0001642382-15-000013.txt : 20150922 0001642382-15-000013.hdr.sgml : 20150922 20150922110025 ACCESSION NUMBER: 0001642382-15-000013 CONFORMED SUBMISSION TYPE: S-11 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 20150922 DATE AS OF CHANGE: 20150922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ETRE Residential, LLC CENTRAL INDEX KEY: 0001642382 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 473989687 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-11 SEC ACT: 1933 Act SEC FILE NUMBER: 333-207069 FILM NUMBER: 151118762 BUSINESS ADDRESS: STREET 1: 44 WALL STREET CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2125967225 MAIL ADDRESS: STREET 1: 44 WALL STREET CITY: NEW YORK STATE: NY ZIP: 10005 S-11 1 penntreatys-11xetreresiden.htm S-11 DRS


As filed with the Securities and Exchange Commission on September 22, 2015
Registration Statement No. 333-
 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-11
FOR REGISTRATION
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

____________________________________
ETRE Residential, LLC
 (Exact name of registrant as specified in its governing instruments)
____________________________________

44 Wall Street
New York, New York 10005
Tel (212) 596-7225
(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant's Principal Executive Offices)
____________________________________

Paul Frischer
President and Chief Executive Officer
ETRE Residential, LLC
44 Wall Street
New York, New York 10005
Tel (212) 596-7225
(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)
____________________________________

Copies to:
Mark Schonberger
Goodwin Procter LLP
620 Eighth Avenue
New York, NY 10018-1405
T: 212-813-8842
F: 212-355-3333
Jay Bernstein, Esq.
Clifford Chance US LLP
31 West 52nd Street
New York, NY 10019
T: 212-878-8000
F: 212-878-8375
____________________________________

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this registration statement.
If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:  ¨
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 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(d) 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 delivery of the prospectus is expected to be made pursuant to Rule 434, 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 x
Smaller reporting company ¨
 
(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Proposed Maximum Aggregate Offering Price(1)(2)
Amount of Registration Fee(1)
Series R-1 common shares........................................................
$35,000,000
$4,067
                                           
(1)             Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended
(2)             Includes the offering price of Series R-1 common shares that may be purchased by the underwriters upon the exercise of their over-allotment option.

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 which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, 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.





The information in this preliminary prospectus is not complete and may be changed.   We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective.   This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, Preliminary Prospectus Dated September 22, 2015

PRELIMINARY PROSPECTUS
____________ Shares

ETRE Residential, LLC
  
Series R-1 Common Shares
Representing Series R-1 Limited Liability Company Interests
  
We are a newly organized Delaware series limited liability company that has been formed to permit public investment in individual commercial real estate properties (principally residential), each of which will be held by a separate property-owning subsidiary owned by a separate series of limited liability company interests, or Series, that we intend to establish.  As a Delaware series limited liability company, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series are segregated and enforceable only against the assets of such Series, as provided under Delaware law.  We intend for each Series to elect and qualify to be taxed as a separate real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the first taxable year ending after the completion of the initial public offering of shares of such Series.
  
This is the initial public offering of our Series R-1 common shares, which represent limited liability company interests of Series R-1 of our Company, or the R-1 Series. We currently anticipate that the initial public offering price will be $ per Series R-1 common share. Prior to this offering, there has been no public market for our Series R-1 common shares. We have applied to have our Series R-1 common shares listed on the NASDAQ Capital Market, or the NASDAQ, under the symbol "EPNT."

  We are only selling our Series R-1 common shares in this offering.  The R-1 Series has been established to allow persons who acquire Series R-1 common shares in this offering to own an indirect 89.00% interest in the Penn Treaty Village Pennthouses, a residential rental community consisting of 224 apartment homes, 28,860 square feet of retail space, and 147 parking spaces, located in Philadelphia, Pennsylvania, or the Property. This interest will be held indirectly by the R-1 Series, following the purchase and sale transaction described herein, through partnership interests in two property owning entities, 1 Brown Street Associates, L.P., or 1 Brown Street, and 800 Delaware Ave Associates L.P., or 800 Delaware and collectively, the Property R-1 Subsidiaries. The seller of the Property will continue to own the remaining 11% interest in the Property R-1 Subsidiaries as a limited partner.

Concurrently with the closing of this offering, the R-1 Series will enter into an administrative services agreement with ETRE Asset Management, LLC, a Delaware limited liability company, or our Administrative Agent, a recently formed subsidiary of ETRE Financial, LLC, a Delaware limited liability company, which, together with its subsidiaries, we refer to as ETRE.  In addition, upon the closing of the purchase and sale transaction, the Property R-1 Subsidiaries will engage Core Realty, Inc., or the Asset Manager, an affiliate of the seller, as asset and property manager for the Property.

 We intend for the R-1 Series to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes, commencing with its short taxable year ending December 31, 2015.  To assist the R-1 Series in qualifying as a REIT, our operating agreement, subject to certain exceptions, contains restrictions on the number of Series R-1 common shares and the number of shares of the R-1 Series that a person may own.  Our operating agreement provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Internal Revenue Code, either more than 9.8% in value or in number, whichever is more restrictive, of the outstanding Series R-1 common shares. See "Description of Series R-1 Common Shares - Operating Agreement and Bylaws - Restrictions on Ownership and Transfer."

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act.  Investing in our Series R-1 common shares involves risks.  See "Risk Factors" beginning on page 13 of this prospectus for a discussion of other material risks of investing in our Series R-1 common shares:
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus.  Any representation to the contrary is a criminal offense.
 
Per Series R-1 Common Share
                                         Total
Public offering price...................................................
$
$
Underwriting discounts and commissions(1)...............
$
$
Proceeds, before expenses, to the R-1 Series..............
$                                           
$

(1)
See "Underwriting" on page 113 of this prospectus for a description of the compensation payable to the underwriters.
We have granted the underwriters the option to purchase up to an additional _________ Series R-1 common shares from us at the initial public offering price, less the underwriting discount, within 30 days after the date of this prospectus  to cover over-allotments, if any.
  
The underwriters expect to deliver the Series R-1 common shares on or about___________ , 2015
 
Sole Book-runner
  
  
Co-Managers
                                                                                                         
  
The date of this Prospectus is________ , 2015 






Penn Treaty Village Pennthouses

Philadelphia, PA




TABLE OF CONTENTS


4



Market Data; Other Third-Party Information
We use market data and industry forecasts and projections throughout this prospectus.  We have obtained substantially all of this information from REIS Inc., or REIS, a nationally recognized real estate consulting firm.  In addition, we have obtained certain market and industry data from publicly available industry publications.  These sources generally state that the information they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information are not guaranteed.  The forecasts and projections are based on industry surveys and the preparers' experience in the industry, and there is no assurance that any of the projected amounts will be achieved.  We believe that the surveys and market research others have performed are reliable, but we have not independently verified this information.
In addition, we use certain information about Core Realty and their business and operations in this prospectus, which we have obtained from Core Realty. We believe this information to be reliable, but the accuracy and completeness of the information are not guaranteed and we have not independently verified this information.

Definitions
1 Brown Street
1 Brown Street Associates, L.P., a Pennsylvania limited partnership, one of the two Property R-1 Subsidiaries and the owner of One Brown Street, Philadelphia, Pennsylvania, which, along with 800 Delaware Avenue, Philadelphia, Pennsylvania, comprises the Property.
800 Delaware
800 North Delaware Avenue Associates, L.P., a Pennsylvania limited partnership, one of the two Property R-1 Subsidiaries and the owner of 800 Delaware Avenue, Philadelphia, Pennsylvania, which, along with One Brown Street, Philadelphia, Pennsylvania, comprises the Property.
Administrative Agent
ETRE Asset Management, LLC, a Delaware limited liability company and a wholly-owned subsidiary of ETRE Financial, LLC, which will provide administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries, as well as each other Series and Property Subsidiaries that we may establish in the future.
Asset Manager
Core Realty, Inc., in its capacity as asset manager, which will provide asset management and property management services to the Property R-1 Subsidiaries and the Property.
common shares
Common shares of limited liability company interests in a Series.
Company
ETRE Residential, LLC.
Core Limited R-1 Partner
Waterview Grande, L.P., a Delaware limited partnership, in its capacity as the 11.00% limited partner in each of the Property R-1 Subsidiaries.
Core Realty
Core Realty, Inc.
Delaware LLC Act
Delaware Limited Liability Company Act.
DGCL
Delaware General Corporation Law.
ETRE
ETRE Financial, LLC and its subsidiaries.
ETRE Limited R-1 Partner
Holdings R-1 Subsidiary, in its capacity as a limited partner of each of the Property R-1 Subsidiaries.
Exchange Act
Securities Exchange Act of 1934, as amended.
General R-1 Partner
ETRE Property R-1 GP, LLC, which will be the general partner of each of the Property R-1 Subsidiaries.
Holdings R-1 Subsidiary
ETRE Holdings R-1, LLC, a Delaware limited liability company, which will be wholly-owned by the R-1 Series and which we expect, substantially concurrently with the completion of this offering, will own (i) an 88.99% limited partner interest in each of the Property R-1 Subsidiaries and (ii) a 0.01% general partner interest in each of the Property R-1 Subsidiaries through the General R-1 Partner.

“Holdings R-1 Subsidiary” collectively refers to both the itself and the General R-1 Partner, unless the context suggests otherwise.
Internal Revenue Code
Internal Revenue Code of 1986, as amended.
JOBS Act
Jumpstart Our Business Startups Act of 2012.
managing member
ETRE Financial, LLC, as the managing member of our Company.
Other Property common shares
Common shares of the Other Property Series.
Other Property Series
New Series that our Company intends to establish in the future to acquire and participate exclusively in the economic returns derived from interests in other real properties.
Other Property Subsidiaries
Consolidated subsidiaries of Other Property Series that our Company intends to organize in the future to be the direct or indirect owners of real property to be acquired by such Other Property Series.
Other Series Programs
Other companies sponsored by ETRE that utilize a series limited liability company structure similar to the Company.
preferred shares
A class or series of preferred shares of limited liability company interests in a Series.
Property
Penn Treaty Village Pennthouses, a residential rental community consisting of 224 apartment homes, 28,860 square feet of retail space, and 147 parking spaces, located in Philadelphia, PA
Property common shares
The Series R-1 common shares and the Other Property common shares.
Property R-1 Subsidiaries
1 Brown Street and 800 Delaware, the two partnerships that collectively own the Property.

Following completion of this offering and the related purchase and sale transaction, each of the Property R-1 Subsidiaries will be owned (i) 89.00% by Holdings R-1 Subsidiary (comprising a 0.01% general partner interest held through the General R-1 Partner and an 88.99% limited partner interest) and (ii) 11.00% by the Core Limited R-1 Partner, as limited partner.
Property Series
The R-1 Series and the Other Property Series.
Property Subsidiaries
The Property R-1 Subsidiaries and the Other Property Subsidiaries.
R-1 Series
Represents the series of ETRE Residential, LLC selling Series R-1 common shares in this offering, which we expect will indirectly own, substantially concurrently with the completion of this offering, an aggregate 89.00% general and limited partner interest in each of the Property R-1 Subsidiaries through its ownership of Holdings R-1 Subsidiary.
REIT
A real estate investment trust for U.S. federal income tax purposes.
Securities Act
The Securities Act of 1933, as amended.
Seller
Waterview Grande, L.P. and its affiliates, which currently owns 100% of the interests in the Property R-1 Subsidiaries, which own the Property.
Series
A series of limited liability company interests of our Company, the assets and liabilities of which will be segregated from each other Series pursuant to Delaware law.
Series R-1 common shares
Series R-1 common shares of limited liability company interests of the R-1 Series, which we are selling in this offering.

5



PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus.  It does not contain all of the information that you should consider before investing in our Series R-1 common shares.  You should read carefully the detailed information set forth under "Risk Factors" and the other information included in this prospectus.  Except where the context suggests otherwise, the terms "Company," "we," "us" and "our" refer to ETRE Residential, LLC, a Delaware series limited liability company, together with its consolidated subsidiaries, including ETRE Holdings R-1, LLC, a Delaware limited liability company, which we refer to as the "Holdings R-1 Subsidiary"; references in this prospectus to "our Administrative Agent" refer to ETRE Asset Management, LLC, a Delaware limited liability company and a subsidiary of ETRE Financial, LLC; and references in this prospectus to "ETRE" refer to ETRE Financial, LLC, the managing member of our Company, and its subsidiaries.  Unless indicated otherwise, the information in this prospectus assumes (1) the Series R-1 common shares to be sold in this offering are to be sold at $ _____ per share, and (2) no exercise by the underwriters of their over-allotment option to purchase up to an additional _______ Series R-1 common shares.
Overview
We are a newly organized Delaware series limited liability company that has been formed to permit public investment in individual commercial real estate properties (principally residential), each of which will be held by a separate property-owning subsidiary owned by a separate series of limited liability company interests, or Series, that we intend to establish.  Each Series we may establish in the future will be a separate Series and not itself a separate legal entity under Delaware law.  As a separate Series, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Series are segregated and enforceable only against the assets of such Series, as provided under Delaware law.  We intend for each Series to elect and qualify to be taxed as a separate real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the first taxable year ending after the completion of the initial public offering of shares of such Series.
This is the initial public offering of our Series R-1 common shares, which represent limited liability company interests of Series R-1 of our Company, or the R-1 Series.  We are selling only our Series R-1 common shares in this offering.  The R-1 Series has been established to allow persons who acquire R-1 common shares in this offering to own an indirect interest in Penn Treaty Village Pennthouses, a residential rental community consisting of 224 apartment homes, 28,860 square feet of retail space, and 147 parking spaces, located in Philadelphia, Pennsylvania. or the Property, of which an 89.00% interest is expected to be acquired by us substantially concurrently with the completion of this offering.  We have applied to have our Series R-1 common shares listed on the NASDAQ under the symbol “EPNT”.

The Property is currently owned by Waterview Grande, L.P. and its affiliates, or the Seller, which in the aggregate currently own 100% of 1 Brown Street Associates, L.P. and 800 North Delaware Avenue Associates L.P., (i.e. the Property R-1 Subsidiaries), the two limited partnerships that together own the Property. An affiliate of Holdings R-1 Subsidiary has executed a purchase and sale agreement with the Seller and the Property R-1 Subsidiaries to acquire an aggregate 89.00% controlling interest in the Property R-1 Subsidiaries. The purchase and sale agreement will be assigned to Holdings R-1 Subsidiary prior to the closing of the acquisition. Specifically, (i) Holdings R-1 Subsidiary, in its capacity as the ETRE Limited R-1 Partner, will acquire an 88.99% limited partner interest in each of the Property R-1 Subsidiaries, and (ii) the General R-1 Partner, an entity wholly-owned by Holdings R-1 Subsidiary, will acquire a 0.01% general partner interest in each of the Property R-1 Subsidiaries. The Seller will retain an aggregate 11.00% limited partnership interest in the Property R-1 Subsidiaries.

The purchase and sale agreement provides for a purchase price for the aggregate 89.00% controlling interest in the Property R-1 Subsidiaries of approximately $78.0 million in cash (based on the negotiated value of $82.0 million for the Property, subject to pro-rations and adjustments as set forth in the purchase and sale agreement). In order to fund $78.0 million to the Seller, the R-1 Series will contribute $26.0 million of the net proceeds of this offering to Holdings R-1 Subsidiary which in turn will pay such $26.0 million to the Seller, with the remaining $52.0 million of the purchase price to be funded from the proceeds of a new $52.0 million non-recourse mortgage loan on the Property, which we intend to cause the Property R-1 Subsidiaries to enter into at the closing. The balance of the net proceeds from this offering will be held by the R-1 Series to pay for closing costs and any remaining amount will be held as working capital reserves. We expect to consummate the purchase and sale transaction substantially concurrently with the completion of this offering. For additional information about the purchase and sale transaction, see “Business and Property-Overview”.
Following the completion of the purchase and sale transaction, the objective of the R-1 Series will be to maximize total returns to holders of our Series R-1 common shares through the payment of consistent cash distributions and the achievement of long-term capital appreciation in the Property.
In connection with our acquisition of an aggregate 89.00% general and limited partner interest in the Property R-1 Subsidiaries, we will amend and restate the limited partnership agreements for each of the Property R-1 Subsidiaries. Under the terms of the limited partnership agreements of the Property R-1 Subsidiaries, the General R-1 Partner will control all of the business, affairs and operations of the Property R-1 Subsidiaries, other than day-to-day management of the Property, which will be performed by Core Realty, or the Asset Manager, pursuant to the asset and property management agreement. Our Asset Manager will at all times be subject to the supervision and oversight of our board of directors and the General R-1 Partner. See “Property R-1 Subsidiaries Limited Partnership Agreements” for more information regarding the limited partnership agreements.
ETRE Asset Management, LLC, or our Administrative Agent, a recently formed subsidiary of ETRE Financial, LLC, or ETRE, will provide certain administrative and advisory services to each of our Series and Property Subsidiaries, including the R-1 Series and the Property R-1 Subsidiaries.  Through our Administrative Agent, we intend to utilize and leverage the extensive expertise and network of relationships of ETRE and its management team.
We intend to elect and qualify each Series, including the R-1 Series, as a REIT under the Internal Revenue Code commencing with, in the case of the R-1 Series, its short taxable year ending December 31, 2015. 

1



The Property – Penn Treaty Village Pennthouses
Penn Treaty Village Pennthouses is a newly developed residential rental community consisting of 224 apartments, 28,860 square feet of retail and 147 parking spaces located at One Brown Street and 800 North Delaware Avenue in Philadelphia, Pennsylvania. The Property, developed by Core Realty, Inc., comprises two eight story towers. Construction of the first tower, One Brown Street, was completed in September 2012 and the second tower, 800 North Delaware, was completed in June 2014. The Property occupies a prominent location along Delaware Avenue with unobstructed views of the Delaware River and is situated within close proximity to Center City, which we believe to be one of Philadelphia’s most desirable submarkets with over 450,000 square feet of entertainment, retail and restaurants planned for future development. The apartments, which average over 1100 square feet, were constructed with high quality finishes including floor to ceiling windows and a built in smart system, which allows residents to control lighting, window treatments, HVAC and a surround sound system from their smart phone or tablet. The Property’s common area features resort-style amenities, an outdoor pool and two furnished rooftop terraces with a walking track and grilling areas.
PROPERTY SUMMARY
 
1 Brown Street

 
800 Delaware Avenue

 
Property Total

Residential Units
126

 
98

 
224

Retail Rentable Square Feet
19,260

 
9,600

 
28,860

Parking Spaces
 
 
 
 
147

% Residential Occupied (1)
96
%
 
99
%
 
98
%
% Commercial Occupied(2)
100
%
 
100
%
 
100
%
Ceiling Height
9' 00"

 
9' 00"

 
9' 00"

Stories
8

 
8

 
8

Year Built
2012

 
2014

 
2012, 2014


(1) Based on leases signed as of June 30, 2015.
(2) Retail space is subject to a master lease between the Property R-1 Subsidiaries and Core Realty and provides for 100% economic occupancy for 18 months following the closing of the purchase and sale transaction (assuming the existing lease for 9,722 square feet remains in effect). For details regarding the master lease, see “-Master Lease” below.

Master Lease

Under the terms of the purchase and sale agreement for the Property, Core Realty will enter into a master lease for all of the vacant commercial space at the Property as of the closing, which currently consists of 19,138 square feet of vacant space. The master lease commences upon the closing of the purchase and sale transaction and requires Core Realty, among other matters, to pay annual rent of $27.00 per square foot (net to us) for such vacant space. As a result, the master lease will permit us to achieve 100% economic occupancy of the aggregate 28,860 square feet of commercial space at the Property for 18 months (assuming the existing lease for 9,722 square feet remains in effect). See “Business and Property-Master Lease” for a description of the material business terms of the master lease.
We cannot give any assurances as to whether Core Realty or we will be able to enter into new leases with replacement tenants prior to the end of the term of the master lease nor or the future financial viability of any such replacement tenants.

2



Philadelphia, Pennsylvania Market Information
According to REIS reports on the Philadelphia apartment market published in March 2015 and May 2015, or together, the REIS Report, despite being the sixth largest city in the United States by population, the Philadelphia metropolitan area, or the Philadelphia Metro has the lowest number of rental units per capita as compared to other top 10 major markets by population (0.05 apartment units per capita based on 2013 US Census population estimate of 6,034,678). This imbalance coupled with significant population gains over the next five years for Philadelphia (estimated 50,500) should aid absorption and drive demand, despite expected new deliveries to the market. Apartment vacancy should remain compressed, particularly for newer luxury properties within the region. Recently, there has been an increased demand for quality Class A rental housing within the Philadelphia CBD, driven by young professionals and empty nesters moving into Center City. “Echo Boomers,” born between 1979 and 1984, constitute approximately 23% of the total Philadelphia Metro population.

The first quarter 2015 vacancy rate in the Philadelphia area is just 3.1%, according to REIS, down 10 basis points from the prior quarter and 30 basis points year-over-year, and less than half the cyclical peak of 6.6% in 2009. The first quarter 2015 Class A vacancy rate is 4.3%, down 10 basis points from the prior quarter and 20 basis points year-over-year. Demand for apartment units has been strong in Philadelphia for the past five years, with net absorption averaging 2,340 units per year during the 2010 to 2014 period. That is more than double the average annual net absorption for the entire 25 years from 1990 to 2014, at about 1,040. Strong demand, in excess of new supply, continued in the first quarter of 2015, with 475 units of net absorption overall, 281 for Class A properties, and 197 for Class B/C properties.

According to REIS, the Philadelphia Metro is known for its moderate, consistent apartment rent gains, and the first quarter of 2015 was no exception. The average asking rent increased 0.5% from the prior quarter and 2.8% year-over-year to $1,154 per month while the average effective rent rose 0.6% from the prior quarter and 2.9% year-over-year to $1,131 per month, respectively, similar to the gains of 2.8% and 3.1% recorded for all 2014. Following one year of weak rents in 2009, when the asking average was unchanged and the effective average slipped 0.6%, annual rent gains averaged 2.4% asking and 2.9% effective during the five years from 2010 to 2014. The first quarter 2015 Class A asking average is $1,380 per month, up 0.5% from the prior quarter and 2.8% year-over-year.

Our Administrative Agent and ETRE
Our Administrative Agent is a wholly-owned subsidiary of ETRE.  Pursuant to the terms of an administrative services agreement between the R-1 Series and the Administrative Agent, our Administrative Agent will provide certain administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries, as well as a management team and appropriate support personnel.  These services include, among others, investor relations and shareholder communications functions for the R-1 Series and assisting the R-1 Series in preparing, reviewing and filing all reports required to be filed by it or us with the SEC, NASDAQ, the Internal Revenue Service and other regulatory agencies. See “Our Administrative Agent-Administrative Services Agreement.” Our Administrative Agent will at all times be subject to the supervision and oversight of our board of directors.
We do not expect to have any employees.
Our Administrative Agent has access to ETRE's senior management team, which has extensive experience in identifying, acquiring, financing, analyzing and managing commercial real estate investments, as well as a broad spectrum of other investments related to commercial real estate.  Each member of the ETRE management team has at least ten years of commercial real estate investment experience.
ETRE is a real estate financial services and information technology company focused on facilitating the public listing of individual commercial real estate assets to improve access, liquidity and transparency in commercial real estate.  ETRE was founded in 2012 by a team of real estate and technology professionals who seek to bring the benefits of the public equities market to real estate investors through an ecosystem of services that incorporate capital markets advisory, asset management, information technology and tenant credit analysis services.  In particular, ETRE's capital markets advisory business seeks to enhance access to the public markets with a comprehensive due diligence process to facilitate the public listing of commercial real estate; its asset management business provides investors with information on listed securities related to real estate; and its information technology business provides a web-based proprietary system with an extensive collection of market information that provides investors with analytics technology for listed securities related to real estate.
The Asset and Property Management Agreement and the Asset Manager
The Property R-1 Subsidiaries will engage Core Realty, or the Asset Manager, an affiliate of the Core Limited R-1 Partner, as asset and property manager for the Property after the closing of the purchase and sale transaction.
Subject to the supervision and oversight of the General R-1 Partner, the Asset Manager will be responsible for performing management and administrative functions of the Property R-1 Subsidiaries in respect of the Property.
At the property level, the Asset Manager will be responsible for overseeing real property operations, including tenant leasing, budgeting, cash management and insurance, and for other functions and powers delegated to it by the General R-1 Partner. In performing its services, the Asset Manager will generally be subject to any applicable restrictions and conditions regarding the activities of the Property R-1 Subsidiaries set forth in our governing documents and the governing documents of the Property R-1 Subsidiaries.
Core Realty is a full-service construction, construction management, investment management, and property management company owned by Michael Samschick that specializes in both commercial and multi-family development projects. Core Realty was founded in 1998 and is operated by Mr. Samschick, who oversees the company's operations and chairs Core Realty's investment committee and has over 30 years of real estate experience.  In addition to Mr. Samschick, Core Realty’s executive team has a combined aggregate of 90 years of experience in acquiring, developing, financing, managing and analyzing real estate assets.
In Core Realty’s latest expansion it has launched a national fund that is acquiring stabilized assets throughout the United States. This new national fund is consistent with Core Realty’s mixed-use and multifamily experience. 
Core Realty manages over 60 properties throughout Philadelphia, New Jersey and Georgia - including apartment buildings, retail centers, office buildings and industrial properties.  Core Realty's investments are a combination of independently owned assets and assets owned with high net worth investors and joint venture partners. Core Realty believes that its 17 years of property management experience enables it to maintain great tenant relationships and implement efficient operating cost management systems that are on par with best-in-class operators.
Core Realty’s focus/efforts over the last several years has been assembling, designing and transforming the west side of Philadelphia, Pennsylvania’s Delaware Avenue waterfront. This transformation in the Northern Liberties and Fishtown sections of downtown Philadelphia entails changing an old manufacturing district into trendy entertainment and residential neighborhoods. Some of Core Realty’s recent projects in this area include: (i) a high-end 76,000 square foot boutique apartment renovation in Northern Liberties; (ii) the renovation and lease-up to 98% occupancy of a 147,000 square foot office building along the Delaware River built in 2013; and, (iii) an ongoing renovation of a 145,000 square foot historic metal foundry into an entertainment complex consisting of a 3,000-seat Live Nation concert venue, 40,000 square foot bowling space, a 12,000 square foot distillery and several restaurants.
Core Realty is converting several additional blocks along the Delaware River waterfront into shops, restaurants, offices and retail, attempting to utilize this historic back drop to its fullest potential. 
The Property R-1 Subsidiaries will pay for the fees, costs and expenses of the Asset Manager.  We have agreed to keep the asset and property management agreement in place with the Asset Manager, subject to the termination rights provided in the asset and property management agreement, until such time as the Core Limited R-1 Partner ceases to own, in the aggregate, 5.0% or more of the combined limited partnership interests in the Property R-1 Subsidiaries (at which time we may terminate the asset and property management agreement with or without cause upon 30 days prior written notice). See “Business and Property-The Asset and Property Management Agreement and the Asset Manager”.


3



Business Strategy
The objective of the R-1 Series is to maximize total returns to holders of our Series R-1 common shares through the payment of consistent cash distributions and the achievement of long-term capital appreciation in the Property.
To achieve this objective, the General R-1 Partner will direct the Asset Manager to seek to maximize the cash flow from, and increase the value of, the Property by:
negotiating new and renewal leases with tenants;
actively managing operating expenses; and
improving the Property.
We expect that the Asset Manager will seek to maximize value through the active management of the Property, participating in various aspects of the operations of the Property, including marketing, operations analysis, physical design, renovation, capital improvements, tenant experience and overall strategic direction.

Our Strengths
We believe that our competitive strengths include the following:
Independent Board of Directors.  Shareholders of Series R-1 common shares will benefit from the oversight provided by an independent board of directors with extensive experience in the real estate, equity and debt markets.

Experienced Management Team and Advisors.  Holders of Series R-1 common shares will benefit from the administrative services of ETRE Asset Management, LLC, our Administrative Agent, a subsidiary of ETRE, its experienced management team and the asset and property management services of the Asset Manager, an affiliate of the Core Limited R-1 Partner.

Investor Accessibility.  Series R-1 common shares provide accessibility for individual investors to own interests in a high-quality, single property commercial real estate asset in the form of a listed public security.

Investor Liquidity.  We have applied to have our Series R-1 common shares listed on the NASDAQ under the symbol  “EPNT” in order to provide liquidity to holders of our Series R-1 common shares.

Economies of Scale Model.  Our Administrative Agent will oversee our SEC reporting and compliance obligations, including as each relates to the R-1 Series, and will provide similar or additional functions for the Other Property Series, achieving economies of scale for each of the Series.

4



Our Financing Strategy
Although our governing documents contain limitations related to certain types of debt financing and cross-subsidiary guarantees, in general, these limitations do not limit the amount of indebtedness that the R-1 Series may incur, directly or through its subsidiaries, including the Property R-1 Subsidiaries.  We expect for the R-1 Series to maintain a flexible capital structure and intend to target a ratio of outstanding indebtedness to the R-1 Series' total assets of between 50% and 70%.  Our board of directors will periodically review this target and may modify or eliminate it without the approval of holders of our Series R-1 common shares.

We will consider a number of factors when evaluating the R-1 Series' level of indebtedness and making financial decisions, including, among others, the following:
the interest rate of the proposed financing;
the extent to which the financing impacts the flexibility of the Asset Manager to manage the Property;
prepayment penalties, defeasance and restrictions on refinancing;
our long-term objectives with respect to the financing;
the R-1 Series' target investment returns;
the ability of the Property to generate cash flow sufficient to cover budgeted capital expenditures, tenant improvements and expected debt service payments;
our overall level of consolidated indebtedness;
timing of debt maturities;
provisions that require recourse;
corporate credit ratios, including debt service or fixed charge coverage, debt to earnings before interest, taxes, depreciation and amortization, or EBITDA, debt to total market capitalization and debt to undepreciated assets; and
the overall ratio of fixed- and variable-rate debt.
Mortgage Indebtedness
We have received a term sheet from Arbor Commercial Funding for a 10-year commercial mortgage loan, which will enable the Property R-1 Subsidiaries to borrow approximately $52,000,000.  The proposed loan, providing for an interest-only payment feature for 5 years followed by 30 years amortization, is expected to bear interest at a fixed rate of 4.25% per annum.  The loan is expected to be secured by a first mortgage lien on the Property.  Certain penalties may apply upon prepayment of the loan, except during the last 3 months of the loan term. The closing of the mortgage loan is contingent on a number of conditions including the lender’s due diligence, the negotiation and execution of definitive documents relating to the mortgage loan and approval of the lender’s loan committee.   We cannot assure you that the Property R-1 Subsidiaries will be able to enter into the mortgage loan on the terms contemplated by the term sheet or at all. See “Business and Property-Mortgage Indebtedness” for more information.

5



Summary Risk Factors
An investment in our Series R-1 common shares involves various risks.  You should consider carefully the risks discussed below and under "Risk Factors" before purchasing our Series R-1 common shares.  If any of the following risks occur, the business, financial condition or results of operations of the R-1 Series could be materially and adversely affected.  In that case, the trading price of our Series R-1 common shares could decline, and you may lose some or all of your investment.
The R-1 Series will hold an interest in a single property, a non-diversified investment.
Under the terms of the purchase and sale agreement for the Property, Core Realty will enter into a master lease for all of the vacant commercial space at the Property as of the closing, and our financial condition, results of operations and cash flow could be materially and adversely affected once the master lease terminates or upon a default under the master lease.

We are employing a novel business model, which may make an investment in the R-1 Series difficult to evaluate as it is unique to the real estate industry.
We and the Asset Manager may not be able to successfully operate the Property or generate sufficient operating cash flows to make or sustain distributions to the holders of our Series R-1 common shares.
If the R-1 Series is unable to timely complete the purchase and sale transaction, or at all, the R-1 Series will have no immediate designated use for substantially all of the net proceeds of this offering, and we may experience delays in locating and securing an attractive alternative investment and, as a result, the R-1 Series will have incurred substantial expenses without the holders of our Series R-1 common shares realizing the expected benefits.
The R-1 Series' investment, leasing and other operational policies are subject to revision from time to time in our board's discretion, which could diminish shareholder returns below expectations.
The R-1 Series' debt service obligations could adversely affect its overall operating results, may jeopardize the R-1 Series' qualification as a REIT, and could adversely affect the ability of the R-1 Series to make distributions to the holders of our Series R-1 common shares and the market price of our Series R-1 common shares.
If the R-1 Series is unable to repay any of its debt obligations in the future, it may be forced to refinance debt or dispose of or further encumber the Property, which could adversely affect distributions to the holders of our Series R-1 common shares.
We depend on our Administrative Agent for the success of each Series and upon access to ETRE's investment professionals and contractors.  We may not find a suitable replacement for our Administrative Agent if the applicable administrative services agreements are terminated, or if key personnel leave the employment of ETRE or otherwise become unavailable to us.
The termination of the administrative services agreement with the R-1 Series is generally limited to cause and certain disposition events related to the Property, which may make it difficult or costly to end our relationship with our Administrative Agent in respect of the R-1 Series and the Property R-1 Subsidiaries.
For so long as the Core Limited R-1 Partner owns at least 5% of the combined limited partnership interests in the Property R-1 Subsidiaries, the termination of the asset and property management agreement will generally be limited to cause and certain disposition events related to the Property, which may make it difficult to end our relationship with the Asset Manager.
We may incur significant transfer tax liability if the Property is transferred, or if Core Limited R-1 Partner transfers any portion of its interest in the Property, during the three-year period following the closing of the purchase and sale transaction.

Potential conflicts of interest may arise among our Administrative Agent and its affiliates, on the one hand, and our Company and our shareholders, on the other hand. 
The Property is located in Philadelphia, Pennsylvania, and adverse economic or regulatory developments in this area could materially and adversely affect the R-1 Series.
We may be unable to renew leases , lease vacant space or re-lease space on favorable terms or at all as the leases expire, which could materially and adversely affect the R-1 Series' financial condition, results of operations and cash flow.
We may not be able to control the R-1 Series' operating costs, or the R-1 Series' expenses may remain constant or increase, even if income from the Property decreases, causing the R-1 Series' results of operations to be adversely affected.
Our shareholders do not elect or vote on our board of directors or the managing member of our Company and have limited ability to influence decisions regarding the businesses of the Series, including the R-1 Series. 
The Series R-1 common shareholders will have limited voting rights and will be bound by a majority vote.
Potential conflicts of interest may arise among the Asset Manager and its affiliates, on the one hand, and the R-1 Series and our Series R-1 common shareholders, on the other hand.
Potential conflicts of interest may arise with respect to certain transactions between the Core Limited R-1 Partner, on the one hand, and the R-1 Series and our Series R-1 common shareholders, on the other.
We have not established a minimum distribution payment level for the R-1 Series and the R-1 Series may be unable to generate sufficient cash flows from its operations to make distributions to holders of Series R-1 common shares at any time in the future.
Failure of each Series to be classified as a separate entity for U.S. federal income tax purposes could adversely affect the timing, amount and character of distributions to a holder of Series R-1 common shares.
The failure of the R-1 Series to qualify as a REIT would subject it to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to holders of our Series R-1 common shares.

6



Our Administrative Services Agreement
Concurrently with the closing of this offering, the R-1 Series will enter into an administrative services agreement with our Administrative Agent, a wholly-owned subsidiary of ETRE Financial, LLC.  Pursuant to the terms of the administrative services agreement, our Administrative Agent will provide certain administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries, as well as a management team and appropriate support personnel. These services include, among others, investor relations and shareholder communications functions for the R-1 Series and assisting the R-1 Series in preparing, reviewing and filing all reports required to be filed by it or us with the SEC, NASDAQ, the Internal Revenue Service and other regulatory agencies. See "Our Administrative Agent-Administrative Services Agreement."

Subject to the supervision and oversight of our board of directors, our Administrative Agent will be responsible for, among other duties: performing financial, accounting and public reporting services. Our Administrative Agent may subcontract any or all of its responsibilities under the administrative services agreement.
  
Our Administrative Agent is expected to provide similar services for each of our Series and Property Subsidiaries, and we expect that each Series that we establish from time to time and the Property Subsidiary related to such Series will enter into an administrative services agreement on similar terms and conditions. Our Administrative Agent may also provide similar services to Other Series Programs.
The administrative services agreement that we will enter into in connection with this offering will have an indefinite term, but may be terminated by our Administrative Agent or the R-1 Series under certain circumstances. The R-1 Series may terminate the administrative services agreement with our Administrative Agent for cause at any time with 30 days prior written notice from our board of directors. Unsatisfactory financial performance of the Property does not constitute "cause" under the administrative services agreement.  See "Our Administrative Agent and the Administrative Services Agreement-Administrative Services Agreement."
In addition, the administrative services agreement with respect to the R-1 Series will be terminated following either (a) a distribution to holders of, or redemption of, outstanding Series R-1 common shares in connection with a disposition of all or substantially all of the R-1 Series' interest in the Property R-1 Subsidiaries, whether held directly or through subsidiaries of the R-1 Series, or the Property R-1 Subsidiaries' interest in the Property, whether held directly or through subsidiaries of the Property R-1 Subsidiaries, as described under "Description of Series R-1 Common Shares-Redemptions-Redemption in Connection with Sale of the Property R-1 Subsidiaries or Property" or (b) a redemption of outstanding Series R-1 common shares pursuant to our tender offer policy as described under "Description of Series R-1 Common Shares-Property Dispositions and Tender Offer Policy as to Series R-1 Common Shares" (which we refer to, in each case, as a "Property Sale").
 The following table summarizes the fees and expense reimbursements that the R-1 Series will pay to our Administrative Agent:
Type
 
Description
 
Payment
Administrative Services Fee
 
________one-time fee upon closing of this offering; $50,000 per quarter plus 2.00% of net operating income during the prior fiscal quarter.(1)
 
Upon closing of this offering; thereafter, quarterly in cash.
Administrative Sale Fee
 
1.00% of the R-1 Series' total capitalization at the end of the month immediately preceding a Property Sale.(2) No administrative sale fee shall be payable to our Administrative Agent in respect of any Property Sale that occurs during the first year following the closing of this offering if the total consideration paid by the purchaser (including any indebtedness assumed by the purchaser) in connection with either the disposition of the Series R-1's interest in the Property R-1 Subsidiaries or the Property or the tender offer related to such Property Sale, as applicable, is less than $77.1 million (the approximate aggregate purchase price paid by us to acquire our aggregate 89.00% interest in the Property).
 
Following a Property Sale, in cash.
Expense reimbursement
 
The R-1 Series and the Property R-1 Subsidiaries will pay all property-level fees, costs and expenses (other than those specifically required to be borne by our Administrative Agent under the administrative services agreement). However, to the extent our Administrative Agent advances the property-level fees, costs and expenses of the R-1 Series and the Property R-1 Subsidiaries, the R-1 Series and the Property R-1 Subsidiaries will reimburse our Administrative Agent for such fees, costs and expenses.
 
Monthly in cash.

(1)
For purposes of calculating the quarterly administrative services fee, the R-1 Series’ net operating income means net income during the fiscal quarter (as determined in accordance with accounting principles generally accepted in the United States, or GAAP), plus (i) total depreciation and amortization, net interest expense and marketing, general and administrative expenses during such fiscal quarter, and (ii) one-time events pursuant to changes in GAAP and certain non-cash items during such fiscal quarter with the approval of a majority of our independent directors.
(2)
For purposes of calculating the administrative sale fee, total capitalization is equal to the sum of the R-1 Series’ total debt, members’ capital, retained earnings and noncontrolling interests in the Property R-1 Subsidiaries.


7



Our Structure

We were formed as a Delaware series limited liability company on May 13, 2015. The R-1 Series, a separate Series of our Company, was established on May 14, 2015 to allow persons who acquire Series R-1 common shares in this offering to own an indirect interest in the Property. We intend for the R-1 Series to elect and qualify to be taxed as a REIT under the Internal Revenue Code commencing with its taxable year ending December 31, 2015.

In accordance with the Delaware LLC Act, the R-1 Series is, and each other Series we may establish in the future will be, a separate Series and not itself a separate legal entity. Section 18-215(b) of the Delaware LLC Act provides that the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable only against the assets of such Series and not against the assets of the limited liability company generally or any other Series. Accordingly, the assets of the R-1 Series include only its interest in the Property and the other assets held by the R-1 Series, including funds delivered for the purchase of Series R-1 common shares.

In addition, Section 18-215(c) of the Delaware LLC Act provides that a series established in accordance with Section 18-215(b) may carry on any lawful business, purpose or activity, other than the business of banking, and has the power and capacity to, in its own name, contract, hold title to assets (including real, personal and intangible property), grant liens and security interests, and sue and be sued. We intend to have each Series, including the R-1 Series, invest in a separate Property Subsidiary that will hold the interests in the property to which such Series relates, and for each Series to otherwise conduct its business, enter into contracts and hold title to assets in its own name to the extent such activities are not undertaken through the applicable Property Subsidiary.

Following the purchase and sale transaction, the R-1 Series will own a 0.01% general partner interest in each of the Property R-1 Subsidiaries through the General R-1 Partner and the ETRE Limited R-1 Partner will own an 88.99% limited partner interest in each of the Property R-1 Subsidiaries. The Seller will continue to own 11.00% of each of the Property R-1 Subsidiaries as a limited partner.

For so long as the Core Limited R-1 Partner and certain of its affiliates and permitted assignees own at least 5% of the interests in each of the Property R-1 Subsidiaries, Core Realty will manage the day to day business, affairs and operations of the Property, subject to the terms and conditions of the asset and property management agreement.

The following chart shows our anticipated structure immediately after giving effect to this offering and the purchase and sale transaction:

(1)
ETRE Financial, LLC is the managing member of our Company, and is the managing member, and controls 100%, of ETRE Asset Management, LLC, our Administrative Agent. ETRE Financial, LLC is partially owned and controlled by its founding members, Paul Frischer and Jesse Stein, who also serve respectively as President and Chief Executive Officer and Chief Operating Officer and Secretary of our company. Mr. Frischer and Mr. Stein have day-to-day management control over ETRE Financial LLC.
(2)
Reflects an aggregate of _______ restricted Series R-1 common shares to be granted to the independent directors under the 2015 non-management director compensation plan.
(3)
After giving effect to this offering, approximately______ % of the Series R-1 common shares outstanding initially will be held by investors in this offering.
(4)
We intend to establish additional Series in the future to hold interests in other real properties. The Series R-1 common shares being sold in this offering will not represent interests in any future Series, and common shares of any future Series will not represent interests in Series R-1.


8



Board Flexibility and Shareholder Influence Over Property Dispositions
We have structured the terms of our operating agreement and our Series R-1 common share tender offer policy to give our board of directors flexibility in structuring disposition transactions and to give holders of our Series R-1 common shares an important role in property dispositions.
Property Dispositions and Tender Offer Policy as to Series R-1 Common Shares
Dispositions of the Property and entity level dispositions of the Property R-1 Subsidiaries require the approval of our board of directors, together with holders of more than 50% of the Series R-1 common shares.  We expect our board of directors will approve dispositions of the Property and entity level dispositions of the Property R-1 Subsidiaries based on its determination, subject to its fiduciary duties to the R-1 Series and the holders of our Series R-1 common shares, that the disposition is advisable and in the best interests of the R-1 Series and such holders of the Series R-1 common shares.

In addition, our tender offer policy as to Series R-1 common shares provides that, in connection with any third‑party purchase offer, tender offer or exchange offer in respect of the Series R-1 common shares that has been accepted by the holders of 75% or more of the aggregate outstanding Series R-1 common shares, our board of directors will, subject to its fiduciary duties to the R-1 Series and the holders of our Series R-1 common shares, cooperate with the successful offeror in order to facilitate the completion of the third‑party purchase offer, tender offer or exchange offer, as applicable, subject to such conditions as our board of directors may determine are necessary to enable the R-1 Series to continue to qualify as a REIT, unless our board of directors determines that our continuing qualification as a REIT is no longer in the best interests of the R-1 Series and the holders of our Series R-1 common shares.  Subject to the conditions described above, following the completion of the third‑party purchase offer, tender offer or exchange offer in respect of the Series R-1 common shares that have been accepted by the holders of 75% or more of the aggregate outstanding Series R-1 common shares, we will effect a redemption as described under "-Redemption in Exchange for Interests of the Property R-1 Subsidiaries at Option of our Board of Directors."

Under the terms of each of the limited partnership agreements of the Property R-1 Subsidiaries, in connection with any dispositions of the Property and entity level dispositions of the Property R-1 Subsidiaries, the R-1 Series has a “drag-along” right to require the Core Limited R-1 Partner to transfer its interests in the Property R-1 Subsidiaries to the third party in the same transaction.

In connection with the consummation of the redemptions described above, we will delist the Series R-1 common shares from the NASDAQ or other national securities exchange on which the shares are then listed. 
This tender offer policy may be amended, modified or rescinded only by the unanimous approval of our board of directors.
The ability to consummate such dispositions or redemptions may be restricted by the terms of the R-1 Series' outstanding indebtedness.
Redemption in Exchange for Interests of the Property R-1 Subsidiaries at Option of our Board of Directors.   
Our operating agreement provides that we may, at any time, redeem all outstanding Series R-1 common shares in exchange for equity interests in the Property R-1 Subsidiaries, a subsidiary of the Property R-1 Subsidiaries and/or any other subsidiary of the R-1 Series. The purpose of this provision is to provide our board of directors with a means by which it can spin off a subsidiary that is a direct or indirect owner of the Property to holders of the Series R-1 common shares. In connection with any such spin-off, we may first convert the applicable spin-off subsidiary into a REIT for U.S. federal income tax purposes or into a Delaware statutory trust, including an entity that has an operating partnership subsidiary.  Our board of directors may in the future seek to effect such a redemption if our board of directors determines it is no longer in the best interests of our Company or the R-1 Series for the Property to be within our Company, including in situations where ownership of the Property may adversely affect the REIT status of the R-1 Series.  In addition, as described above under "-Property Dispositions and Tender Offer Policy as to Series R-1 Common Shares," our policy is to seek to effect such a redemption following certain tender offers in respect of the Series R-1 common shares.
Redemption in Connection with Sale of the Property R-1 Subsidiaries or Property.   
Our operating agreement provides that in the event of a sale, transfer, assignment or other disposition in a transaction or series of related transactions of all or substantially all the R-1 Series' interest in the Property R-1 Subsidiaries, whether held directly or through subsidiaries of the R-1 Series, or Property R-1 Subsidiaries' interest in the Property, whether held directly or through subsidiaries of the Property R-1 Subsidiaries, we are generally required to take one of the following actions, as determined by our board of directors in its sole discretion:

Declare and pay a distribution in cash and/or in securities or other property to holders of the outstanding Series R-1 common shares;

Redeem outstanding Series R-1 common shares in exchange for cash and/or securities or other property; or
Take a combination of the above actions.
For additional information, see "Description of Series R-1 Common Shares-Redemptions-Redemption in Connection with Sale of the Property R-1 Subsidiaries or Property."
Annual Review of Corporate Governance Structure
As part of our efforts to continuously monitor and improve the corporate governance profile applicable to the R-1 Series, the nominating and corporate governance committee of our board of directors, which is comprised solely of independent directors, will, on an annual basis, conduct a review of the corporate governance structure impacting the R-1 Series, taking into account, among other factors, the corporate governance structure and approaches applicable to other Series.  In addition, where the nominating and corporate governance committee determines that changes to the corporate governance structure applicable to the R-1 Series are appropriate and in the best interests of the holders of our Series R-1 common shares, the committee will recommend such changes to our board of directors for adoption and, if required, for approval of the holders of our Series R-1 common shares.
Other Governance Matters
Other than our Series R-1 common shareholders participating in decisions relating to property dispositions and tender offers as described above, our operating agreement vests most other decisions relating to each property, including decisions relating to debt financing, the engagement of property managers and asset managers and other decisions relating to capital improvement projects for each property, in our board of directors and the Administrative Agent. The Series R-1 common shareholders will have limited voting rights and influence over such decisions.
Conflicts of Interest
Conflicts of interest exist and may arise in the future as a result of the relationships between our Administrative Agent and its affiliates (including ETRE Financial, LLC, the managing member of our Company, and Other Series Programs), on the one hand, and us, each Series and our shareholders, on the other hand.
Our operating agreement provides that the real property, affairs and business of each Series, including the R-1 Series, will be managed under the direction of our single board of directors.  ETRE Financial, LLC, as the managing member of our Company, will have the sole right to nominate, elect and remove the members of our board of directors.  Accordingly, shareholders will have no right to nominate, elect or remove members of our board of directors and the managing member will have complete discretion in nominating, electing or removing members of our board of directors. 
We do not expect to have any employees and we will rely completely on our Administrative Agent to provide each Series and Property Subsidiary, including the R-1 Series and the Property R-1 Subsidiaries, with administrative and certain advisory services.  The administrative services agreement with our Administrative Agent was prepared by related parties and its terms, including fees, expense reimbursements and other amounts payable to our Administrative Agent, may not be as favorable to the R-1 Series as if the agreement had been negotiated at arm's length between unaffiliated third parties.
Certain of our officers and directors also serve or may serve as officers, directors or employees of ETRE as well as other ETRE sponsored vehicles and other companies unaffiliated with ETRE.  Accordingly, the ability of these persons to engage in other business activities may reduce the time they spend managing our business, including the business of the R-1 Series.  In addition, these persons may have obligations to those entities, the fulfillment of which might not be in the best interests of us, any Series or any of our shareholders. 
Moreover, our officers and directors will serve as officers and directors for, and our Administrative Agent and ETRE's personnel will provide similar services to, any other Series or Other Series Programs we establish in the future.  The R-1 Series and any other Series or Other Series Programs we establish in the future may have overlapping investment strategies and objectives, and our board of directors, our officers and our Administrative Agent may face conflicts of interest in allocating sale, financing, leasing and other business opportunities among the real properties owned by the different Series and Other Series Programs.  To help alleviate any perceived or actual conflicts of interest, our board of directors has adopted an inter-series relationship, conflicts of interest and opportunity allocation policy (which we refer to as the "Inter-Series Policy"), which is administered by our Administrative Agent and has been designed to govern the operating relationships among the Series, address conflicts of interest among the Series and promote the fair allocation of sale, financing, leasing and other business opportunities among the real properties owned by the different Series, including any Other Series Programs.  See "Management-Inter-Series Relationship, Conflicts of Interest and Opportunity Allocation Policy."  The Inter-Series Policy provides our Administrative Agent with significant flexibility with respect to its ability to make decisions and pursue actions involving conflicts of interest among the Series and Other Series Programs.  Given the significant flexibility afforded our Administrative Agent to resolve such conflicts of interest, our Administrative Agent may resolve conflicts of interests pursuant to the Inter-Series Policy in a manner that holders of Series R-1 common shares may not believe to be in their best interests or in the best interests of the R-1 Series.  Neither holders of our Series R-1 common shares, the R-1 Series, the Property R-1 Subsidiaries, nor the General R-1 Partner will have any recourse against our Administrative Agent if our Administrative Agent satisfies its obligations under the administrative services agreement with the R-1 Series.


9



The nominating and corporate governance committee of our board of directors, which is comprised solely of independent directors, will review specific matters that our Administrative Agent believes may involve conflicts of interest and that are not otherwise addressed by the Inter-Series Policy.  These conflicts of interest may include conflicts between the interests of our Company or any Series, on the one hand, and the interests of our Administrative Agent, and its affiliates, (including ETRE and Other Series Programs) on the other hand.  The nominating and corporate governance committee will determine whether the resolution of any conflict of interest submitted to it is fair and reasonable to us and our shareholders.  If our Administrative Agent obtains such approval of any matter, such matter will be conclusively deemed to be fair and reasonable to us and our shareholders and not a breach by us of any duties that we may owe to our shareholders. 
We do not have a policy that expressly prohibits our directors, officers, security holders or affiliates from engaging for their own account in business activities of the types conducted by us.  However, our code of business conduct and ethics prohibits our directors and executive officers, as well as employees of our Administrative Agent or ETRE who provide services to us, from engaging in any transaction that involves an actual conflict of interest with us and that is not otherwise addressed by the Inter-Series Policy without the approval of the nominating and corporate governance committee."
In addition, the Core Limited R-1 Partner may have interests, including economic interests, that are materially different than the interests of our Series R-1 common shareholders. In particular, upon completion of this offering and the purchase and sale transaction, the Core Limited R-1 Partner will own limited partnership interests in the Property R-1 Subsidiaries, but will not own any of our Series R-1 common shares.
REIT Qualification
In connection with this offering, we intend for the R-1 Series to elect and qualify to be taxed as a REIT under the Internal Revenue Code commencing with its short taxable year ending December 31, 2015.  We believe that the R-1 Series has been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and that its intended manner of operation will enable it to meet the requirements for qualification and taxation as a REIT.  To qualify as a REIT, the R-1 Series must meet on a continuing basis, through its organization and actual investment and operating results, various requirements under the Internal Revenue Code relating to, among other things, the sources of its gross income, the composition and values of its assets, its distribution levels and the diversity of ownership of its shares.  If the R-1 Series fails to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which it failed to qualify as a REIT.  Even if the R-1 Series qualifies for taxation as a REIT, it may be subject to certain U.S. federal, state and local taxes on its income or property.  Any distributions paid by the R-1 Series generally will not be eligible for taxation at the preferential U.S. federal income tax rates that currently apply to certain distributions received by individuals from taxable corporations.
Restrictions on Ownership of our Series R-1 Common Shares
To assist the R-1 Series in qualifying as a REIT, our operating agreement, subject to certain exceptions, contains restrictions on the number of Series R-1 common shares and the number of shares of the R-1 Series that a person may own.  Our operating agreement provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Internal Revenue Code, either more than 9.8% in value or in number of Series R-1 common shares, whichever is more restrictive, of the outstanding Series R-1 common shares.  Our board of directors may, in its sole discretion, waive the 9.8% ownership limit with respect to a particular holder of Series R-1 common shares; provided, however, that our board of directors may only waive the 9.8% ownership limit after it is presented with evidence satisfactory to it that such ownership will not then or in the future jeopardize the R-1 Series' qualification as a REIT. 
Our operating agreement also prohibits any person from, among other things:
beneficially or constructively owning Series R-1 common shares that would result in the R-1 Series being "closely held" under Section 856(h) of the Internal Revenue Code, or otherwise cause the R-1 Series to fail to qualify as a REIT; and
transferring our Series R-1 common shares if such transfer would result in our Series R-1 common shares being owned by fewer than 100 persons.
In addition, our operating agreement provides that any ownership or purported transfer of our Series R-1 common shares in violation of the foregoing restrictions will result in the shares so owned or transferred being automatically transferred to a charitable trust for the benefit of a charitable beneficiary and the purported owner or transferee acquiring no rights in such shares.  If a transfer to a charitable trust would be ineffective for any reason to prevent a violation of the restriction, the transfer resulting in such violation will be void from the time of such purported transfer.

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Implications of being an Emerging Growth Company
We are an "emerging growth company" as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various disclosure and reporting requirements that are otherwise generally applicable to public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.  We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company.  We will cease to be an emerging growth company on the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion, (ii) December 31 of the fiscal year that we become a "large accelerated filer" as defined in Rule 12b‑2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the fair market value of our common shares that are held by non‑affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, (iii) the date on which we have issued more than $1.0 billion in non‑convertible debt securities during the preceding three-year period or (iv) the end of the fiscal year following the fifth anniversary of our initial public offering.  We have irrevocably opted out of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards.  As a result, we will comply with new or revised accounting standards on the same time frames as other public companies that are not emerging growth companies.  If we take advantage of one or more of these exemptions, we do not know if investors will find our Series R-1 common shares or the common shares of any other Series we may establish in the future less attractive as a result.  If they do, there would likely be a less active trading market for our securities than would otherwise be the case.
Our Company Information
Our principal executive offices are located at 44 Wall Street, New York, New York, 10005.  Our telephone number is (212) 596-7225

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THE OFFERING
The Property................................................
Penn Treaty Village Pennthouses, a residential rental community consisting of 224 apartment homes, 28,860 square feet of retail space, and 147 parking spaces, located in Philadelphia, Pennsylvania.
Series R-1 common shares offered by us...
____________ shares (plus up to an additional _________ shares that we may issue and sell upon the exercise of the underwriters' over-allotment option).
Series R-1 common shares to be outstanding after this offering.....................
___________ shares.(1)
Use of proceeds ..........................................
We estimate that the net proceeds from this offering, after deducting the underwriting discount and estimated offering expenses payable by us, will be approximately $______million (based on the offering price of $______ per share), or $____  million if the underwriters exercise their over-allotment option in full. Substantially all of the net proceeds from this offering will be used to acquire an 89.00% controlling interest in the Property, as well as to pay certain closing costs and fund working capital reserves. Under the terms of the purchase and sale agreement between Holdings R-1 Subsidiary, the Seller and the Property R-1 Subsidiaries, Holdings R-1 Subsidiary will acquire an aggregate 89.00% controlling interest in each of the Property R-1 Subsidiaries from the Seller for approximately $78.0 million in cash (based on the negotiated value of $82.0 million for the Property, subject to pro-rations and adjustments as set forth in the purchase and sale agreement) and the Seller will retain an aggregate 11.00% limited partner interest in each of the Property R-1 Subsidiaries. In order to fund $78.0 million to the Seller, the R-1 Series will contribute $26.0 million of the net proceeds of this offering to Holdings R-1 Subsidiary which in turn will pay such $26.0 million to the Seller, with the remaining $52.0 million of the purchase price to be funded from the proceeds of a new $52.0 million non-recourse mortgage loan on the Property, which we intend to cause the Property R-1 Subsidiaries to enter into at the closing. The balance of the net proceeds from this offering will be held by the R-1 Series to pay approximately $______ million in closing costs related to this offering and the purchase and sale transaction and to fund approximately $______ million in working capital cash reserves . We expect to consummate the purchase and sale transaction substantially concurrently with the completion of this offering.
Distribution policy.....................................
We intend to make regular quarterly distributions to holders of Series R-1 common shares. We intend to pay a pro rata initial distribution with respect to the period commencing on the completion of this offering and ending on the last day of the then current fiscal quarter, based on $ per share for a full quarter. On an annualized basis, this would be $ per share, or an annual distribution rate of approximately % based on the assumed initial public offering price set forth on the front cover of the prospectus. We intend to maintain a distribution rate for the 12 month period following completion of this offering that is at or above our initial distribution rate unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in determining our initial distribution rate. We do not intend to reduce the expected distributions per share if the underwriters’ option to purchase additional common shares to cover over-allotments is exercised. Any distributions we pay in the future will depend upon our actual results of operations, liquidity, cash flows, financial conditions, economic conditions, debt service requirements and other factors that could differ materially from our current expectations. See "Distribution Policy."
Proposed NASDAQ symbol...................
"EPNT"
Ownership and transfer restrictions .......
To assist the R-1 Series in qualifying as a REIT, our operating agreement, subject to certain exceptions, contains restrictions on the number of Series R-1 common shares and the number of shares of the R-1 Series that a person may own. Our operating agreement provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Internal Revenue Code, either more than 9.8% in value or in number of the Series R-1 common shares, whichever is more restrictive, of the outstanding Series R-1 common shares. See "Description of Series R-1 Common Shares-Operating Agreement and Bylaws-Restrictions on Ownership and Transfer."
Risk Factors.........................................
An investment in our Series R-1 common shares involves various risks. You should consider carefully the risks discussed below and under ‘‘Risk Factors’’ before purchasing our Series R-1 common shares.
(1)  As of the date of this prospectus, we have a total of 100 Series R-1 common shares outstanding, which were sold to Jesse Stein, one of our executive officers and an officer of ETRE Financial, LLC, in connection with the initial capitalization of the R-1 Series for total consideration of $1,000. At the closing of this offering, we will repurchase these shares from Mr. Stein for $1,000. Accordingly, the 100 Series R-1 common shares that we currently have outstanding are excluded from the number of Series R-1 common shares to be outstanding immediately after the closing of this offering. The number of Series R-1 common shares to be outstanding immediately after the closing of this offering also includes an aggregate of ______ restricted Series R-1 common shares to be granted to our independent directors upon the completion of this offering under our 2015 Non-Management Director Compensation Plan, or the 2015 Director Plan, but excludes _________ Series R-1 common shares that we may issue and sell upon the exercise of the underwriters' overallotment option.


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RISK FACTORS
An investment in our Series R-1 common shares involves risks.  In addition to other information contained elsewhere in this prospectus, you should carefully consider the following risks before acquiring our Series R-1 common shares offered by this prospectus.  The occurrence of any of the following risks could materially and adversely affect the business, prospects, financial condition or results of operations of the R-1 Series, the ability of the R-1 Series to make cash distributions to the holders of Series R-1 common shares and the market price of our Series R-1 common shares, which could cause you to lose all or some of your investment in our Series R-1 common shares.  Some statements in this prospectus, including statements in the following risk factors, constitute forward‑looking statements.  See "Forward‑Looking Statements."
Risks Related to the Business of the R-1 Series
The R-1 Series will hold an interest in a single property, a non-diversified investment.
The R-1 Series will, through its general and limited partner interests in the Property R-1 Subsidiaries, make an investment in a single apartment complex property, a non-diversified investment.  We intend for the Property R-1 Subsidiaries to own and operate only the Property.  The R-1 Series’ return on its investment will depend on the revenues generated by the Property and the appreciation of the value of the Property over time.  These, in turn, are determined by such factors as national and local economic cycles and conditions in the commercial office market, the real estate market in Philadelphia, Pennsylvania, financial markets and the economy, competition from existing rental space as well as future additional space and government regulation (such as tax and building code charges).  The value of the Property may decline substantially after the R-1 Series purchases its interest in it.
Our financial condition, results of operations and cash flow could be materially and adversely affected once the master lease terminates or upon a default under the master lease.
Under the terms of the purchase and sale agreement for the Property, Core Realty will enter into a master lease for all of the vacant commercial space at the Property as of the closing, which currently consists of 19,138 square feet of vacant space, or 66% of the rentable commercial space at the Property. The master lease will require Core Realty, among other matters, to pay annual rent of $516,726, or $27.00 per square foot (net to us), for such vacant space, in monthly installments of $43,061. During the term of the master lease, we will have the right to lease all or a portion of the master-leased space to a new tenant without the consent of Core Realty provided the rent per square foot under the new lease is $27.00 or greater and (ii) Core Realty will have the right to lease all or a portion of the master-leased space to a new tenant that has been approved by us. However, we cannot give any assurances as to whether Core Realty or we will be able to enter into new leases with replacement tenants prior to the end of the term of the master lease nor to the future financial viability of any such replacement tenants. As our income from the master lease represents 10.3% of our total income from the Property on a pro forma basis as of December 31, 2014, the R-1 Series’ financial condition, results of operations and cash flow could be materially and adversely affected once the master lease terminates.
Further, the master lease is not guaranteed, and our recourse against Core Realty in the event of a default may be limited. If there is a non-payment default by Core Realty under the master lease, any distributions payable to the Core Limited R-1 Partner pursuant to the limited partnership agreements of the Property R-1 Subsidiaries will instead be distributed to us until 150% of the defaulted amount has been distributed to us. In addition, a default by Core Realty under the master lease will give us the right to terminate the asset and property management agreement and replace Core Realty as the Asset Manager. However, we may be unable to collect the full amount of the base rent owed to us under the master lease in a timely manner or at all. See “Business and Property-Master Lease” below.

We are employing a novel business model, which may make an investment in the R-1 Series difficult to evaluate as it is unique to the real estate industry.

We were formed to permit public investment in commercial real estate on a single-asset basis.  We are unaware of any public REIT that is currently attempting to implement a single-asset strategy and, as a result, no peer companies exist.  We cannot predict the extent to which investor interest in the Property will lead to the development of an active trading market for our Series R-1 common shares on the NASDAQ or otherwise or how liquid that market might become.  Similarly, we cannot predict the extent to which we will be able to successfully offer to investors shares of the Series we intend to establish in the future and, accordingly, there may be no comparable publicly-traded companies or shares against which you will be able to evaluate the performance of the R-1 Series and our Series R-1 common shares.
We and the Asset Manager may not be able to successfully operate the Property or generate sufficient operating cash flows to make or sustain distributions to the holders of our Series R-1 common shares.

We expect the R-1 Series will complete the purchase and sale transaction substantially concurrently with the completion of this offering.  Following the completion of the purchase and sale, we and the Asset Manager may not be able to successfully operate the Property or implement the operating policies and strategies of the R-1 Series successfully, which may affect our ability to make or sustain distributions to the holders of our Series R-1 common shares.  Furthermore, there can be no assurance that we and the Asset Manager will be able to generate sufficient operating cash flows to pay operating expenses of the R-1 Series or the Property R-1 Subsidiaries and make distributions to the holders of our Series R-1 common shares.

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If the R-1 Series is unable to timely complete the purchase and sale transaction or at all, the R-1 Series will have no immediate designated use for substantially all of the net proceeds of this offering, and we may experience delays in locating and securing an attractive alternative investment and, as a result, the R-1 Series will have incurred substantial expenses without the holders of our Series R-1 common shares realizing the expected benefits.
We intend for the R-1 Series to use the net proceeds from this offering to fund the cash portion of the purchase price for the 89.00% interest in the Property.  We cannot assure you that the R-1 Series will acquire this interest because the purchase and sale transaction is subject to a variety of factors, such as the satisfaction of closing conditions, including receipt of all necessary third‑party consents and approvals.  If we are unable to complete the purchase and sale transaction, the R-1 Series will have no specific designated use for the net proceeds from this offering and investors will be unable to evaluate in advance the manner in which we invest, or the economic merits of the property the R-1 Series may ultimately acquire with, the net proceeds. In addition, if the R-1 Series does not complete the purchase and sale transaction within the anticipated time frame or at all, we may experience delays in locating and securing an attractive alternative investment.  These delays could result in the R-1 Series' future operating results not meeting expectations and adversely affect its ability to make distributions to the holders of Series R-1 common shares.

We are a newly formed company and subject to the risks of any newly established business enterprise.
As a newly formed company, we are subject to the risks of any newly established business enterprise, including risks that we will be unable to create effective operating and financial controls and systems for our Company and each Series we may establish in the future or effectively manage our anticipated growth, including in connection with the additional Series we expect to establish in the future, any of which could have a material adverse effect on the business and operating results of the R-1 Series.
The R-1 Series' investment, leasing and other operational policies are subject to revision from time to time in our board's discretion, which could diminish shareholder returns below expectations.
The R-1 Series' investment, leasing and other operational policies related to the day-to-day management of the R-1 Series business may be amended or revised from time to time at the discretion of our board of directors, without a vote of our shareholders.  Such discretion could result in our Series R-1 common shares failing to yield returns consistent with investors' expectations.
The consideration paid by us in exchange for our interests in the Property R-1 Subsidiaries may exceed the valuation that would have been determined by a third-party valuation expert engaged to determine an estimate of the fair market value of the Property.
The amount of consideration we will pay for our indirect interest in the Property was negotiated on an arm's-length basis, but neither us nor the current owners of the Property engaged any third-party valuation experts to determine the fair market value of the Property. As a result, the consideration to be paid by us for the acquisition of the Property may exceed the valuation that would be determined by a third-party valuation expert engaged to determine an estimate of the fair market value of the Property.
The ability of the R-1 Series to make distributions to the holders of Series R-1 common shares is subject to fluctuations in its financial performance, operating results and unanticipated capital improvements requirements.
In order for the R-1 Series to qualify for taxation as a REIT, it will be required to distribute at least 90% of its REIT taxable income (determined before the deduction for dividends paid and excluding any net capital gains) each year to the holders of Series R-1 common shares.  To the extent the R-1 Series satisfies the 90% distribution requirement but distributes less than 100% of its taxable income, it will be subject to federal income tax on the retained taxable income.  In the event of downturns in its operating results, unanticipated capital improvements to the Property or other factors, the R-1 Series may be unable to declare or pay distributions to the holders of Series R-1 common shares.  The timing and amount of distributions are in the sole discretion of our board of directors, which will consider, among other factors, the R-1 Series' financial performance, any debt service obligations, any debt covenants, capital expenditure requirements and REIT distribution requirements.  We cannot assure you that we will generate sufficient cash from the Property owned by the Property R-1 Subsidiaries in order to fund distributions to holders of Series R-1 common shares.
The R-1 Series' debt service obligations could adversely affect its overall operating results, may jeopardize the R-1 Series' qualification as a REIT, and could adversely affect the ability of the R-1 Series to make distributions to the holders of our Series R-1 common shares and the market price of our Series R-1 common shares.
We have received a term sheet from Arbor Commercial Funding for a 10-year commercial mortgage loan, which will enable the Property R-1 Subsidiaries to borrow approximately $52,000,000.  The proposed loan, providing for an interest-only payment feature for 5 years followed by 30 years amortization, is expected to bear interest at a fixed rate of 4.25% per annum.  The loan is expected to be secured by a first mortgage lien on the Property.  Certain penalties may apply upon prepayment of the loan, except during the last 3 months of the loan term. The closing of the mortgage loan is contingent on a number of conditions including the lender’s due diligence, the negotiation and execution of definitive documents relating to the mortgage loan and approval of the lender’s loan committee.   We cannot assure you that the Property R-1 Subsidiaries will be able to enter into the mortgage loan on the terms contemplated by the term sheet or at all.

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Although our governing documents contain limitations related to certain types of debt financing and cross-subsidiary guarantees, in general, these limitations do not restrict the amount of debt that the R-1 Series can incur, directly or through the Property R-1 Subsidiaries and their respective subsidiaries, and our board of directors may approve increases in the R-1 Series' leverage at any time without the approval of the holders of our Series R-1 common shares.  As a result, the R-1 Series may be able to incur substantial additional debt, including secured debt, in the future.  The Property's existing debt, including the Property R-1 Subsidiaries' indemnification obligations in respect thereof, and the incurrence of any new debt could subject the R-1 Series to many risks, including the risk that:
the R-1 Series' operating cash flow will be insufficient to make required payments of principal and interest;
the R-1 Series' leverage may increase its vulnerability to adverse economic and industry conditions;
the R-1 Series may be required to dedicate a substantial portion of its operating cash flow from operations to payments on its debt, thereby reducing cash available for distribution to the holders of our Series R-1 common shares, funds available for operations and capital expenditures or other purposes; and
the terms of the debt may limit the R-1 Series' ability to make distributions to the holders of our Series R-1 common shares, which may adversely affect the market price of our Series R-1 common shares.
If the R-1 Series or its subsidiaries violate covenants in the loan or any other of the R-1 Series' or such subsidiaries debt agreements or related obligations, the R-1 Series or its subsidiaries could be required to repay all or a portion of its indebtedness before maturity at a time when the R-1 Series or its subsidiaries might be unable to arrange financing for such repayment on attractive terms, if at all.
If the R-1 Series is unable to repay its debt obligations in the future, it may be forced to refinance debt or dispose of or further encumber the Property, which could adversely affect distributions to the holders of our Series R-1 common shares.
If the R-1 Series or its subsidiaries do not have sufficient funds to repay any of its or their existing or future debt (including, in the case of the Property R-1 Subsidiaries, the expected mortgage loan) at maturity, or before maturity in the event of a breach of its or their debt agreements and its or their lenders exercise their right to accelerate repayment, it may be necessary to refinance the debt through additional debt or equity financings.  If the R-1 Series or its subsidiaries are unable to refinance its or their debt on acceptable terms, the R-1 Series may be forced to dispose of its interest in the Property, or its subsidiaries may be forced to dispose of the Property, on disadvantageous terms, potentially resulting in losses.  To the extent the R-1 Series or its subsidiaries cannot meet any future debt service obligations, they will risk losing the Property or any interest therein.  Adverse economic conditions could also cause the terms on which the R-1 Series or its subsidiaries borrow in the future to be unfavorable.  The R-1 Series could be required to liquidate its interest in the Property or its subsidiaries could be required to liquidate the Property in order to meet their respective debt service obligations at times which may not permit the R-1 Series to receive an attractive return on its investment.

Interest expense on any debt incurred may limit cash available for distribution to the holders of our Series R-1 common shares.

The R-1 Series may incur, directly or through the Property R-1 Subsidiaries or their respective subsidiaries, indebtedness that bears interest at variable rates.  Higher interest rates could increase debt service requirements on any variable rate debt incurred and could reduce the amounts available for distribution to the holders of our Series R-1 common shares, as well as reduce funds available for operations, capital expenditure or other purposes. 
Failure to hedge effectively against interest rate changes in the future may adversely affect the R-1 Series' results of operations and its ability to make distributions to the holders of our Series R-1 common shares.
To the extent consistent with our intention to qualify the R-1 Series as a REIT for federal income tax purposes, we may obtain in the future one or more forms of interest rate protection for the R-1 Series – in the form of swap agreements, interest rate cap contracts or similar agreements – to "hedge" against the possible negative effects of interest rate fluctuations.  However, we cannot assure you that any hedging will relieve the adverse effects of interest rate increases or that counterparties under these agreement will honor their obligations thereunder.
The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources.  More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information.  As our Administrative Agent's reliance on technology has increased, so have the risks posed to our Administrative Agent's systems, both internal and those our Administrative Agent has outsourced.  Our three primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationships with our tenants, and private data exposure.  Our Administrative Agent has implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident.

