stabilization, and to employ watchmen to protect the Property and the Improvements. All sums expended by Lender for such purposes shall be deemed to constitute obligatory advances under this Agreement and shall be secured by the Mortgage and the other Loan Documents. For this purpose, Borrower hereby constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution, which power is coupled with an interest, to complete the work in the name of Borrower, and hereby empowers said attorney or attorneys, in the name of Borrower or Lender:

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(i) To use any funds of Borrower including any balance which may be held by Lender and any funds (if any) which may remain unadvanced hereunder for the purpose of completing any construction, including any construction of improvements to achieve Stabilization, whether or not in the manner called for in the applicable plans and specifications;

(ii) To make such additions and changes and corrections to any plans and specifications as shall be necessary or desirable in the judgment of Lender to complete any construction, including any construction of improvements to achieve Stabilization;

(iii) To employ such contractors, subcontractors, agents, architects and inspectors as shall be necessary or desirable for said purpose;

(iv) To pay, settle or compromise all existing bills and claims which are or may be liens against the Eligible Property, or may be necessary or desirable for the completion of the work or the clearance of title to the Eligible Property;

(v) To execute all applications and certificates which may be required in the name of Borrower;

(vi) To enter into, enforce, modify or cancel Leases and to fix or modify Rents on such terms as Lender may consider proper;

(vii) To file for record, at Borrower’s cost and expense and in Borrower’s name, any notices of completion, notices of cessation of labor, or any other notices that Lender in its sole and absolute discretion may consider necessary or desirable to protect its security; and

(viii) To do any and every act with respect to any such construction which Borrower may do in its own behalf.

It is understood and agreed that this power of attorney shall be deemed to be a power coupled with an interest which cannot be revoked. Said attorney-in-fact shall also have the power to prosecute and defend all actions or proceedings in connection with any construction at the Property, including any construction of tenant improvements, and to take such actions and to require such performance as Lender may deem necessary.

Anything herein to the contrary notwithstanding, it is specifically understood and agreed that all funds furnished by the Lender and employed in performance of the obligations of the Borrower under this Agreement shall be deemed advanced by the Lender under an obligation to do so, regardless of the identity of the person or persons to whom such funds are furnished. Funds advanced by the Lender in the reasonable exercise of its judgment that the same are needed to complete tenant improvements or to protect its security shall be deemed obligatory advances hereunder, shall be added to the total indebtedness evidenced by the Note and secured by the Mortgage and other Loan Documents and said indebtedness shall be increased accordingly.

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(e) File an action in mortgage foreclosure or take such other action as is necessary, required or deemed proper to foreclose the Mortgage.

Section 7.2. No Release or Waiver; Remedies Cumulative and Concurrent.

Borrower shall not be relieved of any Obligation by reason of the failure of Lender to comply with any request of Borrower or of any other Person to take action to foreclose on any Eligible Property under any Mortgage or otherwise to enforce any provision of the Loan Documents, or by reason of the release, regardless of consideration, of all or any part of any or all of the Eligible Properties. No delay or omission of Lender to exercise any right, power or remedy accruing upon the happening of an Event of Default shall impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default or any acquiescence therein. No delay or omission on the part of Lender to exercise any option for acceleration of the maturity of the Obligations, or for foreclosure of the Mortgage following any Event of Default as aforesaid, or any other option granted to Lender hereunder in any one or more instances, or the acceptance by Lender of any partial payment on account of the Obligations shall constitute a waiver of any such Event of Default and each such option shall remain continuously in full force and effect. No remedy herein conferred upon or reserved to Lender is intended to be exclusive of any other remedies provided for in the Loan Documents, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder, or under the Loan Documents, or now or hereafter existing at Law or in equity or by statute. Every right, power and remedy given by the Loan Documents to Lender shall be concurrent and may be pursued separately, successively or together against any or all Borrowers or any or all of the Eligible Properties or any part thereof, and every right, power and remedy given by the Loan Documents may be exercised from time to time as often as may be deemed expedient by Lender.

Article VIII

Miscellaneous.

Section 8.1. Further Assurances; Authorization to File Documents.

At any time, and from time to time, upon reasonable request by Lender, Borrower will, at Borrower’s expense, (a) correct any defect, error or omission which may be discovered in the form or content of any of the Loan Documents, and (b) make, execute, deliver and record, or cause to be made, executed, delivered and recorded, any and all further instruments, certificates and other documents as may, in the reasonable opinion of Lender, be necessary or desirable in order to complete, perfect or continue and preserve the lien of the Mortgage. Upon any failure by Borrower to do so, Lender may make, execute and record any and all such instruments, certificates and other documents for and in the name of Borrower, all at the sole expense of Borrower, and Borrower hereby appoints Lender the agent and attorney-in-fact of Borrower to do so, this appointment being coupled with an interest and being irrevocable. Without limitation of the foregoing, Borrower irrevocably authorizes Lender at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements deemed necessary or desirable by Lender to establish or maintain the validity, perfection and priority of the security interests granted in the Mortgage.

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Section 8.2. No Warranty by Lender.

By accepting or approving anything required to be observed, performed or fulfilled by Borrower or to be given to Lender pursuant to this Agreement, including any certificate, Survey, receipt, appraisal or insurance policy, Lender shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof and any such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Lender.

Section 8.3. Standard of Conduct of Lender.

Nothing contained in this Agreement or any other Loan Document shall limit the right of Lender to exercise its business judgment or to act, in the context of the granting or withholding of any advance or consent under this Agreement or any other Loan Document, in a subjective manner, whether or not objectively reasonable under the circumstances, so long as Lender’s exercise of its business judgment or action is made or undertaken in good faith. Borrower and Lender intend by the foregoing to set forth and affirm their entire understanding with respect to the standard pursuant to which Lender’s duties and obligations are to be judged and the parameters within which Lender’s discretion may be exercised hereunder and under the other Loan Documents. As used herein, “good faith” means honesty in fact in the conduct and transaction concerned.

Section 8.4. No Partnership.

Nothing contained in this Agreement shall be construed in a manner to create any relationship between Borrower and Lender other than the relationship of borrower and lender and Borrower and Lender shall not be considered partners or co-venturers for any purpose on account of this Agreement.

Section 8.5. Severability.

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

Section 8.6. Notices.

All Notices required or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by nationally recognized overnight courier service or by certified United States mail, postage prepaid, addressed to the party to whom directed at the applicable address set forth below (unless changed by similar notice in writing given by the particular party whose address is to be

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changed) or by facsimile. Any Notice shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of facsimile, upon receipt; provided that service of a Notice required by any applicable statute shall be considered complete when the requirements of that statute are met. Notwithstanding the foregoing, no notice of change of address shall be effective except upon actual receipt. This Section shall not be construed in any way to affect or impair any waiver of notice or demand provided in this Agreement or in any other Loan Document or to require giving of notice or demand to or upon any Person in any situation or for any reason.

The address and fax number of Borrower are:

C/O Resource Real Estate, Inc.

One Crescent Drive, Suite 203

Philadelphia, PA 19112

Attention: Steven R. Saltzman

Telephone: (215) 717-3370

Fax: (215) 761-0444

E-mail Address: ssaltzman@resourcerei.com

with copies to:

Resource Real Estate, Inc.

2005 Market Street, 15th Floor

Philadelphia, PA 19103

Attention: Shelle Weisbaum

Telephone: (215) 832-4187

Fax: (215) 761-0452

E-mail Address: sweisbaum@resourcerei.com

Ledgewood

1900 Market Street, Suite 750

Philadelphia, PA 19103

Attention: Brian L. Murland

Telephone: (215) 790-2383

Fax: (215) 735-2513

E-mail Address: bmurland@ledgewood.com

The address and fax number of Lender are:

Bank of America, N.A.

Commercial Real Estate

4 Penn Center

1600 JFK Boulevard

Suite 1100

Philadelphia, PA 19103

Attention: David Ross, Senior Vice President & Senior Client Manager

Fax: (267) 675-0148

E-mail Address: david.s.ross@baml.com

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With copies to :

Bank of America, N.A.

Commercial Real Estate

100 South Charles St.

Baltimore, MD 21201

Attention: Charles English

Fax: (410) 547-4050

E-mail Address: charles.d.english@baml.com

Buchanan Ingersoll & Rooney, PC

Two Liberty Place

50 South 16th Street, Suite 3200

Philadelphia, PA 19102

Attention: Frederick H. Masters, Esq.

Fax: (215) 665-8760

E-mail Address: frederick.masters@bipc.com

Section 8.7. Permitted Successors and Assigns; Disclosure of Information.

(a) Each and every one of the covenants, terms, provisions and conditions of this Agreement and the Loan Documents shall apply to, bind and inure to the benefit of Borrower, its successors and those assigns of Borrower consented to in writing by Lender, and shall apply to, bind and inure to the benefit of Lender and the endorsees, transferees, successors and assigns of Lender, and all Persons claiming under or through any of them.

(b) Borrower agrees not to transfer, assign, pledge or hypothecate any right or interest in any payment or advance due pursuant to this Agreement, or any of the other benefits of this Agreement, without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any such transfer, assignment, pledge or hypothecation made or attempted by Borrower without the prior written consent of Lender shall be void and of no effect. No consent by Lender to an assignment shall be deemed to be a waiver of the requirement of prior written consent by Lender with respect to each and every further assignment and as a condition precedent to the effectiveness of such assignment.

(c) Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants. Borrower shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith, and to the extent, if any, specified in any such assignment or participation, such assignee(s) or participant(s) shall have the same rights and benefits with respect to the Loan Documents as such Person(s) would have if such Person(s) were Lender hereunder. Lender may disseminate any information it now has or hereafter obtains pertaining to the Loan, including any security for the Loan, any credit or other information on the Property (including environmental reports and assessments), Borrower, any of Borrower’s principals or any Guarantor, to any actual or prospective assignee or participant, to Lender’s Affiliates, including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to any

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regulatory body having jurisdiction over Lender, to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Borrower and the Loan, or to any other party as necessary or appropriate in Lender’s reasonable judgment.

Section 8.8. Modification; Waiver.

None of the terms or provisions of this Agreement may be changed, waived, modified, discharged or terminated except by instrument in writing executed by the party or parties against whom enforcement of the change, waiver, modification, discharge or termination is asserted. None of the terms or provisions of this Agreement shall be deemed to have been abrogated or waived by reason of any failure or failures to enforce the same.

Section 8.9. Third Parties; Benefit.

All conditions to the obligation of Lender to make advances hereunder are imposed solely and exclusively for the benefit of Lender and its assigns and no other Persons shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make advances in the absence of strict compliance with any or all thereof and no other Person shall, under any circumstances, be deemed to be the beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender at any time in the sole and absolute exercise of its discretion. The terms and provisions of this Agreement are for the benefit of the parties hereto and, except as herein specifically provided, no other Person shall have any right or cause of action on account thereof.

Section 8.10. Rules of Construction/Joint and Several Liability of Borrower.

(a) The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Agreement in its entirety. The terms “agree” and “agreements” mean and include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The captions and headings contained in this Agreement are included herein for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, the Improvements or the Eligible Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles, Sections and Schedules are to the respective Articles, Sections and Schedules contained in this Agreement unless expressly indicated otherwise.

(b) The liability of Opportunity OP and any entity which in the future joins in and assumes this Agreement as a “Borrower” is and shall be joint and several, subject to any limitations which may apply pursuant to Sections 4.26 and/or 4.27 above.

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Section 8.11. Counterparts.

This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one and the same instrument.

Section 8.12. Publicity.

Borrower expressly authorizes Lender to prepare and to furnish to the news media for publication from time to time news releases with respect to the Eligible Property, specifically to include releases detailing Lender’s involvement with the financing of the Property, provided the consent or approval of Opportunity OP is first obtained, which consent or approval shall not be unreasonably withheld, conditioned or delayed and the same shall be provided without charge.

Section 8.13. Governing Law.

This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the Commonwealth of Pennsylvania.

Section 8.14. Time of Essence.

Time shall be of the essence for each and every provision of this Agreement of which time is an element.

Section 8.15. Electronic Transmission of Data.

Lender and Borrower agree that certain data related to the Loan (including confidential information, documents, applications and reports) may be transmitted electronically, including transmission over the Internet. This data may be transmitted to, received from or circulated among agents and representatives of Borrower and/or Lender and their Affiliates and other Persons involved with the subject matter of this Agreement. Borrower acknowledges and agrees that (a) there are risks associated with the use of electronic transmission and that Lender does not control the method of transmittal or service providers, (b) Lender has no obligation or responsibility whatsoever and assumes no duty or obligation for the security, receipt or third party interception of any such transmission, and (c) Borrower will release, hold harmless and indemnify Lender from any claim, damage or loss, including that arising in whole or part from Lender’s strict liability or sole, comparative or contributory negligence, which is related to the electronic transmission of data.

Section 8.16. Forum.

Borrower hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the jurisdiction of any state court or any United States federal court sitting in the State specified in the governing law section of this Agreement and to the jurisdiction of any state court or any United States federal court sitting in the state in which any of the Eligible Property is located, over any Dispute. Borrower hereby irrevocably waives, to the fullest extent permitted by Law, any objection that Borrower may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum.

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Borrower hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court or any United States federal court sitting in the state specified in the governing law section of this Agreement may be made by certified or registered mail, return receipt requested, directed to Borrower at its address for notice set forth in this Agreement, or at a subsequent address of which Lender received actual notice from Borrower in accordance with the notice section of this Agreement, and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Lender to serve process in any manner permitted by Law or limit the right of Lender to bring proceedings against Borrower in any other court or jurisdiction.

Section 8.17. WAIVER OF JURY TRIAL.

BORROWER AND LENDER WAIVE TRIAL BY JURY IN RESPECT OF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.” THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS. BORROWER AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

Section 8.18. USA Patriot Act Notice.

Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), Lender is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Lender to identify Borrower in accordance with the Act.

Section 8.19. Entire Agreement.

The Loan Documents constitute the entire understanding and agreement between Borrower and Lender with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Borrower and Lender with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Lender to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters

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addressed in the Loan Documents. If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other instrument or agreement, including any other Loan Document, the terms, conditions and provisions of this Agreement shall prevail.

Section 8.20 Release of Eligible Property

Borrower may request, at any time, the release of an Eligible Property from the Collateral Pool (each, a “Release Property”). If Borrower so requests, Borrower may obtain the release of a Release Property from the lien of the Mortgage thereon and the release of the Borrower which owns the Release Property (other than those liabilities, obligations and indemnities accruing prior to the date of such release or which expressly survive), upon the satisfaction of each of the following conditions:

(i) Borrower shall give Lender written notice of a proposed release of an Eligible Property (a “Release Notice”), which shall specify the date of such release, which date shall not be less than five (5) Business Days after the date of the sending of the Release Notice or more than forty five (45) days after the date of the sending of the Release Notice, provided, that Borrower shall be entitled to extend the anticipated date of such release for up to an additional forty five (45) days without having to provide a new Release Notice, provided that Borrower gives a notice of extension to Lender on or before the expiration of the initial forty five (45) day period.

(ii) Borrower shall make payment to Lender in immediately available funds of the outstanding principal amount of the Loan secured by the Mortgage encumbering the Release Property, plus all interest accrued on the Loan to the date of payment of such principal amount, plus any termination fee, breakage fee or other early payment penalty payable in connection with any Swap Contract, plus any additional principal amount required pursuant to item (vi) below (such sums being collectively referred to as the “Release Amount”). Notwithstanding anything to the contrary, the Release Amount shall not include any amount secured by a Collateral Mortgage encumbering the Release Property and Lender shall deliver a release of any Collateral Mortgage encumbering the Release Property with the release of the Mortgage.

(iii) Each Borrower, other than the Borrower who is the owner of the Release Property, and Guarantor shall provide Lender with a certificate from an officer of such Borrower and Guarantor certifying that after giving effect to the release of the Mortgage, including the Collateral Mortgage, if applicable, with respect to the Release Property, each such remaining Borrower and Guarantor are in compliance with all terms and conditions of all Loan Documents to which each of them is a party and each remains bounds by the terms of the same.

(iv) On the date such Borrower delivers the Release Notice and on the date of release of the Release Property, no Event of Default shall have occurred and be continuing.

(v) On or prior to the date of release of any Release Property, such Borrower shall pay all out-of-pocket costs and expenses of Lender incurred in connection with the release of the Release Property, including but not limited to reasonable fees of Lender’s attorneys, prepayment fees (including, without limitation, any breakage or termination fees or amounts due under any Swap Contract), if any, as a result of any such prepayment related to such release and all other costs and expenses payable to third parties incurred by Lender in connection with such release.