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Risks Related to Our Relationship with Our Administrative Agent and the Managing Member
We depend on our Administrative Agent for the success of each Series and upon access to ETRE's investment professionals and contractors.  We may not find a suitable replacement for our Administrative Agent if the administrative services agreement is terminated, or if key personnel leave the employment of ETRE or otherwise become unavailable to us.
We do not expect to have any employees and we rely completely on our Administrative Agent to provide each Series, including the R-1 Series, and each Property Subsidiary, including the Property R-1 Subsidiaries, with administrative and certain advisory services.  We have no separate facilities and are completely reliant on our Administrative Agent, which has significant discretion as to the implementation of the operating policies and strategies of each Series, including the R-1 Series.  We depend on the diligence, skill and network of business contacts of our Administrative Agent.  We expect to benefit from the personnel, relationships and experience of the executive team and other personnel of ETRE.  The executive officers and key personnel of ETRE will monitor and manage the properties of each Series, including the R-1 Series; therefore, the success of each Series will depend on their continued service. 
The departure of any of the senior personnel of ETRE, or of a significant number of the personnel of ETRE, could have a material adverse effect on the ability of each Series, including the R-1 Series, to achieve its investment objectives.  In addition, we offer no assurance that our Administrative Agent will remain the administrative agent to each Series, including the R-1 Series, or that we will continue to have access to ETRE's personnel.  The administrative services agreement will have an indefinite term, but may be terminated by our Administrative Agent or the R-1 Series under certain circumstances.  If the administrative services agreement related to the R-1 Series is terminated and no suitable replacement is found to manage the R-1 Series, we may not be able to execute the business plan of the R-1 Series.   
The ability of our Administrative Agent and ETRE's officers and other personnel to engage in other business activities, including managing other Series and Other Series Programs, may reduce the time our Administrative Agent spends managing the business of the R-1 Series and may result in certain conflicts of interest.  
Certain of our officers and directors also serve or may serve as officers, directors or employees of ETRE as well as other ETRE sponsored vehicles, including Other Series Programs, and other companies unaffiliated with ETRE.  These other business activities may reduce the time these persons spend managing our business.  In addition, these persons may have obligations to those entities, the fulfillment of which might not be in the best interests of us, any Series or any of our shareholders.  Moreover, our officers and directors will serve as officers and directors for, and our Administrative Agent and ETRE's personnel will provide administrative services to, any other Series and Property Subsidiaries we will establish in the future.  The R-1 Series and any other Series we will establish in the future may have overlapping investment strategies and objectives, and our board of directors, our officers and our Administrative Agent may face conflicts of interest in allocating sale, financing, leasing and other business opportunities among the real properties owned by the different Series. Our Administrative Agent will face similar conflicts of interest with respect to Other Series Programs. 
The administrative services agreement with the R-1 Series was prepared by related parties and its terms, including fees payable to our Administrative Agent, may not be as favorable to the R-1 Series as if they had been negotiated with an unaffiliated third party.
The administrative services agreement with the R-1 Series was prepared by related parties and its terms, including fees payable by the R-1 Series to our Administrative Agent, may not be as favorable to the R-1 Series as if they had been negotiated with an unaffiliated third party.
The termination of the administrative services agreement with the R-1 Series and the Property R-1 Subsidiaries is generally limited to cause and certain disposition events related to the Property, which may make it difficult or costly to end our relationship with our Administrative Agent.
Termination of the administrative services agreement with the R-1 Series is generally limited to cause and certain disposition events related to the Property. The term "cause" is limited to those circumstances described under "Our Administrative Agent and the Administrative Services Agreement—Administrative Services Agreement," which include certain material breaches, certain acts constituting fraud, misappropriation of funds, embezzlement and gross negligence, certain bankruptcy matters and felony convictions involving our Administrative Agent and the dissolution of our Administrative Agent.  Unsatisfactory financial performance does not constitute "cause" under the administrative services agreement.  These provisions make it difficult to end the R-1 Series' relationship with our Administrative Agent, even if we believe our Administrative Agent's performance is not satisfactory.  In addition, following a Property Sale, the administrative services agreement with respect to the R-1 Series will be terminated, but the R-1 Series will be required to pay our Administrative Agent, subject to certain conditions, an administrative sale fee, in cash, in an amount equal to 1.00% of total capitalization (as defined in the administrative services agreement) at the end of the month immediately preceding the Property Sale.  This provision increases the effective cost to the R-1 Series of disposing of the Property and the effective cost to a bidder of conducting a tender offer for our Series R-1 common shares, which may adversely affect shareholders' and potential bidders' inclination to approve or engage in such a transaction.

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Our Administrative Agent's liability to the R-1 Series is limited under the administrative services agreement, and the R-1 Series have agreed to indemnify our Administrative Agent against certain liabilities.  As a result, the R-1 Series could experience poor performance or losses for which our Administrative Agent would not be liable. 
Pursuant to the administrative services agreement, our Administrative Agent, its officers, stockholders, members, managers, directors, personnel, any person or entity controlling or controlled by our Administrative Agent and any of their officers, stockholders, members, managers, directors, employees, consultants and personnel, and any person providing advisory services to our Administrative Agent are not liable to us, the R-1 Series, the Property R-1 Subsidiaries, our directors, the General R-1 Partner, our shareholders or any subsidiary's shareholders or partners for acts or omissions performed in accordance with and pursuant to the administrative services agreement, except because of acts constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the administrative services agreement, as determined by a final non-appealable order of a court of competent jurisdiction.  The R-1 Series will indemnify our Administrative Agent, its officers, stockholders, members, managers, directors, personnel, any person or entity controlling or controlled by our Administrative Agent and any of their officers, stockholders, members, managers, directors, employees, consultants and personnel, and any person providing advisory services to our Administrative Agent with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts of our Administrative Agent not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of duties, performed in good faith in accordance with and pursuant to the administrative services agreement.
Our operating agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of the managing member.
Our operating agreement provides that the managing member, in exercising its rights in its capacity as the managing member, will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us, any Series or any of our shareholders and will not be subject to any different standards imposed by our operating agreement, the Delaware LLC Act or under any other law, rule or regulation or in equity.  These modifications of fiduciary duties are expressly permitted by Delaware law.
We have agreed to limit remedies available to us and our shareholders for actions by our Administrative Agent and the managing member that might otherwise constitute a breach of duty.
We have agreed to limit the obligations of ETRE Financial, LLC, the managing member of our Company, to us under our operating agreement.  In addition, our Administrative Agent maintains a contractual, as opposed to a fiduciary relationship, with us, each Series and our shareholders.  Accordingly, we and our shareholders will only have recourse and be able to seek remedies against the managing member and our Administrative Agent to the extent they breach their obligations pursuant to our operating agreement or administrative services agreement, as applicable.  Furthermore, we have agreed to limit the liability of the managing member and our Administrative Agent and to indemnify the managing member and our Administrative Agent against certain liabilities.  These provisions are detrimental to shareholders because they restrict the remedies available to them for actions that without those limitations might constitute breaches of duty, including fiduciary duties.  By purchasing Series R-1 common shares, you will be treated as having consented to the provisions set forth in the operating agreement.  In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the administrative services agreement entered into by the R-1 Series or our operating agreement because of our desire to maintain our ongoing relationship with our Administrative Agent and the managing member.
Potential conflicts of interest may arise among our Administrative Agent and its affiliates, on the one hand, and our Company and our shareholders, on the other hand. 
Conflicts of interest may arise among our Administrative Agent and its affiliates, on the one hand, and us and our shareholders, on the other hand, including that our board of directors, our officers and our Administrative Agent and ETRE's personnel may face conflicts of interest in allocating sale, financing, leasing and other business opportunities among the real properties owned by the different Series.  See "Conflicts of Interest; Certain Relationships and Related Party Transactions" for a discussion of these conflicts.  As a result, there may be times when our Administrative Agent and its affiliates have interests that differ from those of our Company and our shareholders.  In addition, our operating agreement and the administrative services agreement with the R-1 Series reduce or eliminate the duties (including fiduciary duties) of our Administrative Agent and its affiliates.  As a result, our Administrative Agent and its affiliates may favor their own interests and the interests of their affiliates over the interests of our Company and our shareholders, which may affect shareholders' investment returns.

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It will be difficult for a shareholder to challenge the resolution by the nominating and corporate governance committee of certain conflicts of interest related to our Administrative Agent and its affiliates. 
The nominating and corporate governance committee of our board of directors will review specific matters that our Administrative Agent believes may involve conflicts of interest and that are not otherwise addressed by the Inter-Series Policy (which addresses certain conflicts of interest among the different Series).  These conflicts of interest may include conflicts between the interests of our Company or any Series, on the one hand, and the interests of our Administrative Agent and its affiliates, on the other hand.  The nominating and corporate governance committee will determine whether the resolution of any conflict of interest submitted to it is fair and reasonable to us and our shareholders.  If our Administrative Agent obtains such approval of any matter, such matter will be conclusively deemed to be fair and reasonable to us and our shareholders and not a breach by us of any duties that we may owe to our shareholders.  This is different from the situation with Delaware corporations, where a conflict resolution by a committee consisting solely of independent directors may, in certain circumstances, merely shift the burden of demonstrating unfairness to the plaintiff.  If you purchase Series R-1 common shares, you will be treated as having consented to the provisions set forth in the operating agreement, including provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other duties under applicable state law. 
Our Administrative Agent may resolve conflicts of interests among the different Series and Other Series Programs in a manner that shareholders may not believe to be in their best interests.
The R-1 Series and any other Series or Other Series Programs we have established, or may establish in the future may have overlapping investment strategies and objectives, and our board of directors, our officers and our Administrative Agent may face conflicts of interest in allocating sale, financing, leasing and other business opportunities among the real properties owned by the different Series and Other Series Programs.  Our board of directors has adopted the Inter-Series Policy, which is administered by our Administrative Agent and has been designed to govern the operating relationships among the Series, address conflicts of interest among the Series and promote the fair allocation of sale, financing, leasing and other business opportunities among the real properties owned by the different Series, including any Other Series Programs.  See "Management-Inter-Series Relationship, Conflicts of Interest and Opportunity Allocation Policy."  The Inter-Series Policy provides our Administrative Agent with significant flexibility with respect to its ability to make decisions and pursue actions involving conflicts of interest among the Series and Other Series Programs.  Given the significant flexibility afforded our Administrative Agent to resolve such conflicts of interest, our Administrative Agent may resolve conflicts of interests pursuant to the Inter-Series Policy in a manner that shareholders may not believe to be in their best interests.  Neither shareholders, any Series nor any Property Subsidiary will have any recourse against our Administrative Agent if our Administrative Agent satisfies its obligations under the administrative services agreement.
We do not own the ETRE name, but we may use the name pursuant to a license agreement with ETRE.  Use of the name by other parties or the termination of our license agreement may harm our business.  
We have entered into a license agreement with ETRE, pursuant to which it has granted us a non-exclusive, royalty-free license to use the name "ETRE Residential, LLC."  Under this agreement, we have a right to use this name for so long as our Administrative Agent serves as our Administrative Agent in respect of any Series.  ETRE will retain the right to continue using the ETRE name.  We will further be unable to preclude ETRE from licensing or transferring the ownership of the ETRE name to third parties, some of whom may compete with us.  Consequently, we will be unable to prevent any damage to goodwill that may occur as a result of the activities of ETRE or others.  Furthermore, in the event that the license agreement is terminated, we will be required to change our name and cease using the name.  Any of these events could disrupt our recognition in the market place, damage any goodwill we may have generated and otherwise harm our business.  The license agreement will terminate if we no longer have any administrative services agreements with our Administrative Agent.
The managing member of our company and certain of our directors and officers are parties to certain litigation, which could have a material adverse effect on us.
ETRE Financial, LLC, our company's managing member, and certain of its members, including Messrs. Frischer and Stein, are parties to certain litigation relating to a dispute brought by one of the minority equity holders of ETRE Financial, LLC. We do not believe there is merit to any of these claims. In addition, none of our company, the administrative agent or the R-1 Series are parties to this litigation. Nevertheless, as a result of such litigation, it is possible that ETRE Financial, LLC and Messrs. Frischer and Stein could be required to devote time and attention to resolving or defending this litigation, and our business could otherwise be adversely affected.

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Risks Related to the Property and Real Estate Investment Generally
The Property is located in Philadelphia, Pennsylvania, and adverse economic or regulatory developments in this area could materially and adversely affect the R-1 Series.
The Property is located in Philadelphia, Pennsylvania.  As a result, the R-1 Series' business is dependent on the condition of the Philadelphia economy in general and the market for residential apartment and retail space in Philadelphia in particular.  The R-1 Series is susceptible to adverse developments in the Philadelphia economic and regulatory environment (such as business layoffs or downsizing, industry slowdowns, relocations of businesses, increases in real estate and other taxes, costs of complying with governmental regulations or increased regulation).  Such adverse developments could materially reduce the value of the Property and its rental revenues, and thus materially and adversely affect the market price of our Series R-1 common shares or the R-1 Series' ability to service current debt and to pay distributions to the holders of Series R-1 common shares.
Because the Property is located in the greater Philadelphia metro-area, we will be exposed to greater risks than if we owned properties in multiple geographic regions.  The economic condition of the Philadelphia metro-area may depend on one or more industries and, therefore, an economic downturn in one of these industry sectors may adversely affect our performance.
Adverse economic and geopolitical conditions in general and in the Philadelphia, Pennsylvania residential real estate markets in particular could have a material adverse effect on the R-1 Series' results of operations, financial condition and the R-1 Series' ability to make distributions to holders of our Series R-1 common shares.
The R-1 Series' business may be affected by the volatility and illiquidity in the financial and credit markets, a general global economic recession, and other market or economic challenges experienced by the real estate industry or the U.S. economy as a whole.  The R-1 Series' business may also be materially and adversely affected by local economic conditions, as substantially all of the R-1 Series' revenues are derived from the Property which is located in Philadelphia, Pennsylvania. Because the R-1 Series' sole asset will be its indirect interest in a multi-family apartment complex located in Philadelphia (as compared to a diversified real estate portfolio), if economic conditions persist or deteriorate, then the R-1 Series' results of operations, financial condition and ability to service current debt and to make distributions to the holders of our Series R-1 common shares may be materially and adversely affected by the following, among other potential conditions:
significant job losses in Philadelphia, which may decrease demand for apartments at the Property, causing market rental rates and property values to be impacted negatively;
an oversupply of, or a reduced demand for, apartment homes;
a decline in household formation or employment or lack of employment growth;
the inability or unwillingness of residents to pay rent increases;
rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs;
economic conditions that could cause an increase in our operating expenses, such as increases in property taxes, utilities, compensation of on-site associates and routine maintenance;
the R-1 Series' ability to borrow, directly or through the Property R-1 Subsidiaries, on terms and conditions that we find acceptable, or at all, may be limited, which could reduce the R-1 Series' ability to refinance existing debt, and increase the R-1 Series' future interest expense; and
reduced liquidity in debt markets and increased credit risk premiums for certain market participants may impair the R-1 Series' ability to access debt capital.  
These conditions may continue or worsen in the future, which could have materially and adversely affect the R-1 Series' results of operations, financial condition and ability to make distributions to the holders of our Series R-1 common shares.
Short-term leases expose us to the effects of declining market rents, which could materially and adversely affect the R-1 Series’ results of operations and cash flow.
Substantially all of the apartment leases at the Property are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms. These circumstances could materially and adversely affect the R-1 Series’ results of operations and cash flow, market price of our Series R-1 common shares or the R-1 Series’ ability to service current debt and to pay distributions to the holders of Series R-1 common shares.
Competition could limit our ability to lease apartments or increase or maintain rents, which could materially and adversely affect the R-1 Series’ results of operations and cash flow.
Our apartment complex competes with other housing alternatives to attract residents, including other rental apartments, condominiums and single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. Competitive residential housing in the greater Philadelphia metro-area could adversely affect our ability to lease apartment s and to increase or maintain rental rates.

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 Competition may impede our ability to attract new tenants or retain tenants or re-let retail space at the Property.
The leasing of retail real estate in Philadelphia is highly competitive.  The principal means of competition are rent charged, location, services provided and the nature and condition of the premises to be leased.  We will directly compete with all lessors and developers of similar space in the area in which the Property is located as well as properties in other submarkets.  The number of competitive retail properties in Philadelphia (which may be newer or better located than the Property) could have a material adverse effect on our ability to lease retail space at the Property, and on the effective rents we are able to charge.
We may be unable to renew the retail leases of the Property, lease vacant space or re-lease space on favorable terms or at all as the leases expire, which could materially and adversely affect the R-1 Series' financial condition, results of operations and cash flow.
To the extent that the Property, and in particular the retail space, has above-market rental rates, we may be forced to renew leases when they expire at a lower rate.  We cannot assure you the leases will be renewed or that the Property will be re-leased at net effective rental rates equal to or above the current net effective rental rates.  If the rental rate of the Property decreases, the tenants do not renew the leases or we do not re-lease a significant portion of the Property's available space, the R-1 Series' financial condition, results of operations, cash flow, and the R-1 Series' ability to satisfy its  or its subsidiaries' principal and interest obligations and our ability to make distributions with respect to our Series R-1 common shares would be materially and adversely affected.
We may be required, especially with respect to our retail space, to make rent or other concessions and/or the R-1 Series may be required to incur significant capital expenditures to improve the Property in order to retain the tenants or attract new tenants, which could materially and adversely affect the R-1 Series, including the R-1 Series' financial condition, results of operations and cash flow.
To the extent there are adverse economic conditions in the Philadelphia real estate market and demand for retail space decreases, upon expiration of the retail leases (and to a lesser degree, apartments), we will be required to make rent or other concessions to tenants, accommodate increased requests for renovations, or provide additional services to the tenants.  As a result, the R-1 Series may have to make significant capital or other expenditures in order to retain tenants or to attract new tenants in sufficient numbers.  Additionally, we or the R-1 Series may need to raise capital to make such expenditures.  If we or the R-1 Series are unable to do so or capital is otherwise unavailable, the R-1 Series may be unable to make the required expenditures.  This could result in non-renewals by tenants upon expiration of the leases, which could materially and adversely affect the R-1 Series' financial condition, results of operations, cash flow and per share trading price of our Series R-1 common shares. 
We and the Asset Manager may not be able to control the R-1 Series' operating costs, or the R-1 Series' expenses may remain constant or increase, even if income from the Property decreases, causing the R-1 Series' results of operations to be adversely affected.
The R-1 Series' financial results depend substantially on leasing units in the Property to tenants on terms favorable to the R-1 Series.  Costs associated with real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property is not fully occupied, rental rates decrease or other circumstances cause a reduction in income from the property.  As a result, cash flow from the operations of the Property may be reduced if tenants do not pay their rents or we are unable to rent the Property on favorable terms.  Under those circumstances, we might not be able to enforce the Property R-1 Subsidiaries' rights as landlord without delays and the R-1 Series may incur substantial legal costs.  
The continuing threat of a terrorist event may materially and adversely affect the Property, its value and the R-1 Series' ability to generate cash flow.
There may be a decrease in demand for apartments and retail space in Philadelphia because it is considered at risk for a future terrorist event, and this decrease may reduce the R-1 Series' revenues.  In the aftermath of a terrorist event, the tenants may choose to relocate to less populated, lower-profile areas of the United States that are not as likely to be targets of future terrorist activity.  This in turn could trigger a decrease in the demand for apartment units in Philadelphia, which could increase vacancies in the Property and force us to lease the Property on less favorable terms.  In addition, a terrorist event could cause insurance premiums at the Property to increase significantly.  As a result, the value of the Property and the level of R-1 Series' revenues could materially decline.
Increases in property taxes would increase the R-1 Series' operating costs, reduce its income and adversely affect the R-1 Series' ability to make distributions to the holders of Series R-1 common shares.
The Property will be subject to real and personal property taxes.  These taxes may increase as tax rates change and as the Property is assessed or reassessed by taxing authorities.  If property taxes increase, the R-1 Series' financial condition, results of operations and our ability to make distributions to the holders of our Series R-1 common shares could be materially and adversely affected and the market price of our Series R-1 common shares could decline.

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Noncompliance with environmental laws and releases of hazardous substances could subject the R-1 Series to fines and liabilities, which could adversely affect its operating results.
The Property will be subject to various federal, state and local environmental laws.  Under these laws, courts and government agencies have the authority to require the Property R-1 Subsidiaries, as owner or operator of a contaminated property, to clean up the Property and incur associated costs, even if we did not know of or were not responsible for the releases of the contamination.  These laws also apply to persons who owned or operated a property at the time that it became contaminated, and therefore it is possible that the Property R-1 Subsidiaries could incur these costs even after it sells the Property.  In addition to the costs of cleanup, environmental contamination can affect the value of a property and, therefore, an owner's ability to borrow funds using the property as collateral or to sell the property.  Under the environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator, pay for the clean‑up of that property if it becomes contaminated and threatens human health or the environment.
Furthermore, various court decisions have established that third parties may recover damages for personal injury, as well as for damage to property and to natural resources caused by contamination.  For instance, a person exposed to asbestos while in a property may seek to recover damages if he or she suffers personal injury from the asbestos.  Lastly, some of these environmental laws restrict the use of a property or place conditions on various activities.  An example would be laws that require a business using chemicals (such as swimming pool treatment chemicals) to manage them carefully and to notify local officials that the chemicals are being used.
The Property R-1 Subsidiaries could be responsible for any of the costs discussed above.  The costs to clean up a contaminated property, to defend against a claim, to satisfy a judgment or pay a penalty, or to comply with environmental laws could be material and could adversely affect the funds available for distribution to the holders of our Series R-1 common shares.  We have obtained a Phase I environmental site assessment for the Property in connection with the purchase and sale transaction.  However, this Phase I environmental site assessment may not reveal all environmental costs that might have a material adverse effect on the business, assets, results of operations or liquidity of the R-1 Series and may not identify all potential environmental liabilities. 
As a result, the Property R-1 Subsidiaries and the R-1 Series may become subject to material environmental liabilities.  We can make no assurances that (1) future laws or regulations will not impose material environmental liabilities on the Property R-1 Subsidiaries or the R-1 Series, or (2) the environmental condition of the Property will not be affected by the condition of the properties in its vicinity or by third parties unrelated to us.
The Property R-1 Subsidiaries and the R-1 Series may incur significant costs complying with the ADA and similar laws, which could adversely affect the R-1 Series' financial condition, results of operations, cash flow and trading price of our Series R-1 common shares.
Under the Americans with Disabilities Act of 1990, or the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons.  If the Property is not in compliance with the ADA, the R-1 Series would be required to incur additional costs to bring the Property into compliance.  Additional federal, state and local laws also may require modifications to the Property, or restrict the ability to renovate the Property.  We cannot predict the ultimate cost of compliance with the ADA or other legislation.  If the Property R-1 Subsidiaries or the R-1 Series incurs substantial costs to comply with the ADA and any other legislation, the R-1 Series' financial condition, results of operations, cash flow, trading price of our Series R-1 common shares and the R-1 Series' or its subsidiaries' ability to satisfy its or their principal and interest obligations and our ability to make distributions to the holders of our Series R-1 common shares could be adversely affected.
Any secured debt obligations incurred will expose the R-1 Series to increased risk of property losses to foreclosure, which could adversely affect its financial condition, cash flow and ability to satisfy its other obligations and make distributions to the holders of Series R-1 common shares.
Incurring mortgage or other secured debt increases the risk of property losses, because any defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately the loss of the property securing the loan.  For tax purposes, a foreclosure of the Property 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 the R-1 Series' tax basis in the Property, the R-1 Series would recognize taxable income on foreclosure but would not receive any cash proceeds.  As a result, we may be required to identify and the R-1 Series may be required to utilize other sources of cash for distributions of that income to the holders of Series R-1 common shares.  Furthermore, we expect that any such sources of additional cash will be limited in light of the fact that we expect the Property to be the sole real estate asset owned and generated by the R-1 Series.
Capital expenditure requirements at the Property may be costly and require the R-1 Series to incur debt, postpone improvements, reduce distributions or otherwise adversely affect the results of its operations and the market price of our Series R-1 common shares.
The Property will have an ongoing need for renovations and other capital improvements, including replacement, from time to time, of furniture, fixtures and equipment.  These capital improvements may give rise to the following risks:
possible environmental problems;
construction cost overruns and delays;

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the possibility that revenues will be reduced while service elements are out of service due to capital improvement projects;
a possible shortage of available cash to fund capital improvements and the related possibility that financing for these capital improvements may not be available on attractive terms; and
uncertainties as to market demand or a loss of market demand after capital improvements have begun.
The costs of renovations and capital improvements could adversely affect the R-1 Series' financial condition, results of operations, the market price of our Series R-1 common shares and the R-1 Series' ability to make distributions to the holders of our Series R-1 common shares.
Real estate redevelopment is subject to timing, budgeting and other risks that may adversely affect the R-1 Series' financial condition and results of operations, the market price of our Series R-1 common shares and our ability to make distributions to the holders of our Series R-1 common shares.
Though not intended to be a primary focus of its initial investment strategy, we may have the Property R-1 Subsidiaries engage in the redevelopment of the Property if suitable opportunities arise.  Redevelopment involves a number of risks, including risks associated with:
construction delays or cost overruns that may increase project costs;
the receipt of zoning, occupancy and other required governmental permits and authorizations;
development costs incurred for projects that are not pursued to completion;
acts of God such as hurricanes, floods or fires that could adversely impact a project;
the negative impact of construction on operating performance during and soon after the construction period;
the ability to raise capital; and
governmental restrictions on the nature or size of a project.
We may not have control over the Property while it is under construction and the R-1 Series may be subject to risks in connection with a developer's ability to control construction costs and the timing of completion of construction or a developer's ability to build in conformity with plans, specifications and timetables.
We cannot assure you that any redevelopment project will be completed on time or within budget.  The inability to complete a project on time or within budget could adversely affect the R-1 Series' financial condition and results of operations, the market price of our Series R-1 common shares and our ability to make distributions to the holders of our Series R-1 common shares.
The Property may be subject to unknown or contingent liabilities which could cause us to incur substantial costs.
Although the R-1 Series will obtain title insurance insuring against losses that may arise in connection with any liens, encumbrances or other title defects not listed as exceptions to coverage on the title policy, the Property may be subject to other unknown or contingent liabilities which could cause the R-1 Series to incur substantial costs for which the R-1 Series may have no recourse, or only limited recourse, against the Seller. The Seller's representations and warranties provided under the purchase and sale agreement relating to the purchase and sale transaction are limited in scope and survive for a period of 180 days after the closing.  In addition, the purchase and sale agreement provides that Sellers and affiliated or related parties will only be liable for breaches of Seller's representations and warranties if the amount of losses arising from such breaches, in aggregate, exceeds $500,000.  Furthermore Seller's liability for such breaches is capped at $8 million.  There is no guarantee that the R-1 Series will recover any amounts with respect to losses due to breaches by Seller of its representations and warranties or arising out of successor liability from pre-closing liabilities.  In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with the Property may exceed expectations, and the R-1 Series may experience other unanticipated adverse effects, all of which may adversely affect the R-1 Series' financial condition, results of operations, the market price of the Series R-1 common shares and the R-1 Series' ability to make distributions to the holders of the Series R-1 common shares.
Uninsured and underinsured losses could result in a loss of capital.
We intend for the Property R-1 Subsidiaries' to maintain comprehensive insurance on the Property, including liability, fire and extended coverage, of the type and amount we believe are customarily obtained for or by multi-family property owners.  There are no assurances that coverage will be available at reasonable rates.  Various types of catastrophic losses, such as floods and losses from terrorist activities, may not be insurable or may not be economically insurable.  Further, lenders may require such insurance and the failure of the Property R-1 Subsidiaries to obtain such insurance could constitute a default under loan agreements of the R-1 Series or its subsidiaries.

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In the event of a substantial loss, the Property R-1 Subsidiaries' insurance coverage may not be sufficient to cover the full current market value or replacement cost of its lost investment.  Should an uninsured loss or a loss in excess of insured limits occur, the R-1 Series could lose all or a portion of the capital it has invested in the Property, as well as the anticipated future revenue from the Property.  In that event, the R-1 Series or its subsidiaries might nevertheless remain obligated for any mortgage debt or other financial obligations related to the Property.  Inflation, changes in building codes and ordinances, environmental considerations and other factors might also keep us from using insurance proceeds received by the Property R-1 Owner to replace or renovate the Property after it has been damaged or destroyed.  Under those circumstances, the insurance proceeds the Property R-1 Owner receives might be inadequate to restore its economic position on the damaged or destroyed property.
We may be unable to sell the Property on favorable terms or at all.
We may decide to have the R-1 Series or the Property R-1 Subsidiaries or their respective subsidiaries sell their interest in the Property in the future.  We cannot predict whether the R-1 Series, the Property R-1 Subsidiaries or their respective subsidiaries will be able to sell their interest in the Property for the price or on the terms set by us, or whether the price or other terms offered by a prospective purchaser would be acceptable to us.  We also cannot predict the length of time needed to find a willing purchaser and to close the sale of the Property.  The R-1 Series, the Property R-1 Subsidiaries or such subsidiaries may be required to expend funds to correct defects or to make improvements before the Property can be sold.  We cannot assure you that the R-1 Series or the Property R-1 Subsidiaries or such subsidiaries will have funds available to correct those defects or to make those improvements.  These factors could adversely affect the R-1 Series’ financial condition and results of operations, the market price of our Series R-1 common shares, the R-1 Series’ ability to make distributions to the holders of Series R-1 common shares and the ability of holders of Series R-1 common shares to realize appreciation in the value of the Property.
We may incur significant transfer tax liability if the Property is transferred, or if Core Limited R-1 Partner transfers any portion of its interest in the Property, during the three-year period following the closing of the purchase and sale transaction.
During the three-year period following the purchase and sale transaction (the “Holding Period”), the Property R-1 Subsidiaries would incur significant transfer tax liability if the Property is transferred, or if the retained interest held by Core Limited R-1 Partner in the Property R-1 Subsidiaries falls below 11.0% in the aggregate. We estimate this potential transfer tax liability to be approximately $3.24 million in the aggregate. Pursuant to the partnership agreements, we have agreed that Core Limited R-1 Partner may not transfer all or any portion of its partnership interest in the Property R-1 Subsidiaries without our prior written consent (which consent will be granted or withheld in our sole and absolute discretion). Further, we have agreed that during the Holding Period, any transfer taxes incurred as a result of a transfer of all or any portion of the partnership interests initiated by the Core Limited R-1 Partner (which will nonetheless require our consent) or attributable to any of the buy-out rights that we have pursuant to the partnership agreements will be paid 50% by the Core Limited R-1 Partner and 50% by us, while a transfer of all or any portion of the partnership interests initiated by us will be considered a partnership expense and paid pro rata. Following the Holding Period, any transfer taxes incurred as a result of a transfer or attributable to a buy-out right will be a partnership expense. If the transfer tax liability is incurred as described above, the R-1 Series’ financial condition, results of operations and cash flow could be materially and adversely affected. See “Property R-1 Subsidiaries Limited Partnership Agreements” below for a description of the limited partnership agreements.


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Risks Related to Our Organization and Structure
Our shareholders do not elect or vote on our board of directors or the managing member of our Company and have limited ability to influence decisions regarding the businesses of the Series, including the R-1 Series. 
Our operating agreement provides that the real property, affairs and business of each Series, including the R-1 Series, will be managed under the direction of our single board of directors, the members of which are nominated and elected by ETRE Financial, LLC, as the managing member of our Company.  Our shareholders do not elect or vote on the managing member of our Company, and, unlike the holders of common stock in a corporation, have only limited voting rights on matters affecting the businesses of the Series, including the R-1 Series, and therefore limited ability to influence decisions regarding the businesses of the Series.  In addition, our operating agreement provides that the board of directors will generally operate in a manner that is appropriate to maintain each Series’ REIT status, which may further limit decisions regarding the business of each Series.
The Series R-1 common shareholders will have limited voting rights and will be bound by a majority vote.
The Series R-1 common shareholders will have voting rights only with respect to certain matters, primarily relating to disposition of the Property.  Each outstanding common share (including our Series R-1 common shares) entitles the holder to one vote on all matters submitted to a vote of common shareholders generally.  Holders of all classes of common shares of all Series vote together as a single class on all matters as to which all holders of common shares are entitled to vote.  In addition, certain matters will require the separate approval of holders of the Series R-1 common shares, such as certain dispositions of the Property or of the Property R-1 Subsidiaries.  Generally, matters to be voted on by our shareholders must either be approved by a majority of the votes cast by all common shares present in person or represented by proxy, and matters requiring the separate approval of holders of the Series R-1 common shares must be approved by holders representing a majority of our Series R-1 common shares.  If any such a vote occurs, you will be bound by the majority vote even if you did not vote with the majority.
We expect to qualify for exceptions from certain corporate governance and other requirements under the rules of the NASDAQ, although we do not expect to rely on these exceptions following the completion of this offering.   
We expect to qualify for exceptions from certain corporate governance and other requirements of the rules of the NASDAQ as a result of being a "controlled company" since more than 50% of the voting power for the election of our directors is held by ETRE.  Pursuant to these exceptions, a "controlled company" may elect not to comply with certain corporate governance requirements of the NASDAQ, including the requirements (i) that the company have a majority of its board of directors consist of independent directors, (ii) that the company have a nominating and corporate governance committee that is composed entirely of independent directors and (ii) that the company have a compensation committee that is composed entirely of independent directors.  These requirements will not apply to us as long as we remain a "controlled company."  Although we do not expect to rely on these exceptions following the completion of this offering, if we were to utilize some or all of these exceptions, our shareholders may not have the same protections afforded to equity holders of entities that are subject to all of the corporate governance requirements of the NASDAQ. 
As we establish additional Series in the future, there may be conflicts of interests among the Series and Other Series Programs, which may result in opportunities that would benefit the Property being allocated to the properties owned by other Series or Other Series Programs.
We have established, and expect to establish in the future, additional Series, Property Subsidiaries and Other Series Programs that will acquire, own and operate other real properties.  These additional Series, Property Subsidiaries or Other Series Programs may own properties that compete with the Property.  If a sale, financing, leasing or other business opportunity would be suitable for the real property owned by more than one Series, our Administrative Agent will allocate it using its business judgment.  Any allocation of this type may involve the consideration of a number of factors that our Administrative Agent determines to be relevant.  Except under the Inter-Series Policy and any other policies adopted by our board of directors, which policies will be designed to minimize conflicts among the Series, no Series will have any duty, responsibility or obligation to refrain from:
engaging in the same or similar activities or lines of business as any other Series or Other Series Program;

doing business with any potential or actual tenant, lender, purchaser, supplier, customer or competitor of any other Series or Other Series Program;

engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual tenants, lenders, purchasers, suppliers or customers of any other Series or Other Series Program;

establishing material commercial relationships with another Series or Other Series Program; or

making operational and financial decisions that could be considered to be detrimental to another Series or Other Series Program.


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In addition, any decisions by our board of directors or our Administrative Agent to renew, extend, modify or terminate an agreement or arrangement, or enter into similar agreements or arrangements in the future, may benefit one Series more than the other Series or limit or impair the ability of either Series to pursue business opportunities.  In addition, third parties may require as a condition to their arrangements or agreements with or related to any one particular Series that such arrangements or agreements include or not include another Series, as the case may be.  Any of these decisions may benefit one Series more than another Series. Similar risks exist with respect to Other Series Programs.
The conflicts of interest policies we will adopt may not adequately address all of the conflicts of interest that may arise with respect to our activities and are subject to change or suspension. 
In order to avoid any actual or perceived conflicts of interest among the Series and with our directors, officers or employees, we intend to adopt the Inter-Series Policy and a code of business conduct and ethics to specifically address some of the conflicts relating to our activities.  There is no assurance that these policies will be adequate to address all of the conflicts that may arise or will address such conflicts in a manner that is favorable to the R-1 Series.  Our board of directors may modify, suspend or rescind the policies set forth in the Inter-Series Policy, including any resolution implementing the provisions of the Inter-Series Policy, in each case, without a vote of our shareholders.
Our operating agreement provides for mandatory redemptions of outstanding Series R-1 common shares, which could materially and adversely affect the value of your investment.
In the event of a sale, transfer, assignment or other disposition in a transaction or series of related transactions of substantially all the R-1 Series’ interest in the Property R-1 Subsidiaries, whether held directly or through subsidiaries of the R-1 Series, or the Property R-1 Subsidiaries’ interest in the Property, whether held directly or through subsidiaries of the Property R-1 Subsidiaries, we may redeem a number of outstanding Series R-1 common shares in exchange for cash and/or securities or other property in an aggregate amount equal to the net proceeds of such disposition allocable to our Series R-1 common shares.  In addition, our operating agreement provides that we may, at any time, redeem all outstanding Series R-1 common shares in exchange for equity interests in the Property R-1 Subsidiaries, a subsidiary of the Property R-1 Subsidiaries and/or any other subsidiary of the R-1 Series.  If we utilize either of these redemption rights, you will no longer hold our Series R-1 common shares and, to the extent you receive securities or other property in connection with such redemption, shareholders will likely have less liquidity since the securities may not be listed on the NASDAQ or other national securities exchange.  This could materially and adversely affect the value of your investment.
Certain provisions of our operating agreement and bylaws could hinder, delay or prevent a change of control of the Property.
Certain provisions of our operating agreement and bylaws could have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change of control of the Property.  These provisions include the following:
Authorization of additional shares, issuances of authorized shares and classification of shares without shareholder approval.  Our operating agreement authorizes us  to issue additional shares or other securities of the R-1 Series for the consideration and on the terms and conditions established by our board of directors without the approval of any holders of our shares.  In particular, our board of directors is authorized to provide for the issuance of an unlimited amount of one or more classes or series of shares of the R-1 Series, including preferred shares, and to fix the number of shares, the relative powers, preferences and rights, and the qualifications, limitations or restrictions applicable to each class or series thereof by resolution authorizing the issuance of such class or series.  Our  ability to issue additional shares and other securities of the R-1 Series could render more difficult or discourage an attempt to obtain control over the Property or over the R-1 Series by means of a proxy contest, tender offer, merger or otherwise.
Appointment and removal of directors.  Under our operating agreement, ETRE Financial, LLC, as the managing member of our Company, will have the sole power to (i) nominate and elect all directors to our board of directors, (ii) set the number of directors of our board of directors, (iii) remove any director, with or without cause, at any time and (iv) fill any vacancies on our board of directors.  Accordingly, shareholders will have limited ability to influence decisions regarding the businesses of the Series.
Limitation on shareholder requested special meetings.  Our bylaws provide that, subject to the satisfaction of certain procedural and information requirements by the shareholders requesting the meeting, special meetings of Series R-1 common shareholders may only be called upon the written request of the shareholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.
Advance notice provisions for shareholder proposals.  Our bylaws require advance written notice for shareholders to bring business before any meeting of our shareholders.  This bylaw provision limits the ability of our shareholders to introduce proposals unless we are notified in a timely manner prior to the meeting.

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Ownership limitations.  To assist each Series in qualifying as a REIT, our operating agreement, subject to certain exceptions, provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Internal Revenue Code, either more than 9.8% in value or in number of common shares, whichever is more restrictive, of the outstanding common shares of any Series. Accordingly, no person may own, or be deemed to own, more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding Series R-1 common shares.  The ownership limits could have the effect of discouraging a takeover or other transaction in which shareholders 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. 
Exclusive authority of our board to amend our bylaws.  Our bylaws provide that our board of directors has the exclusive power to adopt, alter or repeal any provision of the bylaws or to make new bylaws.  Thus, our shareholders may not effect any changes to our bylaws.
A court could potentially conclude that the assets and liabilities of one Series are not segregated from those of another Series of our Company and may thereby potentially expose assets in a Series to the liabilities of another Series. 
In accordance with the Delaware LLC Act, the R-1 Series is, and each other Series we have established, or may establish in the future, will be a separate Series and not itself a separate legal entity.  Section 18-215(b) of the Delaware LLC Act provides that, if certain conditions (as set forth in Section 18-215(b)) are met, including that certain provisions are in the formation and governing documents of the series limited liability company, and if the records maintained for any such series account for the assets associated with such series separately from the assets of the limited liability company, or any other series, then the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable only against the assets of such series and not against the assets of the limited liability company generally or any other series.  Although the Delaware LLC Act provides that records maintained for a series that reasonably identify its assets, including by specific listing, category, type, quantity, computational or allocational formula or procedure (including a percentage or share of any asset or assets) or by any other method where the identity of such assets is objectively determinable, will be deemed to account for the assets associated with such series separately from the other assets of the limited liability company, or any other series thereof, we are not aware of any court case that has interpreted Section 18-215(b) of the Delaware LLC Act or provided any further guidance as to what is required for compliance.  We intend to maintain separate and distinct records for each Series and account for them separately, and to have each Series invest in a separate Property Subsidiary that will hold the interests in the property to which such Series relates; however, it is possible a court could conclude that the methods used did not satisfy Section 18-215(b) of the Delaware LLC Act and thus potentially expose the assets of the R-1 Series to the liabilities of another Series.  In addition, we are not aware of any court case that has tested the limitations on inter-series liability provided by Section 18-215(b) in federal bankruptcy courts and it is possible that a bankruptcy court could determine that the assets of one Series should be applied to meet the liabilities of the other Series or the liabilities of our Company generally where the assets of such other Series or of our Company generally are insufficient to meet our liabilities. 
Potential conflicts of interest may arise among the Asset Manager and their affiliates, on the one hand, and the R-1 Series and our Series R-1 common shareholders, on the other hand.
Under the terms of each of the limited partnership agreements of the Property R-1 Subsidiaries, for so long as the Core Limited R-1 Partner and certain of its affiliates and permitted assignees own at least 5% of the interests in each of the Property R-1 Subsidiaries, Core Realty will manage the day to day business, affairs and operations of the Property, subject to the terms and conditions of the asset and property management agreement. Under the terms of the asset and property management agreement, the Asset Manager will be responsible for overseeing the Property R-1 Subsidiaries’ real property operations. As a result, the Asset Manager will be able to exert significant influence on the Property R-1 Subsidiaries and the Property.
The Asset Manager is an affiliate of the Core Limited R-1 Partner, which will own 11.0% of each of the Property R-1 Subsidiaries, but will not own any of our Series R-1 common shares. As a result of this affiliation, the Asset Manager may have interests, including economic interests, that are materially different than the interests of our Series R-1 common shareholders. The differing interests of the Asset Manager and their affiliates could create conflicts of interest when the R-1 Series, on the one hand, and the Asset Manager, on the other hand, are faced with decisions that could have different implications for the Asset Manager and their affiliates and the R-1 Series.
For so long as the Core Limited R-1 Partner owns at least 5% of the combined limited partnership interests in the Property R-1 Subsidiaries, the termination of the asset and property management agreement will generally be limited to cause and certain disposition events related to the Property, which may make it difficult to end our relationship with the Asset Manager.
Termination of the asset and property management agreement with the Asset Manager without cause, including for unsatisfactory performance, could be difficult. We have agreed to keep the asset and property management agreement in place with the Asset Manager, subject to the termination rights provided in the asset and property management agreement, until such time as the Core Limited R-1 Partner ceases to own, in the aggregate, 5.0% or more of the combined limited partnership interests in the Property R-1 Subsidiaries (the “initial term”). During the initial term, we may only terminate the asset and property management agreement upon 30 days prior written notice in connection with certain cause events involving the Asset Manager. Unsatisfactory performance does not constitute "cause" under the asset and property management agreement.

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Following the initial term, we may terminate the asset and property management agreement with or without cause upon 30 days prior written notice to the Asset Manager. In addition, the asset and property management agreement will be terminated following a Property Sale. See “Business and Property-- The Asset and Property Management Agreement and the Asset Manager” for more information and the definition of “cause”.
The foregoing provisions may substantially restrict our ability to terminate the asset and property management agreement. Furthermore, if the asset and property management agreement is terminated and we are unable to identify a suitable replacement to manage the Property, our ability to execute our business plan could be adversely affected.
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.
The JOBS Act contains provisions that, among other things, relax certain reporting requirements for "emerging growth companies," including certain requirements relating to accounting standards and compensation disclosure.  We are classified as an emerging growth company.  For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to (1) provide an auditor's attestation report on management's assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, (4) provide certain disclosure regarding executive compensation required of larger public companies or (5) hold shareholder advisory votes on executive compensation.  We cannot predict if investors will find our Series R-1 common shares less attractive if we choose to rely on these exemptions.  If some investors find our Series R-1 common shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our Series R-1 common shares and the share price may be more volatile.
If we fail to implement and maintain an effective system of internal controls, we may not be able to accurately determine the financial results of any Series or prevent fraud.  As a result, shareholders could lose confidence in the financial results of the R-1 Series, which could harm its business and the value of our Series R-1 common shares.
Effective internal controls are necessary for us to provide reliable financial reports for each Series and effectively prevent fraud.  We are a newly formed company that will develop financial and operational reporting and control systems.  We may in the future discover areas of our internal controls that need improvement.  Section 404 of the Sarbanes‑Oxley Act will require us to evaluate and report on our internal controls over financial reporting and have our independent auditors annually issue their own opinion on our internal controls over financial reporting.  While we intend to undertake substantial work to prepare for compliance with Section 404, we cannot be certain that we will be successful in implementing or maintaining adequate internal controls over our financial reporting and financial processes.  Furthermore, as we establish additional Series, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective.  If we or our independent auditors discover a material weakness in our internal controls, the disclosure of that fact, even if quickly remedied, could reduce the market value of our Series R-1 common shares.  Additionally, the existence of any material weakness or significant deficiency in respect of our internal controls would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner.
If we are deemed an investment company under the Investment Company Act of 1940, or the 1940 Act, our business would be subject to applicable restrictions under the Investment Company Act, which could make it impracticable for us to continue our business as contemplated and would have a material adverse impact on the market price of our Series R-1 common shares.
We do not believe that we are an “investment company” under the 1940 Act, because we are not, and we do not hold ourselves out, as being engaged primarily in the business of investing, reinvesting or trading in securities, and thus we do not fall within the definition of investment company provided in Section 3(a)(1)(A) of the 1940 Act. If we were to be deemed an investment company, however, either because of SEC interpretational changes or otherwise, we could, among other things, be required either: (i) to substantially change the manner in which we conduct our operations to avoid being required to register as an investment company; or (ii) to register as an investment company, either of which could have an adverse effect on us and the market price of our Series R-1 common shares. If we are required to register as an investment company under the 1940 Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the 1940 Act), portfolio composition, including restrictions with respect to diversification and industry concentration and other matters.

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Risks Related to this Offering
We have not established a minimum distribution payment level for the R-1 Series and the R-1 Series may be unable to generate sufficient cash flows from its operations to make distributions to holders of Series R-1 common shares at any time in the future.
We have not established a minimum distribution payment level for the R-1 Series and the R-1 Series' ability to make distributions to the holders of Series R-1 common shares may be adversely affected by the risk factors described in this prospectus.  Because the R-1 Series will commence operations only upon completion of this offering, the R-1 Series may not generate sufficient income to make distributions to the holders of Series R-1 common shares and we cannot predict when distributions, consisting primarily of cash flow from the Property will commence.  To the extent the R-1 Series uses the net proceeds from this offering to make distributions to the holders of Series R-1 common shares, the amount of cash the R-1 Series has available to invest in the Property or for other purposes would be reduced.
Our board of directors has the sole discretion to determine the timing, form and amount of any distributions to the holders of Series R-1 common shares and there can be no assurance as to the determinations our board of directors will make in respect of any of our future distributions.
Our board of directors has the sole discretion to determine the timing, form and amount of any distributions to the holders of Series R-1 common shares, subject to applicable law.  Our board of directors will make determinations regarding distributions based upon, among other factors, financial performance of the R-1 Series, any debt service obligations, any debt covenants and capital expenditure requirements with respect to the Property.  Among the factors that could impair our ability to make distributions to the holders of Series R-1 common shares are:
the R-1 Series' inability to complete the purchase and sale transaction;
unanticipated expenses or reduced revenues from the Property that reduce the R-1 Series cash flow or non‑cash earnings; and
decreases in the value of the Property.
As a result, no assurance can be given that we will be able to make distributions to the holders of Series R-1 common shares at any time in the future or that the level of any distributions we make to the holders of Series R-1 common shares will increase or even be maintained over time, any of which could materially and adversely affect the market price of our Series R-1 common shares.
A portion of the distributions we make to the holders of the Series R-1 common shares may constitute a return of capital, which would have the effect of reducing the basis of a shareholders' investment in our Series R-1 common shares.
Distributions that we make to the holders of Series R-1 common shares generally will be taxable to holders of R-1 Series as ordinary income.  However, a portion of these distributions may be designated by the R-1 Series as long‑term capital gains to the extent that they are attributable to capital gain income recognized by the R-1 Series or may constitute a return of capital to the extent that they exceed its accumulated earnings and profits as determined for tax purposes.  A return of capital is not taxable, but has the effect of reducing the basis of a holder's investment in our Series R-1 common shares.
We cannot assure you that a public market for our Series R-1 common shares will develop and your ability to sell our Series R-1 common shares may be limited.
Prior to this offering, there has not been a public market for our Series R-1 common shares.  We have applied to have our Series R-1 common shares listed on the NASDAQ. However, we cannot assure you that a regular trading market for our Series R-1 common shares will develop or, if one does develop, that any such market will be sustained.  In the absence of a public trading market, an investor may be unable to liquidate an investment in our Series R-1 common shares.  The initial public offering price will be determined by us and the representative of the underwriters.  We cannot assure you that the price at which our Series R-1 common shares will sell in the public market after the closing of this offering will not be lower than the price at which they are sold by the underwriters.
Series R-1 common shares eligible for future sale may adversely affect the prevailing market prices for our Series R-1 common shares.
We cannot predict the effect, if any, of future sales of Series R-1 common shares, or the availability of Series R-1 common shares for future sale, on the market price of our Series R-1 common shares.  Sales of substantial amounts of Series R-1 common shares (including shares issued to our directors and officers), or the perception that these sales could occur, may adversely affect prevailing market prices for our Series R-1 common shares or may impair our ability to raise capital through a sale of additional equity securities.
The market price of our Series R-1 common shares may be volatile due to numerous circumstances beyond our control.
The trading prices of equity securities issued by REITs historically have been affected by changes in market interest rates.  One of the factors that may influence the price of our Series R-1 common shares is the annual yield from distributions on our Series R-1 common shares as compared to yields available on other investments.  An increase in market interest rates, or a decrease in our distributions to the holders of our Series R-1 common shares, may lead prospective purchasers of our Series R-1 common shares to demand a higher annual yield, which could reduce the market price of our Series R-1 common shares.
Other factors that could affect the market price of our Series R-1 common shares include the following:
changes in market valuations of companies in the commercial office real estate industry;
changes in expectations of future financial performance of the R-1 Series or changes in estimates of securities analysts;
fluctuations in stock market prices and volumes;
issuances of Series R-1 common shares or other securities of the R-1 Series in the future;
the addition or departure of key personnel of ETRE; and
announcements by us or our competitors of acquisitions, investments or strategic alliances.
Future offerings of debt or equity securities ranking senior to our Series R-1 common shares may limit the operating and financial flexibility of the R-1 Series and may adversely affect the market price of our Series R-1 common shares.
If we decide to issue debt or equity securities of the R-1 Series in the future ranking senior to our Series R-1 common shares or the R-1 Series otherwise incurs indebtedness, it is possible that these securities or indebtedness will be governed by an indenture or other instrument containing covenants restricting the operating flexibility of the R-1 Series and limiting our ability to make distributions to the holders of Series R-1 common shares.  Additionally, any convertible or exchangeable securities of the R-1 Series that we issue in the future may have rights, preferences and privileges, including with respect to distributions, more favorable than those of our Series R-1 common shares and may result in dilution to owners of our Series R-1 common shares.  Because our decision to issue debt or equity securities of the R-1 Series in any future offering or otherwise incur indebtedness of the R-1 Series will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of future offerings or financings by or related to the R-1 Series, any of which could reduce the market price of our Series R-1 common shares and dilute the value of our Series R-1 common shares.

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U.S. Federal Income Tax Risk Factors
Failure of each Series to be classified as a separate entity for U.S. Federal income tax purposes could adversely affect the timing, amount and character of distributions to a holder of Series R-1 common shares. 
We intend to treat each Series as a separate business entity for U.S. federal income tax purposes and the series LLC organization as a non-entity for U.S. federal income tax purposes.  Consistent with this approach, the Internal Revenue Service, or the IRS, has issued proposed Treasury Regulations that provide that each individual series of a domestic series LLC organization will generally be treated as a separate entity formed under local law, with each such individual series' classification for U.S. federal income tax purposes determined under general tax principles and the entity classification ("check-the-box") rules.  Although not expected based on the proposed Treasury Regulations, if the IRS were to adopt a different approach than the one adopted in the proposed Treasury Regulations and successfully challenge our treatment of each Series as a separate business entity and the series LLC organization as a non-entity for U.S. federal income tax purposes, we expect that the series LLC organization would be treated as a single corporation that has elected and operated to be taxed as a REIT for U.S. federal income tax purposes.  In that event, the timing, amount and character of distributions to holders of Series R-1 common shares could be adversely impacted and the ability of the series LLC organization to be taxed as a REIT could be adversely impacted because the activity of each Series would be aggregated as the activities of a single REIT. 
The failure of the R-1 Series to qualify as a REIT would subject it to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to holders of our Series R-1 common shares. 
The R-1 Series has been organized and intends to operate in a manner that will enable it to qualify as a REIT for U.S. federal income tax purposes commencing with its short taxable year ending December 31, 2015.  The R-1 Series has not requested and does not intend to request a ruling from the IRS, that it will qualify as a REIT.  Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code and Treasury Regulations promulgated thereunder for which there are limited judicial and administrative interpretations.  To qualify as a REIT, the R-1 Series must meet, on an ongoing basis, various tests regarding the nature and diversification of its assets and its income, the ownership of its outstanding shares, and the amount of its distributions.  The ability of the R-1 Series to satisfy these asset tests depends upon an analysis of the characterization and fair market values of its assets, some of which are not susceptible to precise determination, and for which it will not obtain independent appraisals.  The R-1 Series' compliance with the REIT income and quarterly asset requirements also depends upon its ability to manage successfully the composition of its income and assets on an ongoing basis.  Moreover, new legislation, court decisions or administrative guidance, in each case possibly with retroactive effect, may make it more difficult or impossible for the R-1 Series to qualify as a REIT.  Thus, while the R-1 Series intends to operate so that it 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 circumstances, no assurance can be given that the R-1 Series will so qualify for any particular year. 
If the R-1 Series fails to qualify as a REIT in any taxable year, and it does not qualify for certain statutory relief provisions, the R-1 Series would be required to pay U.S. federal income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates, and distributions to holders of Series R-1 common shares would not be deductible by it in determining its taxable income.  In such a case, the R-1 Series might need to borrow money, sell assets, or reduce or even cease making distributions in order to pay its taxes.  The R-1 Series' payment of income tax would reduce significantly the amount of cash available for distribution to holders of Series R-1 common shares.  Furthermore, if the R-1 Series fails to maintain its qualification as a REIT, the R-1 Series no longer would be required to distribute substantially all of its net taxable income to holders of Series R-1 common shares.  In addition, unless the R-1 Series is eligible for certain statutory relief provisions, it could not re-elect to qualify as a REIT until the fifth calendar year following the year in which it failed to qualify. 
Complying with the REIT requirements may cause the R-1 Series to forego and/or liquidate otherwise attractive investments. 
To qualify as a REIT, the R-1 Series must ensure that it meets the REIT gross income tests annually.  In addition, the R-1 Series must ensure that, at the end of each calendar quarter, at least 75% of the value of its total assets consists of cash, cash items, government securities and qualified real estate assets, including certain mortgage loans and certain kinds of mortgage-backed securities.  Any investment in securities (other than government securities, securities of corporations that are treated as taxable REIT subsidiaries or “TRSs” and qualified REIT 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 the assets of the R-1 Series (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 the total securities of the R-1 Series can be represented by securities of one or more TRSs.  See “U.S. Federal Income Tax Considerations-Requirements for Qualification-General-Asset Tests.” If the R-1 Series fails to comply with these asset requirements at the end of any calendar quarter, it must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing its REIT qualification and suffering adverse tax consequences. In addition, under applicable provisions of the Code regarding prohibited transactions by REITS, any net income that the R-1 Series derives 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) that is held as inventory or primarily for sale to customers in the ordinary course of a trade or business by a REIT, by a lower-tier partnership in which the REIT holds an equity interest or by a borrower that has issued a shared appreciation mortgage or similar debt instrument in the REIT. See “U.S. Federal Income Tax Considerations-Requirements for Qualifications-General-Prohibited Transactions.”

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To meet these tests, the R-1 Series may be required to take or forgo taking actions that it otherwise would otherwise consider advantageous.  For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Internal Revenue Code, the R-1 Series may be required to forego certain investments that it otherwise would make.  In addition, in order to avoid the imposition of a 100% tax in connection with a prohibited transaction, the R-1 Series may be required to forego the sale or disposition of certain investments that it otherwise would undertake. Furthermore, the R-1 Series may be required to make distributions to holders of Series R-1 common shares at disadvantageous times or when it does not have funds readily available for distribution.  These actions could have the effect of reducing the R-1 Series’ income and amounts available for distribution to holders of Series R-1 common shares.  Thus, compliance with the REIT requirements may hinder the investment performance of the R-1 Series.
The REIT distribution requirements could require the R-1 Series to borrow funds during unfavorable market conditions or subject it to tax, which would reduce the cash available for distribution to holders of Series R-1 common shares. 
In order to qualify as a REIT, the R-1 Series must distribute to holders of Series R-1 common shares, on an annual basis, at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains.  In addition, the R-1 Series will be subject to U.S. federal income tax at regular corporate rates to the extent that it distributes less than 100% of its net taxable income (including net capital gains) and will be subject to a 4% nondeductible excise tax on the amount by which its distributions in any calendar year are less than a minimum amount specified under U.S. federal income tax laws.  The R-1 Series intends to distribute its net income to its shareholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax. 
In addition, taxable income of the R-1 Series may exceed its net income as determined by generally accepted accounting principles, or GAAP, because, for example, the R-1 Series may incur nondeductible capital expenditures or be required to make debt or amortization payments.  As a result of the foregoing, the R-1 Series may generate less cash flow than taxable income in a particular year and it may incur U.S. federal income tax and the 4% nondeductible excise tax on that income if it does not distribute such income to holders of Series R-1 common shares in that year.  In that event, the R-1 Series may be required to use cash reserves, incur debt or liquidate assets at rates or times that it regards as unfavorable or make a taxable distribution of its shares in order to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax in that year. 
Even if the R-1 Series qualifies as a REIT, it may incur tax liabilities that reduce its cash flow. 
Even if the R-1 Series qualifies for taxation as a REIT, it may be subject to certain U.S. federal, state and local taxes on its income and assets, including taxes on any undistributed income, and state or local income, franchise, property and transfer taxes, including mortgage recording taxes.  See "U.S. Federal Income Tax Considerations—Taxation of the R-1 Series—Taxation of REITs in General." In addition, any TRSs owned by the R-1 Series will be subject to U.S. federal, state and local corporate income taxes.  Any taxes paid by the R-1 Series or its TRSs would decrease the cash available for distribution to holders of Series R-1 common shares.
Dividends payable by REITs do not qualify for the reduced tax rates on dividend income from regular corporations, which could adversely affect the value of Series R-1 common shares.
The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. holders of Series R-1 common shares that are individuals, trusts and estates is 20%.  Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore may be subject to a 39.6% maximum U.S. federal income tax rate on ordinary income.  Although the reduced U.S. federal income tax rate applicable to dividend income from regular corporate dividends 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 the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including Series R-1 common shares.
Complying with REIT requirements may limit the ability of the R-1 Series to hedge effectively and may cause it to incur tax liabilities. 
The REIT provisions of the Internal Revenue Code may limit the ability of the R-1 Series to hedge its assets and operations.  Under these provisions, any income that the R-1 Series generates from transactions intended to hedge its interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets, and such instrument is properly identified under applicable Treasury Regulations.  Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests.  See "U.S. Federal Income Tax Considerations—Requirements for Qualification—General—Gross Income Tests" and "U.S. Federal Income Tax Considerations—Requirements for Qualification—General—Hedging Transactions." As a result of these rules, the R-1 Series may have to limit its use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS.  This could increase the cost of the hedging activities of the R-1 Series because its TRS would be subject to tax on gains or expose it to greater risks associated with changes in interest rates than the R-1 Series would otherwise want to bear.  In addition, losses in a TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in the TRS. 

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The ability of the board of directors to revoke the REIT election of the R-1 Series without the approval of holders of Series R-1 common shares may cause adverse consequences to holders of Series R-1 common shares. 
Our operating agreement provides that the board of directors may revoke or otherwise terminate the REIT election of the R-1 Series, without the approval of holders of Series R-1 common shares, if the board determines that it is no longer in the best interest of the R-1 Series to continue to qualify as a REIT.  If the R-1 Series ceases to qualify as a REIT, it would become subject to U.S. federal income tax on its net taxable income and it generally would no longer be required to distribute any of its net taxable income to holders of Series R-1 common shares, which may have adverse consequences on its total return to holders of Series R-1 common shares. 
Legislative or regulatory tax changes related to REITs could materially and adversely affect our business. 
At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be changed, possibly with retroactive effect.  We cannot predict if or when any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective or whether any such law, regulation or interpretation may take effect retroactively.  The R-1 Series and holders of Series R-1 common shares could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation. 
Your investment has various tax risks. 
Although provisions of the Internal Revenue Code generally relevant to an investment in Series R-1 common shares are described in "U.S. Federal Income Tax Considerations," you should consult your tax advisor concerning the effects of U.S. federal, state, local and foreign tax laws to you with regard to an investment in Series R-1 common shares.


31



FORWARD-LOOKING STATEMENTS
Some of the statements under "Summary," "Risk Factors," "Use of Proceeds,"  "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business and Property," "Distribution Policy" and elsewhere in this prospectus constitute forward-looking statements.  These forward-looking statements are based on our beliefs, assumptions and expectations of the future performance of the R-1 Series, taking into account information currently available to us.  In some cases, you can identify forward‑looking statements by terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should" and "would" or the negative of these terms or other comparable terminology.  Statements regarding the following subjects, among others, are forward-looking by their nature:
use of proceeds of this offering;
the R-1 Series' ability to complete the acquisition of the Property on the anticipated timeline or at all;
the R-1 Series' business strategy;
the R-1 Series’ and the Property R-1 Subsidiaries’ ability to refinance the loan that is expected to encumber the Property as of the closing of the purchase and sale transaction prior to its maturity date and to obtain future financing arrangements;

the R-1 Series' expected leverage;
estimates or statements relating to, and the R-1 Series' ability to make, future distributions;
the R-1 Series' ability to compete in the marketplace;
Core Realty’s ability to manage the Property

market, industry and economic trends;
the R-1 Series' ability to qualify and maintain its qualification as a REIT; and
availability of qualified personnel.
Our 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 any such change occurs, the business, financial condition, liquidity and results of operations of the R-1 Series may vary materially from those expressed in, or implied by, our forward-looking statements.  You should carefully consider these risks before you make an investment decision with respect to our Series R-1 common shares, along with, among others, the following factors that could cause actual results to vary from our forward-looking statements:
the factors referenced in this prospectus, including those set forth under "Risk Factors" and "Business and Property;" 
our ability and the ability of the Asset Manager to successfully operate the Property and generate sufficient operating cash flows to make and sustain distributions to holders of our Series R-1 common shares;
general volatility of the capital markets;
changes in the R-1 Series' investment objectives and business strategy;
our dependence on our Administrative Agent and our ability to find a suitable replacement if the R-1 Series or our Administrative Agent were to terminate the administrative services agreement; 
our dependence on the Asset Manager and our ability to find a suitable replacement if the Property R-1 Subsidiaries or our Asset Manager were to terminate the asset and property management agreement related to the Property; 
limitations on the R-1 Series' business by the REIT requirements; and
the degree and nature of the R-1 Series' competition.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  You should not rely on these forward-looking statements, which apply only as of the date of this prospectus.  We are not obligated, and do not intend, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


32



USE OF PROCEEDS
We estimate that the net proceeds from this offering, after deducting the underwriting discount and estimated offering expenses payable by us, will be approximately $____  million (based on the offering price of $____ per share).  We estimate that the net proceeds will be approximately $_____ million (after payment of underwriting discounts and commissions but before closing costs ) if the underwriters exercise their over-allotment option in full.

Substantially all of the net proceeds from this offering will be used to acquire an 89.00% controlling interest in the Property, as well as to pay certain closing costs and fund working capital reserves. Under the terms of the purchase and sale agreement between Holdings R-1 Subsidiary, the Seller and the Property R-1 Subsidiaries, Holdings R-1 Subsidiary will acquire an aggregate 89.00% controlling interest in each of the Property R-1 Subsidiaries from the Seller for approximately $78.0 million in cash (based on the negotiated value of $82.0 million for the Property, subject to pro-rations and adjustments as set forth in the purchase and sale agreement) and the Seller will retain an aggregate 11.00% limited partner interest in each of the Property R-1 Subsidiaries. In order to fund $78.0 million to the Seller, the R-1 Series will contribute $26.0 million of the net proceeds of this offering to Holdings R-1 Subsidiary which in turn will pay such $26.0 million to the Seller, with the remaining $52.0 million of the purchase price to be funded from the proceeds of a new $52.0 million non-recourse mortgage loan on the Property, which we intend to cause the Property R-1 Subsidiaries to enter into at the closing. The balance of the net proceeds from this offering will be held by the R-1 Series to pay approximately $_____ million in closing costs related to this offering and the purchase and sale transaction and to fund approximately $______ million in working capital cash reserves. We expect to consummate the purchase and sale transaction substantially concurrently with the completion of this offering.

The closing costs to be paid by the R-1 Series include:
approximately $___ million to reimburse out-of-pocket expenses incurred by ETRE and its affiliates in connection with the formation of the R-1 Series and this offering;
approximately $___ million to reimburse costs incurred by ETRE in connection with the purchase and sale transaction; and
$_________ to pay the one-time portion of an administrative services fee to our Administrative Agent.
If the underwriters exercise their over-allotment option in full, we expect to use the approximately $______ million of additional net proceeds for general working capital purposes, including to fund additional cash reserves.  Pending the use of such additional net proceeds, we intend for the R-1 Series to invest in interest-bearing, short-term investment-grade securities, money-market accounts or other investments that are consistent with its intention to elect and qualify to be taxed as a REIT.

Estimated Sources and Uses of Funds

The following table sets forth the estimated sources and uses of funds that we expect in connection with this offering, the purchase and sale transaction and the mortgage loan we intend to enter into concurrently with the completion of this offering. The amounts shown below may change based on the actual proceeds from this offering, the principal amount of the mortgage loan, or changes to other line items. See “Business and Property-Overview” for more information about the purchase and sale transaction, and see “Business and Property-Mortgage Indebtedness” for more information about the mortgage loan.
Sources
 
 
Uses
 
Gross proceeds from this offering
$
 
Proceeds to Seller for 89.00% interest in the Property
$
78,000,000

Mortgage loan proceeds
52,000,000

 
Transaction costs(1)
 
 
 
 
Cash reserves
 
Total Sources
 
 
Total Uses
 

(1) Includes closing costs and underwriting discounts and commissions.

33



DISTRIBUTION POLICY
We intend to make regular quarterly distributions to holders of Series R-1 common shares. We intend to pay a pro rata initial distribution with respect to the period commencing on the completion of this offering and ending on the last day of the then current fiscal quarter, based on $______ per share for a full quarter. On an annualized basis, this would be $____ per share, or an annual distribution rate of approximately ___% based on the assumed initial public offering price set forth on the front cover of the prospectus. This initial annual distribution rate will represent approximately 100% of estimated cash available for distribution for the 12 month period following the completion of this offering, as adjusted, to reflect certain assumptions regarding our future cash flows during this period as presented in the table and footnotes below.

Estimated cash available for distribution for the initial quarterly and annual dividends, as adjusted, assumes that operating income for the three months ended June 30, 2015, the first complete fiscal quarter in which both 1 Brown Street and 800 Delaware were fully operational, will remain stable through the 12 month period following the completion of this offering. We believe that operating income achieved during the second quarter of 2015 reflects the Property’s stabilized occupancy following a period of development and lease-up that extended into, and was completed during, the first quarter of 2015. Thus, historical revenues for periods prior to the three months ended June 30, 2015 would not be an appropriate indication of estimated revenues on a forward-looking basis. Because we assume that occupancy has stabilized as of the second quarter of 2015, we assume that revenues for the 12 month period following the completion of this offering will remain the same as they were for the pro forma three month period ended June 30, 2015, on an annualized basis. Accordingly, we also assume that operating expenses for this 12 month period, including standard turnover costs for the residential space, tenant improvements, leasing commissions as well as capital expenditures for the Property’s commercial space, will remain the same as they were for the pro forma three month period ended June 30, 2015 and will continue, on an annualized basis, for the initial 12 month period following the completion of this offering. In addition, based on our assumed offering proceeds, we expect to establish an initial $_____ cash reserve for working capital and capital expenditure purposes. Because we have made the assumptions set forth above in calculating estimated cash available for distribution for the initial 12 month period following this offering, as adjusted, we do not intend this number to be a projection or forecast of our actual results of operations, FFO or our liquidity, and have calculated this number for the sole purpose of determining our estimated initial quarterly and annual distribution rates. Our estimated cash available for distribution for the 12 month period following this offering, as adjusted, should not be considered as an alternative to cash flow from operating activities (computed in accordance with GAAP) or as an indicator of our liquidity or our ability to pay dividends or make other distributions. In addition, the methodology upon which we made the adjustments described below is not necessarily intended to be a basis for determining future dividends or other distributions.

We intend to maintain a distribution rate for the 12 month period following completion of this offering that is at or above our initial distribution rate unless actual results of operations, economic conditions or other factors differ materially from the assumptions used in determining our initial distribution rate. Any future distributions we make will be at the discretion of our board of directors and will be dependent upon a number of factors, including prohibitions or restrictions under financing agreements or applicable law and other factors described below. We do not intend to reduce the expected distributions per share if the underwriters’ option to purchase additional common shares to cover over-allotments is exercised.

We cannot assure you that our estimated distributions will be made or sustained or that our board of directors will not change our distribution policy in the future. Any distributions we pay in the future will depend upon our actual results of operations, liquidity, cash flows, financial conditions, economic conditions, debt service requirements and other factors that could differ materially from our current expectations. Our actual results of operations, liquidity, cash flows and financial conditions will be affected by a number of factors, including the revenue we receive from the Property, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our ability to pay dividends and make other distributions to our shareholders, please see “Risk Factors.”

U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its net taxable income, excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. In addition, a REIT is required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions it makes in a calendar year are less than the sum of 85% of its ordinary income, 95% of its capital gain net income and 100% of its undistributed income from prior years. For more information, please see “U.S. Federal Income Tax Considerations.” We anticipate that our cash available for distribution will be sufficient to enable us to meet the annual distribution requirements applicable to REITs and to avoid or minimize the imposition of U.S. federal income and excise taxes. However, under some circumstances, we may be required to pay distributions in excess of cash available for distribution in order to meet these distribution requirements or to avoid or minimize the imposition of tax, and we may need to borrow funds or dispose of assets to make such distributions.
It is possible that, at least initially, our distributions will exceed our then current and accumulated earnings and profits as determined for U.S. federal income tax purposes. Therefore, a portion of our distributions may represent a return of capital for U.S. federal income tax purposes. That portion of our distributions in excess of our current and accumulated earnings and profits will not be taxable to a taxable U.S. shareholder under current U.S. federal income tax law to the extent that portion of our distributions do not exceed the shareholder’s adjusted tax basis in the shareholder’s common shares, but rather will reduce the adjusted basis of the common shares. As a result, the gain recognized on a subsequent sale of those common shares or upon our liquidation will be increased (or a loss decreased) accordingly. To the extent those distributions exceed a taxable U.S. shareholder’s adjusted tax basis in his or her common shares, they generally will be treated as a capital gain realized from the taxable disposition of those shares. The percentage of our shareholder distributions that exceeds our current and accumulated earnings and profits may vary substantially from year to year. For a more complete discussion of the tax treatment of distributions to holders of our common shares, see “U.S. Federal Income Tax Considerations.”

The following table describes the adjustments we have made to our pro forma net loss for the six months ended June 30, 2015 in order to calculate our estimated cash available for distribution for the initial quarterly and annual dividend, as adjusted.



 
Property R-1 Subsidiaries
 
R-1 Series' Share(1)
Pro forma net loss for the six months ended June 30, 2015
$
(1,188,300
)
 
$
(1,057,587
)
     Less: pro forma net loss for the three months ended March 31, 2015
(745,394
)
 
(663,400
)
Pro forma net loss for the three months ended June 30, 2015
(442,906
)
 
(394,187
)
     Add: pro forma depreciation and amortization for the three months ended June 30, 2015
897,000

 
798,330

     Less Adjustment to reflect the R-1 Series' 100% share of the administrative services fee(2)

 
(7,827
)
Adjusted pro forma cash flow for the three months ended June 30, 2015
$
454,094

 
396,316

 
 
 
 
Adjustments to pro forma cash flow for the three months ended June 30, 2015
 
 
 
     Add: three months of contracted commercial rent for new leases
$
194,805

 
$
173,376

     Less: Incremental property management fee associated with contracted commercial rent
(5,844
)
 
(5,201
)
     Less: Incremental administrative services fee associated with contracted commercial rent
 
 
(3,896
)
Net incremental cash flows following the completion of the offering(3)
$
188,961

 
$
164,279

 
 
 
 
Estimated cash available for distribution for the three months following the completion of the offering(4)
$
643,055

 
$
560,595

 
 
 
 
Total estimated initial quarterly dividend to R-1 Series shareholders
 
 
$
560,595

Payout ratio based on the R-1 Series' share of estimated cash available for distribution(5)
 
 
100
%
 
 
 
 
Total estimated initial annual dividend to R-1 Series shareholders
 
 
$
2,242,380

Payout ratio based on the R-1 Series' share of estimated cash available for distribution(5)
 
 
100
%
 
 
 
 



(1)
Reflects the R-1 Series 89.00% ownership interest in the Property R-1 Subsidiaries
(2)
The administrative services fee is borne solely by the R-1 Series, not by the Property R-1 Subsidiaries, and therefore, the pro forma net loss for the three months ended June 30, 2015, has been adjusted to reflect 100% of the administrative services fee as an expense of the R-1 Series.
(3)
Adjusts pro forma cash flow for the three months ended June 30, 2015 to include contracted rental revenues from (i) the master lease with Core Realty for all of the vacant commercial space at the Property, which will be entered into at the closing of the purchase and sale transaction and (ii) the lease with New River Health and Wellness LLC, which commenced September 1, 2015 as described in “Business and Property - ‘Master Lease’ and - ‘Commercial Tenants’ with deductions for the incremental property management fee and administrative services fee incurred in connection with these additional revenues.
(4)
Through the initial and quarterly and annual dividend periods, assumes (i) residential rental revenues for the three months ended June 30, 2015 will remain stable as a result of recent occupancy stabilization; (ii) commencement of the new lease with New River Health and Wellness, LLC; and (iii) commencement of the Master Lease following the completion of the offering.
(5)
Calculated as the total estimated initial quarterly and annual dividends to holders of R-1 Series common shares divided by the R-1 Series total estimated cash available for distribution for the three-month and 12-month periods, respectively, following the completion of the offering.






34



CAPITALIZATION
The following table sets forth (1) the R-1 Series' actual capitalization at _________, 2015, and (2) its capitalization, as adjusted on a pro forma basis to give effect to (i) the sale of our Series R-1 common shares in this offering, (ii) the purchase and sale transaction, and (iii) the application of the net proceeds as set forth in "Use of Proceeds". You should read this table together with "Use of Proceeds" included elsewhere in this prospectus.
 
As of ______, 2015
 
Actual
 
Pro Forma (1)(2)
 
(dollars in thousands
Cash..................................................................................................
$
1

 

Total debt.........................................................................................
$
0

 

100 Series R-1 common shares outstanding, actual, and Series R-1 common shares outstanding, pro forma...........................................
1

 

Non-controlling interest in the Property R-1 Subsidiaries...............
0

 

Total equity.....................................................................................
1

 

Total capitalization..........................................................................
$
1

 

                                           
(1)
Assumes _______ Series R-1 common shares will be sold in this offering at an initial public offering price of $_____ per share, resulting in net proceeds of $_____ million after deducting the underwriting discount and estimated offering expenses of $_____ million.  See "Use of Proceeds."
(2)
Pro forma Series R-1 common shares outstanding includes (a) the _______ Series R-1 common shares to be issued in this offering and (b) an aggregate of ______ restricted Series R-1 common shares to be granted to our independent directors upon the completion of this offering under our 2015 Director Plan, but excludes (i) up to ________ Series R-1 common shares that we may issue and sell upon exercise of the underwriters' over-allotment option in full. 