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(vi) In the event there is to be only one remaining Eligible Property in the Collateral Pool after the release of one or more Release Properties, such remaining Eligible Property in the Collateral Pool, notwithstanding anything in Section 2.1 or elsewhere in this Agreement to the contrary, shall not have a Loan-to-Value Ratio in excess of forty percent (40%). Accordingly, where the release of one or more Eligible Properties will result in only one remaining Eligible property being in the Collateral Pool and such remaining Eligible Property has a Loan-to-Value Ratio in excess of forty percent (40%), the Release Amount for the Release Property or Properties shall include a reduction in the outstanding principal amount of the Loan advanced with respect to and secured by the Mortgage encumbering such Eligible Property which will be the last remaining property in the Collateral Pool such that the Loan-to-Value Ratio for such Eligible Property which will be the last property in the Collateral Pool shall not have a Loan-to-Value Ratio in excess of forty percent (40%).

Section 8.21 NO RIGHT TO CURE AN EVENT OF DEFAULT OR LENDER’S OBLIGATION TO ACCEPT ANY CURE.

Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, Borrower acknowledges and agrees that neither Borrower nor Guarantor has the right to cure any Event of Default once it occurs and Lender is under no obligation or duty to accept any cure of an Event of Default or the offer of the same by or from Borrower or Guarantor. Any language in this Agreement or in any of the other Loan Documents such as “upon the occurrence and continuance of an Event of Default”, “during the continuance of an Event of Default”, “so long as such Event of Default is continuing” or the like, shall not for any reason whatsoever or howsoever mean, imply, grant or otherwise entitle Borrower or Guarantor to any such right to cure an Event of Default once one occurs or obligate Lender to accept any cure, or the offer of any cure.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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[Signature Page 1 of 1 to Loan Agreement]

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

BORROWER:
RESOURCE REAL ESTATE OPPORTUNITY OP, LP
By:	Resource Real Estate Opportunity
	REIT, Inc., its sole General Partner

By:	/s/    Steven R. Saltzman (SEAL)
	Name: Steven R. Saltzman
	Title: Chief Financial Officer,           Senior Vice President and Treasurer

LENDER:
BANK OF AMERICA, N.A.
By:	/s/    Charles D. English
	Name: Charles D. English
	Title: Senior Vice President

Schedule 1

Definitions

Unless the context otherwise specifies or requires, the following terms shall have the meanings herein specified, such definitions to be applicable equally to the singular and the plural forms of such terms and to all genders:

“AAA” means the American Arbitration Association, or any successor thereof.

“Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“Advisor” means Resource Real Estate Opportunity Advisor, LLC.

“Advisory Agreement” means that certain Amended and Restated Advisory Agreement by and between Guarantor and Advisor dated January 11, 2011, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Approved Manager” means Resource Real Estate Opportunity Manager, LLC, Resource Real Estate Management, Inc., Resource Real Estate Opportunity Advisor, LLC, or any other reputable and creditworthy property manager, subject to the prior approval of Lender, not to be unreasonably withheld, with a portfolio of properties comparable to the Property under active management.

“Architect” means a registered architect, licensed in the state where an Eligible Property which is (or is to be) added to the Collateral Pool is located, who is engaged for the purpose of preparing, signing and sealing, as the project architect, all plans and specifications, including any required for any permits or approvals, which may be required in connection with any and all work at such Eligible Property which is part of the work approved and budgeted for in connection with an Advance of proceeds of the Loan and/or such Eligible Property achieving Stabilization.

“Architect’s Consent and Certificate” means the written consent and certificate of the Architect providing, among other things, to the consent of the Architect to the collateral assignment of the Architect’s contract to Lender pursuant to the Assignment of Contracts, in form and substance satisfactory to Lender

“Assignment” means an Assignment and Security Agreement to be executed by Opportunity OP to secure its Obligations, which Assignment and Security Agreement, among other things, assigns, pledges and grants a security interest in all right, title and interest, of the grantor, in and to its membership interests in all equity and ownership interests in any Person which is a Borrower and the owner of an Eligible Property which is part of the Collateral Pool.

“Assignment of Contracts” means an Assignment of Contracts, from time to time, executed by a Borrower, as the owner of an Eligible Property which is part of the Collateral Pool, which among other things, assigns to Lender, as collateral for the Loan, the Architect’s agreement, any and all Construction Contracts and all permits and approvals, which Assignment of Contracts shall be in form and substance satisfactory to Lender.

“Assignment and Subordination of Property Management Agreement” means those certain Assignment and Subordination of Property Management Agreements by and among those of Opportunity OP, the applicable Borrower which is the owner of the Eligible Property being added to the Collateral Pool, Guarantor, and the Approved Managers, as required by Lender, and Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified, which pertain to any and all of the Management Agreements as such Management Agreements pertain to any and all Eligible Properties which are part of the Collateral Pool.

“Assignment of Leases and Rents” means those certain Assignment of Leases and Rents executed by each Borrower which owns an Eligible Property which is part of the Collateral Pool in favor of Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Authorized Signer” means any signer of this Agreement, acting alone, or any other representative of Borrower duly designated and authorized by Borrower to sign draw requests in a writing addressed to Lender, which writing may include a draw request in the form attached hereto as Schedule 3.

“Banking Day” means any day that is not a Saturday, Sunday or banking holiday in the State.

“Borrower” means Opportunity OP and any other Person who owns an Eligible Property which is added to and part of the Collateral Pool, from time to time, and executes and delivers an allonge to the Note and this Agreement and the other documents required pursuant to this Agreement.

“Borrower’s Deposit Account” means an account established with Lender pursuant to the terms of Section 4.6.

“Budget” means the breakdown of hard costs and soft costs approved by Lender in connection with Borrower’s plan for Stabilization of an Eligible Property which is part of the Collateral Pool, including, without limitation, any and all such hard and soft costs for Improvements, leasing costs, interest and/or operating deficits.

“Casualty” means any act or occurrence of any kind or nature that result in damage, loss or destruction to the Property.

“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.

“Closing Checklist” means that certain Closing Requirements and Checklist setting forth the conditions for closing the Loan and recording the Mortgage.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral Pool” means, at any time and from time to time, the pool of Eligible Properties which are encumbered by a Mortgage and secure the Loan pursuant to the terms of this Agreement.

“Condemnation” means any taking of title to, use of, or any other interest in any Eligible Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.

“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.

“Construction Consultant” means a person or firm appointed or designated by Lender from time to time to inspect the progress of the construction of the Improvements and the conformity of construction with the Plans and Specifications, the Budget and the Project Schedule, and to perform such other acts and duties for such other purposes as Lender may from time to time deem appropriate or as may be required by the terms of this Agreement.

“Construction Contract” means a written agreement, in form and content approved in writing by Lender, by and between a Borrower, as owner, and a Contractor, as general contractor or a specific trade contractor, for the Construction of the Improvements, as the same may be amended from time to time with the prior written approval of Lender.

“Construction of the Improvements” means the construction of the Improvements.

“Contractor” means a contractor, as general contractor, or a specific trade contractor, engaged or to be engaged for the Construction of the Improvements.

“Contractor’s Consent and Certificate” means the written consent and certificate of any and all Contractors, providing, among other things, to the consent by such Contractor to the collateral assignment of the Contractor’s Construction Contract to Lender pursuant to the Assignment of Contracts, in form and substance satisfactory to Lender.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise, “Controlling” or “Controlled” have meanings correlative thereto.

“Default” means an event or circumstance that, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Agreement.

“Dispute” means any controversy, claim or dispute between or among the parties to this Agreement, including any such controversy, claim or dispute arising out of or relating to (a) this Agreement, (b) any other Loan Document, (c) any related agreements or instruments, or (d) the transaction contemplated herein or therein (including any claim based on or arising from an alleged personal injury or business tort).

“Eligible Property” has the meaning as set forth in Section 2.2(e) of this Agreement.

“Environmental Agreement” means an Environmental Indemnification and Release Agreement by and between Borrower and Lender pertaining to an Eligible Property, as the same may from time to time be extended, amended, restated or otherwise modified.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Event of Default” means any event or circumstance specified in Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI.

“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Lender in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in the Mortgage or any of the other Loan Documents, including attorneys’ fees, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, an Eligible Property.

“Financial Statements” means (i) for each reporting party other than an individual, a balance sheet, income statement, statements of cash flow and amounts and sources of contingent liabilities, a reconciliation of changes in equity and liquidity verification, cash flow projections, real estate schedules providing details on each individual real property in the reporting party’s portfolio, including, but not limited to raw land, land under development, construction in process and stabilized properties and unless Lender otherwise consents, consolidated statements if the reporting party is a holding company or a parent of a subsidiary entity; and (ii) for each reporting party who is an individual, a balance sheet, statements of cash flow and amounts and sources of contingent liabilities, sources and uses of cash and liquidity verification, cash flow projections, real estate schedules providing details on each individual real property in the reporting party’s portfolio, including, but not limited to raw land, land under development, and unless Lender otherwise consents, Financial Statements for each entity owned or jointly owned by the reporting party. For purposes of this definition and any covenant requiring the delivery of Financial Statements, each party for whom Financial Statements are required is a “reporting party” and a specified period to which the required Financial Statements relate is a “reporting period.”

“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.

“Guarantor” means Resource Real Estate Opportunity REIT, Inc., a Maryland corporation, and its successors and assigns.

“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Improvements” means all on-site improvements, including buildings, to any of the Land of an Eligible Property, together with all fixtures, improvements and appurtenances now or later to be located on the Land and/or in such buildings or on-site improvements. The definition of Improvements shall include any and all improvements, alterations, additions, repairs, and/or installations to be made to an Eligible Property as part of the Borrower’s plan to achieve Stabilization of the same or for which any of the proceeds of an Advance are intended to be used, including those which are capital, structural and/or cosmetic in nature and shall also include appliances and other items to be installed by Borrower in any individual tenant apartments as part of the Borrower’s plan to achieve Stabilization of an Eligible Property or for which any of the proceeds of an Advance are intended to be used. Improvements shall not include any equipment, machinery or personal property not affixed to the Land, a building or an on-site improvement.

“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering an Eligible Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Eligible Property, in each case whether now or hereafter existing or arising.

“Land” means the land described in and encumbered by a Mortgage.

“Laws” means all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to an Eligible Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.

“Loan” means the loan from Lender to Borrower, the repayment obligations in connection with which are evidenced by the Note.

“Loan Amount” means Twenty Five Million and No/100 Dollars ($25,000,000.00).

“Loan Documents” means this Agreement, the Note, any and all Mortgages, any and all Environmental Agreements, the Guaranty, any Swap Contract, the Assignment and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Management Agreements” means any agreement entered into whereby any Borrower or Guarantor is obligated to pay a fee or other compensation for or in connection with management or advisory services for, with respect to or in connection with the ownership, directly or indirectly, investment in, directly or indirectly, and/or operation of any of the Eligible Properties which are added to the Collateral Pool. Without limitation, the following agreements are included within the definition of Management Agreement and are sometimes referred to as the “Existing Management Agreements”: (i) that certain Management Agreement dated as of September 14, 2009 by and among Guarantor, Opportunity OP and Resource Real Estate Opportunity Manager, LLC and (ii) that certain Management Agreement dated as of October 5, 2010 by and between Resource Real Estate Opportunity Manager, LLC and Resource Real Estate Opportunity Management, Inc. The Advisory Agreement is expressly excluded from the defined term “Management Agreement”.

“Mortgage” means a Mortgage, Assignment of Leases, Security Agreement and Fixture Filing or a Deed of Trust, Assignment of Leases, Security Agreement and Fixture Filing, from time to time, given by a Borrower and encumbering an Eligible Property to secure the Obligations, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified. The term Mortgage shall include a Collateral Mortgage pursuant to section 2.1(d)(iv).

“Net Proceeds” when used with respect to any Condemnation Awards or Insurance Proceeds, means the gross proceeds from any Condemnation or Casualty remaining after payment of all expenses, including attorneys’ fees, incurred in the collection of such gross proceeds.

“Note” means the Promissory Note of even date herewith, in an amount equal to the Loan Amount, made by Borrower to the order of Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified, including any and all allonges to the same whereby a Person becomes an additional Borrower.

“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 8.6 of this Agreement.

“Obligations” means all present and future debts, obligations and liabilities of Borrower to Lender arising pursuant to, or on account of, the provisions of this Agreement, the Note, a Mortgage or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Note; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under a Mortgage or any of the other Loan Documents, together with interest thereon as provided in a Mortgage or such Loan Document; (c) to pay and perform all obligations of Borrower (or its Affiliate) under any Swap Contract; and (d) to perform, observe and comply with all of the terms, covenants and conditions, expressed or implied, which Borrower is required to perform, observe or comply with pursuant to the terms of this Agreement, a Mortgage or any of the other Loan Documents.

“Permitted Encumbrances” means (a) any matters set forth in any policy of title insurance issued to Lender and insuring Lender’s interest in an Eligible Property which is part of the Collateral Pool and which are acceptable to Lender as of the date such Eligible Property is added to the Collateral Pool, (b) the lien and/or other interests of the Mortgage encumbering an Eligible Property which is part of the Collateral Pool and (c) any other lien, encumbrance, easement, interest or title company exception to coverage that Lender shall expressly approve in its sole and absolute discretion, as evidenced by a “marked-up” commitment for title insurance or a pro-forma policy of title insurance with respect to any Mortgage which is initialed on behalf of Lender.

“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.

“Plans and Specifications” means any and all plans and specifications prepared in connection with the construction of the Improvements and approved in writing by Lender, as the same may from time to time be amended with the prior written approval of Lender.

“Project Schedule” means the schedule for commencement and completion of the Stabilization of an Eligible Property, including, without limitation, construction of the Improvements, as the same may be revised from time to time with the written approval of Lender.

“Property” means the real and personal property being considered as an Eligible Property to be added to the Collateral Pool.

“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of an Eligible Property or any part thereof, or arising from the use or enjoyment of the Property or any part thereof, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Eligible Property or any part thereof.

“Stabilization” has the meaning set forth in Section 2.1(c).

“State” means the Commonwealth of Pennsylvania.

“Survey” means a map or plat of survey of an Eligible Property which conforms with Lender’s survey requirements.

“Swap Contract” means any agreement, whether or not in writing, relating to any Swap Transaction, including, unless the context otherwise clearly requires, any form of master agreement (the “Master Agreement”) published by the International Swaps and Derivatives Association, Inc., or any other master agreement, entered into prior to the date hereof or any time after the date hereof, between Swap Counterparty and Borrower (or its Affiliate), together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.

“Swap Counterparty” means Lender or an Affiliate of Lender, in its capacity as counterparty under any Swap Contract.

“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-Lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to the date hereof or anytime after the date hereof between Swap Counterparty and Borrower (or its Affiliate) so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by the Mortgage in connection with the Loan.

“Taxes” means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any communities facilities or other private district on Borrower or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.

Schedule 2

Improvements

Borrower covenants, represents and warrants as follows:

1. Compliance with Laws; Plans and Specifications; Correction of Construction Work. The Improvements shall be constructed in accordance with all applicable (whether present or future) Laws. Improvements, if constructed substantially in accordance with the Plans and Specifications as approved by Lender, will fully comply with applicable Laws, including those Laws relating to access and facilities for disabled persons. The Plans and Specifications are complete and adequate for the construction of the Improvements. The Plans and Specifications have been approved by all Governmental Authorities. Promptly following any demand by Lender, Borrower shall correct or cause the correction of any work that fails to comply with the requirements of this Section 1 of Schedule 2 and any material departures or deviations from the Plans and Specifications not approved by Lender.

2. Changes to Plans and Specifications. Borrower shall not make or permit any changes in the Plans and Specifications as approved by Lender, including any such changes that alter, diminish or add to the work to be performed or change the design of the Improvements, without the prior written consent of Lender and under such conditions as Lender may establish.

3. Building Permits; Other Permits. All building, construction and other permits necessary or required in connection with the construction of the Improvements have been validly issued and are final and not subject to any appeal or appeal period. All required fees have been paid and bonds and/or other security have been posted in connection with all permits that have been issued. Following the issuance thereof, all permits will remain in full force and effect.

4. Draw Requests.

(a) So long as no Default shall exist and subject to all other terms, covenants, conditions and agreements of this Agreement, Lender shall make Advances for Improvements pursuant to the Budget, to the extent that funds are available for those purposes and so long as Borrower has paid for any and all costs in excess of the amount to be funded pursuant to Advances of the Loan in accordance with the Budget, subject to the other terms, covenants, conditions and agreements of this Agreement. Advances for Improvements shall be made not more frequently than monthly based on draw requests signed by an Authorized Signer in the form of Schedule 3 or in another form approved by Lender. If required by Lender, a draw request for Improvements shall be set forth on AIA Forms G702 and G703 or another form approved by Lender, and shall be accompanied by (i) evidence satisfactory to Lender that the Improvements or such portion of them for which Loan proceeds are being requested have been completed in a good and workmanlike manner (including, if required by Lender, site access to Lender and a Construction Consultant specified by Lender for the purpose of making a property), (ii) invoices, receipts or other evidence satisfactory to Lender verifying the costs for which Loan proceeds are being requested, (iii) if required by Lender, affidavits, and/or releases from all parties who furnished materials and/or services in connection with the requested payment.