35



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the information provided under the sections of this prospectus entitled "Risk Factors," "Forward-Looking Statements," and "Business and Property" and our and the R-1 Series' audited financial statements and the related notes included elsewhere in this prospectus.  This discussion contains forward-looking statements reflecting current expectations that involve risks and uncertainties.  Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled "Risk Factors" and "Forward-Looking Statements" and elsewhere in this prospectus.  
Overview
We are a newly organized Delaware series limited liability company that has been formed to permit public investment in individual commercial real estate properties (principally residential), each of which will be held by a separate property-owning subsidiary owned by a separate Series of limited liability company interests, or Series, that we intend to establish.  Each Series we may establish in the future will be a separate Series and not itself a separate legal entity under Delaware law.  As a separate Series, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Series are segregated and enforceable only against the assets of such Series as provided under Delaware law.  We intend for each Series to elect and qualify to be taxed as a separate REIT for U.S. federal income tax purposes, commencing with the first taxable year ending after the completion of the initial public offering of shares of such Series.
The R-1 Series has been established to allow persons who acquire Series R-1 common shares in this offering to own an indirect 89.00% interest in Penn Treaty Village Pennthouses, a residential rental community consisting of 224 apartment homes, 28,860 square feet of retail space, and 147 parking spaces, located in Philadelphia, Pennsylvania.
We intend to elect and qualify each Series, including the R-1 Series, as a REIT under the Internal Revenue Code commencing with, in the case of the R-1 Series, its short taxable year ending December 31, 2015.
Critical Accounting Policies
Below is a discussion of the accounting policies that management believes will be critical once the R-1 Series commences operations.  The R-1 Series' accounting policies have been established to conform with GAAP.  We consider these policies critical because they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and are important for understanding and evaluating the R-1 Series' reported financial results.  These judgments affect the reported amounts of assets and liabilities and the R-1 Series' disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  With different estimates or assumptions, materially different amounts could be reported in the R-1 Series' financial statements.  Additionally, other companies may utilize different estimates that may impact the comparability of the R-1 Series' results of operations to those of companies in similar businesses.
Real Estate Assets
Depreciation and Amortization.  Investments in real estate will be carried at cost and depreciated over the estimated useful lives.  Repair and maintenance costs will be charged to expense as incurred and significant replacements and betterments will be capitalized.  Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset.  We will consider the period of future benefit of an asset to determine its appropriate useful life.  We anticipate the estimated useful lives of the R-1 Series' assets by class to be generally as follows: 
Buildings
30 years
Land improvements
15 years
Tenant improvements
Shorter of lease term or expected useful life
Tenant origination and absorption costs
Remaining term of related lease
Personal property
7 years

Real Estate Acquisition Accounting.  In accordance with Accounting Standards Codification (ASC) 805, Business Combinations, or ASC 805, when an investment is made the R-1 Series will allocate the cost of the acquisition to the acquired tangible assets, identifiable intangibles and assumed liabilities based on their estimated acquisition-date fair values.  In addition, ASC 805 requires that acquisition costs be expensed as incurred.
Intangible assets include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up.  Acquired in-place lease value will be amortized to expense over the average remaining non-cancelable terms of the respective leases.

36



We will assess the acquisition-date fair values of all tangible assets, identifiable intangibles and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount or capitalization rates and available market information.  Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions.  The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.
We will estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions.  In estimating carrying costs, management will include real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods.
The R-1 Series will amortize the value of in-place leases to depreciation and amortization expense over the remaining average non-cancelable term of the respective leases.
Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities will require us to estimate market lease rates, property-operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods and the number of years the property will be held for investment.  The use of inappropriate estimates would result in an incorrect valuation of the R-1 Series' acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of its net income.
Impairment of Real Estate and Related Intangible Assets.  We will monitor events and changes in circumstances that could indicate that the carrying amounts of the R-1 Series' real estate and related intangible assets may be impaired. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets may be greater than fair value, we will assess the recoverability, considering recent operating results, expected net operating cash flow and plans for future operations.  If, based on this analysis of undiscounted cash flows, we do not believe that the R-1 Series will be able to recover the carrying value of the real estate and related intangible assets, the R-1 Series would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets as defined by ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets. Examples of events and changes in circumstances that could indicate potential impairments are: significant decreases in occupancy, rental income, operating income and market values.  Evaluating real estate for potential impairment can require our management to make significant judgments and estimates.
Revenue Recognition
We will recognize minimum rent, including rental abatements and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases and it will include amounts expected to be received in later years in deferred rents.  Our policy for percentage rental income is to defer recognition of contingent rental income until the specified target (i.e., breakpoint) that triggers the contingent rental income is achieved.  We will record property operating expense reimbursements due from tenants for common area maintenance, real estate taxes and other recoverable costs in the period the related expenses are incurred.  We will make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period.
We will make estimates of the collectability of our tenant receivables related to base rents, expense reimbursements and other revenue or income.  We will specifically analyze accounts receivable and historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.  In addition, with respect to tenants in bankruptcy, we will make estimates of the expected recovery of pre-petition and post-petition claims in assessing the estimated collectability of the related receivable.  These estimates have a direct impact on our net income because a higher bad debt reserve results in less net income.
The R-1 Series will recognize gains on sales of real estate pursuant to the provisions of ASC 605-976, Accounting for Sales of Real Estate, or ASC 605-976.  The specific timing of a sale will be measured against various criteria in ASC 605-976 related to the terms of the transaction and any continuing involvement associated with the property.  If the criteria for profit recognition under the full-accrual method are not met, the R-1 Series will defer gain recognition and account for the continued operations of the property by applying the percentage-of-completion, reduced profit, deposit, installment or cost recovery methods, as appropriate, until the appropriate criteria are met.
Share Based Compensation
We will account for share-based compensation in accordance with the provisions of ASC 718, Share-based Payment.  ASC 718 requires that compensation cost for share-based compensation be recognized ratably over the service period of the award.  Because all of our share-based compensation will be issued to non-employees, the amount of compensation is to be adjusted, in each reporting period, based on the fair value of the award at the end of the reporting period.  The award is re-marked until such time as the award has vested, the service being provided is substantially completed or, under certain circumstances, likely to be completed, whichever occurs first.

37



Income Taxes
We will operate in a manner intended to enable us to qualify as a REIT under Sections 856-859 of the Internal Revenue Code.  Under those sections, a REIT which distributes at least 90% of its REIT taxable income, excluding net capital gains and determined without regard to the dividends paid deduction, as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders.  Compliance with the REIT Regulations can be complex and requires our management to exercise judgment.


38



Results of Operations
As of the date of this prospectus, the R-1 Series has no operations because it has been in its organizational stage.  Substantially concurrently with the completion of this offering, the R-1 Series will acquire an indirect 89.00% interest in the Property through partnership interests in the Property R-1 Subsidiaries and will commence operations.  Thereafter, the R-1 Series' operations will consist primarily of revenues from the tenants and operating expenses. 
For the six months ended June 30, 2015, total revenue from the Property was approximately $2.78 million, consisting of rental revenue of approximately $2.70 million, and other  income of  approximately $0.08 million. During the same period, operating expenses from the Property were approximately $0.92 million, consisting of approximately $0.07 million in real estate taxes and approximately $0.85 million in other operating costs. 
For the year ended December 31, 2014, total revenue from the Property was approximately $4.29 million, consisting of rental revenue of approximately $4.13 million, and other  income of approximately $0.16 million. During the same period, operating expenses from the Property were approximately $1.55 million, consisting of approximately $0.13 million in real estate taxes and approximately $1.42 million in other operating costs. 
Following the completion of this offering, the R-1 Series will begin to incur an ongoing administrative services fees payable to our Administrative Agent (estimated to be approximately $0.30 million per annum), an asset and property management fee payable to our Asset Manager (estimated to be approximately $0.15 million per annum) and its allocable portion of other general overhead expenses (estimated to be approximately $_______ per annum).
Liquidity and Capital Resources
The R-1 Series' short-term and long-term liquidity requirements consist primarily of funding its distributions and operating expenses and other expenditures directly associated with its interest in the Property, including:
The acquisition of the R-1 Series' interest in the Property R-1 Subsidiaries;
Distributions paid to holders of our Series R-1 common shares pursuant to the R-1 Series' distribution policy and to maintain its REIT status; and
Administrative services  fees, administrative sale fees and expense reimbursements payable to our Administrative Agent;
The Property R-1 Subsidiaries’ short-term and long-term liquidity requirements consist primarily of funding its distributions and operating expenses and other expenditures directly associated with the Property, including:
Fees payable to the Asset Manager;
Interest expense and scheduled principal payments on the Property's mortgage debt;
Capital expenditures to improve the Property; and
Recurring repairs and maintenance expenditures required to maintain the Property.
We expect the R-1 Series will meet its short-term liquidity requirements generally through its share of net cash provided by the Property's operations, existing cash balances, the net proceeds of this offering and, if necessary, short-term borrowings.  We expect the R-1 Series will meet its long-term liquidity requirements through the ability to refinance borrowings on the Property, the issuance of additional equity securities or debt securities and the sources described above with respect to the R-1 Series' short-term liquidity.
Although our governing documents contain limitations related to certain types of debt financing and cross-subsidiary guarantees, in general, these limitations do not limit the amount of indebtedness that the R-1 Series may incur, directly or through the Property R-1 Subsidiaries and its subsidiaries.  We expect for the R-1 Series to maintain a flexible capital structure and intend to target a ratio of outstanding indebtedness to the R-1 Series' total assets of between 50% and 70%. Our board of directors will periodically review this target and may modify or eliminate it without the approval of holders of our Series R-1 common shares.


39



Contractual Obligations
The R-1 Series had no contractual obligations as of June 30, 2015. An affiliate of the R-1 Series has entered into the purchase and sale agreement relating to the acquisition of an 89.00% interest in the Property, which will be assigned to the R-1 Series prior to the closing of the acquisition. In addition, prior to the completion of this offering, the R-1 Series will enter into an administrative services agreement with our Administrative Agent, and the Property R-1 Subsidiaries will enter into the asset and property management agreement with the Asset Manager, each of which will be effective upon closing of this offering. Further, following the purchase and sale transaction, the Property will be subject to a mortgage loan that will encumber the Property, as described below.  Other than these agreements, the R-1 Series does not have any other material contractual obligations.
Related Party Fees

The Administrative Agent, an affiliate of the managing member of our Company, will provide certain administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries as well as a management team and appropriate support personnel. The administrative services fee includes an approximate   $______ one‑time fee upon closing of this offering. This one-time fee will be expensed as part of the formation and organization of the R-1 Series.
In addition, the R-1 Series will pay the Administrative Agent $50,000 per quarter plus 2.0% of net operating income, as defined below, during the prior fiscal quarter under the administrative services agreement.  For purposes of calculating the quarterly administrative services fee, net operating income means the R-1 Series' net income during the fiscal quarter (as determined in accordance with GAAP), plus (i) total depreciation and amortization, net interest, marketing and general and administrative expenses during such fiscal quarter and (ii) one-time events pursuant to changes in GAAP and certain non-cash items during such fiscal quarter with the approval of a majority of our independent directors.
In addition, the Administrative Agent will be entitled to an administrative sales fee upon a future sale of the Property as provided in the administrative services agreement, which will be included as a cost of sale at such time.
Mortgage Indebtedness
We have received a term sheet from Arbor Commercial Funding for a 10-year commercial mortgage loan, which will enable the Property R-1 Subsidiaries to borrow approximately $52,000,000. The proposed loan, providing for an interest-only payment feature for 5 years, followed by 30 years amortization is expected to bear interest at a fixed rate of 4.25% per annum.  The loan is expected to be secured by a first mortgage lien on the Property.  Certain penalties may apply upon prepayment of the loan, except during the last 3 months of the loan term. The closing of the mortgage loan is contingent on a number of conditions including the lender's due diligence, the negotiation and execution of definitive documents relating to the mortgage loan and approval of the lender's loan committee.  We cannot assure you that the Property R-1 Subsidiaries will be able to enter into the mortgage loan on the terms contemplated by the term sheet or at all. See “Business and Property-Mortgage Indebtedness” for more information.

Off-Balance Sheet Arrangements
As of the date of this prospectus, the R-1 Series had no off-balance sheet transactions.

40



Funds from Operations
Management believes that funds from operations, or FFO, a non-GAAP measure, is an additional and appropriate measure of the operating performance of REITs in general and the R-1 Series in particular.  We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss (computed in accordance with GAAP), excluding gains or losses from sales of depreciable properties, the cumulative effect of changes in accounting principles and real estate-related depreciation and amortization.
Our management utilizes FFO as a measure of the R-1 Series' operating performance, and believes FFO is also useful to investors, because it facilitates an understanding of the R-1 Series' operating performance after adjustment for certain non-cash expenses, such as real estate depreciation, which assumes that the value of real estate assets diminish predictably over time.  Furthermore, although FFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO may provide us and investors with an additional useful measure to compare the R-1 Series' financial performance to certain other REITs.
FFO is not equivalent to net income or cash generated from operating activities determined in accordance with GAAP.  Furthermore, FFO does not represent amounts available for management's discretionary use because FFO excludes depreciation and amortization and captures neither the changes in the value of the Property that results from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of the Property, all of which have real economic effect and could materially impact the R-1 Series' results from operations.  There can be no assurance that FFO presented by us is comparable to similarly titled measures of other REITs.  FFO does not represent cash generated from operating activities and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or to cash flow from operating activities determined in accordance with GAAP.  FFO is not indicative of cash available to fund ongoing cash needs, including the ability to make cash distributions.  Although FFO is a measure used for comparability in assessing the performance of REITs, as the NAREIT White Paper only provides guidelines for computing FFO, the computation of FFO may vary from one company to another.
The following table presents a reconciliation of the Property's pro forma net loss , the most directly comparable GAAP measure, to pro forma FFO and pro forma FFO attributable to common shareholders for the periods presented:
Reconciliation of Pro Forma Net Loss to Pro Forma FFO and Pro Forma FFO Attributable to Common Shareholders
 
 
For the Six Months Ended June 30, 2015
 
For the Year Ended December 31, 2014
Net loss
 
$
(1,188,300
)
 
$
(3,327,400
)
Add:
 
 
 
 
Depreciation and amortization
 
1,794,000

 
3,588,000

Funds from operations
 
$
605,700

 
$
260,600

Less:
 
 
 
 
FFO attributable to non-controlling interests (1)
 
81,700

 
56,660

FFO attributable to common shareholders (1)
 
$
524,000

 
$
203,940


(1) The administrative services fee is borne solely by the R-1 Series, not by the Property R-1 Subsidiaries, and therefore, FFO has been adjusted so that 100% of the administrative services fee is reflected as an expense of the R-1 Series. 

41



Quantitative and Qualitative Disclosures About Market Risks
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices and other market changes that affect market sensitive instruments.  In pursuing its business plan, we expect that the primary market risk to which the R-1 Series will be exposed is interest rate risk.
The R-1 Series may be exposed to the effects of interest rate changes primarily as a result of the Property's long-term debt. The R-1 Series will not have any long-term floating rate debt, but the R-1 Series or its subsidiaries may incur long-term floating rate debt in the future.
Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk.  To achieve our objectives, the R-1 Series may borrow, directly or through the Property R-1 Subsidiaries or its subsidiaries, at fixed rates or variable rates.  The R-1 Series may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate its interest rate risk on a related financial instrument.  The R-1 Series will not enter into derivative transactions for speculative purposes.
Inflation
We expect the R-1 Series will be exposed to inflation risk as income from the Property's long-term leases with commercial tenants, together with income from short-term leases with its residential tenants, will be the sole source of its cash flows from operations.  We expect the following provisions will protect the R-1 Series from the impact of inflation: with respect to (i) apartment leases, the ability to adjust rents generally on an annual basis as short-term leases expire and (ii) with respect to (ii) retail leases, rent steps, reimbursement billings for operating expense pass-through charges, and real estate tax and insurance reimbursements on a per square foot allowance.  However, due to the expected long-term nature of the retail leases, it may not re-set frequently enough to cover inflation.

42



BUSINESS AND PROPERTY

Overview
We are a newly organized Delaware series limited liability company that has been formed to permit public investment in individual commercial real estate properties (principally residential), each of which will be held by a separate property-owning subsidiary   owned by a separate Series of limited liability company interests, or Series, that we intend to establish.  Each Series we may establish in the future will be a separate Series and not itself a separate legal entity under Delaware law.  As a separate Series, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Series are segregated and enforceable only against the assets of such Series as provided under Delaware law.  We intend for each Series to elect and qualify to be taxed as a separate REIT for U.S. federal income tax purposes, commencing with the first taxable year ending after the initial public offering of shares of such Series has been completed.
The R-1 Series has been established to allow persons who acquire Series R-1 common shares in this offering to own an indirect 89.00% interest in Penn Treaty Village Pennthouses, a residential rental community consisting of 224 apartment homes, 28,860 square feet of retail space, and 147 parking spaces, located in Philadelphia, Pennsylvania, which interest will be held indirectly by the R-1 Series, following the purchase and sale transaction described below, through its partnership interests in the Property R-1 Subsidiaries.
The Property is currently owned by Waterview Grande, L.P. and its affiliates, or the Seller, which in the aggregate currently own 100% of the Property R-1 Subsidiaries, two limited partnerships that together own the Property. An affiliate of Holdings R-1 Subsidiary has executed a purchase and sale agreement with Seller and the Property R-1 Subsidiaries to acquire an aggregate direct and indirect 89.00% interest in each of the Property R-1 Subsidiaries. The purchase and sale agreement will be assigned to Holdings R-1 Subsidiary prior to the closing of the acquisition. Specifically, (i) Holdings R-1 Subsidiary, in its capacity as the ETRE Limited R-1 Partner, will acquire an 88.99% limited partner interest in each of the Property R-1 Subsidiaries, and (ii) the General R-1 Partner, an entity wholly-owned by Holdings R-1 Subsidiary, will acquire a 0.01% general partner interest in each of the Property R-1 Subsidiaries. The Seller will retain an 11.00% limited partnership interest in each of the Property R-1 Subsidiaries.

The purchase and sale agreement provides for a purchase price for the aggregate 89.00% controlling interest in the Property R-1 Subsidiaries of approximately $78.0 million in cash (based on the negotiated value of $82.0 million for the Property, subject to pro-rations and adjustments as set forth in the purchase and sale agreement). In order to fund $78.0 million to the Seller, the R-1 Series will contribute $26.0 million of the net proceeds of this offering to Holdings R-1 Subsidiary which in turn will pay such $26.0 million to the Seller, with the remaining $52.0 million of the purchase price to be funded from the proceeds of a new $52.0 million non-recourse mortgage loan on the Property, which we intend to cause the Property R-1 Subsidiaries to enter into at the closing. The balance of the net proceeds from this offering will be held by the R-1 Series to pay for closing costs and any remaining amount will be held as working capital reserves. We expect to consummate the purchase and sale transaction substantially concurrently with the completion of this offering.

Following the completion of the purchase and sale transaction, the objective of the R-1 Series will be to maximize total returns to holders of our Series R-1 common shares through the payment of consistent cash distributions and the achievement of long-term capital appreciation in the Property.

In connection with our acquisition of an aggregate 89.00% general and limited partner interest in the Property R-1 Subsidiaries, we will amend and restate the limited partnership agreements for each of the Property R-1 Subsidiaries. Under the terms of the limited partnership agreements of the Property R-1 Subsidiaries, the General R-1 Partner will control all of the business, affairs and operations of the Property R-1 Subsidiaries, other than day-to-day management of the Property, which will be performed by Core Realty, or the Asset Manager, pursuant to the asset and property management agreement. Our Asset Manager will at all times be subject to the supervision and oversight of our board of directors and the General R-1 Partner. See “Property R-1 Subsidiaries Limited Partnership Agreements” for more information regarding the limited partnership agreements.
Generally, each of our Series and/or the Property Subsidiaries, including the R-1 Series, will enter into an administrative services agreement with our Administrative Agent, which is a recently-formed subsidiary of ETRE Financial, LLC.  Our Administrative Agent will provide certain administrative and advisory services to each of our Series and Property Subsidiaries, including the R-1 Series and the Property R-1 Subsidiaries. Through our Administrative Agent, we intend to utilize and leverage the extensive expertise and extensive network of relationships of ETRE and its management team.
We intend to elect and qualify each Series, including the R-1 Series, as a REIT under the Internal Revenue Code commencing with, in the case of the R-1 Series, its short taxable year ending December 31, 2015.

43



Business Strategy
The objective of the R-1 Series is to maximize total returns to holders of our Series R-1 common shares through the payment of consistent cash distributions and the achievement of long-term capital appreciation in the Property.

To achieve this objective, the General R-1 Partner will direct the Asset Manager to seek to maximize the cash flow from, and increase the value of, the Property by:

securing and negotiating new and renewal leases for the apartment units and retail space to increase occupancy and manage tenant turnover;

finding permanent tenants for the retail space currently covered by the master lease;

actively managing operating expenses; and

improving the Property.

We expect that the Asset Manager will seek to maximize value through the active management of the Property, participating in various aspects of the operations of the Property, including marketing, operations analysis, physical design, renovation, capital improvements, tenant experience and overall strategic direction.

Our Strengths
We believe that our competitive strengths include the following:
Independent Board of Directors.  Shareholders of Series R-1 common shares will benefit from the oversight of an independent board of directors with extensive experience in the real estate, equity and debt markets. Jay Anderson serves as the chief operating officer of The Feil Organization, a private real estate development and management firm with over 26 million square feet of retail, commercial, and industrial properties. Mark Filanowski is a founding partner of Intrepid Shipping and was previously chief financial officer of Marine Transport Corporation. Samuel Fuller is President of Fuller Development, LLC and formerly served as Executive Vice President of Development for the Northeast Region for Archstone and Executive Vice President of AvalonBay.
Experienced Management Team and Advisors.  Holders of Series R-1 common shares will benefit from the administrative services of ETRE Asset Management, LLC, our Administrative Agent, a subsidiary of ETRE, our experienced management team and the asset and property management services of the Asset Manager, Core Realty, an affiliate of the Core Limited R-1 Partner. Paul Frischer, our president and chief executive officer and a founding member of ETRE, leads the development and implementation of ETRE and has extensive experience in the real estate industry, covering all aspects of commercial real estate investment, including equity, debt and trading.  Jesse Stein, our chief operating officer, secretary and a founding member of ETRE, is the leading visionary and architect for ETRE, with extensive experience in real estate capital markets, financial modeling, and equity trading.

Founded in 1998, Core Realty is a full service construction, property management, and investment management company owned by Michael Samschick that specializes in both commercial and multifamily development projects.
Investor Accessibility.  Series R-1 common shares provide accessibility for individual investors to own interests in a high-quality, single-property commercial real estate asset in the form of a listed public security.

Investor Liquidity.  We have applied to have our Series R-1 common shares listed on the NASDAQ under the ticker “EPNT” in order to provide liquidity to holders of our Series R-1 common shares.

Economies of Scale Model.  Our Administrative Agent will oversee our SEC reporting and compliance obligations, including as each relates to the R-1 Series.  These functions include investor reporting and communication, periodic filings with the SEC, audit oversight and general compliance.  The Administrative Agent will provide similar or additional functions for the Other Property Series, achieving economies of scale for each of the Series.

44




The Property
Penn Treaty Village Pennthouses
Penn Treaty Village Pennthouses is a newly developed residential rental community consisting of 224 apartments, 28,860 rentable square feet of commercial space and 147 parking spaces located at One Brown Street and 800 North Delaware Avenue in Philadelphia, Pennsylvania. The Property, developed by Core Realty, Inc., comprises two eight story towers. Construction of the first tower, One Brown Street, was completed in September 2012 and the second tower, 800 North Delaware, was completed in June 2014. The Property occupies a prominent location along Delaware Avenue with unobstructed views of the Delaware River and is situated within close proximity to Center City, which we believe to be one of Philadelphia’s most desirable submarkets with over 450,000 square feet of entertainment, retail and restaurants planned for future development. The apartments, which average over 1100 square feet, were constructed with high quality finishes including floor to ceiling windows and a built in smart system, which allows residents to control lighting, window treatments, HVAC and a surround sound system from their smart phone or tablet. The Property’s common area features resort-style amenities, an outdoor pool and two furnished rooftop terraces with a walking track and grilling areas.
PROPERTY SUMMARY
 
1 Brown Street

 
800 Delaware Avenue

 
Property Total

Residential Units
126

 
98

 
224

Commercial Rentable Square Feet
19,260

 
9,600

 
28,860

Parking Spaces
 
 
 
 
147

% Residential Occupied (1)
96
%
 
99
%
 
98
%
% Commercial Occupied(2)
100
%
 
100
%
 
100
%
Ceiling Height
9' 00"

 
9' 00"

 
9' 00"

Stories
8

 
8

 
8

Year Built
2012

 
2014

 
2012, 2014

(1) Based on leases signed as of June 30, 2015.
(2) Retail space is subject to a master lease between the Property R-1 Subsidiaries and Core Realty and provides for 100% economic occupancy for 18 months following the closing of the purchase and sale transaction (assuming the existing lease for 9,722 square feet remains in effect). For details regarding the master lease, see “-Master Lease” below.

 Site Description
The site consists of a 79,627 square-foot parcel on the corner of Brown Street and Front Street. The current development plan for the Property’s surrounding area includes over 450,000 square feet of entertainment, retail and restaurants all within a four-block radius to Penn Treaty Village. These developments include two sites, totaling close to 150,000 square feet, for an entertainment venue, a high-end entertainment space with restaurant and two additional restaurants. The Sugar House Casino, located across the street and constructed in 2010, is currently undergoing a $155 million expansion. Once completed, we anticipate that Penn Treaty Village will become an epicenter of high-end retail shopping, award-winning restaurants and nightlife entertainment.
Transportation & Access
As part of the new Penn Treaty Village re-development along Delaware Avenue, The Pennthouses provide residents with easy access to Center City and all areas of Philadelphia, as well as New Jersey via the Ben Franklin and Betsy Ross bridges. High-end dining and night clubs traverse Delaware Avenue, along with man-made biking and walking paths. The Property is accessible within minutes of major Interstate Highways, I-95 and I-676, as well as Philadelphia thoroughfares including Delaware Avenue, Spring Garden Street and Vine Street Expressway.
Apartment Features
The apartments are available as one, two or three bedroom units with spacious floor plans. The apartments have condominium-quality finishes such as oversized floor to ceiling windows, nine foot ceilings, crown molding, full-size washer and dryer, gourmet eat-in kitchen with granite counters, stainless steel appliances and marble baths with spa showers and jacuzzi tubs. Each Apartment has a built-in smart system allowing residents to control lighting, solar blinds, heating and central air conditioning as well as a surround sound system from a smart phone or tablet.
Building Amenities and Furnishings
The Property features a number of amenities, which include two first class lobbies, 24-hour concierge service, a parking garage, state of the art fitness center and clubhouse, resort-style outdoor pool with cabanas and two furnished rooftop terraces with a jumbo flat screen television, walking track and grilling areas.


45



Zoning and Development of the Delaware River Waterfront
The site is situated in the Fifth Ward of the City of Philadelphia, Pennsylvania. The total parcel size of approximately 79,627 square feet, or 1.83 acres, was purchased by Core Realty in 2012 for the development of Penn Treaty Village, a community of residential and mixed-use commercial buildings. The site, situated on the Delaware River Waterfront, was formerly used as an auto storage facility, and has been the focus of a major rehabilitation project by Philadelphia’s City Planning Commission for the past two years. The City’s Central Delaware Master Plan, created by the Delaware River Waterfront Corporation and adopted by the City Planning Commission, calls for a waterfront trail connecting a series of riverfront parks and open space, mixed-use development with mostly mid-rise residential buildings and improved pedestrian and transit links from city neighborhoods to the waterfront. Penn Treaty Village fronts portions of Fishtown and Northern Liberties and is in close proximity to Penn Treaty Park, an existing waterfront park, which is considered an important amenity in the City’s Master Plan. The Delaware River Waterfront Corporation considers Penn Treaty Village to be a key element in the redevelopment of the surrounding area and believes the high quality development would help extend neighborhoods to the river and also enhance value and marketability and spur development across Delaware Avenue, on the water's edge.
Lobby and Layout
The Grand Lobby features elegant marble and a beautifully lit fountain. Tenants and their guests are treated to daily fresh baked cookies and a no cost Starbucks Coffee and Tazo Tea machine. There is a 24 hour full-service concierge, as well as a conference room and free wifi. These lobby features are exclusively offered for residents and their guests.
Roof
The Property has an expansive furnished rooftop terrace with a jumbo screen television, a walking track, grilling and dining areas as well as a resort style heated pool with cabanas.

46



Unit Mix
The following table sets forth a summary schedule of the Property's apartment units for leases in place as of June 30, 2015.
Unit Type
Units
Square Feet
Average Rent Per Unit
Average Rent Per Square Foot
Percent Occupied
Annualized Base Rent
One Brown- 1BR/1BA
7
948
$
1,824

$
1.92

100
%
$
153,216

One Brown- 2 BR/2 BA
107
1,316
2,613

1.99

95
%
3,187,337

One Brown- 3 BR/2 BA
6
1,577
3,519

2.23

100
%
253,368

One Brown- 3 BR/3 BA
6
2,215
3,461

1.56

100
%
249,192

800 Delaware- Studio
7
448
1,232

2.75

100
%
103,488

800 Delaware- 1 BR/1 BA
84
864
1,913

2.21

100
%
1,928,304

800 Delaware- 1 BR/1 BA- Den
7
1,079
2,513

2.33

99
%
208,981

Total/Weighted Average
224
253,465
$
2,327

$
2.06

98
%
$
6,083,886

Commercial Tenants

As of June 30, 2015, the commercial space of the Property was leased to one tenant on a triple net basis.  The following table sets forth information regarding the commercial tenants in the Property based on the effective annualized base rent as of June 30, 2015, including the master lease, which will be entered into as of the closing of the purchase and sale agreement:
Tenant
Lease Expiration
Remaining Lease Term (Years)
Extension Options
Total Leased Square Feet
Percent of Property Commercial Rentable Square Feet
Annualized Base Rent
Percent of Property Commercial Annualized Base Rent
New River Health & Wellness, LLC
8/30/2025
10.00
2x5 years
9,722
33.7%
$
262,494

33.7%
Core Realty, Inc.
18 months from closing
1.50
 
19,138
66.3%
516,726

66.3%
Total /Weighted Average

4.36
 
28,860
100.0%
$
779,220

100.0%

Annualized Base Rent

The following table sets forth information regarding the Property's effective annualized base rent as of June 30, 2015, including the master lease, which will be entered into as of the closing of the purchase and sale agreement:

 
Annualized Base Rent
% of Total
Annualized Residential Base Rent
$
6,083,886

88.2%
Annualized Commercial Base Rent
779,220

10.8%
Annualized Total Rental Revenue
$
6,863,106

100.0%


47



Percent Leased and Rental Revenue-Residential
The following table sets forth the percentage leased and annualized base rent per leased apartment unit since the receipt of a certificate of occupancy for each of the towers in the Property as of the dates indicated below:
One Brown Street
Date
Percentage Leased(1)
Annualized Base Rent per Leased Apartment Unit(2)
June 30, 2015
96.0%
$32,883
March 31, 2015
94.0%
$31,857
December 31, 2014
79.0%
$31,848
December 31, 2013
95.0%
$30,806
December 31, 2012
57.0%
$31,859
  
800 Delaware Avenue
Date
Percentage Leased(1)
Annualized Base Rent per Leased Apartment Unit(2)
June 30, 2015
99.0%
$22,895
March 31, 2015
92.0%
$22,674
December 31, 2014
62.0%
$21,609

 (1)      Based on leases signed as of the dates indicated above and calculated as number of leased units divided by the total number of units.
 (2)     Annualized base rent does not include other income such as parking income, late fees, and amenity fees.


48




Commercial Lease Expirations
The following table sets forth a summary schedule of the lease expirations for the three commercial leases in place as of June 30, 2015 (or to be in place as of the closing) plus available space at the Property for each of the ten full calendar years beginning with the year ending December 31, 2015. 
Year of Lease Expiration
Number of Leases Expiring
Square Footage of Leases Expiring
Percent of Property Square Footage of Leases Expiring
Annualized Base Rent

Percent of Property Annualized Base Rent
Annualized Base Rent Per Leased Square Foot

2015
0
0
0.0%
0

0.0%
0.00

2016
0
0
0.0%
0

0.0%
0.00

2017
    2(1)
19,138
66.3%
$
516,726

66.3%
0.00

2018
0
0
0.0%
0

0.0%
0.00

2019
0
0
0.0%
0

0.0%
0.00

2020
0
0
0.0%
0

0.0%
0.00

2021
0
0
0.0%
0

0.0%
0.00

2022
0
0
0.0%
0

0.0%
0.00

2023
0
0
0.0%
0

0.0%
0.00

2024
0
0
0.0%
0

0.0%
0.00

Thereafter
1
9,722
33.7%
262,494

33.7%
$
27.00

Total/Weighted Average
3
28,860
100.0%
$
779,220

100.0%
$
27.00


(1) Represents the master lease with respect to each of the towers in the Property. 

49



Floor Plans
The following are representative floor plans for each of the towers in the Property:
Real Property Taxes

The following table sets forth a summary of real estate tax payments for the Property for the 2012, 2013, 2014 fiscal years and for the six months ended June 30, 2015:

One Brown Street
Year Ended December 31,
Six Months Ended June 30, 2015
 
2012

2013

2014

2015

Assessed Value Less Exemption
$
1,968,896

$
1,968,896

$
7,441,114

$
7,802,214

Real Estate Tax Rate
 
 
1.34
%
1.36
%
Total Taxes Paid (1)
$
87,643

$
57,588

$
98,346

$
106,118

Taxes Paid Per Unit
$
696

$
457

$
781

$
842

  
  
800 Delaware Avenue
Year Ended December 31,
Six Months Ended June 30, 2015
 
2012

2013

2014

2015

Assessed Value Less Exemption
$
236,768

$
236,768

$
6,500,000

$
3,240,000

Real Estate Tax Rate
 
 
1.34
%
1.34
%
Total Taxes Paid (1)
$
22,302

$
23,135

$
22,903

$
43,416

Taxes Paid Per Unit
$
228

$
236

$
234

$
448

                                       
(1) Real estate taxes for the entire fiscal year are paid during the first quarter of the calendar year.

Depreciation

The federal tax basis, the depreciation rate, method of depreciation and the life claimed for purposes of depreciation of the Property will be determined based upon the completion of cost allocation study with respect to the Property.


50



Philadelphia Multi-Family Market Overview
According to REIS reports on the Philadelphia apartment market published in March 2015 and May 2015, or together, the REIS Report, despite being the sixth largest city in the United States by population, the Philadelphia metropolitan area, or the Philadelphia Metro has the lowest number of rental units per capita as compared to other top 10 major markets by population (0.05 apartment units per capita based on 2013 US Census population estimate of 6,034,678). This imbalance coupled with significant population gains over the next five years for Philadelphia (estimated 50,500) should aid absorption and drive demand, despite expected new deliveries to the market. Apartment vacancy should remain compressed, particularly for newer luxury properties within the region. Recently, there has been an increased demand for quality Class A rental housing within the Philadelphia CBD, driven by young professionals and empty nesters moving into Center City. “Echo Boomers,” born between 1979 and 1984, constitute approximately 23% of the total Philadelphia Metro population.

The first quarter 2015 vacancy rate in the Philadelphia area is just 3.1%, according to REIS, down 10 basis points from the prior quarter and 30 basis points year-over-year, and less than half the cyclical peak of 6.6% in 2009. The first quarter 2015 Class A vacancy rate is 4.3%, down 10 basis points from the prior quarter and 20 basis points year-over-year. Demand for apartment units has been strong in Philadelphia for the past five years, with net absorption averaging 2,340 units per year during the 2010 to 2014 period. That is more than double the average annual net absorption for the entire 25 years from 1990 to 2014, at about 1,040. Strong demand, in excess of new supply, continued in the first quarter of 2015, with 475 units of net absorption overall, 281 for Class A properties, and 197 for Class B/C properties.

According to REIS, the Philadelphia Metro is known for its moderate, consistent apartment rent gains, and the first quarter of 2015 was no exception. The average asking rent increased 0.5% from the prior quarter and 2.8% year-over-year to $1,154 per month while the average effective rent rose 0.6% from the prior quarter and 2.9% year-over-year to $1,131 per month, respectively, similar to the gains of 2.8% and 3.1% recorded for all 2014. Following one year of weak rents in 2009, when the asking average was unchanged and the effective average slipped 0.6%, annual rent gains averaged 2.4% asking and 2.9% effective during the five years from 2010 to 2014. The first quarter 2015 Class A asking average is $1,380 per month, up 0.5% from the prior quarter and 2.8% year-over-year.


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Our Financing Strategy
Although our governing documents contain limitations related to certain types of debt financing and cross-subsidiary guarantees, in general, these limitations do not limit the amount of indebtedness that the R-1 Series may incur, directly or through its subsidiaries, including the Property R-1 Subsidiaries.  We expect for the R-1 Series to maintain a flexible capital structure and intend to target a ratio of outstanding indebtedness to the R-1 Series' total assets of between 50% and 70%.  Our board of directors will periodically review this target and may modify or eliminate it without the approval of holders of our Series R-1 common shares.
We will consider a number of factors when evaluating the R-1 Series' level of indebtedness and making financial decisions, including, among others, the following:
the interest rate of the proposed financing;
the extent to which the financing impacts the flexibility of the Asset Manager to manage the Property;
prepayment penalties, defeasance, and restrictions on refinancing;
our long-term objectives with respect to the financing;
the R-1 Series' target investment returns;
the ability of the Property to generate cash flow sufficient to cover budgeted capital expenditures, tenant improvements and expected debt service payments;
overall level of consolidated indebtedness;
timing of debt maturities;
provisions that require recourse;
corporate credit ratios, including debt service and fixed charge coverage, debt to EBITDA, debt to total market capitalization and debt to undepreciated assets; and
the overall ratio of fixed- and variable-rate debt.
Mortgage Indebtedness

We have received a term sheet from Arbor Commercial Funding for a 10-year commercial mortgage loan, which will enable the Property R-1 Subsidiaries to borrow approximately $52,000,000 of the purchase price of the Property.  The proposed loan, providing for an interest-only payment feature for 5 years followed by 30 years amortization, is expected to bear interest at a fixed rate of 4.25% per annum.  The loan is expected to be secured by a first mortgage lien on the Property. 
The Loan will be non-recourse, except that the Property R-1 Subsidiaries will be personally liable (jointly and severally) for all Freddie Mac standard exceptions to non-recourse liability and for environmental compliance and violations, all as set forth more fully in the loan documents. Notwithstanding, based on the loan to value and anticipated debt service coverage, lender will not require a guarantor for the “non-recourse carve-outs”.
Yield maintenance will apply until the loan is securitized. A 2-year lockout period follows, after which defeasance is in effect. During the defeasance period, the loan cannot be prepaid but may be defeased by substituting securities as collateral for the loan, pursuant to the loan documents. During the last 3 calendar months of the loan term, the indebtedness may be prepaid without a premium. If the loan is not securitized within the first 1 year, then yield maintenance applies for the life of the loan. In this event, the loan will be open to prepayment during the entire term. Partial prepayments will not be allowed. The Property R-1 Subsidiaries must pay interest accrual through the last day of the month in which payoff occurs, along with a premium as follows: a) during the prepayment period, the greater of a yield maintenance formula or 1.0% of the unpaid principal balance applies; b) after the prepayment period, a premium equal to 1.0% of the unpaid principal balance continues until the last 3 months of the loan term; and c) no prepayment premium is in effect during the last 3 months of the loan term.
The closing of the mortgage loan is contingent on a number of conditions including the lender’s due diligence, the negotiation and execution of definitive documents relating to the mortgage loan and approval of the lender’s loan committee.  We cannot assure you that the Property R-1 Subsidiaries will be able to enter into the mortgage loan on the terms contemplated by the term sheet or at all.

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Our Administrative Agent and ETRE
Our Administrative Agent is a wholly-owned subsidiary of ETRE.  Pursuant to the terms of an administrative services agreement between the R-1 Series and our Administrative Agent, our Administrative Agent will provide certain administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries as well as a management team and appropriate support personnel. These services include, among others, investor relations and shareholder communications functions for the R-1 Series and assisting the R-1 Series in preparing, reviewing and filing all reports required to be filed by it or us with the SEC, NASDAQ, the Internal Revenue Service and other regulatory agencies. See “Our Administrative Agent-Administrative Services Agreement.” Our Administrative Agent will at all times be subject to the supervision and oversight of our board of directors. We do not expect to have any employees.
Our Administrative Agent has access to ETRE's senior management team, which has extensive experience in identifying, acquiring, financing, analyzing and managing commercial real estate investments, as well as a broad spectrum of other investments related to commercial real estate.  Each of the ETRE team members has at least ten years of commercial real estate investment experience.
ETRE is a real estate financial services and information technology company focused on facilitating the public listing of individual commercial real estate assets to improve access, liquidity and transparency in commercial real estate.  ETRE was founded in 2012 by a team of real estate and technology professionals who seek to bring the benefits of the public equities market to real estate investors through an ecosystem of services that incorporate capital markets advisory, asset management, information technology and tenant analysis services.  In particular, ETRE's capital markets advisory business seeks to enhance access to the public markets with a comprehensive due diligence process to facilitate the public listing of commercial real estate; its asset management business provides investors with information on listed securities related to real estate; and its information technology business provides a web-based proprietary system with an extensive collection of market information that provides investors with analytics technology for listed securities related to real estate.
The Asset and Property Management Agreement and the Asset Manager
The Property R-1 Subsidiaries will engage Core Realty, or the Asset Manager, an affiliate of the Core Limited R-1 Partner, as asset and property manager for the Property after the closing of the purchase and sale transaction.
Subject to the supervision and oversight of the General R-1 Partner, the Asset Manager will be responsible for performing management and administrative functions of the Property R-1 Subsidiaries in respect of the Property.
At the property level, the Asset Manager will be responsible for overseeing real property operations, including tenant leasing, budgeting, cash management and insurance, and for other functions and powers delegated to it by the General R-1 Partner.  In performing its services, the Asset Manager will generally be subject to any applicable restrictions and conditions regarding the activities of the Property R-1 Subsidiaries set forth in our governing documents and the governing documents of the Property R-1 Subsidiaries.
Core Realty is a full-service construction, construction management, investment management, and property management company owned by Michael Samschick that specializes in both commercial and multi-family development projects. Core Realty was founded in 1998 and is operated by Mr. Samschick, who oversees the company's operations and chairs Core Realty's investment committee and has over 30 years of real estate experience.  In addition to Mr. Samschick, Core Realty’s executive team has a combined aggregate of 90 years of experience in acquiring, developing, financing, managing and analyzing real estate assets.
In Core Realty’s latest expansion it has launched a national fund that is acquiring stabilized assets throughout the United States. This new national fund is consistent with Core Realty’s mixed-use and multifamily experience. 
Core Realty manages over 60 properties throughout Philadelphia, New Jersey and Georgia - including apartment buildings, retail centers, office buildings and industrial properties.  Core Realty's investments are a combination of independently owned assets and assets owned with high net worth investors and joint venture partners. Core Realty believes that its 17 years of property management experience enables it to maintain great tenant relationships and implement efficient operating cost management systems that are on par with best-in-class operators.
Core Realty’s focus/efforts over the last several years has been assembling, designing and transforming the west side of Philadelphia, Pennsylvania’s Delaware Avenue waterfront. This transformation in the Northern Liberties and Fishtown sections of downtown Philadelphia entails changing an old manufacturing district into trendy entertainment and residential neighborhoods. Some of Core Realty’s recent projects in this area include: (i) a high-end 76,000 square foot boutique apartment renovation in Northern Liberties; (ii) the renovation and lease-up to 98% occupancy of a 147,000 square foot office building along the Delaware River built in 2013; and, (iii) an ongoing renovation of a 145,000 square foot historic metal foundry into an entertainment complex consisting of a 3,000-seat Live Nation concert venue, 40,000 square foot bowling space, a 12,000 square foot distillery and several restaurants.
Core Realty is converting several additional blocks along the Delaware River waterfront into shops, restaurants, offices and retail, attempting to utilize this historic back drop to its fullest potential. 
Pursuant to the asset and property management agreement, the Asset Manager will provide the asset management services in exchange for a quarterly asset management fee of 3.0% of the Property R-1 Subsidiaries' Effective Gross Revenues (as defined in the asset and property management agreement), and the Property R-1 Subsidiaries will reimburse the Asset Manager for fees, costs, and expenses of the Asset Manager incurred on the Property R-1 Subsidiaries' behalf.  

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The initial term of the asset and property management agreement expires on the date on which the Core Limited R-1 Partner owns, in the aggregate, less than 5.0% of the combined limited partnership interests in the Property R-1 Subsidiaries. During the initial term, the Property R-1 Subsidiaries may only terminate the asset and property management agreement upon 30 days prior written notice in connection with certain cause events involving the Asset Manager. “Cause” is defined as:
our Asset Manager's continued material breach of any provision of the asset and property management agreement following a period of 30 days after written notice thereof, unless (i) such material breach, by its nature, is not capable of being cured within such 30 day period and (ii) within such 30 day period, our Asset Manager commences to cure such material breach and thereafter diligently pursues the cure of such material breach and (iii) our Asset Manager causes such material breach to be cured within a reasonable period time thereafter;

our Asset Manager's fraud, misappropriation of funds, or embezzlement;

our Asset Manager’s gross negligence of duties under the asset and property management agreement;

the commencement of any proceeding relating to our Asset Manager’s bankruptcy or insolvency, including an order for relief in an involuntary bankruptcy case or our Asset Manager authorizing or filing a voluntary bankruptcy petition;

our Asset Manager is convicted (including a plea of nolo contendere) of a felony; or

the dissolution of our Asset Manager; provided, that notwithstanding the foregoing, if any conduct specified above is committed by any individual other than any senior executive, then we will have no right to exercise such termination right if the Asset Manager immediately terminates or causes the termination of such individual from employment and makes us whole from the actual financial loss resulting from such conduct.

Following the initial term, the asset and property management agreement will be automatically renewed for one year renewal terms, and may be terminated by either party with or without cause upon 30 days prior written notice to the other party. The Asset Manager may also terminate the asset and property management agreement during the initial term with or without cause upon 30 days prior written notice to the Property R-1 Subsidiaries.
In addition, the asset and property management agreement will be terminated following either (a) a distribution to holders of, or redemption of, outstanding Series R-1 common shares in connection with a disposition of all or substantially all of the R-1 Series’ interest in the Property R-1 Subsidiaries, whether held directly or through subsidiaries of the R-1 Series, or the Property R-1 Subsidiaries’ interest in the Property, whether held directly or through subsidiaries of the Property R-1 Subsidiaries, as described under “Description of Series R-1 Common Shares-Redemptions-Redemption in Connection with a Sale of the Property R-1 Subsidiaries or Property” or (b) a redemption of outstanding Series R-1 common shares pursuant to our tender offer policy as described under “Description of Series R-1 Common Shares-Property Dispositions and Tender Offer Policy as to Series R-1 Common Shares (which we refer to, in each case, as a “Property Sale”). No termination fee will be payable by either party upon a termination event.


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Master Lease
Under the terms of the purchase and sale agreement for the Property, Core Realty will enter into a master lease for all of the vacant commercial space at the Property as of the closing, which currently consists of 19,138 square feet of vacant space. The master lease commences upon the closing of the purchase and sale transaction and requires Core Realty, among other matters, to pay annual rent of $27.00 per square foot (net to us) for such vacant space. As a result, the master lease will permit us to achieve 100% economic occupancy of the aggregate 28,860 square feet of commercial space at the Property for 18 months (assuming the existing lease for 9,722 square feet remains in effect). The material business terms of the master lease are as follows:
Term:
18 months from the closing
Base Rent:
$27.00 per square foot (net)
 
Annual Rent: $516,726
 
Monthly Installments: $43,061
Reimbursements:
Core Realty will be responsible for its proportionate share of all operating expenses and taxes of the Property (currently approximately $6.00 per square foot)
Replacement Tenant:
We will have the right to lease all or a portion of the master-leased space to a new tenant without the consent of Core Realty provided the rent per square foot under the new lease is $27.00 or greater and (ii) Core Realty will have the right to lease all or a portion of the master-leased space to a new tenant that has been approved by us.
Ongoing Core Realty Obligations for Replacement Lease:
We will enter into new direct leases with the new tenant but Core Realty will still be responsible for paying rent and other obligations under the master lease if the new tenant defaults under during the 18-month term of the master lease.
Default Remedies:
If there is a non-payment default by Core Realty, any distributions payable to the Core Limited R-1 Partner pursuant to the limited partnership agreements of the Property R-1 Subsidiaries will instead be distributed to us until 150% of the defaulted amount has been distributed to us. In addition, a default by Core Realty under the master lease will give us the right to terminate the asset and property management agreement and replace Core Realty as the Asset Manager

We cannot give any assurances as to whether Core Realty or we will be able to enter into new leases with replacement tenants prior to the end of the term of the master lease nor or the future financial viability of any such replacement tenants.
Competition
The leasing of multi-family properties is highly competitive in the greater Philadelphia metro area. The R-1 Series and the Property R-1 Subsidiaries will compete with numerous acquirers, developers, owners and operators of commercial real estate, many of which own or may seek to acquire or develop properties similar to the Property in the same market in which the Property is located.  The principal means of competition are rent charged, location, services provided and the nature and condition of the facility to be leased.  In addition, the R-1 Series and the Property R-1 Subsidiaries will face competition from other real estate companies including other REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, individual investors and others that may have greater financial resources or access to capital than the R-1 Series and the Property R-1 Subsidiaries.  If the R-1 Series' and the Property R-1 Subsidiaries’ competitors offer space at rental rates below current market rates, below the rental rate the R-1 Series and the Property R-1 Subsidiaries currently charge the tenants, in better locations within the Property's market or in higher quality facilities, the R-1 Series and the Property R-1 Subsidiaries may lose potential tenants and we may be pressured to reduce the Property's rental rates below the rates that the R-1 Series and the Property R-1 Subsidiaries currently charge or offer other concessions in order to retain the tenants when the tenants’ leases expire.

Insurance
The Property R-1 Subsidiaries, and the R-1 Series will maintain all applicable lines of insurance on the Property and its operations.  The amount and scope of insurance coverage provided by the policies maintained will be customary for similarly situated multi-family properties in Philadelphia. We believe the amount of insurance coverage the Property R-1 Subsidiaries and the R-1 Series will have on the Property will be adequate.  We cannot assure you that in the future insurance will be available at a reasonable cost or that the Property R-1 Subsidiaries or the R-1 Series will be able to maintain adequate levels of insurance coverage on the Property.  In addition, we cannot give any assurances as to the future financial viability of their insurers or that the insurance coverage provided will fully cover all losses on the Property upon the occurrence of a catastrophic event.


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Our Policies with Respect to Certain Other Activities
If our board of directors determines that additional funding is required, we may raise such funds through additional offerings of equity or debt securities of the R-1 Series or by the retention of cash flow (subject to provisions in the Internal Revenue Code concerning distribution requirements and the taxability of undistributed REIT taxable income) or a combination of these methods.  In the event that our board of directors determines to raise additional equity capital in respect of the R-1 Series, it has the authority, without shareholder approval, to authorize us to issue additional Series R-1 common shares or other classes of shares of the R-1 Series, including preferred shares, in any manner (including in exchange for cash or property) and on such terms and for such consideration as it deems appropriate, at any time.
We may repurchase or otherwise reacquire our Series R-1 common shares and may engage in such activities in the future. The R-1 Series does not intend to engage in trading, underwriting or agency distribution or sale of securities of other issuers. The R-1 Series has not in the past, and is not expected in the future, to invest in the securities of other issuers for the purpose of exercising control over such issuers. The R-1 Series has not made any loans to third parties, although the R-1 Series may in the future make loans to third parties, including, without limitation, to the Property R-1 Subsidiaries. The R-1 Series intends to make investments in such a way that we will not be treated as an investment company under the 1940 Act.
The primary business of the R-1 Series will be to own its interest in the Property R-1 Subsidiaries, which will own and operate the Property.
In our quarterly and annual reports and earnings releases, we intend to provide shareholders with price per unit, revenue per unit, and other information regarding the Property.
Our board of directors may change any of these policies at any time without prior notice to, or a vote of, our shareholders.
Distribution Reinvestment Plan
In the future, we may adopt a distribution reinvestment plan that will permit holders of Series R-1 common shares who elect to participate in the plan to have their cash distributions reinvested in additional Series R-1 common shares.  As a result, if our board of directors authorizes, and we declare, a cash distribution, then such shareholders who have elected to participate in our distribution reinvestment plan will have their cash distribution reinvested in additional Series R-1 common shares, rather than receiving the cash distribution. The expected use of proceeds from such reinvestments will be to add to the reserves available to operate the Property.
Staffing
The R-1 Series is managed by our Administrative Agent pursuant to the administrative services agreement between our Administrative Agent and the R-1 Series.  All of our officers are employees of our Administrative Agent or its affiliates.  We will have no employees upon completion of this offering.  See "Our Administrative Agent and the Administrative Services Agreement—Administrative Services Agreement."
Operating and Regulatory Structure
General
The Property is subject to various laws, ordinances and regulations, including regulations relating to common areas.  Upon acquisition, we believe the Property will have the necessary permits and approvals to operate its business.
Americans with Disabilities Act
The Property must comply with Title III of the ADA, to the extent that the Property is a "public accommodation" as defined by the ADA.  The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of the Property where such removal is readily achievable.  We believe the Property is in substantial compliance with the ADA and that neither the R-1 Series nor its subsidiaries will be required to make substantial capital expenditures to address the requirements of the ADA.  However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants.  The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess the Property and to make alterations as appropriate in this respect.

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Environmental Matters
Under various federal, state and/or local laws, ordinances and regulations, as a current or former owner or operator of real property, the R-1 Series may be liable for costs and damages resulting from the presence or release of hazardous substances, waste, or petroleum products at, on, in, under or from such property, including costs for investigation or remediation, natural resource damages, or third party liability for personal injury or property damage.  These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such materials, and the liability may be joint and several.  The Property may be impacted by contamination arising from current or prior uses of the Property or adjacent properties for commercial, industrial or other purposes.  Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials.  The R-1 Series also may be liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities, without regard to whether we comply with environmental laws in doing so.  The presence of contamination or the failure to remediate contamination on the Property may adversely affect the ability to attract and/or retain tenants, and the ability to develop or sell or borrow against the Property.  In addition to potential liability for cleanup costs, private plaintiffs may bring claims for personal injury, property damage or for similar reasons.  Environmental laws also may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination.  Moreover, if contamination is discovered on the Property, environmental laws may impose restrictions on the manner in which the Property may be used or how businesses may be operated on the Property.
In addition, the Property is subject to various federal, state and local environmental and health and safety laws and regulations.  Noncompliance with these environmental and health and safety laws and regulations could subject the R-1 Series or the tenants to liability.  These liabilities could affect the tenants' ability to make rental payments to the R-1 Series.  Moreover, changes in laws could increase the potential costs of compliance with such laws and regulations or increase liability for noncompliance.  This may result in significant unanticipated expenditures or may otherwise materially and adversely affect the R-1 Series' operations, or those of the Property's tenants, which could in turn have a material adverse effect on the R-1 Series.  The R-1 Series may require its tenants to comply with environmental and health and safety laws and regulations and to indemnify the R-1 Series for any related liabilities in its leases with them.  But in the event of the bankruptcy or inability of any of such tenants to satisfy such obligations, the R-1 Series may be required to satisfy such obligations.  We are not presently aware of any instances of material non-compliance with environmental or health and safety laws or regulations at the Property, and, upon acquisition, we believe that the R-1 Series and/or the tenants will have all material permits and approvals necessary under current laws and regulations to operate the Property.
As the owner or operator of real property, the R-1 Series may also incur liability based on various building conditions.  For example, buildings and other structures on the Property may contain, or may have contained, asbestos-containing material, or ACM.  Environmental and health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements.  These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially resulting in substantial costs.  In addition, the R-1 Series may be subject to liability for personal injury or property damage sustained as a result of releases of ACM into the environment.  We are not presently aware of any material liabilities related to building conditions, including any instances of material non-compliance with asbestos requirements or any material liabilities related to asbestos.
In addition, the Property may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or costs for remediation.  When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time.  Some molds may produce airborne toxins or irritants.  Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria.  Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions.  As a result, the presence of significant mold or other airborne contaminants at the Property could require the R-1 Series to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the Property or increase indoor ventilation.  In addition, the presence of significant mold or other airborne contaminants could expose the R-1 Series to liability from its tenants, employees of the tenants or others if property damage or personal injury occurs.  We are not presently aware of any material adverse indoor air quality issues at the Property.

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Implications of Being an Emerging Growth Company
We are an "emerging growth company" as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various disclosure and reporting requirements that are otherwise generally applicable to public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.  We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an "emerging growth company."  We will cease to be an "emerging growth company" on the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.0 billion, (ii) December 31 of the fiscal year in which we become a "large accelerated filer" as defined in Rule 12b‑2 under the Exchange Act, which would occur if the fair market value of our common shares that are held by non‑affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, (iii) the date on which we have issued more than $1.0 billion in non‑convertible debt securities during the preceding three-year period or (iv) the end of the fiscal year following the fifth anniversary of our initial public offering.  We have irrevocably opted out of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.  As a result, we will comply with new or revised accounting standards on the same time frames as other public companies that are not "emerging growth companies."  If we take advantage of one or more of these exemptions, we do not know if investors will find our Series R-1 common shares or the common shares of any other Series we may establish in the future less attractive as a result.  If they do, there would likely be a less active trading market for our securities than would otherwise be the case.
Legal Proceedings
Neither we nor our Administrative Agent is currently subject to any legal proceedings.


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OUR ADMINISTRATIVE AGENT AND THE ADMINISTRATIVE SERVICES AGREEMENT
Set forth below is certain information regarding our Administrative Agent, the personnel of ETRE and the administrative services agreement related to the R-1 Series and the Property R-1 Subsidiaries. The R-1 Series will enter into an administrative services agreement with our Administrative Agent, a recently formed wholly-owned subsidiary of ETRE Financial, LLC.  Our Administrative Agent is member-managed and controlled by ETRE Financial, LLC. Pursuant to the terms of the administrative services agreement, our Administrative Agent will provide administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries, as well as a management team and appropriate support personnel.  Our Administrative Agent will at all times be subject to the supervision and oversight of our board of directors. We do not expect to have any employees.
General
All of our officers are employees of our Administrative Agent or its affiliates.  The executive offices of our Administrative Agent are located at 44 Wall Street, New York, New York, 10005, and the telephone number of our Administrative Agent's executive offices is (212) 596-7225. 
Executive Officers and Key Personnel of ETRE
The following table sets forth certain information with respect to each of the executive officers:
Executive officer
Age
Position held with ETRE
Position held with our Company
Paul Frischer
55
Founding Member; President and Chief Executive Officer; member of Board of Managers
President and Chief Executive Officer; Director
Jesse Stein
37
Founding Member; Chief Operating Officer; member of Board of Managers
Chief Operating Officer and Secretary; Director
Darren Glickman
47
Chief Financial Officer
Chief Accounting Officer
Biographical Information
Set forth below is biographical information for the key personnel of ETRE. 
Paul Frischer, is a founding member of ETRE Financial, LLC, and has served as its President and Chief Executive Officer and as a member of its Board of Managers since August 2012. Mr. Frischer has served as our President and Chief Executive Officer and as a member of our board of directors since May 2015. Mr. Frischer also serves as the President and Chief Executive Officer and is a member on the board of directors of ETRE REIT, LLC, a company sponsored by ETRE Financial, LLC.  Prior to joining ETRE Financial, LLC, Mr. Frischer was Executive Managing Director of Research and Real Estate Strategies at Newmark Knight Frank, a commercial real estate advisory firm, from January 2009 to February 2012, and was responsible for directing Newmark Knight Frank's national research platform and providing market and property analysis for various operating units.  Mr. Frischer is also the Founder and managing member of Rexx Index LLC, formed in 2006, a leading benchmark provider in the emerging real estate derivatives market that utilizes algorithmic and econometric models to standardize commercial real estate in premier U.S. markets.  Earlier in his career, from 2002 to 2005, Mr. Frischer was with UBS Financial Services, where he specialized in a self-employed 401K platform to service leading residential real estate firms in New York and Connecticut.  As part of his involvement with portfolio management at UBS, Mr. Frischer also worked on structured ABS investments for alternative energy and shipping interests.  In addition to these activities, Mr. Frischer has been the President and Chief Executive Officer of Frischer Kranz, Inc., since 1999, and has been involved with numerous industries inclusive of printing, logistics, and real estate.  Mr. Frischer holds an E.M.B.A. from the Stern School of Business at New York University and is a graduate of Bucknell University. Mr. Frischer was selected to serve as a member of our board of directors because of his leadership qualities and extensive real estate experience.

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Jesse Stein, is a founding member of ETRE Financial, LLC has served as a member of its Board of Managers since August 2012.  Mr. Stein has served as our Chief Operating Officer and Secretary and as a member of our board of directors since May 2015. Mr. Stein also serves as Chief Operating Officer and Secretary and is a member on the board of directors of ETRE REIT, LLC, a company sponsored by ETRE Financial, LLC. Mr. Stein previously served as the Executive Vice President of Acquisitions for United Realty Advisors, LP, an affiliate of United Realty Partners, LLC, or United Realty Partners, a privately held real estate investment and advisory firm from September 2011 through June 2013.  Prior to joining United Realty Partners, Mr. Stein was a Managing Director at Multi Capital Group, a boutique real estate and investment banking firm that specializes in equity and debt placement, capital structuring, and principal investment activity.  Mr. Stein was employed by Multi Capital Group from September 2005 until December 2008 and from March 2011 until September 2011.  From January 2009 to March 2011, Mr. Stein was a Principal at The FoxStone Group, a real estate advisory firm that provides services such as capital structuring, financial analysis, market research, due diligence, and investment sourcing.  Mr. Stein spent five years as a proprietary equities trader at JGM Securities (September 2000 to July 2001), Numina Capital (August 2001 to June 2003), and Spectrum Capital Partners (August 2003 to September 2005).  Mr. Stein holds a Bachelor's Degree in Industrial and Labor Relations from Cornell University and a Masters Degree in Real Estate Investments from New York University.  Mr. Stein was selected to serve as a member of our board of directors because of his significant real estate capital markets experience.

Darren Glickman is the Chief Financial Officer of ETRE Financial, LLC and serves as our Chief Accounting Officer. Mr. Glickman also serves as Chief Accounting Officer of ETRE REIT, LLC, a company sponsored by ETRE Financial, LLC. Mr. Glickman came to ETRE Financial, LLC from Paramount Group, Inc. in November of 2014, where he was a Vice President responsible for financial and investor reporting for a series of private real estate funds. Mr. Glickman joined Paramount in January of 2012 from Aetos Capital, LLC, where he was the Chief Financial Officer for a series of opportunity funds with $10 billion of real estate investments in Japan, China and South Korea. Prior to joining Aetos Capital, LLC in January of 2003, Mr. Glickman was a Vice President in the Investment Accounting division of Goldman, Sachs & Co., where he focused primarily on accounting and reporting for the Whitehall Funds. Prior to joining Goldman, Sachs & Co. in June of 1998, Mr. Glickman was an audit manager in the Real Estate Services division of Deloitte & Touche LLP, where he began his real estate finance career in 1993. Mr. Glickman is a Certified Public Accountant in New York State and holds a Bachelor of Business Administration in Accounting from Baruch College.
Inter-Series Conflict Resolution Committee
Our board of directors has adopted the Inter-Series Policy, which is administered by our Administrative Agent and has been designed to govern the operating relationships among the Series, address conflicts of interest among the Series and promote the fair allocation of sale, financing, leasing and other business opportunities among the real properties owned by the different Series.  See "Management—Inter-Series Relationship, Conflicts of Interest and Opportunity Allocation Policy."  Upon completion of this offering, our Administrative Agent will establish an inter-series conflict resolution committee, the purpose of which will be to administer, on behalf of the Administrative Agent, certain provisions of the Inter-Series Policy.  The inter-series conflict resolution committee will be comprised of ______________, _____________ and ______________, two of whom are independent directors.  The inter-series conflict resolution committee will meet as frequently as it believes is necessary.
Administrative Services Agreement
The R-1 Series will enter into the administrative services agreement with our Administrative Agent effective upon the closing of this offering.  Pursuant to the terms of the administrative services agreement, our Administrative Agent will perform certain services for the R-1 Series and the Property R-1 Subsidiaries, subject to oversight by our board of directors. 
These services include, among others, investor relations and shareholder communications functions for the R-1 Series and assisting the R-1 Series in preparing, reviewing and filing all reports required to be filed by it or us with the SEC, NASDAQ, the Internal Revenue Service and other regulatory agencies.

Specifically, our Administrative Agent will perform (or cause to be performed) such services and activities relating to our assets and operations described below:
investigating, selecting and, on behalf of the R-1 Series and its subsidiaries, engaging and conducting business with and supervising the performance of such persons as our Administrative Agent deems necessary to the proper performance of its obligations under the administrative services agreement (including consultants, accountants, correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositories, custodians, agents for collection, insurers, insurance agents, banks, securities investment advisors, the registrar and the transfer agent and any and all agents for any of the foregoing), including affiliates of our Administrative Agent and persons acting in any other capacity deemed by our Administrative Agent to be necessary or desirable for the performance of any of the foregoing services (including entering into contracts in the name of the R-1 Series and its subsidiaries with any of the foregoing);

consulting with our officers and directors and assisting the directors in the formulation and implementation of the R-1 Series’ financial policies and, as necessary, furnishing our board of directors with advice and recommendations with respect to the investment objectives and policies of the R-1 Series and in connection with any borrowings (or refinancing of borrowings) proposed to be undertaken by the R-1 Series or its subsidiaries;


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(A) arranging for financing and refinancing and making other changes in the asset or capital structure of the R-1 Series and its subsidiaries; (B) entering into leases and service contracts for the R-1 Series and its subsidiaries and, to the extent necessary, performing all other operational functions for the maintenance and administration of the R-1 Series and its subsidiaries; (C) actively overseeing and managing the R-1 Series for purposes of meeting the R-1 Series’ investment objectives; (D) overseeing, supervising and evaluating affiliated and non-affiliated asset managers and property managers who perform services for the R-1 Series and its subsidiaries; (E) overseeing affiliated and non-affiliated persons with whom our Administrative Agent contracts to perform certain of the services required to be performed under the administrative services agreement; and (F) managing accounting and other recordkeeping functions for the R-1 Series and overseeing accounting and other recordkeeping functions for its subsidiaries, including reviewing and analyzing the capital and operating budgets and generating an annual budget for the R-1 Series;

negotiating on behalf of the R-1 Series and its subsidiaries with banks or other lenders for loans to be made to the R-1 Series and its subsidiaries, and negotiating with investment banking firms and broker-dealers on behalf of the R-1 Series and its subsidiaries, or negotiating private sales of the Series R-1 common shares or obtaining loans for the R-1 Series and its subsidiaries, but in no event in such a manner that our Administrative Agent will be acting as broker-dealer or underwriter; provided, however, that any fees and costs payable to third parties incurred by our Administrative Agent in connection with the foregoing will be the responsibility of the R-1 Series and its subsidiaries;

from time to time, or at any time reasonably requested by the board of directors, making reports to our board of directors, on our Administrative Agent's performance of services to the R-1 Series and the Property R-1 Subsidiaries under the administrative services agreement, including reports with respect to potential conflicts of interest involving our Administrative Agent or any of its affiliates;

performing investor relations and shareholder communications functions for the R-1 Series;

rendering such services to the R-1 Series and/or to the Property R-1 Subsidiaries as may be reasonably determined by the board of directors consistent with the terms and conditions in the administrative services agreement;

maintaining the R-1 Series’ and its subsidiaries accounting and other records and assisting the R-1 Series in preparing, reviewing and filing all reports required to be filed by it or us with the SEC, NASDAQ, the IRS and other regulatory agencies;

doing all things reasonably necessary to assure its ability to render the services described in the administrative services agreement; and

making recommendations to our board of directors with respect to follow-on offerings, tender offers in respect of the Series R-1 common shares, dispositions of the Property and other significant transactions.

Notwithstanding the foregoing, (i) during the term of the asset and property management agreement between the Property R-1 Subsidiaries and the Asset Manager, the Asset Manager will be responsible for performing all day-to-day management and administrative functions at the property level and arranging for financings and refinancing of property-level indebtedness, including overseeing real property operations of the R-1 Series’ subsidiaries (i.e. tenant leasing, property financing, construction and renovation, budgeting, cash management and insurance), subject to and in accordance with the terms of the asset and property management agreement, (ii) during the term of the asset and property management agreement, to the extent that any services under the administrative services agreement overlap with or conflict with the services to be provided by and delegated to the Asset Manager, then the asset and property management agreement shall apply to such services and the Administrative Agent will not provide such services, and (iii) notwithstanding any other provision in this the administrative services agreement to the contrary, our Administrative Agent shall at all times be subject to any applicable restrictions and conditions regarding the activities of the R-1 Series and/or its subsidiaries set forth in the governing documents of our Company, the Property R-1 Subsidiaries and/or any other subsidiary.
 

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Pursuant to the administrative services agreement, our Administrative Agent does not assume any responsibility other than to render the services called for thereunder and is not responsible for any action of our board of directors or the General R-1 Partner in following or declining to follow its advice or recommendations.  In addition, to the extent that officers of our Administrative Agent also serve as our officers, these officers owe us duties under Delaware law in their capacity as our officers.  Under the administrative services agreement, our Administrative Agent, its officers, stockholders, members, managers, directors, personnel, any person or entity controlling or controlled by our Administrative Agent and any of their officers, stockholders, members, managers, directors, employees, consultants and personnel, and any person providing advisory services to our Administrative Agent are not liable to us, the R-1 Series, the Property R-1 Subsidiaries, our directors, the General R-1 Partner, our shareholders or any subsidiary's shareholders or partners for acts or omissions performed in accordance with and pursuant to the administrative services agreement, except because of acts constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the administrative services agreement, as determined by a final non-appealable order of a court of competent jurisdiction.  The R-1 Series will indemnify our Administrative Agent, its officers, stockholders, members, managers, directors, personnel, any person or entity controlling or controlled by our Administrative Agent and any of their officers, stockholders, members, managers, directors, employees, consultants and personnel, and any person providing advisory services to our Administrative Agent with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts of our Administrative Agent not constituting bad faith, willful misconduct, gross negligence, or reckless disregard of duties, performed in good faith in accordance with and pursuant to the administrative services agreement.  Our Administrative Agent indemnifies us, the R-1 Series, the Property R-1 Subsidiaries, the General R-1 Partner, our shareholders, members and partners with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts of our Administrative Agent constituting bad faith, willful misconduct, gross negligence, or reckless disregard of its duties under the administrative services agreement, as determined by a final non-appealable order of a court of competent jurisdiction, or any claims by ETRE's personnel relating to the terms and conditions of their employment by our Administrative Agent or ETRE.  Notwithstanding the foregoing, our Administrative Agent carries errors and omissions and other customary insurance. Our Administrative Agent is expected to provide similar services for each of our Series and Property Subsidiaries, and we expect that each Series that we establish from time to time and the Property Subsidiary related to such Series will enter into an administrative services agreement on similar terms and conditions.
The administrative services agreement may be amended or modified by written agreement among the R-1 Series and our Administrative Agent. 
The administrative services agreement will have an indefinite term, but may be terminated by our Administrative Agent or the R-1 Series under certain circumstances.  The R-1 Series may terminate the administrative services agreement with our Administrative Agent at any time with 30 days prior written notice from our board of directors for cause, which is defined as:
our Administrative Agent's continued material breach of any provision of the administrative services agreement following a period of 30 days after written notice thereof, unless (i) such material breach, by its nature, is not capable of being cured within such 30 day period and (ii) within such 30 day period, our Administrative Agent commences to cure such material breach and thereafter diligently pursues the cure of such material breach and (iii) our Administrative Agent causes such material breach to be cured within a reasonable period time thereafter;
our Administrative Agent's fraud, misappropriation of funds, or embezzlement against any Series of our Company;
our Administrative Agent's gross negligence of duties under the administrative services agreement;
the commencement of any proceeding relating to our Administrative Agent's Bankruptcy (as defined below) or insolvency, including an order for relief in an involuntary bankruptcy case or our Administrative Agent authorizing or filing a voluntary bankruptcy petition;
our Administrative Agent is convicted (including a plea of nolo contendere) of a felony; or
the dissolution of our Administrative Agent.
For purposes of the above, “Bankruptcy” means (a) the filing by our Administrative Agent of a voluntary petition seeking liquidation, reorganization, arrangement or readjustment, in any form, of its debts under Title 11 of the United States Code or any other federal, state or foreign insolvency law, or our Administrative Agent’s filing an answer consenting to or acquiescing in any such petition, (b) the making by our Administrative Agent of any assignment for the benefit of its creditors, (c) the expiration of 60 days after the filing of an involuntary petition under Title 11 of the Unites States Code, an application for the appointment of a receiver for a material portion of the assets of our Administrative Agent, or an involuntary petition seeking liquidation, reorganization, arrangement or readjustment of its debts under any other federal, state or foreign insolvency law, provided that the same shall not have been vacated, set aside or stayed within such 60-day period or (d) the entry against our Administrative Agent of a final and non-appealable order for relief under any bankruptcy, insolvency or similar law.
Unsatisfactory financial performance does not constitute "cause" under the administrative services agreement.

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In addition, the administrative services agreement will be terminated following either (a) a distribution to holders of, or redemption of, outstanding Series R-1 common shares in connection with a disposition of all or substantially all of the R-1 Series' interest in the Property R-1 Subsidiaries, whether held directly or through subsidiaries of the R-1 Series, or the Property R-1 Subsidiaries' interest in the Property, whether held directly or through subsidiaries of the Property R-1 Subsidiaries, as described under "Description of Series R-1 Common Shares-Redemptions-Redemption in Connection with Sale of the Property R-1 Subsidiaries or Property" or (b) a redemption of outstanding Series R-1 common shares pursuant to our tender offer policy as described under "Description of Series R-1 Common Shares-Property Dispositions and Tender Offer Policy as to Series R-1 Common Shares (which we refer to, in each case, as a "Property Sale").
Our Administrative Agent may also terminate the administrative services agreement if we become required to register as an investment company under the 1940 Act, with such termination deemed to occur immediately before such event.  In addition, if the R-1 Series or the Property R-1 Subsidiaries defaults in the performance of any material term of the agreement and the default continues for a period of 30 days after written notice to the R-1 Series (unless (i) such default, by its nature, is not capable of being cured within such 30 day period and (ii) within such 30 day period, the R-1 Series or the Property R-1 Subsidiaries commence to cure such default and thereafter diligently pursues the cure of such default and (iii) the R-1 Series or the Property R-1 Subsidiaries cause such default to be cured within a reasonable period time thereafter), our Administrative Agent may terminate the management agreement upon 60 days written notice.
Our Administrative Agent may assign the administrative services agreement to an affiliate with the approval of a majority of the board of directors (including a majority of the independent directors).  The Administrative Agent may assign any rights to receive fees or other payments under the administrative services agreement to any person without obtaining the approval of the board of directors.  The R-1 Series generally cannot assign the administrative services agreement without the consent of our Administrative Agent.  In connection with a redemption of all outstanding Series R-1 common shares in exchange for equity interests in the Property R-1 Subsidiaries as described under "Description of Series R-1 Common Shares Redemptions—Redemption in Exchange for Interests of the Property R-1 Subsidiaries at Option of our Board of Directors," all rights and obligations of the R-1 Series under the administrative services agreement will be automatically assigned to the Property R-1 Subsidiaries, unless our Administrative Agent elects to terminate the agreement in connection with such redemption.
Administrative Services Fees and Expenses
Neither we nor the R-1 Series maintains an office or employs personnel.  Instead, we rely on the facilities and resources of our Administrative Agent to provide certain administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries.
Administrative Services Fee and Administrative Sale Fee
The R-1 Series will pay a $_______ one-time administrative services fee to our Administrative Agent upon the closing of this offering.  Thereafter, the R-1 Series will pay our Administrative Agent a quarterly administrative services fee in an amount equal to $50,000 per quarter plus 2.00% of net operating income during the prior fiscal quarter. The administrative services fee shall be payable upon the closing of this offering, and quarterly thereafter in cash.
For purposes of calculating the quarterly administrative services fee, the net operating income means the R-1 Series’ net income during the fiscal quarter (as determined in accordance with GAAP), plus (i) total depreciation and amortization, net interest expense and marketing, general and administrative expenses during such fiscal quarter, and (ii) one-time events pursuant to changes in GAAP and certain non-cash items during such fiscal quarter with the approval of a majority of our independent directors.
Following a Property Sale, the R-1 Series and the Property R-1 Subsidiaries will pay our Administrative Agent an administrative sale fee, in cash, in an amount equal to 1.00% of the R-1 Series’ total capitalization at the end of the month immediately preceding a Property Sale. For purposes of calculating the administrative sale fee, total capitalization is equal to the sum of the R-1 Series’ total debt, members’ capital, retained earnings and noncontrolling interests in the Property Subsidiary.  No administrative sale fee shall be payable to our Administrative Agent in respect of any Property Sale that occurs during the first year following the closing of this offering if the total consideration paid by the purchaser (including any indebtedness assumed by the purchaser) in connection with the disposition of the R-1 Series’ interest in the Property R-1 Subsidiaries or the Property or in respect of the Series R-1 common shares tendered pursuant to the purchase offer, tender offer or exchange offer related to such Property Sale, as applicable, is less than the aggregate cash contribution paid by the R-1 Series in connection with the acquisition of its interest in the Property R-1 Subsidiaries pursuant to the purchase and sale transaction (i.e., $77.1 million, subject to adjustments set forth in the purchase and sale agreement).

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Our Administrative Agent will use the proceeds from its administrative services fee, and expects to use the proceeds from any administrative sale fee, in part to pay compensation to ETRE’s officers and personnel who, notwithstanding that certain of them also are our officers, receive no cash compensation directly from us.  The R-1 Series and the Property R-1 Subsidiaries do not reimburse our Administrative Agent or its affiliates for the salaries and other compensation of ETRE’s personnel to the extent that such personnel perform services for which our Administrative Agent receives the administrative services fee.  Our Administrative Agent will also use the proceeds from its administrative services fee to pay certain non-property level expenses associated with the ordinary course of business and operations of the R-1 Series and its subsidiaries, including:
accounting and other expenses related to the administration of non-property-level audits (including the fees and expenses of the accountants of the R-1 Series);

the preparation, printing and mailing of all filings made under the Exchange Act, including Forms 10-K, 10-Q and 8-K, and proxy statements (except as set forth below under “-Reimbursement of Property-Level Expenses”);  and

insurance for our directors and officers (unless such director or officer is associated solely with the R-1 Series).

Reimbursement of Property-Level Expenses
The R-1 Series and the Property R-1 Subsidiaries will pay (i) all fees, costs and expenses related to non-ordinary course business and operations of ETRE Residential, LLC and the R-1 Series; provided, however, that any such expenses that are not consistent with the Property R-1 Subsidiaries’ then approved annual operating budget will not be reimbursable with cash generated by the Property's operations without the approval of the General R-1 Partner and (ii) all property-level fees, costs and expenses consistent with the Property R-1 Subsidiaries’ then approved annual operating budget or as otherwise approved by the General R-1 Partner, in each case, other than those specifically required to be borne by our Administrative Agent under the administrative services agreement. These expenses include, but are not limited to:
the actual cost of goods and services used by the R-1 Series or any subsidiary thereof and obtained from entities not affiliated with the Administrative Agent;
fees, costs and expenses of the asset managers and property managers performing property management and leasing services for the Property, including the fees, costs and expenses of the Asset Manager;
costs associated with property-level insurance required in connection with the business of the R-1 Series;
expenses associated with the listing of the Series R-1 common shares (or any other securities of our Company associated with the R-1 Series or of any subsidiary of our Company or any subsidiary of the R-1 Series) on a national securities exchange, if applicable, or with the formation of the R-1 Series or any subsidiary thereof and the offering, issuance and distribution of the Series R-1 common shares (or any other securities of our Company associated with the R-1 Series or of any subsidiary of our Company or any subsidiary of the R-1 Series), such as selling commissions and fees, advertising expenses, taxes, legal and accounting fees, listing and registration fees;

expenses of organizing, revising, amending, converting, modifying or terminating the R-1 Series or any subsidiary thereof;
expenses related to the preparation, printing and mailing of any proxy statements or other SEC filings in connection with any shareholder proposal, disposition, tender offer or redemption relating to the Property, the Property R-1 Subsidiaries or the R-1 Series;
expenses related to the preparation, printing and mailing of other property-level reports required by governmental entities;
property-level service expenses, including all costs and expenses incurred by our Administrative Agent or its affiliates in fulfilling its duties hereunder at the property level, including reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services; provided, however, that no reimbursement shall be made for costs of such employees of our Administrative Agent or its affiliates to the extent that such employees perform services for which our Administrative Agent receives a separate fee; and
property-level accounting and legal fees.
However, to the extent our Administrative Agent advances the fees, costs and expenses related to non-ordinary course of business and operations of ETRE Residential, LLC or the R-1 Series or the property-level fees, costs and expenses of ETRE Residential , LLC, the R-1 Series and/or its subsidiaries, the R-1 Series and the Property R-1 Subsidiaries will reimburse our Administrative Agent for such fees, costs and expenses. Expense reimbursements shall be payable monthly in cash.

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To the extent any of the foregoing expenses are allocable to both the R-1 Series and any other Series we establish in the future, such expenses will be allocated to the respective Series in accordance with the inter-series relationship, conflicts of interest and opportunity allocation policy.  See "Management—Inter-Series Relationship, Conflicts of Interest and Opportunity Allocation Policy."
License Agreement
Prior to the completion of the offering, we will enter into a license agreement with ETRE pursuant to which ETRE will grant us a non-exclusive, royalty free license to use the name "ETRE Residential, LLC." Other than with respect to this license, we will have no legal right to use the "ETRE" name.  In the event we no longer have any administrative services agreements with our Administrative Agent, we would be required to change our name to eliminate the use of "ETRE."


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MANAGEMENT
Our Directors, Director Nominees and Officers
ETRE Financial, LLC, an affiliate of our Administrative Agent, as the managing member of our Company, will have the sole power to (i) nominate and elect all directors to our board of directors, (ii) set the number of directors of our board of directors, (iii) remove any director, with or without cause, at any time and (iv) fill any vacancies on our board of directors.  ETRE Financial, LLC has nominated and elected our initial board of directors.  ETRE Financial, LLC is partially owned and controlled by its founding members, Paul Frischer and Jesse Stein, who also serve, respectively, as President and Chief Executive Officer and Chief Operating Officer and Secretary of our Company.  Each of our directors holds office for an annual term, or until his or her resignation or removal by ETRE Financial, LLC. Our officers serve at the pleasure of our board of directors.
Our Board is currently comprised of two members. Effective upon completion of this offering, ETRE Financial, LLC will increase the size of the board to five directors and will appoint three additional directors who are independent within the criteria established by the NASDAQ for independent board members.  Following these appointments, we expect that our board of directors will consist of five directors.
In addition, effective upon completion of this offering, our board of directors will establish an audit committee, compensation committee and nominating and corporate governance committee that have the responsibilities described below under "—Corporate Governance—Board of Directors and Committees."
The following table sets forth certain information about our directors, director nominees, executive officers and other key personnel. 
Name
Age
Position Held with Our Company
Paul Frischer
55
President and Chief Executive Officer; Director
Jesse Stein
37
Chief Operating Officer and Secretary; Director
Darren Glickman
47
Chief Accounting Officer
Jay Anderson
58
Director Nominee(1)
Mark Filanowski
61
Director Nominee(1)
Samuel Fuller
54
Director Nominee(1)

(1)         Independent within the criteria established by the NASDAQ
                Each of Mr. Frischer and Mr. Stein may be deemed to be a promoter with respect to this offering, within the meaning of such terms under the Securities Act, by virtue of their having co-founded our Company.  Mr. Frischer and Mr. Stein are our only promoters.
Biographical Information
Directors and Officers
For biographical information on Paul Frischer, Jesse Stein, and Darren Glickman see "Our Administrative Agent and the Administrative Services Agreement—Executive Officers and Key Personnel of ETRE." Additional biographical information of the directors and director nominees of our Company is outlined below.
Jay Anderson.  Mr. Anderson serves as the Chief Operating Officer of The Feil Organization, a private real estate development and management firm with over 26 million square feet of retail, commercial, and industrial properties, more than 5,000 residential units, as well as hundreds of net-leased properties and thousands of acres of undeveloped land under management.  Mr. Anderson has served in this position for over five years and has been with The Feil Organization for over 34 years in numerous positions.  Mr. Anderson is also a founding partner of RCG Longview, a real estate finance company.  He is responsible for RCG Longview's acquisition and financing functions as well as managing the lending and investment process for the organization's entire investment portfolio.  His prior experience includes positions with Deloitte Haskins & Sells as well as W.R. Grace & Company's Consumer Services Group.  Mr. Anderson has a BS in Accounting from Brooklyn College and an MBA in Finance & Taxation from New York University.  He is a member of the M&T Real Estate Advisory Board and a Trustee of Kean University and The Starlight Children's Foundation.  Mr. Anderson was selected to serve as a member of our board of directors because of his significant private real estate and debt market experience.


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Mark Filanowski. Mr. Filanowski is a founding partner of Intrepid Shipping, LLC which was formed in 2002. Intrepid Shipping manages a fleet of six ocean-going vessels employed in dry bulk and chemical parcel businesses, and also manages a portfolio of residential mortgages and participates in investments in the medical technology field. Mr. Filanowski was previously a Director, Senior Vice President and Chief Financial Officer of Marine Transport Corporation from 1998 until 2001. Prior thereto, Mr. Filanowski was Senior Vice President of Marine Transport Lines, Inc. (MTL), a predecessor company of Marine Transport Corporation, where he served as MTL's Chief Financial Officer, and headed vessel operations and ship management from 1994 to 1998, and as Chief Financial Officer from 1989 to 1994. From 1984 to 1988, Mr. Filanowski served as Vice President and Controller of Armtek Corporation, and from 1976 to 1984 he was a Certified Public Accountant and served as Audit and Tax Manager at Ernst & Young. Mr. Filanowski is also a director at Pangaea Logistics Solutions Ltd. Mr. Filanowski graduated from the University of Connecticut and received an M.B.A. from New York University. Mr. Filanowski was selected to serve as a member of our board of directors because of his extensive public market and accounting experience.

Samuel Fuller. Mr. Fuller has served as the President of Fuller Development, LLC since May 2005. Fuller Development is involved in the ownership, development, acquisition, redevelopment, construction, conversion and asset management of all asset classes of real estate throughout the Northeast United States. Mr. Fuller also served from March 2012 to March 2013 as Executive Vice President of Development for the Northeast Region for Archstone (formerly ASN), one of the largest investors, developers and operators of apartment communities in the United States. During his tenure there, Mr. Fuller was responsible for building a northeast development pipeline in anticipation of Archstone’s planned IPO. Archstone was subsequently purchased by AvalonBay Communites, Inc. and Equity Residential. Prior to forming Fuller Development, Mr. Fuller was the Executive Vice President of AvalonBay, a company he helped form in November 1993. AvalonBay, headquartered in Arlington, Virginia, is a real estate investment trust focused on developing, redeveloping, acquiring and managing luxury apartment communities in high barrier-to-entry markets of the United States. Mr. Fuller was the chief executive responsible for overseeing a nationwide team, managing all aspects of the Company's development investment and construction activity throughout the country. Mr. Fuller earned his Masters in Business Administration from Harvard Business School in 1989 and he earned his Bachelor of Science in Mechanical Engineering from the University of New Hampshire College of Engineering and Physical Sciences in 1983. Mr. Fuller has served on the Multi-Family Leadership Board of the National Association of Home Builders. He has served on the Executive Committee of the Real Estate Finance Association, and was a member of the Urban Land Institute, where he has served on the Executive Committee of ULI Fairfield Westchester District Council. Mr. Fuller also served on the Board and is now a special member of CV Properties LLC a commercial Real Estate Development Company with Offices in Boston and Southport, CT. Mr. Fuller was selected to serve as a member of our board of directors because of his significant experience in the development and management of multi-family properties throughout the United States.

Executive and Director Compensation
Executive Compensation
Because the administrative services agreement provides that our Administrative Agent is responsible for providing certain administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries, our officers, who are employees of ETRE, do not receive cash compensation from us for serving as our officers.  ETRE compensates each of our officers.  We pay our Administrative Agent an administrative services fee and our Administrative Agent will use the proceeds from the administrative services fee in part to pay compensation to ETRE's officers and personnel. 
Compensation of Directors
We will pay a $______ annual base fee to each of our independent directors.  Each independent director's annual base director fee will be paid __% in cash and __% in awards under the 2015 Director Plan.  See "—Non-Management Director Compensation Plan."   We will also reimburse all members of our board of directors for their travel expenses incurred in connection with their attendance at full board of directors and committee meetings.  Initially, such fees and reimbursements will be borne by the R-1 Series.  As we establish additional Series in the future, we expect to allocate such fees and reimbursements among the Series, and the compensation committee may determine to increase such fees at the time such Series are established. 
Initial Grants of Equity Compensation to Independent Directors
Under our 2015 Director Plan, our board of directors is authorized to approve grants of equity-based awards to our non-management directors.  Our board of directors will approve an initial grant of _________ restricted Series R-1 common shares to our independent directors.  See "—2015 Non-Management Director Compensation Plan."

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Corporate Governance — Board of Directors and Committees
Our operating agreement provides that the real property, affairs and business of each Series shall be managed under the direction of our single board of directors, the members of which are nominated and elected by ETRE Financial, LLC, as the managing member of our Company.  Subject to the supervision and oversight of our board of directors, our Administrative Agent will be responsible for supervising all aspects of real property operations, including the selection of asset managers and property managers, tenant leasing, property financing, construction and renovations, budgeting, cash management and insurance, and for other functions and authority delegated to it by our board of directors.  Our board of directors currently consists of two members.  Effective upon completion of this offering, ETRE Financial, LLC will increase the size of the board to five directors and will appoint three additional directors who are independent within the criteria established by the NASDAQ for independent board members.  Our directors keep informed about our business by attendance at meetings of our board and its committees and through supplemental reports and communications.  Our independent directors meet regularly in executive session without the presence of our corporate officers, our Administrative Agent, ETRE's personnel or our non-independent directors.
Upon completion of this offering, our board of directors will establish an audit committee and will adopt a charter for the audit committee that complies with current U.S. federal and NASDAQ rules relating to corporate governance matters.  In addition, upon completion of this offering, our board of directors will establish a compensation committee and nominating and corporate governance committee, as described below.  Our board of directors may establish other committees from time to time.  Moreover, upon completion of this offering, our Administrative Agent will establish an inter-series conflict resolution committee.  See "Our Administrative Agent and the Administrative Services Agreement—Inter-Series Conflict Resolution Committee."
Audit Committee
The audit committee will be comprised of  _________________________ and _______________, each of whom is an independent director and "financially literate" under the rules of the NASDAQ.  We expect ______________ will chair the audit committee.  The audit committee will be responsible for engaging independent certified public accountants, preparing audit committee reports, reviewing with the independent certified public accountants the plans and results of the audit engagement, approving professional services provided by the independent certified public accountants, reviewing the independence of the independent certified public accountants, considering the range of audit and non-audit fees and reviewing the adequacy of our internal accounting controls.
Compensation Committee
The compensation committee will be comprised exclusively of independent members of our board of directors.  The initial members of this committee will be ______________ (who we expect will serve as chair of this committee), ____________, and _____________. The principal functions of the compensation committee will be to review the compensation and fees payable to our Administrative Agent under the administrative services agreement, evaluate the performance of our Administrative Agent and prepare compensation committee reports.  
Nominating and Corporate Governance Committee
The nominating and corporate governance committee will be comprised exclusively of independent members of our board of directors.  The initial members of this committee will be ______________ (who we expect will serve as chair of this committee), _____________, and _______________. The nominating and corporate governance committee will be responsible for seeking, considering and recommending to the managing member of our Company qualified candidates for election as directors.  The committee also periodically will prepare and submit to the managing member for adoption its selection criteria for director nominees and annually recommends to our board of directors nominees for each committee of the board.  In addition, the committee annually will facilitate the assessment of the board of directors' performance as a whole and of the individual directors and reports thereon to the board. 
The nominating and corporate governance committee will also review and make recommendations on matters involving general operation of the board and our corporate governance.  In this regard, the nominating and corporate governance committee will, on an annual basis, conduct a review of the corporate governance structure impacting the R-1 Series, taking into account, among other factors, the corporate governance structure and approaches applicable to the other Series.  In addition, where the nominating and corporate governance committee determines that changes to the corporate governance structure applicable to the R-1 Series are appropriate and in the best interests of the holders of our Series R-1 common shares, the committee will recommend such changes to our board of directors for adoption and, if required, for approval of the holders of our Series R-1 common shares.
In addition, the nominating and corporate governance committee will review specific matters that our Administrative Agent believes may involve conflicts of interest and that are not otherwise addressed by the inter-series relationship, conflicts of interest and opportunity allocation policy described below.  These conflicts of interest may include conflicts between the interests of our Company or any Series, on the one hand, and the interests of our Administrative Agent and its affiliates, on the other hand.  The nominating and corporate governance committee will determine whether the resolution of any conflict of interest submitted to it is fair and reasonable to us and our shareholders.  Any matters approved by the nominating and corporate governance committee will be conclusively deemed to be fair and reasonable to us and our shareholders and not a breach by us of any duties that we may owe to our shareholders.  In addition, the nominating and corporate governance committee may review and approve any related person transactions, including those that are approved pursuant to our related person policy, as described under "Conflicts of Interest; Certain Relationships and Related Party Transactions—Statement of Policy Regarding Transactions with Related Persons," and may establish guidelines or rules to cover specific categories of transactions.

68



Inter-Series Relationship, Conflicts of Interest and Opportunity Allocation Policy
We expect that the R-1 Series and each other Series and Other Series Program we establish in the future will have certain ongoing, operating relationships with each other.  We expect that the operating relationships among the Series will primarily include the coordination and use of Company overhead and support services.  In addition, the R-1 Series and each other Series and Other Series Program we establish in the future may have overlapping investment strategies and objectives, and our board of directors, our officers and our Administrative Agent and ETRE's personnel may face conflicts of interest in allocating sale, financing, leasing and other business opportunities among the real properties owned by the different Series and Other Series Programs.
In an effort to govern these operating relationships, address these conflicts of interest and promote the fair allocation of sale, financing, leasing and other business opportunities, our board of directors has adopted an inter-series relationship, conflicts of interest and opportunity allocation policy (which we refer to as the "Inter-Series Policy"), which is administered by our Administrative Agent.  Our Administrative Agent's adherence to this policy is expected to be reviewed quarterly by our board of directors.  Our board of directors may modify, suspend or rescind the policies set forth in the Inter-Series Policy without shareholder approval.  Our board may also adopt additional or other policies or make exceptions with respect to the application of the policies described in the Inter-Series Policy in connection with particular facts and circumstances, all as our board may determine, consistent with its fiduciary duties to our Company and all of our shareholders.
General Policy
Under the Inter-Series Policy, all material matters in which holders of Series R-1 common shares and common shares of any other Series may have divergent interests will be generally resolved in a manner that is in the best interests of our Company and all of such common shareholders after giving fair consideration to the potentially divergent interests and all other relevant interests of the holders of such separate classes of common shares.  Under the Inter-Series Policy, the relationship between the R-1 Series and each other Series and the means by which the terms of any material transaction between them will be determined will be governed by a process of fair dealing.
Relationship Among the Series
The Inter-Series Policy provides that our Administrative Agent will seek to manage each Series in a manner designed to maximize the operations, assets and value of all Series and Other Series Programs.
General.  The Inter-Series Policy provides that, except as otherwise provided in the Inter‑Series Policy, all material commercial transactions between a Series and any other Series, including Other Series Programs, will be on commercially reasonable terms taken as a whole.
Allocation of company overhead and support services.  Each Series will have access to the support services of any other Series.  For shared company services, costs (other than those specifically required to be borne by our Administrative Agent under the administrative services agreement)relating to these services will be:
allocated directly to the Series utilizing those services, and
if not directly allocable to a Series, allocated among all of the then existing Series on a pro rata basis.
For other support services the Inter-Series Policy  provides that the Series will seek to achieve efficiencies to minimize the aggregate costs incurred by the Series combined, although any Series also will be entitled to negotiate and procure support services on its own.
Our board of directors may, without shareholder approval, modify or amend the method of allocation of support services and shared company services.
Our Administrative Agent will be responsible for the allocation of support services among the Series and Other Series Programs in a manner that is consistent with the Inter-Series Policy.
Financing arrangements.  No Series will be obligated to provide financial support to any other Series or Other Series Program.  To the extent a Series (the "lending Series") loans money to any other Series, including Other Series Programs (the "borrowing Series"), such loans will be made at interest rates and on other terms and conditions designed to be substantially equivalent to the interest rates and other terms and conditions that the borrowing Series would be able to obtain from third parties, including the public markets, as a non-affiliate of our Company or any other Series or Other Series Program without the benefit of any guarantee by our Company or any other Series or Other Series Program.  This policy contemplates that these loans will be made on the basis set forth above regardless of the interest rates and other terms and conditions on which the lending Series may have acquired the funds.  If, however, the lending Series incurs any fees or charges in order to keep available funds for use by the borrowing Series, those fees or charges will be allocated to the borrowing Series.

69



Business Opportunities
The Inter-Series Policy provides that our Administrative Agent will allocate any sale, financing, leasing and other business opportunities among the Series, in whole or in part, as it considers to be in the best interests of our Company and its shareholders as a whole and as contemplated by the other provisions of the Inter-Series Policy.  If a sale, financing, leasing or other business opportunity would be suitable for the real property owned by more than one Series, our Administrative Agent will allocate it using its business judgment.  Any allocation of this type may involve the consideration of a number of factors that our Administrative Agent determines to be relevant, including concepts of fairness over time, cash flows from the properties owned by the respective Series, the properties' respective tenant bases and lease rental rates, the Series' available cash and existing leverage, the type and condition of the properties, local market conditions where the properties are located, whether a property is jointly owned by a Series with other investors, potential tax consequences associated with the business opportunity and whether a Series or property is otherwise better positioned to undertake or have allocated to it the business opportunity.
Our Administrative Agent will also be responsible to allocate business opportunities among the Series and Other Series Programs in a manner that is consistent with the Inter-Series Policy.
Except under the Inter-Series Policy  and any other policies adopted by our board of directors, which policies will be designed to minimize conflicts among the Series, no Series will have any duty, responsibility or obligation to refrain from:
engaging in the same or similar activities or lines of business as any other Series, or Other Series Program.
doing business with any potential or actual tenant, lender, purchaser, supplier, customer or competitor of any other Series, or Other Series Program, or
engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual tenants, lenders, purchasers, suppliers or customers of any other Series, or Other Series Program.
Determinations by our Administrative Agent and the Inter-Series Conflict Resolution Committee
Our Administrative Agent maintains a contractual as opposed to a fiduciary relationship with us, each Series and our shareholders.  In making determinations in connection with the policies set forth in the Inter-Series Policy, the inter-series conflict resolution committee  and our Administrative Agent  will act in accordance with our Administrative Agent's obligations under the administrative services agreement with the R-1 Series (and any other administrative services agreements our Administrative Agent enters into with the other Series we establish in the future and their related Property Subsidiaries).  For a description of the administrative services agreement with the R-1 Series, see "Our Administrative Agent and the Administrative Services Agreement."
Review and Amendment and Modification of the Inter-Series Policy
Our board of directors expects on a quarterly basis to review our Administrative Agent's adherence to the Inter-Series Policy and on an annual basis to assess the Inter-Series Policy and consider policy changes.  Our board of directors may modify, suspend, waive or rescind the policies set forth in the Inter-Series Policy, including any resolution implementing the provisions of the Inter-Series Policy, without the approval of our shareholders.  Our board may also adopt additional or other policies or make exceptions with respect to the application of the policies described in the Inter-Series Policy in connection with particular facts and circumstances, all as our board may determine, consistent with its fiduciary duties to our Company and all of our shareholders.

70



2015 Non-Management Director Compensation Plan
Prior to the completion of this offering, we will adopt the 2015 Director Plan to provide incentive compensation to attract and retain qualified non-management directors.  The 2015 Director Plan will be administered by a committee (which may be the compensation committee) appointed by our board of directors.  The 2015 Director Plan will permit the granting of restricted Series R-1 common shares, restricted common shares of Other Property Series, share options, restricted share units, phantom shares, dividend equivalent rights, and other equity-based awards.  Prior to the completion of this offering, our board of directors will approve an initial grant of restricted Series R-1 common shares to our independent directors.
Administration
The committee appointed by our board of directors to administer the 2015 Director Plan will have the full authority to administer and interpret the 2015 Director Plan, authorize the granting of awards, determine the eligibility of non-management directors to receive an award, determine the number of our common shares to be covered by each award (subject to the individual participant limitations provided in the 2015 Director Plan), determine the terms, provisions and conditions of each award (which may not be inconsistent with the terms of the 2015 Director Plan), prescribe the form of instruments evidencing awards and take any other actions and make all other determinations that it deems necessary or appropriate in connection with the 2015 Director Plan or the administration or interpretation thereof.  In connection with this authority, the committee may, among other things, establish performance goals that must be met in order for awards to be granted or to vest, or for the restrictions on any such awards to lapse.  From and after the consummation of this offering, the 2015 Director Plan will be administered by a committee consisting of two or more directors, each of whom is intended to be, to the extent required by Rule 16b-3 under the Exchange Act, a non-employee director and will, at such times as we are subject to Section 162(m) of the Internal Revenue Code and intend that grant be exempt from the restriction of Section 162(m), qualify as an outside director for purposes of Section 162(m) of the Internal Revenue Code, or, if no committee exists, the board of directors.  References below to the committee include a reference to the board for those periods in which the board is acting.
Available Shares
Our 2015 Director Plan provides for grants of our Series R-1 common shares, and other equity-based awards up to an aggregate of  ___% of the issued and outstanding Series R-1 common shares and the common shares of Other Property Series (on a fully diluted basis (assuming, if applicable, the exercise of all outstanding options and the conversion of all warrants and convertible securities into Series R-1 common shares and the common shares of Other Property Series) and including our Series R-1 common shares to be sold pursuant to the underwriters' exercise of their overallotment option) at the time of the award.  If an option or other award granted under the 2015 Director Plan expires or terminates, the shares subject to any portion of the award that expires, forfeits or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards.  Unless previously terminated by our board of directors, no new award may be granted under the 2015 Director Plan after the first anniversary of the earlier of the date that such plan was initially approved by (i) our board of directors or (ii) our shareholders.  No award may be granted under our 2015 Director Plan to any person who, assuming exercise of all options and payment of all awards held by such person would own or be deemed to own more than 9.8% of the outstanding our Series R-1 common shares.  Prior to the completion of this offering, our board of directors will approve an initial grant of restricted Series R-1 common shares to each of our independent directors.  In addition, ___% of each independent director's annual base director fee will be paid in awards under our 2015 Director Plan.
Awards Under the Plan
Restricted Shares.  A restricted share award is an award of our Series R-1 common shares or the common shares of Other Property Series as applicable, that is subject to restrictions on transferability and such other restrictions, if any, as the committee may impose at the date of grant.  Grants of restricted shares will be subject to vesting schedules as determined by the committee.  The restrictions may lapse separately or in combination at such times, under such circumstances, including, without limitation, a specified period of service or the satisfaction of pre-established criteria, in such installments or otherwise, as the committee may determine.  A participant granted restricted shares will have all of the rights of a shareholder, including, without limitation, the right to vote and the right to receive distributions on the Series R-1 common shares or the common shares of Other Property Series, as applicable.  Although dividends will be paid on restricted Series R-1 common shares or the common shares of Other Property Series, whether or not vested, at the same rate and on the same date as on Series R-1 common shares or the common shares of Other Property Series, as applicable, holders of such restricted shares are prohibited from selling such shares until they vest.
Stock Options.  The terms of specific options, including whether options shall constitute "incentive stock options" for purposes of Section 422(b) of the Internal Revenue Code, will be determined by the committee.  The exercise price of an option shall be determined by the committee and reflected in the applicable award agreement.  The exercise price with respect to incentive stock options may not be lower than 100% (110% in the case of an incentive stock option granted to a 10% shareholder, if permitted under the plan) of the fair market value of our Series R-1 common shares or the common shares of Other Property Series, as applicable, on the date of grant.  Each option shall be exercisable after the period or periods specified in the award agreement, which will generally not exceed ten years from the date of grant (or five years in the case of an incentive stock option granted to a 10% shareholder, if permitted under the plan).  Options will be exercisable at such times and subject to such terms as determined by the committee.    

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Phantom Shares.  Phantom shares, when issued, will reduce the number of shares available for grant under the 2015 Director Plan and will vest as provided in the applicable award agreement.  A phantom share represents a right to receive the fair market value of a Series R-1 common share or common share of Other Property Series, as applicable, or, if provided by the committee, the right to receive the fair market value of a Series R-1 common share or the common share of Other Property Series, as applicable, in excess of a base value established by the committee at the time of grant.  Phantom shares may generally be settled in cash or by transfer of Series R-1 common shares or the common shares of Other Property Series, as applicable, (as may be elected by the participant or the committee as may be provided by the committee at grant).  The committee may, in its discretion and under certain circumstances, permit a participant to receive as settlement of the phantom shares installments over a period not to exceed ten years.
Dividend Equivalents.  A dividend equivalent is a right to receive (or have credited) the equivalent value (in cash or Series R-1 common shares or the common shares of Other Property Series) of dividends paid on Series R-1 common shares or the common shares of Other Property Series, as applicable, otherwise subject to an award.  The committee may provide that amounts payable with respect to dividend equivalents will be converted into cash or additional Series R-1 common shares or the common shares of Other Property Series, as applicable.  The committee will establish all other limitations and conditions of awards of dividend equivalents as it deems appropriate.
Restricted Share Units.  Restricted share units represent a promise to pay Series R-1 common shares or the common shares of Other Property Series (or a cash amount equal to the value thereof) upon the completion of a vesting period.  Dividend equivalents generally are granted with restricted share units and are earned during the vesting period, and paid in the year following the year to which they relate.
Other Share-Based Awards. The 2015 Director Plan authorizes the granting of other awards based upon Series R-1 common shares or the common shares of Other Property Series (including the grant of securities convertible into Series R-1 common shares, the common shares of Other Property Series and share appreciation rights), subject to terms and conditions established at the time of grant.
 
Change in Control
Upon a change in control (as defined in the 2015 Director Plan), the committee may make such adjustments as it, in its discretion, determines are necessary or appropriate in light of the change in control, but only if the committee determines that the adjustments do not have a substantial adverse economic impact on the participants (as determined at the time of the adjustments) and provided that any discretionary increase in the aggregate number of shares issuable under the 2015 Director Plan must be approved by our board of directors.
Other Changes
Our board of directors may amend, alter, suspend or discontinue the 2015 Director Plan but cannot take any action that would impair the rights of a participant's existing grants.  To the extent necessary and desirable (including, as required by law or any stock exchange rules), the board of directors must obtain approval of our shareholders for any amendment that would:
other than through adjustment as provided in the 2015 Director Plan, increase the total number of shares reserved for issuance under the 2015 Director Plan; or
change the class of directors eligible to participate in the 2015 Director Plan.
The committee or our board of directors may amend the terms of any award granted under the 2015 Director Plan, prospectively  or retroactively, but, generally may not impair the rights of any participant without his or her consent.
Code of Business Conduct and Ethics
Our code of business conduct and ethics applies to our officers and directors, our Administrative Agent and to ETRE's personnel when such individuals are acting for or on our behalf.  Among other matters, our code of business conduct and ethics is designed to deter wrongdoing and to promote:
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely and understandable disclosure in our public communications;
compliance with applicable governmental laws, rules and regulations;
prompt internal reporting of violations of the code to appropriate persons identified in the code; and
accountability for adherence to the code.
Any waiver of the code of business conduct and ethics for our officers or directors may be made only by our board of directors or one of our board of directors committees and will be promptly disclosed if and to the extent required by law or stock exchange regulations. 


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PRINCIPAL SHAREHOLDERS
We currently have outstanding 100 Series R-1 common shares, all of which are owned by Mr. Stein.  Upon completion of this offering, we will repurchase all 100 Series R-1 common shares from Mr. Stein at his cost of $10.00 per share.
The following table sets forth certain information following the closing of this offering regarding the ownership of our Series R-1 common shares by:
each of our directors and director nominees;

each of our executive officers;

each holder of more than 5% of our Series R-1 common shares; and

all of our director, director nominees and executive officers as a group.

In accordance with SEC rules, each listed person’s beneficial ownership includes:
all shares the investor actually owns beneficially or of record;

all shares over which the investor has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund), and

all shares the investor has the right to acquire within 60 days (such as restricted common shares that are currently vested or which are scheduled to vest within 60 days).

Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power.  Except as indicated in the footnotes to the table below, the business address of the shareholders listed below is the address of our principal executive office, 44 Wall Street, New York, New York, 10005.
  
 
Series R-1 Common Shares Outstanding
  
 
Immediately Prior to
Offering
 
Immediately After
Offering
Name and Address
 
Number of Series R-1 Common Shares Beneficially Owned
 
Percentage of All Series R-1 Common Shares(1)
 
Number of Series R-1 Common Shares Beneficially Owned
 
Percentage of
All Series R-1 Common Shares
(2)
Paul Frischer
 
-
 
-
 
  
 
  
Jesse Stein
 
100(3)
 
100%
 
  
 
  
Darren Glickman
 
-
 
-
 
 
 
 
Jay Anderson
 
-
 
-
 
 
 
 
Mark Filanowski
 
-
 
-
 
 
 
 
Samuel Fuller
 
-
 
-
 
 
 
 
All of our directors, director nominees and executive officers as a group (6 persons)
 
100
 
100%
 
 
 
 
                                           
* Represents less than 1% of the Series R-1 common shares outstanding at the closing of this offering.
(1)
Based on a total of 100 Series R-1 common shares outstanding as of the date of this prospectus, which does not give effect to this offering.   
(2)
Assumes the issuance of ________ Series R-1 common shares offered hereby and an aggregate of  ______ restricted Series R-1 common shares to be granted to our independent directors upon the completion of this offering under our 2015 Director Plan. Does not reflect ______ Series R-1 common shares reserved for issuance upon exercise of the underwriters' over-allotment option in full.
(3)
We sold these shares to Jesse Stein in connection with the initial capitalization of the R-1 Series for total consideration of $1,000. At the closing of this offering, we will repurchase these shares from Mr. Stein for $1,000. Accordingly, the 100 Series R-1 common shares that we currently have outstanding are excluded from the number of Series R-1 common shares to be outstanding immediately after the closing of this offering.

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CONFLICTS OF INTEREST; CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Conflicts of Interest
Conflicts of interest exist and may arise in the future as a result of the relationships between our Administrative Agent and its affiliates (including ETRE Financial, LLC, the managing member of our Company, and Other Series Programs), on the one hand, and us, each Series and our shareholders, on the other hand.
Our operating agreement provides that the real property, affairs and business of each Series, including the R-1 Series, will be managed under the direction of our single board of directors. ETRE Financial, LLC, as the managing member of our Company, will have the sole right to nominate, elect and remove the members of our board of directors. Accordingly, shareholders will have no right to nominate, elect or remove members of our board of directors and the managing member will have complete discretion in nominating, electing or removing members of our board of directors.
We do not expect to have any employees and we will rely completely on our Administrative Agent to provide each Series and Property Subsidiary, including the R-1 Series and the Property R-1 Subsidiaries, with administrative and certain advisory services. The administrative services agreement with our Administrative Agent related to the R-1 Series and the Property R-1 Subsidiaries was prepared by related parties and its terms, including fees, expense reimbursements and other amounts payable to our Administrative Agent, may not be as favorable to the R-1 Series and the Property R-1 Subsidiaries as if the agreement had been negotiated at arm's length between unaffiliated third parties.
Certain of our officers and directors also serve or may serve as officers, directors or employees of ETRE as well as other ETRE sponsored vehicles and other companies unaffiliated with ETRE. Accordingly, the ability of these persons to engage in other business activities may reduce the time they spend managing our business, including the business of the R-1 Series. In addition, these persons may have obligations to those entities, the fulfillment of which might not be in the best interests of us, any Series or any of our shareholders.
Moreover, our officers and directors will serve as officers and directors for, and our Administrative Agent and ETRE's personnel will provide similar services to, any other Series or Other Series Programs we establish in the future. The R-1 Series and any other Series or Other Series Programs we establish in the future may have overlapping investment strategies and objectives, and our board of directors, our officers and our Administrative Agent may face conflicts of interest in allocating sale, financing, leasing and other business opportunities among the real properties owned by the different Series and Other Series Programs. To help alleviate any perceived or actual conflicts of interest, our board of directors has adopted an inter-series relationship, conflicts of interest and opportunity allocation policy (which we refer to as the "Inter-Series Policy"), which is administered by our Administrative Agent and has been designed to govern the operating relationships among the Series, address conflicts of interest among the Series and promote the fair allocation of sale, financing, leasing and other business opportunities among the real properties owned by the different Series, including any Other Series Programs. See "Management-Inter-Series Relationship, Conflicts of Interest and Opportunity Allocation Policy." The Inter-Series Policy provides our Administrative Agent with significant flexibility with respect to its ability to make decisions and pursue actions involving conflicts of interest among the Series and Other Series Programs. Given the significant flexibility afforded our Administrative Agent to resolve such conflicts of interest, our Administrative Agent may resolve conflicts of interests pursuant to the Inter-Series Policy in a manner that holders of Series R-1 common shares may not believe to be in their best interests or in the best interests of the R-1 Series. Neither holders of our Series R-1 common shares, the R-1 Series, the Property R-1 Subsidiaries nor the General R-1 Partner will have any recourse against our Administrative Agent if our Administrative Agent satisfies its obligations under the administrative services agreement with the R-1 Series.
The nominating and corporate governance committee of our board of directors, which is comprised solely of independent directors, will review specific matters that our Administrative Agent believes may involve conflicts of interest and that are not otherwise addressed by the Inter-Series Policy. These conflicts of interest may include conflicts between the interests of our Company or any Series, on the one hand, and the interests of our Administrative Agent, and its affiliates (including ETRE and Other Series Programs), on the other hand. The nominating and corporate governance committee will determine whether the resolution of any conflict of interest submitted to it is fair and reasonable to us and our shareholders. If our Administrative Agent obtains such approval of any matter, such matter will be conclusively deemed to be fair and reasonable to us and our shareholders and not a breach by us of any duties that we may owe to our shareholders.
We do not have a policy that expressly prohibits our directors, officers, security holders or affiliates from engaging for their own account in business activities of the types conducted by us. However, our code of business conduct and ethics prohibits our directors and executive officers, as well as employees of our Administrative Agent or ETRE who provide services to us, from engaging in any transaction that involves an actual conflict of interest with us and that is not otherwise addressed by the Inter-Series Policy without the approval of the nominating and corporate governance committee. See "Risk Factors-Potential conflicts of interest may arise among our Administrative Agent and its affiliates, on the one hand, and our Company and our shareholders, on the other hand."

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Administrative Services Agreement
The R-1 Series will enter into the administrative services agreement with our Administrative Agent effective upon the closing of this offering. Pursuant to the terms of the administrative services agreement, our Administrative Agent will provide administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries, as well as a management team and appropriate support personnel. Our Administrative Agent will at all times be subject to the supervision and oversight of our board of directors. The administrative services agreement will have an indefinite term, but may be terminated by our Administrative Agent or the R-1 Series under certain circumstances. Our Administrative Agent is entitled to receive from the R-1 Series an administrative services fee and, under certain circumstances, an administrative sale fee. The R-1 Series is also obligated to reimburse certain expenses incurred by our Administrative Agent. See "Our Administrative Agent and the Administrative Services Agreement-Administrative Services Agreement."

ETRE License Agreement

Prior to the completion of the offering, we will enter into a license agreement with ETRE, pursuant to which ETRE will grant us a non-exclusive, royalty free license to use the name "ETRE Residential, LLC."  See "Our Administrative Agent and the Administrative Services Agreement—License Agreement."
Initial Capitalization
In connection with the formation and initial capitalization of the R-1 Series, Mr. Stein purchased 100 Series R-1 common shares for a purchase price of $1,000.  We will use $1,000 of the net proceeds of this offering to repurchase the shares Mr. Stein acquired.
Indemnification and Limitation of the Managing Member's, Directors' and Officers' Liability
Our operating agreement provides that to the fullest extent permitted by applicable law ETRE Financial, LLC, the managing member of our Company, and our directors or officers will not be liable to us.  In addition, pursuant to our operating agreement, we have agreed to indemnify the managing member and each of our directors and officers, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the company and counsel fees and disbursements on a solicitor and client basis) arising from the performance of any of their obligations or duties in connection with their service to us or the operating agreement, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such person may hereafter be made party by reason of being or having been the managing member or one of our directors or officers.
Prior to completion of this offering, we intend to enter into separate indemnification agreements with our directors and officers.  Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law and our operating agreement against any and all expenses, judgments, fines, penalties and amounts paid in settlement of any claim.  The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law and our operating agreement.
Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Statement of Policy Regarding Transactions with Related Persons
Our board of directors has adopted a written statement of policy regarding transactions with related persons, which we refer to as our "related person policy." Our related person policy requires that a "related person" (as defined as in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to our chief financial officer any "related person transaction" (defined as any transaction that is reportable by us under Item 404(a) of Regulation S-K in which we (including any Series) were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto.  Our chief financial officer will then promptly communicate that information to our Administrative Agent.  No related person transaction will be consummated without the approval or ratification of our Administrative Agent or the inter-series conflict resolution committee, in the case of transactions addressed by the Inter-Series Policy, or any committee of our board of directors consisting exclusively of disinterested directors, in the case of transactions not otherwise addressed by such policy.  It is our policy that persons interested in a related person transaction will recuse themselves from any vote of a related person transaction in which they have an interest.


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DESCRIPTION OF SERIES R-1 COMMON SHARES
The following descriptions of the Series R-1 common shares, and the R-1 Series, certain provisions of Delaware law and certain provisions of our certificate of formation and operating agreement and our bylaws, which will be in effect upon consummation of this offering, are summaries and are qualified by reference to Delaware law and our certificate of formation, operating agreement and bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus is a part.  See "Where You Can Find More Information."
General
We are a Delaware series limited liability company organized on May 13, 2015 under the Delaware LLC Act issuing different series (“Series”) of limited liability company interests. In accordance with the Delaware LLC Act, the R-1 Series is, and each other Series we may establish in the future will be, a separate series and not itself a separate legal entity.  Section 18-215(b) of the Delaware LLC Act provides that, if certain conditions (as set forth in Section 18-215(b)) are met, including that certain provisions are in the formation and governing documents of the series limited liability company, and if the records maintained for any such series account for the assets associated with such series separately from the assets of the limited liability company, or any other series, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable only against the assets of such series and not against the assets of the limited liability company generally or any other series.  Accordingly, the real property and other assets of one Series include only the real property, related assets and other assets that are held by that Series, including funds delivered for the purchase of shares in that Series.  However, the limitations on inter-series liability provided by Section 18-215(b) have never been tested in federal bankruptcy courts and it is possible that a bankruptcy court could determine that the assets of one Series should be applied to meet the liabilities of the other Series or the liabilities of our Company generally where the assets of such other Series or of our Company generally are insufficient to meet our liabilities.
Each Series will be treated as a separate legal entity for U.S. federal income tax purposes and will elect and qualify to be taxed as a REIT for U.S. federal income tax purposes. 
The limited liability company interests in each Series will be denominated in common shares of limited liability company interests ("common shares") and, if created in the future, preferred shares of limited liability company interests.  Only Series R-1 common shares are being offered and sold pursuant to this prospectus.  Our operating agreement provides that we may issue an unlimited number of Series R-1 common shares with the approval of a majority of our entire board of directors and without shareholder approval.
All of the Series R-1 common shares offered by this prospectus will be duly authorized and validly issued.  Upon payment in full of the consideration payable with respect to the Series R-1 common shares, as determined by our board of directors, the holders of such shares will not be liable to us to make any additional capital contributions with respect to such shares (except for the return of distributions under certain circumstances as required by Sections 18-215, 18-607 and 18-804 of the Delaware LLC Act).  Holders of Series R-1 common shares have no conversion, exchange, sinking fund, redemption or appraisal rights, no pre-emptive rights to subscribe for any securities of our Company and no preferential rights to distributions.
In general, the R-1 Series will participate exclusively in 89.00% of the economic returns derived from the Property.  Upon completion of the purchase and sale transaction substantially concurrently with the completion of this offering, the Property will be owned by the Property R-1 Subsidiaries; 89.00% by the R-1 Series through the Holdings R-1 Subsidiary’s general and limited partner interests in the Property R-1 Subsidiaries and 11.00% by the Core Limited R-1 Partner through its limited partner interests in the Property R-1 Subsidiaries. The partnership interests of the Holdings R-1 Subsidiary (including the general partner interests held through its subsidiary, the General R-1 Partner) and the Core Limited R-1 Partner will represent all of the outstanding economic interests in the Property R-1 Subsidiaries.
We intend for the R-1 Series to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes commencing with its short taxable year ended December 31, 2015.
We expect that our board or directors will authorize the creation of new Series that will acquire and participate exclusively in the economic returns derived from the interests in other real properties (each, an “Other Property Series” and, together with the R-1 Series, the “Property Series”).  We expect each such Series to hold the interests in these other real properties through newly-organized Delaware limited liability companies or limited partnerships (each, an “Other Property Subsidiary” and, together with the Property R-1 Subsidiaries, the “Property Subsidiaries”), which will be owned and controlled by the applicable Property Series.  Our board of directors may also authorize the creation of a new Series that will acquire from the R-1 Series and the Other Property Series that we expect will be created in the future minority interests in the various Property Subsidiaries respectively owned by such Property Series.
Each Property Series will invest funds, directly or indirectly, in the corresponding Property Subsidiary, and the assets and liabilities of each Property Subsidiary will be segregated from each other Property Subsidiary.  Each Series and the related Property Subsidiary will have a separate administrative services agreement with our Administrative Agent, which will manage such Property Subsidiary's real property and make the decisions with respect to the assets of each Series invested in such Property Subsidiary, subject to the oversight and supervision of our board of directors.  We will maintain separate, distinct records for each Series, and account for its assets separately from the other Series and the other assets of our Company.


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In addition, Section 18-215(c) of the Delaware LLC Act provides that a series established in accordance with Section 18-215(b)  may carry on any lawful business, purpose or activity, other than the business of banking, and has the power and capacity to, in its own name, contract, hold title to assets (including real, personal and intangible property), grant liens and security interests, and sue and be sued.  We intend for each Series to otherwise conduct its business, enter into contracts and hold title to assets in its own name to the extent such activities are not undertaken through the applicable Property Subsidiary and/or its subsidiaries.
Distributions
General We intend to make regular quarterly distributions to holders of Series R-1 common shares and common shares of the Other Property Series ("Other Property common shares" and, together with the Series R-1 common shares, the "Property common shares").  U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its net taxable income, excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income.

Subject to the preferential rights, if any, of holders of any other class of shares of the R-1 Series and to the provisions of our operating agreement regarding the restrictions on ownership and transfer of shares, holders of outstanding Series R-1 common shares are entitled to receive distributions on such Series R-1 common shares out of assets legally available for such purposes if, as and when authorized by our board of directors and declared by us.
Types of Distributions and Distribution Policy  Distributions in respect of the common shares of any Property Series may be made, as determined by our board of directors, (1) in cash, (2) in common shares of such Property Series or (3) in other securities of such Property Series or the related Property Subsidiary (or other subsidiaries of such Property Series or Property Subsidiary).  The value of distributions payable in any such securities shall be determined by our board of directors deploying the methodology described below under "—Valuations of Share Distributions." 
Our policy will generally be to distribute all cash available for distribution, other than reserves, of each Property Series to the holders of shares that correspond to such Property Series on a quarterly basis.  However, our board of directors has discretion over the actual amount of distributions made by each Property Series, which will depend upon the earnings and financial condition of such Property Series, maintenance of the Property Series' REIT qualification, restrictions on making distributions under Delaware law and such other factors as our board of directors deems relevant. 
Sale of Property Subsidiary or Underlying Properties.  Upon the sale of all or substantially all of a Property Series' interest in the related Property Subsidiary, whether held directly or through subsidiaries of the Property Series, or all or substantially all of such Property Subsidiary's interest in the related underlying real property, whether held directly or through subsidiaries of the Property Subsidiary, our operating agreement generally provides that our board of directors will either declare and pay as a distribution on or redeem the common shares of such Property Series with the cash, securities or other property available for distribution or redemption from such sale, less any amounts paid as distributions on any class of preferred shares of such Property Series or amounts that our board of directors in its discretion sets aside to fund the Property Series' reserves, debts, liabilities or expenses.  See "-Redemptions-Redemption in Connection with Sale of the Property R-1 Subsidiaries or Property" for the applicable redemption provisions related to the Series R-1 common shares.
Share Distributions.  Subject to the preferential rights, if any, of holders of any other class of shares of a Property Series, our board of directors may declare and pay distributions to holders of Property common shares of such Property Series that consist of (1)  such Property common shares on an equal per-share basis to all holders and (2) other securities of such Property Series or the related Property Subsidiary (or other subsidiaries of such Property Series or Property Subsidiary) on an equal per-share basis.  The terms of the Series R-1 common shares restrict our board of directors from declaring distributions on any other common shares payable in Series R-1 common shares.
Valuations of Share Distributions.  In the case of distributions of shares or other securities for which there is an existing trading market, the value of the shares or other securities included in such distribution will be calculated based on the average market price per share or security over a three‑day trading period immediately preceding the distribution payment date.  In the case of distributions of shares or other securities for which there is no existing trading market, the value of the shares or other securities included in such distribution will be determined by the board of directors in good faith.
Voting Rights
Subject to the provisions of our operating agreement regarding the restrictions on ownership and transfer of shares and except as may otherwise be specified in the terms of any class of common shares of any Series, each outstanding common share (including our Series R-1 common shares) entitles the holder to one vote on all matters submitted to a vote of common shareholders generally.  Holders of all classes of common shares of all Series vote together as a single class on all matters as to which all holders of common shares are entitled to vote. 
Generally, all matters to be voted on by our shareholders must be approved by a majority of the votes cast by all common shares present in person or represented by proxy. 
 
Each outstanding Series R-1 common share will have one vote per share.  No separate class vote of Series R-1 common shares will be required for any matter, except as required by the Delaware LLC Act and except as described below.

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The following circumstances will require the separate approval of holders representing a majority of the Series R-1 common shares:

any amendment to our operating agreement that would adversely change the rights of the Series R-1 common shares; 
subject to certain exceptions, mergers, consolidations or conversions of our Company; 
the termination  and winding up of the R-1 Series, following an election by our board of directors to terminate  the R-1 Series; 
any incurrence or issuance of external indebtedness or preferred shares by or that otherwise corresponds to the R-1 Series, the Property R-1 Subsidiaries and/or its subsidiaries that does not satisfy the conditions described under "—Restrictions on Debt Financing and Cross-Subsidiary Guarantees;" and
all such other matters as our board of directors, in its sole discretion, determines will require the approval of the holders of the outstanding Series R-1 common shares voting as a separate class. 
Furthermore, our operating agreement provides that our board of directors may grant the holders of equity interests in entities controlled by a Series to vote with the shareholders associated with such Series on certain matters, either as a separate class or with such shareholders and on any such basis as our board of directors may determine. The Core Limited R-1 Partner does not have the right to vote with the shareholders on any matter. See “Property R-1 Subsidiaries Limited Partnership Agreements” for more information about the rights and obligations of partners in the Property R-1 Subsidiaries.
Notwithstanding the foregoing, the approval of the holders of Series R-1 common shares is not required in the case of a redemption described under “-Redemptions-Redemption in Exchange for Interests of the Property R-1 Subsidiaries at Option of our Board of Directors,” or for any of the other matters specified under “Amendment of Our Operating Agreement and Bylaws-No Shareholder Approval.”
Our bylaws provide that special meetings of holders of Series R-1 common shares may be called by our board of directors, the chairman of our board, our chief executive officer or president.  Additionally, our bylaws provide that, subject to the satisfaction of certain procedural and information requirements by the shareholders requesting the meeting, a special meeting of the holders of Series R-1 common shares must be called by our secretary upon the written request of the holders of Series R-1 common shares entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.
ETRE Financial, LLC, as the managing member of our Company, will have the sole power to (i) nominate and elect all directors to our board of directors, (ii) set the number of directors of our board of directors, (iii) remove any director, with or without cause, at any time and (iv) fill any vacancies on our board of directors.  Each of our directors will hold office for an annual term, or until his or her resignation or removal by ETRE Financial, LLC.  See "—Operating Agreement and Bylaws—Election and Removal of Members of Our Board of Directors; Size of Board of Directors" below.
Restrictions on Debt Financing and Cross-Subsidiary Guarantees 
As described above, the debts, liabilities, obligations and expenses of each Series will generally be enforceable only against the assets of such Series and not against the assets of any other Series.  In addition, we plan to hold the Series' real property interests in separate Property Subsidiaries in order to isolate further the legal liabilities and legal risks arising out of the ownership, operation and financing of each of the real properties.  
In order to reinforce the legal separateness of our different Series, our operating agreement generally restricts the incurrence or issuance of external indebtedness or preferred shares by or that otherwise corresponds to a Property Series and/or any subsidiary of such Property Series; provided, however, that we, a Property Series and/or a subsidiary of a Property Series may so incur or issue external debt (including through any guarantee of external debt) or preferred shares if the Property Series and/or a subsidiary of such Property Series receive the net proceeds of such incurrence or issuance.  In general, these restrictions can only be waived with the approval of a majority of the outstanding Property common shares of the applicable Property Series.
Board Flexibility and Shareholder Influence Over Property Dispositions
We have structured the terms of our operating agreement, the partnership agreements of the Property R-1 Subsidiaries and our Series R-1 common share tender offer policy to give our board of directors flexibility in structuring disposition transactions and to give holders of our Series R-1 common shares an important role in property dispositions.
Property Dispositions and Tender Offer Policy as to Series R-1 Common Shares 
Dispositions of the Property and entity-level dispositions of the Property R-1 Subsidiaries and/or its subsidiaries require the approval of our board of directors together with holders of more than 50% of the Series R-1 common shares voting on the matter.  We expect our board of directors will approve dispositions of the Property and entity level dispositions of the Property R-1 Subsidiaries and/or its subsidiaries based on its determination, subject to its fiduciary duties to the R-1 Series and the holders of our Series R-1 common shares, that the disposition is in the best interests of such Series and such holders.

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In addition, our tender offer policy as to the Series R-1 common shares generally provides that, if our board, in its sole discretion, has waived the 9.8% ownership limit or established a different ownership limit for an offeror, we will seek to effect a redemption as described under “-Redemption in Exchange for Interests of the Property R-1 Subsidiaries at Option of our Board of Directors” following the completion of any third‑party purchase offer, tender offer or exchange offer in respect of the Series R-1 common shares that has been accepted by the holders of more than 50% of the aggregate outstanding Series R-1 common shares.
Moreover, our tender offer policy as to Series R-1 common shares provides that, in connection with any third‑party purchase offer, tender offer or exchange offer in respect of the Series R-1 common shares that has been accepted by the holders of 75% or more of the aggregate outstanding Series R-1 common shares, our board of directors will, subject to its fiduciary duties to the R-1 Series and the holders of our Series R-1 common shares, cooperate with the successful offeror in order to facilitate the completion of the third‑party purchase offer, tender offer or exchange offer, as applicable, including, by way of example, waiving or establishing an excepted holder limit to the 9.8% ownership limit with respect to the successful offeror, subject to such conditions as our board of directors may determine are necessary to enable the R-1 Series to continue to qualify as a REIT, unless our board of directors determines that our continuing qualification as a REIT is no longer in the best interests of the R-1 Series, and the holders of our R-1 Series common shares.  See “-Operating Agreement and Bylaws-Restrictions on Ownership and Transfer” below.  Subject to the conditions described above, following the completion of the third-party purchase offer, tender offer or exchange offer in respect of the Series R-1 common shares that has been accepted by the holders of 75% or more of the aggregate outstanding Series R-1 common shares, we will effect a redemption as described under “-Redemption in Exchange for Interests of the Property R-1 Subsidiaries at Option of our Board of Directors.”
Under the terms of each of the limited partnership agreements of the Property R-1 Subsidiaries, in connection with any dispositions of the Property and entity level dispositions of the Property R-1 Subsidiaries, sale the R-1 Series has a “drag-along” right to require the Core Limited R-1 Partner to transfer its interests in the Property R-1 Subsidiaries to the third party in the same transaction.
In connection with the consummation of the transactions described above, we will delist the Series R-1 common shares from the NASDAQ or other national securities exchange on which the shares are then listed.
In addition, upon the disposition of the Property or the Property R-1 Subsidiaries and its subsidiaries under certain circumstances the Administrative Sale Fee will be payable, but all other fees and expense reimbursements with respect to the R-1 Series and the Property R-1 Subsidiaries payable to the Administrative Agent will terminate. 
This tender offer policy may be amended, modified or rescinded only by the unanimous approval of our board of directors.
The ability to consummate such dispositions or redemptions may be restricted by the terms of the R-1 Series' outstanding indebtedness.
Redemptions
Redemption in Exchange for Interests of the Property R-1 Subsidiaries at Option of Our Board of Directors.  Our operating agreement provides that we may, at any time, redeem all outstanding Series R-1 common shares in exchange for equity interests in the Property R-1 Subsidiaries, a subsidiary of the Property R-1 Subsidiaries and/or any other subsidiary of the R-1 Series.  The purpose of this provision is to provide our board of directors with a means by which it can spin off a subsidiary that is a direct or indirect owner of the Property to holders of the Series R-1 common shares.  In connection with any such spin-off, we may first convert the applicable spin-off subsidiary into a REIT for U.S. federal income tax purposes or into a Delaware statutory trust, including an entity that has an operating partnership subsidiary.  Our board of directors may in the future seek to effect such a redemption if our board of directors determines it is no longer in the best interests of our Company or the R-1 Series for the Property to be within our Company, including in situations where ownership of the Property may adversely affect the REIT status of the R-1 Series.  In addition, as described above under “-Property Dispositions and Tender Offer Policy as to Series R-1 Common Shares,” our policy is to seek to effect such a redemption following certain tender offers in respect of the Series R-1 common shares. This type of redemption may only be made on a pro rata basis to the holders of Series R-1 common shares.
In connection with such a redemption of the Series R-1 common shares, we would, subject to the preferential rights, if any, of holders of any other class of shares of the R-1 Series, exchange the Series R-1 common shares for 100% of the R-1 Series' ownership interest in the applicable spin-off subsidiary. 
Redemption in Connection with Sale of the Property R-1 Subsidiaries or Property.  In the event of a sale, transfer, assignment or other disposition in a transaction or series of related transactions of all or substantially all the R-1 Series’ interest in the Property R-1 Subsidiaries, whether held directly or through subsidiaries of the R-1 Series, or Property R-1 Subsidiaries’ interest in the Property, whether held directly or through subsidiaries of the Property R-1 Subsidiaries, we are generally required to take one of the following actions, which will be selected in the sole discretion of our board of directors:
Subject to limitations, we may declare and pay a distribution in cash and/or in securities or other property to holders of the outstanding Series R-1 common shares equally on a share-for-share basis in an aggregate amount equal to the net proceeds of the disposition, less any amounts paid as distributions on any class of preferred shares of the R-1 Series and amounts that our board of directors in its discretion sets aside to fund the R-1 Series’ reserves, debts, liabilities or expenses.


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Subject to limitations, if the disposition involves the disposition of all, not merely substantially all, of the R-1 Series’ interest in the Property R-1 Subsidiaries or the Property R-1 Subsidiaries’ interest in the Property, we may redeem all outstanding Series R-1 common shares in exchange for cash and/or securities or other property in an aggregate amount equal to the net proceeds of such disposition allocable, as described above in the first bullet, to the Series R-1 common shares.

Subject to limitations, if the disposition involves substantially all, but not all, of the R-1 Series’ interest in the Property R-1 Subsidiaries or the Property R-1 Subsidiaries’ direct or indirect interest in the Property R-1 Subsidiaries or the Property, we may redeem a number of outstanding Series R-1 common shares in exchange for cash and/or securities or other property in an aggregate amount equal to the net proceeds of such disposition allocable, as described above in the first bullet, to the Series R-1 common shares.  The number of Series R-1 common shares to be redeemed would be equal to the lesser of (1) a number determined by dividing the aggregate amount allocated to the redemption of these shares by the average market price of one Series R-1 common share during the 10-trading day period beginning on the 15th trading day following the completion of that disposition and (2) the total number of outstanding Series R-1 common shares.
  
Subject to limitations, we may take a combination of the actions described in the preceding bullets whereby we may use an amount equal to a portion of the net proceeds of the disposition allocable to Series R-1 common shares to either (1) declare and pay a distribution as described in the first bullet above, or (2) redeem part or all of the remaining Series R-1 common shares as described in the second or third bullet above.

For purposes of these provisions, “substantially all” of the R-1 Series’ interest in the Property R-1 Subsidiaries as of any date means at least 80% of the outstanding equity interests in the Property R-1 Subsidiaries held by the R-1 Series, whether held directly or through subsidiaries of the R-1 Series, and “substantially all” of the Property R-1 Subsidiaries’ interest in the Property means a portion of such real property that represents at least 80% of the fair value of such real property attributed to the Property R-1 Subsidiaries, whether held directly or through subsidiaries of the Property R-1 Subsidiaries, as of such date.
General Procedures
Public Announcements; Notices.  In the case of specified dispositions or a redemption, we will publicly announce or otherwise provide specified information to holders of Series R-1 common shares.
Fractional Shares.  Our board of directors will not have to issue or deliver any fractional shares to any holder of Series R-1 common shares upon any redemption or distribution under the provisions described under "—Redemptions."  Instead of issuing fractional shares, we will pay cash for the fractional share in an amount equal to the fair market value of the fractional share, without interest.
No Adjustments for Distributions.  No adjustments for distributions will be made upon the exchange of any Series R-1 common shares; except that, if a redemption date with respect to Series R-1 common shares comes after the record date for the payment of a distribution to be paid on those shares but before the payment or distribution, the registered holders of those shares at the close of business on such record date will be entitled to receive the distribution on the payment date, notwithstanding the redemption of those shares or our default in payment of the distribution.
Payment of Taxes.  If any person exchanging a certificate representing Series R-1 common shares wants us to issue a certificate in a different name than the registered name on the old certificate, that person must pay any transfer or other taxes required by reason of the issuance of the certificate in another name or establish, to the satisfaction of us or our agent, that the tax has been paid or is not applicable.
Liquidation Rights
In the event of a liquidation, termination or winding up of the R-1 Series, whether voluntary or involuntary, we will first pay or provide for payment of debts and other liabilities of the R-1 Series, including the liquidation preferences of any class of preferred shares of the Series. Thereafter, holders of the Series R-1 common shares will share in the funds of the R-1 Series remaining for distribution pro rata in accordance with their respective interests in the R-1 Series.

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Preferred Shares
Section 215(e) of the Delaware LLC Act also specifically authorizes the creation of ownership interests of different classes of limited liability company interests within each Series, having such relative rights, powers and duties as the limited liability company agreement may provide, and may make provision for the future creation in the manner provided in the limited liability company agreement of additional classes of membership interests.  In accordance with this provision, our operating agreement provides that a  majority of our entire board of directors is authorized to provide for the issuance from time to time of an unlimited amount of one or more classes or series of preferred shares of limited liability company interests ("preferred shares") in a Series, including the R-1 Series.  Subject to the restrictions described above under "—Restrictions on Debt and Financing and Cross-Subsidiary Guarantees," and unless otherwise required by law or by any stock exchange, if applicable, any such authorized preferred shares will be available for issuance without further action by our common shareholders.  Our board of directors is authorized to fix the number of preferred shares, the relative powers, preferences and rights, and the qualifications, limitations or restrictions applicable to each class or series thereof by resolution authorizing the issuance of such class or series and without shareholder approval.  As of the date of this prospectus, no preferred shares are outstanding and we have no current plans to issue any preferred shares.
We could issue a class or series of preferred shares that could, depending on the terms of the class or series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of holders of Series R-1 common shares might believe to be in their best interests or in which holders of Series R-1 common shares might receive a premium for their Series R-1 common shares.
Transfer Agent and Registrar
The transfer agent and registrar for our Series R-1 common shares is American Stock Transfer & Trust Company, LLC.
Operating Agreement and Bylaws
Managing Member
Our operating agreement designates ETRE Financial, LLC, an affiliate of our Administrative Agent, as the managing member of our Company.  As described below under "—Election and Removal of Members of Our Board of Directors; Size of Board of Directors," the managing member will have the sole right to appoint, remove and nominate directors, set the number of directors and fill vacancies on our board of directors.  The managing member will generally not be entitled to vote on matters submitted to our shareholders, although its approval will be required with respect to certain amendments to the operating agreement that would adversely affect its rights in respect of our board of directors.  The managing member will not have any distribution, redemption, conversion or liquidation rights by virtue of its status as the managing member.
Our operating agreement further provides that the managing member, in exercising its rights in its capacity as the managing member, will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us, any Series or any of our shareholders and will not be subject to any different standards imposed by our operating agreement, the Delaware LLC Act or under any other law, rule or regulation or in equity. 
Organization and Duration
Our company was formed on May 13, 2015 as ETRE Residential, LLC, a Delaware series limited liability company, and will remain in existence until dissolved in accordance with our operating agreement.
Purpose
Under our operating agreement, we are permitted to engage in any business activity that lawfully may be conducted by a limited liability company organized under Delaware law and, in connection therewith, to exercise all of the rights and powers conferred upon us pursuant to the agreement relating to such business activity; provided, however, that, our board of directors may only authorize a Property Series to revoke or otherwise terminate such Property Series' REIT election, without approval of our shareholders, if it determines that it is no longer in such Series' best interests to continue to qualify as a REIT.
Agreement to be Bound by Our Operating Agreement; Power of Attorney
By purchasing a Series R-1 common share, you will be admitted as a member of our company associated with the R-1 Series and will be bound by the provisions of, and deemed to be a party to, our operating agreement.  Pursuant to this agreement, each shareholder and each person who acquires a common share from a shareholder grants to our chief executive officer and our secretary a power of attorney to, among other things, execute and file documents required for our qualification, continuance or dissolution.  The power of attorney also grants our chief executive officer and our secretary the authority to make certain amendments to, and to execute and deliver such other documents as may be necessary or appropriate to carry out the provisions or purposes of, our operating agreement.

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Election and Removal of Members of Our Board of Directors; Size of Board of Directors
Our operating agreement and bylaws provide that ETRE Financial, LLC, as the managing member of our Company, will have the sole power to (i) nominate and elect all directors to our board of directors, (ii) set the number of directors of our board of directors, (iii) remove any director, with or without cause, at any time and (iv) fill any vacancies on our board of directors.  The number of directors may not be fewer than one.  Each of our directors will hold office for an annual term, or until his or her resignation or removal by ETRE Financial, LLC.
Duties of Officers and Directors
Our operating agreement provides that, except as may otherwise be provided by the operating agreement or by our bylaws, the property, affairs and business of each Series will be managed under the direction of our board of directors.  Pursuant to our bylaws, our board of directors has the power to appoint our officers and such officers have the authority and exercise the powers and perform the duties specified in our bylaws or as may be specified by our board of directors.
Our operating agreement further provides that the authority and function of our board of directors and officers will be identical to the authority and functions of a board of directors and officers of a corporation organized under the DGCL, except as expressly modified by the terms of the operating agreement.  Further, our operating agreement provides that except as specifically provided therein, the fiduciary duties and obligations owed to our limited liability company and to our members shall be the same as the respective duties and obligations owed by officers and directors of a corporation organized under the DGCL to their corporation and stockholders, respectively. 
Finally, because a single board of directors will oversee the operations of each Series, our operating agreement provides that the fiduciary duties of our board of directors extend to each Series separately.  Our operating agreement also provides our board of directors should, in the event of any conflicts of interest among the different Series, be able to take into account the competing interests of the different Series in discharging its fiduciary duties and taking action on behalf of each Series.  To address conflicts of interest that may arise in allocating sale, financing, leasing and other business opportunities among the real properties owned by the different Series, our board of directors has adopted the Inter-Series Policy which is administered by our Administrative Agent.  See "Management—Inter-Series Relationship, Conflicts of Interest and Opportunity Allocation Policy."  In the future, we may determine to have separate classes of directors oversee the operations of different Series.
Our operating agreement does not expressly modify the duties and obligations owed by officers and directors under the DGCL.  However, there are certain provisions in our operating agreement regarding exculpation and indemnification of our officers and directors that differ from the DGCL.  First, our operating agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us.  Under the DGCL, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our shareholders; (ii) intentional misconduct or knowing violations of the law that are not done in good faith; (iii) improper redemption of stock or declaration of a dividend; or (iv) a transaction from which the director derived an improper personal benefit.  Second, our operating agreement provides that we indemnify our directors and officers for acts or omissions to the fullest extent permitted by law.  Under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if the director or officer acted in good faith and in a manner he reasonably believed to be in the best interests of the corporation, and, in a criminal action, if the officer or director had no reasonable cause to believe his conduct was unlawful. 
Prior to completion of this offering, we intend to enter into separate indemnification agreements with our directors and officers.  Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law and our operating agreement against any and all expenses, judgments, fines, penalties and amounts paid in settlement of any claim.  The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law and our operating agreement.
Board Committees

Our operating agreement authorizes our board of directors to establish committees from among the members of the board of directors as well as other natural persons and provides that our board of directors may delegate to such committees any of the powers of the board directors, except as prohibited by law. Our operating agreement further provides that a committee and its members may be specifically associated with a Series. Each committee member will owe the same duties to our Company, our Series and our shareholders as our directors, whether or not such committee member is a director.

Advance Notice of New Business

Our bylaws provide that special meetings of shareholders may be called by our board of directors, the chairman of our board, our chief executive officer or president.  Additionally, our bylaws provide that, subject to the satisfaction of certain procedural and information requirements by the shareholders requesting the meeting, a special meeting of shareholders must be called by our secretary upon the written request of shareholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.  See "—Voting Rights" for a discussion of certain voting requirements with respect to the Series R-1 common shares. 