(b) Each draw request and each receipt of the funds requested thereby shall constitute an affirmation that (i) the work completed to the date of the draw request is of quality and in all other respects consistent with the tenant improvement plans and specifications, and (ii) if applicable, construction of the Improvements is proceeding in accordance with the Budget and Project Schedule.

5. Advances for Improvements.

Advances for Improvements shall not exceed the amount for the same pursuant to the Budget. Any and all costs in excess of the amount of Advances for the same in the Budget shall be first paid for in full by the Borrower before any amount of the Loan will be advanced for the same. If at any time the cost for the Improvements exceeds the Budget, upon demand by Lender, from time to time, Borrower shall deposit the amount thereof with Lender and such amount shall be advanced before any amount of the Loan shall be advanced. impose. Lender may require an inspection of the Eligible Property in order to verify completion of Improvements prior to making any advance. Lender shall not be obligated to make the final advance of the Loan for Improvements unless the following conditions shall have been satisfied, to the extent required by Lender:

(a) Lender shall have received such evidence as Lender may require that construction has been completed in a good and workmanlike manner, in accordance with applicable requirements of all Governmental Authorities and substantially in accordance with Plans and Specifications reasonably satisfactory to Lender;

(b) To the extent required by applicable Governmental Authorities for the use and occupancy of the Improvements, certificates of occupancy and other applicable permits and releases shall have been issued with respect to the Improvements and copies thereof shall have been furnished to Lender;

(c) Lender shall have received a satisfactory set of as-built plans and specifications for the Improvements; and

(d) If required by Lender, Lender shall have received a satisfactory “bringdown” search evidencing no liens or other encumbrances with respect to the Eligible Property other than as shown on Lender’s mortgagee title insurance policy issued with respect to the Mortgage.

6. Account for Funding Advances.

Subject to Lender’s right to advance Loan proceeds as provided in this Agreement, Lender may make advances into Borrower’s checking account maintained with Lender. Borrower hereby irrevocably authorizes Lender to deposit any advance to the credit of Borrower in that account, by wire transfer or other deposit. Borrower further irrevocably authorizes Lender to pay and reimburse itself for any Expenses incurred by Lender by debit to such account.

7. Lender’s Rights and Remedies on Default.

Upon the occurrence of and during the existence of any Event of Default, Lender shall have the right, in addition to any other rights or remedies available to Lender, to exercise any one or more of the following rights and remedies:

(a) Lender may terminate its obligation to advance any further principal of the Loan by Notice to Borrower.

(b) Lender may apply any undisbursed Loan proceeds to the satisfaction of the conditions of the Loan Documents, irrespective of the allocation of such Loan proceeds in the Budget.

(c) Lender may make advances directly to the property manager, the title insurance company, or any contractor, subcontractor, sub-subcontractor or material supplier, or to any of them jointly. The execution of this Agreement by Borrower shall, and hereby does, constitute an irrevocable authorization so to advance the proceeds of the Loan. No further direction or authorization from Borrower shall be necessary to warrant such direct advances. Each advance shall be secured by the Mortgage and shall satisfy the obligations of Lender hereunder to the extent of the amount of the advance.

Schedule 3

Form of Draw Request

[BORROWER’S LETTERHEAD]

DRAW REQUEST NO.                 

TO: BANK OF AMERICA, N.A. (“Lender”)

LOAN NO.  

PROJECT

LOCATION

BORROWER  

FOR PERIOD ENDING              

In accordance with the Loan Agreement in the amount of $25,000,000.00 dated                         , 2011 between Borrower, in addition to others, and Lender, Borrower requests that $                                  be advanced from Loan proceeds, which advance is in accordance with the Budget. The proceeds should be credited to the account of                                                  , Account No.                            , at                                    .

TOTAL DRAW REQUEST $                            

[Optional language to appoint a new Authorized Signer for draw requests:]

                                      is hereby designated and authorized to sign future draw requests on behalf of Borrower in connection with the Loan. Lender shall be entitled to rely on draw requests given by such Person(s) until this authorization is revoked by Borrower in writing.

AUTHORIZED SIGNER:

                                                                                                                                       Dated:                                                              

Schedule 3.4

Claims

None

Schedule 4

Leasing and Tenant Matters

1. Representations and Warranties of Borrower Regarding Leases.

Borrower represents and warrants that Borrower has delivered to Lender Borrower’s standard form of tenant lease and an accurate and complete rent roll for each Eligible Property, and no Lease or lease guaranty contains any option or right of first refusal to purchase all or any portion of the Property or any present or future interest therein.

2. Covenants of Borrower Regarding Leases and Rents.

Borrower covenants that Borrower (a) will observe and perform all of the obligations imposed upon the landlord in the Leases and will not do or permit to be done anything to impair the security thereof; (b) will use its best efforts to enforce or secure, or cause to be enforced or secured, the performance of each and every obligation and undertaking of the respective tenants under the Leases and will appear in and defend, at Borrower’s sole cost and expense, any action or proceeding arising under, or in any manner connected with, the Leases; (c) will not collect any of the Rents more than one (1) month in advance of the time when the same are due under the terms of the Leases; (d) will not discount any future accruing Rents; (e) without the prior written consent of Lender, will not execute any assignment of the Leases or the Rents; (f) other than in the ordinary course of business, will not alter, modify or change the terms of the Leases, or surrender, cancel or terminate the same without the prior written consent of Lender; and (g) will execute and deliver, at the request of Lender, all such assignments of the Leases and Rents in favor of Lender as Lender may from time to time reasonably require.

3. Leasing Guidelines.

Borrower shall not enter into any Lease of space in the Improvements unless approved or deemed approved by Lender prior to execution. Borrower’s standard form of tenant lease, and any revisions thereto, must have the prior written approval of Lender. Lender shall be “deemed” to have approved any Lease that: (a) is on the standard form lease approved by Lender with no deviations except as approved by Lender, such approval not to be unreasonably withheld, conditioned or delayed; (b) is entered into in the ordinary course of business with a bona fide unrelated third party tenant, and Borrower, acting in good faith and exercising due diligence, has determined that the tenant is financially capable of performing its obligations under the Lease; and (c) is in accordance with the pro-forma rent schedule for the Eligible Property which Borrower has delivered to Lender and which Lender has approved in writing. If requested by Lender, after the occurrence of an Event of Default, Borrower shall provide to Lender a correct and complete copy of each existing and future Lease, including any exhibits, and any guaranty(ies) thereof, within fifteen (15) days after Lender’s request (for existing Leases) or fifteen (15) days after execution (for future Leases).

4. Delivery of Leasing Information and Documents.

From time to time upon Lender’s request, Borrower shall promptly deliver to Lender (a) a complete rent roll of the Eligible Property in such detail as Lender may require, together with such operating statements and leasing schedules and reports as Lender may require, and (b) such other information regarding tenants and prospective tenants and other leasing information as Lender may reasonably request.

Schedule 4.21

Deposit Accounts

None

Schedule 5

Tax and Insurance Reserve Deposits

1. On each monthly payment date under the Note, Borrower shall pay to Lender one-twelfth (1/12^th) of the amount estimated by Lender to pay all installments of Taxes levied against the Eligible Property and all insurance premiums for insurance required to be maintained by Borrower under the Loan Documents, in each case coming due during the upcoming twelve (12) month period. Lender reserves the right to periodically adjust the amount of the monthly deposit to account for changes in Taxes from an interim basis to final basis each tax year. Required payments hereunder shall be added together with the regular payments under the Note and with any other sums required under the Loan Documents, all of which shall be paid monthly as an aggregate sum by Borrower to Lender until the Obligations are paid and performed in full. Unless otherwise required by applicable Law, funds paid by Borrower hereunder shall not be or be deemed to be escrow or trust funds. At Lender’s option, such funds may be held in an individual account, consolidated with other like accounts, or commingled with the general funds of Lender. Such funds shall be held in an interest-bearing account in the name of Lender and all interest shall be credited to Borrower. Borrower agrees that it shall include all interest and earnings on such funds paid to or deposited with Lender as its income (and, if Borrower is a partnership or other pass-through entity, the income of its partners, members or beneficiaries, as the case may be), and shall be the owner of all such funds for federal and applicable state and local tax purposes.

2. Provided no Event of Default has occurred and is continuing, Lender shall pay for the account of Borrower, to the extent funds paid to Lender hereunder are sufficient for such purposes, prior to the delinquency date for such expense, real property Taxes and insurance premiums for which Borrower has provided invoices to Lender in advance. In its sole and absolute discretion, Lender may retain a third party tax lien service to obtain tax certificates or other evidence or estimates of Taxes due or to become due and Borrower shall promptly reimburse Lender for the cost of retaining any such service. Any unpaid reimbursements for any tax lien service will be added to the Obligations. Borrower shall ensure Lender’s receipt, at least thirty (30) days prior to the respective due date for payment, of all bills, invoices and statements for all Taxes and insurance premiums to be paid. Lender shall not be responsible for the payment of any invoice if Borrower has not paid to Lender sufficient funds for such item under this Schedule 5, even if the shortfall results from Lender’s failure to adequately estimate and collect sufficient funds to satisfy such charges. In making any payment for Taxes or insurance hereunder, Lender shall be entitled to rely on any tax lien service or any bill, statement or estimate procured from the appropriate public office or insurance company or agent without any inquiry into the accuracy, validity, enforceability or contestability of any Taxes, valuation, sale, forfeiture, tax lien or title or claim thereof.

3. Borrower grants to Lender a security interest in all funds paid to or deposited with Lender hereunder, and any proceeds thereof, as security for the Obligations. Such security interest shall be governed by the Uniform Commercial Code of the State, and Lender shall have available to it all of the rights and remedies available to a secured party thereunder. Borrower shall have no right to unilaterally demand payment of or to withdraw funds deposited with Lender hereunder except as expressly permitted hereby. Upon the occurrence of an Event of Default which is not waived by Lender in writing, Borrower agrees that Lender may apply any funds paid to or deposited with Lender hereunder to cure the default.

Schedule 6

INTENTIONALLY OMITTED

Schedule 7

Swap Contracts

1. Swap Documentation. Within the timeframes required by Lender and Swap Counterparty, Borrower shall deliver to Swap Counterparty the following documents and other items, executed and acknowledged as appropriate, all in form and substance satisfactory to Lender and Swap Counterparty: (a) Master Agreement in the form published by the International Swaps and Derivatives Association, Inc. and related schedule in the form agreed upon between Borrower (or its Affiliate) and Swap Counterparty; (b) a confirmation under the foregoing, if applicable; (c) the Guaranty; (d) if Borrower (or its Affiliate) is anything other than a natural person, evidence of due authorization to enter into transactions under the foregoing Swap Contract with Swap Counterparty, together with evidence of due authorization and execution of any Swap Contract; and such other title endorsements, documents, instruments and agreements as Lender and Swap Counterparty may require to evidence satisfaction of the conditions set forth in this Section 1 of Schedule 7, including a swap endorsement to Lender’s title policy in form and substance satisfactory to Lender.

2. Conveyance and Security Interest. To secure Borrower’s Obligations, Borrower hereby transfers, assigns and transfers to Lender, and grants to Lender a security interest in, all of Borrower’s right, title and interest, but not its obligations, duties or liabilities for any breach, in, under and to the Swap Contract, any and all amounts received by Borrower in connection therewith or to which Borrower is entitled thereunder, and all proceeds of the foregoing. All amounts payable to Borrower under the Swap Contract shall be paid to Lender and shall be applied to pay interest or other amounts under the Loan.

3. Cross-Default. It shall be an Event of Default under this Agreement if any Event of Default occurs as defined under any Swap Contract as to which Borrower (or its Affiliate) is the Defaulting Party, or if any Termination Event occurs under any Swap Contract as to which Borrower (or its Affiliate) is an Affected Party. As used in this Section, the terms “Defaulting Party,” “Termination Event” and “Affected Party” have the meanings ascribed to them in the Swap Contract.

4. Remedies; Cure Rights. In addition to any and all other remedies to which Lender and Swap Counterparty are entitled at law or in equity, Swap Counterparty shall have the right, to the extent so provided in any Swap Contract or any Master Agreement relating thereto, (a) to declare an event of default, termination event or other similar event thereunder and to designate an Early Termination Date as defined under the Master Agreement, and (b) to determine net termination amounts in accordance with the Swap Contract and to setoff amounts between Swap Contracts. Lender shall have the right at any time (but shall have no obligation) to take in its name or in the name of Borrower (or its Affiliate) such action as Lender may at any time determine to be necessary or advisable to cure any default under any Swap Contract or to protect the rights of Borrower (or its Affiliate) or Swap Counterparty thereunder; provided, however, that before the occurrence of an Event of Default under this Agreement, Lender shall give prior written notice to Borrower before taking any such action. For this purpose, Borrower hereby constitutes Lender its true and lawful attorney-in-fact with full power of substitution,

which power of attorney is coupled with an interest and irrevocable, to exercise, at the election of Lender, any and all rights and remedies of Borrower (or its Affiliate) under the Swap Contract, including making any payments thereunder and consummating any transactions contemplated thereby, and to take any action that Lender may deem proper in order to collect, assert or enforce any claim, right or title, in and to the Swap Contract hereby assigned and conveyed, and generally to take any and all such action in relation thereto as Lender shall deem advisable. Lender shall not incur any liability if any action so taken by Lender or on its behalf shall prove to be inadequate or invalid. Borrower expressly understands and agrees that Lender is not hereby assuming any duties or obligations of Borrower (or its Affiliate) to make payments to Swap Counterparty under any Swap Contract or under any other Loan Document. Such payment duties and obligations remain the responsibility of Borrower (or its Affiliate) notwithstanding any language in this Agreement.

5. Automatic Deduction and Credit.

(a) At all times when any Swap Contract is in effect, Borrower shall maintain the Checking Account in good standing with Lender. Borrower hereby grants to Lender and Swap Counterparty a security interest in the Checking Account, and any other accounts and deposit accounts from which Borrower may from time to time authorize Lender to debit payments due on the Loan and the Swap Contracts. Borrower is granting this security interest to Lender and Swap Counterparty for the purpose of securing the Obligations.

(b) At all times when any Swap Contract is in effect, all monthly payments owed by Borrower under the Note will be automatically deducted on their due dates from the Checking Account. Lender is hereby authorized to apply the amounts so debited to Borrower’s obligations under the Loan. Notwithstanding the foregoing, Lender will not automatically deduct the principal payment at maturity from the Checking Account.

(c) At all times when any Swap Contract is in effect, all payments owed by Borrower (or its Affiliate) under any Swap Contract will be automatically deducted on their due dates from the Checking Account. The preceding sentence includes Borrower’s authorization for Lender to debit from the Checking Account any monetary obligation owed by Borrower (or its Affiliate) to Swap Counterparty following any Early Termination Date, as defined under the Master Agreement. Swap Counterparty is hereby authorized to apply the amounts so debited to the obligations of Borrower (or its Affiliate) under the applicable Swap Contract.

(d) Lender will debit the Checking Account on the dates the foregoing payments become due; provided, however, that if a due date does not fall on a Banking Day, Lender will debit the Checking Account on the first Banking Day following such due date.

(e) Borrower shall maintain sufficient funds on the dates when Lender enters debits authorized by this Agreement. If there are insufficient funds in the Checking Account on any date when Lender enters any debit authorized by this Agreement, without limiting Lender’s other remedies in such an event, the debit will be reversed in whole or in part, in Lender’s sole and absolute discretion, and such amount not debited shall be deemed to be unpaid and shall be immediately due and payable in accordance with the terms of the Note and/or the Swap Contract, as applicable.

(f) So long as there is no Event of Default existing under this Agreement or any Swap Contract, Lender will automatically credit the Checking Account for payments owed by Swap Counterparty under the Swap Contract. Lender will credit the Checking Account on the dates the foregoing payments become due; provided, however, that if a due date does not fall on a Banking Day, Lender will credit the Checking Account on the first Banking Day following such due date.

Schedule 8

Financial Covenants

1.         Guarantor Minimum Tangible Net Worth.

At all times Guarantor shall maintain on a consolidated basis (i) a Minimum Tangible Net Worth equal to at least 200% of the outstanding principal amount of the Loan, as determined by Lender and (ii) a Minimum Tangible Net Worth equal to at least Twenty Million and No/100 Dollars ($20,000,000.00), as determined by Lender.

“Minimum Tangible Net Worth” means the value of total assets (on the basis of the lower of cost or market) (including leaseholds and leasehold improvements and reserves against assets but excluding goodwill, patents, trademarks, trade names, organization expense, unamortized debt discount and expense, capitalized or deferred research and development costs, deferred marketing expenses, and other like intangibles, and monies due from affiliates, officers, directors, employees, shareholders, members or managers) less total liabilities, including but not limited to accrued and deferred income taxes, but excluding the non-current portion of Subordinated Liabilities.

“Subordinated Liabilities” means liabilities subordinated to the Borrower’s obligations to the Lender in a manner acceptable to the Lender in its sole discretion.

2.         Guarantor’s Unencumbered Liquid Assets.

At all times Guarantor shall maintain Unencumbered Liquid Assets having an aggregate market value of not less than the greater of (i) Five Million and No/100 Dollars ($5,000,000.00) or (ii) Twenty Percent (20%) of the outstanding principal amount of the Loan.

“Unencumbered Liquid Assets” means the following assets (excluding assets of any retirement plan) which (i) are not the subject of any lien, pledge, security interest or other arrangement with any creditor to have his claim satisfied out of the asset (or proceeds thereof) prior to the general creditors of the owner of the asset, (ii) are held solely in the name of one or more credit parties subject to this covenant (with no other persons or entities having ownership rights therein), (iii) may be converted to cash within five (5) days, (iv) are otherwise acceptable to the Lender in its sole discretion and (v) are not being counted or included to satisfy any other liquidity requirement under any other obligation, whether with the Lender or any other lender, unless otherwise expressly agreed by the Lender in writing:

(a) Cash or cash equivalents held in the United States and denominated in United States dollars;

(b) United States Treasury or governmental agency obligations which constitute full faith and credit of the United States of America;

(c) Commercial paper rated P-1 or A1 by Moody’s or S&P, respectively;

(d) Medium and long-term securities rated investment grade by one of the rating agencies described in (c) above;

(e) Eligible Stocks; and

(f) Mutual funds quoted in The Wall Street Journal which invest primarily in the assets described in (a) – (e) above.

“Eligible Stocks” includes any common or preferred stock which (i) is not control or restricted stock under Rule 144 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, or subject to any other regulatory or contractual restrictions on sales, (ii) is traded on a U. S. national stock exchange, including NASDAQ, with a liquidity on such exchange for such stock acceptable to the Lender and (iii) has, as of the close of trading on the applicable exchange (excluding after hours trading), a per share price of at least Ten Dollars ($10).

3.         Additional Negative Covenants.

Guarantor shall not, without the Lender’s prior written consent and approval:

(a) Enter into any consolidation, merger, or other combination, or convert to another form of business entity.

(b) Intentionally Omitted.

(c) Engage in any business activities substantially different from the Guarantor’s present business.

(d) Liquidate or dissolve the Guarantor’s business.

(e) Voluntarily suspend its business.

(f) Intentionally Omitted.

(g) Incur secured or unsecured debt (including guarantying the debt of another) except that Guarantor may incur trade debt in the ordinary course of its business and operations provided such trade debt (i) is due and payable within sixty (60) days, (ii) all such trade debt does not in the aggregate equal or exceed, at any time, 2% of the outstanding principal balance of the Loan and (iii) is not evidenced by a written obligation. In connection with any parcel of improved real property owned by an entity which is wholly owned by Opportunity OP and which entity is not a Borrower (a “Non-Borrower Entity”) and which improved real property is not part of the Collateral Pool, Lender agrees that it will not unreasonably withhold its prior written consent to Guarantor’s execution and delivery to a “Qualified Lender” (as hereinafter defined) of a guaranty and/or indemnity agreement which is solely with respect and limited to standard and typical non-recourse loan carve-out obligations for a non-recourse loan to be made by the Qualified Lender to the Non-Borrower Entity and which non-recourse loan is to be secured by such improved real property owned by the Non-Borrower Entity and which is not part of the Collateral Pool.

For purposes hereof, the term “Qualified Lender” shall mean any Person (other than a natural Person) that is:

(i) a commercial bank organized under the laws of the United States of America or any State thereof;

(ii) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, provided that such bank is acting through a branch or agency located in the United States of America;

(iii) a life insurance company organized under the laws of any State of the United States of America, or organized under the laws of any country and licensed as a life insurer by any State within the United States of America;

(iv) a nationally recognized investment banking company or other nationally recognized financial institution in the business of making commercial real estate loans or operating commercial real estate, or an Affiliate thereof (other than any Person which is a Borrower or any Guarantor) organized under the laws of any State of the United States;

(v) a hedge fund or “accredited investor” (as defined in Regulation D of the Securities Act of 1933, as amended) organized under the laws of the United States of America or any State thereof that is engaged in making, purchasing, holding or investing in commercial mortgage loans and similar extensions of credit in the ordinary course of its business (other than any Person which is directly or indirectly an Affiliate of any of Borrower or Guarantor) or

(vi) otherwise accepted by Lender, in Lender’s sole and absolute discretion, as a “Qualified Lender”.

EX-10.24

Exhibit 10.24

Promissory Note

$25,000,000.00 December 2, 2011

FOR VALUE RECEIVED, Resource Real Estate Opportunity OP, LP, a Delaware limited partnership (“Borrower”), hereby, promises to pay to the order of Bank of America, N.A., a national banking association, together with any and all of its successors and assigns and/or any other holder of this Note, “Lender”), without offset, in immediately available funds in lawful money of the United States of America, at 4 Penn Center, 1600 JFK Boulevard, Suite 1100, Philadelphia, PA 19103, the principal sum of Twenty Five Million and No/100 Dollars ($25,000,000.00) (or the unpaid balance of all principal advanced against this Note, if that amount is less), together with interest on the unpaid principal balance of this Note from day to day outstanding as hereinafter provided.

Section 1 Payment Schedule and Maturity Date. Prior to maturity, accrued and unpaid interest shall be due and payable in arrears on the first day of each month commencing on January 1, 2012. The entire principal balance of this Note then unpaid, together with all accrued and unpaid interest and all other amounts payable hereunder and under the other Loan Documents (as hereinafter defined), shall be due and payable in full on December 2, 2014 (the “Maturity Date”), the final maturity of this Note.

Section 1A Extension Option. Lender shall grant a request by Borrower to extend the Maturity Date of this Note to December 2, 2015 (the “Extended Maturity Date”), upon and subject to the following terms and conditions:

(a) Basic Conditions. Unless otherwise agreed by Lender in writing:

(i) Borrower shall request the extension, if at all, by written notice to Lender not more than 180 days, and not less than 45 days, prior to the Maturity Date.

(ii) At the time of the request and at the Maturity Date, any construction or other improvements to be made to the Improvements (as defined in the Loan Agreement) which Borrower agreed to make to an Eligible Property (as defined in the Loan Agreement) which is part of the Collateral Pool (as defined in the Loan Agreement) shall have been completed as scheduled, and all conditions to the final Advance of proceeds of the Loan with respect to all such Eligible Properties which are scheduled to have been satisfied by such dates shall have been satisfied.

(iii) At the time of the request, and at the time of the extension, there shall not exist any Event of Default, nor any condition or state of facts which after notice and/or lapse of time would constitute an Event of Default.

(iv) Current financial statements regarding Borrower and each Guarantor (as defined in the Loan Agreement) (dated not earlier than forty five (45) days prior to the request for extension) and all other financial statements and other information as may be required under the Loan Documents regarding Borrower, each Guarantor and each Eligible Property which is part of the Collateral Pool, shall have been submitted promptly to Lender, and there shall not have occurred, in the opinion of Lender, in the exercise of its sole discretion, any material adverse change in the business or financial condition of Borrower or any Guarantor or any Eligible Property which is part of the Collateral Pool or in any other state of facts submitted to Lender in connection with the Loan Documents, from that which existed on the date of this Note.

(v) Whether or not the extension becomes effective, Borrower shall pay all out-of-pocket costs and expenses incurred by Lender in connection with the proposed extension (pre- and post-closing), including without limitation, appraisal fees, environmental audit and reasonable attorneys’ fees actually incurred by Lender; all such costs and expenses incurred up to the time of Lender’s written agreement to the extension shall be due and payable prior to Lender’s execution of that agreement (or if the proposed extension does not become effective, then upon demand by Lender), and any future failure to pay such amounts shall constitute a default under the Loan Documents.

(vi) All applicable regulatory requirements, including appraisal requirements, shall have been satisfied with respect to the extension.

(vii) Not later than the Maturity Date, (A) the extension shall have been consented to and documented to Lender’s satisfaction by each Borrower, Guarantor and Lender; (B) Lender shall have been provided with an updated title report and judgment and lien searches, and appropriate title insurance endorsements shall have been issued as required by Lender; and (C) Borrower shall have paid to Lender a non-refundable extension fee in an amount equal to 25 basis points of the sum of (I) the outstanding principal balance of the Note plus (II) the undisbursed amount of the Loan budgeted by Lender and Borrower to be advanced with respect to any and all Eligible Properties which are part of the Collateral Pool.

If all of the foregoing conditions are not satisfied strictly in accordance with their terms, the extension shall not be or become effective.

(b) Changes in Loan Terms. All terms and conditions of the Loan Documents shall continue to apply to the extended term.

Section 2 Security; Loan Documents. This Note is entered into pursuant to the terms of that certain Loan Agreement of even date herewith by and among Borrowers and Lender (as the same may from time to time be amended, restated, modified or supplemented, the “Loan Agreement”). The security for this Note, from time to time, includes any and all “Mortgages” (as that term is defined in the Loan Agreement). This Note, the Mortgages, the Loan Agreement and all other documents now or hereafter securing, guaranteeing or executed in connection with the loan evidenced by this Note (the “Loan”), as the same may from time to time be amended, restated, modified or supplemented, are herein sometimes called individually a “Loan Document” and together the “Loan Documents.”

Section 3 Interest Rate.

(a) BBA LIBOR Daily Floating Rate. The unpaid principal balance of this Note from day to day outstanding which is not past due, shall bear interest at a fluctuating rate of interest per annum (the Floating Rate”) equal to the BBA LIBOR Daily Floating Rate for that day plus Three Hundred (300) basis points per annum. The “BBA LIBOR Daily Floating Rate” shall mean a fluctuating rate of interest per annum equal to the British Bankers’ Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by Lender from time to time) as determined for each Business Day at approximately 11:00 a.m. London time two (2) London Banking Days prior to the date in question, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a one month term, as adjusted from time to time in Lender’s sole discretion for reserve requirements, deposit insurance assessment rates and other regulatory costs. A “London Banking Day” is a day on which banks in London are open for business and dealing in offshore dollars. Interest shall be computed for the actual number of days which have elapsed, on the basis of a 360-day year.

(b) Alternative Rates. Lender may notify Borrower if the BBA LIBOR Daily Floating rate is not available for any reason, or if Lender determines that no adequate basis exists for determining the BBA LIBOR Daily Floating Rate, or that any applicable Law or regulation or compliance therewith by Lender prohibits or restricts or makes impossible the charging of interest based on the BBA LIBOR Daily Floating Rate. If Lender so notifies Borrower, then interest shall accrue and be payable on the unpaid principal balance of this Note at a fluctuating rate of interest equal to the Prime Rate of Lender, from the date of such notification by Lender until Lender notifies Borrower that the circumstances giving rise to such suspension no longer exist, or until the Maturity Date of this Note (whether by acceleration, declaration, extension or otherwise), whichever is earlier to occur. The term “Prime Rate” means, on any day, the rate of interest per annum then most recently established by Lender as its “prime rate.” Any such rate is a general reference rate of interest, may not be related to any other rate, and may not be the lowest or best rate actually charged by Lender to any customer or a favored rate and may not correspond with future increases or decreases in interest rates

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charged by other lenders or market rates in general, and that Lender may make various business or other loans at rates of interest having no relationship to such rate. Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in Lender’s Prime Rate. If Lender (including any subsequent holder of this Note) ceases to exist or to establish or publish a prime rate from which the Prime Rate is then determined, the applicable variable rate from which the Prime Rate is determined thereafter shall be instead the prime rate reported in The Wall Street Journal (or the average prime rate if a high and a low prime rate are therein reported), and the Prime Rate shall change without notice with each change in such prime rate as of the date such change is reported.

(c) Default Rate. After the occurrence and during the continuance of an Event of Default, the Lender, in the Lender’s sole discretion and without notice or demand, may raise the rate of interest accruing on the outstanding principal balance of this Note by three hundred (300) basis points above the rate of interest otherwise applicable (“Default Rate”), independent of whether the Lender elects to accelerate the outstanding principal balance of this Note. Notwithstanding the provisions of 42 Pa. C.S.A. §8101 to the contrary, the Default Rate shall apply to all sums outstanding under the Loan after the occurrence and during the continuance of an Event of Default, and also after entry of a judgment or judgments against Borrower (whether by confession of judgment under a warrant of attorney, in a mortgage foreclosure action or otherwise), and whether or not any event described in Section 6.10 of the Loan Agreement has occurred. Said judgment(s) shall bear interest at the Default Rate until satisfied in full.

Section 4 Prepayment.

(a) Borrower may prepay the principal balance of this Note, in full at any time or in part from time to time, without fee, premium or penalty, provided that: (i) Lender shall have actually received from Borrower prior written notice of (A) Borrower’s intent to prepay, (B) the amount of principal which will be prepaid (the “Prepaid Principal”), and (C) the date on which the prepayment will be made; (ii) each prepayment shall be in the amount of $1,000 or a larger integral multiple of $1,000 (unless the prepayment retires the outstanding balance of this Note in full); and (iii) each prepayment shall be in the amount of 100% of the Prepaid Principal, plus accrued unpaid interest thereon to the date of prepayment, plus any termination fee, breakage fee or other early payment penalty payable in connection with any Swap Contract (as defined in the Loan Agreement), plus any other sums which have become due to Lender under the Loan Documents on or before the date of prepayment but have not been paid.

(b) The terms of Section 8.20 of the Loan Agreement regarding the release of an Eligible Property which is part of the Collateral Pool are incorporated into this Section 4.

(c) The terms of Section 2.1(a)(ii) of the Loan Agreement regarding the Loan being a revolving credit facility are incorporated in to this Section.

Section 5 Late Charges. If Borrower shall fail to make any payment under the terms of this Note (other than the payment due at maturity) within fifteen (15) days after the date such payment is due, Borrower shall pay to Lender on demand a late charge equal to four percent (4%) of the amount of such payment. Such fifteen (15) day period shall not be construed as in any way extending the due date of any payment. The late charge is imposed for the purpose of defraying the expenses of Lender incident to handling such delinquent payment. This charge shall be in addition to, and not in lieu of, any other amount that Lender may be entitled to receive or action that Lender may be authorized to take as a result of such late payment.

Section 6 Certain Provisions Regarding Payments. All payments made under this Note shall be applied, to the extent thereof, to late charges, to accrued but unpaid interest, to unpaid principal, and to any other sums due and unpaid to Lender under the Loan Documents, in such manner and order as Lender may elect in its sole discretion, any instructions from Borrower or anyone else to the contrary notwithstanding. Remittances shall be made without offset, demand, counterclaim, deduction, or recoupment (each of which is hereby waived) and shall be accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or

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banks. Acceptance by Lender of any payment in an amount less than the amount then due on any indebtedness shall be deemed an acceptance on account only, notwithstanding any notation on or accompanying such partial payment to the contrary, and shall not in any way (a) waive or excuse the existence of an Event of Default (as hereinafter defined), (b) waive, impair or extinguish any right or remedy available to Lender hereunder or under the other Loan Documents, or (c) waive the requirement of punctual payment and performance or constitute a novation in any respect. Payments received after 2:00 p.m. shall be deemed to be received on, and shall be posted as of, the following Business Day. Whenever any payment under this Note or any other Loan Document falls due on day which is not a Business Day, such payment may be made on the next succeeding Business Day.

Section 7 Events of Default. The occurrence of any one or more of the following shall constitute an “Event of Default” under this Note:

(a) Borrower fails to pay as and when first due and payable any amount payable by Borrower to Lender under the terms of this Note and such failure continues uncured for ten (10) days after the date such amount is first due and payable, except no such ten (10) day cure period shall be applicable at the maturity of this Note, whether such maturity is the scheduled Maturity Date or Extended Maturity Date, if applicable, or by earlier acceleration.

(b) Any covenant, agreement or condition in this Note is not fully and timely performed, observed or kept, subject to any applicable grace or cure period.

(c) An Event of Default (as therein defined) occurs under any of the Loan Documents other than this Note (subject to any applicable grace or cure period).