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Our bylaws provide that with respect to an annual meeting of shareholders, the proposal of business to be considered by shareholders may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of our board of directors, or (3) by any shareholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in our bylaws.  Our bylaws provide that with respect to special meetings of shareholders, only the business specified in our notice of meeting may be brought before the meeting.  The purpose of requiring shareholders to give advance notice of proposals is to afford our board of directors the opportunity to consider the advisability of the proposals and, to the extent considered necessary by our board of directors, to inform shareholders and make recommendations regarding the proposals.  The advance notice procedures also permit a more orderly procedure for conducting our shareholder meetings.
Limited Liability
In the case of a Delaware series limited liability company, the Delaware LLC Act provides that a member who receives a distribution with respect to a series and knew at the time of the distribution that the distribution was in violation of the Delaware LLC Act shall be liable to the series for the amount of the distribution for three years.  Under the Delaware LLC Act, a series limited liability company may not make a distribution with respect to a series to a member if, after the distribution, all liabilities of such series, other than liabilities to members on account of their limited liability company interests with respect to such series and liabilities for which the recourse of creditors is limited to specific property of such series, would exceed the fair value of the assets of such series.  For the purpose of determining the fair value of the assets of the series, the Delaware LLC Act provides that the fair value of property of the series subject to liability for which recourse of creditors is limited shall be included in the assets of such series only to the extent that the fair value of that property exceeds the nonrecourse liability.  Under the Delaware LLC Act, an assignee who becomes a substituted member of a company is liable for the obligations of his assignor to make contributions to the company, except the assignee is not obligated for liabilities unknown to him at the time the assignee became a member and that could not be ascertained from the operating agreement.
Limitations on Liability and Indemnification of the Managing Member, Our Directors and Officers, Board Committee Members and Our Administrative Agent
Our operating agreement provides that to the fullest extent permitted by applicable law the managing member, our directors or officers and members of committees of our board of directors will not be liable to us.  In addition, pursuant to our operating agreement, we have agreed to indemnify the managing member, each of our directors and officers and each member of a committee of our board of directors, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the company and counsel fees and disbursements on a solicitor and client basis) arising from the performance of any of their obligations or duties in connection with their service to us or the operating agreement, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such person may hereafter be made party by reason of being or having been the managing member, one of our directors or officers or a member of a committee of our board of directors.
Prior to completion of this offering, we intend to enter into separate indemnification agreements with our directors and officers.  Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law and our operating agreement against any and all expenses, judgments, fines, penalties and amounts paid in settlement of any claim.  The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law and our operating agreement.
In addition, our operating agreement provides that our Administrative Agent maintains a contractual as opposed to a fiduciary relationship with us, each Series and our shareholders.  Pursuant to the terms of the administrative services agreement, the liability of our Administrative Agent and certain of its affiliates to the R-1 Series is limited and the R-1 Series has agreed to indemnify our Administrative Agent and such affiliates against certain liabilities.  See "Our Administrative Agent and the Administrative Services Agreement."
Amendment of Our Operating Agreement and Bylaws
Amendments to our operating agreement may be proposed only by or with the consent of our board of directors.  To adopt a proposed amendment, our board of directors is required to seek written approval of the holders of the number of shares required to approve the amendment or call a meeting of our shareholders to consider and vote upon the proposed amendment.  Except as set forth below, an amendment must be approved by holders representing a majority of the common shares and, in general, to the extent that such amendment would have a material adverse effect on the holders of any class or series of shares of a Series, by the holders of a majority of the holders of such class or series.
Prohibited Amendments.  No amendment may be made that would:
enlarge the obligations of any shareholder without such shareholder's consent, unless approved by at least a majority of the type or class of shares so affected;
provide that we are not dissolved upon an election to dissolve our limited liability company by our board of directors that is approved by holders representing a majority of the common shares;
change the term of existence of our Company; or

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give any person the right to dissolve our limited liability company other than our board of directors' right to dissolve our limited liability company with the approval by holders representing a majority of the common shares.
The provision of our operating agreement preventing the amendments having the effects described in any of the clauses above can be amended upon the approval by holders representing at least two-thirds of the common shares.
In addition, certain amendments to our operating agreement require the separate approval of holders representing a majority of the Series R-1 common shares. See "-Voting Rights".
No Shareholder Approval.  Our board of directors may generally make amendments to our operating agreement without the approval of any shareholder or assignee to reflect:
a change in our name, the location of our principal place of our business, our registered agent or our registered office;
the admission, substitution, withdrawal or removal of shareholders in accordance with our operating agreement;
the merger of our Company or any of its subsidiaries into, or the conveyance of all of our assets to, a newly-formed entity if the sole purpose of that merger or conveyance is to effect a mere change in our legal form into another limited liability entity;
a change that our board of directors determines to be necessary or appropriate for us to qualify or continue our qualification as a company in which our members have limited liability under the laws of any state or to ensure that each Series will continue to qualify as a REIT for U.S. federal income tax purposes or otherwise not taxed as an entity for U.S. federal income tax purposes other than as we specifically so designate;
an amendment that our board of directors determines, based upon the advice of counsel, to be necessary or appropriate to prevent us, members of our board, or our officers, agents or trustees from in any manner being subjected to the provisions of the 1940 Act, the Advisers Act or "plan asset" regulations adopted under ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed;
an amendment that our board of directors determines to be necessary or appropriate for the issuance of any additional Series R-1 common shares, the authorization, establishment, creation or issuance of any additional classes or series of shares or other securities of the R-1 Series to be issued by us, or for the establishment or creation of other Series or the authorization or issuance of additional securities of such Series by us; 
any other amendment expressly permitted in our operating agreement to be made by our board of directors acting alone;
an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our operating agreement;
any amendment that our board of directors determines to be necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by our operating agreement;
a change in our fiscal year or taxable year and related changes; and
any other amendments substantially similar to any of the matters described in the clauses above.
In addition, our board of directors may make amendments to our operating agreement without the approval of any shareholder if our board of directors determines that those amendments:
do not adversely affect the shareholders (including any particular class or series of shares of a Series as compared to other classes or series of shares) in any material respect;
are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;
are necessary or appropriate to facilitate the trading of shares or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the shares are or will be listed for trading, compliance with any of which our board of directors deems to be in the best interests of us and our shareholders;
are necessary or appropriate for any action taken by our board of directors relating to splits or combinations of shares under the provisions of our operating agreement;
are necessary to preserve the managing member's right to appoint, remove or nominate directors, set the number of directors or fill vacancies on our board of directors; or

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are required to effect the intent expressed in this prospectus or the intent of the provisions of our operating agreement or are otherwise contemplated by our operating agreement.
Our bylaws generally provide that our board of directors has the exclusive power to adopt, alter or repeal the bylaws or make new bylaws.
Managing Member Approval.  Notwithstanding the foregoing, no amendment to our operating agreement or bylaws may be made without the prior approval of the managing member that would adversely affect the managing member's right to appoint, remove or nominate directors, set the number of directors or fill vacancies on our board of directors.
Merger, Sale or Other Disposition of Assets
Our board of directors is generally prohibited, without the prior separate approval of holders of the common shares of  each Series entitled to vote thereon, from causing us to, among other things, sell, exchange or otherwise dispose of all or substantially all of the assets of the Series in a single transaction or a series of related transactions, or approving on our behalf the sale, exchange or other disposition of all or substantially all of the assets of the Series.  In this regard, subject to the exceptions described below, mergers, consolidations or conversions of our Company, and certain dispositions of all or substantially all of the assets of the R-1 Series, require the approval of holders representing a majority of the Series R-1 common shares.
Subject to the restrictions described above under "—Restrictions on Debt and Financing and Cross-Subsidiary Guarantees," our board of directors may mortgage, pledge, hypothecate or grant a security interest in all or substantially all the assets of the Series without the approval of any shareholder.  Our board of directors may also sell all or substantially all of the assets of the Series under a foreclosure or other realization upon the encumbrances above without that approval.
If the conditions specified in our operating agreement are satisfied, our board of directors may merge our Company or any of its subsidiaries into, or convey all of the assets of the Series to, a newly-formed entity if the sole purpose of that merger or conveyance is to effect a mere change in our legal form into another limited liability entity, in each case without any approval of our shareholders.  The shareholders are not entitled to dissenters' rights of appraisal under the operating agreement or applicable Delaware law in the event of a merger or consolidation, a sale of all or substantially all of the assets of the Series or any other similar transaction or event. 
Termination and Dissolution
We will continue as a limited liability company until terminated under our operating agreement.  We will dissolve upon: (1) the election of our board of directors to dissolve us, if separately approved by holders of the common shares  of   each Series entitled to vote thereon; (2) the sale, exchange or other disposition of all or substantially all of the assets of the Series; (3) the entry of a decree of judicial dissolution of our limited liability company; or (4) at any time that we no longer have any shareholders, unless our business is continued in accordance with the Delaware LLC Act.
In this regard, a termination of the R-1 Series requires the separate approval of holders representing a majority of the Series R-1 common shares.  See "-Voting Rights".
Books and Reports
We are required to keep appropriate books of our business at our principal offices.  The books will be maintained for both tax and financial reporting purposes on a basis that permits the preparation of financial statements in accordance with GAAP.  For financial reporting purposes and tax purposes, our fiscal year and our tax year are the calendar year, unless otherwise determined by our board of directors in accordance with the Internal Revenue Code. 
Determinations by Our Board of Directors
Any determinations made by our board of directors under any provision described in our operating agreement will be final and binding on our shareholders, except as may otherwise be required by law.  We will prepare a statement of any determination by our board of directors respecting the fair market value of any properties, assets or securities, and will file the statement with our company secretary.
Restrictions on Ownership and Transfer
In order for each Series to qualify as a REIT under the Internal Revenue Code, shares of the Series must be owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year.  Also, not more than 50% of the value of the outstanding shares of the Series may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made).  To qualify as a REIT, each Series must satisfy other requirements as well.  See "U.S. Federal Income Tax Considerations—Requirements for Qualification-General."

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To assist each Series in qualifying as a REIT, our operating agreement, subject to certain exceptions, contains restrictions on the number of common shares of any Series and the number of shares of any Series that a person may own.  Our operating agreement provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Internal Revenue Code, either more than 9.8% in value or in number of common shares, whichever is more restrictive, of the outstanding common shares of any Series. Accordingly, no person may own, or be deemed to own, more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding Series R-1 common shares.  We refer to these limits collectively as the "ownership limit."  An individual or entity that becomes subject to the ownership limit or any of the other restrictions on ownership and transfer of the shares of any Series described below is referred to as a "prohibited owner" if, had the violative transfer or other event been effective, the individual or entity would have been a beneficial owner or, if appropriate, a record owner of shares.
The constructive ownership rules under the Internal Revenue Code are complex and may cause shares of any Series owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity.  As a result, the acquisition of less than 9.8% by value or number of common shares, whichever is more restrictive, of the outstanding common shares of our any Series, or 9.8% by value or number of shares, whichever is more restrictive, of the outstanding shares of any Series (or the acquisition of an interest in an entity that owns, actually or constructively, shares of any Series by an individual or entity), could, nevertheless, cause that individual or entity, or another individual or entity, to own constructively in excess of the ownership limit. 
Our board may, in its sole discretion, subject to such conditions as it may determine and the receipt of certain representations and undertakings, prospectively or retroactively, waive the ownership limit or establish a different limit on ownership, or excepted holder limit, for a particular shareholder if the shareholder’s ownership in excess of the ownership limit would not (1) result in a Series being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year), (2) result in any income received by a Series failing to qualify as rents from real property for purposes of the REIT requirements, or (3) otherwise result in a Series failing to qualify as a REIT. As a condition of its waiver or grant of excepted holder limit, our board of directors may, but is not required to, require an opinion of counsel or IRS ruling satisfactory to our board of directors in order to determine or ensure a Series’ qualification as a REIT.
In connection with granting a waiver of the ownership limit, creating an excepted holder limit or at any other time, our board of directors may from time to time increase or decrease the ownership limit for all other individuals and entities unless, after giving effect to such increase, five or fewer individuals could beneficially or constructively own in the aggregate, more than 49.9% in value of the shares then outstanding of a Series or such Series would otherwise fail to qualify as a REIT.  Prior to the modification of the ownership limit, our board of directors may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Series' qualification as a REIT.  A reduced ownership limit will not apply to any person or entity whose percentage ownership of common shares or shares of a Series, as applicable, is in excess of such decreased ownership limit until such time as such individual's or entity's percentage ownership of common shares or shares of a Series, as applicable, equals or falls below the decreased ownership limit, but any further acquisition of common shares or shares of a Series, as applicable, in excess of such percentage ownership of common shares or shares of a Series will be in violation of the ownership limit. 
Our operating agreement further prohibits:
any person from beneficially or constructively owning, applying certain attribution rules of the Internal Revenue Code, shares of a Series that would result in the Series being "closely held" under Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause the Series to fail to qualify as a REIT; and
any person from transferring shares of a Series if such transfer would result in shares of the Series being owned by fewer than 100 persons (determined without reference to any rules of attribution).
Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of a Series that will or may violate the ownership limit or any of the other foregoing restrictions on ownership and transfer of shares of such Series, or who would have owned shares of such Series transferred to a trust as described below, must immediately give us written notice of the event, or in the case of an attempted or proposed transaction, must give at least 15 days' prior written notice to us and provide us with such other information as we may request in order to determine the effect of such transfer on such Series' qualification as a REIT.  The foregoing restrictions on ownership and transfer of shares of a Series will not apply if our board of directors determines that it is no longer in the best interests of the Series to attempt to qualify, or to continue to qualify, as a REIT or that compliance with the restrictions and limitations on ownership and transfer of shares of the Series as described above is no longer required in order for the Series to qualify as a REIT.

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If any transfer of shares of a Series would result in shares of the Series being beneficially owned by fewer than 100 persons, such transfer will be null and void and the intended transferee will acquire no rights in such shares.  In addition, if any purported transfer of shares of a Series or any other event would otherwise result in any person violating the ownership limit or an excepted holder limit established by our board of directors or in the Series being "closely held" under Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT, then that number of shares (rounded up to the nearest whole share) that would cause the Series to violate such restrictions will be automatically transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us and the intended transferee will acquire no rights in such shares.  The automatic transfer will be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in a transfer to the trust.  Any dividend or other distribution paid to the prohibited owner, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to the trustee upon demand for distribution to the beneficiary by the trust.  If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable ownership limit or the Series being "closely held" under Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT, then our operating agreement provides that the transfer of the shares will be null and void.
Shares of a Series transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price paid by the prohibited owner for the shares (or, if the event that resulted in the transfer to the trust did not involve a purchase of such shares at market price, the last reported sales price on the NASDAQ (or other applicable exchange) on the day of the event which resulted in the transfer of such shares to the trust) and (2) the market price on the date we accept, or our designee accepts, such offer.  We may reduce the amount payable by the amount of any dividend or other distribution that we have paid to the prohibited owner before we discovered that the shares had been automatically transferred to the trust and that are then owed to the trustee as described above, and we may pay the amount of any such reduction to the trustee for the benefit of the charitable beneficiary.  We have the right to accept such offer until the trustee has sold the shares held in the trust as discussed below.  Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates, the trustee must distribute the net proceeds of the sale to the prohibited owner and any dividends or other distributions held by the trustee with respect to such shares will be paid to the charitable beneficiary. 
If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity designated by the trustee who could own the shares without violating the ownership limit or the other restrictions on ownership and transfer of shares of the Series.  After the sale of the shares, the interest of the charitable beneficiary in the shares transferred to the trust will terminate and the trustee must distribute to the prohibited owner an amount equal to the lesser of (1) the price paid by the prohibited owner for the shares (or, if the event which resulted in the transfer to the trust did not involve a purchase of such shares at market price, the last reported sales price on the NASDAQ (or other applicable exchange) on the day of the event which resulted in the transfer of such shares to the trust) and (2) the sales proceeds (net of commissions and other expenses of sale) received by the trust for the shares.  The trustee may reduce the amount payable to the prohibited owner by the amount of any dividend or other distribution that we paid to the prohibited owner before we discovered that the shares had been automatically transferred to the trust and that are then owed to the trustee as described above.  Any net sales proceeds in excess of the amount payable to the prohibited owner will be immediately paid to the beneficiary of the trust, together with any dividends or other distributions thereon.  In addition, if, prior to discovery by us that shares a Series have been transferred to a trust, such shares are sold by a prohibited owner, then such shares will be deemed to have been sold on behalf of the trust and to the extent that the prohibited owner received an amount for or in respect of such shares that exceeds the amount that such prohibited owner was entitled to receive, such excess amount will be paid to the trustee upon demand.  The prohibited owner has no rights in the shares held by the trustee. 
The trustee will be designated by us and will be unaffiliated with us and with any prohibited owner.  Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiary of the trust, all dividends and other distributions paid by us with respect to the shares held in trust and may also exercise all voting rights with respect to the shares held in trust.  These rights will be exercised for the exclusive benefit of the beneficiary of the trust.  Any dividend or other distribution paid prior to our discovery that shares of a Series have been transferred to the trust will be paid by the recipient to the trustee upon demand.
Subject to Delaware law, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee's sole discretion:
to rescind as void any vote cast by a prohibited owner prior to our discovery that the shares have been transferred to the trust; and
to recast the vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust.
However, if we have already taken irreversible company action, then the trustee may not rescind and recast the vote. 
In addition, if our board of directors determines in good faith that a proposed transfer or other event would violate the restrictions on ownership and transfer of the shares of a Series, our board of directors may take such action as it deems advisable to refuse to give effect to or to prevent such transfer, including, but not limited to, causing us to redeem the shares of such Series, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. 

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Every owner of 5% or more (or such lower percentage as required by the Internal Revenue Code or the regulations promulgated thereunder) of shares of a Series, within 30 days after the end of each taxable year, must give us written notice, stating the shareholder's name and address, the number of shares of each class of a Series that the shareholder beneficially owns and a description of the manner in which the shares are held.  Each such owner must provide to us in writing such additional information as we may request in order to determine the effect, if any, of the shareholder's beneficial ownership on the Series' qualification as a REIT and to ensure compliance with the ownership limit.  In addition, each shareholder must provide to us in writing such information as we may request in good faith in order to determine the Series' qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance. 
Any certificates representing shares of a Series will bear a legend referring to the restrictions described above. 
These restrictions on ownership and transfer could delay, defer or prevent a transaction or a change in control that might involve a premium price for the Series R-1 common shares or otherwise be in the best interest of the holders of the Series R-1 common shares. 
Anti-Takeover Effects, Our Operating Agreement and Bylaws
The following is a summary of certain provisions of our operating agreement and bylaws that may be deemed to have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change of control of the Property.  These provisions include the following:
Authorized but Unissued Shares
Our operating agreement authorizes us to establish additional shares or other securities of the R-1 Series and to issue an unlimited number of shares or other securities of the R-1 Series for the consideration and on the terms and conditions established by our board of directors without the approval of any holders of our shares.  In particular, our board of directors is authorized to provide for the issuance by us of an unlimited amount of one or more classes or series of shares of the R-1 Series, including preferred shares, and to fix the number of shares, the relative powers, preferences and rights, and the qualifications, limitations or restrictions applicable to each class or series thereof by resolution authorizing the issuance of such class or series.  Our ability to establish additional shares and other securities of the R-1 Series could render more difficult or discourage an attempt to obtain control over the Property by means of a proxy contest, tender offer, merger or otherwise.
Delaware Business Combination Statute—Section 203
We are a limited liability company organized under Delaware law.  Some provisions of Delaware law may delay or prevent a transaction that would cause a change in our control.
Section 203 of the DGCL, which restricts certain business combinations with interested stockholders in certain situations, does not apply to limited liability companies unless they elect to utilize it.  Our operating agreement does not currently elect to have Section 203 of the DGCL apply to us.  In general, this statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction by which that person became an interested stockholder, unless the business combination is approved in a prescribed manner.  For purposes of Section 203, a business combination includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior did own, 15% or more of voting stock.
Other Provisions of Our Operating Agreement and Bylaws
Certain provisions of our operating agreement and bylaws may make a change in control of our Company or any Series more difficult to effect.  For example, shareholders will not have the right to vote to elect or remove directors or fill vacancies on our board of directors.


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SHARES ELIGIBLE FOR FUTURE SALE
After giving effect to this offering and the other transactions described in this prospectus, there will be ___________ Series R-1 common shares outstanding on a fully diluted basis, including ______ restricted Series R-1 common shares to be granted to our independent directors under our 2015 Director Plan (or _______ Series R-1 common shares outstanding if the underwriters' option to purchase additional shares is exercised in full). Our Series R-1 common shares are newly issued securities for which there is no established trading market.  No assurance can be given as to (1) the likelihood that an active market for our Series R-1 common shares will develop, (2) the liquidity of any such market, (3) the ability of the shareholders to sell the shares or (4) the prices that shareholders may obtain for any of the shares.  No prediction can be made as to the effect, if any, that future sales of Series R-1 common shares or the availability of Series R-1 common shares for future sale will have on the market price prevailing from time to time.  Sales of substantial amounts of Series R-1 common shares, or the perception that such sales could occur, may affect adversely prevailing market prices of our Series R-1 common shares.
For a description of certain restrictions on ownership and transfer of Series R-1 common shares, see "Description Series R-1 Common Shares-Operating Agreement and Bylaws-Restrictions on Ownership and Transfer."
Upon completion of this offering, we will have reserved for issuance up to an aggregate of ____% of the issued and outstanding Series R-1 common shares and the common shares of Other Property Series (on a fully diluted basis, assuming, if applicable, the exercise of all outstanding options and the conversion of all warrants and convertible securities into our Series R-1 common shares and the common shares of Other Property Series) and including Series R-1 common shares to be sold pursuant to the underwriters' exercise of their overallotment option) at the time of the award for future awards under our 2015 Director Plan. In connection with this offering, our board of directors has approved an aggregate of ______ restricted Series R-1 common shares to be granted to our independent directors upon the completion of this offering under our 2015 Director Plan.
Rule 144 
In general, under Rule 144 under the Securities Act, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us.  A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.
A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of one percent of the then outstanding Series R-1 common shares or the average weekly trading volume of the Series R-1 common shares during the four calendar weeks preceding such sale.  Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us (which requires that we are current in our periodic reports under the Exchange Act).
Lock-Up Agreements
The R-1 Series, our Administrative Agent, ETRE and each of our directors and officers have entered into lock-up agreements with the underwriters. Under these agreements, we and each of these persons may not, without the prior written approval of the underwriters, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any Series R-1 common shares or any securities convertible into or exercisable or exchangeable for Series R-1 common shares.  These restrictions will be in effect for a period of 180 days after the date of this prospectus.  At any time and without public notice, the underwriters may in their sole discretion releases some or all of the securities from these lock-up agreements.

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PROPERTY R-1 SUBSIDIARIES LIMITED PARTNERSHIP AGREEMENTS
The following is a summary of material provisions in the limited partnership agreements of the Property R-1 Subsidiaries, copies of which are filed as exhibits to the registration statement of which this prospectus is a part. See “Where You Can Find More Information.”
General
1 Brown Street Associates, L.P., a Pennsylvania limited partnership (“1 Brown Street”), and 800 North Delaware Avenue Associates, L.P., a Pennsylvania limited partnership (“800 Delaware”) (each, a “Property R-1 Subsidiary” and collectively, the “Property R-1 Subsidiaries”) are the direct owners of the Property.
In connection with this offering and pursuant to a purchase and sale agreement, Holdings R-1 Subsidiary will acquire an aggregate direct and indirect 89.00% interest in each of the Property R-1 Subsidiaries from Waterview Grande, L.P. and its affiliates, which currently own 100% of the interests in the Property R-1 Subsidiaries. Specifically, upon completion of this offering, (i) Holdings R-1 Subsidiary, in its capacity as the ETRE Limited R-1 Partner, will own an 88.99% limited partner interest in each of the Property R-1 Subsidiaries, and (ii) the General R-1 Partner, an entity wholly-owned by Holdings R-1 Subsidiary, will own a 0.01% general partner interest in each of the Property R-1 Subsidiaries. Waterview Grande, L.P., or the Core Limited R-1 Partner, will retain an 11.00% limited partnership interest in each of the Property R-1 Subsidiaries. In connection with our acquisition of an aggregate 89.00% general and limited partner interest in the Property R-1 Subsidiaries, we will amend and restate the limited partnership agreements for each of the Property R-1 Subsidiaries. A summary of the amended and restated limited partnership agreements, which will be in substantially the same form for each of the two Property R-1 Subsidiaries, is below.

Rights and Powers of the General R-1 Partner

Under the terms of the limited partnership agreements of the Property R-1 Subsidiaries, the General R-1 Partner will control all of the business, affairs and operations of the Property R-1 Subsidiaries, other than day-to-day management of the Property, which will be performed by Core Realty, or the Asset Manager, pursuant to the asset and property management agreement. Our Asset Manager will at all times be subject to the supervision and oversight of our board of directors and the General R-1 Partner. The General R-1 Partner will have the full and exclusive power and authority to manage the affairs of the Property R-1 Subsidiary, except that, unless the General R-1 Partner has otherwise obtained unanimous consent from the partners, the General R-1 Partner may not cause the Property R-1 Subsidiary to:
create new classes of interests in the Property R-1 Subsidiaries and/or to issue additional interests in the Property R-1 Subsidiaries to any person or persons the result of which would be to disproportionately subordinate, or disproportionately dilute, the interests of the Core Limited R-1 Partner;

to amend or modify either partnership agreement in a manner that would have a disproportionately adverse effect on the Core Limited R-1 Partner; or

to enter into any agreement (A) that would cause the Core Limited R-1 Partner or its affiliates to become personally liable on or in respect of or to guarantee any indebtedness of any Property R-1 Subsidiary, or (B) that is recourse to the Core Limited R-1 Partner or its affiliates.

As the general partner, the General R-1 Partner will have responsibility and discretion in the management and control of the Property R-1 Subsidiaries, including the ability to cause the Property R-1 Subsidiaries to enter into certain major transactions, including a merger of the Property R-1 Subsidiaries or a sale of substantially all of its assets, subject to certain voting rights of the Series R-1 common shareholders. The General R-1 Partner is under no obligation to give priority to the separate interests of the limited partners of the Property R-1 Subsidiaries or holders of our Series R-1 common shares in deciding whether to cause the Property R-1 Subsidiaries to take or decline to take any actions. As the general partner of the Property R-1 Subsidiaries, the General R-1 Partner may amend the partnership agreement of the Property R-1 Subsidiaries in its sole discretion at any time, subject to the limited consent rights of the Core Limited R-1 Partner as described above. The General R-1 Partner may implement mergers involving the Property R-1 Subsidiaries or sales of all or substantially all of its assets subject to the voting rights of the Series R-1 common shareholders. The limited partners have no power to remove the general partner without the general partner’s consent.
Capital Contributions
If a Property R-1 Subsidiary requires additional funds at any time to fund its anticipated cash needs and the General R-1 Partner determines to fund an additional capital contribution, then the Core Limited R-1 Partner will have the opportunity to fund such additional capital contribution on a pro rata basis. If the Core Limited R-1 Partner chooses not to participate, then, contemporaneously with the funding of the additional capital contribution by the Holdings R-1 Subsidiary, the percentage interest of the Core Limited R-1 Partner will be decreased (and the percentage interest of the Holdings R-1 Subsidiary will be increased) to account for the additional capital contribution, provided that in no event may the Core Limited R-1 Partner’s percentage interest be reduced below (i) 11.00% at any time during the three-year period following the effective date of the partnership agreements (the “Holding Period”), and (ii) following the end of the Holding Period, zero percent, nor shall the Holding R-1 Subsidiary’ aggregate percentage interest be increased by more than the reduction in the Core Limited R-1 Partner’s percentage interest. In addition, the Holdings R-1 Subsidiary or its affiliate may lend any sums to a Property R-1 Subsidiary if (i) during the Holding Period, additional capital contributions would reduce the Core Limited R-1 Partner’s partnership interest below 11.00% and (ii) such loans are at a market interest rate.

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Operations
The partnership agreements of the Property R-1 Subsidiaries provide that the Property R-1 Subsidiaries will be operated in a manner that will enable the R-1 Series to satisfy the requirements for qualification as a REIT for U.S. federal income tax purposes.
Under the terms of the partnership agreements, the General R-1 Partner and its affiliates will be reimbursed for any reasonable, customary and documented, out-of-pocket expenses, fees, and costs which any of them pays for, and which are related to the operations of a Property R-1 Subsidiary (including, without limitation, any annual appraisal fees and costs of third-parties related to the preparation and filing of the federal, state and local tax returns of such Property R-1 Subsidiary).
Subject to the terms of the asset and property management agreement with the Asset Manager and the administrative services agreement with the Administrative Agent, the General R-1 Partner will have the right to engage certain ETRE affiliates to provide property management, development/project management, construction management, leasing agency and other property-related and/or administrative services with respect to the Property, on market terms that are not materially less favorable to the Property R-1 Subsidiaries, and not materially more favorable to such ETRE affiliates, than those that would be obtained in an arms-length transaction between unaffiliated parties.
The partnership agreements also provide that each partner of a Property R-1 Subsidiary will, to the maximum extent permitted by applicable law, owe no duties to the Property R-1 Subsidiary or to any other partner or any other person or group of persons, except to the extent such duties are expressly set forth in the partnership agreements and, for the avoidance of doubt, shall owe no fiduciary duties to the Property R-1 Subsidiary or to any other partner or any other person or group of persons; provided, that each partner shall be subject to the implied contractual covenant of good faith and fair dealing. Without limiting the foregoing, to the extent there is any conflict of interest between the shareholders of the R-1 Series and any limited partner of a Property R-1 Subsidiary, the limited partners expressly acknowledge that the General R-1 Partner will be entitled to act in the best interests of the shareholders of the R-1 Series.
Moreover, the partnership agreements provide that each partner recognizes that the partners of the Property R-1 Subsidiaries and the affiliates of such partners may have other business interests and may engage in other activities in addition to those relating to the Property R-1 Subsidiaries, including the making or management of other investments (debt and equity).
Distributions
The partnership agreements of the Property R-1 Subsidiaries provide that the Property R-1 Subsidiaries will distribute cash available for distribution to the partners of the Property R-1 Subsidiaries pro rata in accordance with their respective percentage interests at such times and in such amounts as determined by the General R-1 Partner, but in no event less than quarterly. Cash available for distribution is calculated as income from the Property less operating expenses, with provisions for reasonable and customary reserves as determined by the General R-1 Partner in its discretion, but subject in all cases to the REIT requirements pertaining to the Property R-1 Subsidiaries’ assets, income and operations, as described in the partnership agreements. Further, upon the liquidation of a Property R-1 Subsidiary, after payment of debts and obligations, any remaining assets of the Property R-1 Subsidiary will be distributed to partners pro rata in accordance with their respective percentage interests.
To satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income and excise tax, the R-1 Series’ current policy is to cause the Property R-1 Subsidiaries to distribute all cash available for distribution other than reserves on a quarterly basis. Any distributions the R-1 Series and Property R-1 Subsidiaries make will be at the discretion of our board of directors and will depend upon the R-1 Series’ earnings and financial condition, maintenance of the R-1 Series’ REIT qualification, restrictions on making distributions under Delaware law and such other factors as our board of directors deems relevant. The R-1 Series’ earnings and financial condition will be affected by various factors, including rental income from the Property, the Property’s operating expenses and any other expenditures. For more information, see “Distribution Policy.”
Transferability of Interests
No limited partner may transfer all or any portion of its partnership interest in the Property R-1 Subsidiaries without the prior written consent of the General R-1 Partner (which consent shall be granted or withheld in the sole and absolute discretion of the General R-1 Partner).
Notwithstanding the above, including if the consent of the General R-1 Partner is obtained, no partner may transfer (as such term is defined in the limited partnership agreements) all or any portion of its partnership interest under any circumstances if such transfer:
would cause the Property R-1 Subsidiary to lose its status as a limited partnership for federal income tax purposes;

would cause the Property R-1 Subsidiary to violate the terms of any financing documents, including the mortgage loan agreement, which violation has not been waived by the lender; or

would violate any federal securities laws or any applicable state securities laws (including suitability standards).


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During the Holding Period, any transfer taxes incurred as a result of a transfer of all or any portion of the partnership interests initiated by (i) the Core Limited R-1 Partner shall be paid 50% by the Core Limited R-1 Partner and 50% by the Holdings R-1 Subsidiary or (ii) the Holdings R-1 Subsidiary shall be considered a partnership expense. For the avoidance of doubt, the General R-1 Partner must consent to any transfer by the Core Limited R-1 Partner as described above. Following the Holding Period, any transfer taxes incurred as a result of a transfer will be a partnership expense. Any transfer taxes attributable to any of the buy-out rights described below will be paid (i) during the Holding Period 50% by the Core Limited R-1 Partner and 50% by the Holdings R-1 Subsidiary and (ii) after the Holding Period will be considered a Property R-1 Subsidiary expense.
Certain Buy-Out Rights
The Holdings R-1 Subsidiary has the right to purchase the partnership interests held by the Core Limited R-1 Partner in certain limited situations, as described below.
Bankruptcy Purchase Option    
If the Core Limited R-1 Partner becomes a Bankrupt Partner (as defined in the partnership agreement), then the Holdings R-1 Subsidiary shall have the right to elect at any time within 180 calendar days after the Core Limited R-1 Partner has become a Bankrupt Partner to purchase the Core Limited R-1 Partner’s entire partnership interest for the market value of such partnership interest as determined pursuant to the terms of the partnership agreement. If the Holdings R-1 Subsidiary declines to purchase all of the Core Limited R-1 Partner’s partnership interest, the option to purchase such partnership interest will terminate, and the personal representative, trustee, or receiver of the Core Limited R-1 Partner’s estate may proceed, subject to the terms and provisions of the partnership agreement, to distribute the Core Limited R-1 Partner’s partnership interest to the successors entitled to receive the same, but such distributions will only be effective as to such successors who thereupon become a party to the partnership agreement and who thereby agree to hold all of the partnership interest transferred to such successor subject in all respects to the terms and provisions of the partnership agreement.
Purchase Option Upon Certain Events
If (i) the Core Limited R-1 Partner or its affiliate is removed as the asset manager of the Property in accordance with the terms of the asset and property management agreement or otherwise ceases to be the asset manager of the Property or (ii) the first day after the date on which the Core Limited R-1 Partner ceases to own, in the aggregate, 5.0% or more of the combined limited partnership interests in the Property R-1 Subsidiaries (either (i) or (ii), a “Trigger Event”), then the Holdings R-1 Subsidiary will have the right to elect at any time after the occurrence of a Trigger Event to purchase the entire partnership interest of the Core Limited R-1 Partner for the market value of such partnership interest, in accordance with the terms of the partnership agreement.
Right of First Offer
If at any time the Core Limited R-1 Partner intends to sell, or market for sale, its partnership interest (the “ROFO Interest”), then prior to formally marketing the ROFO Interest or otherwise agreeing to a sale, the Core Limited R-1 Partner must first notify the Holdings R-1 Subsidiary that it intends to sell, or market for sale, the ROFO Interest.    The offering notice must set forth the dollar value the Core Limited R-1 Partner places on all of the property and assets of the Property R-1 Subsidiary, as determined in the sole discretion of the Core Limited R-1 Partner and the price in cash by which the Holdings R-1 Subsidiary would buy the entire partnership interest of the Core Limited R-1 Partner, as calculated in the manner described in the partnership agreement. Upon receipt of such offering notice, the Holdings R-1 Subsidiary will have 15 business days to notify the Core Limited R-1 Partner of its election to purchase all, but not less than all, of the ROFO Interest. If the Holdings R-1 Subsidiary does not timely deliver an election notice, then the Core Limited R-1 Partner will be free to market the ROFO Interest for sale at any price and thereafter may accept or reject any offers for the ROFO Interest in its sole discretion; provided, however, that the final purchase price accepted by the Core Limited R-1 Partner must be at least equal to 98% of the price at which the Core Limited R-1 Partners’ partnership interest was offered to the Holdings R-1 Subsidiary in the offering notice (the “Minimum ROFO Price”). If the Core Limited R-1 Partner does not receive an offer to purchase the ROFO Interest that is equal to or greater than the Minimum ROFO Price or otherwise does not determine to accept an offer to purchase the ROFO Interest within 90 days after the Holdings R-1 Subsidiary elects (or is deemed to have elected) not to purchase the ROFO Interest, then the Core Limited R-1 Partner will cease to have the right to sell the ROFO Interest until such time, if any, that the Core Limited R-1 Partner issues a new offering notice to the Holdings R-1 Subsidiary and the Core Limited R-1 Partner again complies with the right of first offer provisions described above.

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Indemnification
Each Partnership R-1 Subsidiary will indemnify its partners, as well as its partners’ respective partners, members, shareholders, officers, directors, trust managers, representatives, advisors and agents (each an “indemnitee”) from and against any and all losses, claims, expenses and other amounts arising from any and all legal proceedings instituted by any persons other than the indemnitee seeking indemnification under the partnership agreement and that relate to the operations of the Partnership R-1 Subsidiary (other than those instituted by a lender pursuant to a recourse guaranty), unless it is established that the act or omission of such indemnitee caused the matter giving rise to the proceeding and was the result of gross negligence, willful misconduct, fraud, or a material breach of the partnership agreement (including without limitation a material breach of the implied contractual covenant of good faith and fair dealing).
In the event that the Holdings R-1 Subsidiary or an affiliate thereof delivers a recourse guaranty to a lender in connection with any financing, then the Holdings R-1 Subsidiary or its affiliate will be reimbursed by the Property R-1 Subsidiary in the event that, pursuant to the recourse guaranty made by the Holdings R-1 Subsidiary or its affiliate, the Holdings R-1 Subsidiary or its affiliate is required to make payments to the lender on behalf of the Property R-1 Subsidiary; provided that the Holdings R-1 Subsidiary will not be entitled to a recourse claim reimbursement in the event that (i) the underlying claim arose solely from the acts or omissions of the Holdings R-1 Subsidiary or its affiliates, which acts or omissions were solely within the control of the Holdings R-1 Subsidiary and its affiliates, unless such acts or omissions were approved by the Core Limited R-1 Partner in accordance with the partnership agreement or otherwise, or (ii) the Holdings R-1 Subsidiary or its affiliate that provided a recourse guaranty become liable under such recourse guaranty as a result of the fraud, willful misconduct, embezzlement, gross mismanagement, gross negligence, recklessness, criminal conduct, or a material breach of the partnership agreement or the recourse guaranty by the Holdings R-1 Subsidiary or any of its affiliates.
The Core Limited R-1 Partner covenants and agrees to indemnify, defend and hold harmless the Property R-1 Subsidiary and the Holdings R-1 Subsidiary from and against all loss, liability or damage of the Property R-1 Subsidiary or the Holdings R-1 Subsidiary incurred or suffered, directly or indirectly, arising from or related to (i) any claim under a recourse guaranty that arises solely from the acts or omissions of the Core Limited R-1 Partner or its affiliates (including in its capacity as Asset Manager pursuant to the asset and property management agreement), which acts or omissions were solely within the control of the Core Limited R-1 Partner and its affiliates, unless such acts or omissions were specifically approved by the Holdings R-1 Subsidiary (it being understood that entering into the asset and property management agreement will not be deemed an “approval” by the Holdings R-1 Subsidiary); or (ii) the fraud, willful misconduct, embezzlement, gross mismanagement, gross negligence, recklessness, criminal conduct, or a material breach of the partnership agreement, the asset and property management agreement or the recourse guaranty by the Core Limited R-1 Partner or any of its affiliates.


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U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax consequences relating to the R-1 Series' qualification and taxation as a REIT and the acquisition, holding, and disposition of Series R-1 common shares.  For purposes of this section, "we," "our," and "us" mean only the R-1 Series. You are urged to both review the following discussion and to consult your tax advisor to determine the effects of ownership and disposition of Series R-1 common shares on your individual tax situation, including any state, local or non-U.S. tax consequences. 
This summary is based upon the Internal Revenue Code, the regulations promulgated by the U.S. Treasury Department, or the Treasury Regulations, current administrative interpretations and practices of the IRS, (including administrative interpretations and practices expressed in private letter rulings which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings) 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.  No advance ruling has been or will be sought from the IRS regarding any matter discussed in this summary. 
This summary is also based upon the assumption that the operation of the R-1 Series, and of its subsidiaries and other lower-tier and affiliated entities, will in each case be in accordance with its applicable organizational documents or partnership agreements.  This summary does not discuss the effect that U.S. state and local taxes and taxes imposed by non-U.S. jurisdictions could have on the matters discussed in this summary.  In addition, this summary assumes that holders of Series R-1 common shares hold such Series R-1 common shares as a capital asset, which generally means as property held for investment.  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 holder of Series R-1 common shares in light of the holder's investment or tax circumstances, or to holders of Series R-1 common shares subject to special tax rules, such as:
U.S. expatriates;
persons who mark-to-market Series R-1 common shares;
subchapter S corporations;
U.S. holders of Series R-1 common shares, as defined below, whose functional currency is not the U.S. dollar;
financial institutions;
insurance companies;
broker-dealers; 
regulated investment companies, or "RICs;"
REITs; 
trusts and estates;
persons holding Series R-1 common shares as part of a "straddle," "hedge," "conversion transaction," "synthetic security" or other integrated investment;
holders who receive Series R-1 common shares through the exercise of employee stock options or otherwise as compensation;
persons subject to the alternative minimum tax provisions of the Internal Revenue Code;
persons holding their interest through a partnership or similar pass-through entity;
persons holding a 10% or more (by vote or value) beneficial interest in the R-1 Series;
and, except to the extent discussed below:
tax-exempt organizations; and
non-U.S. holders of Series R-1 common shares, as defined below.
For purposes of this summary, a U.S. holder of Series R-1 common shares is a beneficial owner of Series R-1 common shares who for U.S. federal income tax purposes is:
a citizen or resident of the U.S.;
a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S. or of a political subdivision thereof (including the District of Columbia);
an estate whose income is subject to U.S. federal income taxation regardless of its source; or

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any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person.
A non-U.S. holder of Series R-1 common shares is a beneficial owner of Series R-1 common shares who is neither a U.S. holder of Series R-1 common shares nor an entity that is treated as a partnership for U.S. federal income tax purposes. 
THE U.S. FEDERAL INCOME TAX TREATMENT OF HOLDERS OF SERIES R-1 COMMON SHARES 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 OF HOLDING SERIES R-1 COMMON SHARES TO ANY PARTICULAR HOLDER WILL DEPEND ON THE HOLDER'S PARTICULAR TAX CIRCUMSTANCES.  YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES TO YOU, IN LIGHT OF YOUR PARTICULAR INVESTMENT OR TAX CIRCUMSTANCES, OF ACQUIRING, HOLDING, AND DISPOSING OF SERIES R-1 COMMON SHARES. 
Taxation of the R-1 Series
ETRE Residential, LLC intends to treat each Series as a separate business entity for U.S. federal income tax purposes and the series LLC organization as a non-entity for U.S. federal income tax purposes.  The IRS has issued proposed Treasury Regulations that provide that each individual series of a domestic series LLC organization will generally be treated as a separate entity formed under local law, with each such individual series’ classification for U.S. federal income tax purposes determined under general tax principles and the entity classification (“check-the-box”) rules.  Even though the proposed Treasury Regulations are not currently effective, they would require taxpayers that do not adopt their approach with respect to a series LLC formed after the date of the proposed Treasury Regulations to change their treatment of such series LLC once such regulations are finalized, potentially subjecting those taxpayers to substantial costs.  Although the proposed Treasury Regulations effectively penalize taxpayers that do not adopt this approach there can be no assurance as to whether the proposed Treasury Regulations will be finalized in their current form or at all.  Although not expected based on the proposed Treasury Regulations, if the IRS were to adopt a different approach than the one adopted in the proposed Treasury Regulations and successfully challenge ETRE Residential, LLC’s treatment of each Series as a separate business entity and the series LLC organization as a non-entity for U.S. federal income tax purposes, ETRE Residential, LLC expects that the series LLC organization would be treated as a single corporation that has elected and operated to be taxed as a REIT because ETRE Residential, LLC will have made an election for each Series to be taxed as a corporation and each Series will be organized and operated so as to qualify as a REIT for U.S. federal income tax purposes.  If the series LLC organization were so treated, the timing, amount and character of distributions to holders of Series R-1 common shares could be adversely impacted and the ability of the series LLC organization to be taxed as a REIT could be adversely impacted because the activity of each Series would be aggregated as the activities of a single REIT.  See “Failure to Qualify,” below, for a discussion of the effect of a failure to qualify as a REIT for a taxable year.
The R-1 Series intends to elect and qualify to be taxed as a REIT under the Internal Revenue Code, commencing with its short taxable year ending December 31, 2015.  The R-1 Series believes it has been organized and intends to operate in a manner that will allow it to qualify for taxation as a REIT under the Internal Revenue Code commencing with its short taxable year ending December 31, 2015. However, we cannot assure you that we will meet the applicable requirements under U.S. federal income tax laws, which are highly technical and complex.

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The law firm of Goodwin Procter LLP has acted as counsel to ETRE Residential, LLC in connection with this offering. The R-1 Series will receive the opinion of Goodwin Procter LLP prior to effectiveness of the registration statement of which this prospectus forms a part to the effect that, commencing with the R-1 Series’ short taxable year ending December 31, 2015, the R-1 Series will be organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code. The opinion of Goodwin Procter LLP will be filed as an exhibit to the registration statement of which this prospectus is a part. Such opinion will be based on various assumptions relating to the R-1 Series’ and future Series’ organization and operation, including that all factual representations and statements set forth in all relevant documents, records and instruments are true and correct, all actions described herein are completed in a timely fashion and that the R-1 Series will at all times operate in accordance with the method of operation described in its organizational documents and registration statement. Additionally, the opinion of Goodwin Procter LLP is conditioned upon factual representations and covenants made by the company, the R-1 Series and its Administrative Agent regarding the series LLC organization’s and the R-1 Series’ organization, assets, and present and future conduct of the R-1 Series’ and future Series’ business operations and other items regarding the R-1 Series’ and future Series’ ability to meet the various requirements for qualification as a REIT. Goodwin Procter LLP will not verify such representations, and the opinion of Goodwin Procter LLP assumes that such representations and covenants are accurate and complete and that the R-1 Series and future Series’ will take no action that could adversely affect its qualification as a REIT. Although the R-1 Series believes it will be organized and intends to operate so that it will qualify as a REIT commencing with its short taxable year ending December 31, 2015, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in the R-1 Series’ circumstances or applicable law, no assurance can be given by Goodwin Procter LLP or the R-1 Series that it will so qualify for any particular year. Goodwin Procter LLP will have no obligation to advise the R-1 Series or holders of Series R-1 common shares 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 or any court, and no assurance can be given that the IRS will not challenge the conclusions set forth in such opinions. In addition, the opinion of Goodwin Procter LLP will be based upon the Internal Revenue Code, the regulations promulgated thereunder, and administrative and judicial interpretations thereof existing and in effect as of the date of its opinion, all of which are subject to change, and any such change could be applied retroactively. No assurance can therefore be given that the conclusions in the opinion of Goodwin Procter LLP will not be adversely affected in the future by a subsequent change in applicable law, regulations or interpretations thereof. Goodwin Procter LLP will have no obligation to advise us or the holders of our stock of any subsequent change in the matters stated, represented or assumed in its opinion or of any subsequent change in applicable law.
Qualification and taxation as a REIT depend on the R-1 Series' ability to meet, on a continuing basis, through actual operating results, distribution levels, and diversity of stock ownership, various qualification requirements imposed upon REITs by the Internal Revenue Code, the compliance with which will not be reviewed by Goodwin Procter LLP.  In addition, the R-1 Series' ability to qualify as a REIT depends in part upon the operating results, organizational structure and entity classification for U.S. federal income tax purposes of certain entities in which the R-1 Series invests, including the Property R-1 Subsidiaries.  The R-1 Series' ability to qualify as a REIT for a particular year also requires that the R-1 Series satisfy certain asset and income tests during such year, some of which depend upon the fair market values of assets in which the R-1 Series directly or indirectly owns an interest.  Such values may not be susceptible to a precise determination.  Accordingly, no assurance can be given that the actual results of the R-1 Series' operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.   
Taxation of REITs in General
As indicated above, the R-1 Series' qualification and taxation as a REIT for a particular year depend upon the R-1 Series' ability to meet, on a continuing basis during such year, through actual results of operations, distribution levels, diversity of share ownership and various qualification requirements imposed upon REITs by the Internal Revenue Code.  The material qualification requirements are summarized below under "—Requirements for Qualification—General." While the R-1 Series intends to operate so that it will qualify as a REIT, no assurance can be given that the IRS will not challenge the R-1 Series' qualification as a REIT, or that the R-1 Series will be able to operate in accordance with the REIT requirements in the future.  See "—Failure to Qualify."
Provided that the R-1 Series qualifies as a REIT, it will generally be entitled to a deduction for dividends that it pays and therefore will not be subject to U.S. federal corporate income tax on its net taxable income that is currently distributed to holders of Series R-1 common shares.  This treatment substantially eliminates the "double taxation" at the corporate and shareholder levels that generally results from investment in a corporation.  Rather, income generated by a REIT generally is taxed only at the shareholder level upon a distribution of dividends by the REIT. 
Holders of Series R-1 common shares who are noncorporate U.S. holders of Series R-1 common shares are generally taxed on corporate dividends at a maximum rate of 20% (the same as long-term capital gains).  With limited exceptions, however, ordinary dividends received by noncorporate U.S. holders of Series R-1 common shares from the R-1 Series or from other entities that are taxed as REITs will continue to be taxed at rates applicable to ordinary income, which are as high as 39.6%.  Net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to the shareholders of a REIT, subject to special rules for certain items such as capital gains recognized by REITs.  See "—Taxation of Holders of Series R-1 Common Shares."
If the R-1 Series qualifies as a REIT, it will nonetheless be subject to U.S. federal income tax as follows:
The R-1 Series will be taxed at regular corporate rates on any undistributed REIT taxable income, including undistributed net capital gains.

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The R-1 Series may be subject to the "alternative minimum tax" on its items of tax preference, if any, including any deductions of net operating losses.
If the R-1 Series has net income from prohibited transactions, which are, in general, sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, as described below, such income will be subject to a 100% tax.  See "—Requirements for Qualification—General—Prohibited Transactions" and "—Requirements for Qualification—General—Foreclosure Property" below.
If the R-1 Series elects to treat property that it acquires in connection with a foreclosure of a mortgage loan or leasehold as "foreclosure property," it may thereby avoid (1) the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), and (2) the inclusion of any income from such property not qualifying for purposes of the REIT gross income tests discussed below, 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%).
If the R-1 Series fails to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintains its qualification as a REIT because other requirements are met, it will be subject to a 100% tax on an amount equal to (1) the greater of (A) the amount by which it fails the 75% gross income test or (B) the amount by which it fails the 95% gross income test, as the case may be, multiplied by (2) a fraction intended to reflect its profitability.
If the R-1 Series fails to satisfy any of the REIT asset tests, as described below, other than a failure of the 5% or 10% REIT asset tests that does not exceed a statutory de minimis amount as described more fully below, but its failure is due to reasonable cause and not due to willful neglect and it nonetheless maintains its REIT qualification because of specified cure provisions, it will be required to pay a tax equal to the greater of $50,000 or the highest corporate tax rate (currently 35%) of the net income generated by the non-qualifying assets during the period in which the R-1 Series failed to satisfy the asset tests.
If the R-1 Series fails to satisfy any provision of the Internal Revenue Code that would result in its failure to qualify as a REIT (other than a gross income or asset test requirement) and that violation is due to reasonable cause, it may retain its REIT qualification, but it will be required to pay a penalty of $50,000 for each such failure.
If the R-1 Series fails to distribute on an annual basis at least the sum of (1) 85% of its REIT ordinary income for such year, (2) 95% of its REIT capital gain net income for such year and (3) any undistributed taxable income from prior periods, or the "required distribution," it will be subject to a 4% excise tax on the excess of the required distribution over the sum of (A) the amounts actually distributed (taking into account excess distributions from prior years), plus (B) retained amounts on which U.S. federal income tax is paid at the corporate level.
The R-1 Series may be required to pay monetary penalties to the IRS in certain circumstances, including if it fails to meet record-keeping requirements intended to monitor its compliance with rules relating to the composition of the holders of Series R-1 common shares, as described below in "—Requirements for Qualification—General."
The R-1 Series may be subject to a 100% excise tax on some items of income and expense that are directly or constructively paid between it, its Tenants and/or any TRSs if and to the extent that the IRS successfully adjusts the reported amounts of these items.
If the R-1 Series acquires appreciated assets from a subchapter C corporation (generally a corporation that is not a REIT, a RIC or an S corporation) in a transaction in which the adjusted tax basis of the assets in its hands is determined by reference to the adjusted tax basis of the assets in the hands of the subchapter C corporation, it will be subject to tax on such appreciation at the highest corporate income tax rate then applicable if it subsequently recognizes gains on a disposition of any of the assets during the 10-year period following its acquisition of the assets from the subchapter C corporation.  The results described in this paragraph assume that the subchapter C corporation will not elect, in lieu of this treatment, to be subject to an immediate tax when the R-1 Series acquires the assets.
The R-1 Series may elect to retain and pay income tax on its net long-term capital gain.  In that case, a holder of Series R-1 common shares would include the holder's proportionate share of the R-1 Series' undistributed long-term capital gain (to the extent the R-1 Series makes a timely designation of such gain to the holder of such Series R-1 common shares) in the holder of such Series R-1 common share's income, would be deemed to have paid the tax that the holder of such Series R-1 common shares paid on such gain, and would be allowed a credit for the holder of such Series R-1 common share's proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the holder of Series R-1 common share's basis in such Series R-1 common shares.  Holders of Series R-1 common shares that are U.S. corporations will also appropriately adjust their earnings and profits for the retained capital gain in accordance with Treasury Regulations to be promulgated.

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The R-1 Series may have subsidiaries or own interests in other lower-tier entities that are taxable C corporations, including any TRSs, the earnings of which could be subject to U.S. federal corporate income tax.
In addition, the R-1 Series and its subsidiaries may be subject to a variety of taxes other than U.S. federal income tax, including payroll taxes and state, local, and foreign income, transfer, franchise, property and other taxes.  The R-1 Series could also be subject to tax in situations and on transactions not presently contemplated. 
Requirements for Qualification—General
In connection with this offering, ETRE Residential, LLC intends for the R-1 Series to elect and qualify to be taxed as a REIT under the Internal Revenue Code commencing with its short taxable year ending December 31, 2015.  ETRE Residential, LLC believes that the R-1 Series has been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and that its intended manner of operation will enable it to meet the requirements for qualification and taxation as a REIT.  To qualify as a REIT, the R-1 Series must meet on a continuing basis, through its organization and actual investment and operating results, various requirements under the Internal Revenue Code relating to, among other things, the sources of its gross income, the composition and values of its assets, its distribution levels and the diversity of ownership of its shares.  If the R-1 Series fails to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which it failed to qualify as a REIT.  Even if the R-1 Series qualifies for taxation as a REIT, it may be subject to certain U.S. federal, state and local taxes on its income or property.  Any distributions paid by the R-1 Series generally will not be eligible for taxation at the preferential U.S. federal income tax rates that currently apply to certain distributions received by individuals from taxable corporations.
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 the special Internal Revenue Code provisions applicable to REITs;
(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 during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months;
(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 entities);
(7)
that makes an election to be taxable as a REIT for the current taxable year or has made such an election for a previous taxable year that has not been terminated or revoked, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT status;
(8)
that has no earnings and profits from any non-REIT taxable year as of a successor to any subchapter C corporation at the close of any taxable year;
(9)
that uses the calendar year for U.S. federal income tax purposes and complies with the recordkeeping requirements of the Internal Revenue Code and regulations thereunder; and
(10)
that meets other tests described below, including with respect to the nature of its income and assets and the amount of its distributions. 
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) do not need to be satisfied for the first taxable year for which an election to become a REIT has been made.  Our operating agreement provides restrictions regarding the ownership and transfer of Series R-1 common shares, which are intended, among other purposes, to assist the R-1 Series in satisfying the share ownership requirements described in conditions (5) and (6) above.  The R-1 Series intends to monitor the beneficial owners of the its shares to ensure that its shares are at all times beneficially owned by 100 or more persons, but no assurance can be given that the R-1 Series will be successful in this regard.  For purposes of condition (6), an "individual" generally includes a supplemental unemployment compensation benefit plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes, but does not include a qualified pension plan or profit sharing trust. 

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To monitor compliance with the share ownership requirements, the R-1 Series is required to maintain records regarding the actual ownership of its shares.  To do so, the R-1 Series must demand written statements each year from the record holders of significant percentages of its shares in which the record holders are to disclose the actual owners of the shares (i.e., the persons required to include in gross income the dividends paid by us).  A list of those persons failing or refusing to comply with this demand must be maintained as part of its records.  Failure by the R-1 Series to comply with these record-keeping requirements could subject the R-1 Series to monetary penalties.  If the R-1 Series satisfies these requirements and after exercising reasonable diligence would not have known that condition (6) is not satisfied, it will be deemed to have satisfied such condition.  A holder of shares Series R-1 common shares that fails or refuses to comply with the demand is required by Treasury Regulations to submit a statement with the holder's tax return disclosing the actual ownership of the shares and other information. 
With respect to condition (8), the R-1 Series believes it will not initially have any earnings and profits from any non-REIT taxable year or as a successor to any subchapter C corporation. 
With respect to condition (9), the R-1 Series intends to elect to be taxed as a REIT beginning with our 2015 taxable year, and to adopt December 31 as its taxable year-end and thereby satisfy this requirement.
Effect of Subsidiary Entities
Ownership of Partnership Interests.  In the case of a REIT that is a partner in a partnership, Treasury Regulations provide that the REIT is deemed to own its proportionate share of the partnership's assets and to earn its proportionate share of the partnership's gross income based on its pro rata share of capital interests in the partnership for purposes of the asset and gross income tests applicable to REITs, as described below.  However, solely for purposes of the 10% value test described below, the determination of a REIT's interest in partnership assets will be based on the REIT's proportionate interest in any securities issued by the partnership, excluding, for these purposes, certain excluded securities as described in the Internal Revenue Code.  In addition, the assets and gross income of the partnership generally are deemed to retain the same character in the hands of the REIT.  Thus, the R-1 Series' proportionate share of the assets and items of income of a partnership in which it owns an equity interest, including each Property R-1 Subsidiary, is treated as the R-1 Series' assets and items of income for purposes of applying the REIT requirements described below.  Consequently, to the extent that the R-1 Series directly or indirectly holds a preferred or other equity interest in a partnership, including each Property R-1 Subsidiary, the partnership's assets and operations may affect the R-1 Series' ability to qualify as a REIT, even though it may have no control, or only limited influence, over the partnership. 
An investment in a partnership involves special tax considerations.  For example, it is possible that the IRS could treat a subsidiary partnership as a corporation for U.S. federal income tax purposes.  In this case, the subsidiary partnership would be subject to entity-level tax and the character of the R-1 Series' assets and items of gross income would change, possibly causing us to fail the requirements to qualify as a REIT.  See "—Failure to Qualify" below.  In addition, special rules apply in the case of appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership.  In general terms, these rules require that certain items of income, gain, loss and deduction associated with the contributed property be allocated to the contributing partner for U.S. federal income tax purposes.  These rules could adversely affect the R-1 Series, for example, by requiring that a lower amount of depreciation deductions be allocated to the R-1 Series, which in turn would cause it to have a greater amount of taxable income without a corresponding increase in cash and result in a greater portion of the R-1 Series' distributions being taxed as dividend income. 
Disregarded Subsidiaries.  If a REIT owns a corporate subsidiary that is a "qualified REIT subsidiary," the separate existence of that subsidiary is disregarded for U.S. federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT, including for purposes of the gross income and asset tests applicable to REITs as summarized below.  Generally, a qualified REIT subsidiary is any corporation, other than a TRS, as described below under "—Requirements for Qualification—General—Effect of Subsidiary Entities—Taxable REIT Subsidiaries," that is wholly owned by a REIT, or by other disregarded subsidiaries, or by a combination of the two.  Single member limited liability companies that are wholly owned by a REIT are also generally disregarded as separate entities for U.S. federal income tax purposes, including for purposes of the REIT gross income and asset tests.  Disregarded subsidiaries, along with partnerships in which the R-1 Series holds an equity interest, are sometimes referred to herein as "pass-through subsidiaries."
In the event that a disregarded subsidiary ceases to be wholly owned by the R-1 Series —for example, if any equity interest in the subsidiary is acquired by a person other than the R-1 Series or another disregarded subsidiary of the R-1 Series —the subsidiary's separate existence would no longer be disregarded for U.S. 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 the R-1 Series' ability to satisfy the various asset and gross income tests applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the value or voting power of the outstanding securities of another corporation.  See "—Requirements for Qualification—General—Asset Tests" and "—Requirements for Qualification—General—Gross Income Tests."

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Taxable REIT Subsidiaries.  A REIT generally may jointly elect with a subsidiary corporation, whether or not wholly owned, to treat the subsidiary corporation as a TRS.  The separate existence of a TRS or other taxable corporation, unlike a disregarded subsidiary as discussed above, is not ignored for U.S. federal income tax purposes.  Accordingly, such an entity would generally be subject to corporate U.S. federal, state, local and income and franchise taxes on its earnings, which may reduce the cash flow generated by the R-1 Series and its subsidiaries in the aggregate, and the R-1 Series' ability to make distributions to holders of Series R-1 common shares.  The R-1 Series' TRSs may invest in assets and engage in activities that could not be held or conducted directly by it without jeopardizing its qualification as a REIT. 
For purposes of the gross income and asset tests applicable to REITs, a REIT is 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 the subsidiary is an asset in the hands of the REIT, and the REIT recognizes as income the dividends that it receives from the subsidiary.  This treatment can affect the gross income and asset test calculations that apply to the REIT, as described below.  Because a REIT does not include the assets and income of such subsidiary corporations in determining the REIT’s compliance with the REIT requirements, such entities may be used by the parent REIT to undertake indirectly activities that a REIT, due to the requirements applicable to REITs, might otherwise not be able to undertake directly or through pass-through subsidiaries (or, if such activities could be undertaken, it would only be in a commercially unfeasible manner) such as, for example, activities that give rise to certain categories of income such as management fees.  If dividends are paid to the R-1 Series by one or more TRSs it may own, then a portion of the dividends that it distributes to the holders of Series R-1 common shares who are taxed at individual rates generally will be eligible for taxation at preferential qualified dividend income tax rates rather than at ordinary income rates.  See “-Taxation of Holders of R-1 Series Common Shares-Taxation of Taxable U.S. Holders of R-1 Series Common Shares” and “-Requirements for Qualification-General-Annual Distribution Requirements.”
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, if a TRS has a debt to equity ratio as of the close of the taxable year exceeding 1.5 to 1, it 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 a REIT, its Tenants and/or 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. 
Rents received by the R-1 Series that include amounts for services furnished by a TRS to any of its tenants will not be subject to the excise tax if such amounts qualify for the safe harbor provisions contained in the Internal Revenue Code.  Safe harbor provisions are provided where (1) amounts are excluded from the definition of impermissible tenant service income as a result of satisfying a 1% de minimis exception; (2) a TRS renders a significant amount of similar services to unrelated parties and the charges for such services are substantially comparable; (3) rents paid to the R-1 Series by tenants leasing at least 25% of the net leasable space at a property that are not receiving services from the TRS are substantially comparable to the rents paid to the R-1 Series by tenants leasing comparable space at such property and that are receiving such services from the TRS (and the charge for the services is separately stated); or (4) the TRS's gross income from the service is not less than 150% of the TRS's direct cost of furnishing the service. 
Gross Income Tests
In order to maintain the R-1 Series' qualification as a REIT, the R-1 Series annually must satisfy two gross income tests.  First, at least 75% of the R-1 Series' gross income for each taxable year, excluding gross income from sales of inventory or dealer property in "prohibited transactions" and certain hedging and foreign currency transactions, must be derived from investments relating to real property or mortgages on real property, including "rents from real property," dividends received from and gain from the disposition of shares of other REITs, interest income derived from obligations secured by mortgages on real property or on interests in real property (including certain types of mortgage-backed securities), and gains from the sale of real estate assets, as well as income from certain kinds of temporary investments.  Second, at least 95% of the R-1 Series' gross income in each taxable year, excluding gross income from prohibited transactions and certain hedging and foreign currency transactions, must be derived from some combination of income that qualifies under the 75% income test described above, as well as other dividends, interest, and gain from the sale or disposition of stock or securities, which need not have any relation to real property. 
For purposes of the 75% and 95% gross income tests, a REIT is deemed to have earned a proportionate share of the income earned by any partnership, or any limited liability company treated as a partnership for U.S. federal income tax purposes, in which it owns an interest, which share is determined by reference to its capital interest in such entity, and is deemed to have earned the income earned by any qualified REIT subsidiary. 

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Rents received by the R-1 Series will qualify as “rents from real property” in satisfying the 75% gross income test described above only if several conditions are met, including the following.  The rent must not be based in whole or in part on the income or profits of any person.  However, an amount will not be excluded from rents from real property solely by reason of being based on a fixed percentage or percentages of receipts or sales or being based on the net income or profits of a tenant which derives substantially all of its income with respect to such property from subleasing of substantially all of such property, to the extent that the rents paid by the sublessees would qualify as rents from real property, if earned directly by the R-1 Series.  If rent is partly attributable to personal property leased in connection with a lease of real property, the portion of the total 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, or in connection with, the lease.  Moreover, for rents received to qualify as rents from real property, the R-1 Series generally must not operate or manage the property or furnish or render certain services to the tenants of such property, other than through an “independent contractor” who is adequately compensated and from which the R-1 Series derives no income, or through a TRS.  The R-1 Series is permitted, however, to perform services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered rendered to the occupant of the property.  In addition, the R-1 Series may directly or indirectly provide non-customary services to tenants of the R-1 Series’ property if the gross income from such services does not exceed 1% of the total gross income from the property for the relevant taxable year.  In such a case, only the amounts for non-customary services are not treated as rents from real property and the provision of the services does not disqualify the rents from treatment as rents from real property.  If, however, the gross income from such non-customary services exceeds this 1% threshold, none of the gross income derived from the property for the relevant property is treated as rents from real property.  For purposes of this test, the gross income received from such non-customary services is deemed to be at least 150% of the direct cost of providing the services.  Moreover, the R-1 Series is permitted to provide services to tenants through a TRS without disqualifying the rental income received from tenants as rents from real property.  Also, rental income will qualify as rents from real property only to the extent it is not treated as “related party rent,” which generally includes rent from a tenant if the R-1 Series directly or indirectly (through application of certain constructive ownership rules) owns, (1) in the case of any tenant which is a corporation, stock possessing 10% or more of the total combined voting power of all classes of stock entitled to vote, or 10% or more of the total value of shares of all classes of stock of such tenant or (2) in the case of any tenant which is not a corporation, an interest of 10% or more in the assets or net profits of such tenant.  However, rental payments from a TRS will qualify as rents from real property even if the R-1 Series owns more than 10% of the total value or combined voting power of the TRS if at least 90% of the property is leased to unrelated tenants and the rent paid by the TRS is substantially comparable to the rent paid by the unrelated tenants for comparable space.
Unless the R-1 Series determines that the resulting non-qualifying income under any of the following situations, taken together with all other non-qualifying income earned by it in the taxable year, will not jeopardize its qualification as a REIT, it does not intend to:
charge rent for property that is based in whole or in part on the income or profits of any person, except by reason of being based on a fixed percentage or percentages of receipts or sales, as described above;
rent property to a related party tenant, including any TRS, unless the rent from the lease to the TRS would qualify for the special exception from the related party tenant rule applicable to certain leases with a TRS;
derive rental income attributable to personal property other than personal property leased in connection with the lease of property, the amount of which is no more than 15% of the total rent received under the lease; or
directly perform services considered to be non-customary or rendered to the occupant of the Property. 
The R-1 Series may receive distributions from its TRSs or other C corporations that are neither REITs nor qualified REIT subsidiaries.  These distributions will be classified 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 dividends received by the R-1 Series from a REIT, however, will be qualifying income for purposes of both the 95% and 75% gross income tests. 

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Hedging Transactions
The R-1 Series may enter into hedging transactions with respect to one or more of its 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 the R-1 Series enters into (1) in the normal course of the R-1 Series' business primarily to manage risk of interest rate or price changes 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 the R-1 Series clearly identifies as specified in Treasury Regulations before the close of the day on which it was acquired, originated, or entered into, including gain from the sale or disposition of such a transaction, or (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 close 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 the R-1 Series enters into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the 75% and 95% gross income tests.  The R-1 Series intends to structure any hedging transactions in a manner that does not jeopardize its qualification as a REIT. 
Failure to Satisfy the Gross Income Tests
The R-1 Series intends to monitor its sources of income, including any non-qualifying income received by it, so as to ensure its compliance with the gross income tests.  If the R-1 Series fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may still qualify as a REIT for the year if it is entitled to relief under applicable provisions of the Internal Revenue Code.  These relief provisions will generally be available if the failure of the R-1 Series to meet these tests was due to reasonable cause and not due to willful neglect and, following the identification of such failure, the R-1 Series sets forth a description of each item of its gross income that satisfies the gross income tests in a schedule for the taxable year filed in accordance with the Treasury Regulations.  It is not possible to state whether the R-1 Series 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 involving the R-1 Series, the R-1 Series will not qualify as a REIT.  As discussed above under "—Taxation of the R-1 Series—Taxation of REITs in General," even where these relief provisions apply, a tax would be imposed upon the profit attributable to the amount by which the R-1 Series fails to satisfy the particular gross income test. 
Asset Tests
At the close of each calendar quarter of its taxable year, the R-1 Series must also satisfy four tests relating to the nature of its assets.  First, at least 75% of the value of the R-1 Series' 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 REITs, and certain kinds of mortgage-backed securities and mortgage loans.  Assets that do not qualify for purposes of the 75% asset test are subject to the additional asset tests described below. 
Second, subject to certain exceptions described below, the value of any one issuer's securities owned by the R-1 Series may not exceed 5% of the value of its total assets. Third, subject to certain exceptions described below, the R-1 Series may not own more than 10% of any one issuer's outstanding securities, as measured by either voting power or value.  Fourth, the aggregate value of all securities of any TRSs held by the R-1 Series may not exceed 25% of the value of its total assets. 
The 5% and 10% asset tests do not apply to securities of TRSs, qualified REIT subsidiaries or securities that are "real estate assets" for purposes of the 75% asset test described above.  In addition, the 10% value test does not apply to certain "straight debt" and other excluded securities, as described in the Internal Revenue Code including, but not limited to, any loan to an individual or estate, any obligation to pay rents from real property and any security issued by a REIT.  For these purposes, (1) a REIT's interest as a partner in a partnership is not considered a security; (2) any debt instrument issued by a partnership (other than straight debt or another security that is excluded from the 10% value test) will not be considered a security issued by the partnership if at least 75% of the partnership's gross income is derived from sources that would qualify for the 75% gross income test; and (3) any debt instrument issued by a partnership (other than straight debt or another excluded security) will not be considered a security issued by the partnership to the extent of the REIT's interest as a partner in the partnership.  For purposes of the 10% value test, "straight debt" means a written unconditional promise to pay on demand on a specified date a sum certain in money if (i) debt is not convertible, directly or indirectly, into stock, (ii) the interest rate and interest payment dates are not contingent on profits, the borrower's discretion, or similar factors other than certain contingencies relating to the timing and amount of principal and interest payments, as described in the Internal Revenue Code and (iii) in the case of an issuer that is a corporation or a partnership, securities that otherwise would be considered straight debt will not be so considered if the R-1 Series, and any of its "controlled taxable REIT subsidiaries," as defined in the Internal Revenue Code, hold any securities of the corporate or partnership issuer which (a) are not straight debt or other excluded securities (prior to the application of this rule), and (b) have an aggregate value greater than 1% of the issuer's outstanding securities (including, for the purposes of a partnership issuer, its interest as a partner in the partners). 

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Failure to Satisfy the Asset Tests 
After initially meeting the asset tests at the close of a quarter, the R-1 Series will not lose its qualification as a REIT for failure to satisfy the asset tests at the end of a later quarter solely by reason of changes in asset values (including a failure caused solely by change in the foreign currency exchange rate used to value a foreign asset).  If the R-1 Series fails to satisfy the asset tests because the R-1 Series acquires or increases its ownership interest in securities during a quarter, the R-1 Series can cure this failure by disposing of the non-qualifying assets within 30 days after the close of that quarter.  If the R-1 Series fails the 5% asset test, the 10% vote test, or the 10% value test at the end of any quarter, and such failure is not cured within 30 days thereafter, the R-1 Series may dispose of sufficient assets (generally, within six months after the last day of the quarter in which its identification of the failure to satisfy those asset tests occurred) to cure the violation, provided that the non-permitted assets do not exceed the lesser of 1% of its assets at the end of the relevant quarter or $10,000,000.  If the R-1 Series fails any of the other asset tests, or its failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as the failure was due to reasonable cause and not willful neglect, the R-1 Series is permitted to avoid disqualification as a REIT, after the 30-day cure period, by taking steps including the disposition of sufficient assets to meet the asset tests (generally within six months after the last day of the quarter in which its identification of the failure to satisfy the REIT asset test occurred), and paying a tax equal to the greater of (A) $50,000 or (B) an amount determined by multiplying the net income generated by the non-qualifying assets during the period in which the R-1 Series failed to satisfy the relevant asset test by (2) the highest corporate tax rate (currently 35%).
The R-1 Series believes its holding of the property, temporary investments, cash and any TRSs the R-1 Series may form will comply with the foregoing REIT asset requirements, and the R-1 Series intends to monitor compliance with such tests on an ongoing basis.  There can be no assurance, however, that the R-1 Series will be successful in this effort.  Moreover, the values of some of the R-1 Series' assets, including the securities of its TRSs or other non-publicly traded investments, may not be susceptible to a precise determination and are subject to change in the future.  Furthermore, the proper classification of an instrument as debt or equity for U.S. federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT asset tests.  Accordingly, there can be no assurance that the IRS will not contend that the R-1 Series' assets do not meet the requirements of the REIT asset tests. 
Annual Distribution Requirements
In order to qualify as a REIT, the R-1 Series is required to distribute dividends, other than capital gain dividends, to holders of Series R-1 common shares each year in an amount at least equal to:
(1)the sum of:
a)
90% of its "REIT taxable income" (computed without regard to its deduction for dividends paid and its net capital gains), and
b)
90% of the net income from foreclosure property (after tax) as described below, and recognized built-in gain, as discussed above, minus 
(2)the sum of specified items of non-cash income that exceeds a percentage of its income. 
These distributions must be paid either in the taxable year to which they relate, or in the following taxable year if such distributions are declared in October, November or December of the taxable year, are payable to holders of Series R-1 common shares of record on a specified date in any such month, and are actually paid before the end of January of the following year.  Such distributions are treated as both paid by the R-1 Series and received by each holder of Series R-1 common shares on December 31 of the year in which they are declared.  In addition, at the R-1 Series' election, a distribution for a taxable year may be declared before the R-1 Series timely files its tax return for the year, provided the R-1 Series pays such distribution with or before its first regular dividend payment after such declaration, provided that such payment is made during the 12-month period following the close of such taxable year.  These distributions are taxable to holders of Series R-1 common shares in the year in which paid, even though the distributions relate to its prior taxable year for purposes of the 90% distribution requirement. 
In order for distributions to be counted towards the R-1 Series' distribution requirement, and to give rise to a tax deduction to the R-1 Series, they must not be "preferential dividends." A dividend is not a preferential dividend if it is pro rata among all outstanding shares of stock within a particular class, and is in accordance with the preferences among its different classes of stock as set forth in the R-1 Series' organizational documents. 
To the extent that the R-1 Series distributes at least 90%, but less than 100%, of its REIT taxable income, as adjusted, the R-1 Series will be subject to tax at ordinary corporate tax rates on the retained portion.  In addition, the R-1 Series may elect to retain, rather than distribute, its net long-term capital gains and pay tax on such gains.  In this case, the R-1 Series would elect to have holders of Series R-1 common shares include their proportionate share of such undistributed long-term capital gains in their income and receive a corresponding credit for their proportionate share of the tax paid by the R-1 Series.  Holders of Series R-1 common shares would then increase their adjusted basis in such Series R-1 common shares by the difference between the designated amounts included in their long-term capital gains and the tax deemed paid with respect to their proportionate shares. 