Section 8 Remedies. Upon the occurrence of an Event of Default, Lender may at any time thereafter exercise any one or more of the following rights, powers and remedies:

(a) Lender may accelerate the Maturity Date and declare the unpaid principal balance and accrued but unpaid interest on this Note, and all other amounts payable hereunder and under the other Loan Documents, at once due and payable, and upon such declaration the same shall at once be due and payable.

(b) Lender may set off the amount due against any and all accounts, credits, money, securities or other property now or hereafter on deposit with, held by or in the possession of Lender to the credit or for the account of Borrower, without notice to or the consent of Borrower.

(c) Lender may foreclose any liens or security interests securing payment hereof.

(d) Lender may exercise any of its other rights, powers and remedies under the Loan Documents or at law or in equity.

Section 9 Remedies Cumulative. All of the rights and remedies of Lender under this Note and the other Loan Documents are cumulative of each other and of any and all other rights at law or in equity, and the exercise by Lender of any one or more of such rights and remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other rights and remedies. No single or partial exercise of any right or remedy shall exhaust it or preclude any other or further exercise thereof, and every right and remedy may be exercised at any time and from time to time. No failure by Lender to exercise, nor delay in exercising, any right or remedy, including but not limited to the right to accelerate the maturity of this Note, shall operate as a waiver of such right or remedy or as a waiver of any Event of Default. Without limiting the generality of the foregoing provisions, the acceptance by Lender from time to time of any payment under this Note which is past due or which is less than the payment in full of all amounts due and payable at the time of such payment, shall not (i) constitute a waiver of or impair or extinguish the right of Lender to accelerate the maturity of this Note or to exercise any other Right at the time or at any subsequent time, or nullify any prior exercise of any such Right, or (ii) constitute a waiver of the requirement of punctual payment and performance or a novation in any respect.

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Section 10 Costs and Expenses of Enforcement. Borrower agrees to pay to Lender on demand all costs and expenses incurred by Lender in seeking to collect this Note or to enforce any of Lender’s rights and remedies under the Loan Documents, including court costs and reasonable attorneys’ fees and expenses, whether or not suit is filed hereon, or whether in connection with bankruptcy, insolvency or appeal.

Section 11 Commercial Purpose. Borrower warrants that the Loan is being made solely to acquire or carry on a business or commercial enterprise, and/or Borrower is a business or commercial organization. Borrower further warrants that all of the proceeds of this Note shall be used for commercial purposes and stipulates that the Loan shall be construed for all purposes as a commercial loan, and is made for other than personal, family, household, or agricultural purposes.

Section 12 WAIVER OF JURY TRIAL. BORROWER, AND LENDER BY ITS ACCEPTANCE OF THIS NOTE, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND LENDER MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS NOTE, THE LOAN AGREEMENT, THE MORTGAGE OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND EACH OF BORROWER AND LENDER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH OF BORROWER AND LENDER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

Section 13 CONFESSION OF JUDGMENT. BORROWER DOES HEREBY AUTHORIZE AND EMPOWER THE PROTHONOTARY, CLERK OF COURT OR ANY ATTORNEY OF ANY COURT OF RECORD OF THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT (AS SUCH TERM IS DEFINED IN THIS NOTE), TO WAIVE ISSUANCE AND SERVICE OF PROCESS AND ALL OTHER NOTICE AND TO APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWER AND IN FAVOR OF LENDER, ITS SUCCESSORS OR ASSIGNS, AS OF ANY TERM, PAST, PRESENT OR FUTURE, WITH OR WITHOUT DECLARATION, FOR EACH AND ALL OF THE FOLLOWING:

(a) THE UNPAID PRINCIPAL SUM EVIDENCED BY THIS NOTE WITH ALL OF THE ACCRUED AND UNPAID INTEREST THEREON, WHETHER BASIC INTEREST, DEFAULT INTEREST AT THE “DEFAULT RATE,” OR BOTH, AS HEREIN PROVIDED;

(b) ALL OTHER SUMS AS ARE DUE AND PAYABLE TO LENDER UNDER THE TERMS OF THIS NOTE OR UNDER THE TERMS OF ANY OF THE OTHER LOAN DOCUMENTS, WHETHER BY ACCELERATION OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ALL PREPAYMENT PREMIUMS PAYABLE UNDER THIS NOTE;

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(c) THE AGGREGATE OF ALL SUMS EXPENDED BY LENDER AT ANY TIME AND FROM TIME TO TIME, WHETHER PERMITTED UNDER THE TERMS OF THE LOAN DOCUMENTS, PERMITTED BY LAW, OR PERMITTED BY STATUTE, (i) TO EXTINGUISH OR KEEP CURRENT, AS THE CASE MAY BE, ENCUMBRANCES AND LIENS ON THE ELIGIBLE PROPERTIES, (ii) TO PRESERVE, PROTECT, DEFEND AND MAINTAIN THE MORTGAGED PROPERTY, OR ANY OF THEM, INCLUDING WITHOUT LIMITATION, ALL SUMS ADVANCED OR EXPENDED FOR THE ERECTION, CONSTRUCTION, ALTERATION OR REPAIR OF IMPROVEMENTS CONSTITUTING PART OF THE MORTGAGED PROPERTY, TO PRESERVE, RESTORE AND MAINTAIN THE ELIGIBLE PROPERTY, TO PAY REAL ESTATE TAXES, TO PAY INSURANCE PREMIUMS OF ANY NATURE BENEFITTING OR RELATING TO THE PROPERTY, TO PAY CONDOMINIUM, CO-OPERATIVE, RECIPROCAL EASEMENT OBLIGATIONS, RESTRICTIVE COVENANT MAINTENANCE OBLIGATIONS, AND OTHER SIMILAR FEES AND CHARGES, AND TO PAY ANY OTHER LIENABLE EXPENSES CHARGEABLE AGAINST THE MORTGAGED PROPERTY, OR ANY OF THEM, (iii) TO PRESERVE, PROTECT, DEFEND AND MAINTAIN THE LIEN PRIORITY OF ANY OR ALL OF THE MORTGAGES ON THE MORTGAGED PROPERTY, OR ANY OF THEM, AND/OR (iv) DUE TO AN EVENT OF DEFAULT UNDER THIS NOTE OR UNDER ANY OF THE OTHER LOAN DOCUMENTS; AND

(d) THE COSTS OF SUIT AND REASONABLE ATTORNEY’S FEES, BUT NOT LESS THAN $25,000, WHICH ATTORNEY’S FEES SHALL BE ENTERED, ALLOWED, AND PAID AS PART OF SAID JUDGMENT, WITH RELEASE OF ALL ERRORS AND WAIVER OF ALL RIGHT OF APPEAL, AND ON WHICH JUDGMENT LENDER MAY ISSUE OR CAUSE TO BE ISSUED AN EXECUTION OR EXECUTIONS, WAIVING APPRAISEMENT AS TO ANY PROPERTY LEVIED UPON BY VIRTUE OF ANY SUCH EXECUTION, ANY RIGHT TO A HEARING BEFORE EXECUTION ON ANY SUCH JUDGMENT, AND ALL EXEMPTION FROM LEVY AND SALE OF ANY PROPERTY WHICH NOW OR HEREAFTER IS EXEMPT UNDER ANY ACT OF THE COMMONWEALTH OF PENNSYLVANIA AND/OR ANY OTHER STATE WHEREIN THE JUDGMENT IS ENTERED OR TO WHICH THE JUDGMENT IS TRANSFERRED. NO SINGLE EXERCISE OF THIS WARRANT AND POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THIS POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE STRICKEN, VACATED, REMOVED OR OTHERWISE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID, BUT THIS POWER SHALL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS LENDER SHALL ELECT UNTIL THIS NOTE AND ALL SUMS DUE HEREUNDER SHALL BE PAID IN FULL, AND BORROWER HAS PERFORMED ALL OF THE OTHER PROVISIONS HEREUNDER AND/OR UNDER THE TERMS OF THE OTHER LOAN DOCUMENTS. BORROWER HEREBY AUTHORIZES LENDER TO RE-ASSESS DAMAGES FROM TIME TO TIME AND AS OFTEN AS LENDER DEEMS NECESSARY SO THAT ANY AND ALL JUDGMENTS CONFESSED HEREUNDER SHALL INCLUDE ALL SUMS LISTED UNDER SUBPARAGRAPHS (A) THROUGH (D) ABOVE AS THE SAME ARE INCURRED FROM TIME TO TIME, EVEN AFTER ENTRY OF JUDGMENT UNDER THIS WARRANT OF ATTORNEY.

Section 14 Service of Process. Each Borrower hereby irrevocably designates and appoints Steven R. Saltzman of Resource Real Estate, Inc., as each such Borrower’s authorized agent to accept and acknowledge on Borrower’s behalf service of any and all process that may be served in any suit, action, or proceeding instituted in connection with this Note in any state or federal court sitting in the Commonwealth of Pennsylvania. If such agent shall cease so to act, Borrower shall irrevocably designate and appoint without delay another such agent in the Commonwealth of Pennsylvania satisfactory to Lender and shall promptly deliver to Lender evidence in writing of such agent’s acceptance of such appointment and its agreement that such appointment shall be irrevocable.

Borrower hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Note by (a) the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to Borrower and (b) serving a copy thereof upon the agent, if any, hereinabove designated] and appointed by Borrower as Borrower’s agent for service of process. Borrower irrevocably agrees that such service shall be deemed to be service of process upon Borrower in any such suit, action, or proceeding. Nothing in this Note shall affect the right of Lender to serve process in

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any manner otherwise permitted by law and nothing in this Note will limit the right of Lender otherwise to bring proceedings against Borrower in the courts of any jurisdiction in which an Eligible Property which is part of the Collateral Pool is located, subject to any provision or agreement for arbitration or dispute resolution set forth in the Loan Agreement.

Section 15 Heirs, Successors and Assigns. The terms of this Note and of the other Loan Documents shall bind and inure to the benefit of the heirs, devisees, representatives, successors and assigns of the parties. The foregoing sentence shall not be construed to permit Borrower to assign the Loan except as otherwise permitted under the Loan Documents.

Section 16 General Provisions. Time is of the essence with respect to Borrower’s obligations under this Note. If more than one person or entity executes this Note as Borrower, all of said parties shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Borrower and each party executing this Note as Borrower hereby severally (a) waive demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and all other notices (except any notices which are specifically required by this Note or any other Loan Document), filing of suit and diligence in collecting this Note or enforcing any of the security herefor; (b) agree to any substitution, subordination, exchange or release of any such security or the release of any party primarily or secondarily liable hereon; (c) agree that Lender shall not be required first to institute suit or exhaust its remedies hereon against Borrower or others liable or to become liable hereon or to perfect or enforce its rights against them or any security herefor; (d) consent to any extensions or postponements of time of payment of this Note for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences with respect hereto, without notice thereof to any of them; and (e) submit (and waive all rights to object) to non-exclusive personal jurisdiction of any state or federal court sitting in the Commonwealth of Pennsylvania for the enforcement of any and all obligations under this Note and the other Loan Documents, except with respect to any of the Mortgages which shall be enforced in the jurisdiction where the Eligible Property encumbered thereby is situated; (f) agree that their liability under this Note shall not be affected or impaired by any determination that any title, security interest or lien taken by Lender to secure this Note is invalid or unperfected; and (g) hereby subordinate to the Loan and the Loan Documents any and all rights against Borrower and any security for the payment of this Note, whether by subrogation, agreement or otherwise, until this Note is paid in full. A determination that any provision of this Note is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Note to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. This Note may not be amended except in a writing specifically intended for such purpose and executed by the party against whom enforcement of the amendment is sought. Captions and headings in this Note are for convenience only and shall be disregarded in construing it. This Note and its validity, enforcement and interpretation shall be governed by the laws of the Commonwealth of Pennsylvania (without regard to any principles of conflicts of laws) and applicable United States federal law. Whenever a time of day is referred to herein, unless otherwise specified such time shall be the local time of the place where payment of this Note is to be made. The term “Business Day” shall mean a day on which Lender is open for the conduct of substantially all of its banking business at its office in the city in which this Note is payable (excluding Saturdays and Sundays). Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Loan Agreement. The words “include” and “including” shall be interpreted as if followed by the words “without limitation.”

Section 17 Notices. Any notice, request, or demand to or upon Borrower or Lender shall be deemed to have been properly given or made when delivered in accordance with the terms of the Loan Agreement regarding notices.

Section 18 No Usury. It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Lender to contract for, charge, take, reserve, or receive a greater amount of interest than under state law) and that this Section shall control every other covenant and agreement in this Note and the other Loan Documents. If applicable state or federal law should at any time be judicially interpreted so as to render usurious any amount called for under this Note or under any of the other Loan Documents, or contracted for, charged, taken, reserved, or received with respect to the Loan, or if Lender’s

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exercise of the option to accelerate the Maturity Date, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by applicable law, then it is Lender’s express intent that all excess amounts theretofore collected by Lender shall be credited on the principal balance of this Note and all other indebtedness secured by the Mortgage, and the provisions of this Note and the other Loan Documents shall immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid or agreed to be paid to Lender for the use or forbearance of the Loan shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan.

Section 19 Joint and Several Liability.

(a) As used in this Section 19, the term “Co-Borrower” shall mean Borrower and any other Person who becomes a “Borrower” (as defined in the Loan Agreement) in the future pursuant to the Loan Agreement.

(b) Each Co-Borrower agrees that it is jointly and severally liable to Lender for the payment of all obligations arising under this Note and the other Loan Documents, and that such liability is independent of the obligations of the other Co-Borrowers. Lender may bring an action against any Co-Borrower, whether an action is brought against the other Co-Borrowers.

(c) Each Co-Borrower agrees that any release which may be given by Lender to the other Co-Borrowers or any Guarantor will not release such Co-Borrower from its obligations under this Note or any of the other Loan Documents.

(d) Each Co-Borrower waives any right to assert against Lender any defense, setoff, counterclaim or claim that such Co-Borrower may have against the other Co-Borrowers or any other party liable to Lender for the obligations of the Co-Borrowers under this Note or any of the other Loan Documents.

(e) Each Co-Borrower agrees that it is solely responsible for keeping itself informed as to the financial condition of the other Co-Borrowers and of all circumstances which bear upon the risk of nonpayment, including, without limitation, the condition of each and all of the Eligible Properties. Each Co-Borrower waives any right it may have to require Lender to disclose to such Co-Borrower any information that Lender may now or hereafter acquire concerning the financial condition of the other Co-Borrowers.

(f) Each Co-Borrower waives all rights to notices of default or nonperformance by any other Co-Borrower under this Note and the other Loan Documents. Each Co-Borrower further waives all rights to notices of the existence or the creation of new indebtedness by any other Co-Borrower.

(g) Co-Borrowers represent and warrant to Lender that each will derive benefit, directly and indirectly, from the collective administration and availability of the Loan under this Note and the other Loan Documents. Co-Borrowers agree that Lender will not be required to inquire as to the disposition by any Co-Borrower of funds disbursed in accordance with the terms of this Note or any of the other Loan Documents.

(h) Until all obligations of Co-Borrowers to Lender under this Note and the other Loan Documents have been paid in full, each Co-Borrower waives any right of subrogation, reimbursement, indemnification and contribution (contractual, statutory or otherwise), including any claim or right of subrogation under the Bankruptcy Code (Title 11, United States Code) or any successor statute, that such Co-Borrower may now or hereafter have against any other Co-Borrower with respect to the indebtedness incurred under this Note or any of the other Loan Documents. Each Co-Borrower waives any right to enforce any remedy which Lender now has or may hereafter have against any other Co-Borrower, and waives any benefit of, and any right to participate in, any security now or hereafter held by Lender.

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(i) Each Co-Borrower hereby waives any election of remedies by Lender that impairs any subrogation or other right of such Co-Borrower to proceed against any other Co-Borrower or other person, including any loss of rights resulting from any applicable anti-deficiency laws relating to nonjudicial foreclosures of real property or other laws limiting, qualifying or discharging obligations or remedies.

Section 20. Limitation of Liability.

(a) The liability of Resource Real Estate Opportunity OP, LP is limited as provided for in Section 4.26 of the Loan Agreement, the terms of which are hereby incorporated by this reference.

(b) The liability of each owner of an Eligible Property which is added to the Collateral Pool and which becomes a Borrower for the unpaid principal amount due and payable under this Note shall be limited as provided for in Section 4.27 of the Loan Agreement, the terms of which are hereby incorporated by this reference.

(c) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Borrower hereunder shall in no event exceed the amount which under applicable federal and state laws relate to the insolvency of debtors.

THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

BORROWER ACKNOWLEDGES THAT THIS NOTE CONTAINS AN AUTHORIZATION TO CONFESS JUDGMENT, THAT IT HAS CONSULTED LEGAL COUNSEL WITH RESPECT THERETO (OR KNOWINGLY WAIVED ITS RIGHT TO DO SO), AND THAT IT UNDERSTANDS THAT THE EXERCISE BY LENDER OF THE CONFESSION WILL RESULT IN THE ENTRY OF JUDGMENT AGAINST BORROWER AND THE SALE OR ATTACHMENT OF, OR EXECUTION UPON BORROWER’S PROPERTY (INCLUDING WITHOUT LIMITATION PERSONAL PROPERTY AND REAL PROPERTY) WITHOUT PRIOR NOTICE OR THE OPPORTUNITY FOR A HEARING.

[Remainder of Page Intentionally Left Blank]

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[Signature Page 1 of 1 to Promissory Note]

IN WITNESS WHEREOF, intending to be legally bound hereby, Borrower has duly executed this Note under seal as of the date first above written.

BORROWER:
RESOURCE REAL ESTATE OPPORTUNITY OP, LP
By:	Resource Real Estate Opportunity REIT, Inc., its sole General Partner

By:	/s/    Steven R. Saltzman	(SEAL)
Name:	Steven R. Saltzman
Title:	Chief Financial Officer, Senior Vice President and Treasurer

EX-10.25

Exhibit 10.25

Guaranty Agreement

This Guaranty Agreement (this “Guaranty”) is made as of the 2nd day of December, 2011, by RESOURCE REAL ESTATE OPPORTUNITY REIT, INC., a Maryland corporation (“Guarantor”), in favor of BANK OF AMERICA, N.A., a national banking association (together with its successors and assigns, “Lender”).

Recitals

Resource Real Estate Opportunity OP, LP, a Delaware limited partnership (“Borrower”) has requested that Lender make a loan (the “Loan”) to it evidenced by a Promissory Note of even date herewith in the original principal amount of Twenty Five Million and No/100 Dollars ($25,000,000) made by Borrower to the order of Lender (as the same may from time to time be amended, supplemented, restated or otherwise modified, the “Note”). Certain terms and conditions of the Loan are set forth in the Loan Agreement of even date herewith between Borrower and Lender (as the same may from time to time be amended, supplemented, restated or otherwise modified, the “Loan Agreement”). As a condition precedent to making the Loan, Lender has required that Guarantor execute and deliver this Guaranty to Lender. Any capitalized term used and not defined in this Guaranty shall have the meaning given to such term in the Loan Agreement. The terms “Borrower” and “Borrowers” as used in this Guaranty shall include any and all entities which in the future execute and deliver an allonge to the Note and Loan Agreement and own an Eligible Property which is added to the Collateral Pool.

Agreements

For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to induce Lender to make the Loan to Borrower, Guarantor hereby guarantees to Lender the prompt and full payment and performance of the indebtedness and obligations described below in this Guaranty (collectively called the “Guaranteed Obligations”), this Guaranty being upon the following terms and conditions:

Section 1 Guaranty of Payment.

Guarantor hereby unconditionally and irrevocably guarantees to Lender the punctual payment when due, whether by lapse of time, by acceleration of maturity, or otherwise, of all principal, interest (including interest accruing after maturity and after the commencement of any bankruptcy or insolvency proceeding by or against any or all of the Borrowers, whether or not allowed in such proceeding), prepayment premiums, fees, late charges, costs, expenses, indemnification indebtedness, and other sums of money now or hereafter due and owing, or which any or all of the Borrowers are obligated to pay, pursuant to the terms of the Note, the Loan Agreement, the Mortgages, the Assignment of Leases and Rents, the Environmental Agreements, any application, agreement, note or other document executed and delivered in connection with any Letter of Credit (if applicable), any of the other Loan Documents, or any Swap Contract, as the same may from time to time be amended, supplemented, restated or otherwise modified (collectively, the “Indebtedness”). The Indebtedness includes all costs and expenses incurred by Lender in seeking to enforce Lender’s rights and remedies with respect to the Indebtedness, including court costs, and reasonable attorneys’ fees, whether or not suit is filed or other proceedings are initiated thereon. This Guaranty covers the Indebtedness presently outstanding and the Indebtedness arising subsequent to the date hereof, including all amounts advanced by Lender in stages or installments. The guaranty of Guarantor as set forth in this Section 1 is a continuing guaranty of payment and not a guaranty of collection.

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Section 2 Guaranty of Performance.

(a) Guarantor hereby unconditionally and irrevocably guarantees to Lender the complete performance when due of all other Obligations of any or all of the Borrowers under all of the Loan Documents, including, without limiting the generality of the foregoing, all such Obligations of any or all of the Borrowers to:

(i) Complete the construction or making of Improvements to any Eligible Property which is part of the Collateral Pool and as part of the Borrower’s plan to achieve Stabilization of the same (“Construction of the Improvements”);

(ii) Make all deposits required under the terms of the Loan Agreement and the other Loan Documents, as and when required;

(iii) Promptly pay in full and discharge all Property Assessments (as that term is defined in the Mortgage) prior to the day upon which the same shall become delinquent (subject to the terms of the Mortgages regarding permitted contests of such Property Assessments);

(iv) Pay, at or before the times required by the Loan Documents, the premiums on all policies of insurance required to be maintained under the terms of the Loan Documents; and

(v) Duly and punctually perform and observe all other terms, covenants and conditions of the Note, the Loan Agreement, the Mortgages, the Environmental Agreements, all other Loan Documents, and any Swap Contract.

(b) Upon demand by Lender following the occurrence and during the continuance of an Event of Default under any of the Loan Documents (an “Event of Default”), Guarantor will cause all Improvements to be completed in accordance with the requirements of the Loan Agreement and other Loan Documents and will pay all bills in connection therewith. If Lender shall have requested Guarantor to complete or cause the completion of Construction of the Improvements or the renovation or equipping thereof, Guarantor shall be entitled to requisition and draw all of the undisbursed Loan proceeds intended to be used for such Construction of the Improvements pursuant to the Budget for the same (but not in excess of the committed amount of the Loan for the same), together with any deposits in the Borrower’s Deposit Account made with respect to the Construction of the Improvements. Lender shall disburse such funds for the purpose of, and to the extent necessary for, completing the Construction of the Improvements in accordance with the Budget for the same, provided that:

(i) Guarantor shall be performing the Guaranteed Obligations, including but not limited to any and all performance related to the Construction of the Improvements, or causing the performance of the same with due diligence;

(ii) Guarantor shall have made all required deposits into the Borrower’s Deposit Account and all other deposits required under the Loan Agreement;

(iii) All such disbursements of Loan proceeds to Guarantor shall be secured by the Mortgage with respect to the same and any other collateral or security for the Loan with the same priority as all previous advances of Loan proceeds to Borrowers;

(iv) Guarantor shall have cured all Defaults and Events of Default under the Loan, provided that Guarantor shall not be required to cure any non-monetary Default or Event of Default which is personal to Borrowers and therefore not susceptible to cure by Guarantor; and

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(v) Guarantor shall otherwise comply with the provisions of the Loan Agreement governing draw requests and disbursement of the Loan.

(c) The liability and obligations under this Section 2 shall not be limited or restricted by the existence of, or any terms of, the guaranty of payment under Section 1 or the guaranty of specific obligations under Section 3.

Section 3 Guaranty of Specific Obligations.

Guarantor hereby unconditionally and irrevocably guarantees payment of, and agrees to protect, defend, indemnify and hold harmless Lender for, from and against, any and all losses, damages or liability which may be suffered or incurred by, imposed on or awarded against Lender as a result of:

(a) Fraud by any or all of the Borrowers or Guarantor in connection with the construction, leasing or operation of any of the Eligible Properties, the making or disbursement of the Loan, or any certificates or documents provided in connection therewith;

(b) Material misrepresentation or breach of warranty by any or all of the Borrowers or Guarantor in connection with the construction, leasing or operation of any of the Eligible Properties, the making or disbursement of the Loan, or any certificates or documents provided in connection therewith;

(c) After the occurrence of an Event of Default, distributions to the members, partners or shareholders of any or all of the Borrowers or Guarantor (or to any beneficiary or trustee if any of the Borrowers is or Guarantor is a trust) of any Rents, security deposits, or other income arising with respect to any Eligible Property which is part of the Collateral Pool or in the event such distribution is made which results in an Event of Default.

(d) The misapplication by any or all of the Borrowers or Guarantor of any Insurance Proceeds or Condemnation Awards attributable to any Eligible Property;

(e) Any filing by any or all of the Borrowers or Guarantor of a bankruptcy petition, or the making by any or all of the Borrowers or Guarantor of an assignment for the benefit of creditors, or the appointment of a receiver of any property of any or all of the Borrowers or Guarantor in any action initiated by, or consented to by, any or all of the Borrowers or Guarantor; or

(f) Any acts of any or all of the Borrowers or Guarantor taken in bad faith with the intent to hinder, delay or interfere with the exercise by Lender of any rights and remedies under the Loan Documents after the occurrence of an Event of Default.

Section 4 Primary Liability of Guarantor; Environmental Obligations.

(a) This Guaranty is an absolute, irrevocable and unconditional guaranty of payment and performance, and Guarantor shall be liable for the payment and performance of the Guaranteed Obligations as a primary obligor. This Guaranty shall be effective as a waiver of, and Guarantor hereby expressly waives, any right to which Guarantor may otherwise have been entitled, whether existing under statute, at Law or in equity, to require Lender to take prior recourse or proceedings against any collateral, security or Person. It shall not be necessary for Lender, in order to enforce such payment or performance by Guarantor, first to institute suit or pursue or exhaust any rights or remedies against any or all of the Borrowers or other Person liable on such indebtedness or for such performance, or to enforce any rights against any security given to secure such indebtedness or performance, or to join any or all Borrowers or

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any other Person liable for the payment or performance of the Guaranteed Obligations or any part thereof in any action to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations; provided, however, that nothing herein contained shall prevent Lender from suing on the Note or foreclosing any or all of the Mortgages (including exercising any power of sale) or exercising any other right under the Loan Documents.

(b) Upon the occurrence and during the continuance of an Event of Default, the Guaranteed Obligations, for purposes of this Guaranty, shall be deemed immediately due and payable at the election of Lender, and Guarantor shall, on demand and without presentment, protest, notice of protest, further notice of nonpayment or of dishonor, default or nonperformance, or notice of acceleration or of intent to accelerate, or any other notice whatsoever, without any notice having been given to Guarantor previous to such demand of the acceptance by Lender of this Guaranty, and without any notice having been given to Guarantor previous to such demand of the creating or incurring of such indebtedness or of such obligation to perform, all such notices being hereby waived by Guarantor, pay the amount due to Lender or perform or observe the agreement, covenant, term or condition, as the case may be, and pay all damages and all costs and expenses that may arise in consequence of such Event of Default (including, without limitation, all reasonable attorneys’ fees and expenses, investigation costs, court costs, and any and all other costs and expenses incurred by Lender in connection with the collection and enforcement of the Note or any other Loan Document), whether or not suit is filed thereon, or whether at maturity or by acceleration, or whether before or after maturity, or whether in connection with bankruptcy, insolvency or appeal. It shall not be necessary for Lender, in order to enforce such payment or performance by Guarantor, first to institute suit or pursue or exhaust any rights or remedies against any or all of the Borrowers or other Person liable on such indebtedness or for such performance, or to enforce any rights against any security given to secure such indebtedness or performance, or to join any or all of the Borrowers or any other Person liable for the payment or performance of the Guaranteed Obligations or any part thereof in any action to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations; provided, however, that nothing herein contained shall prevent Lender from suing on the Note or foreclosing the any or all of the Mortgages (including exercising any power of sale) or exercising any other right under the Loan Documents and if such foreclosure or other remedy is availed of, only the net proceeds therefrom, after deduction of all charges and expenses of every kind and nature whatsoever, shall be applied in reduction of the amount due on the Note and any or all of the Mortgages, and Lender shall not be required to institute or prosecute proceedings to recover any deficiency as a condition of payment hereunder or enforcement hereof. At any sale of the Land or other collateral given for the Indebtedness or any part thereof, whether by foreclosure (including exercising any power of sale) or otherwise, Lender may at its discretion purchase all or any part of any or all of the Eligible Properties or collateral so sold or offered for sale for its own account and may, in payment of the amount bid therefor, deduct such amount from the balance due it pursuant to the terms of the Note and other Loan Documents.

(c) Suit may be brought or demand may be made against any or all of the Borrowers or against any or all parties who have signed this Guaranty or any other guaranty covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together, without impairing the rights of Lender against any party hereto. Any time that Lender is entitled to exercise its rights or remedies hereunder, it may in its discretion elect to demand payment and/or performance. If Lender elects to demand performance, it shall at all times thereafter have the right to demand payment until all of the Guaranteed Obligations have been paid and performed in full. If Lender elects to demand payment, it shall at all times thereafter have the right to demand performance until all of the Guaranteed Obligations have been paid and performed in full.

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(d) The liability of Guarantor or any other Person hereunder for Guaranteed Obligations arising out of or related to any of the Environmental Agreements shall not be limited or affected in any way by any provision in this Guaranty, the other Loan Documents or applicable Law limiting the liability of any or all of the Borrowers, Guarantor or such other Person, or Lender’s recourse or rights to a deficiency judgment.

5. Certain Agreements and Waivers by Guarantor.

(a) Guarantor agrees that neither Lender’s rights or remedies nor Guarantor’s obligations under the terms of this Guaranty shall be released, diminished, impaired, reduced or affected by any one or more of the following events, actions, facts, or circumstances, and the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of:

(i) any limitation on the liability of, or recourse against, any other Person in any Loan Document or arising under any Law;

(ii) any claim or defense that this Guaranty was made without consideration or is not supported by adequate consideration or that the obligations of Guarantor hereunder exceed or are more burdensome than those of any or all of the Borrowers under the other Loan Documents;

(iii) the taking or accepting of any other security or guaranty for, or right of recourse with respect to, any or all of the Guaranteed Obligations;

(iv) Intentionally Omitted;

(v) any homestead exemption or any other exemption under applicable law;

(vi) any release, surrender, abandonment, exchange, alteration, sale or other disposition, subordination, deterioration, waste, failure to protect or preserve, impairment, or loss of, or any failure to create or perfect any lien or security interest with respect to, or any other dealings with, any collateral or security at any time existing or purported, believed or expected to exist in connection with any or all of the Guaranteed Obligations, or any impairment of Guarantor’s recourse against any Person or collateral;

(vii) whether express or by operation of Law, any partial release of the liability of Guarantor hereunder (except to the extent expressly so released) or any complete or partial release of any or all of the Borrowers or any other Person liable, directly or indirectly, for the payment or performance of any or all of the Guaranteed Obligations;

(viii) the death, insolvency, bankruptcy, disability, dissolution, liquidation, termination, receivership, reorganization, merger, consolidation, change of form, structure or ownership, sale of all assets, or lack of corporate, partnership or other power of any or all of the Borrowers or any other Person at any time liable for the payment or performance of any or all of the Guaranteed Obligations;

(ix) either with or without notice to or consent of Guarantor, any renewal, extension, modification, supplement, subordination or rearrangement of the terms of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including without limitation, material alterations of the terms of payment (including changes in maturity date(s) and interest rate(s)) or performance (including changes with respect to the construction of the Improvements) or any other terms thereof, or any waiver, termination, or release of, or consent to departure from, any of the Loan Documents or any other guaranty of any or all of the Guaranteed Obligations, or any adjustment, indulgence, forbearance, or compromise that may be granted from time to time by Lender to any or all of the Borrowers or any other Person at any time liable for the payment or performance of any or all of the Guaranteed Obligations;

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(x) any neglect, lack of diligence, delay, omission, failure, or refusal of Lender to take or prosecute (or in taking or prosecuting) any action for the collection or enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any action to foreclose (or in foreclosing or taking or prosecuting any action to foreclose) upon any security therefor, or to exercise (or in exercising) any other right or power with respect to any security therefor, or to take or prosecute (or in taking or prosecuting) any action in connection with any Loan Document, or any failure to sell or otherwise dispose of in a commercially reasonable manner any collateral securing any or all of the Guaranteed Obligations;

(xi) any failure of Lender to notify Guarantor of any creation, renewal, extension, rearrangement, modification, supplement, subordination, or assignment of the Guaranteed Obligations or any part thereof, or of any Loan Document, or of any release of or change in any security, or of the occurrence or existence of any Default or Event of Default, or of any other action taken or refrained from being taken by Lender against any or all of the Borrowers or any security or other recourse, or of any new agreement between Lender and any or all of the Borrowers, it being understood that Lender shall not be required to give Guarantor any notice of any kind under any circumstances with respect to or in connection with the Guaranteed Obligations, any and all rights to notice Guarantor may have otherwise had being hereby waived by Guarantor, and Guarantor shall be responsible for obtaining for itself information regarding any or all of the Borrowers, including, but not limited to, any changes in the business or financial condition of any or all of the Borrowers, and Guarantor acknowledges and agrees that Lender shall have no duty to notify Guarantor of any information which Lender may have concerning any or all of the Borrowers;

(xii) if for any reason Lender is required to refund any payment by any or all of the Borrowers to any other party liable for the payment or performance of any or all of the Guaranteed Obligations or pay the amount thereof to someone else;

(xiii) the making of advances by Lender to protect its interest in any or all of the the Eligible Properties, preserve the value of the Property or for the purpose of performing any term or covenant contained in any of the Loan Documents;

(xiv) the existence of any claim, counterclaim, set-off or other right that Guarantor may at any time have against any or all of the Borrowers, Lender, or any other Person, whether or not arising in connection with this Guaranty, the Note, the Loan Agreement, the Environmental Agreements or any other Loan Document, provided nothing herein shall prohibit Guarantor from raising any mandatory counterclaim in any action brought by Lender to enforce this Guaranty;

(xv) the unenforceability of all or any part of the Guaranteed Obligations against any or all of the Borrowers, whether because the Guaranteed Obligations exceed the amount permitted by Law or violate any usury law, or because the act of creating the Guaranteed Obligations, or any part thereof, is ultra vires, or because the officers or Persons creating the Guaranteed Obligations acted in excess of their authority, or because of a lack of validity or enforceability of or defect or deficiency in any of the Loan Documents, or because any or all of the Borrowers has any valid defense, claim or offset with respect thereto, or because any or all of the Borrowers’ obligation ceases to exist by operation of Law, or because of any other reason or circumstance, it being agreed that Guarantor shall remain liable hereon regardless of whether any or all of the Borrowers or any other Person be found not liable on the Guaranteed Obligations, or any part thereof, for any reason (and regardless of any joinder of any or all of the Borrowers or any other party in any action to obtain payment or performance of any or all of the Guaranteed Obligations);

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(xvi) any order, ruling or plan of reorganization emanating from proceedings under Title 11 of the United States Code with respect to any or all of the Borrowers or any other Person, including any extension, reduction, composition, or other alteration of the Guaranteed Obligations, whether or not consented to by Lender, or any action taken or omitted by Lender in any such proceedings, including any election to have Lender’s claim allowed as being secured, partially secured or unsecured, any extension of credit by Lender in any such proceedings or the taking and holding by Lender of any security for any such extension of credit;

(xvii) any other condition, event, omission, action or inaction that would in the absence of this paragraph result in the release or discharge of the Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty or any other agreement;

(xviii) any early termination of any of the Guaranteed Obligations;

(xix) Lender’s enforcement or forbearance from enforcement of the Guaranteed Obligations on a net or gross basis; or

(xx) any liability, irregularity or unenforceability in whole or in part (including with respect to any netting provision) of any Swap Contract or any confirmation, instrument or agreement required thereunder or related thereto, or any transaction entered into thereunder, or any limitation on the liability of any or all of the Borrowers thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever.

(b) In the event any payment by any or all of the Borrowers or any other Person to Lender is held to constitute a preference, fraudulent transfer or other voidable payment under any bankruptcy, insolvency or similar Law, or if for any other reason Lender is required to refund such payment or pay the amount thereof to any other party, such payment by any or all of the Borrowers or any other party to Lender shall not constitute a release of Guarantor from any liability hereunder, and this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior release, surrender or discharge by Lender of this Guaranty or of Guarantor), as the case may be, with respect to, and this Guaranty shall apply to, any and all amounts so refunded by Lender or paid by Lender to another Person (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Lender and any attorneys’ fees, costs and expenses paid or incurred by Lender in connection with any such event.

(c) It is the intent of Guarantor and Lender that the obligations and liabilities of Guarantor hereunder are absolute, irrevocable and unconditional under any and all circumstances and that until this Guaranty terminates in accordance with Section 18 hereof, the obligations and liabilities of Guarantor hereunder shall not be discharged or released, in whole or in part, by any act or occurrence that might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or release of a guarantor. Without extending the term of this Guaranty pursuant to Section 18 hereof, Lender shall be entitled to continue to hold this Guaranty in its possession for the longer of (i) the period after which any performance of obligations under the Environmental Agreement shall accrue, or (ii) a period of one year from the date the Guaranteed Obligations are paid and performed in full and for so long thereafter as may be necessary to enforce any obligation of Guarantor hereunder and/or to exercise any right or remedy of Lender hereunder.

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(d) Guarantor’s obligations shall not be affected, impaired, lessened or released by loans, credits or other financial accommodations now existing or hereafter advanced by Lender to any or all of the Borrowers in excess of the Guaranteed Obligations. All payments, repayments and prepayments of the Loan, whether voluntary or involuntary, received by Lender from any or all of the Borrowers, any other Person or any other source (other than from Guarantor pursuant to a demand by Lender hereunder), and any amounts realized from any collateral for the Loan, shall be deemed to be applied first to any portion of the Loan which is not covered by this Guaranty, and last to the Guaranteed Obligations, and this Guaranty shall bind Guarantor to the extent of any Guaranteed Obligations that may remain owing to Lender. Lender shall have the right to apply any sums paid by Guarantor to any portion of the Loan in Lender’s sole and absolute discretion.

(e) If acceleration of the time for payment of any amount payable by any or all of the Borrowers under the Note, the Loan Agreement, any other Loan Document, or any Swap Contract is stayed or delayed by any Law or tribunal, all such amounts shall nonetheless be payable by Guarantor on demand by Lender.

Section 6 Subordination.

If, for any reason whatsoever, any or all of the Borrowers are now or hereafter become indebted to Guarantor:

(a) such indebtedness and all interest thereon and all liens, security interests and rights now or hereafter existing with respect to property of any or all of the Borrowers securing such indebtedness shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all liens, security interests and rights now or hereafter existing to secure the Guaranteed Obligations;

(b) Guarantor shall not be entitled to enforce or receive payment, directly or indirectly, of any such indebtedness of any or all of the Borrowers to Guarantor until the Guaranteed Obligations have been fully and finally paid and performed; provided, however, that so long as no Event of Default shall have occurred and be continuing or so long as none of the following results in the occurrence of an Event of Default, Guarantor shall not be prohibited from receiving such (i) reasonable management fees or reasonable salary from any or all of the Borrowers as Lender may find acceptable from time to time in its sole and absolute discretion, and (ii) distributions from any or all of the Borrowers which are attributable to any or all of the Borrowers’ income from the Eligible Properties;

(c) Guarantor hereby assigns and grants to Lender a security interest in all such indebtedness and security therefor, if any, of any or all of the Borrowers to Guarantor now existing or hereafter arising, including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership, bankruptcy, reorganization, arrangement or other debtor relief or insolvency proceedings involving any or all of the Borrowers as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and shall have the right to receive directly from the receiver, trustee or other custodian (whether or not an Event of Default shall have occurred or be continuing under any of the Loan Documents), dividends and payments that are payable upon any obligation of any or all of the Borrowers to Guarantor now existing or hereafter arising, and to have all benefits of any security therefor, until the Guaranteed Obligations have been fully and finally paid and performed. If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in this Section 6, Guarantor shall pay the same to Lender immediately, Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Lender and shall have absolutely no dominion over the same except to pay it immediately to Lender; and

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(d) Guarantor shall promptly upon request of Lender from time to time execute such documents and perform such acts as Lender may require to evidence and perfect its interest and to permit or facilitate exercise of its rights under this Section 6, including, but not limited to, execution and delivery of proofs of claim, further assignments and security agreements, and delivery to Lender of any promissory notes or other instruments evidencing indebtedness of any or all of the Borrowers to Guarantor. All promissory notes, accounts receivable ledgers or other evidences, now or hereafter held by Guarantor, of obligations of any or all of the Borrowers to Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under and is subject to the terms of this Guaranty.

Section 7 Other Liability of Guarantor or Borrowers.

If Guarantor is or becomes liable, by endorsement or otherwise, for any indebtedness owing by any or all of the Borrowers to Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may have against Guarantor. If any or all of the Borrowers are or become indebted to Lender for any indebtedness other than or in excess of the Indebtedness for which Guarantor is liable under this Guaranty, any payment received or recovery realized upon such other indebtedness of any or all of the Borrowers to Lender may be applied to such other indebtedness. This Guaranty is independent of (and shall not be limited by) any other guaranty now existing or hereafter given. Further, Guarantor’s liability under this Guaranty is in addition to any and all other liability Guarantor may have in any other capacity, including without limitation, if applicable, its capacity as a general partner.

Section 8 Lender Assigns; Disclosure of Information.

This Guaranty is for the benefit of Lender and Lender’s successors and assigns, and in the event of an assignment of the Guaranteed Obligations, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Obligations so assigned, may be transferred with such Guaranteed Obligations. Guarantor waives notice of any transfer or assignment of the Guaranteed Obligations or any part thereof and agrees that failure to give notice of any such transfer or assignment will not affect the liabilities of Guarantor hereunder. Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants. Guarantor shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith, and to the extent, if any, specified in any such assignment or participation, such assignee(s) or participant(s) shall have the same rights and benefits with respect to the Loan Documents as such Person(s) would have if such Person(s) were Lender hereunder. Lender may disclose to any such assignee or participant or prospective assignee or participant, to Lender’s affiliates, including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to any regulatory body having jurisdiction over Lender and to any other parties as necessary or appropriate in Lender’s reasonable judgment, any information Lender now has or hereafter obtains pertaining to the Guaranteed Obligations, this Guaranty, or Guarantor, including information regarding any security for the Guaranteed Obligations or for this Guaranty, and/or credit or other information on Guarantor and/or any other Person liable, directly or indirectly, for any part of the Guaranteed Obligations.

Section 9 Binding Effect; Joint and Several Liability.

This Guaranty is binding not only on Guarantor, but also on Guarantor’s heirs, personal representatives, successors and assigns. Upon the death of Guarantor, if Guarantor is a natural person, this Guaranty shall continue against Guarantor’s estate as to all of the Guaranteed Obligations, including that portion incurred or arising after the death of Guarantor and shall be provable in full against Guarantor’s estate, whether or not the Guaranteed Obligations are then due and payable. If this Guaranty is signed by more than one Person, then all of the obligations of Guarantor arising hereunder shall be jointly and severally binding on each of the undersigned, and their respective heirs, personal representatives, successors and assigns, and the term “Guarantor” shall mean all of such Persons and each of them individually.

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Section 10 Governing Law; Forum; Consent to Jurisdiction.

The validity, enforcement, and interpretation of this Guaranty, shall for all purposes be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania and applicable United States federal law, and is intended to be performed in accordance with, and only to the extent permitted by, such laws. All obligations of Guarantor hereunder are payable and performable at the place or places where the Guaranteed Obligations are payable and performable. Guarantor hereby irrevocably submits generally and unconditionally for Guarantor and in respect of Guarantor’s property to the non-exclusive jurisdiction of any state court, or any United States federal court, sitting in the Commonwealth of Pennsylvania, over any suit, action or proceeding arising out of or relating to this Guaranty or the Guaranteed Obligations. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection that Guarantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon Guarantor and may be enforced in any court in which Guarantor is subject to jurisdiction. Guarantor hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court, or any United States federal court, sitting in the state specified in the first sentence of this Section may be made by certified or registered mail, return receipt requested, directed to Guarantor at the address set forth at the end of this Guaranty, or at a subsequent address of which Lender receives actual notice from Guarantor in accordance with the notice provisions hereof, and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing hereon shall affect the right of Lender to serve process in any manner permitted by law or limit the right of Lender to bring proceedings against Guarantor in any other court or jurisdiction. Guarantor hereby releases, to the extent permitted by applicable law, all errors and all rights of exemption, appeal, stay of execution, inquisition, and other rights to which Guarantor may otherwise be entitled under the laws of the United States of America or any State or possession of the United States of America now in force or which may hereinafter be enacted. The authority and power to appear for and enter judgment against the Guarantor shall not be exhausted by one or more exercises thereof or by any imperfect exercise thereof and shall not be extinguished by any judgment entered pursuant thereto. Such authority may be exercised on one or more occasions or from time to time in the same or different jurisdiction as often as the Lender shall deem necessary and desirable.

Section 11 Invalidity of Certain Provisions.

If any provision of this Guaranty or the application thereof to any Person or circumstance shall, for any reason and to any extent, be declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor the application of such provision to any other Person or circumstance shall be affected thereby, and the remaining provisions of this Guaranty, or the applicability of such provision to other Persons or circumstances, as applicable, shall remain in effect and be enforceable to the maximum extent permitted by applicable Law.

Section 12 Costs and Expenses of Enforcement.

Guarantor agrees to pay to Lender on demand all reasonable costs and reasonable expenses incurred by Lender in seeking to enforce Lender’s rights and remedies under this Guaranty, including, without limitation, court costs, costs of alternative dispute resolution and reasonable attorneys’ fees, whether or not suit is filed or other proceedings are initiated hereon. All such costs and expenses incurred by Lender shall constitute a portion of the Guaranteed Obligations hereunder, shall be subject to the provisions hereof with respect to the Guaranteed Obligations and shall be payable by Guarantor on demand by Lender.

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Section 13 No Usury.

It is not the intention of Lender or Guarantor to obligate Guarantor to pay interest in excess of that lawfully permitted to be paid by Guarantor under applicable Law. Should it be determined that any portion of the Guaranteed Obligations or any other amount payable by Guarantor under this Guaranty constitutes interest in excess of the maximum amount of interest that Guarantor, in Guarantor’s capacity as guarantor, may lawfully be required to pay under applicable Law, the obligation of Guarantor to pay such interest shall automatically be limited to the payment thereof in the maximum amount so permitted under applicable Law. The provisions of this Section shall override and control all other provisions of this Guaranty and of any other agreement between Guarantor and Lender.

Section 14 Representations, Warranties, and Covenants of Guarantor.

Until the Guaranteed Obligations are paid and performed in full and each and every term, covenant and condition of this Guaranty is fully performed, Guarantor hereby represents, warrants, and covenants that: (a) Guarantor has a financial interest, directly or indirectly, in each of the Borrowers and will derive a material and substantial benefit, directly or indirectly, from the making of the Loan to Borrower and from the making of this Guaranty by Guarantor; (b) this Guaranty is duly authorized and valid, and is binding upon and enforceable against Guarantor, subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditor’s rights and enforcement of debtors’ obligations; (c) Guarantor is not, and the execution, delivery and performance by Guarantor of this Guaranty will not cause Guarantor (i) to Guarantor’s knowledge, to be, in violation of or in default with respect to any law or (ii) in default (or at risk of acceleration of indebtedness) under any agreement or restriction by which Guarantor is bound or affected; (d) unless Guarantor is a natural person, Guarantor is duly organized, validly existing, and in good standing under the laws of the state of its organization and has full power and authority to enter into and perform this Guaranty; (e) there is no litigation pending or, to the knowledge of Guarantor, threatened by or before any tribunal against or affecting Guarantor except as set forth on Schedule 14(e) attached hereto and incorporated herein; (f) all financial statements and information heretofore furnished to Lender by Guarantor do, and all financial statements and information hereafter furnished to Lender by Guarantor will, fully and accurately present the condition (financial or otherwise) of Guarantor as of their dates and the results of Guarantor’s operations for the periods therein specified, and, since the date of the most recent financial statements of Guarantor heretofore furnished to Lender, no material adverse change has occurred in the financial condition of Guarantor, nor, except as heretofore disclosed in writing to Lender, has Guarantor incurred any material liability, direct or indirect, fixed or contingent; (g) after giving effect to this Guaranty, Guarantor is solvent, is not engaged or about to engage in business or a transaction for which the property of Guarantor is an unreasonably small capital, and does not intend to incur or believe that it will incur debts that will be beyond its ability to pays as such debts mature; (h) Guarantor has read and fully understands the provisions contained in the Note, the Loan Agreement, the Mortgage, the Environmental Agreement and the other Loan Documents. Guarantor further represents, warrants and covenants that if any Swap Contract shall at any time be in effect, (x) Guarantor has received and examined copies of each such Swap Contract, the observance and performance of which by Borrowers is hereby guaranteed; (y) Guarantor will benefit from Lender’s entering into each such Swap Contract and any transaction thereunder with Borrowers, and Guarantor has determined that the execution and delivery by Guarantor of this Guaranty are necessary and convenient to the conduct, promotion and attainment of the business of Guarantor; and (z) Lender has no duty to determine whether any Swap Contract, or any other transaction relating to or arising under any Swap Contract, will be or has been entered into by Borrowers for purposes of hedging interest rate, currency

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exchange rate, or other risks arising in its businesses or affairs and not for purposes of speculation, or is otherwise inappropriate for Borrowers. Guarantor’s representations, warranties and covenants are a material inducement to Lender to enter into the other Loan Documents and any Swap Contract shall survive the execution hereof and any bankruptcy, foreclosure, transfer of security or other event affecting Borrowers, Guarantor, any other party, or any security for all or any part of the Guaranteed Obligations.