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If the R-1 Series fails to distribute on an annual basis at least the sum of (1) 85% of its REIT ordinary income for such year, (2) 95% of its REIT capital gain net income for such year and (3) any undistributed taxable income from prior periods, the R-1 Series will be subject to a nondeductible 4% excise tax on the excess of such amount over the sum of (A) the amounts actually distributed (taking into account excess distributions from prior periods) and (B) the amounts of income retained on which the R-1 Series has paid corporate income tax.  The R-1 Series intends to distribute its net income to its shareholders in a manner that satisfies the REIT 90% distribution requirement and that protects it from being subject to U.S. federal income tax on its income and the 4% nondeductible excise tax. 
It is possible that the R-1 Series, from time to time, may not have sufficient cash to meet the REIT distribution requirements due to timing differences between (1) the actual receipt of cash, including the receipt of distributions from any partnership subsidiaries and (2) the inclusion of items in income by it for U.S. federal income tax purposes.  In the event that such timing differences occur, in order to meet the distribution requirements, it might be necessary to arrange for short-term, or possibly long-term, borrowings, or to pay dividends in the form of taxable in-kind distributions of property, including taxable stock dividends.  In the case of a taxable stock dividend, holders of Series R-1 common shares would be required to include the dividend as income and would be required to satisfy the tax liability associated with the distribution with cash from other sources including sales of Series R-1 common shares.  Both a taxable stock distribution and sale of Series R-1 common shares resulting from such distribution could adversely affect the price of Series R-1 common shares. 
The R-1 Series may be able to rectify a failure to meet the distribution requirements for a year by paying "deficiency dividends" to holders of Series R-1 common shares in a later year, which may be included in its deduction for dividends paid for the earlier year.  In this case, the R-1 Series may be able to avoid losing its REIT qualification.  However, the R-1 Series will be required to pay interest and a penalty based on the amount of any deduction taken for deficiency dividends. 
Recordkeeping Requirements
The R-1 Series is required to maintain records and request on an annual basis information from specified holders of Series R-1 common shares.  These requirements are designed to assist the R-1 Series in determining the actual ownership of its outstanding stock and maintaining its qualification as a REIT. 
Prohibited Transactions
Net income the R-1 Series derives 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) that is held as inventory or primarily for sale to customers in the ordinary course of a trade or business by a REIT, by a lower-tier partnership in which the REIT holds an equity interest or by a borrower that has issued a shared appreciation mortgage or similar debt instrument in the REIT.  The R-1 Series intends to conduct its operations so that the Property and any other asset owned by it or its pass-through subsidiaries will not be held as inventory or primarily for sale to customers, and that a sale of any such assets will not be in the ordinary course of business.  However, whether property is held as inventory or "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 particular property in which the R-1 Series holds a direct or indirect interest will not be treated as property held as inventory or primarily for sale to customers, or that certain safe-harbor provisions of the Internal Revenue Code discussed below that prevent such treatment will apply.  The 100% tax will not apply to gains from the sale of property by the R-1 Series' TRSs or other taxable corporations, although such income will be subject to tax in the hands of the corporation at regular corporate income tax rates. 
The Internal Revenue Code provides a safe harbor that, if met, allows the R-1 Series to avoid being treated as engaged in a prohibited transaction.  In order to meet the safe harbor, among other things, (i) the R-1 Series must have held the property for at least two years for the production of rental income (and, in the case of property which consists of land or improvements not acquired through foreclosure, the R-1 Series must have held the property for two years for the production of rental income), (ii) the R-1 Series capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) the R-1 Series (a) has seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale or (b) either (I) the aggregate adjusted tax basis of property sold during the year of sale is 10% or less of the aggregate adjusted tax basis of all of its assets as of the beginning of the taxable year, or (II) the aggregate fair market value of property sold during the year of sale is 10% or less of the aggregate fair market value of all of its assets as of the beginning of the taxable year, and (III) in the case of either (I) or (II), substantially all of the marketing and development expenditures with respect to the property sold are made through an independent contractor from whom the R-1 Series derives no income.  For these purposes, the sale of more than one property to one buyer as part of one transaction constitutes one sale.


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Foreclosure Property
Foreclosure property is real property (including interests in real property) and any personal property incident to such real property (1) that is acquired by a REIT as a result of the REIT having bid on the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after there was a default (or default was imminent) on a lease of the property or a mortgage loan held by the REIT and secured by the property, (2) for which the related loan or lease was made, entered into or acquired by the REIT at a time when default was not imminent or anticipated and (3) for which such REIT makes a proper election to treat the property as foreclosure property.  REITs generally are 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 in the hands of the selling REIT. 
Although not currently expected, to the extent that the R-1 Series acquires non-performing or distressed debt secured by a real estate asset with a view to subsequently taking control of the collateral (i.e., loan-to-own investments), any property that the R-1 Series acquires through such a transaction will not qualify to be treated as foreclosure property because it will not satisfy condition (2) in the preceding paragraph.  However, provided that the income generated by such property is qualifying income for purposes of the 75% gross income test, such income will not be subject to tax at the maximum corporate rate assuming that it is currently distributed to holders of Series R-1 common shares.  See "—Requirements for Qualification—General—Annual Distribution Requirements."
Failure to Qualify
In the event that the R-1 Series violates a provision of the Internal Revenue Code that would result in its failure to qualify as a REIT in any taxable year, the R-1 Series may nevertheless continue to qualify as a REIT.  Specified relief provisions will be available to the R-1 Series to avoid such disqualification if (1) the violation is due to reasonable cause and not due to willful neglect, (2) the R-1 Series pays a penalty of $50,000 for each failure to satisfy a requirement for qualification as a REIT and (3) the violation does not include a violation under the gross income or asset tests described above (for which other specified relief provisions are available).  This cure provision reduces the instances that could lead to its disqualification as a REIT for violations due to reasonable cause.  If the R-1 Series fails to qualify for taxation as a REIT in any taxable year and none of the relief provisions of the Internal Revenue Code apply, the R-1 Series will be subject to tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates.  Distributions to holders of Series R-1 common shares in any year in which the R-1 Series is not a REIT will not be deductible by it, nor will they be required to be made.  In this situation, to the extent of current and accumulated earnings and profits, and, subject to limitations of the Internal Revenue Code, distributions to holders of Series R-1 common shares will generally be taxable in the case of noncorporate U.S. holders of Series R-1 common shares at a maximum rate of 20% and dividends in the hands of its corporate U.S. holders of Series R-1 common shares may be eligible for the dividends received deduction.  Unless the R-1 Series is entitled to relief under the specific statutory provisions, the R-1 Series will also be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost.  It is not possible to state whether the R-1 Series will be entitled to statutory relief in all circumstances.  Even if the R-1 Series qualifies for taxation as a REIT, it may be subject to certain U.S. federal, state and local taxes on its income or property. Any distributions paid by the R-1 Series generally will not be eligible for taxation at the preferential U.S. federal income tax rates that currently apply to certain distributions received by individuals from taxable corporations.
Tax Aspects of Investments in Partnerships
General
The R-1 Series will hold the Property through the Property R-1 Subsidiaries, which intend to be taxed as partnerships for U.S. federal income tax purposes may hold other property through an entity that is classified as a partnership for U.S. federal income tax purposes. In general, partnerships are "pass-through" entities that are not subject to U.S. federal income tax.  Rather, partners are allocated their proportionate shares of the items of income, gain, loss, deduction and credit of a partnership, and are subject to tax on these items without regard to whether the partners receive a distribution from the partnership.  The R-1 Series will include in its income its proportionate share of these partnership items for purposes of the various REIT income tests, based on its capital interest in such partnership, and in the computation of the R-1 Series' REIT taxable income.  Moreover, for purposes of the REIT asset tests, the R-1 Series includes its proportionate share of assets held by subsidiary partnerships, based on its capital interest in such partnerships (other than for purposes of the 10% value test, for which the determination of its interest in partnership assets will be based on the R-1 Series' proportionate interest in any securities issued by the partnership excluding, for these purposes, certain excluded securities as described in the Internal Revenue Code).  Consequently, to the extent that the R-1 Series holds an equity interest in a partnership, the partnership's assets and operations may affect its ability to continue to qualify as a REIT, even though it may have no control, or only limited influence, over the partnership. 

Taxation of Holders of Series R-1 Common Shares
Taxation of Taxable U.S. Holders of Series R-1 Common Shares 
This section summarizes the taxation of U.S. holders of Series R-1 common shares that are not tax-exempt organizations. 

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If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Series R-1 common shares, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership.  A partner of a partnership holding Series R-1 common shares should consult its tax advisor regarding the U.S. federal income tax consequences to the partner of the acquisition, ownership and disposition of Series R-1 common shares by the partnership. 
Distributions.  Provided that the R-1 Series qualifies as a REIT, distributions made to taxable U.S. holders of Series R-1 common shares out of its current or accumulated earnings and profits, and not designated as capital gain dividends, will generally be taken into account by such holders as ordinary dividend income and will not be eligible for the dividends received deduction for corporations.  In determining the extent to which a distribution with respect to Series R-1 common shares constitutes a dividend for U.S. federal income tax purposes, its earnings and profits will be allocated first to distributions with respect to its preferred stock, if any is outstanding, and then to its common stock.  Dividends received from REITs are generally not eligible to be taxed at the preferential qualified dividend income rates currently applicable to noncorporate U.S. holders of Series R-1 common shares who receive dividends from taxable subchapter C corporations. 
In addition, distributions from the R-1 Series that are designated as capital gain dividends will be taxed to taxable U.S. holders of Series R-1 common shares as long-term capital gains, to the extent that they do not exceed the R-1 Series' actual net capital gain for the taxable year, without regard to the period for which the U.S. holder has held such Series R-1 common shares.  To the extent that the R-1 Series elects under the applicable provisions of the Internal Revenue Code to retain its net capital gains, U.S. holders of Series R-1 common shares will be treated as having received, for U.S. federal income tax purposes, its undistributed capital gains as well as a corresponding credit for taxes paid by us on such retained capital gains. 
U.S. holders of Series R-1 common shares will increase their adjusted tax basis in such Series R-1 common shares by the difference between their allocable share of such retained capital gain and their share of the tax paid by the R-1 Series.  Corporate U.S. holders of Series R-1 common shares may be required to treat up to 20% of some capital gain dividends as ordinary income.  Long-term capital gains are generally taxable at maximum U.S. federal rates of 20% in the case of noncorporate U.S. holders of Series R-1 common shares, and 35% for corporations.  Capital gains attributable to the sale of depreciable real property held for more than 12 months are subject to a 25% maximum U.S. federal income tax rate for noncorporate U.S. holders of Series R-1 common shares, to the extent of previously claimed depreciation deductions. 
A portion of the R-1 Series' distributions may be treated as a return of capital for U.S. federal income tax purposes.  As a general matter, a portion of the R-1 Series' distributions will be treated as a return of capital for U.S. federal income tax purposes if the aggregate amount of its distributions for a year exceeds its current and accumulated earnings and profits for that year.  To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder's adjusted tax basis in the holder's Series R-1 common shares, and to the extent that it exceeds the holder's adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares.  As a general matter, any such gain will be long-term capital gain if Series R-1 common shares have been held for more than one year.  In addition, any dividend declared by the R-1 Series in October, November or December of any year and payable to a U.S. holder of Series R-1 common shares of record on a specified date in any such month will be treated as both paid by the R-1 Series and received by a U.S. holder of Series R-1 common shares on December 31 of such year, provided that the dividend is actually paid by the R-1 Series before the end of January of the following calendar year. 
With respect to noncorporate U.S. holders of Series R-1 common shares, the R-1 Series may elect to designate a portion of its distributions paid to such U.S. holders of Series R-1 common shares as "qualified dividend income."  A portion of a distribution that is properly designated as qualified dividend income is taxable to noncorporate U.S. holders of Series R-1 common shares as capital gain, provided that the U.S. holder of Series R-1 common shares has held such Series R-1 common shares with respect to which the distribution is made for more than 60 days during the 121-day period beginning on the date that is 60 days before the date on which such Series R-1 common shares became ex-dividend with respect to the relevant distribution.  The maximum amount of the R-1 Series' distributions eligible to be designated as qualified dividend income for a taxable year is equal to the sum of:
(1)
the qualified dividend income received by the R-1 Series during such taxable year from subchapter C corporations (including any TRSs);
(2)
the excess of any "undistributed" REIT taxable income recognized during the immediately preceding year over the U.S. federal income tax paid by the R-1 Series with respect to such undistributed REIT taxable income; and
(3)
the excess of any income recognized during the immediately preceding year attributable to the sale of a built-in-gain asset that was acquired in a carry-over basis transaction from a non-REIT corporation or had appreciated at the time its REIT election became effective over the U.S. federal income tax paid by the R-1 Series with respect to such built-in gain. 
Generally, dividends that the R-1 Series receives will be treated as qualified dividend income for purposes of (1) above if the dividends are received from a domestic subchapter C corporation, such as any TRSs, and specified holding period and other requirements are met. 

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To the extent that the R-1 Series has available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that must be made in order to comply with the REIT distribution requirements.  See "—Requirements for Qualification—General—Annual Distribution Requirements." Such losses, however, are not passed through to U.S. holders of Series R-1 common shares and do not offset income of U.S. holders of Series R-1 common shares from other sources, nor do they affect the character of any distributions that are actually made by the R-1 Series, which are generally subject to tax in the hands of U.S. holders of Series R-1 common shares to the extent that the R-1 Series has current or accumulated earnings and profits. 
Dispositions of Series R-1 Common Shares.  In general, a U.S. holder of Series R-1 common shares will realize gain or loss upon the sale, redemption or other taxable disposition of Series R-1 common shares in an amount equal to the difference between the sum of the fair market value of any property and the amount of cash received in such disposition and the U.S. holder's adjusted tax basis in Series R-1 common shares at the time of the disposition.  A U.S. holder's adjusted tax basis in Series R-1 common shares generally will equal the U.S. holders acquisition cost, increased by the excess of net capital gains deemed distributed to the U.S. holder of Series R-1 common shares (as discussed above), less tax deemed paid on it and reduced by returns of capital.  In general, capital gains recognized by individuals and other noncorporate U.S. holders of Series R-1 common shares upon the sale or disposition of Series R-1 common shares will be subject to a maximum U.S. federal income tax rate of 20% if such Series R-1 common shares were held for more than 12 months, and will be taxed at ordinary income rates (of up to 39.6%) if such Series R-1 common shares are held for 12 months or less.  Gains recognized by U.S. holders of Series R-1 common shares that are corporations are subject to U.S. federal income tax at a maximum rate of 35%, whether or not classified as long-term capital gains.  The IRS has the authority to prescribe, but has not yet prescribed, regulations that would apply a capital gain tax rate of 25% (which is generally higher than the long-term capital gain tax rates for noncorporate holders) to a portion of capital gain realized by a noncorporate holder on the sale of REIT stock or depositary shares that would correspond to the REIT's "unrecaptured Section 1250 gain."
Prospective U.S. holders of Series R-1 common shares are advised to consult their tax advisors with respect to their capital gain tax liability.  Capital losses recognized by a U.S. holder of Series R-1 common shares upon the disposition of Series R-1 common shares held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the U.S. holder but not ordinary income (except in the case of noncorporate taxpayers, who may offset up to $3,000 of ordinary income each year).  In addition, any loss upon a sale or exchange of shares of Series R-1 common shares by a U.S. holder who has held such Series R-1 common 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 received from the R-1 Series that were required to be treated by the U.S. holder of such Series R-1 common shares as long-term capital gain. 
If a U.S. holder of Series R-1 common shares recognizes a loss upon a subsequent disposition of its Series R-1 common shares in an amount that exceeds a prescribed threshold, it is possible that the provisions of recently adopted Treasury Regulations involving "reportable transactions" could apply, with a resulting requirement to separately disclose the loss generating transactions to the IRS.  Although these regulations are directed towards "tax shelters," they are written quite broadly and apply to transactions that would not typically be considered tax shelters.  Significant penalties apply for failure to comply with these requirements.  You should consult your tax advisors concerning any possible disclosure obligation with respect to the receipt or disposition of Series R-1 common shares, or transactions that might be undertaken directly or indirectly by us.  Moreover, you should be aware that the R-1 Series and other participants in transactions involving the R-1 Series (including its advisors) might be subject to disclosure or other requirements pursuant to these regulations. 
Passive Activity Losses and Investment Interest Limitations
Distributions made by the R-1 Series and gain arising from the sale or exchange by a U.S. holder of Series R-1 common shares will not be treated as passive activity income.  As a result, U.S. holders of Series R-1 common shares will not be able to apply any "passive losses" against income or gain relating to Series R-1 common shares.  Distributions made by the R-1 Series, to the extent they do not constitute a return of capital, generally will be treated as investment income for purposes of computing the investment interest limitation.  A U.S. holder of Series R-1 common shares that elects to treat capital gain dividends, capital gains from the disposition of stock or qualified dividend income as investment income for purposes of the investment interest limitation will be taxed at ordinary income rates on such amounts. 
Medicare Tax on Unearned Income
Certain U.S. holders of Series R-1 common shares that are individuals, estates, or trusts are required to pay an additional 3.8% tax on “net investment income,” which includes, among other things, dividends on and gains from the sale or other disposition of stock.

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Taxation of Tax-Exempt U.S. Holders of R-1 Series Common Shares
U.S. tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income taxation.  However, they are subject to taxation on their unrelated business taxable income, which is referred to in this registration statement as unrelated business taxable income, or "UBTI." Although many 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 U.S. holder has not held Series R-1 common shares as "debt financed property" within the meaning of the Internal Revenue Code (i.e., where the acquisition or ownership of the property is financed through a borrowing by the tax-exempt U.S. holder of Series R-1 common shares), and (2) Series R-1 common shares are not otherwise used in an unrelated trade or business, distributions from the R-1 Series and income from the sale of Series R-1 common shares generally should not give rise to UBTI to a tax-exempt U.S. holder. 
Tax-exempt U.S. holders of Series R-1 common shares that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from U.S. federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code, respectively, are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI unless they are able to properly claim a deduction for amounts set aside or placed in reserve for specific purposes so as to offset the income generated by their investment in Series R-1 common shares.  These prospective investors should consult their tax advisors concerning these "set aside" and reserve requirements. 
In certain circumstances, a pension trust (1) that is described in Section 401(a) of the Internal Revenue Code, (2) is tax exempt under Section 501(a) of the Internal Revenue Code, and (3) that owns more than 10% of the R-1 Series could be required to treat a percentage of the dividends from the R-1 Series as UBTI if the R-1 Series is a "pension-held REIT." The R-1 Series will not be a pension-held REIT unless (1) either (A) one pension trust owns more than 25% of the value of its stock or (B) a group of pension trusts, each individually holding more than 10% of the value of its stock, collectively owns more than 50% of such stock and (2) the R-1 Series would not have qualified as a REIT but for the fact that Section 856(h)(3) of the Internal Revenue Code provides that stock owned by such trusts will be treated, for purposes of the requirement that not more than 50% of the value of the outstanding stock of a REIT is owned, directly or indirectly, by five or fewer "individuals" (as defined in the Internal Revenue Code to include certain entities), as owned by the beneficiaries of such trusts. 
Tax-exempt U.S. holders of Series R-1 common shares are urged to consult their tax advisors regarding the U.S. federal, state, local and foreign tax consequences of the acquisition, ownership and disposition of its stock. 
Taxation of Non-U.S. Holders of R-1 Series Common Shares
The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition of Series R-1 common shares applicable to non-U.S. holders.  The discussion is based on current law and is for general information only.  It addresses only selective and not all aspects of U.S. federal income taxation. 
Ordinary Dividends.  The portion of dividends received by non-U.S. holders of Series R-1 common shares payable out of the R-1 Series' earnings and profits that are not attributable to gains from sales or exchanges of U.S. real property interests and which are not effectively connected with a U.S. trade or business of the non-U.S. holder of Series R-1 common shares generally will be treated as ordinary income and will be subject to U.S. federal withholding tax at the rate of 30%, unless reduced or eliminated by an applicable income tax treaty.  Under some treaties, however, lower rates generally applicable to dividends do not apply to dividends from REITs. 
In general, non-U.S. holders of Series R-1 common shares will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of Series R-1 common shares.  In cases where the dividend income from a non-U.S. holder's investment in its Series R-1 common shares 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 U.S. holders of Series R-1 common shares are taxed with respect to such dividends, and may also be subject to the 30% branch profits tax (unless reduced or eliminated by an applicable income tax treaty) on the income after the application of the income tax in the case of a non-U.S. holder of Series R-1 common shares that is a corporation. 

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Non-Dividend Distributions.  Unless (1) the Series R-1 common shares constitute a U.S. real property interests, or "USRPIs," or (2) either (A) the non-U.S. holder's investment in Series R-1 common shares is effectively connected with a U.S. trade or business conducted by such non-U.S. holder of Series R-1 common shares (in which case the non-U.S. holder will be subject to the same treatment as U.S. holders of Series R-1 common shares with respect to such gain) or (B) the non-U.S. holder of Series R-1 common shares 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 be subject to a 30% tax on the individual's net capital gain for the year), distributions by us which are not treated as dividends for U.S. federal income tax purposes (i.e., not treated as being paid out of the R-1 Series' current and accumulated earnings and profits) will not be subject to U.S. federal income tax.  If it cannot be determined at the time at which a distribution is made whether or not the distribution will constitute a dividend for U.S. federal income tax purposes, the distribution will be subject to withholding at the rate applicable to dividends.  However, the non-U.S. holder of Series R-1 common shares 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 its current and accumulated earnings and profits and, therefore, did not constitute a dividend for U.S. federal income tax purposes.  In addition, if the Series R-1 common shares constitute USRPIs, as described below, distributions by the R-1 Series in excess of the sum of its earnings and profits plus the non-U.S. holder's adjusted tax basis in its Series R-1 common shares will be taxed under the Foreign Investment in Real Property Tax Act of 1980, or "FIRPTA," at the rate of tax, including any applicable capital gains rates, that would apply to a U.S. holder of Series R-1 common shares 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 withholding tax (at a rate of 10%) of the amount by which the distribution exceeds the holder of Series R-1 common share's share of the R-1 Series' earnings and profits plus the holder's adjusted basis in its stock.  As discussed below, the R-1 Series expects that the Series R-1 common shares will not be treated as USRPIs in the hands of a non-U.S. holder who holds less than 5% of the Series R-1 common shares.
Because it will not generally be possible for us to determine the extent to which a distribution will be from the R-1 Series current or accumulated earnings and profits at the time the distribution is made, the R-1 Series intends to withhold and remit to the IRS 30% of distributions to non-U.S. holders of Series R-1 common shares (other than distributions that are deemed to be attributable to USRPI capital gains, as described in greater detail below) unless (i) a lower treaty rate applies and the non-U.S. holder of Series R-1 common shares provides an IRS Form W-8BEN or W-8BEN-E evidencing eligibility for that reduced treaty rate with us or (ii) the non-U.S. holder of Series R-1 common shares files an IRS Form W‑8ECI with the R-1 Series claiming that the distribution is income effectively connected with the non-U.S. holder’s trade or business.  However, if the R-1 Series determines that any of the shares held by a non-U.S. holder is likely to be treated as a USRPI, the R-1 Series intends to withhold and remit to the IRS at least 10% of distributions on such shares even if a lower rate would apply under the preceding discussion.
Capital Gain Dividends.  Under FIRPTA, a distribution made by us to a non-U.S. holder of Series R-1 common shares, to the extent attributable to gains from dispositions of USRPIs held by us directly or through pass-through subsidiaries, or "USRPI capital gains," will be considered effectively connected with a U.S. trade or business of the non-U.S. holder of Series R-1 common shares and will be subject to U.S. federal income tax at the rates applicable to U.S. holders of Series R-1 common shares, without regard to whether the distribution is designated as a capital gain dividend.  In addition, the R-1 Series will be required to withhold tax equal to 35% of the amount of any distribution to the extent it is attributable to 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 of Series R-1 common shares that is a corporation.  However, this 35% tax will not apply to any distribution with respect to any class of the R-1 Series stock which is "regularly traded" on an established securities market located in the United States (as defined by applicable Treasury Regulations) if the non-U.S. holder did not own more than 5% of such class of stock at any time during the one-year period ending on the date of such dividend.  Instead, any such distribution will be treated as a distribution subject to the rules discussed above under "—Taxation of Holders of R-1 Series Common Shares—Taxation of Non-U.S. Holders of R-1 Series Common Shares—Ordinary Dividends." Also, the branch profits tax will not apply to such a distribution. 
Capital gain dividends received by a non-U.S. holder from a REIT that are not attributable to USRPI capital gains, if any, are generally not subject to U.S. federal income or withholding tax, unless either (1) the non-U.S. holder's investment in Series R-1 common shares is effectively connected with a U.S. trade or business conducted by such non-U.S. holder (in which case the non-U.S. holder will be subject to the same treatment as U.S. holders of Series R-1 common shares with respect to such gain) or (2) the non-U.S. holder of Series R-1 common shares 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 be subject to a 30% tax on the individual's net capital gain for the year).  The R-1 Series intends to withhold and remit to the IRS 35% of a distribution to a non-U.S. holder of Series R-1 common shares only to the extent that such distribution is attributable to USRPI capital gains.  The amount withheld is creditable against the non-U.S. holder of Series R-1 common share's U.S. federal income tax liability or refundable when the non-U.S. holder properly and timely files a tax return with the IRS. 
Dispositions of Series R-1 Common Shares.  Unless the Series R-1 common shares constitute a USRPI, a sale of Series R-1 common shares by a non-U.S. holder generally will not be subject to U.S. federal income taxation under FIRPTA.  The Series R-1 common shares will not be treated as a USRPI if the R-1 Series is a “domestically controlled qualified investment entity.” A REIT is a domestically controlled qualified investment entity if, at all times during a specified testing period (generally the lesser of the five-year period ending on the date of disposition of Series R-1 common shares or the period of existence), less than 50% in value of its outstanding stock is held directly or indirectly by non-U.S. holders of Series R-1 common shares. The R-1 Series expects to be a domestically controlled qualified investment entity and, therefore, the sale of Series R-1 common shares should not be subject to taxation under FIRPTA. Because the Series R-1 common shares will be publicly traded, however, no assurance can be given that the R-1 Series will be a domestically controlled qualified investment entity.

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Specific "wash sale" rules applicable to sales of shares in a REIT could result in gain recognition, taxable under FIRPTA, upon the sale of Series R-1 common shares.  These rules would apply if a non-U.S. holder (1) disposes of Series R-1 common shares within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been taxable to such non-U.S. holder as gain from the sale or exchange of a USRPI, (2) is treated as acquiring, or as entering into a contract or option to acquire, other Series R-1 common shares during the 61-day period that begins 30 days prior to such ex-dividend date, and (3) if Series R-1 common shares are "regularly traded" on an established securities market in the United States, such non-U.S. holder has owned more than 5% of the Series R-1 common shares at any time during the one-year period ending on the date of such distribution. 
In the event that the R-1 Series does not constitute a domestically controlled qualified investment entity, a non-U.S. holder's sale of Series R-1 common shares nonetheless will generally not be subject to tax under FIRPTA as a sale of a USRPI, provided that (1) the Series R-1 common shares are "regularly traded on an established securities market located in the United States" (as defined by applicable Treasury Regulations) and (2) the selling non-U.S. holder owned, actually or constructively, 5% or less of the outstanding Series R-1 common shares at all times during the five-year period ending on the date of sale.  The R-1 Series believes that the Series R-1 common shares will be regularly traded on an established securities market located in the United States; however, no assurance can be given that the Series R-1 common shares will continue to be regularly traded on an established securities market located in the United States. 
If gain on the sale of Series R-1 common shares were subject to taxation under FIRPTA, the non-U.S. holder would be subject to the same treatment as a U.S. holder of Series R-1 common shares with respect to such gain, including 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 Series R-1 common shares 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 the Series R-1 common shares is effectively connected with a U.S. trade or business conducted by such non-U.S. holder, the non-U.S. holder of Series R-1 common shares will be subject to the same treatment as a U.S. holder of Series R-1 common shares with respect to such gain or (2) if the non-U.S. holder of Series R-1 common shares 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. 
Backup Withholding and Information Reporting
The R-1 Series will report to U.S. holders of Series R-1 common shares 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 U.S. holder of Series R-1 common shares may be subject to backup withholding (the current rate is 28%) with respect to dividends paid, unless the holder (1) is a corporation or comes within other exempt categories and, when required, demonstrates this fact or (2) provides a taxpayer identification number or social security number, certifies under penalties of perjury that such number is correct and that such holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules.  A U.S. holder of Series R-1 common shares 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.  In addition, the R-1 Series may be required to withhold a portion of capital gain distribution to any U.S. holder of Series R-1 common shares who fails to certify its non-foreign status. 
The R-1 Series must report annually to the IRS and to each non-U.S. holder of Series R-1 common shares 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. holder of Series R-1 common shares resides under the provisions of an applicable income tax treaty.  A non-U.S. holder of Series R-1 common shares may be subject to backup withholding unless applicable certification requirements are met. 
Payment of the proceeds of a sale of Series R-1 common shares within the United States is subject to both backup withholding and information reporting requirements unless the beneficial owner certifies under penalties of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person) or the holder otherwise establishes an exemption.  Payment of the proceeds of a sale of Series R-1 common shares conducted through certain United States related financial intermediaries is subject to information reporting requirements (but not backup withholding) unless the financial intermediary has documentary evidence in its records that the beneficial owner is a non-U.S. holder and specified conditions are met or an exemption is otherwise established. 
Backup withholding is not an additional tax.  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 timely furnished to the IRS. 

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Foreign Account Tax Compliance Act, or the FATCA
Under Section 1471 through 1474 of the Internal Revenue Code, provisions commonly known as “FATCA”, together with administrative guidance and certain intergovernmental agreements, or IGAs, entered into thereunder, withholding taxes may apply to certain types of payments made to “foreign financial institutions” (as specially defined in the Internal Revenue Code) and certain other non-U.S. entities unless the entity qualifies for an exemption. A withholding tax of 30% generally will be imposed on dividends on, and gross proceeds from the sale or other disposition of, Series R-1 common shares paid to: (a) a foreign financial institution (as the beneficial owner or as an intermediary for the beneficial owners) unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders to the IRS (or, if it is located in an jurisdiction that has entered into an IGA, to its own government which, in turn, will provide such information to the IRS) and meets certain other specified requirements; and (b) a non-financial foreign entity (as the beneficial owner or, in certain cases, as an intermediary for the beneficial owners) unless such entity certifies that it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner and such entity meets certain other specified requirements. Distributions and proceeds from a sale or other disposition of Series R-1 common shares that are treated as giving rise to income effectively connected with the conduct of a U.S. trade or business are not subject to FACTA withholding, however. These rules will apply with respect to payments of dividends on Series R-1 common shares and payments of gross proceeds from a sale or other disposition of our common stock after December 31, 2016. We will not pay any additional amounts in respect of any amounts withheld. U.S. holders and non-U.S. holders of Series R-1 common shares are encouraged to consult their tax advisors regarding the particular consequences to them of this legislation and guidance.
State, Local and Foreign Taxes
The R-1 Series and its subsidiaries and holders of Series R-1 common shares may be subject to state, local and foreign taxation in various jurisdictions, including those in which holders or the R-1 Series transact business, own property or reside.  The state, local or foreign tax treatment of the R-1 Series and holders of Series R-1 common shares may not conform to the U.S. federal income tax treatment discussed above.  Any foreign taxes incurred by us would not pass through to holders of Series R-1 common shares as a credit against their U.S. federal income tax liability.  Prospective investors should consult their tax advisor regarding the application and effect of state, local and foreign income and other tax laws on an investment in Series R-1 common shares. 
Proposed Legislation or Other Actions Affecting REITs
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department.  No assurance can be given as to whether, when, or in what form, the U.S. federal income tax laws applicable to the R-1 Series and holders of Series R-1 common shares may be enacted.  Changes to the U.S. federal income tax laws and interpretations of U.S. federal tax laws could adversely affect an investment in Series R-1 common shares.


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ERISA CONSIDERATIONS
A fiduciary of a pension, profit sharing, retirement or other employee benefit plan (or a plan), subject to the Employee Retirement Income Security Act of 1974, as amended (or ERISA), should consider the fiduciary standards under ERISA in the context of the plan's particular circumstances before authorizing an investment of a portion of such plan's assets in the common shares.  Accordingly, among other things, such fiduciary should consider (i) whether the investment satisfies the diversification requirements of Section 404(a)(1)(C) of ERISA, (ii) whether the investment is in accordance with the documents and instruments governing the plan as required by Section 404(a)(1)(D) of ERISA, and (iii) whether the investment is prudent under ERISA.  In addition to the imposition of general fiduciary standards of investment prudence and diversification, ERISA, and the corresponding provisions of the Internal Revenue Code, prohibit a wide range of transactions involving the assets of the plan and persons who have certain specified relationships to the plan ("parties in interest" within the meaning of ERISA, "disqualified persons" within the meaning of the Internal Revenue Code).  A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Internal Revenue Code.  In addition, the fiduciary of the plan that is engaged in such a non‑exempt prohibited transaction may be subject to penalties under ERISA and the Internal Revenue Code.  Thus, a plan fiduciary considering an investment in the common shares also should consider whether the acquisition or the continued holding of the common shares might constitute or give rise to a direct or indirect prohibited transaction that is not subject to an exemption issued by the Department of Labor (or the DOL).
The DOL has issued final regulations (or the DOL Regulations) as to what constitutes assets of an employee benefit plan under ERISA.  Under the DOL Regulations, if a plan acquires an equity interest in an entity, which interest is neither a "publicly offered security" nor a security issued by an investment company registered under the 1940 Act, the plan's assets would include, for example, for purposes of the fiduciary responsibility provision of ERISA, both the equity interest and an undivided interest in each of the entity's underlying assets unless certain specified exceptions apply.  The DOL Regulations define a publicly offered security as a security that is "widely held," "freely transferable," and either part of a class of securities registered under the Exchange Act or sold pursuant to an effective registration statement under the Securities Act (provided the securities are registered under the Exchange Act within 120 days after the end of the fiscal year of the issuer during which the public offering occurred).  The common shares are being sold in an offering registered under the Securities Act and will be registered under the Exchange Act.
The DOL Regulations provide that a security is "widely held" only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another.  A security will not fail to be "widely held" because the number of independent investors falls below 100 subsequent to the initial public offering as a result of events beyond the issuer's control.  We expect the Series R-1 common shares to be "widely held" upon completion of the initial public offering.
The DOL Regulations provide that whether a security is "freely transferable" is a factual question to be determined on the basis of all relevant facts and circumstances.  The DOL Regulations further provide that when a security is part of an offering in which the minimum investment is $10,000 or less, as is the case with this offering, certain restrictions ordinarily will not, alone or in combination, affect the finding that such securities are "freely transferable."  We believe that the restrictions imposed under our charter on the transfer of our common shares are limited to the restrictions on transfer generally permitted under the DOL Regulations and are not likely to result in the failure of common shares to be "freely transferable."  The DOL Regulations only establish a presumption in favor of the finding of free transferability, and, therefore, no assurance can be given that the DOL will not reach a contrary conclusion.
Assuming that the common shares will be "widely held" and "freely transferable," we believe that our common shares will be publicly offered securities for purposes of the DOL Regulations and that our assets will not be deemed to be "plan assets" of any plan that invests in our common shares.
Certain individuals, including us, ETRE Financial, LLC, our Administrative Agent and any of their respective affiliates may be parties in interest and disqualified persons with respect to plans subject to ERISA or the Internal Revenue Code.  Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code may arise if common shares are acquired or held by a plan with respect to which we, ETRE Financial, LLC, our Administrative Agent or any of their respective affiliates is a party in interest or a disqualified person.  Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Internal Revenue Code may be applicable, however, in certain cases, depending in part on the type of plan fiduciary making the decision to acquire the common shares and the circumstances under which such decision is made.  Accordingly, each holder of our common shares will be deemed to have represented and agreed that its purchase and holding of such common shares (or any interest therein) will not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code.


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UNDERWRITING
Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom ______________________ is acting as representative, have severally agreed to purchase, and we, on behalf of the R-1 Series, have agreed to sell to them, severally, the number of Series R-1 common shares indicated below:
Name
Number of shares
  
  
 
  
 
  
 
 
 
 
  Total
 
The underwriters and the representative are collectively referred to as the "underwriters" and the "representative," respectively.  The underwriters are offering the Series R-1 common shares subject to their acceptance of the shares from us and subject to prior sale.  The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the Series R-1 common shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions.  The underwriters are obligated to take and pay for all of the Series R-1 common shares offered by this prospectus if any such shares are taken.  However, the underwriters are not required to take or pay for the shares covered by the underwriters' over-allotment option described below.
The underwriters initially propose to offer part of the Series R-1 common shares directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers.  After the initial offering of the Series R-1 common shares, the offering price and other selling terms may from time to time be varied by the representative.
We, on behalf of the R-1 Series, have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to _______________ additional Series R-1 common shares at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions.  The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the Series R-1 common shares by this prospectus.  To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional Series R-1 common shares as the number listed next to the underwriter's name in the preceding table bears to the total number of Series R-1 common shares listed next to the names of all underwriters in the preceding table.
The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to the R-1 Series.  These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase up to an additional __________ Series R-1 common shares. 
  
Per Share
 
No Exercise
 
Full Exercise
Public offering price
 
 
 
 
 
Underwriting discounts and commissions
  
 
 
 
  
Proceeds, before expenses
 
 
 
 
 
The estimated total transaction costs payable by us, exclusive of underwriting discounts and commissions, are approximately $__________
We have applied to have our Series R-1 common shares listed on the NASDAQ under the trading symbol “EPNT”

The R-1 Series, our Administrative Agent, ETRE and each of our directors and officers have agreed that, without the prior written consent of the representatives on behalf of the underwriters, they will not, during the period ending 180 days after the date of this prospectus:
offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase lend or otherwise transfer or dispose of, directly or indirectly, any Series R-1 common shares or any securities convertible into or exercisable or exchangeable for Series R-1 common shares;
file any registration statement with the SEC relating to the offering of any Series R-1 common shares or any securities convertible into or exercisable or exchangeable for Series R-1 common shares; or
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Series R-1 common shares, whether any such transaction described above is to be settled by delivery of Series R-1 common shares or such other securities, in cash or otherwise.
In addition, the R-1 Series, our Administrative Agent, ETRE and each of our directors and officers have agreed that, without the prior written consent of the representative on behalf of the underwriters, they will not, during the period ending 180 days after the date of this prospectus, make any demand for, or exercise any right with respect to, the registration of any Series R-1 common shares or any security convertible into or exercisable or exchangeable for Series R-1 common shares.
The restrictions described in the immediately preceding paragraph do not apply to:
the sale of Series R-1 common shares to the underwriters; or
transactions by any person other than us  relating to the Series R-1 common shares or other securities acquired in open market transactions after the completion of the offering of the Series R-1 common shares. 
In order to facilitate the offering of the Series R-1 common shares, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Series R-1 common shares.  Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position.  A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option.  The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market.  In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option.  The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position.  The underwriters must close out any naked short position by purchasing shares in the open market.  A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Series R-1 common shares in the open market after pricing that could adversely affect investors who purchase in this offering.  As an additional means of facilitating this offering, the underwriters may bid for, and purchase, Series R-1 common shares in the open market to stabilize the price of the Series R-1 common shares.  These activities may raise or maintain the market price of the Series R-1 common shares above independent market levels or prevent or retard a decline in the market price of the Series R-1 common shares.  The underwriters are not required to engage in these activities and may end any of these activities at any time.
We, on behalf of the R-1 Series, and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering.  The representative may agree to allocate a number of Series R-1 common shares to underwriters for sale to their online brokerage account holders.  Internet distributions will be allocated by the representative to underwriters that may make Internet distributions on the same basis as other allocations. 
Pricing of the Offering
Prior to this offering, there has been no public market for the Series R-1 common shares.  The price was determined by negotiations between us and the representative.  Among the factors considered in determining the price were the R-1 Series' future prospects and those of its industry in general, the Property's revenues, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to the R-1 Series' activities. 
Affiliations
The underwriters and their affiliates may from time to time in the future engage in transactions with us and perform services for us in the ordinary course of business. 


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LEGAL MATTERS
Certain legal matters relating to this offering will be passed upon for us by Goodwin Procter LLP, New York, New York.  In addition, the description of U.S. federal income tax consequences contained in the section of the prospectus entitled "U.S. Federal Income Tax Considerations" is based on the opinion of Goodwin Procter LLP.  Certain legal matters relating to this offering will be passed upon for the underwriters by _____________________.
EXPERTS
The balance sheet of ETRE Residential, LLC, Series R-1 as of May 27, 2015, included in this Prospectus has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such balance sheet is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The combined balance sheet of ETRE Residential, LLC and ETRE Residential, LLC, Series R-1 as of May 27, 2015 included in this Prospectus has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such balance sheet is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The Statement of Revenues and Certain Operating Expenses of Penn Treaty Pennthouses for the year ended December 31, 2014 included in this Prospectus has been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein (which report expresses an unmodified opinion and includes an emphasis-of-matter paragraph referring to the purpose and basis of presentation of the Statement), and is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.


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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S‑11, including exhibits and schedules filed with the registration statement of which this prospectus is a part, under the Securities Act with respect to the Series R-1 common shares to be sold in this offering.  This prospectus does not contain all of the information set forth in the registration statement and exhibits and schedules to the registration statement.  For further information with respect to us, the R-1 Series and the Series R-1 common shares to be sold in this offering, reference is made to the registration statement, including the exhibits and schedules to the registration statement.  Copies of the registration statement, including the exhibits and schedules to the registration statement, may be examined without charge at the public reference room of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549.  Information about the operation of the public reference room may be obtained by calling the SEC at 1‑800‑SEC‑0300.  Copies of all or a portion of the registration statement may be obtained from the public reference room of the SEC upon payment of prescribed fees.  Our SEC filings, including our registration statement, are also available to you, free of charge, on the SEC's website at www.sec.gov.
As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and will file periodic reports, proxy statements and will make available to our shareholders annual reports containing audited financial information for each year and quarterly reports for the first three quarters of each fiscal year containing unaudited interim financial information.


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INDEX TO FINANCIAL STATEMENTS
ETRE Residential, LLC, Series R-1 Pro Forma Financial Statements
 
Summary Historical and Unaudited Pro Forma Financial and Other Data
F-2
Unaudited Pro Forma Balance Sheet as of June 30, 2015
F-3
Unaudited Pro Forma Statement of Operations for the Six Months Ended June 30, 2015
F-4
Unaudited Pro Forma Statement of Operations for the Year Ended December 31, 2014
F-5
Notes to the Unaudited Pro Forma Financial Statements
F-6

Penn Treaty Village Pennthouses Historical Financial Statements
 
Independent Auditors' Report
F-10
Statement of Revenue and Certain Operating Expenses for the Six Months Ended June 30, 2015 (Unaudited) and for the Year Ended December 31, 2014
F-11
Notes to the Statement of Revenue and Certain Operating Expenses
F-12

ETRE Residential, LLC and ETRE Residential, LLC, Series R-1
 
Report of Independent Registered Public Accounting Firm
F-14
Combined Balance Sheets as of June 30, 2015 (Unaudited) and May 27, 2015
F-15
Notes to the Combined Balance Sheets
F-16

ETRE Residential, LLC, Series R-1
 
Report of Independent Registered Public Accounting Firm
F-18
Balance Sheets as of June 30, 2015 (Unaudited) and May 27, 2015
F-19
Notes to the Balance Sheet
F-20


F- 1



ETRE Residential, LLC, Series R-1
Summary Historical and Unaudited Pro Forma Financial and Other Data

The following sets forth ETRE Residential, LLC, Series R-1 (the “R-1 Series”) unaudited pro forma balance sheet as of June 30, 2015 and its unaudited pro forma statements of operations for the six months ended June 30, 2015 and the year ended December 31, 2014. The unaudited pro forma financial information is being presented as if this offering, including application of the net proceeds therefrom as set forth under “Use of Proceeds,” all had occurred on June 30, 2015 for balance sheet purposes and as of January 1, 2014 for the purpose of the statements of operations. The pro forma balance sheet and statements of operations are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if the relevant transactions had been consummated on the date indicated, nor are they indicative of future operating results.

Concurrently with the completion of this offering, the R-1 Series will use the net proceeds from this offering to acquire an 89.00% controlling interest in a luxury residential rental community known as Penn Treaty Village Pennthouses (the “Property”), consisting of 224 apartment homes, 28,860 square feet of ground floor retail space, and 147 parking spaces, located in the Northern Liberties section of Philadelphia, Pennsylvania.

The Property is currently owned by 1 Brown Street Associates, L.P. and 800 North Delaware Avenue Associates, L.P. (together the “Property R-1 Subsidiaries”), which are in turn currently owned 100% by Waterview Grande, L.P. and its affiliates (the “Seller”). An affiliate of ETRE Holdings R-1, LLC (the “Holdings R-1 Subsidiary”), a wholly-owned subsidiary of the R-1 Series, has executed a purchase and sale agreement with the Seller and the Property R-1 Subsidiaries to acquire an aggregate direct and indirect 89.00% controlling interest in the Property R-1 Subsidiaries in exchange for $78.0 million in cash, subject to adjustments as set forth in the purchase and sale agreement, to be funded by (i) $26.0 million of net proceeds from this offering and (ii) the proceeds of a new $52.0 million non-recourse mortgage loan on the Property expected to be consummated concurrently with the closing of this offering. The purchase and sale agreement will be assigned to Holdings R-1 Subsidiary prior to the closing of the acquisition.

Specifically, (i) Holdings R-1 Subsidiary will acquire an 88.99% limited partner interest in each of the Property R-1 Subsidiaries, and (ii) ETRE Property R-1 GP, LLC (the “General R-1 Partner”), an entity wholly-owned by Holdings R-1 Subsidiary, will acquire a 0.01% general partner interest in each of the Property R-1 Subsidiaries. The Seller will retain an aggregate 11.00% non-controlling interest in the Property R-1 Subsidiaries.

The pro forma financial statements are based upon available information, preliminary estimates and certain assumptions that we believe are reasonable under the circumstances, as set forth in the notes to the pro forma financial statements. You should read the following information together with the information contained under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the R-1 Series’ audited balance sheet and the notes thereto included in this prospectus.
  



F- 2



ETRE RESIDENTIAL, LLC, SERIES R-1
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 2015


 
 
 
 
 
Pro Forma Adjustments
 
 
  (US$)
 
ETRE Residential, LLC, Series R-1
 
Proceeds
from
Offering
 
Activity Related to New Loan
 
Repurchase of Initial 100 Shares
 
Acquisition of Partnership Interests
 
ETRE Residential,
LLC,
Series R-1
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
$
1,000

 
$
26,931,380

[A]
$
51,116,500

[L]
$
(1,000
)
[A]
$
(78,047,880
)
[A]
$

 
Land
 

 

 

 

 
5,564,580

[B]
5,564,580

 
Land improvements

 

 

 

 
4,742,200

[B]
4,742,200

 
Building
 

 

 

 

 
63,465,800

[B]
63,465,800

 
Tenant improvements

 

 

 

 
4,310

[B]
4,310

 
Personal property

 

 

 

 
7,445,440

[B]
7,445,440

 
Restricted cash, tenant deposits

 

 

 

 
574,100

[B]
574,100

 
Other assets
 

 

 

 

 
283,320

[B]
283,320

 
Deferred financing costs

 

 
883,500

[L]

 

 
883,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
1,000

 
$
26,931,380

 
$
52,000,000

 
$
(1,000
)
 
$
4,031,870

 
$
82,963,250

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable & accrued expenses
$

 
$

 
$

 
$

 
$
57,870

[B]
$
57,870

 
Due to affiliates

 

 

 

 
83,040

[B]
83,040

 
Security deposits

 

 

 

 
574,090

[B]
574,090

 
Prepaid rents
 

 

 

 

 
142,420

[B]
142,420

 
Mortgage note payable

 

 
52,000,000

[L]

 

 
52,000,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities
 

 

 
52,000,000

 

 
857,420

 
52,857,420

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 ETRE Residential, LLC, Series R-1:
 
 
 
 
 
 
 
 
 
 
 
 
   Series R-1 common shares
1,000

 
32,050,000

[A]

 
(1,000
)
[A]

 
32,050,000

 
 
 

 
(2,714,870
)
[C]

 

 
(40,000
)
[C]
(2,754,870
)
 
 
 

 
(480,750
)
[C]

 

 

 
(480,750
)
 
 
 

 
(1,923,000
)
[C]

 

 

 
(1,923,000
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total ETRE Residential, LLC, Series R-1
1,000

 
26,931,380

 

 
(1,000
)
 
(40,000
)
 
26,891,380

 
Non-controlling interests

 

 

 

 
3,214,450

[B,D]
3,214,450

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total equity
 
1,000

 
26,931,380

 

 
(1,000
)
 
3,174,450

 
30,105,830

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and equity
$
1,000

 
$
26,931,380

 
$
52,000,000

 
$
(1,000
)
 
$
4,031,870

 
$
82,963,250







The accompanying notes are an integral part of these unaudited pro forma financial statements.



F- 3



ETRE RESIDENTIAL, LLC, SERIES R-1
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SX MONTHS ENDED JUNE 30, 2015


 
 
 
 
ETRE
 
Penn Treaty
 
 
 
ETRE
 
  (US$)
 
Residential,
LLC,
Series R-1
 
Pennthouses
Historical
 
Pro Forma Adjustments
 
Residential,
Series R-1
Pro Forma
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
Residential rental income
 
$

 
$
2,669,300

 
$

 
$
2,669,300

 
 
Commercial rental income
 

 
25,800

 

 
25,800

 
 
Tenant recoveries and other income
 

 
88,800

 

 
88,800

 
Total revenues
 

 
2,783,900

 

 
2,783,900

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
Property operating expenses
 

 
373,600

 
(64,800
)
[E]
308,800

 
 
Maintenance and repairs
 

 
267,200

 

 
267,200

 
 
Asset and property management fees
 

 

 
83,500

[F]
83,500

 
 
Utilities
 

 
165,700

 

 
165,700

 
 
Real estate and other taxes
 

 
71,900

 

 
71,900

 
 
Insurance
 

 
39,100

 

 
39,100

 
 
Depreciation
 

 

 
1,749,800

[G]
1,749,800

 
Total operating expenses
 

 
917,500

 
1,768,500

 
2,686,000

 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) from Operations
 

 
1,866,400

 
(1,768,500
)
 
97,900

 
 
Interest
 

 

 
(1,149,200
)
[L]
(1,149,200
)
 
 
Administrative services fee
 

 

 
(137,000
)
[H]
(137,000
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$

 
$
1,866,400

 
$
(3,054,700
)
 
(1,188,300
)
 
 
Net loss attributable to non-controlling interests
 
 
[I]
115,640

 
 
Net loss attributable to common shareholders
 
 
 
$
(1,072,660
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Pro forma weighted average common shares outstanding - basic and diluted
[J]
 [________]

 
 
 
 
 
 
 
 
 
 
 
 
 
Pro forma basic loss per share - basic and diluted
 
 
[K]
 [________]





The accompanying notes are an integral part of these unaudited pro forma financial statements.


F- 4



ETRE RESIDENTIAL, LLC, SERIES R-1
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2014


 
 
 
ETRE
 
Penn Treaty
 
 
 
ETRE
  (US$)
 
Residential,
LLC,
Series R-1
 
 Pennthouses
Historical
 
Pro Forma Adjustments
 
Residential,
Series R-1
Pro Forma
 
Revenues:
 
 
 
 
 
 
 
 
 
Residential rental income
 
$

 
$
4,076,800

 
$

 
$
4,076,800

 
Commercial rental income
 

 
50,100

 

 
50,100

 
Tenant recoveries and other income
 

 
164,200

 

 
164,200

Total revenues
 

 
4,291,100

 

 
4,291,100

 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
Property operating expenses
 

 
673,800

 
(112,000
)
[E]
561,800

 
Maintenance and repairs
 

 
456,300

 

 
456,300

 
Asset and property management fees
 

 

 
128,700

[F]
128,700

 
Utilities
 

 
223,700

 

 
223,700

 
Real estate and other taxes
 

 
127,900

 

 
127,900

 
Insurance
 

 
67,600

 

 
67,600

 
Depreciation
 

 

 
3,499,600

[G]
3,499,600

Total operating expenses
 

 
1,549,300

 
3,516,300

 
5,065,600

 
 
 
 
 
 
 
 
 
 
Income (loss) from Operations
 

 
2,741,800

 
(3,516,300
)
 
(774,500
)
 
Interest
 

 

 
(2,298,400
)
[L]
(2,298,400
)
 
Administrative services fee
 

 

 
(254,500
)
[H]
(254,500
)
 
Net income (loss)
 
$

 
$
2,741,800

 
$
(6,069,200
)
 
(3,327,400
)
 
Net loss attributable to non-controlling interests
 
 
 
 
[I]
338,020

 
Net loss attributable to common shareholders
 
 
 
 
 
$
(2,989,380
)
 
 
 
 
 
 
 
 
 
 
 
Pro forma weighted average common shares outstanding - basic and diluted
 
 
[J]
 [________]

 
 
 
 
 
 
 
 
 
 
 
Pro forma basic loss per share - basic and diluted
 
 
 
[K]
 [________]








The accompanying notes are an integral part of these unaudited pro forma financial statements.



F- 5



ETRE RESIDENTIAL, LLC, SERIES R-1
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS

PRO FORMA ADJUSTMENTS
The pro forma balance sheet and statements of operations adjust the ETRE Residential, LLC, Series R-1 (the “R-1 Series”) financial statements to give effect to the purchase of an aggregate 89.00% controlling interest in 1 Brown Street Associates, L.P. and 800 North Delaware Avenue Associates, L.P. (together the “Property R-1 Subsidiaries”) from Waterview Grande, L.P. and its affiliates (the “Seller”). The Property R-1 Subsidiaries collectively own a luxury residential rental community known as Penn Treaty Pennthouses (the “Property”), consisting of 224 apartment homes, 28,860 square feet of ground floor retail space, and 147 parking spaces, located in the Northern Liberties section of Philadelphia, Pennsylvania. The Seller will retain an aggregate 11.00% non-controlling interest in the Property R-1 Subsidiaries. Following the IPO (as defined below), the Property is expected to be encumbered by a new $52.0 million first mortgage.

The agreement with the Seller (which will be assigned to the R-1 Series prior to the closing of the acquisition), as subsequently amended in September 2015, provides for total consideration of $78.0 million, subject to adjustments as set forth in the purchase and sale agreement, to be funded by (i) $26.0 million of net proceeds from the IPO (as defined below) and (ii) the proceeds of a new $52.0 million non-recourse mortgage loan on the Property expected to be consummated concurrently with the closing of the R-1 Series IPO (see Note (L) below). The Seller will retain an aggregate 11.00% non-controlling interest in the Property R-1 Subsidiaries.

The R-1 Series is a separate series of ETRE Residential, LLC, a newly organized Delaware series limited liability company. The R-1 Series intends to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes.

(A)
To facilitate the purchase and sale transaction described above, ETRE Residential, LLC will issue common shares in the R-1 Series (“Series R-1 common shares”) in an initial public offering (the “IPO”). In connection with the IPO, [___] Series R-1 common shares will be issued by ETRE Residential, LLC and the Seller will retain an aggregate 11.00% non-controlling interest in the Property R-1 Subsidiaries.

The R-1 Series estimates that it will receive gross proceeds of approximately $32.0 million from the IPO, assuming the underwriters’ option to purchase additional shares of our common stock to cover over-allotments is not exercised, and assuming an initial public offering price of $[___] per share. The R-1 Series expects to use the estimated $32.0 million of gross proceeds generated from the IPO as follows:

Approximately $26.0 million is for the acquisition of the aggregate 89.00% controlling interest in the Property R-1 Subsidiaries;

Approximately $5.2 million in transaction costs, including (i) total Offering Costs of approximately $5.1 million, and (ii) total Deal Costs of approximately $40,000 (each as defined in note (C) below);

Approximately $0.9 million for costs related to the $52.0 million first mortgage (as further discussed in note (L) below);

$1,000 towards the repurchase of the 100 previously issued and outstanding Series R-1 common shares.
(B)    The net interest in the Property R-1 Subsidiaries acquired by the R-1 Series is calculated as follows:

Net interest in the Property R-1 Subsidiaries acquired by the R-1 Series:
 
Value of the Property and related net assets held by the Property R-1 Subsidiaries(1)
$
81,222,330

Less: new first mortgage
(52,000,000)

    Equity value of the Property and related net assets held by the Property R-1 Subsidiaries
29,222,330

Less: 11.00% equity interest in the Property R-1 Subsidiaries retained by the Seller
(3,214,450
)
    Net interest in the Property R-1 Subsidiaries acquired by the R-1 Series
$
26,007,880


(1) The value for the Property and related net assets held by the Property R-1 Subsidiaries was negotiated in connection with the purchase and sale agreement. This negotiated value, which totals $82.0 million, is subject to pro-rations and adjustments as further set forth in the purchase and sale agreement, and has been adjusted to reflect a valuation based on the cash consideration anticipated to be paid by the R-1 Series to the Seller for an aggregate 89.00% interest in the Property R-1 Subsidiaries.



F- 6



The R-1 Series will allocate the value of the Property and related net assets held by the Property R-1 Subsidiaries to the acquired tangible assets, identifiable intangibles and assumed liabilities based on their estimated acquisition-date fair values, in accordance with Accounting Standards Codification (ASC) 805, Business Combinations, or ASC 805. The current allocation of the value of the Property and related net assets held by the Property R-1 Subsidiaries has been performed on a preliminary basis and is based on management’s preliminary estimate of fair value of the identifiable assets and liabilities.

The preliminary estimate of fair value of the R-1 Series’ identifiable assets and liabilities is as follows, subject to change based on finalization of the valuation procedures:
Identifiable net assets:
 
Land
$
5,564,580

Land improvements
4,742,200

Building
63,465,800

Tenant improvements
4,310

Personal property
7,445,440

Restricted cash, tenant deposits
574,100

Other assets
283,320

Accounts payable & accrued expenses
(57,870
)
Due to affiliates (1)
(83,040
)
Security deposits
(574,090
)
Prepaid rents
(142,420
)
  Subtotal
81,222,330

Mortgage note payable
(52,000,000)

  Total identifiable net assets of the Property R-1 Subsidiaries
29,222,330

Deferred financing costs attributable to the R-1 Series
883,500

  Total identifiable net assets of the R-1 Series
$
30,105,830


(1)
Amounts due to the Seller to cover closing adjustments as further set forth in the purchase and sale agreement.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies-Real Estate Assets-Real Estate Acquisition Accounting” in the accompanying prospectus for additional discussion on fair value.

(C)
Transaction Costs

Transaction costs include (i) the underwriting fee and other amounts incurred which are directly attributable to the offering of the R-1 Series (including professional fees paid to attorneys, accountants, and auditors, printing costs, filing fees, SEC registration fees, NASDAQ listing fees, and other costs incurred in connection with the offering), as well as the upfront Administrative Services Fee paid to the Administrative Agent by the R-1 Series (collectively, “Offering Costs”), and (ii) costs incurred in connection with the acquisition of the interests in the Property R-1 Subsidiaries (including professional fees paid to attorneys, accountants, and auditors and other amounts related to the due diligence of the underlying assets and liabilities of the Property R-1 Subsidiaries) (“Deal Costs”).

Total transaction costs of the R-1 Series are expected to be approximately $5.2 million including the following:
Underwriting fee
$ 1,923,000
Other offering costs
2,714,870
Administrative services fee
480,750
  Subtotal, Offering Costs(1)
5,118,620
Deal Costs(2)
40,000
  Total transaction costs
$ 5,158,620

(D)
Non-Controlling Interests - the Property R-1 Subsidiaries

Upon the completion of the purchase and sale transaction, the Seller will retain an aggregate 11.00% non-controlling interest in the Property R-1 Subsidiaries, the value of which is estimated to be approximately $3.2 million based on its 11.00% percentage interest as defined in the underlying partnership agreements of the R-1 Subsidiaries, and based on an estimated $29.2 million equity valuation for the R-1 Subsidiaries.

F- 7



(E)    Property Operating Expenses
Pursuant to the asset and property management agreement (as further described in note (F) below), certain expenses will no longer be charged to the Property R-1 Subsidiaries following the IPO. Based on a preliminary operating budget of the Property R-1 Subsidiaries for the twelve month period following the IPO, the total amount of such eliminated expenses are estimated to be approximately $64,800 and $112,000 in the accompanying pro forma statement of operations for the six months ended June 30, 2015, and for the year ended December 31, 2014, respectively.
(F)    Asset and Property Management Fees

Upon closing of the acquisition of the Property, the Property R-1 Subsidiaries will enter into an asset and property management agreement with Core Realty, Inc. (the “Asset Manager”), an affiliate of the Seller.  Subject to the supervision and oversight of the General R-1 Partner, the Asset Manager will be responsible for performing all day-to-day management and administrative functions of the Property R-1 Subsidiaries in respect of the Property.

The Asset Manager will be responsible for overseeing real property operations, including tenant leasing, construction and renovations, budgeting, cash management and insurance, and for other functions and authority delegated to it by the General R-1 Partner. In performing its services, the Asset Manager will generally be subject to any applicable restrictions and conditions regarding the activities of the Property R-1 Subsidiaries set forth in our governing documents and the governing documents of the Property R-1 Subsidiaries.

Pursuant to the asset and property management agreement, in exchange for its services the Asset Manager will receive from the Property R-1 Subsidiaries a quarterly asset management fee of 3.0% of the Property R-1 Subsidiaries’ Effective Gross Revenues (as defined in the asset and property management agreement), as well as reimbursements for certain fees, costs, and expenses; provided that if the Seller retains less than a minimum 5.0% aggregate equity interest in the Property R-1 Subsidiaries or the Property, the R-1 Series may terminate the asset and property management agreement upon 30 days’ notice. Such asset and property management fees are estimated to be approximately $83,500 and $128,700 in the accompanying pro forma statement of operations for the six months ended June 30, 2015, and for the year ended December 31, 2014, respectively.

(G)
Depreciation (Purchase Price Allocation)

Depreciation has been adjusted to reflect the pro forma depreciation for the six months ended June 30, 2015 and the year ended December 31, 2014.  The following amounts and estimated remaining useful lives were used to calculate depreciation expense, attributable to (i) net real estate, which includes two buildings, (ii) land improvements, (iii) personal property, and (iv) tenant improvements (amortized over the life of each respective remaining lease term):

Description
Estimated
Allocated
Purchase
Price
Estimated
Depreciable
Life
Estimated
Annualized
Depreciation
Expense
Estimated
Six Month
Depreciation
Expense
  Net real estate
$
63,465,800

30
2,115,520

1,057,760

  Land improvements
4,742,200

15
316,150

158,075

  Personal property
7,445,440

7
1,063,620

531,810

  Tenant improvements
4,310

1
4,310

2,155

Total
75,657,750

 
3,499,600

1,749,800


The allocation of the purchase price and the assessment of the estimated depreciable life has been performed on a preliminary basis and will not be finalized until subsequent to the closing of the acquisition and is based on management’s preliminary estimate of fair value of the identifiable assets and liabilities.

(H)    Administrative Services Fee

ETRE Asset Management, LLC (the “Administrative Agent”), an affiliate of the managing member of ETRE Residential, LLC, will provide certain administrative and advisory services to the R-1 Series and the Property R-1 Subsidiaries, and will provide a management team and appropriate support personnel. The administrative services fee includes an approximate $0.5 million one-time fee payable by the R-1 Series from IPO proceeds upon the closing of the IPO. Thereafter, following the acquisition of the Property, the R-1 Series will pay the Administrative Agent $50,000 per quarter plus 2.00% of the Property’s net operating income during the prior fiscal quarter from distributions it receives from the Property R-1 Subsidiaries. 
Total net operating income of approximately $1.8 million was used to calculate the pro forma quarterly administrative services fee of approximately $137,000 in the accompanying pro forma statement of operations for the six months ended June 30, 2015, and total net operating income of approximately $2.7 million was used to calculate the pro forma quarterly administrative services fee of approximately $254,500 in the accompanying pro forma statement of operations for the year ended December 31, 2014.
For purposes of calculating the quarterly administrative services fee, net operating income means the Property R-1 Subsidiaries’ net income during the respective fiscal quarter (as determined in accordance with accounting principles generally accepted in the United States (“GAAP”)), plus (i) total depreciation and amortization, net interest expense and marketing, general and administrative expenses during such fiscal quarter, and (ii) one-time events pursuant to changes in GAAP and certain non-cash items during such fiscal quarter with the approval of a majority of ETRE Residential, LLC’s independent directors.


F- 8



Loss Per Share
(I)    Following the IPO, the Seller will retain an aggregate 11.00% non-controlling interest in the Property R-1 Subsidiaries. The net loss attributable to the 11.00% non-controlling interest is estimated to be approximately $0.1 million and $0.3 million in the accompanying pro forma statement of operations for the six months ended June 30, 2015, and for the year ended December 31, 2014, respectively.
For purposes of calculating the net loss attributable to non-controlling interests, net income (loss) is adjusted by the quarterly administrative services fee of approximately $137,000 and $254,500 in the accompanying pro forma statement of operations for the six months ended June 30, 2015, and for the year ended December 31, 2014, respectively, which is borne solely by the R-1 Series (as discussed in note (H) above).
(J)    Assuming an offering price of $[___], approximately [___] million Series R-1 common shares, totaling approximately $32.0 million in gross proceeds, will be issued in the IPO. Pro forma weighted average common shares outstanding - basic and diluted, includes (a) the [___] million Series R-1 common shares to be issued in the IPO and (b) an aggregate of [___] restricted Series R-1 common shares to be granted to the independent directors of the R-1 Series upon the closing of the IPO, but excludes (i) up to [___] Series R-1 common shares that the R-1 Series may issue and sell upon exercise of the underwriters’ over-allotment option in full.
(K)    Pro forma basic and diluted loss per share equals pro forma net loss attributable to common shareholders divided by the number of Series R-1 common shares to be outstanding after the IPO and the issuance of restricted Series R-1 common shares, to be granted to the independent directors of the R-1 Series upon the closing of the IPO.

(L)
New First Mortgage Loan and Related Financing Costs

In connection with the R-1 Series’ acquisition of its interest in the Property, the Property R-1 Subsidiaries have received a commitment for a new ten-year commercial mortgage loan of approximately $52.0 million.
 
The proposed loan will carry an expected fixed interest rate of approximately 4.25% per annum and require interest-only payments for the first five years, with amortization thereafter based on a 30 year repayment schedule (for the remaining five years of the loan). Interest expense (before amortization of deferred financing costs, as further discussed below) is estimated to be approximately $1.1 million and $2.2 million in the accompanying pro forma statement of operations for the six months ended June 30, 2015, and for the year ended December 31, 2014, respectively.
The R-1 Series expects to fund deferred financing costs of approximately $0.9 million in connection with the closing of the new loan, which will be capitalized and amortized over the loan’s ten-year term based on the effective interest method. The amortized amounts are estimated to be approximately $44,200 and $88,400 in the accompanying pro forma statement of operations for the six months ended June 30, 2015, and for the year ended December 31, 2014, respectively, and are included as an additional component of interest expense.
Prior to closing, the interest rate on the proposed loan will be subject to fluctuations in market interest rates. Market interest rates are sensitive to many factors that are beyond the R-1 Series’ control. Each increase in the interest rate of the proposed loan of 0.125% would increase interest expense and decrease income (loss) from operations by approximately $65,000 per annum over the term of the proposed loan.



F- 9




INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Members of
ETRE Residential, LLC, Series R-1
44 Wall Street
New York, New York
We have audited the accompanying statement of revenue and certain operating expenses of Penn Treaty Village Pennthouses (the “Property”), for the year ended December 31, 2014 and the related notes (the “Statement”).
Management’s Responsibility for the Statement
Management is responsible for the preparation and fair presentation of the Statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statement that is free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Property’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Statement referred to above presents fairly, in all material respects, the revenue and certain operating expenses described in Note 1 of the Property for the year ended December 31, 2014, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
We draw attention to Note 1 to the Statement, which describes that the accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the Registration Statement on Form S-11, as amended, of ETRE Residential, LLC) and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ Deloitte & Touche LLP
New York, New York
May 29, 2015


F- 10



PENN TREATY VILLAGE PENNTHOUSES
STATEMENTS OF REVENUE AND CERTAIN OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 2015 (UNAUDITED)
AND FOR THE YEAR ENDED DECEMBER 31, 2014


 
 
 
For the Six
 
For the Year
  (US$)
 
Months Ended
June 30, 2015
(Unaudited)
 
Ended
December 31, 2014
 
Revenues:
 
 
 
 
 
Residential rental income
 
$
2,669,300

 
$
4,076,800

 
Commercial rental income
 
25,800

 
50,100

 
Tenant recoveries and other income
 
88,800

 
164,200

 
 
 
 
 
 
Total revenues
 
2,783,900

 
4,291,100

 
 
 
 
 
 
 
Certain operating expenses:
 
 
 
 
 
Property operating expenses
 
373,600

 
673,800

 
Maintenance and repairs
 
267,200

 
456,300

 
Utilities
 
165,700

 
223,700

 
Real estate and other taxes
 
71,900

 
127,900

 
Insurance
 
39,100

 
67,600

 
 
 
 
 
 
Total certain operating expenses
 
917,500

 
1,549,300

 
 
 
 
 
 
Revenue in excess of certain operating expenses
$
1,866,400

 
$
2,741,800








The accompanying notes are an integral part of these statements of revenue and certain operating expenses.

F- 11




PENN TREATY VILLAGE PENNTHOUSES
NOTES TO STATEMENTS OF REVENUE AND CERTAIN OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 2015 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 2014

1.
FORMATION AND ORGANIZATION
The accompanying statements of revenue and certain operating expenses includes the operations of a luxury residential rental community known as Penn Treaty Pennthouses (the “Property”), consisting of 224 apartment homes, 28,860 square feet of ground floor retail space, and 147 parking spaces, located in the Northern Liberties section of Philadelphia, Pennsylvania, which is wholly owned by 1 Brown Street Associates, L.P. and 800 North Delaware Avenue Associates, L.P.
The accompanying statements of revenue and certain operating expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, these statements are not intended to be a complete representation of the Property's actual operations for the periods. Material amounts that would not be directly attributable to future operating results of the Property are excluded. Items excluded consist primarily of depreciation, management fees, interest expense, and certain other expenses related to the operation of the Property.
The accompanying statement of revenues and certain operating expenses for the six months ended June 30, 2015 is unaudited. In the opinion of management, all adjustments (which are of normal and recurring nature) considered necessary, for the fair and consistent presentation of the statement of revenues and certain operating expenses for the six months ended June 30, 2015, have been included.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The statements of revenue and certain operating expenses have been prepared using the accrual method of accounting. As such, revenue is recorded when earned and expenses are recognized when incurred.
Revenue Recognition
Rental revenue is recognized when it is earned. Escalations and recoveries from tenants are received from commercial tenants for certain costs as provided in the lease agreements. These costs generally include real estate taxes, utilities, insurance, common area maintenance and other recoverable costs. Expected reimbursements are recorded as the related expenses are incurred.
Property Operating Expenses
Property operating expenses represent direct expenses of operating the Property (including certain personnel costs related thereto) and consist primarily of common area maintenance and repairs, commissions and marketing costs in connection with new leases, professional and administrative costs, security and monitoring, utilities, insurance, taxes, and other miscellaneous operating expenses that are expected to continue in the ongoing operation of the Property.
Use of Estimates
The preparation of the accompanying statements of revenue and certain operating expenses in accordance with accounting principles generally accepted in the United States of America requires management of the Property to make certain estimates and assumptions that affect the reported amounts of revenue and certain operating expenses during the reporting period. Actual results could differ from those estimates.
3.    TENANT LEASES
Substantially all of the residential operating leases outstanding as of June 30, 2015 and December 31, 2014 are scheduled to expire within twelve months.
Future minimum rental revenue to be received under non-cancellable commercial operating leases as of June 30, 2015 and December 31, 2014 are as follows:

For the year ended December 31,
As of June 30, 2015
(Unaudited)
As of December 31, 2014
2015 (1)
$
82,500

$
82,500

2016
269,000

269,000

2017
282,000

282,000

2018
285,000

285,000

2019
292,000

292,000

Thereafter
1,711,000

1,711,000

Total
$
2,921,500

$
2,921,500

(1) Rent commences September 1, 2015.
    
Upon the expiration of the lease in August 2025, the commercial tenant may exercise, at its discretion, two five-year extension options.

4.
COMMITMENTS AND CONTINGENCIES
The Property, from time-to-time, is involved with lawsuits arising in the ordinary course of business. In the opinion of the Property's management, any liability resulting from such litigation would not be material in relation of the Property's results of operations.
5.
SUBSEQUENT EVENTS
The Property has evaluated subsequent events through September 22, 2015 which is the date these financial statements were available to be issued and has not identified any events that require additional disclosure.



F- 12




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Members of
ETRE Residential, LLC
44 Wall Street
New York, New York
We have audited the accompanying combined balance sheet of ETRE Residential, LLC and ETRE Residential, LLC, Series R-1, (the “Company”), all of which operate under common control as of May 27, 2015.  This balance sheet is the responsibility of the Company’s management.  Our responsibility is to express an opinion on this combined balance sheet based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such combined balance sheet presents fairly, in all material respects, the combined financial position of ETRE Residential, LLC and ETRE Residential, LLC, Series R-1 as of May 27, 2015, in conformity with accounting principles generally accepted in the United States of America.
 
/s/ Deloitte & Touche LLP
New York, New York
May 29, 2015



F- 13



ETRE RESIDENTIAL, LLC AND ETRE RESIDENTIAL, LLC, SERIES R-1
COMBINED BALANCE SHEETS
AS OF JUNE 30, 2015 (UNAUDITED) AND MAY 27, 2015


 
As of
June 30, 2015 (Unaudited)
 
As of
May 27, 2015
Assets
 
 
 
Cash
$
1,000

 
$1,000
Members’ equity
 
 
 
Common stock, par value $10 per share; 100 Series R-1 shares authorized and outstanding
$
1,000

 
$1,000









See notes to the combined balance sheets.

F- 14




ETRE RESIDENTIAL, LLC AND ETRE RESIDENTIAL, LLC, SERIES R-1
NOTES TO THE COMBINED BALANCE SHEETS
AS OF JUNE 30, 2015 (UNAUDITED) AND MAY 27, 2015


1.
ORGANIZATION
ETRE Residential, LLC and ETRE Residential, LLC, Series R-1 (together, the “Company”) were formed on May 13, 2015 and May 14, 2015, respectively, pursuant to, and in accordance with, the Delaware Limited Liability Company Act (the “Act”). The Company is formed as a series limited liability company under the Act. Each series that the Company establishes will be a separate series and not itself a separate legal entity under Delaware law. As a separate series, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the series are segregated and enforceable only against the assets of such series, as provided under Delaware law. As of June 30, 2015 and May 27, 2015, the Company has created the R-1 Series (the “R-1 Series”, and together with all series which may be established by the Company in the future, the “Series”) which was established on May 14, 2015 and capitalized on May 27, 2015. The Company and the R-1 Series operate under common control, and therefore, have presented a combined balance sheet for the Company on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). As of June 30, 2015 and May 27, 2015, neither the Company nor any Series had commenced operations.
ETRE Financial, LLC is the sole managing member of the Company, and Jesse Stein is the initial Member of the Company, effective as of May 13, 2015. The Company is authorized to create an unlimited number of separate series, and to issue an unlimited number of common shares and an unlimited number of preferred shares in respect of each such series. Each Series intends to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. Each Series will be subject to the risks involved with owning real estate. These include, among others, the risks normally associated with changes in the general economic climate, changes in the real estate and mortgage markets, changes in tax laws, interest rate levels, and the availability of financing. In order to maintain its qualification as a REIT, each Series plans to distribute at least 90% of its taxable income to its shareholders.
2.
FORMATION OF THE COMPANY AND INITIAL PUBLIC OFFERING
The R-1 Series
The R-1 Series was capitalized with $1,000 and has 100 Series R-1 common shares issued and outstanding.
In April 2015, an affiliate of the R-1 Series executed a purchase and sale agreement (which was subsequently amended in September 2015) to acquire an 89.00% controlling interest in Penn Treaty (as defined below) in exchange for $78.0 million in cash, subject to adjustments as set forth in the purchase and sale agreement, to be funded by (i) $26.0 million of net proceeds from this offering and (ii) the proceeds of a new $52.0 million non-recourse mortgage loan on the Property expected to be consummated concurrently with the closing of this offering. The purchase and sale agreement will be assigned to the R-1 Series prior to the closing of the acquisition.
On July 27, 2015, the R-1 Series submitted to the U.S. Securities and Exchange Commission Amendment No. 1 to its draft registration statement on Form S-11, initially submitted on June 1, 2015, in connection with the initial public offering of R-1 Series common shares by the R-1 Series (the “R-1 Series IPO”). The proceeds from the R-1 Series IPO, after deducting underwriting commissions, offering costs, an administrative services fee and other transaction costs, will be used to acquire the 89.00% controlling interest in a luxury residential rental community known as Penn Treaty Pennthouses (“Penn Treaty”), consisting of 224 apartment homes, 28,860 square feet of ground floor retail space, and 147 parking spaces, located in the Northern Liberties section of Philadelphia, Pennsylvania.
3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Reporting and Use of Estimates
The preparation of the balance sheet in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. Separate statements of operations, changes in members’ equity and cash flows have not been presented as neither the Company nor the R-1 Series has commenced operations.
Underwriting Commissions and Offering Costs
Underwriting commissions and offering costs to be incurred in connection with the R-1 Series IPO will be reflected as a reduction of members’ equity. Costs incurred that are not directly associated with the completion of the R-1 Series IPO will be expensed as incurred.
As of June 30, 2015 and May 27, 2015, ETRE Financial, LLC has incurred approximately $30,000 (unaudited) of costs related to the IPO. Upon successful completion of the IPO, the R-1 Series will reimburse ETRE Financial, LLC for any costs associated with the offering from the proceeds from the IPO.
4.
SUBSEQUENT EVENTS
Management has evaluated subsequent events through September 22, 2015, which is the date these combined balance sheets were available to be issued and has not identified any events that require additional disclosure.

F- 15





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and Members of
ETRE Residential, LLC, Series R-1
44 Wall Street
New York, New York
We have audited the accompanying balance sheet of ETRE Residential, LLC, Series R-1 (the “Company”) as of May 27, 2015. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects, the financial position of ETRE Residential, LLC, Series R-1 as of May 27, 2015, in conformity with accounting principles generally accepted in the United States of America.
  
/s/ Deloitte & Touche LLP
New York, New York
May 29, 2015



F- 16



ETRE RESIDENTIAL, LLC, SERIES R-1
BALANCE SHEETS
AS OF JUNE 30, 2015 (UNAUDITED) AND MAY 27, 2015

 
As of
June 30, 2015
(Unaudited)
 
As of
May 27, 2015
Assets
 
 
 
Cash
$
1,000

 
$
1,000

Members’ equity
 
 
 
Common stock, par value $10 per share; 100 Series R-1 shares authorized and outstanding
$
1,000

 
$
1,000


  










See notes to the balance sheetS.


F- 17




ETRE RESIDENTIAL, LLC, SERIES R-1
NOTES TO THE BALANCE SHEETS
AS OF JUNE 30, 2015 (UNAUDITED) AND MAY 27, 2015

1.
ORGANIZATION 
ETRE Residential, LLC, (“ETRE Residential”) was formed May 13, 2015 pursuant to, and in accordance with, the Delaware Limited Liability Company Act (the “Act”). ETRE Residential is formed as a series limited liability company under the Act. ETRE Residential, LLC, Series R-1 (the “R-1 Series”) was established on May 14, 2015 and capitalized on May 27, 2015.
The R-1 Series is a separate series of ETRE Residential. The R-1 Series intends to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with the year ending on December 31, 2015. The R-1 Series will be subject to the risks involved with owning real estate. These include, among others, the risks normally associated with changes in the general economic climate, changes in the real estate and mortgage markets, changes in tax laws, interest rate levels, and the availability of financing. In order to maintain its qualification as a REIT, the R-1 Series plans to distribute at least 90% of its taxable income to its shareholders. The R-1 Series is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares.
The R-1 Series’ balance sheet is presented on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). As of June 30, 2015, neither ETRE Residential nor the R-1 Series had commenced operations.
2.
FORMATION OF THE COMPANY AND INITIAL PUBLIC OFFERING
The R-1 Series was capitalized with $1,000 and has 100 Series R-1 common shares issued and outstanding.
In April 2015, an affiliate of ETRE Holdings R-1, LLC (the “Holdings R-1 Subsidiary”), a wholly-owned subsidiary of the R-1 Series, executed a purchase and sale agreement with Waterview Grande, L.P. and its affiliates (the “Seller”) to acquire an 89.00% controlling interest in a luxury residential rental community known as Penn Treaty Pennthouses (the “Property”), consisting of 224 apartment homes, 28,860 square feet of ground floor retail space, and 147 parking spaces, located in the Northern Liberties section of Philadelphia, Pennsylvania. The Property is currently owned by 1 Brown Street Associates, L.P. and 800 Delaware Ave Associates, L.P. (together the “Property R-1 Subsidiaries”), which are in turn currently owned 100% by the Seller.
The agreement with the Seller (which will be assigned to the R-1 Series prior to the closing of the acquisition), as subsequently amended in September 2015, provides for the acquisition of an aggregate direct and indirect 89.00% controlling interest in the Property R-1 Subsidiaries in exchange for $78.0 million in cash, subject to adjustments as set forth in the purchase and sale agreement, to be funded by (i) $26.0 million of net proceeds from the R-1 Series IPO (as defined below) and (ii) the proceeds of a new $52.0 million non-recourse mortgage loan on the Property expected to be consummated concurrently with the closing of the R-1 Series IPO.
On July 27, 2015, the R-1 Series submitted to the U.S. Securities and Exchange Commission Amendment No. 1 to its draft registration statement on Form S-11, initially submitted on June 1, 2015, in connection with the initial public offering of R-1 Series common shares by the R-1 Series (the “R-1 Series IPO”). The proceeds from the R-1 Series IPO, after deducting underwriting commissions, offering costs, an administrative services fee and other transaction costs, will be used to acquire the 89.00% controlling interest in the Property.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Reporting and Use of Estimates
The preparation of the balance sheet in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates. Separate statements of operations, changes in members’ equity and cash flows have not been presented as the R-1 Series has not commenced operations.
Underwriting Commissions and Offering Costs
Underwriting commissions and offering costs to be incurred in connection with the R-1 Series IPO (including certain costs related to the completion of the purchase and sale transaction) will be reflected as a reduction of members’ equity. Costs incurred that are not directly associated with the completion of the R-1 Series IPO will be expensed as incurred.
As of June 30, 2015 and May 27, 2015, ETRE Financial, LLC has incurred approximately $30,000 (unaudited) of costs related to the IPO. Upon successful completion of the IPO, the R-1 Series will reimburse ETRE Financial, LLC for any costs associated with the offering from the proceeds from the IPO.
4.    SUBSEQUENT EVENTS
Management has evaluated subsequent events through September 22, 2015, which is the date these balance sheets were available to be issued, and has not identified any events that require additional disclosure.



F- 18



You should rely only on the information contained in this prospectus. We have not authorized anyone to provide information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, Series R-1 common shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our Series R-1 common shares.
Until ,                    2015 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.
 
 
 
 
 
 
 
 
ETRE Residential, LLC
 
 
 
 
 
 
 
 
Series R-1
 
 
 
 
Common Shares
 
 
 
 
 
 
 
 
 
Prospectus
 
 
 
 
                                 , 2015
 
 
 
 
 
 
 
 
 
Book-runner
 
 
 
 
 
 
 
 
 
Co-Managers
 
 
 
 
 
 
 



F- 19



PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 31.  Other expenses of issuance and distribution.
The following table shows the fees and expenses, other than underwriting discounts and commissions, to be paid by the R-1 Series in connection with the sale and distribution of the securities being registered hereby.  All amounts except the SEC registration fee and the Financial Industry Regulatory Authority, Inc. ("FINRA") filing fee are estimated.
  
(dollars in thousands
  
  
Securities and Exchange Commission registration fee....................................................................
$ *
FINRA filing fee..............................................................................................................................
$ *
NASDAQ listing fee.........................................................................................................................
$ *
Legal fees and expenses (including Blue Sky fees)..........................................................................
$ *
Accounting fees and expenses..........................................................................................................
$ *
Printing and engraving expenses.......................................................................................................
$ *
Transfer agent fees and expenses......................................................................................................
$ *
Miscellaneous....................................................................................................................................
$ *
Total...................................................................................................................................................
$ *
                                           
*          To be furnished by amendment.
Item 32.  Sales to Special Parties.
None.
Item 33.  Recent sales of unregistered securities.
Jesse Stein has purchased 100 Series R-1 common shares issued on May 27, 2015 for a purchase price of $1,000 in a private offering.  Such issuance was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof and/or Regulation D thereunder.
Item 34.  Indemnification of directors and officers.
Pursuant to our operating agreement, we have agreed to indemnify ETRE Financial, LLC, the managing member of our Company, and each of our directors and officers, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the company and counsel fees and disbursements on a solicitor and client basis) arising from the performance of any of their obligations or duties in connection with their service to us or the operating agreement, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such person may hereafter be made party by reason of being or having been the managing member or one of our directors or officers. 
Prior to completion of this offering, we intend to enter into separate indemnification agreements with our directors and officers.  Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law and our operating agreement against any and all expenses, judgments, fines, penalties and amounts paid in settlement of any claim.  The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law and our operating agreement.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
We maintain directors' and officers' liability insurance for our officers and directors.
Item 35.  Treatment of proceeds from shares being registered.
None of the proceeds will be credited to an account other than the appropriate capital share account.

I-1



Item 36.  Financial statements and exhibits.
(a)Financial Statements.  See page F‑1 for an index of the financial statements that are being filed as part of this Registration Statement.
(b)Exhibits.  The following is a complete list of exhibits filed as part of the registration statement, which are incorporated herein:
Exhibit number
Exhibit description
 
3.1
Certificate of Formation of ETRE Residential, LLC
 
3.1.1
Certificate of Amendment of ETRE Residential, LLC
 
3.2
Amended and Restated Limited Liability Company Agreement of ETRE Residential, LLC
 
3.3
Bylaws of ETRE Residential, LLC
 
4.1*
Specimen Series R-1 Common Share Certificate of ETRE Residential, LLC
 
5.1*
Opinion of Goodwin Procter LLP (including consent of such firm)
 
8.1*
Tax Opinion of Goodwin Procter LLP (including consent of such firm)
 
10.1*
Form of Amended and Restated Agreement of Limited Partnership of 1 Brown Street Associates, L.P. / 800 North Delaware Avenue Associates, L.P., by and among ETRE Property R-1 GP, LLC, ETRE Holdings R-1, LLC and Waterview Grande, L.P.
 
10.2*
Form of Administrative Services Agreement between ETRE Residential, LLC, Series R-1 and ETRE Asset Management, LLC.
 
10.3*
Form of Asset and Property Management Agreement by and between 1 Brown Street Associates, L.P. / 800 North Delaware Avenue Associates, L.P. and Core Realty, Inc.
 
10.4*
Form of Lease by and between 1 Brown Street Associates, L.P. / 800 North Delaware Avenue Associates, L.P. and Core Realty, Inc.
 
10.5*
Agreement for the Purchase and Sale of Partnership Interests by and among ETRE Holdings A-2, LLC, 1 Brown Street Associates, L.P., 800 North Delaware Avenue Associates, L.P., Waterview Grande, L.P., 1-33 Brown Street, LLC and 800 North Delaware Avenue, LLC, dated April 16, 2015, as assigned by ETRE Holdings A-2, LLC to ETRE Holdings R-1, LLC on ______, 2015
 
10.6*
Form of Indemnification Agreement among ETRE Residential, LLC and its proposed directors and officers
 
10.7*
Form of License Agreement
 
10.8*
2015 Non-Management Director Compensation Plan
 
21.1*
List of Subsidiaries of ETRE Residential, LLC
 
23.1*
Consent of Goodwin Procter LLP (included in Exhibit 5.1)
 
23.2*
Consent of Goodwin Procter LLP (included in Exhibit 8.1)
 
23.3
Consent of Deloitte & Touche LLP
 
23.4
Consent of Deloitte & Touche LLP
 
23.5
Consent of Deloitte & Touche LLP
 
24.1
Power of Attorney (included on signature page)
 
99.1
Consent of Jay Anderson to be named as a proposed director
 
99.2
Consent of Mark Filanowski to be named as a proposed director
 
99.3
Consent of Samuel Fuller to be named as a proposed director
 

*                To be filed by amendment.
†            Compensatory plan or arrangement.

I-2



Item 37.  Undertakings.
(a)The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
(b)Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (or the Securities Act), may be permitted to directors, officers or controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  If a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant 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 registrant 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 Securities Act and will be governed by the final adjudication of such issue.
(c)The undersigned registrant hereby further undertakes that:
(1)For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)For the purpose of determining any liability under the Securities Act, each post‑effective amendment that contains a form of prospectus 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.


I-3



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 Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on September 22, 2015.
ETRE Residential, LLC
By: /s/ Paul Frischer
Name:
Paul Frischer
Title:
President and Chief Executive Officer
  
Each person whose signature appears below hereby constitutes and appoints Paul Frischer, such person's true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and any additional related registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including post‑effective amendments to the registration statement and any such related registration statements), and to file the same, with all exhibits thereto, and any other documents in connection therewith, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or its substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
Signatures
 
Title
 
Date
 
 
 
 
 
 
By:
/s/ Paul Frischer
 
President, Chief Executive Officer and Director
(Principal Executive Officer)
 
September 22, 2015
 
  Paul Frischer
 
 
 
 
 
 
 
 
By:
/s/ Darren Glickman
 
Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)
 
September 22, 2015
 
Darren Glickman
 
 
 
 
 
 
 
 
 
By:
/s/ Jesse Stein
 
Chief Operating Officer, Director
 
September 22, 2015
 
Jesse Stein
 
 
 
 
 
 
 
 


I-4



Exhibit number
Exhibit description
 
3.1
Certificate of Formation of ETRE Residential, LLC
 
3.1.1
Certificate of Amendment of ETRE Residential, LLC
 
3.2
Amended and Restated Limited Liability Company Agreement of ETRE Residential, LLC
 
3.3
Bylaws of ETRE Residential, LLC
 
4.1*
Specimen Series R-1 Common Share Certificate of ETRE Residential, LLC
 
5.1*
Opinion of Goodwin Procter LLP (including consent of such firm)
 
8.1*
Tax Opinion of Goodwin Procter LLP (including consent of such firm)
 
10.1*
Form of Amended and Restated Agreement of Limited Partnership of 1 Brown Street Associates, L.P. / 800 North Delaware Avenue Associates, L.P., by and among ETRE Property R-1 GP, LLC, ETRE Holdings R-1, LLC and Waterview Grande, L.P.
 
10.2*
Form of Administrative Services Agreement between ETRE Residential, LLC, Series R-1 and ETRE Asset Management, LLC.
 
10.3*
Form of Asset and Property Management Agreement by and between 1 Brown Street Associates, L.P. / 800 North Delaware Avenue Associates, L.P. and Core Realty, Inc.
 
10.4*
Form of Lease by and between 1 Brown Street Associates, L.P. / 800 North Delaware Avenue Associates, L.P. and Core Realty, Inc.
 
10.5*
Agreement for the Purchase and Sale of Partnership Interests by and among ETRE Holdings A-2, LLC, 1 Brown Street Associates, L.P., 800 North Delaware Avenue Associates, L.P., Waterview Grande, L.P., 1-33 Brown Street, LLC and 800 North Delaware Avenue, LLC, dated April 16, 2015, as assigned by ETRE Holdings A-2, LLC to ETRE Holdings R-1, LLC on ______, 2015
 
10.6*
Form of Indemnification Agreement among ETRE Residential, LLC and its proposed directors and officers
 
10.7*
Form of License Agreement
 
10.8*
2015 Non-Management Director Compensation Plan
 
21.1*
List of Subsidiaries of ETRE Residential, LLC
 
23.1*
Consent of Goodwin Procter LLP (included in Exhibit 5.1)
 
23.2*
Consent of Goodwin Procter LLP (included in Exhibit 8.1)
 
23.3
Consent of Deloitte & Touche LLP
 
23.4
Consent of Deloitte & Touche LLP
 
23.5
Consent of Deloitte & Touche LLP
 
24.1
Power of Attorney (included on signature page)
 
99.1
Consent of Jay Anderson to be named as a proposed director
 
99.2
Consent of Mark Filanowski to be named as a proposed director
 
99.3
Consent of Samuel Fuller to be named as a proposed director
 

*                      To be filed by amendment.
†                 Compensatory plan or arrangement


I-5
EX-3.1 2 exhibit31certofformation.htm EXHIBIT 3.1 Exhibit


Exhibit 3.1 
CERTIFICATE OF FORMATION
OF
ETRE RESIDENTIAL, LLC
FIRST:           The name of the limited liability company is ETRE Residential, LLC
SECOND:      The address of its registered office in the State of Delaware is 1811 Silverside Road in the City of Wilmington, Delaware 19810, in the County of New Castle. The name of its registered agent at such address is Vcorp Services, LLC.
THIRD:          Members may be admitted in accordance with the terms of the Operating Agreement of the limited liability company.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation, on May 13, 2015.
/s/Farah Moiso                                               
Farah Moiso,
Authorized Person



EX-3.2 3 exhibit32.htm EXHIBIT 3.2 Exhibit


Exhibit 3.2






FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ETRE RESIDENTIAL, LLC







TABLE OF CONTENTS

 
 
Page
Article I DEFINITIONS
1
Section 1.1
Definitions
1
Section 1.2
Construction
7
Article II ORGANIZATION
7
Section 2.1
Formation
7
Section 2.2
Name
7
Section 2.3
Registered Office; Registered Agent; Principal Office; Other Offices
7
Section 2.4
Purposes
8
Section 2.5
Powers
8
Section 2.6
Power of Attorney
8
Section 2.7
Term
9
Section 2.8
Title to Assets
10
Section 2.9
Certificate of Formation
10
Article III MEMBERS, SERIES AND SHARES
10
Section 3.1
Members
10
Section 3.2
Series of the Company; Establishment of R‑1 Series
11
Section 3.3
Authorization to Issue Shares
14
Section 3.4
Series R‑1 Common Shares
16
Section 3.5
Voting Rights of Common Shares Generally
23
Section 3.6
Certificates
23
Section 3.7
Record Holders
24
Section 3.8
Registration and Transfer of Shares
24
Section 3.9
Splits and Combinations
25
Section 3.10
Agreements and Bylaws
26
Article IV DISTRIBUTIONS
26
Section 4.1
Distributions to Record Holders
26
Article V MANAGEMENT AND OPERATION OF BUSINESS
26
Section 5.1
Power and Authority of Board of Directors
26
Section 5.2
Number; Nominations and Elections; Removals; Vacancies
29
Section 5.3
Resignation
29
Section 5.4
Determinations by Board
29
Section 5.5
Committees of the Board of Directors
30
Section 5.6
Exculpation, Indemnification, Advances and Insurance
30
Section 5.7
Duties of Officers and Directors
33
Section 5.8
Standards of Conduct and Modification of Duties of the Managing Member
34
Section 5.9
Contractual Relationship with the Administrative Agent
34
Section 5.10
Outside Activities
34
Section 5.11
Reliance by Third Parties
35
Section 5.12
Certain Conflicts of Interest
35
Article VI BOOKS, RECORDS, ACCOUNTING AND REPORTS
36
Section 6.1
Records and Accounting
36
Section 6.2
Fiscal Year
36
Article VII TAX MATTERS
36
Section 7.1
Tax Treatment
36
Section 7.2
Qualifying and Maintaining Qualification as a REIT
36
Article VIII DISSOLUTION, TERMINATION AND LIQUIDATION
37
Section 8.1
Dissolution and Termination
37
Section 8.2
Liquidator
37
Section 8.3
Liquidation of a Series
38
Section 8.4
Cancellation of Certificate of Formation
39
Section 8.5
Return of Contributions
39
Section 8.6
Waiver of Partition
39
Article IX AMENDMENT OF AGREEMENT
39
Section 9.1
General
39
Section 9.2
Super Majority Amendments
40
Section 9.3
Amendments to be Adopted Solely by the Board of Directors
40
Section 9.4
Certain Amendment Requirements
41
Section 9.5
Approval of Managing Member
42
Article X MERGER, CONSOLIDATION OR CONVERSION
42
Section 10.1
Authority
42
Section 10.2
Procedure for Merger, Consolidation or Conversion
42
Section 10.3
Approval by Members of Merger, Consolidation or Conversion or Sales of Substantially All Assets
43
Section 10.4
Certificate of Merger or Conversion
44
Section 10.5
Effect of Merger
44
Article XI MEMBER MEETINGS
45
Section 11.1
Meetings
45
Section 11.2
Voting Rights
45
Section 11.3
Extraordinary Actions
45
Section 11.4
Board Approval
46
Section 11.5
Action By Members without a Meeting
46
Section 11.6
Managing Member
46
Article XII GENERAL PROVISIONS
46
Section 12.1
Addresses and Notices
46
Section 12.2
Further Action
47
Section 12.3
Binding Effect
47
Section 12.4
Integration
47
Section 12.5
Creditors
47
Section 12.6
Waiver
47
Section 12.7
Counterparts
47
Section 12.8
Applicable Law
47
Section 12.9
Invalidity of Provisions
47
Section 12.10
Consent of Members
47
Section 12.11
Facsimile Signatures
47
Article XIII RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES
48
Section 13.1
Definitions
48
Section 13.2
Ownership Limitations
50
Section 13.3
Remedies for Breach
51
Section 13.4
Notice of Restricted Transfer
51
Section 13.5
Owners Required To Provide Information
51
Section 13.6
Remedies Not Limited
52
Section 13.7
Ambiguity
52
Section 13.8
Exceptions
52
Section 13.9
Increase or Decrease in Aggregate Ownership and Common Share Ownership Limits
53
Section 13.10
Legend
54
Section 13.11
Transfer of Shares in Trust
55
Section 13.12
NASDAQ Transactions
56
Section 13.13
Enforcement
57
Section 13.14
Non‑Waiver
57
Section 13.15
Severability
57








FIRST AMENDED AND RESTATED LIMITED LIABILITY

COMPANY AGREEMENT OF ETRE RESIDENTIAL, LLC
This FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ETRE RESIDENTIAL, LLC, is dated as of [•], 2015. Capitalized terms used herein without definition shall have the respective meanings ascribed thereto in Section 1.1, Section 3.4 and Article VIII.
WHEREAS, the Company was formed under the Delaware Act pursuant to a certificate of formation filed with the Secretary of State of the State of Delaware on May 13, 2015, as amended by a certificate of amendment filed with the Secretary of State of the State of Delaware on May 14, 2015, and a Limited Liability Company Agreement of ETRE Residential, LLC, dated as of May 14, 2015 (the “Original LLC Agreement”); and
WHEREAS, the Board of Directors of the Company has authorized and approved an amendment and restatement of the Original LLC Agreement on the terms set forth herein.
NOW THEREFORE, the limited liability company agreement of the Company is hereby amended and restated to read in its entirety as follows:
ARTICLE I
DEFINITIONS
Section 1.1    Definitions.     Certain terms used in Section 3.4 of this Agreement are defined in that Section, and certain other terms used in Article VIII of this Agreement are defined in that Article. In addition, the following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

Additional Member” means a Person admitted as a Member of the Company and associated with a Series in accordance with Article III as a result of an issuance of Shares of such Series to such Person by the Company.
Administrative Agent” means ETRE Asset Management LLC, a Delaware limited liability company, together with its successors and assigns.
Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the Person in question. As used herein, the term “Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
Agreement” means this First Amended and Restated Limited Liability Company Agreement of ETRE Residential, LLC, as it may be amended, modified, supplemented or restated from time to time.
Board of Directors” has the meaning assigned to such term in Section 5.1.
Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day.
Bylaws” means any Bylaws of the Company adopted by the Board of Directors in accordance with Section 5.1.
Capital Contribution” means with respect to any Member, the amount of cash and the initial Gross Asset Value of any other property contributed or deemed contributed to the capital of a Series by or on behalf of such Member, reduced by the amount of any liability assumed by such Series relating to such property and any liability to which such property is subject.
Certificate” means a certificate (i) in global form in accordance with the rules and regulations of the Depositary or (ii) in such other form as may be adopted by the Board of Directors, issued by the Company evidencing ownership of one or more Shares.
Certificate of Formation” means the Certificate of Formation of the Company filed with the Secretary of State of the State of Delaware as referenced in Section 2.9, as such Certificate of Formation may be amended, supplemented or restated from time to time.
Chairman of the Board”, “Chief Executive Officer”, “President”, “Vice President”, “Chief Operating Officer”, “Treasurer”, “Assistant Treasurer”, “Secretary” and “Assistant Secretary” have the meanings assigned to such terms in the Bylaws.
Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any successor law.
Commission” means the United States Securities and Exchange Commission.
Common Shares” means any Shares of a Series that are not Preferred Shares.
Company” means ETRE Residential, LLC, a Delaware series limited liability company, and any successors thereto.
Company Group” means the Company, each Series and each Subsidiary of a Series.
Conflict of Interest” means any matter that the Administrative Agent believes may involve a conflict of interest, that is not otherwise addressed by the Inter‑Series Policy and that is submitted to the Nominating and Corporate Governance Committee to determine whether the resolution of such matter is fair and reasonable to the Company and the Members.
Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. C. Section 18‑101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute.
Depositary” means, with respect to any Shares issued in global form, The Depository Trust Company and its successors and permitted assigns.
DGCL” means the General Corporation Law of the State of Delaware, 8 Del. C. Section 101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute.
Director” means (i) a member of the Board of Directors of the Company and each Series and (ii) with respect to a Series, any Person who has been designated pursuant to the terms of the Series Designation for such Series as a specific Director to be associated with such Series.
Exchange Act” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time and any successor to such statute, and the rules and regulations promulgated thereunder.
Expenses and Liabilities” has the meaning assigned to such term in Section 5.6(a).
Governmental Entity” means any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof.
Gross Asset Value” means, with respect to any asset contributed by a Member to a Series, the gross fair market value of such asset as determined by the Board of Directors.
Group Member” means a member of the Company Group.
Group Member Agreement” means the partnership agreement of any Group Member that is a limited or general partnership, the limited liability company agreement of any Group Member, other than the Company, that is a limited liability company, the certificate of incorporation and bylaws or similar organizational documents of any Group Member that is a corporation, the joint venture agreement or similar governing document of any Group Member that is a joint venture and the governing or organizational or similar documents of any other Group Member that is a Person other than a limited or general partnership, limited liability company, corporation or joint venture, as such may be amended, supplemented or restated from time to time.
Indemnified Person” means (a) any Person who is or was a Director or Officer of the Company and/or associated with a Series, (b) any Person who is or was a member of a committee of the Board of Directors established by the Board of Directors or pursuant to any Series Designation, (c) any Person who is or was the Managing Member, together with its officers, directors, members, managers or partners, (d) any Person who is or was serving at the request of the Company as an officer, director, member, manager, partner, tax matters partner, fiduciary or trustee of another Person (including any Subsidiary); provided, that a Person shall not be an Indemnified Person by reason of providing, on a fee for services basis, trustee, fiduciary or custodial services, and (e) any Person the Board of Directors designates as an “Indemnified Person” for purposes of this Agreement.
Independent Director” means a Director who meets the then current independence standards established by each National Securities Exchange on which Shares are listed for trading and any other independence standards adopted by the Board of Directors.
Inter‑Series Committee” means any inter‑series conflict resolution committee established by the Administrative Agent to administer, on behalf of the Administrative Agent, certain provisions of the Inter‑Series Policy.
Inter‑Series Policy” means any inter‑series relationship, conflicts of interest and opportunity allocation policy of the Company adopted by the Board of Directors in accordance with Section 5.1.
Initial Member” means, with respect to the R‑1 Series, Jesse Stein and, with respect to any Series that is established and designated after the date hereof, means the Person identified in the Series Designation of such Series as the Initial Member associated therewith.
Liquidator” means one or more Persons selected by the Board of Directors to perform the functions described in Section 8.2 as liquidating trustee of the Company or a Series, as applicable, within the meaning of the Delaware Act.
Managing Member” means ETRE Financial, LLC, a Delaware limited liability company, in its capacity as a member of the Company.
Member” means each member of the Company associated with a Series, including, unless the context otherwise requires, the Initial Member, each Substitute Member and each Additional Member.
Merger Agreement” has the meaning assigned to such term in Section 10.1.
NASDAQ” means the Nasdaq Capital Market.
National Securities Exchange” means an exchange registered with the Commission under Section 6(a) of the Exchange Act.
Nominating and Corporate Governance Committee” means a committee of the Board of Directors designated as such in accordance with the Bylaws, and composed entirely of one or more Directors who meets the then current independence and other standards required of nominating and corporate governance committee members established by each National Securities Exchange on which Shares are listed for trading.
Officers” has the meaning assigned to such term in Section 5.1(h).
Offering Document” means, with respect to any class or series of Shares, the prospectus, offering memorandum, private placement memorandum or other offering document related to the initial offering of such Shares, approved by the Board of Directors (or a committee thereof).
Opinion of Counsel” means a written opinion of counsel (who may be regular counsel to the Company or any of its Affiliates) acceptable to the Board of Directors.
Original LLC Agreement” has the meaning set forth in the recitals to this Agreement.
Outstanding” means, with respect to Shares, all Shares that are issued by the Company and reflected as outstanding on the Company’s books and records as of the date of determination.
Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, Governmental Entity or other entity; provided, however, that, solely for purposes of Article XIII, the term “Person” shall have the meaning specified in Section 13.1.
Plan of Conversion” has the meaning assigned to such term in Section 10.1.
Preferred Shares” means a class of Shares of a Series that entitles the Record Holders thereof to a preference or priority over the Record Holders of any other class of Shares of such Series in (i) the right to share profits or losses or items thereof, (ii) the right to share in Series distributions, or (iii) rights upon termination or liquidation of such Series (including in connection with the dissolution or liquidation of the Company). “Preferred Shares” shall not include Common Shares.
R‑1 Series” has the meaning assigned to such term in Section 3.2(c).
Record Date” means the date established by the Company in accordance with the provisions of the Bylaws for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Members associated with any Series or entitled to exercise rights in respect of any lawful action of Members associated with any Series or (b) the identity of Record Holders entitled to receive any report or distribution or to participate in any offer.
Record Holder” or “holder” means (a) with respect to any Common Shares, the Person in whose name such Shares are registered on the books of the Transfer Agent as of the opening of business on a particular Business Day, and (b) with respect to any Shares of any other class, the Person in whose name such Shares are registered on the books of the Transfer Agent or on the books that the Company has caused to be kept as of the opening of business on such Business Day.
REIT” means a real estate investment trust within the meaning of Sections 856 through 860 of the Code.
Securities Act” means the Securities Act of 1933, as amended, supplemented or restated from time to time and any successor to such statute, and the rules and regulations promulgated thereunder.
Series” has the meaning assigned to such term in Section 3.2(a).
Series Designation” has the meaning assigned to such term in Section 3.2(a).
Series Property” means, at any particular time, all interests, properties (whether tangible or intangible, and whether real, personal or mixed) and rights of any type contributed to or acquired by any one or more of the Series and owned or held by or for the account of any one or more of the Series, whether owned or held by or for the account of any one or more of the Series as of the date of the formation or establishment thereof or thereafter contributed to or acquired by any one or more of the Series.
Series R‑1 Common Shares” means Common Shares of the R‑1 Series.
Series R‑1 IPO” means the initial public offering and sale of the Series R‑1 Common Shares.
Share” means a share of a Series issued by the Company that evidences a Member’s rights, powers and duties with respect to the Company and such Series pursuant to this Agreement, the Bylaws and the Delaware Act. Shares may be Common Shares or Preferred Shares, and may be issued in different classes or series.
Share Designation” has the meaning assigned to such term in Section 3.3(c).
Special Approval” means approval by a majority of the members of the Nominating and Corporate Governance Committee.
Subsidiary” means, with respect to any Person or a Series, as of any date of determination, any other Person as to which such Person or Series owns or otherwise controls, directly or indirectly, more than 50% of the voting shares or other similar interests or a sole general partner interest or managing member or similar interest of such Person.
Substitute Member” means a Person who is admitted as a Member of the Company and associated with a Series pursuant to Section 3.8(c) as a result of a transfer of Shares to such Person.
Surviving Business Entity” has the meaning assigned to such term in Section 10.2(a)(ii).
transfer” means, with respect to a Share, a transaction by which the Record Holder of a Share assigns such Share to another Person who is or becomes a Member, and includes a sale, assignment, gift, exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage; provided, however, that, solely for purposes of Article XIII, the term “Transfer” shall have the meaning specified in Section 13.1.
Transfer Agent” means, with respect to any class of Shares, such bank, trust company or other Person (including the Company or one of its Affiliates) as shall be appointed from time to time by the Company to act as registrar and transfer agent for such class of Shares; provided that if no Transfer Agent is specifically designated for such class of Shares, the Company shall act in such capacity.
U.S. GAAP” means United States generally accepted accounting principles consistently applied.
Section 1.2    Construction     Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; and (c) the term “include” or “includes” means includes, without limitation, and “including” means including, without limitation.

ARTICLE II
ORGANIZATION
Section 2.1    Formation    The Company has been formed as a series limited liability company pursuant to the provisions of the Delaware Act.

Except as expressly provided to the contrary in this Agreement or the Bylaws, the rights, duties (including fiduciary duties), liabilities and obligations of the Members and the administration, dissolution and termination of the Company and each Series shall be governed by the Delaware Act. All Shares shall constitute personal property of the owner thereof for all purposes and a Member has no interest in specific Company or Series property.
Section 2.2    Name    The name of the Company shall be “ETRE Residential, LLC”. The words “Limited Liability Company”, “LLC”, or similar words or letters shall be included in the Company’s name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The business of the Company and any Series may be conducted under any other name or names, as determined by the Board of Directors. The Board of Directors may change the name of the Company at any time and from time to time and shall notify the Members of such change in the next regular communication to the Members. The Board of Directors may change the name of any Series at any time and from time to time and shall notify the Members associated with such Series of such change in the next regular communication to such Members.

Section 2.3    Registered Office; Registered Agent; Principal Office; Other Offices
Unless and until changed by the Board of Directors, the registered office of the Company in the State of Delaware shall be located at VCorp Services, LLC, 1811 Silverside Road, Wilmington, Delaware 19810, and the registered agent for service of process on the Company and each Series in the State of Delaware at such registered office shall be VCorp Services, LLC. The principal office of the Company shall be located at 44 Wall Street, New York, New York 10005 or such other place as the Board of Directors may from time to time designate by notice to the Members. Unless otherwise provided in the applicable Series Designation, the principal office of each Series shall be located at 44 Wall Street, New York, New York 10005 or such other place as the Board of Directors may from time to time designate by notice to the Members associated with the applicable Series. The Company and each Series may maintain offices at such other place or places within or outside the State of Delaware as the Board of Directors determines to be necessary or appropriate.
Section 2.4    Purposes    The purposes of the Company and, unless otherwise provided in the applicable Series Designation, each Series shall be to (a) promote, conduct or engage in, directly or indirectly, any business, purpose or activity that lawfully may be conducted by a limited liability company organized pursuant to the Delaware Act, (b) acquire, hold and dispose of interests in any corporation, partnership, joint venture, limited liability company, trust or other entity and, in connection therewith, to exercise all of the rights and powers conferred upon the Company and each Series with respect to its interests therein, and (c) conduct any and all activities related or incidental to the foregoing purposes.

Section 2.5    Powers        The Company and each Series shall be empowered to do any and all acts and things necessary and appropriate for the furtherance and accomplishment of the purposes described in Section 2.4.

Section 2.6    Power of Attorney.    Each Member hereby constitutes and appoints each of the Chief Executive Officer and the Secretary and, if a Liquidator shall have been selected pursuant to Section 8.2, the Liquidator (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys in fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney in fact, with full power and authority in his name, place and stead, to:

(a)execute, swear to, acknowledge, deliver, file and record in the appropriate public offices:
(i)all certificates, documents and other instruments (including this Agreement and the Certificate of Formation and all amendments or restatements hereof or thereof) that the Chief Executive Officer or Secretary, or the Liquidator, determines to be necessary or appropriate to form, qualify or continue the existence or qualification of the Company as a series limited liability company in the State of Delaware and in all other jurisdictions in which the Company or any Series may conduct business or own property;

(ii)all certificates, documents and other instruments that the Chief Executive Officer or Secretary, or the Liquidator, determines to be necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement;

(iii)all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the Board of Directors or the Liquidator determines to be necessary or appropriate to reflect the dissolution, liquidation and/or termination of the Company or a Series pursuant to the terms of this Agreement;

(iv)all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Member pursuant to, or in connection with other events described in, Article III or Article VIII;

(v)all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges of any class of Shares issued pursuant to Section 3.3; and

(vi)all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger, consolidation or conversion of the Company pursuant to Article X.

(b)execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments that the Board of Directors or the Liquidator determines to be necessary or appropriate to (i) make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Members hereunder or is consistent with the terms of this Agreement or (ii) effectuate the terms or intent of this Agreement; provided, that when required by Section 9.2 or any other provision of this Agreement that establishes a percentage of the Members or of the Members of any class or series required to take any action, the Chief Executive Officer or Secretary, or the Liquidator, may exercise the power of attorney made in this Section 2.6(b) only after the necessary vote, consent, approval, agreement or other action of the Members or of the Members of such class or series, as applicable.

Nothing contained in this Section 2.6 shall be construed as authorizing the Chief Executive Officer or Secretary, or the Liquidator, to amend, change or modify this Agreement except in accordance with Article XI or as may be otherwise expressly provided for in this Agreement.
(c)The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Member and the transfer of all or any portion of such Member’s Shares and shall extend to such Member’s heirs, successors, assigns and personal representatives. Each such Member hereby agrees to be bound by any representation made by the Chief Executive Officer or Secretary, or the Liquidator, acting in good faith pursuant to such power of attorney; and each such Member, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the Chief Executive Officer or Secretary, or the Liquidator, taken in good faith under such power of attorney in accordance with Section 2.6. Each Member shall execute and deliver to the Chief Executive Officer or Secretary, or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as any of such Officers or the Liquidator determines to be necessary or appropriate to effectuate this Agreement and the purposes of the Company.

Section 2.7    Term    The term of the Company commenced on the day on which the Certificate of Formation was filed with the Secretary of State of the State of Delaware pursuant to the provisions of the Delaware Act. The existence of each Series shall commence upon the effective date of the Series Designation establishing such Series, as provided in Section 3.2, or, in the case of the R‑1 Series, as provided in Section 3.2(c). The term of the Company and each Series shall be perpetual, unless and until it is dissolved or terminated in accordance with the provisions of Article VIII. The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation as provided in the Delaware Act.

Section 2.8    Title to Assets    Title to the assets of a Series, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by such Series, and no Member, Director or Officer, individually or collectively, shall have any ownership interest in such Series’ assets or any portion thereof. Title to any or all of the assets of a Series may be held in the name of such Series or one or more nominees, as the Board of Directors may determine. All Series’ assets shall be recorded as the property of the applicable Series in the books and records maintained for such Series, irrespective of the name in which record title to such Series’ assets is held.

Section 2.9    Certificate of Formation    The Certificate of Formation, as required by the Delaware Act, and a certificate of amendment thereto, have been filed with the Secretary of State of the State of Delaware, such filings being hereby confirmed, ratified and approved in all respects. The Board of Directors shall use all reasonable efforts to cause to be filed such other certificates or documents that it determines to be necessary or appropriate for the formation, continuation, qualification and operation of a series limited liability company in the State of Delaware or any other state in which the Company or any Series may elect to do business or own property. To the extent that the Board of Directors determines such action to be necessary or appropriate, the Board of Directors shall direct the appropriate Officers of the Company to file amendments to and restatements of the Certificate of Formation and do all things to maintain the Company as a series limited liability company under the laws of the State of Delaware or of any other state in which the Company or any Series may elect to do business or own property, and any such Officer so directed shall be an “authorized person” of the Company and, unless otherwise provided in a Series Designation, each Series within the meaning of the Delaware Act for purposes of filing any such certificate with the Secretary of State of the State of Delaware. The Company shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Formation, any qualification document or any amendment thereto to any Member.

ARTICLE III
MEMBERS, SERIES AND SHARES

Section 3.1    Members

(a)A Person shall be admitted as a Member and shall become bound by the terms of this Agreement if such Person purchases or otherwise lawfully acquires any Share and becomes the Record Holder of such Share in accordance with the provisions of Article III, Article IV and Article XIII hereof. A Person may become a Record Holder without the consent or approval of any of the Members. A Person may not become a Member without acquiring a Share.

(b)The name and mailing address of each Member shall be listed on the books and records of the Company maintained for such purpose by the Company or the Transfer Agent. The Secretary of the Company shall update the books and records of the Company from time to time as necessary to reflect accurately the information therein (or shall cause the Transfer Agent to do so, as applicable).

(c)Except as otherwise provided in the Delaware Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member.

(d)Except as otherwise provided in the Delaware Act, the debts, obligations and liabilities of a Series, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of such Series, and not of any other Series. In addition, the Members shall not be obligated personally for any such debt, obligation or liability of any Series solely by reason of being a Member.

(e)Unless otherwise provided herein, Members may not be expelled from or removed as Members of the Company. Members shall not have any right to resign from the Company; provided, that when a transferee of a Member’s Shares becomes a Record Holder of such Shares, such transferring Member shall cease to be a Member of the Company with respect to the Shares so transferred.

(f)Except to the extent expressly provided in this Agreement (including any Share Designation or Series Designation): (i) no Member shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon dissolution or termination of the Company or any Series may be considered as such by law and then only to the extent provided for in this Agreement; (ii) no Member holding any class or series of any Shares of a Series shall have priority over any other Member holding the same class or series of Shares of such Series either as to the return of Capital Contributions or as to distributions; (iii) no interest shall be paid by the Company or any Series on Capital Contributions; and (iv) no Member, in its capacity as such, shall participate in the operation or management of the business of the Company or any Series, transact any business in the Company’s or any Series’ name or have the power to sign documents for or otherwise bind the Company or any Series by reason of being a Member.

(g)Except as may be otherwise agreed between the Company or a Series, on the one hand, and a Member, on the other hand, any Member shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Company or a Series, including business interests and activities in direct competition with the Company or any Series. Neither the Company, any Series nor any of the other Members shall have any rights by virtue of this Agreement in any such business interests or activities of any Member.

(h)The Managing Member, by execution of this Agreement, continues to be admitted as a member of the Company. The Managing Member will not have any distribution, redemption, conversion or liquidation rights by virtue of its status as the Managing Member.

Section 3.2    Series of the Company; Establishment of R‑1 Series

(a)Establishment of Series. Subject to the provisions of this Agreement, the Board of Directors may, at any time and from time to time, by a written action or actions approved by the Board of Directors in compliance with Section 3.2(d) (each, a “Series Designation”), establish one or more series (each a “Series”). The Series Designation establishing one or more Series shall relate solely to the Series established thereby and shall not be construed: (i) to affect the terms and conditions of any other Series, or (ii) to designate, fix or determine the rights, powers, authority, privileges, preferences, duties, responsibilities, liabilities and obligations in respect of Shares associated with any other Series, or the Members associated therewith. The terms and conditions for each Series established pursuant to this Section 3.2 shall be as set forth in this Agreement and the Series Designation for the Series.

(b)Series Operation. Each of the Series shall operate to the extent practicable as if it were a separate limited liability company. Accordingly, references to the Company herein shall, unless and only to the extent the context otherwise requires, be interpreted to refer to each individual Series severally.

(c)Establishment of the R‑1 Series. Without limiting the authority of the Board of Directors to establish and designate any further Series by Series Designation, Series R‑1 of the Company (the “R‑1 Series”) was originally established and designated, effective as of May 14, 2015, pursuant to the terms of the Original LLC Agreement. The Board of Directors hereby ratifies, confirms and approves the establishment and designation of the R‑1 Series in all respects. This Agreement shall constitute the Series Designation of the R‑1 Series, and the terms and conditions for the R‑1 Series shall be as set forth in this Agreement.

(d)Series Designation. The Series Designation establishing a Series may: (i) specify a name or names under which the business and affairs of such Series may be conducted; (ii) designate, fix and determine the relative rights, powers, authority, privileges, preferences, duties, responsibilities, liabilities and obligations in respect of Shares of such Series and the Members associated therewith (to the extent such terms differ from those set forth in this Agreement), (iii) designate or authorize the designation of specific Directors or Officers to be associated with such Series and (iv) establish or authorize the establishment of committees of the Board of Directors to be associated with such Series, appoint or authorize the appointment of Directors or other natural Persons to serve on such committees, delegate or authorize the delegation to such committees of any of the powers of the Board of Directors, except as prohibited by law, and designate or authorize the designation of the members of such committees to be associated with such Series. A Series Designation (or any resolution of the Board of Directors amending any Series Designation) shall be effective when a duly executed original of the same is delivered to the Secretary of the Company for inclusion among the permanent records of the Company, and shall be annexed to, and constitute part of, this Agreement (it being understood and agreed that, upon such effective date, the Series described in such Series Designation shall be deemed to have been established and the Shares of such Series shall be deemed to have been authorized in accordance with the provisions thereof). The Series Designation establishing a Series may set forth specific provisions governing the rights of such Series against a Member associated with such Series who fails to comply with the applicable provisions of this Agreement (including, for the avoidance of doubt, the applicable provisions of such Series Designation). In the event of a conflict between the terms and conditions of this Agreement and a Series Designation, the terms and conditions of the Series Designation shall prevail.

(e)Assets and Liabilities Associated with a Series.

i.Assets Associated with a Series. All consideration received by the Company for the issuance or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, and all income, earnings, profits and proceeds thereof, from whatever source derived, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be (“assets”), shall, subject to the provisions of this Agreement, be held for the benefit of the Members associated with such Series, and not for the benefit of the Members associated with any other Series, for all purposes, and shall be accounted for and recorded upon the books and records of the Company separately from any assets associated with any other Series. Such assets are herein referred to as “assets associated with” that Series. In the event that there are any assets in relation to the Company that, in the Board of Directors’ reasonable judgment, are not readily associated with a particular Series, the Board of Directors shall allocate such assets to, between or among any one or more of the Series, in such manner and on such basis as the Board of Directors deems fair and equitable, and any asset so allocated to a particular Series shall thereupon be deemed to be an asset associated with that Series. Each allocation by the Board of Directors pursuant to the provisions of this Section 3.2(e)(i) shall be conclusive and binding upon the Members associated with each and every Series. Separate and distinct records shall be maintained for each and every Series, and the Board of Directors shall not commingle the assets of one Series with the assets of any other Series.

ii.Liabilities Associated with a Series. All debts, liabilities, expenses, costs, charges, obligations and reserves incurred by, contracted for other otherwise existing (“liabilities”) with respect to a particular Series shall be charged against the assets associated with that Series. Such liabilities are herein referred to as “liabilities associated with” that Series. In the event that there are any liabilities in relation to the Company that, in the Board of Directors’ reasonable judgment, are not readily associated with a particular Series, the Board of Directors shall allocate and charge (including indemnification obligations) such liabilities to, between or among any one or more of the Series, in such manner and on such basis as the Board of Directors deems fair and equitable, and any liability so allocated and charged to a particular Series shall thereupon be deemed to be a liability associated with that Series. Each allocation by the Board of Directors pursuant to the provisions of this Section 3.2(e)(ii) shall be conclusive and binding upon the Members associated with each and every Series. All liabilities associated with a Series shall be enforceable against the assets associated with that Series only, and not against the assets associated with any other Series, and except to the extent set forth above, no liabilities shall be enforceable against the assets associated with any Series prior to the allocation and charging of such liabilities as provided above. Any allocation of liabilities that are not readily associated with a particular Series to, between or among one or more of the Series shall not represent a commingling of such Series to pool capital for the purpose of carrying on a trade or business or making common investments and sharing in profits and losses therefrom. The Board of Directors has caused notice of this limitation on interseries liabilities to be set forth in the Certificate of Formation, and, accordingly, the statutory provisions of Section 18‑215(b) of the Delaware Act relating to limitations on interseries liabilities (and the statutory effect under Section 18‑207 of the Delaware Act of setting forth such notice in the Certificate of Formation) shall apply to the Company and each Series. Notwithstanding any other provision of this Agreement, no distribution on or in respect of Shares in a particular Series, including, for the avoidance of doubt, any distribution made in connection with the winding up of such Series, shall be effected by the Company other than from the assets associated with that Series, nor shall any Member or former Member associated with a Series otherwise have any right or claim against the assets associated with any other Series (except to the extent that such Member or former Member has such a right or claim hereunder as a Member or former Member associated with such other Series or in a capacity other than as a Member or former Member).

(f)Ownership of Series Property. Title to and beneficial interest in Series Property shall be deemed to be held and owned by the relevant Series, and no Member or Members of such Series, individually or collectively, shall have any title to or beneficial interest in specific Series Property or any portion thereof. Each Member of a Series irrevocably waives any right that it may have to maintain an action for partition with respect to its interest in the Company, any Series or any Series Property. Any Series Property may be held or registered in the name of the relevant Series, in the name of a Subsidiary of the relevant Series, in the name of a nominee, or in “street name”, as the Board of Directors may determine; provided, however, that Series Property shall be recorded as the property of the relevant Series on the Company’s books and records, irrespective of the name in which legal title to such Series Property is held. Any corporation, brokerage firm or transfer agent called upon to transfer any assets to or from the name of any Series shall be entitled to rely upon instructions or assignments signed or purporting to be signed by the Board of Directors or its agents without inquiry as to the authority of the person signing or purporting to sign such instruction or assignment or as to the validity of any transfer to or from the name of such Series.

(g)Prohibition on Issuance of External Debt and Preferred Shares. Neither the Company, nor any Series or any Subsidiary of such Series, shall incur or issue external indebtedness or issue preferred shares (including Preferred Shares) by or that otherwise corresponds to such Series or any Subsidiary of such Series; provided, however, that the Company, a Series or a Subsidiary of a Series may so incur external debt (including through any guarantee of external debt) or issue preferred shares (including Preferred Shares) if the Series or a Subsidiary of such Series receives the net proceeds of such incurrence or issuance or such incurrence of external indebtedness or issuance of preferred shares is approved by the affirmative vote of the holders of not less than a majority of the Common Shares of such Series then Outstanding.

Section 3.3    Authorization to Issue Shares

(a)The Company may issue Shares, and options, rights, warrants and appreciation rights relating to Shares, for any Company or Series purpose at any time and from time to time to such Persons for such consideration (which may be cash, property, services or any other lawful consideration) or for no consideration and on such terms and conditions as the Board of Directors shall determine, all without the approval of any Members, notwithstanding any provision of Section 9.1 or Section 9.2. Each Share shall have the rights and be governed by the provisions set forth in this Agreement (including any Share Designation or Series Designation) and the Bylaws. Except to the extent expressly provided in this Agreement (including any Share Designation or Series Designation), no Shares shall entitle any Member to any preemptive, preferential or similar rights with respect to the issuance of Shares.

(b)As of the date of this Agreement, the Series R‑1 Common Shares have been designated as Common Shares of the R‑1 Series. As of the date of this Agreement, immediately prior to the initial closing of the Series R‑1 IPO, the Initial Member holds an aggregate of 100 Series R‑1 Common Shares, which shares will be repurchased by the Company with the net proceeds of the Series R‑1 IPO immediately following the initial closing of the Series R‑1 IPO.

(c)In addition to the Common Shares Outstanding on the date hereof, and without the consent or approval of any Members, additional Shares of a Series may be issued by the Company in one or more classes or series, with such designations, preferences, rights, powers and duties (which may be junior to, equivalent to, or senior or superior to, any existing classes or series of Shares of such Series), as shall be fixed by the Board of Directors and reflected in a written action or actions approved by the Board of Directors in compliance with Section 5.1 (each, a “Share Designation”) or in a Series Designation, including (i) the right to share in Series distributions, the dates distributions will be payable and whether distributions with respect to such series or class will be cumulative or non-cumulative; (ii) rights upon dissolution or termination and liquidation of the Company or such Series; (iii) whether, and the terms and conditions upon which, the Company may redeem the Shares; (iv) whether such Shares are issued with the privilege of conversion or exchange and, if so, the conversion or exchange price or prices or rate or rates, or any adjustments thereto, the date or dates on which, or the period or periods during which, the Shares will be convertible or exchangeable and all other terms and conditions upon which the conversion or exchange may be made; (v) the terms and conditions upon which such Shares will be issued, evidenced by certificates and assigned or transferred; (vi) the terms and amounts of any sinking fund provided for the purchase or redemption of Shares of the class or series; (vii) whether there will be restrictions on the issuance of Shares of the same class or series or any other class or series; and (viii) the right, if any, of the holder of each such Share to vote on Company or Series matters, including matters relating to the relative rights, preferences and privileges of such Shares; provided, however, that no Share Designation shall be required in connection with the issuance of Series R‑1 Common Shares. A Share Designation (or any resolution of the Board of Directors amending any Share Designation) shall be effective when a duly executed original of the same is delivered to the Secretary of the Company for inclusion among the permanent records of the Company, and shall be annexed to, and constitute part of, this Agreement. Unless otherwise provided in the applicable Share Designation or Series Designation, the Board of Directors may at any time increase or decrease the amount of Shares of any class or series, but not below the number of Shares of such class or series then Outstanding.

(d)Subject to Section 3.2(g) hereof, and unless otherwise provided in the applicable Share Designation or Series Designation, the Company is authorized to issue in respect of each Series an unlimited number of Common Shares and an unlimited number of Preferred Shares. All Shares issued pursuant to, and in accordance with the requirements of, this Article III shall be validly issued Shares in the Company, except to the extent otherwise provided in the Delaware Act or this Agreement (including any Share Designation or Series Designation).

(e)The Board of Directors may, without the consent or approval of any Members, amend this Agreement and make any filings under the Delaware Act or otherwise to the extent the Board of Directors determines that it is necessary or desirable in order to effectuate any issuance of Shares pursuant to this Article III, including, without limitation, an amendment of Section 3.3(d).

Section 3.4    Series R‑1 Common Shares    In addition to the other provisions of this Agreement applicable to Common Shares generally, the Series R‑1 Common Shares shall be subject to the following provisions:

(a)Voting.

i.The Series R‑1 Common Shares shall entitle the Record Holders thereof to one vote per Share on any and all matters submitted to the consent or approval of Members generally. No separate vote or consent of the Record Holders of Series R‑1 Common Shares shall be required for the approval of any matter, except as required by the Delaware LLC Act, except as provided in Section 3.4(a)(ii) or except as provided elsewhere in this Agreement.

ii.The affirmative vote of the holders of not less than a majority of the Series R‑1 Common Shares then Outstanding shall be required for:

1.any amendment to this Agreement that would adversely change the rights of the Series R‑1 Common Shares;

2.a Significant Transaction;

3.except as provided in Section 10.3(d), mergers, consolidations or conversions of the Company;

4.the termination and winding up of the R‑1 Series, following an election by the Board of Directors to terminate the R‑1 Series (including, without limitation, following an election by the Board of Directors to dissolve the Company);

5.any incurrence or issuance of external indebtedness or preferred shares (including Preferred Shares) by or that otherwise corresponds to the R‑1 Series and/or any Subsidiary of the R‑1 Series (including, without limitation, the Holdings R‑1 Subsidiary and the Property R‑1 Subsidiaries) that does not satisfy the conditions described in Section 3.2(g); and

6.all such other matters as the Board of Directors, in its sole discretion, determines shall require the approval of the holders of the Outstanding Series R‑1 Common Shares voting as a separate class.

Notwithstanding the foregoing, the separate approval of the holders of Series R‑1 Common Shares shall not be required in the case of a Board Redemption pursuant to Section 3.4(e) or for any of the other matters specified under Section 9.3.
(b)Distributions. Subject to the preferential rights, if any, of holders of any other class of Shares of the R‑1 Series and to Article XIII, holders of outstanding Series R‑1 Common Shares are entitled to receive distributions on the Series R‑1 Common Shares on an equal per‑Share basis to all holders of Series R‑1 Common Shares out of assets legally available for such purposes if, as and when authorized by the Board of Directors and declared and paid by the Company. Distributions in respect of the Series R‑1 Common Shares may be made, as determined by the Board of Directors, (1) in cash, (2) in Series R‑1 Common Shares or (3) in other securities of the R‑1 Series, the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries (or other Subsidiaries of the R‑1 Series).

(c)Share Distributions.

i.Subject to the preferential rights, if any, of holders of any other class of Shares of the R‑1 Series, the Company may declare and pay distributions to holders of Series R‑1 Common Shares that consist of (1)  Series R‑1 Common Shares on an equal per‑Share basis to all holders and (2) other securities of the R‑1 Series, the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries (or other Subsidiaries of the R‑1 Series) on an equal per‑Share basis to all holders.

ii.The Company shall not declare and pay a share distribution with respect to the Common Shares of any Series (other than the R‑1 Series) consisting of Series R‑1 Common Shares or any other securities of the R‑1 Series, the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries (or other Subsidiaries of the R‑1 Series).

(d)Valuations of Share Distributions. In the case of distributions of Shares or other securities for which there is an existing trading market, the value of the Shares or other securities included in such distribution will be calculated based on the average Market Price per Share or security over a three Trading Day period immediately preceding the distribution payment date. In the case of distributions of Shares or other securities for which there is no existing trading market, the value of the Shares or other securities included in such distribution will be determined by the Board of Directors in good faith.

(e)Redemption at Option of Board of Directors. At any time following the initial closing of the Series R‑1 IPO, the Board of Directors, in its sole discretion, may, at any time, subject to the availability of assets legally available therefor and the preferential rights, if any, of holders of any other class of Shares of the R‑1 Series, redeem, on a pro rata basis, all of the outstanding Series R‑1 Common Shares in exchange for an aggregate number of outstanding fully paid and non‑assessable (if applicable) shares of common stock of, or partnership, limited liability company or other equity interests in, the Holdings R‑1 Subsidiary, the Property R‑1 Subsidiaries and/or any other Subsidiary of the R‑1 Series (any such Subsidiary or Subsidiaries, the “R‑1 Series Subsidiary” or the “R‑1 Series Subsidiaries”, as applicable) equal to the number of outstanding shares of common stock of, or partnership or other equity interests in, such R‑1 Series Subsidiary (or such R‑1 Series Subsidiaries) held by the R‑1 Series; provided that substantially all of the assets and liabilities of the R‑1 Series are held, directly or indirectly, by such R‑1 Series Subsidiary (or such R‑1 Series Subsidiaries) (a “Board Redemption”).

In connection with any Board Redemption, the Company may first cause any R‑1 Series Subsidiary to elect to be treated as a corporation that will elect and qualify to be taxed as a REIT for U.S. federal income tax purposes (or convert such R‑1 Series Subsidiary into a corporation that will so elect and qualify) or convert such R‑1 Series Subsidiary into a Delaware statutory trust, including an entity that has an operating partnership subsidiary.
(f)Distribution or Redemption in Connection with Certain Significant Transactions. In the event of a Disposition by the R‑1 Series in a transaction or series of related transactions of all or substantially all the R‑1 Series’ interest in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries, whether held directly or through Subsidiaries of the R‑1 Series, or the Property R‑1 Subsidiaries’ interests in the R‑1 Property, to any Person(s) or group(s) of which the R‑1 Series is not a majority owner (whether by merger, consolidation, sale of assets or stock, liquidation, dissolution, winding up or otherwise) (a “Significant Transaction”), the Company shall, upon, or as soon as practicable after, the consummation of such Disposition (but, in any event, no later than the first Business Day following the end of the 10‑Trading Day period beginning on the 15th Trading Day following the consummation of such Disposition), declare and pay a distribution and/or effect a redemption (a “Significant Transaction Distribution/Redemption”), at the sole discretion of the Board of Directors, in accordance with Section 3.4(g). Notwithstanding the preceding sentence, the Company shall be under no obligation to declare and pay and/or effect a Significant Transaction Distribution/Redemption that it might otherwise be required to declare and pay and/or effect pursuant to such sentence (i) in connection with a spin‑off or similar disposition of the R‑1 Series’ entire interest in the R‑1 Property to the holders of Series R‑1 Common Shares, including any such disposition that is made in connection with a Board Redemption, or (ii) in connection with the liquidation, termination, dissolution or winding up of the Company or the R‑1 Series, whether voluntary or involuntary.

(g)Consideration in Connection with Significant Transaction Distribution/Redemption. In connection with any Significant Transaction Distribution/Redemption, the Company may at the sole discretion of the Board of Directors, (i) either (x) subject to the limitations described in Section 3.4(b) and to the other provisions described in this Section 3.4(g), declare and pay a distribution in cash and/or in securities or other property (determined as provided below) to holders of the outstanding Series R‑1 Common Shares equally on a share for share basis in an aggregate amount equal to the R‑1 Series Net Proceeds of such Significant Transaction; or (y) provided that there are assets legally available therefor and subject to the preferential rights, if any, of holders of any other class of Shares of the R‑1 Series, then (A) if such Significant Transaction involves the Disposition of all (not merely substantially all) of the R‑1 Series’ interest in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries, whether held directly or through Subsidiaries of the R‑1 Series, or the Property R‑1 Subsidiaries’ interests in the R‑1 Property, redeem all outstanding Series R‑1 Common Shares in exchange for cash and/or securities or other property (determined as provided below) in an aggregate amount equal to the R‑1 Series Net Proceeds of such Significant Transaction; or (B) if such Significant Transaction involves the Disposition of substantially all (but not all) of the R‑1 Series’ interest in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries, whether held directly or through Subsidiaries of the R‑1 Series, or the Property R‑1 Subsidiaries’ interests in the R‑1 Property, apply an aggregate amount of cash and/or securities or other property (determined as provided below) equal to the R‑1 Series Net Proceeds of such Significant Transaction to the redemption of outstanding Series R‑1 Common Shares, the number of shares to be redeemed to equal the lesser of (1) the whole number nearest the number determined by dividing the aggregate amount so allocated to the redemption of the Series R‑1 Common Shares by the average Market Price of one Series R‑1 Common Share during the 10‑Trading Day period beginning on the 15th Trading Day following the consummation of such Disposition, and (2) the number of Series R‑1 Common Shares outstanding, and (ii) subject to the limitations described in Section 3.4(b) and to the other provisions described in this Section 3.4(g), combine the payment of a distribution on and the redemption of Series R‑1 Common Shares for cash and/or other securities or other property as described below.

In the event that the Board of Directors elects the option described in (ii) of the preceding paragraph, a distribution shall first be paid on all the outstanding Series R‑1 Common Shares equally on a share for share basis, and some or all of the outstanding Series R‑1 Common Shares shall thereafter be redeemed for cash and/or other securities or other property, as follows. The aggregate amount of such distribution shall equal a portion of the total R‑1 Series Net Proceeds determined by the Board of Directors in its sole discretion, and the portion of the R‑1 Series Net Proceeds to be applied to such a redemption shall equal an amount equal to the total R‑1 Series Net Proceeds less the aggregate amount of such distribution. If the Significant Transaction involves the Disposition of all (not merely substantially all) of the R‑1 Series’ interest in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries, whether held directly or through Subsidiaries of the R‑1 Series, or the Property R‑1 Subsidiaries’ interests in the R‑1 Property, then, following the payment of such distribution, all remaining outstanding Series R‑1 Common Shares will be redeemed in exchange for cash and/or securities or other property in an aggregate amount equal to the portion of the R‑1 Series Net Proceeds to be applied to the redemption. If the Significant Transaction involves the Disposition of substantially all (but not all) of the R‑1 Series’ interest in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries, whether held directly or through Subsidiaries of the R‑1 Series, or the Property R‑1 Subsidiaries’ interests in the R‑1 Property, then the portion of the R‑1 Series Net Proceeds to be applied to the redemption will be used to redeem a number of shares equal to the lesser of (1) the whole number nearest the number determined by dividing the aggregate amount so allocated to the redemption of the Series R‑1 Common Shares by the average Market Price of one Series R‑1 Common Share during the 10‑Trading Day period beginning on the 15th Trading Day following consummation of the Disposition, and (2) the number of Series R‑1 Common Shares outstanding.
For purposes of this Section 3.4, in the case of a Significant Transaction involving a Disposition of the R‑1 Series’ interest in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries, whether held directly or through Subsidiaries of the R‑1 Series, or the Property R‑1 Subsidiaries’ interests in the R‑1 Property in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions. Any redemption described in this Section 3.4 shall be effected in accordance with the applicable provisions set forth in Section 3.4(h). For purposes of this Section 3.4, the term “Exchange Shares” shall mean shares of or partnership, limited liability company or other equity interests in any R‑1 Series Subsidiary for which Series R‑1 Common Shares may be exchanged pursuant to a Board Redemption or securities which may distributed to Series R‑1 Common Shares or for which Series R‑1 Common Shares may be exchanged pursuant to a Significant Transaction Redemption/Distribution, as applicable.
For purposes of this Section 3.4, “substantially all” of the R‑1 Series’ interest in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries as of any date shall mean at least 80% of the outstanding partnership, limited liability company or other equity interests in the Holdings R‑1 Subsidiary or the Property R‑1 Subsidiaries held by the R‑1 Series, whether held directly or through Subsidiaries of the R‑1 Series, as of such date, and “substantially all” the Property R‑1 Subsidiaries’ interests in the R‑1 Property as of any date shall mean a portion of such real property that represents at least 80% of the Fair Value of such real property attributed to the Property R‑1 Subsidiaries as of such date.
(h)Certain Procedures Relating to Redemptions and Distributions.

i.The Board of Directors may, in its sole discretion, elect to issue or deliver fractional Exchange Shares in connection with a redemption or distribution or to make a cash payment in lieu of fractional shares, as described below. If the Board of Directors elects not to issue or deliver fractional Exchange Shares, then no such fractional shares shall be issued or delivered in connection with the redemption or distribution, and, in lieu thereof, each holder of Series R‑1 Common Shares who would otherwise be entitled to a fractional interest of an Exchange Share shall, upon surrender of such holder’s certificate or certificates representing Series R‑1 Common Shares, receive a cash payment (without interest) (the “Fractional Payment”) equal to the Fair Value of such fractional interest as is determined by the Board of Directors.

ii.No adjustments in respect of distributions shall be made upon the exchange of any Series R‑1 Common Shares; provided, however, that, if the Redemption Date with respect to Series R‑1 Common Shares shall be subsequent to the Record Date for the payment of a distribution thereon or with respect thereto but prior to the payment or distribution thereof, the Registered Holders of such Shares at the close of business on such Record Date shall be entitled to receive the distribution payable on such Shares on the date set for payment of such distribution, notwithstanding the redemption of such Shares or the Company’s default in payment of the distribution due on such date.

iii.At such time or times as the Company exercises its right to cause a Board Redemption, and at the time of any redemption pursuant to any Significant Transaction Redemption/Distribution, the Company shall give notice of such redemption to the holders of Series R‑1 Common Shares whose shares are to be redeemed, by mailing by first‑class mail a notice of such redemption (a “Redemption Notice”), in the case of a redemption at the discretion of the Board of Directors, not less than 30 nor more than 60 days prior to the date fixed for such redemption (the “Redemption Date”), and, in the case of any other required redemption, as soon as practicable before or after the Redemption Date, in either case, to their last addresses as they appear upon the Company’s books. Each such Redemption Notice shall specify the Redemption Date, and shall state that the payment of cash (including any Fractional Payment), issuance of certificates representing the applicable type of Exchange Shares or the delivery of the other applicable property (such cash, Exchange Shares or other property, the “Reference Property”) to be received upon exchange of Series R‑1 Common Shares shall be upon surrender of certificates representing such Series R‑1 Common Shares.

iv.Before any holder Series R‑1 Common Shares shall be entitled to receive any Reference Property, such holder must surrender, at such office as the Company shall specify, certificates for such Series R‑1 Common Shares duly endorsed to the Company or in blank or accompanied by proper instruments of transfer to the Company or in blank, unless the Company shall waive such requirement. The Company shall, as soon as practicable after such surrender of certificates representing such Series R‑1 Common Shares, pay, issue and/or deliver to the holder for whose account such Series R‑1 Common Shares were so surrendered, or to such holder’s nominee or nominees, the Reference Property to which such holder shall be entitled.

v.From and after any Redemption Date, all rights of a holder of Series R‑1 Common Shares shall cease except for the right, upon surrender of the certificates representing such Series R‑1 Common Shares, to receive Reference Property, as described in Section 3.4(h)(i) and Section 3.4(h)(iii) and rights to distributions as described in Section 3.4(h)(ii). No holder of a certificate that immediately prior to the applicable Redemption Date represented Series R‑1 Common Shares shall be entitled to receive any dividend or other distribution with respect to Exchange Shares until surrender of such holder’s certificate for a certificate or certificates representing Exchange Shares. Upon surrender, the holder shall receive the amount of any dividends or other distributions (without interest) that were payable with respect to a record date after the Redemption Date, but that were not paid by reason of the foregoing with respect to the number of Exchange Shares represented by the certificate or certificates issued upon such surrender.

vi.If any certificate for Exchange Shares is to be issued in a name other than that in which the certificate representing Series R‑1 Common Shares surrendered in exchange therefor is registered, it shall be a condition of such issuance that the person requesting the issuance pays any transfer or other taxes required by reason of the issuance of certificates for such Exchange Shares in a name other than that of the record holder of the certificate surrendered, or establishes, to the satisfaction of the Company or its agent, that such tax has been paid or is not applicable. Under no circumstances shall the Company or the R‑1 Series be liable to a holder of Series R‑1 Common Shares for any Exchange Shares or dividends or distributions thereon delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(i)Absence of Certain Other Rights. Holders of Series R‑1 Common Shares shall have no conversion, exchange, sinking fund, redemption or appraisal rights, no pre‑emptive rights to subscribe for any securities of the Company and no preferential rights to distributions of the R‑1 Series.

(j)Status of the Property R‑1 Subsidiaries. For the avoidance of doubt, so long as the R‑1 Series or one of its Subsidiaries is a general partner of the Property R‑1 Subsidiaries, the Property R‑1 Subsidiaries shall deemed to be a Subsidiary of the R‑1 Series for purposes of this Agreement.

(k)Definitions. For the purpose of this Section 3.4, the following terms shall have the following meanings:

Disposition” shall mean the sale, transfer, assignment or other disposition (whether by merger, consolidation, sale or contribution of assets or shares, or otherwise) by the R‑1 Series or any of its Subsidiaries of properties or assets. Disposition shall not include a merger, consolidation, exchange of shares or other business combination transaction involving the Company in which the R‑1 Series continues, immediately following such transaction, to hold the same, direct and indirect, interest in the business, assets and liabilities of the R‑1 Series that it held immediately prior to such transaction.
Fair Value” shall mean, in the case of equity securities or debt securities of a class that has previously been publicly traded for a period of at least three months, the Market Price thereof (if such Market Price, as so defined, can be determined) or, in the case of an equity security or debt security that has not been publicly traded for at least such period, means the fair value per Share of stock or per other unit of such other security, on a fully distributed basis, as determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the Board of Directors; provided, however, that, in the case of property other than securities, the “Fair Value” thereof shall be determined in good faith by the Board of Directors based upon such appraisals or valuation reports of such independent experts as the Board of Directors shall in good faith determine to be appropriate in accordance with good business practice. Any such determination of Fair Value shall be described in a statement filed with the records of the actions of the Board of Directors.
Holdings R‑1 Subsidiary” means ETRE Holdings R‑1, LLC, a Delaware limited liability company, together with its successors and assigns.
Market Price” of any class or series of securities on any day shall mean the average of the high and low reported sales prices regular way of a security of such class or series on such day (if such day is a Trading Day, and, if such day is not a Trading Day, on the Trading Day immediately preceding such day), or, in case no such reported sale takes place on such Trading Day, the average of the reported closing bid and asked prices regular way of a security of such class or series on such Trading Day, in either case, on the principal National Securities Exchange on which such securities are listed or admitted for trading, or, if the securities of such class or series are not so listed or admitted on such Trading Day, the average of the closing bid and asked prices of a security of such class or series in the over‑the‑counter market on such Trading Day as furnished by any professional market maker selected from time to time by the Company, or, if such closing bid and asked prices are not made available on such Trading Day (including, without limitation, because such securities are not publicly held), the market value of a security of such class or series as determined by the Board of Directors.
Property R‑1 Subsidiaries” means, collectively, 1 Brown Street Associates, L.P., a Pennsylvania limited partnership, and 800 North Delaware Avenue Associates, L.P., a Pennsylvania limited partnership, together with their successors and assigns.
R‑1 Property” means, collectively, the real property located at 1 Brown Street, Philadelphia, Pennsylvania 19123, together with the improvements thereon, and the real property located at 800 North Delaware Avenue, Philadelphia, PA 19123, together with the improvements thereon, which are collectively known as the Penn Treaty Village Pennthouses.
R‑1 Series Net Proceeds” shall mean, as of any date, with respect to any Disposition of any of the properties and assets of the R‑1 Series, an amount, if any, equal to the gross proceeds of such Disposition after any payment of, or reasonable provision for, (a) any preferential amounts, accumulated and unpaid distributions and other obligations in respect of Preferred Shares of the R‑1 Series and (b) any amounts that the Board of Directors in its discretion sets aside to fund the R‑1 Series’ reserves, debt, liabilities or expenses. To the extent the proceeds of any Disposition include any securities or other property other than cash, the Board of Directors shall determine the value of such securities or property; provided that the value of any marketable securities included in such proceeds shall be the average of the daily Market Price of such securities for the 10 consecutive Trading Days beginning on the 15th Trading Day following consummation of the Disposition.
Trading Day” shall mean each Business Day other than any day on which any relevant class or series of securities is not available for trading on the principal National Securities Exchange or market on which such securities are listed or admitted for trading or, if the securities of such class or series are not so listed or admitted on such day, the over‑the‑counter market.
Section 3.5    Voting Rights of Common Shares Generally        Subject to the provisions of Article XIII and unless otherwise provided in this Agreement, any Share Designation or Series Designation, (i) Common Shares shall entitle the Record Holders thereof to one vote per Share on any and all matters submitted for the consent or approval of Members generally and (ii) Record Holders of all classes of Common Shares of all Series shall vote together as a single class on all matters as to which all Record Holders of Common Shares are entitled to vote.

Section 3.6    Certificates

(a)Upon the issuance of Shares by the Company to any Person, the Company may issue one or more Certificates in the name of such Person evidencing the number of such Shares being so issued. Certificates shall be executed on behalf of the Company by the Chairman of the Board, Chief Executive Officer, President or any Vice President and by the Chief Operating Officer, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary. No Certificate representing Shares shall be valid for any purpose until it has been countersigned by the Transfer Agent; provided, however, that if the Board of Directors elects to issue Shares in global form, the Certificates representing Shares shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Shares have been duly registered in accordance with the directions of the Company. Any or all of the signatures required on the Certificate may be by facsimile. If any Officer or Transfer Agent who shall have signed or whose facsimile signature shall have been placed upon any such Certificate shall have ceased to be such Officer or Transfer Agent before such Certificate is issued by the Company, such Certificate may nevertheless be issued by the Company with the same effect as if such Person were such Officer or Transfer Agent at the date of issue. Certificates for each class of Shares shall be consecutively numbered and shall be entered on the books and records of the Company as they are issued and shall exhibit the holder’s name and number and type of Shares.