Section 15 Additional Representations, Warranties, and Covenants of Guarantor.

a) Guarantor Minimum Tangible Net Worth.

(i) At all times Guarantor shall maintain on a consolidated basis a Minimum Tangible Net Worth equal to at least 200% of the outstanding principal amount of the Loan, as determined by Lender.

(ii) At all times Guarantor shall maintain on a consolidated basis, a Minimum Tangible Net Worth equal to at least Twenty Million and No/100 Dollars ($20,000,000.00), as determined by Lender.

(iii) “Minimum Tangible Net Worth” means the value of total assets (on the basis of the lower of cost or market) (including leaseholds and leasehold improvements and reserves against assets but excluding goodwill, patents, trademarks, trade names, organization expense, unamortized debt discount and expense, capitalized or deferred research and development costs, deferred marketing expenses, and other like intangibles, and monies due from affiliates, officers, directors, employees, shareholders, members or managers) less total liabilities, including but not limited to accrued and deferred income taxes, but excluding the non-current portion of Subordinated Liabilities.

(iv) “Subordinated Liabilities” means liabilities subordinated to the Borrower’s obligations to the Lender in a manner acceptable to the Lender in its sole discretion.

b) Guarantor’s Unencumbered Liquid Assets.

(i) At all times Guarantor shall maintain Unencumbered Liquid Assets having an aggregate market value of not less than the greater of (i) Five Million and No/100 Dollars ($5,000,000.00) or (ii) Twenty Percent (20%) of the outstanding principal amount of the Loan.

(ii) “Unencumbered Liquid Assets” means the following assets (excluding assets of any retirement plan) which (i) are not the subject of any lien, pledge, security interest or other arrangement with any creditor to have his claim satisfied out of the asset (or proceeds thereof) prior to the general creditors of the owner of the asset, (ii) are held solely in the name of one or more credit parties subject to this covenant (with no other persons or entities having ownership rights therein), (iii) may be converted to cash within five (5) days, (iv) are otherwise acceptable to the Lender in its sole discretion and (v) are not being counted or included to satisfy any other liquidity requirement under any other obligation, whether with the Lender or any other lender, unless otherwise expressly agreed by the Lender in writing:

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(a) Cash or cash equivalents held in the United States and denominated in United States dollars;

(b) United States Treasury or governmental agency obligations which constitute full faith and credit of the United States of America;

(c) Commercial paper rated P-1 or A1 by Moody’s or S&P, respectively;

(d) Medium and long-term securities rated investment grade by one of the rating agencies described in (c) above;

(e) Eligible Stocks; and

(f) Mutual funds quoted in The Wall Street Journal which invest primarily in the assets described in (a) – (e) above.

(iii) “Eligible Stocks” includes any common or preferred stock which (i) is not control or restricted stock under Rule 144 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, or subject to any other regulatory or contractual restrictions on sales, (ii) is traded on a U. S. national stock exchange, including NASDAQ, with a liquidity on such exchange for such stock acceptable to the Lender and (iii) has, as of the close of trading on the applicable exchange (excluding after hours trading), a per share price of at least Ten Dollars ($10).

c) Additional Negative Covenants.

(i) Guarantor shall not, without the Lender’s prior written consent and approval:

(a) Enter into any consolidation, merger or other combination, or convert to another form of business entity.

(b) Intentionally Omitted.

(c) Engage in any business activities substantially different from the Guarantor’s present business.

(d) Liquidate or dissolve the Guarantor’s business.

(e) Voluntarily suspend its business.

(f) Intentionally Omitted.

(g) Incur secured or unsecured debt (including guarantying the debt of another) except that Guarantor may incur trade debt in the ordinary course of its business and operations provided such trade debt (i) is due and payable within sixty (60) days, (ii) all such trade debt does not in the aggregate equal or exceed, at any time, 2% of the outstanding principal balance of the Loan and (iii) is not evidenced by a written obligation. In connection with any parcel of improved real property owned by an entity which is wholly owned by Opportunity OP and which entity is not a Borrower (a “Non-Borrower Entity”) and which improved real property is not part of the Collateral Pool, Lender agrees that it will not unreasonably withhold its prior written consent to Guarantor’s execution and delivery to a “Qualified Lender” (as hereinafter defined) of a guaranty and/or indemnity agreement which is

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solely with respect and limited to standard and typical non-recourse loan carve-out obligations for a non-recourse loan to be made by the Qualified Lender to the Non-Borrower Entity and which non-recourse loan is to be secured by such improved real property owned by the Non-Borrower Entity and which is not part of the Collateral Pool.

For purposes of this Guaranty, the term “Qualified Lender” shall mean any Person (other than a natural Person) that is:

(i) a commercial bank organized under the laws of the United States of America or any State thereof;

(ii) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, provided that such bank is acting through a branch or agency located in the United States of America;

(iii) a life insurance company organized under the laws of any State of the United States of America, or organized under the laws of any country and licensed as a life insurer by any State within the United States of America;

(iv) a nationally recognized investment banking company or other nationally recognized financial institution in the business of making commercial real estate loans or operating commercial real estate, or an Affiliate thereof (other than any Person which is a Borrower or any Guarantor) organized under the laws of any State of the United States;

(v) a hedge fund or “accredited investor” (as defined in Regulation D of the Securities Act of 1933, as amended) organized under the laws of the United States of America or any State thereof that is engaged in making, purchasing, holding or investing in commercial mortgage loans and similar extensions of credit in the ordinary course of its business (other than any Person which is directly or indirectly an Affiliate of any of Borrower or Guarantor) or

(vi) otherwise accepted by Lender, in Lender’s sole and absolute discretion, as a “Qualified Lender”.

Section 16 Notices.

All notices, requests, consents, demands and other communications required or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by nationally recognized overnight courier service, or by certified United States mail, postage prepaid, addressed to the party to whom directed at the addresses specified in this Guaranty (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of facsimile, upon receipt; provided that service of a notice required by any applicable statute shall be considered complete when the requirements of that statute are met. Notwithstanding the foregoing, no notice of change of address shall be effective except upon actual receipt. This Section shall not be construed in any way to affect or impair any waiver of notice or demand provided in this Guaranty or in any other Loan Document or to require giving of notice or demand to or upon any Person in any situation or for any reason.

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Section 17 Cumulative Rights.

All of the rights and remedies of Lender under this Guaranty and the other Loan Documents are cumulative of each other and of any and all other rights at law or in equity, and the exercise by Lender of any one or more of such rights and remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other rights and remedies. No single or partial exercise of any right or remedy shall exhaust it or preclude any other or further exercise thereof, and every right and remedy may be exercised at any time and from time to time. No failure by Lender to exercise, nor delay in exercising, any right or remedy shall operate as a waiver of such right or remedy or as a waiver of any Event of Default. No notice to or demand on Guarantor in any case shall of itself entitle Guarantor to any other or further notice or demand in similar or other circumstances. No provision of this Guaranty or any right or remedy of Lender with respect hereto, or any default or breach, can be waived, nor can this Guaranty or Guarantor be released or discharged in any way or to any extent, except specifically in each case by a writing intended for that purpose (and which refers specifically to this Guaranty) executed and delivered by Lender to Guarantor.

Section 18 Term of Guaranty.

This Guaranty shall continue in effect until all the Guaranteed Obligations (whether by Borrowers, Guarantor or any other Person) and all of the obligations of Guarantor to Lender under this Guaranty are fully and finally paid, performed and discharged and are not subject to any bankruptcy preference period or any other refund or disgorgement.

Section 19 Financial Statements.

Guarantor agrees to provide to Lender, as and when required, the Financial Statements and other financial information required to be delivered to Lender with respect to Guarantor pursuant to the terms of the Loan Agreement, other Loan Documents and a certification from Grantor’s Chief Executive Officer or Chief Financial Officer certifying compliance with financial representations, warranties and covenants set forth in Sections 14 and 15, in the form and detail required by the Loan Documents and as satisfactory to Lender. Guarantor also agrees to provide to Lender such other and further financial information with respect to Guarantor as Lender shall from time to time request. All assets shown on the Financial Statements provided by Guarantor, unless clearly designated to the contrary shall, be conclusively deemed to be free and clear of any exemption or any claim of exemption of Guarantor at the date of the Financial Statements and at all times thereafter. Acceptance of any Financial Statement by Lender, whether or not in the form prescribed herein, shall be relied upon by Lender in the administration, enforcement, and extension of the Guaranteed Obligations.

Section 20 Subrogation.

Guarantor shall not have any right of subrogation under any of the Loan Documents or any right to participate in any security for the Guaranteed Obligations or any right to reimbursement, exoneration, contribution, indemnification or any similar rights, until the Guaranteed Obligations have been fully and finally paid, performed and discharged in accordance with Section 18 above, and Guarantor hereby waives all of such rights.

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Section 21 Time of Essence.

Time shall be of the essence in this Guaranty with respect to all of Guarantor’s obligations hereunder.

Section 22 Entire Agreement; Counterparts; Construction.

This Guaranty embodies the entire agreement between Lender and Guarantor with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty supersedes all prior agreements and understandings, if any, with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty shall be effective upon execution by Guarantor and delivery to Lender. This Guaranty may not be modified, amended or superseded except in a writing signed by Lender and Guarantor referencing this Guaranty by its date and specifically identifying the portions hereof that are to be modified, amended or superseded. This Guaranty has been executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement. As used herein, the words “include” and “including” shall be interpreted as if followed by the words “without limitation.”

Section 23 Forum.

Guarantor hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the jurisdiction of any state court or any United States federal court sitting in the State specified in the governing law section of this Guaranty, over any Dispute. Guarantor hereby irrevocably waives, to the fullest extent permitted by Law, any objection that Guarantor may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Guarantor hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court or any United States federal court sitting in the state specified in the governing law section of this Guaranty may be made by certified or registered mail, return receipt requested, directed to Guarantor at its address for notice set forth in this Guaranty, or at a subsequent address of which Lender received actual notice from Guarantor in accordance with the notice section of this Guaranty, and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Lender to serve process in any manner permitted by Law or limit the right of Lender to bring proceedings against Guarantor in any other court or jurisdiction.

Section 24 WAIVER OF JURY TRIAL.

IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS GUARANTY. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR AND LENDER, AND GUARANTOR AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS. GUARANTOR AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. GUARANTOR FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

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Section 25 CONFESSION OF JUDGMENT.

UPON THE OCCURRENCE OF A DEFAULT OR AT ANY TIME THEREAFTER, GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY DESIGNATED BY LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR FOR GUARANTOR, OR ANY OF THEM, IN ANY COURT OF RECORD AND CONFESS JUDGMENT AGAINST GUARANTOR, OR ANY OF THEM, WITHOUT A PRIOR HEARING, IN FAVOR OF LENDER FOR, AND IN THE AMOUNTS OF, THE INDEBTEDNESS, ALL OTHER AMOUNTS PAYABLE BY GUARANTOR UNDER THE TERMS OF THE LOAN DOCUMENTS, COSTS OF SUIT, AND REASONABLE ATTORNEY’S FEES BUT NOT LESS THAN $25,000.00. IF A COPY OF THIS GUARANTY, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF LENDER, SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL OF THIS GUARANTY. GUARANTOR HEREBY RELEASES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ERRORS AND ALL RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION, INQUISITION, AND OTHER RIGHTS TO WHICH GUARANTOR MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR OF ANY STATE OF POSSESSION OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY HEREINAFTER BE ENACTED. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE EXERCISED ON ONE OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT JURISDICTION AS OFTEN AS LENDER SHALL DEEM NECESSARY AND DESIRABLE, FOR ALL OF WHICH THIS GUARANTY SHALL BE SUFFICIENT WARRANT. NOTHING HEREIN, HOWEVER, SHALL BE DEEMED TO WAIVE GUARANTOR’S RIGHTS TO MOVE TO OPEN OR STRIKE ANY JUDGMENT OBTAINED HEREUNDER BY CONFESSION IN ACCORDANCE WITH, AND SUBJECT TO, LAW AND ALL RULES OF COURT.

Section 26 ACKNOWLEDGMENT OF CONFESSION OF JUDGMENT.

GUARANTOR ACKNOWLEDGES THAT THIS GUARANTY CONTAINS AN AUTHORIZATION TO CONFESS JUDGMENT, THAT IT HAS CONSULTED LEGAL COUNSEL WITH RESPECT THERETO (OR KNOWINGLY WAIVED ITS RIGHT TO DO SO), AND THAT IT UNDERSTANDS THAT THE EXERCISE BY LENDER OF THE CONFESSION WILL RESULT IN THE ENTRY OF A JUDGMENT AGAINST GUARANTOR AND THE SALE OR ATTACHMENT OF, OR EXECUTION UPON, GUARANTOR’S PROPERTY (INCLUDING WITHOUT LIMITATION PERSONAL PROPERTY AND REAL PROPERTY) WITHOUT PRIOR NOTICE OR THE OPPORTUNITY FOR A HEARING.

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Section 27 Intentionally Omitted.

Section 28 Event of Default.

Any breach of any term or covenant or agreement of Guarantor under and pursuant to this Agreement shall be and constitute an “Event of Default” under each and all of the Note, Loan Agreement and other Loan Documents.

Section 29 Additional Borrowers.

Guarantor acknowledges and agrees that the Loan Agreement contemplates that additional Persons may be added to the same as a borrower thereunder and accordingly, any and all such added Persons shall be included within the definitions of “Borrower”.

Section 30 NO RIGHT TO CURE AN EVENT OF DEFAULT OR LENDER’S OBLIGATION TO ACCEPT ANY CURE.

Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, Guarantor acknowledges and agrees that neither Borrower nor Guarantor has the right to cure any Event of Default once it occurs and Lender is under no obligation or duty to accept any cure of an Event of Default or the offer of the same by or from Borrower or Guarantor. Any language in this Guaranty or in any of the other Loan Documents such as “upon the occurrence and continuance of an Event of Default”, “during the continuance of an Event of Default”, “so long as such Event of Default is continuing” or the like, shall not for any reason whatsoever or howsoever mean, imply, grant or otherwise entitle Borrower or Guarantor to any such right to cure an Event of Default once one occurs or obligate Lender to accept any cure, or the offer of any cure.

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

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[Signature Page 1 of 1 to Guaranty Agreement]

IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty under seal as of the date first written above.

Address of Guarantor:	GUARANTOR: RESOURCE REAL ESTATE OPPORTUNITY REIT, INC., a Maryland corporation
c/o Resource Real Estate, Inc.	By: /s/ Steven R. Saltzman               [SEAL]
One Crescent Drive, Suite 203	Name: Steven R. Saltzman
Philadelphia, PA 19112 Attention: Steven Saltzman	Title:   Chief Financial Officer, Senior Vice             President and Treasurer
Fax No.: 215-761-0444
with a copy to: c/o Resource Real Estate, Inc. 2005 Market Street, 15th Floor Philadelphia, PA 19103 Attention: Shelle Weisbaum, Esq. Fax No.: 215-761-0452
Address of Lender:
Bank of America, N.A.
1600 John F. Kennedy, Suite 1100 Philadelphia, Pennsylvania 19103 Attn: David Ross Facsimile: (267) 675-0148 One South Charles Street Baltimore, Maryland 21201 Mail Code: N04-325-0426
Attn: Charles English Facsimile: 410-547-4050
with a copy to: Buchanan Ingersoll & Rooney PC Two Liberty Place 550 South 16th Street, Suite 3200 Philadelphia, Pennsylvania 19102 Attn: Frederick H. Masters, Esq. Facsimile: 215-665-8760

EX-21.1

EXHIBIT 21.1

Direct and Indirect Subsidiaries of Resource Real Estate Opportunity REIT, Inc.

Resource Real Estate Opportunity OP, LP

RRE Opportunity Holdings, LLC

RRE 107th Avenue Holdings, LLC

RRE Westhollow Holdings, LLC

RRE Crestwood Holdings, LLC

RRE Iroquois Holdings, LLC

RRE Iroquois, LP

RRE Campus Club Holdings, LLC

RRE Cannery Holdings, LLC

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 30, 2011 with respect to the consolidated financial statements and schedules included in the Annual Report on Form 10-K for the year ended December 31, 2010 of Resource Real Estate Opportunity REIT, Inc., which are incorporated by reference in this Prospectus. We consent to the incorporation by reference in Post-effective Amendment No. 6 to the Registration Statement and Prospectus of the aforementioned report, and to the use of our name as it appears under the caption “Experts”.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania

January 20, 2012