(b)If any mutilated Certificate is surrendered to the Transfer Agent, the appropriate Officers on behalf of the Company shall execute, and the Transfer Agent shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number and class or series of Shares as the Certificate so surrendered. The appropriate Officers on behalf of the Company shall execute, and the Transfer Agent shall countersign and deliver, a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate: (i) makes proof by affidavit, in form and substance satisfactory to the Company, that a previously issued Certificate has been lost, destroyed or stolen; (ii) requests the issuance of a new Certificate before the Company has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim; (iii) if requested by the Company, delivers to the Company a bond, in form and substance satisfactory to the Company, with surety or sureties and with fixed or open penalty as the Company may direct to indemnify the Company, the applicable Series and the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and (iv) satisfies any other reasonable requirements imposed by the Company. If a Member fails to notify the Company within a reasonable time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Shares represented by the Certificate is registered before the Company or the Transfer Agent receives such notification, the Member shall be precluded from making any claim against the Company, the applicable Series or the Transfer Agent for such transfer or for a new Certificate. As a condition to the issuance of any new Certificate under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent) reasonably connected therewith.

Section 3.7    Record Holders    The Company shall be entitled to recognize the Record Holder as the owner of a Share and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Share on the part of any other Person, regardless of whether the Company shall have actual or other notice thereof, except as otherwise provided by law or any applicable rule, regulation, guideline or requirement of any National Securities Exchange on which such Shares are listed for trading. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Shares, as between the Company on the one hand, and such other Persons on the other, such representative Person shall be the Record Holder of such Shares.

Section 3.8    Registration and Transfer of Shares    Subject to the restrictions on transfer and ownership limitations contained below and in Article XIII hereof:

(a)The Company shall keep or cause to be kept on behalf of the Company and each Series a register that will provide for the registration and transfer of Shares. Unless otherwise provided in any Share Designation or Series Designation, the Transfer Agent is hereby appointed registrar and transfer agent for the purpose of registering Common Shares and transfers of such Common Shares as herein provided. Upon surrender of a Certificate for registration of transfer of any Shares evidenced by a Certificate, the appropriate Officers of the Company shall execute and deliver, and in the case of Common Shares, the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the Record Holder’s instructions, one or more new Certificates evidencing the same aggregate number and type of Shares as were evidenced by the Certificate so surrendered; provided, that a transferor shall provide the address and facsimile number for each such transferee as contemplated by Section 12.1.

(b)The Company shall not recognize any transfer of Shares until the Certificates evidencing such Shares, if any, are surrendered for registration of transfer. No charge shall be imposed by the Company for such transfer; provided, that as a condition to the issuance of any new Certificate, the Company may, on behalf of the applicable Series, require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto.

(c)By acceptance of the transfer of any Share, each transferee of a Share (including any nominee holder or an agent or representative acquiring such Shares for the account of another Person) (i) shall be admitted to the Company as a Substitute Member with respect to the Shares so transferred to such transferee when any such transfer or admission is reflected in the books and records of the Company, (ii) shall be deemed to agree to be bound by the terms of this Agreement, (iii) shall become the Record Holder of the Shares so transferred, (iv) grants powers of attorney to the Officers of the Company and any Liquidator of the Company, as specified herein, and (v) makes the consents and waivers contained in this Agreement. The transfer of any Shares and the admission of any new Member shall not constitute an amendment to this Agreement.

(d)Nothing contained in this Agreement shall preclude the settlement of any transactions involving Shares entered into through the facilities of any National Securities Exchange on which such Shares are listed for trading.

Section 3.9    Splits and Combinations

(a)Subject to paragraph (d) of this Section, Section 3.3 and Section 3.4, and unless otherwise provided in any Share Designation or Series Designation, the Company may make a pro rata distribution of Shares of any class or series of a Series to all Record Holders of such class or series of Shares of a Series, or may effect a subdivision or combination of Shares of any class or series of a Series, in each case, on an equal per‑Share basis and so long as, after any such event, any amounts calculated on a per‑Share basis or stated as a number of Shares are proportionately adjusted.

(b)Whenever such a distribution, subdivision or combination of Shares is declared, the Board of Directors shall select a Record Date as of which the distribution, subdivision or combination shall be effective and shall send notice thereof at least 20 days prior to such Record Date to each Record Holder as of a date not less than 10 days prior to the date of such notice. The Board of Directors also may cause a firm of independent public accountants selected by it to calculate the number of Shares to be held by each Record Holder after giving effect to such distribution, subdivision or combination. The Board of Directors shall be entitled to rely on any certificate provided by such firm as conclusive evidence of the accuracy of such calculation.

(c)Promptly following any such distribution, subdivision or combination, the Company may issue Certificates to the Record Holders of Shares as of the applicable Record Date representing the new number of Shares held by such Record Holders, or the Board of Directors may adopt such other procedures that it determines to be necessary or appropriate to reflect such changes. If any such combination results in a smaller total number of Shares Outstanding, the Company shall require, as a condition to the delivery to a Record Holder of such new Certificate, the surrender of any Certificate held by such Record Holder immediately prior to such Record Date.

(d)Subject to Section 3.4 and unless otherwise provided in any Share Designation or Series Designation, the Company shall not issue fractional Shares upon any distribution, subdivision or combination of Shares. If a distribution, subdivision or combination of Shares would otherwise result in the issuance of fractional Shares, each fractional Share shall be rounded to the nearest whole Share (and a 0.5 Share shall be rounded to the next higher Share).

Section 3.10    Agreements and Bylaws    The rights of all Members and the terms of all Shares are subject to the provisions of this Agreement (including any Share Designation or Series Designation) and the Bylaws.
ARTICLE IV
DISTRIBUTIONS

Section 4.1    Distributions to Record Holders

(a)Subject to the applicable provisions of the Delaware Act and except as otherwise provided herein, the Board of Directors may, in its sole discretion, at any time and from time to time, declare, make and pay distributions of cash or other assets of a Series to the Members associated with such Series. Subject to the terms of any Share Designation or any Series Designation (including, without limitation, the preferential rights, if any, of holders of any other class of Shares of the applicable Series) and of Article XIII, distributions shall be paid to the holders of the Common Shares of a Series on an equal per‑Share basis as of the Record Date selected by the Board of Directors. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to any Member on account of its interest in any Series if such distribution would violate the Delaware Act or other applicable law.

(b)Notwithstanding Section 4.1(a), in the event of the termination and liquidation of a Series, all distributions shall be made in accordance with, and subject to the terms and conditions of, Section 8.3(a).

(c)Each distribution in respect of any Shares of a Series shall be paid by the Company, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Shares as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Company’s and such Series’ liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise.

ARTICLE V
MANAGEMENT AND OPERATION OF BUSINESS

Section 5.1    Power and Authority of Board of Directors    Except as otherwise expressly provided in this Agreement or the Bylaws, the business and affairs of the Company and each Series shall be managed by or under the direction of a board of directors (the “Board of Directors”). As provided below, the Board of Directors shall have the power and authority to appoint Officers of the Company and each Series, as well as Officers to be associated with a specific Series. The Directors and Officers shall constitute “managers” within the meaning of the Delaware Act. Except as otherwise specifically provided in this Agreement with respect to the Managing Member, no Member, by virtue of its status as such, shall have any management power over the business and affairs of the Company or any Series or actual or apparent authority to enter into, execute or deliver contracts on behalf of, or to otherwise bind, the Company or any Series. Except as otherwise specifically provided in this Agreement, the authority and functions of the Board of Directors, on the one hand, and of the Officers, on the other hand, shall be identical to the authority and functions of the board of directors and officers, respectively, of a corporation organized under the DGCL. In addition to the powers that now or hereafter can be granted to managers under the Delaware Act and to all other powers granted under any other provision of this Agreement or the Bylaws, the Board of Directors shall have full power and authority to do, and to direct the Officers, subject to the provisions of the Bylaws, to do, all things and on such terms as it determines to be necessary or appropriate to conduct the business of the Company and each Series, to exercise all powers set forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4, including the following:

(a)the making of any expenditures, the lending or, subject to Section 3.2(g), borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into Shares, and the incurring of any other obligations;

(b)the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Company and/or any Series;

(c)the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Company or any Series or the merger or other combination of the Company with or into another Person (subject, however, to any prior approval of Members that may be required by this Agreement);

(d)the use of the assets of the Company or any Series (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Company, any Series and any Subsidiaries of any Series; the lending of funds to other Persons (including other Group Members); the repayment of obligations of the Company, any Series and any Subsidiaries of any Series; and the making of capital contributions to any Member of the Company associated with any Series or any Subsidiaries of any Series;

(e)the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Company or any Series under contractual arrangements to all or particular assets of the Company or any Series);

(f)the declaration and payment of distributions of cash or other assets to Members associated with a Series;

(g)the adoption, amendment and repeal of the Bylaws; provided, however, that if the adoption, amendment or repeal of any Bylaw would operate as an amendment to a provision of this Agreement requiring the approval of any Member (including the Managing Member), such adoption, amendment or repeal will not be effective without the approval of the Members as would be required by this Agreement were such provision to be amended;

(h)the election and removal of officers of the Company and/or associated with any Series (“Officers”) in the manner prescribed in the Bylaws;

(i)the selection and dismissal of employees, agents, outside attorneys, accountants, consultants and contractors (including, without limitation, the Administrative Agent) and the determination of their compensation and other terms of employment or hiring, and the creation and operation of employee benefit plans, employee programs and employee practices;

(j)the solicitation of proxies from holders of any class of Shares issued on or after the date of this Agreement that entitles the holders thereof to vote on any matter submitted for consent or approval of Members under this Agreement and the Bylaws;

(k)the maintenance of insurance for the benefit of the Company Group or any Group Member and the Indemnified Persons;

(l)the formation of, or acquisition or disposition of an interest in, and the contribution of property and the making of loans to, any limited or general partnership, joint venture, corporation, limited liability company or other entity or arrangement;

(m)the control of any matters affecting the rights and obligations of the Company or any Series, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or remediation, and the incurring of legal expense and the settlement of claims and litigation;

(n)the indemnification of any Person against liabilities and contingencies to the extent permitted by law;

(o)the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of the Shares from, or requesting that trading be suspended on, any such exchange;

(p)the issuance, sale or other disposition, and the purchase or other acquisition, of Shares or options, rights, warrants or appreciation rights relating to Shares;

(q)the undertaking of any action in connection with the Company’s or any Series’ interest or participation in any Group Member;

(r)the registration of any offer, issuance, sale or resale of Shares or other securities or any Series issued or to be issued by the Company under the Securities Act and any other applicable securities laws (including any resale of Shares or other securities by Members or other security holders);

(s)the execution and delivery of agreements with Affiliates of the Company to render services to a Group Member (including, without limitation, administrative services agreements among the Administrative Agent, any Series and the Subsidiaries of such Series);

(t)the adoption, amendment and repeal of the Inter‑Series Policy and the delegation to the Administrative Agent and the Inter‑Series Committee of the authority to interpret, make determinations under and oversee the implementation of the policies set forth in the Inter‑Series Policy; and

(u)unless otherwise provided in the Series Designation establishing a Series or in a Share Designation related to such Series, the granting of rights to holders of equity interests in entities controlled by such Series to vote on matters to be voted upon by Members associated with such Series, either as a separate class or with such Members and on any such basis as the Board of Directors shall determine.

Section 5.2    Number; Nominations and Elections; Removals; Vacancies    The number of Directors initially shall be five, which number may be increased or decreased by the Managing Member. The number of Directors may not be fewer than one. The names of the initial Directors are:

Paul Frischer
Jesse Stein
[_________]
[_________]
[_________]
The Managing Member shall have the sole power to (i) nominate and elect all Directors to the Board of Directors, (ii) set the number of Directors of the Board of Directors, (iii) remove any Director, with or without cause, at any time and (iv) fill any vacancies on the Board of Directors. Each of the Directors will hold office for an annual term, or until his or her resignation or removal by the Managing Member. It shall not be necessary to list in this Agreement the names and addresses of any Directors hereinafter elected.
Section 5.3    Resignation    Any Director may resign by written notice to the Board of Directors, effective upon execution and delivery to the Company of such written notice or upon any future date specified in the notice.

Section 5.4    Determinations by Board    Except as may otherwise be required by law, the determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board of Directors consistent with this Agreement, shall be final and conclusive and shall be binding upon the Company and each Series and every holder of Shares: the amount of the net income of any Series for any period and the amount of assets at any time legally available for the payment of distributions or redemption of Shares; the amount of paid in surplus, net assets, other surplus, annual or other cash flow, funds from operations, net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); any interpretation of the terms, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of any class or series of Shares; the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by any Series or of any Shares; the number of Shares of any class or series of a Series of the Company; any matter relating to the acquisition, holding and disposition of any assets by any Series; the evaluation of any competing interests among the Series and the resolution of any conflicts of interests among the Series; or any other matter relating to the business and affairs of the Company or any Series or required or permitted by applicable law, this Agreement or the Bylaws or otherwise to be determined by the Board of Directors. The Company shall prepare a statement of any determination by the Board of Directors, respecting the fair market value of any properties, assets or securities, and shall file such statement with the Secretary of the Company.

Section 5.5    Committees of the Board of Directors    The Board of Directors may by resolution establish one or more committees of the Board of Directors and appoint from among its members or other natural Persons to serve on such committees at the pleasure of the Board of Directors. The Board of Directors may delegate to such committees any of the powers of the Board of Directors, except as prohibited by law.

Section 5.6    Exculpation, Indemnification, Advances and Insurance

(a)Subject to other applicable provisions of this Article V, to the fullest extent permitted by applicable law, the Indemnified Persons shall not be liable to the Company, any Series, any Subsidiary of any Series, any Director of the Company or associated with any Series, any Member or any holder of any equity interest in any Subsidiary of any Series, for any acts or omissions by any of the Indemnified Persons arising from the exercise of their rights or performance of their duties and obligations in connection with the Company or any Series, this Agreement or any investment made or held by the Company or any Series, including with respect to any acts or omissions made while serving at the request of the Company or on behalf of any Series as an officer, director, member, partner, tax matters partner, fiduciary or trustee of another Person or any employee benefit plan. The Indemnified Persons shall be indemnified by the Company and, to the extent Expenses and Liabilities are associated with any Series, each such Series, in each case, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Company and counsel fees and disbursements on a solicitor and client basis) (collectively, “Expenses and Liabilities”) arising from the performance of any of their duties or obligations in connection with their service to the Company and/or each such Series or this Agreement, or any investment made or held by the Company, each such Series or any Subsidiaries of such Series, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such Person may hereafter be made party by reason of being or having been a manager of the Company or such Series under Delaware law, a Director or Officer of the Company or associated with such Series or any Subsidiary of such Series, or an officer, director, member, partner, tax matters partner, fiduciary or trustee of another Person or any employee benefit plan at the request of the Company or on behalf of such Series. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnified Person, pursuant to a loan guaranty or otherwise, for any indebtedness of the Company, any Series or any Subsidiary of any Series (including any indebtedness which the Company, any Series or any Subsidiary of any Series has assumed or taken subject to), and the Officers are hereby authorized and empowered, on behalf of the Company or any Series, to enter into one or more indemnity agreements consistent with the provisions of this Section 5.6 in favor of any Indemnified Person having or potentially having liability for any such indebtedness. It is the intention of this Section 5.6(a) that the Company and each applicable Series indemnify each Indemnified Person to the fullest extent permitted by law.

(b)The provisions of this Agreement and the Bylaws, to the extent they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, including Section 5.8, are agreed by each Member to modify such duties and liabilities of the Indemnified Person to the extent permitted by law.

(c)Any indemnification under this Section 5.6 (unless ordered by a court) shall be made by the Company and each applicable Series unless the Board of Directors determines in the specific case that indemnification of the Indemnified Person is not proper in the circumstances because such person has not met the applicable standard of conduct set forth in Section 5.6(a). Such determination shall be made by a majority vote of the Directors who are not parties to the applicable suit, action or proceeding. To the extent, however, that an Indemnified Person has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such Indemnified Person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such Indemnified Person in connection therewith, notwithstanding an earlier determination by the Board of Directors that the Indemnified Person had not met the applicable standard of conduct set forth in Section 5.6(a).

(d)Notwithstanding any contrary determination in the specific case under Section 5.6(c), and notwithstanding the absence of any determination thereunder, any Indemnified Person may apply to the Court of Chancery of the State of Delaware or any other court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Section 5.6(a). The basis of such indemnification by a court shall be a determination by such court that indemnification of the Indemnified Person is proper in the circumstances because such Indemnified Person has met the applicable standards of conduct set forth in Section 5.6(a). Neither a contrary determination in the specific case under Section 5.6(c) nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the Indemnified Person seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5.6(d) shall be given to the Company promptly upon the filing of such application. If successful, in whole or in part, the Indemnified Person seeking indemnification shall also be entitled to be paid the expense of prosecuting such application.

(e)To the fullest extent permitted by law, expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Company and each applicable Series in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that such Indemnified Person is not entitled to be indemnified by the Company and each such Series as authorized in this Section 5.6.

(f)The indemnification and advancement of expenses provided by or granted pursuant to this Section 5.6 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under this Agreement, or any other agreement, vote of Members or disinterested Directors or otherwise, and shall continue as to an Indemnified Person who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnified Person unless otherwise provided in a written agreement with such Indemnified Person or in the writing pursuant to which such Indemnified Person is indemnified, it being the policy of the Company that indemnification of the persons specified in Section 5.6(a) shall be made to the fullest extent permitted by law. The provisions of this Section 5.6 shall not be deemed to preclude the indemnification of any person who is not specified in Section 5.6(a) but whom the Company or an applicable Series has the power or obligation to indemnify under the provisions of the Delaware Act.

(g)The Company and any Series may, but shall not be obligated to, purchase and maintain insurance on behalf of any Person entitled to indemnification under this Section 5.6 against any liability asserted against such Person and incurred by such Person in any capacity to which they are entitled to indemnification hereunder, or arising out of such Person’s status as such, whether or not the Company would have the power or the obligation to indemnify such Person against such liability under the provisions of this Section 5.6.

(h)The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 5.6 shall, unless otherwise provided when authorized or ratified, shall inure to the benefit of the heirs, executors and administrators of any person entitled to indemnification under this Section 5.6.

(i)The Company and any Series may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company and/or such Series and to the employees and agents of the Company Group similar to those conferred in this Section 5.6 to Indemnified Persons.

(j)If this Section 5.6 or any portion of this Section 5.6 shall be invalidated on any ground by a court of competent jurisdiction the Company and each applicable Series shall nevertheless indemnify each Indemnified Person as to expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit, proceeding or investigation, whether civil, criminal or administrative, including a grand jury proceeding or action or suit brought by or in the right of the Company, to the full extent permitted by any applicable portion of this Section 5.6 that shall not have been invalidated.

(k)Each of the Indemnified Persons may, in the performance of his, her or its duties, consult with legal counsel and accountants, and any act or omission by such Person on behalf of the Company or any Series in furtherance of the interests of the Company or such Series in good faith in reliance upon, and in accordance with, the advice of such legal counsel or accountants will be full justification for any such act or omission, and such Person will be fully protected for such acts and omissions; provided that such legal counsel or accountants were selected with reasonable care by or on behalf of the Company or such Series.

(l)An Indemnified Person shall not be denied indemnification in whole or in part under this Section 5.6 because the Indemnified Person had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(m)Any liabilities which an Indemnified Person incurs as a result of acting on behalf of the Company or any Series (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the Internal Revenue Service, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise) shall be treated as liabilities indemnifiable under this Section 5.6, to the maximum extent permitted by law.

(n)A Director shall, in the performance of his duties, be fully protected in relying in good faith upon the records of the Company and any Series and on such information, opinions, reports or statements presented to the Company by any of the Officers or employees of the Company and/or associated with any Series or any other Group Member, or committees of the Board of Directors, or by any other Person as to matters the Director reasonably believes are within such other Person’s professional or expert competence.

(o)Any amendment, modification or repeal of this Section 5.6 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of or other rights of any indemnitee under this Section 5.6 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted and provided such Person became an indemnitee hereunder prior to such amendment, modification or repeal.

Section 5.7 Duties of Officers and Directors

(a)Except as otherwise expressly provided in this Agreement or required by the Delaware Act, (i) the duties and obligations owed to the Company by the Officers and Directors shall be the same as the duties and obligations owed to a corporation organized under DGCL by its officers and directors, respectively, and (ii) the duties and obligations owed to the Members by the Officers and Directors shall be the same as the duties and obligations owed to the stockholders of a corporation under the DGCL by its officers and directors, respectively.

(b)The Board of Directors shall have the right to exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it thereunder either directly or by or through the duly authorized Officers of the Company and/or associated with a Series, and the Board of Directors shall not be responsible for the misconduct or negligence on the part of any such Officer duly appointed or duly authorized by the Board of Directors in good faith.

(c)In addition, the duties and obligations (including fiduciary duties) owed to the Company by the Directors under Section 5.7(a) shall extend to each Series separately. In the event of any conflicts of interest among the different Series, each of the Directors shall be permitted to take into account the competing interests of the different Series in discharging his or her duties and obligations (including fiduciary duties) and taking action on behalf of each Series.

(d)Unless otherwise provided by the Board of Directors or pursuant to any Series Designation, each member of a committee of the Board of Directors established by the Board of Directors or pursuant to any Series Designation will owe the same duties and obligations to the Company, the Series and the Members as a Director, whether or not such committee member is a Director.

Section 5.8    Standards of Conduct and Modification of Duties of the Managing Member    Notwithstanding anything to the contrary herein or under any applicable law, including, without limitation, Section 18‑1101(c) of the Delaware Act, the Managing Member, in exercising its rights hereunder in its capacity as the managing member of the Company, shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the Company, any Series or any Members, and shall not be subject to any other or different standards imposed by this Agreement, any other agreement contemplated hereby, under the Delaware Act or under any other applicable law or in equity. To the maximum extent permitted by applicable law, the Managing Member shall not have any duty (including any fiduciary duty) to the Company, any Series, the Members or any other Person, including any fiduciary duty associated with self-dealing or corporate opportunities, all of which are hereby expressly waived; provided that this Section 5.8 shall not in any way reduce or otherwise limit the specific obligations of the Managing Member expressly provided in this Agreement or in any other agreement with the Company or any Series and such other obligations, if any, as are required by applicable laws.

Section 5.9    Contractual Relationship with the Administrative Agent    To the maximum extent permitted by applicable law, the obligations of the Administrative Agent to the Company, any Series, the Members or any other Person shall be limited to the specific obligations of the Administrative Agent expressly provided in any administrative agency agreement or other contract between the Administrative Agent and the Company, any Series and/or any Subsidiary of a Series, and the Administrative Agent shall not have any other duty (including any fiduciary duty) to the Company, any Series, the Members or any other Person, including any fiduciary duty associated with self dealing or corporate opportunities, all of which are hereby expressly waived.

Section 5.10    Outside Activities    It shall be deemed not to be a breach of any duty (including any fiduciary duty) or any other obligation of any type whatsoever of any Director or Affiliates of such Director (other than any express obligation contained in any agreement to which such Person and the Company, any Series or any Subsidiary of a Series are parties) to engage in outside business interests and activities in preference to or to the exclusion of the Company or any Series or in direct competition with the Company or any Series; provided such Director or Affiliate does not engage in such business or activity as a result of or using confidential information provided by or on behalf of the Company or any Series to such Director; provided, further, that a Person shall not be deemed to be in direct competition with the Company or any Series solely because of such Person's ownership, directly or indirectly, solely for investment purposes, of securities of any publicly traded entity if such Person does not, together with such Person's Affiliates, collectively own 5% or more of any class or securities of such publicly traded entity, and such Person is not a director or officer (and does not hold an equivalent position) in such publicly traded entity. Directors shall have no obligation hereunder or as a result of any duty expressed or implied by law to present business opportunities to the Company or any Series that may become available to Affiliates of such Director. None of any Group Member, any Member or any other Person shall have any rights by virtue of a Director’s duties as a Director, this Agreement or any Group Member Agreement in any business ventures of any Director.

Section 5.11    Reliance by Third Parties    Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Company or any Series shall be entitled to assume that the Board of Directors and any Officer authorized by the Board of Directors to act on behalf of and in the name of the Company or any Series has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Company or such Series and to enter into any authorized contracts on behalf of the Company or such Series, and such Person shall be entitled to deal with the Board of Directors or any Officer as if it were the Company’s or such Series’ sole party in interest, both legally and beneficially. Each Member hereby waives, to the fullest extent permitted by law, any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the Board of Directors or any Officer in connection with any such dealing. In no event shall any Person dealing with the Board of Directors or any Officer or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the Board of Directors or any Officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Company or any Series by the Board of Directors or any Officer or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement and/or the Bylaws were in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Company or any Series and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Company or the applicable Series.

Section 5.12    Certain Conflicts of Interest    The resolution of any Conflict of Interest approved by Special Approval shall be conclusively deemed to be fair and reasonable to the Company and the Members and not a breach of any duty hereunder at law, in equity or otherwise.

ARTICLE VI
BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 6.1    Records and Accounting    The Board of Directors shall keep or cause to be kept at the principal office of the Company appropriate books and records with respect to the business of the Company and each Series, including all books and records necessary to provide to the Members any information required to be provided pursuant to this Agreement. Any books and records maintained by or on behalf of the Company or any Series in the regular course of its business, including the record of the Members, books of account and records of Company or Series proceedings, may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape, photographs, micrographics or any other information storage device; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Company shall be maintained, for tax and financial reporting purposes, on an accrual basis in accordance with U.S. GAAP.

Section 6.2    Fiscal Year    Unless otherwise provided in a Series Designation, the fiscal year for tax and financial reporting purposes of each Series shall be a calendar year ending December 31 unless otherwise required by the Code. The fiscal year for financial reporting purposes of the Company shall be a calendar year ending December 31.

ARTICLE 7
TAX MATTERS

Section 7.1    Tax Treatment        The Company intends to be treated as a non‑entity and intends to treat each Series as a separate business entity, in each case, for U.S. federal income tax purposes.

Section 7.2    Qualifying and Maintaining Qualification as a REIT.        From the Initial Date (as defined in Article XIII) of a Series until the Restriction Termination Date (as defined in Article XIII) of such Series, the Board of Directors shall take such action from time to time as the Board of Directors determines is necessary or appropriate in order to maintain such Series’ qualification as a REIT; provided, however, if the Board of Directors determines that it is no longer in the best interests of a Series to continue to be qualified as a REIT, the Board of Directors may authorize a Series to revoke or otherwise terminate the its REIT election pursuant to Section 856(g) of the Code. The Board of Directors also may determine that compliance with any restriction or limitation on share ownership and transfers set forth in Article XIII is no longer required for REIT qualification. It is intended that each Series elect to be treated as a corporation that will elect to be taxed as a REIT prior to the Initial Date of such Series until the Restriction Termination Date of such Series.
ARTICLE XIII
DISSOLUTION, TERMINATION AND LIQUIDATION

Section 8.1    Dissolution and Termination

(a)The Company shall not be dissolved by the admission of Substitute Members or Additional Members associated with any Series. The Company shall dissolve, and its affairs shall be wound up, upon:

i.an election to dissolve the Company by the Board of Directors that is separately approved by the affirmative vote of the holders of not less than a majority of the Common Shares of each Series then Outstanding entitled to vote thereon;

ii.the sale, exchange or other disposition of all or substantially all of the assets and properties of all Series;

iii.the entry of a decree of judicial dissolution of the Company pursuant to the provisions of the Delaware Act; or

iv.at any time that there are no members of the Company, unless the business of the Company is continued in accordance with the Delaware Act.

(b)A Series shall not be terminated by the admission of Substitute Members or Additional Members associated with such Series. Unless otherwise provided in the Series Designation establishing such Series or in a Share Designation related to such Series, a Series shall terminate, and its affairs shall be wound up, upon:

i.the dissolution of the Company pursuant to Section 8.1(a);

ii.an event set forth as an event of termination of such Series in the Series Designation establishing such Series; or

iii.an election to terminate the Series by the Board of Directors that is approved by the affirmative vote of the holders of not less than a majority of the Shares of such Series then Outstanding entitled to vote on such termination.

Section 8.2    Liquidator    Upon dissolution of the Company or termination of any Series, the Board of Directors shall select one or more Persons to act as Liquidator.

In the case of a dissolution of the Company, (i) the Liquidator (if other than the Board of Directors) shall be entitled to receive such compensation for its services as may be separately approved by the affirmative vote of the holders of not less than a majority of the Common Shares of each Series then Outstanding entitled to vote on such liquidation; (ii) the Liquidator (if other than the Board of Directors) shall agree not to resign at any time without 15 days’ prior notice and may be removed at any time, with or without cause, by notice of removal separately approved by the affirmative vote of the holders of not less than a majority of the Common Shares of each Series then Outstanding entitled to vote on such liquidation; (iii) upon dissolution, death, incapacity, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be separately approved by the affirmative vote of the holders of not less than a majority of the Common Shares of each Series then Outstanding entitled to vote on such liquidation. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article VIII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the Board of Directors under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers) necessary or appropriate to carry out the duties and functions of the Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Company as provided for herein. In the case of a termination of an Series, other than in connection with a dissolution of the Company, the Board of Directors shall act as Liquidator.
Section 8.3    Liquidation of a Series.    In connection with the liquidation of a Series, whether as a result of the dissolution of the Company or the termination of such Series, the Liquidator shall proceed to dispose of the assets of such Series, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as determined by the Liquidator, subject to Sections 18‑215 and 18‑804 of the Delaware Act, the terms of any Share Designation or Series Designation and the following:

(a)Subject to Section 8.3(c), the assets may be disposed of by public or private sale or by distribution in kind to one or more Members associated with such Series on such terms as the Liquidator and such Member or Members may agree. If any property is distributed in kind, the Member receiving the property shall be deemed for purposes of Section 8.3(c) to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Members associated with such Series. Notwithstanding anything to the contrary contained in this Agreement, the Members understand and acknowledge that a Member associated with a Series may be compelled to accept a distribution of any asset in kind from such Series despite the fact that the percentage of the asset distributed to such Member exceeds the percentage of that asset which is equal to the percentage in which such Member shares in distributions from the Company in respect of such Series. The Liquidator may defer liquidation or distribution of the Series’ assets for a reasonable time if it determines that an immediate sale or distribution of all or some of the assets would be impractical or would cause undue loss to the Members associated with such Series. The Liquidator may distribute the Series’ assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Members associated with the Series.

(b)Liabilities of each Series include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 8.2) and amounts to Members associated with such Series otherwise than in respect of their distribution rights under Article IV. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be applied to other liabilities or distributed as additional liquidation proceeds.

(c)Subject to the terms of any Share Designation or Series Designation (including, without limitation, the preferential rights, if any, of holders of any other class of Shares of the applicable Series), all property and all cash in excess of that required to discharge liabilities as provided in Section 8.3(b) shall be distributed to the holders of the Common Shares of the Series on an equal per‑Share basis.

Section 8.4    Cancellation of Certificate of Formation.    In the case of a dissolution of the Company, upon the completion of the distribution of Series cash and property in connection the termination of all Series, the Certificate of Formation and all qualifications of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Company shall be taken.

Section 8.5    Return of Contributions.    None of any member of the Board of Directors or any Officer of the Company or associated with any Series will be personally liable for, or have any obligation to contribute or loan any monies or property to the Company or any Series to enable it to effectuate, the return of the Capital Contributions of the Members associated with a Series, or any portion thereof, it being expressly understood that any such return shall be made solely from Series assets.

Section 8.6    Waiver of Partition.    To the maximum extent permitted by law, each Member hereby waives any right to partition of the Company or Series property.

ARTICLE IX
AMENDMENT OF AGREEMENT

Section 9.1    General.    Except as provided in Section 9.2, Section 9.3, Section 9.4, and Section 9.5 or in any Share Designation or Series Designation, the Board of Directors may amend any of the terms of this Agreement but only in compliance with the terms, conditions and procedures set forth in this Section 9.1. If the Board of Directors desires to amend any provision of this Agreement other than pursuant to Section 9.3, then it shall first adopt a resolution setting forth the amendment proposed, declaring its advisability, and then (i) call a special meeting of the Members entitled to vote in respect thereof for the consideration of such amendment, (ii) direct that the amendment proposed be considered at the next annual meeting of the Members, if any, or (iii) to the extent permitted by the applicable Share Designation or Series Designation, seek the written consent of the Members. Amendments to this Agreement may be proposed only by or with the consent of the Board of Directors. Such special or annual meeting shall be called and held upon notice in accordance with Article XI of this Agreement and the Bylaws. The notice shall set forth such amendment in full or a brief summary of the changes to be effected thereby, as the Board of Directors shall deem advisable. At the meeting, a vote of Members entitled to vote thereon shall be taken for and against the proposed amendment. A proposed amendment shall be effective upon its approval by the affirmative vote of the holders of not less than a majority of the Common Shares of all Series then Outstanding, voting together as a single class, unless a greater percentage is required under this Agreement or by Delaware law.

Section 9.2    Super Majority Amendments. Notwithstanding Section 9.1, the affirmative vote of the holders of Outstanding Common Shares of all Series representing at least two thirds of the total votes that may be cast by all such Outstanding Common Shares, voting together as a single class, shall be required to alter or amend any provision of this Section 9.2 or Section 9.4(b).

Section 9.3    Amendments to be Adopted Solely by the Board of Directors. Notwithstanding Section 9.1, the Board of Directors, without the approval of any Member, may amend any provision of this Agreement, and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:

(a)a change in the name of the Company, the location of the principal place of business of the Company, the registered agent of the Company or the registered office of the Company;

(b)the admission, substitution, withdrawal or removal of Members in accordance with this Agreement;

(c)a change that the Board of Directors determines to be necessary or appropriate to qualify or continue the qualification of the Company as a limited liability company under the laws of any state or to ensure that each Series will continue to qualify as a REIT for U.S. federal income tax purposes or otherwise not be taxed as an entity for U.S. federal income tax purposes, other than as the Company specifically so designates;

(d)a change that, in the sole discretion of the Board of Directors, it determines (i) does not adversely affect the Members (including adversely affecting the holders of any particular class or series of Shares of a Series as compared to other holders of other classes or series of Shares) in any material respect, (ii) to be necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act), (iii) to be necessary, desirable or appropriate to facilitate the trading of the Shares (including, without limitation, the division of any class or classes or series of Outstanding Shares into different classes or series to facilitate uniformity of tax consequences within such classes or series of Shares) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which Shares are or will be listed for trading, compliance with any of which the Board of Directors deems to be in the best interests of the Company and the Members, (iv) to be necessary or appropriate in connection with action taken by the Board of Directors pursuant to Section 3.10, (v) are necessary to preserve the Managing Member’s right to appoint, remove or nominate directors, set the number of Directors or fill vacancies on the Board of Directors or (vi) is required to effect the intent expressed in any Offering Document or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement;

(e)a change in the fiscal year or taxable year of the Company or any Series and any other changes that the Board of Directors determines to be necessary or appropriate as a result of a change in the fiscal year or taxable year of the Company or any Series;

(f)an amendment that the Board of Directors determines, based on the advice of counsel, to be necessary or appropriate to prevent the Company or its Directors, Officers, trustees or agents from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor;

(g)an amendment that the Board of Directors determines to be necessary or appropriate in connection with the issuance of any additional Series R‑1 Common Shares, the establishment or creation of additional Series pursuant to Section 3.2 or the authorization, establishment, creation or issuance of any class or series of Shares of any Series pursuant to Section 3.2 and the admission of Additional Members;

(h)any other amendment expressly permitted in this Agreement to be made by the Board of Directors acting alone;

(i)an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 10.3;

(j)an amendment that the Board of Directors determines to be necessary or appropriate to reflect and account for the formation by the Company of, or investment by the Company or any Series in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Company or any Series of activities permitted by the terms of Section 2.4;

(k)a merger, conversion or conveyance pursuant to Section 10.3(d); or

(l)any other amendments substantially similar to the foregoing.

Section 9.4    Certain Amendment Requirements.

(a)Notwithstanding the provisions of Sections 9.1 and 9.3, no provision of this Agreement that establishes a percentage of Outstanding Shares required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the affirmative vote of holders of Outstanding Shares whose aggregate Outstanding Shares constitute not less than the voting requirement sought to be reduced.

(b)Notwithstanding the provisions of Section 9.1 and Section 9.3, but subject to Section 9.2, no amendment to this Agreement may (i) enlarge the obligations of any Member without its consent, unless such shall be deemed to have occurred as a result of an amendment approved pursuant to Section 9.3(c), (ii) change Section 8.1(a), (iii) change the term of the Company or, (iv) except as set forth in Section 8.1(a), give any Person the right to dissolve the Company.

(c)Except as provided in Section 10.3, and subject to Section 3.4(a) and the terms of any Series Designation or Share Designation, and without limitation of the Board of Directors’ authority to adopt amendments to this Agreement without the approval of any Members as contemplated in Section 9.1, notwithstanding the provisions of Section 9.1, any amendment that would have a material adverse effect on the rights or preferences of any class or series of Shares of a Series in relation to other classes or series of Shares of such Series must be approved by the holders of a majority of the Outstanding Shares of the class or series affected.

Section 9.5    Approval of Managing Member. Notwithstanding any provision in this Agreement or the Bylaws to the contrary, no amendment to this Agreement or the Bylaws may be made that would adversely affect the Managing Member’s right to appoint, remove or nominate Directors, set the number of Directors or fill vacancies on the Board of Directors, without the prior written approval of the Managing Member.
ARTICLE X
MERGER, CONSOLIDATION OR CONVERSION

Section 10.1    Authority. The Company may merge or consolidate with one or more limited liability companies or “other business entities” as defined in Section 18‑209 of the Delaware Act, or convert into any such entity, whether such entity is formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written agreement of merger or consolidation (“Merger Agreement”) or a written plan of conversion (“Plan of Conversion”), as the case may be, in accordance with this Article X.

Section 10.2    Procedure for Merger, Consolidation or Conversion. A merger, consolidation or conversion of the Company pursuant to this Article X requires the prior approval of the Board of Directors.

(a)If the Board of Directors shall determine to consent to the merger or consolidation, the Board of Directors shall approve the Merger Agreement, which shall set forth:

i.the names and jurisdictions of formation or organization of each of the business entities proposing to merge or consolidate;

ii.the name and jurisdiction of formation or organization of the business entity that is to survive the proposed merger or consolidation (the “Surviving Business Entity”);

iii.the terms and conditions of the proposed merger or consolidation;

iv.the manner and basis of exchanging or converting the rights or securities of, or interests in, each constituent business entity for, or into, cash, property, rights, or securities of or interests in, the Surviving Business Entity; and if any rights or securities of, or interests in, any constituent business entity are not to be exchanged or converted solely for, or into, cash, property, rights, or securities of or interests in, the Surviving Business Entity, the cash, property, rights, or securities of or interests in, any limited liability company or other business entity which the holders of such rights, securities or interests are to receive, if any;

v.a statement of any changes in the constituent documents or the adoption of new constituent documents (the certificate of formation or limited liability company agreement, articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation;

vi.the effective time of the merger or consolidation, which may be the date of the filing of the certificate of merger or consolidation pursuant to Section 10.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided, that if the effective time of the merger or consolidation is to be later than the date of the filing of the certificate of merger or consolidation, the effective time shall be fixed no later than the time of the filing of the certificate of merger or consolidation or the time stated therein); and

vii.such other provisions with respect to the proposed merger or consolidation that the Board of Directors determines to be necessary or appropriate.

(b)If the Board of Directors shall determine to consent to the conversion, the Board of Directors may approve and adopt a Plan of Conversion containing such terms and conditions that the Board of Directors determines to be necessary or appropriate.

Section 10.3    Approval by Members of Merger, Consolidation or Conversion or Sales of Substantially All Assets.

(a)Except as provided in Section 10.3(d), the Board of Directors, upon its approval of the Merger Agreement or Plan of Conversion, as the case may be, shall direct that the Merger Agreement or Plan of Conversion, as applicable, be submitted to a vote of the Members, whether at an annual meeting or a special meeting, in either case, in accordance with the requirements of Article IX and the Bylaws. A copy or a summary of the Merger Agreement or Plan of Conversion, as applicable, shall be included in or enclosed with the notice of meeting.

(b)Except as provided in Section 10.3(d), the Merger Agreement or Plan of Conversion, as applicable, shall be approved upon receiving the separate approval by the affirmative vote of the holders of not less than a majority of the Common Shares of each Series then Outstanding entitled to vote thereon unless the Merger Agreement or Plan of Conversion, as applicable, contains any provision that, if contained in an amendment to this Agreement, the provisions of this Agreement or the Delaware Act would require for its approval the vote or consent of a greater percentage of the Outstanding Shares or of any other class or series of Members, in which case such greater percentage vote or consent shall be required for approval of the Merger Agreement or Plan of Conversion, as applicable.

(c)Except as provided in Section 10.3(d), after such approval by vote or consent of the Members, and at any time prior to the filing of the certificate of merger or a certificate of conversion pursuant to Section 10.4, the merger, consolidation or conversion may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement or the Plan of Conversion, as the case may be.

(d)Notwithstanding anything else contained in this Article X or in this Agreement, the Board of Directors is permitted, without Member approval, to convert the Company into a new limited liability entity, or to merge the Company into, or convey all of the Series’ assets to, another limited liability entity, or which shall be newly formed and shall have no assets, liabilities or operations at the time of such conversion, merger or conveyance other than those it receives from the Company if (i) the Board of Directors has received an Opinion of Counsel that the conversion, merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Member, (ii) the sole purpose of such conversion, merger or conveyance is to effect a mere change in the legal form of the Company into another limited liability entity and (iii) the governing instruments of the new entity provide the Members and the Board of Directors with substantially the same rights and obligations as are herein contained.

(e)Members are not entitled to dissenters’ rights of appraisal in the event of a merger, consolidation or conversion pursuant to this Article X, a sale of all or substantially all of the assets of all the Series or the Series’ Subsidiaries, or any other similar transaction or event.

(f)The Board of Directors may not cause the Company and/or the Series to sell, exchange or otherwise dispose of all or substantially all of all the Series’ assets, in one transaction or a series of related transactions, or approve on behalf of the Company and the Series any such sale, exchange or other disposition, without receiving the separate approval by the affirmative vote of the holders of not less than a majority of the Common Shares of each Series then Outstanding entitled to vote thereon; provided, however, that, subject to Section 3.2(g), the foregoing will not limit the ability of the Board of Directors to authorize the Series to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Series without the approval of any Member.

(g)Each Merger, consolidation or conversion approved pursuant to this Article X shall provide that all holders of Common Shares of a Series shall be entitled to receive the same consideration pursuant to such transaction with respect to each of their Common Shares of such Series.

Section 10.4    Certificate of Merger or Conversion. Upon the required approval by the Board of Directors and the Members of a Merger Agreement or a Plan of Conversion, as the case may be, a certificate of merger or certificate of conversion, as applicable, shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act.

Section 10.5    Effect of Merger. At the effective time of the certificate of merger:

(a)all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity and all other things and causes of action belonging to each of those business entities, shall be vested in the Surviving Business Entity to the extent they were of each constituent business entity;

(b)the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation;

(c)all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and

(d)all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it.

ARTICLE XI
MEMBER MEETINGS

Section 11.1    Meetings. There shall be an annual meeting of the Members, to be held on proper notice at such time (after the delivery of the annual report) and convenient location as shall be determined by or in the manner prescribed in the Bylaws, for the transaction of any business within the power of the Company or the Series. Except as otherwise provided in this Agreement, special meetings of Members may be called in the manner provided in the Bylaws. Any meeting may be adjourned and reconvened as the Directors determine or as provided in the Bylaws.

Section 11.2    Voting Rights. Subject to the provisions of any class or series of Shares of any Series then Outstanding, the Members shall be entitled to vote only on the following matters: (a) amendment of this Agreement to the extent and as provided in Article IX; (b) dissolution of the Company or termination of a Series to the extent and as provided in Section 8.1; (c) merger or consolidation of the Company, or the sale or disposition of all or substantially all of the Series’ assets, to the extent and as provided in Article X; (d) any incurrence or issuance of external indebtedness or preferred shares (including Preferred Shares) by or that otherwise corresponds to a Series or any Subsidiary of such Series to the extent and as provided in Section 3.2(g); and (e) such other matters with respect to which the Board of Directors has adopted a resolution declaring that a proposed action is advisable and directing that the matter be submitted to the Members for approval or ratification. Except with respect to the foregoing matters, no action taken by the Members at any meeting shall in any way bind the Board of Directors. For the avoidance of doubt, the holders of the Series R‑1 Common Shares shall have the right vote on the matters specified in Section 3.4.

Section 11.3    Extraordinary Actions. Except as specifically provided in this Agreement, notwithstanding any provision of law permitting or requiring any action to be taken or authorized by the affirmative vote of the holders of a greater number of votes, any such action shall be effective and valid if taken or approved by the affirmative vote of holders of Shares entitled to cast a majority of all the votes entitled to be cast on the matter.

Section 11.4    Board Approval. The submission of any action of the Company or a Series to Members for their consideration shall first be approved by the Board of Directors.

Section 11.5    Action By Members without a Meeting. Any Share Designation or Series Designation may provide that any action required or permitted to be taken by the holders of the Shares to which such Share Designation relates or the Members associated with the Series to which such Series Designation relates may be taken without a meeting by the written consent of such holders or Members entitled to cast a sufficient number of votes to approve the matter as required by statute, this Agreement or the Bylaws of the Company, as the case may be.

Section 11.6    Managing Member. The Managing Member shall generally not be entitled to vote on matters submitted to the Members for approval; provided, however, that the Managing Member’s prior written approval shall be required for any amendment to this Agreement or the Bylaws specified in Section 9.6.

ARTICLE XII
GENERAL PROVISIONS

Section 12.1    Addresses and Notices. Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Member under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Member at the address described below. Any notice, payment or report to be given or made to a Member hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Shares at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Company, regardless of any claim of any Person who may have an interest in such Shares by reason of any assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 12.1 executed by the Company, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Company is returned by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Company of a change in his address) if they are available for the Member at the principal office of the Company for a period of one year from the date of the giving or making of such notice, payment or report to the other Members. Any notice to the Company (including any Series) shall be deemed given if received by the Secretary at the principal office of the Company designated pursuant to Section 2.3. The Board of Directors and the Officers may rely and shall be protected in relying on any notice or other document from a Member or other Person if believed by it to be genuine.

Section 12.2    Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

Section 12.3    Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

Section 12.4    Integration. This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.

Section 12.5    Creditors. None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Company or any Series.

Section 12.6    Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.
Section 12.7    Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Share, upon accepting the Certificate evidencing such Share.

Section 12.8    Applicable Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflict of laws. Each Member (i) irrevocably submits to the non-exclusive jurisdiction and venue of any Delaware state court or U.S. federal court sitting in Wilmington, Delaware in any action arising out of this Agreement and (ii) consents to the service of process by mail. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court.

Section 12.9    Invalidity of Provisions. If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

Section 12.10    Consent of Members. Each Member hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Members, such action may be so taken upon the concurrence of less than all of the Members and each Member shall be bound by the results of such action.

Section 12.11    Facsimile Signatures. The use of facsimile signatures affixed in the name and on behalf of the transfer agent and registrar of the Company on certificates representing Shares is expressly permitted by this Agreement.
ARTICLE XIII
RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES

Section 13.1    Definitions. For the purpose of this Article XIII, the following terms shall have the following meanings:

Aggregate Ownership Limit” shall mean not more than 9.8 percent (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding Shares of a Series, or such other percentage determined by the Board of Directors in accordance with Section 13.9.
Beneficial Ownership” shall mean ownership of Shares of a Series by a Person, whether the interest in the Shares of such Series is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3) of the Code. The terms “Beneficial Owner”, “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.
Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.
Charitable Beneficiary” shall mean one or more beneficiaries of the Trust as determined pursuant to Section 13.11(f); provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
Common Share Ownership Limit” shall mean not more than 9.8 percent (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding Common Shares of a Series, or such other percentage determined by the Board of Directors in accordance with Section 13.9.
Constructive Ownership” shall mean ownership of Shares of a Series by a Person, whether the interest in the Shares of such Series is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner”, “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.
Excepted Holder” shall mean a Person for whom an Excepted Holder Limit is created by this Agreement or by the Board of Directors pursuant to Section 13.8.
Excepted Holder Limit” shall mean, provided that the affected Excepted Holder agrees to comply with any requirements established by the Board of Directors pursuant to Section 13.8 and subject to adjustment pursuant to Section 13.9, the percentage limit established by the Board of Directors pursuant to Section 13.8.
Initial Date” shall mean, with respect to any Series, unless otherwise provided in the Series Designation of such Series, the date of the closing of the Initial Offering of such Series; provided that such Series intends to qualify as a REIT.
Initial Offering” shall mean, with respect to any Series, the first issuance and sale for cash of Common Shares of such Series to any Person other than an Affiliate of the Company pursuant to (i) a public offering registered under the Securities Act or (ii) a private offering in accordance with Rule 144A, Regulation D or Regulation S of the Securities Act.
Market Price” on any date shall mean, with respect to any class or series of outstanding Shares of a Series, the Closing Price for such Shares on such date. The “Closing Price” on any date shall mean the last sale price for such Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NASDAQ or, if such Shares are not listed or admitted to trading on the NASDAQ, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal National Securities Exchange on which such Shares are listed or admitted to trading or, if such Shares are not listed or admitted to trading on any National Securities Exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over‑the‑counter market, as reported by the principal automated quotation system that may then be in use or, if such Shares are not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Shares selected by the Board of Directors of the Company or, in the event that no trading price is available for such Shares, the fair market value of the Shares, as determined in good faith by the Board of Directors of the Company.
Person” shall mean, solely for the purposes of this Article XIII, an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act and a group to which an Excepted Holder Limit applies.
Prohibited Owner” shall mean with respect to any purported Transfer, any Person who, but for the provisions of Section 13.2, would Beneficially Own or Constructively Own Shares of a Series and, if appropriate in the context, shall also mean any Person who would have been the Record Holder of the Shares that the Prohibited Owner would have so owned.
Restriction Termination Date” means, with respect to any Series, the first day after the Initial Date on which the Board of Directors determines in accordance with Section 7.2 that it is no longer in the best interests of the Series to continue to qualify as a REIT or that compliance with any restriction or limitation on ownership and transfers of Shares of the Series set forth in this Article XIII is no longer required in order for such Series to qualify as a REIT.
Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire or change its Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Shares of a Series or the right to vote or receive distributions on Shares of a Series, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any securities or rights convertible into or exchangeable for Shares of a Series or any interest in Shares of a Series or any exercise of any such conversion or exchange right and (c) Transfers of interests in other entities that result in changes in Beneficial Ownership or Constructive Ownership of Shares of a Series; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise. The terms “Transferring” and “Transferred” shall have the correlative meanings.
Trust” shall mean any trust provided for in Section 13.11(a).
Trustee” shall mean the Person that is unaffiliated with the Company, any Series or any Prohibited Owner, that is appointed by the Company to serve as trustee of the Trust.
Section 13.2    Ownership Limitations. During the period commencing on the Initial Date of a Series and prior to the Restriction Termination Date of such Series, but subject to Section 13.12:

(a)Basic Restrictions.

i.(1) No Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own Shares of such Series in excess of the Aggregate Ownership Limit, (2) no Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own Common Shares of such Series in excess of the Common Share Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own Shares of such Series in excess of the Excepted Holder Limit for such Excepted Holder.

ii.No Person shall Beneficially Own or Constructively Own Shares of such Series to the extent that such Beneficial Ownership or Constructive Ownership of Shares of such Series would result in the Series being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise failing to qualify as a REIT (including, but not limited to, Beneficial Ownership or Constructive Ownership that would result in the Series owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Series from such tenant could cause the Series to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).

iii.Any Transfer of Shares of such Series that, if effective, would result in the Shares of such Series being beneficially owned by fewer than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares of such Series.

(b)Transfer in Trust. If any Transfer of Shares of such Series occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning Shares of such Series in violation of Section 13.2(a)(i) or (ii).

i.then that number of Shares of such Series the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 13.2(a)(i) or (ii) (rounded up to the nearest whole share) shall be automatically transferred to a Trust for the benefit of a Charitable Beneficiary, as described in Section 13.11, effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such shares; or

ii.if the transfer to the Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 13.2(a)(i) or (ii), then the Transfer of that number of Shares of such Series that otherwise would cause any Person to violate Section 13.2(a)(i) or (ii) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares of such Series.

Section 13.3    Remedies for Breach. If the Board of Directors or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 13.2 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any Shares of a Series in violation of Section 13.2 (whether or not such violation is intended), the Board of Directors or such committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Company to redeem shares, refusing to give effect to such Transfer on the books of the Company or instituting proceedings to enjoin such Transfer or other event; provided, however, that any Transfer or attempted Transfer or other event in violation of Section 13.2 shall automatically result in the transfer to the Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non‑action) by the Board of Directors or such committee thereof.

Section 13.4    Notice of Restricted Transfer. Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of Shares of a Series that will or may violate Section 13.2(a) or any Person who would have owned Shares of a Series that resulted in a transfer to the Trust pursuant to the provisions of Section 13.2(b) shall immediately give written notice to the Company of such event or, in the case of such a proposed or attempted transaction, give at least 15 days’ prior written notice, and shall provide to the Company such other information as the Company may request in order to determine the effect, if any, of such Transfer on the Series’ qualification as a REIT.

Section 13.5    Owners Required To Provide Information. From the Initial Date of a Series and prior to the Restriction Termination Date of such Series:

(a)every owner of five percent or more (or such lower percentage as required by the Code or the U.S. Treasury Department regulations promulgated thereunder) of the outstanding Shares of such Series, within 30 days after the end of each taxable year, shall give written notice to the Company stating the name and address of such owner, the number of Shares of each class and series of such Series Beneficially Owned and a description of the manner in which such Shares are held. Each such owner shall promptly provide to the Company in writing such additional information as the Company may request in order to determine the effect, if any, of such Beneficial Ownership on the Series’ qualification as a REIT and to ensure compliance with the Common Share Ownership Limit and the Aggregate Ownership Limit; and

(b)each Person who is a Beneficial Owner or Constructive Owner of Shares of such Series and each Person (including the Member of record) who is holding Shares of such Series for a Beneficial Owner or Constructive Owner shall promptly provide to the Company in writing such information as the Company may request, in good faith, in order to determine the Series’ qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance.

Section 13.6    Remedies Not Limited. Subject to Section 7.2, nothing contained in this Article XIII shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Company and a Series and the interests of the Members associated with such Series in preserving such Series’ qualification as a REIT.

Section 13.7    Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Article XIII, the Board of Directors shall have the power to determine the application of the provisions of this Article XIII with respect to any situation based on the facts known to it. In the event Article XIII requires an action by the Board of Directors and this Agreement fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of this Article XIII. Absent a decision to the contrary by the Board of Directors (which the Board may make in its sole and absolute discretion), if a Person would have (but for the remedies set forth in Section 13.3) acquired Beneficial Ownership or Constructive Ownership of Shares a Series in violation of Section 13.2, such remedies (as applicable) shall apply first to the Shares of such Series which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually owned) by such Person, pro rata among the Persons who actually own such Shares of such Series based upon the relative number of the Shares of such Series held by each such Person.

Section 13.8    Exceptions.

(a)Subject to Section 13.2(a)(ii), the Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a Person from the Aggregate Ownership Limit and/or the Common Share Ownership Limit, as the case may be, and may establish or increase an Excepted Holder Limit for such Person if the Board of Directors determines, based on such representations and undertakings as it may require, that:

i.such exemption will not cause the Beneficial Ownership or Constructive Ownership of Shares of the applicable Series of any individual (as defined in Section 542(a)(2) of the Code as modified by Section 856(h)(3) of the Code) to violate Section 13.2(a)(ii); and

ii.such Person does not and will not Constructively own an interest in a tenant of such Series (or a tenant of any entity owned or controlled by such Series) that would cause such Series to own, actually or Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant (for this purpose, a tenant from whom the Series (or an entity owned or controlled by the Series) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the Board of Directors, rent from such tenant would not adversely affect the Series’ ability to qualify as a REIT shall not be treated as a tenant of the Series).

(b)Prior to granting any exception pursuant to Section 13.8(a), the Board of Directors may require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem necessary or advisable in order to determine or ensure a Series’ qualification as a REIT. Notwithstanding the receipt of any ruling or opinion, the Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

(c)Subject to Section 13.2(a)(iii), an underwriter which participates in a public offering or a private placement of Shares of a Series (or securities convertible into or exchangeable for Shares of a Series) may Beneficially Own or Constructively Own Shares of such Series (or securities convertible into or exchangeable for Shares of such Series) in excess of the Aggregate Ownership Limit, the Common Share Ownership Limit, or both such limits, but only to the extent necessary to facilitate such public offering or private placement.

(d)The Board of Directors may only reduce the Excepted Holder Limit for an Excepted Holder: (1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage that is less than the Common Share Ownership Limit or Aggregate Ownership Limit, as applicable.

Section 13.9    Increase or Decrease in Aggregate Ownership and Common Share Ownership Limits.

(a)Subject to Section 13.2(a)(ii), the Board of Directors may from time to time increase or decrease the Common Share Ownership Limit and the Aggregate Ownership Limit; provided, however, that any decreased Common Share Ownership Limit and/or Aggregate Ownership Limit will not be effective for any Person whose percentage ownership in Common Shares or Shares of the applicable Series is in excess of such decreased Common Share Ownership Limit and/or Aggregate Ownership Limit until such time as such Person’s percentage of Common Shares or Shares of such Series equals or falls below the decreased Common Share Ownership Limit and/or Aggregate Ownership Limit, but any further acquisition of Common Shares or Shares of such Series in excess of such percentage ownership of Common Shares or Shares of such Series will be in violation of the Common Share Ownership Limit and/or Aggregate Ownership Limit; and, provided further, that any increased or decreased Common Share Ownership Limit and/or Aggregate Ownership Limit would not allow five or fewer Persons to Beneficially Own more than 49.9% in value of the outstanding Shares of such Series.

(b)Prior to increasing or decreasing the Common Share Ownership Limit or the Aggregate Ownership Limit pursuant to Section 13.9(a), the Board of Directors may require such opinions of counsel, affidavits, undertakings or agreements, in any case in form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem necessary or advisable in order to determine or ensure the applicable Series’ qualification as a REIT.

Section 13.10    Legend. Each certificate for Shares of a Series, if certificated, or any written statement of information in lieu of a certificate delivered to a holder of uncertificated Shares of a Series shall bear substantially the following legend:

“The shares represented by this certificate are subject to restrictions on Beneficial Ownership and Constructive Ownership and Transfer for the purpose, among others, of the [Name] Series’ maintenance of its qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Subject to certain further restrictions and except as expressly provided in the Operating Agreement, (i) no Person may Beneficially Own or Constructively Own Common Shares in excess of 9.8 percent (in value or number of shares, whichever is more restrictive) of the outstanding Common Shares of the [Name] Series, unless such Person is exempt from such limitation or is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially Own or Constructively Own Shares in excess of 9.8 percent (in value or number of shares, whichever is more restrictive) of the outstanding Shares of the [Name] Series, unless such Person is exempt from such limitation or is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially Own or Constructively Own Shares that would result in the [Name] Series being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise cause the [Name] Series to fail to qualify as a REIT; and (iv) any Transfer of Shares of the [Name] Series that, if effective, would result in the Shares being beneficially owned by less than 100 Persons (as determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Shares.
Any Person who Beneficially Owns or Constructively Owns or attempts to Beneficially Own or Constructively Own Shares of the [Name] Series which causes or will cause a Person to Beneficially Own or Constructively Own Shares of the [Name] Series in excess or in violation of the above limitations must immediately notify the Company or, in the case of such a proposed or attempted transaction, give at least 15 days prior written notice. If any of the restrictions on transfer or ownership as set forth in (i) through (iii) above are violated, the Shares of the [Name] Series in excess or in violation of the above limitations will be automatically transferred to a Trustee of a Trust for the benefit of one or more Charitable Beneficiaries. In addition, the [Name] Series may redeem Shares upon the terms and conditions specified by the Board of Directors in its sole discretion if the Board of Directors determines that ownership or a Transfer or other event may violate the restrictions described above. Furthermore, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described in (i) through (iii) above may be void ab initio. All capitalized terms in this legend have the meanings defined in the Operating Agreement, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Shares of the [Name] Series on request and without charge. Requests for such a copy may be directed to the Secretary of the Company at its principal office.”
Instead of the foregoing legend, the certificate or written statement of information delivered in lieu of a certificate, if any, may state that the Company will furnish a full statement about certain restrictions on transferability to a Member on request and without charge.
Section 13.11    Transfer of Shares in Trust.

(a)Ownership in Trust. Upon any purported Transfer or other event described in Section 13.2(b) that would result in a transfer of Shares of a Series to a Trust, such Shares of such Series shall be deemed to have been transferred to the Trustee as trustee of a Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Trust pursuant to Section 13.2(b). The Trustee shall be appointed by the Company and shall be a Person unaffiliated with the Company, any Series and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Company as provided in Section 13.11(f).

(b)Status of Shares Held by the Trustee. Shares of a Series held by the Trustee shall be issued and outstanding Shares of such Series. The Prohibited Owner shall have no rights in the shares held by the Trustee. The Prohibited Owner shall not benefit economically from ownership of any Shares held in trust by the Trustee, shall have no rights to distributions and shall not possess any rights to vote or other rights attributable to the Shares held in the Trust.

(c)Distribution and Voting Rights. The Trustee shall have all voting rights and rights to distributions with respect to Shares of a Series held in the Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any distribution paid prior to the discovery by the Company that the Shares of a Series have been transferred to the Trustee shall be paid by the recipient of such distribution to the Trustee upon demand and any distribution authorized but unpaid shall be paid when due to the Trustee. Any distribution so paid to the Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to Shares held in the Trust and, subject to Delaware law, effective as of the date that the Shares of a Series have been transferred to the Trust, the Trustee shall have the authority (at the Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Company that the Shares of such Series have been transferred to the Trustee and (ii) to recast such vote in accordance with the desires of the Trustee acting for the benefit of the Charitable Beneficiary; provided, however, that if the Company has already taken irreversible limited liability company action, then the Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Article XIII, until the Company has received notification that Shares of a Series have been transferred into a Trust, the Company shall be entitled to rely on its share transfer and other Member records for purposes of preparing lists of Members entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of Members.

(d)Sale of Shares by Trustee. Within 20 days of receiving notice from the Company that Shares of a Series have been transferred to the Trust, the Trustee of the Trust shall sell the Shares held in the Trust to a person, designated by the Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in Section 13.2(a). Upon such sale, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 13.11(d). The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the Shares or, if the event causing the Shares to be held in the Trust did not involve a purchase of such Shares at Market Price, the Market Price of the Shares on the day of the event causing the Shares to be held in the Trust and (2) the price per Share received by the Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the Shares held in the Trust. The Trustee may reduce the amount payable to the Prohibited Owner by the amount of distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Trustee pursuant to Section 13.11(c). Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Company that Shares of a Series have been transferred to the Trustee, such Shares are sold by a Prohibited Owner, then (i) such Shares shall be deemed to have been sold on behalf of the Trust and (ii) to the extent that the Prohibited Owner received an amount for such Shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 13.11(d), such excess shall be paid to the Trustee upon demand.

(e)Purchase Right in Shares Transferred to the Trustee. Shares of a Series transferred to the Trustee shall be deemed to have been offered for sale to the Company, or its designee, at a price per Share equal to the lesser of (i) the price per Share in the transaction that resulted in such Transfer to the Trust (or, if the event that resulted in the Transfer to the Trust did not involve a purchase of such Shares at Market Price, the Market Price of such Shares on the day of the event that resulted in the Transfer of such Shares to the Trust) and (ii) the Market Price on the date the Company, or its designee, accepts such offer. The Company may reduce the amount payable to the Trustee by the amount of distributions which has been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Trustee pursuant to Section 13.11(c) and may pay the amount of such reduction to the Trustee for the benefit of the Charitable Beneficiary. The Company shall have the right to accept such offer until the Trustee has sold the Shares held in the Trust pursuant to Section 13.11(d). Upon such a sale to the Company, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

(f)Designation of Charitable Beneficiaries. By written notice to the Trustee, the Company shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Trust such that the Shares of a Series held in the Trust would not violate the restrictions set forth in Section 13.2(a) in the hands of such Charitable Beneficiary. Neither the failure of the Company to make such designation nor the failure of the Company to appoint the Trustee before its automatic transfer provided for in Section 13.2(b) shall make such transfer ineffective; provided that the Company thereafter makes such designation and appointment.

Section 13.12    NASDAQ Transactions. Nothing in this Article XIII shall preclude the settlement of any transaction entered into through the facilities of the NASDAQ or any other National Securities Exchange or automated inter‑dealer quotation system. The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Article XIII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article XIII.

Section 13.13    Enforcement. The Company is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article XIII.

Section 13.14    Non‑Waiver. No delay or failure on the part of the Company or the Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the Company or the Board of Directors, as the case may be, except to the extent specifically waived in writing.

Section 13.15    Severability. If any provision of this Article XIII or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provisions shall be affected only to the extent necessary to comply with the determination of such court.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.
INITIAL MEMBER ASSOCIATED WITH THE R‑1 SERIES

______________________________    
Jesse Stein

MANAGING MEMBER
ETRE FINANCIAL, LLC

By:
_________________________________    
Paul Frischer
Authorized Person

COMPANY
ETRE RESIDENTIAL, LLC

By: ____________________________         
Paul Frischer
Authorized Person



EX-3.3 4 exhibit33.htm EXHIBIT 3.3 Exhibit



Exhibit 3.3
ETRE RESIDENTIAL, LLC
BYLAWS
Article I
OFFICES

Section 1    PRINCIPAL OFFICE.  The principal office of the Company and each series of the Company (each a “Series”) established pursuant to the Operating Agreement (as defined below) in the State of Delaware shall be located at such place as the Board of Directors may designate.

Section 2    ADDITIONAL OFFICES.  The Company and each Series may have additional offices, including a principal executive office, at such places as the Board of Directors may from time to time determine or the business of the Company or such Series may require.


Article II
MEETINGS OF SHAREHOLDERS

Section 1    PLACE.  All meetings of shareholders (for purposes of these Bylaws, the term “shareholder” shall refer to a member of the Company associated with a Series and the terms “share” or “share of limited liability company interest” shall refer to a share of a Series issued by the Company that evidences a member’s rights, powers and duties with respect to the Company and such Series pursuant to Delaware law, the Operating Agreement and these Bylaws) shall be held at the principal executive office of the Company or at such other place as shall be set by the Board of Directors and stated in the notice of the meeting.

Section 2    ANNUAL MEETING.  An annual meeting of the shareholders for the transaction of any business within the powers of the Company and/or the Series shall be held during the month of May of each year, after the delivery of the annual report, referred to in Section 11 of this Article II, at a convenient location and on proper notice, on a date and at the time set by the Directors, beginning with the year 2016.  Failure to hold an annual meeting does not invalidate the Company’s or any Series’ existence or affect any otherwise valid acts of the Company or any Series.

Section 3    SPECIAL MEETINGS.

(a)General.  The Chairman of the Board, Chief Executive Officer, President or Board of Directors may call a special meeting of the shareholders.  Subject to subsection (b) of this Section 3, a special meeting of shareholders shall also be called by the Secretary of the Company upon the written request of the shareholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.

(b)Shareholder Requested Special Meetings.  (1) Any shareholder of record seeking to have shareholders request a special meeting shall, by sending written notice to the Secretary (the “Record Date Request Notice”) by registered mail, return receipt requested, request the Board of Directors to fix a record date to determine the shareholders entitled to request a special meeting (the “Request Record Date”).  The Record Date Request Notice shall set forth the purpose of the meeting and the matters proposed to be acted on at it, shall be signed by one or more shareholders of record as of the date of signature (or their agents duly authorized in a writing accompanying the Record Date Request Notice), shall bear the date of signature of each such shareholder (or such agent) and shall set forth all information relating to each such shareholder that must be disclosed in solicitations of proxies for the matters proposed to be acted on at such meeting, or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Upon receiving the Record Date Request Notice, the Board of Directors may fix a Request Record Date.  The Request Record Date shall not precede and shall not be more than ten days after the close of business on the date on which the resolution fixing the Request Record Date is adopted by the Board of Directors.  If the Board of Directors, within ten days after the date on which a valid Record Date Request Notice is received, fails to adopt a resolution fixing the Request Record Date, the Request Record Date shall be the close of business on the tenth day after the first date on which the Record Date Request Notice is received by the Secretary.

(2)In order for any shareholder to request a special meeting, one or more written requests for a special meeting signed by shareholders of record (or their agents duly authorized in a writing accompanying the request) as of the Request Record Date entitled to cast not less than a majority (the “Special Meeting Percentage”) of all of the votes entitled to be cast at such meeting (the “Special Meeting Request”) shall be delivered to the Secretary.  In addition, the Special Meeting Request (a) shall set forth the purpose of the meeting and the matters proposed to be acted on at it (which shall be limited to those lawful matters set forth in the Record Date Request Notice received by the Secretary), (b) shall bear the date of signature of each such shareholder (or such agent) signing the Special Meeting Request, (c) shall set forth the name and address, as they appear in the Company’s books, of each shareholder signing such request (or on whose behalf the Special Meeting Request is signed), the class, series and number of all shares of limited liability company interest of the Company which are owned by each such shareholder, and nominee holder for, and number of, shares owned by such shareholder beneficially but not of record, (d) shall be sent to the Secretary by registered mail, return receipt requested, and (e) shall be received by the Secretary within 60 days after the Request Record Date.  Any requesting shareholder (or agent duly authorized in a writing accompanying the revocation or the Special Meeting Request) may revoke his, her or its request for a special meeting at any time by written revocation delivered to the Secretary.

(3)The Secretary shall inform the requesting shareholders of the reasonably estimated cost of preparing and mailing the notice of meeting (including the Company’s proxy materials).  The Secretary shall not be required to call a special meeting upon shareholder request and such meeting shall not be held unless, in addition to the documents required by paragraph (2) of this Section 3(b), the Secretary receives payment of such reasonably estimated cost prior to the mailing of any notice of the meeting.

(4)Except as provided in the next sentence, any special meeting shall be held at such place, date and time as may be designated by the Chairman of the Board, Chief Executive Officer, President or Board of Directors, whoever has called the meeting.  In the case of any special meeting called by the Secretary upon the request of shareholders (a “Shareholder Requested Meeting”), such meeting shall be held at such place, date and time as may be designated by the Board of Directors; provided, however, that the date of any Shareholder Requested Meeting shall be not more than 90 days after the record date for such meeting (the “Meeting Record Date”); and provided further  that if the Board of Directors fails to designate, within ten days after the date that a valid Special Meeting Request is actually received by the Secretary (the “Delivery Date”), a date and time for a Shareholder Requested Meeting, then such meeting shall be held at 2:00 p.m. local time on the 90th day after the Meeting Record Date or, if such 90th day is not a Business Day (as defined below), on the first preceding Business Day; and provided further  that in the event that the Board of Directors fails to designate a place for a Shareholder Requested Meeting within ten days after the Delivery Date, then such meeting shall be held at the principal executive offices of the Company.  In fixing a date for any special meeting, the Chairman of the Board, Chief Executive Officer, President or Board of Directors may consider such factors as he, she or it deems relevant within the good faith exercise of business judgment, including, without limitation, the nature of the matters to be considered, the facts and circumstances surrounding any request for a meeting and any plan of the Board of Directors to call an annual meeting or a special meeting.  In the case of any Shareholder Requested Meeting, if the Board of Directors fails to fix a Meeting Record Date that is a date within 30 days after the Delivery Date, then the close of business on the 30th day after the Delivery Date shall be the Meeting Record Date.  The Board of Directors may revoke the notice for any Shareholder Requested Meeting in the event that the requesting shareholders fail to comply with the provisions of paragraph (3) of this Section 3(b).

(5)If written revocations of requests for the special meeting have been delivered to the Secretary and the result is that shareholders of record (or their agents duly authorized in writing), as of the Request Record Date entitled to cast less than the Special Meeting Percentage have delivered and not revoked requests for a special meeting to the Secretary, the Secretary shall:  (i) if the notice of meeting has not already been mailed, refrain from mailing the notice of the meeting and send to all requesting shareholders who have not revoked such requests written notice of any revocation of a request for the special meeting, or (ii) if the notice of meeting has been mailed and if the Secretary first sends to all requesting shareholders who have not revoked requests for a special meeting written notice of any revocation of a request for the special meeting and written notice of the Secretary’s intention to revoke the notice of the meeting, revoke the notice of the meeting at any time before ten days before the commencement of the meeting.  Any request for a special meeting received after a revocation by the Secretary of a notice of a meeting shall be considered a request for a new special meeting.

(6)The Chairman of the Board, Chief Executive Officer, President or the Board of Directors may appoint regionally or nationally recognized independent inspectors of elections to act as the agent of the Company for the purpose of promptly performing a ministerial review of the validity of any purported Special Meeting Request received by the Secretary.  For the purpose of permitting the inspectors to perform such review, no such purported request shall be deemed to have been delivered to the Secretary until the earlier of (i) five Business Days after receipt by the Secretary of such purported request and (ii) such date as the independent inspectors certify to the Company that the valid requests received by the Secretary represent at least a majority of the issued and outstanding shares of limited liability company interest that would be entitled to vote at such meeting.  Nothing contained in this paragraph (6) shall in any way be construed to suggest or imply that the Company or any shareholder shall not be entitled to contest the validity of any request, whether during or after such five Business Day period, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

(7)For purposes of these Bylaws, “Business Day” shall mean Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day.

Section 4    NOTICE.  Not less than ten nor more than 90 days before each meeting of shareholders, the Secretary shall give to each shareholder entitled to vote at such meeting and to each shareholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail, by presenting it to such shareholder personally, by leaving it at the shareholder’s residence or usual place of business or by any other means permitted by Delaware law.  If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at the shareholder’s address as it appears on the records of the Company, with postage thereon prepaid.

Subject to Section 12(a) of this Article II, any business of the Company and the Series may be transacted at an annual meeting of shareholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice.  No business shall be transacted at a special meeting of shareholders except as specifically designated in the notice.
Section 5    ORGANIZATION AND CONDUCT.  Every meeting of shareholders shall be conducted by an individual appointed by the Board of Directors to be chairman of the meeting or, in the absence of such appointment, by the Chairman of the Board or, in the case of a vacancy in the office or absence of the Chairman of the Board, by one of the following officers present at the meeting:  the vice Chairman of the Board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or, in the absence of such officers, a chairman chosen by the shareholders by the vote of a majority of the votes cast by shareholders present in person or by proxy.  The Secretary, or, in the Secretary’s absence, an Assistant Secretary, or in the absence of both the Secretary and Assistant Secretaries, a person appointed by the Board of Directors or, in the absence of such appointment, a person appointed by the chairman of the meeting shall act as Secretary.  In the event that the Secretary presides at a meeting of the shareholders, an Assistant Secretary, or in the absence of Assistant Secretaries, an individual appointed by the Board of Directors or the chairman of the meeting, shall record the minutes of the meeting.  The order of business and all other matters of procedure at any meeting of shareholders shall be determined by the chairman of the meeting.  The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to shareholders of record of the Company, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to shareholders of record of the Company entitled to vote on such matter, their duly authorized proxies and other such individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) determining when the polls should be opened and closed; (f) maintaining order and security at the meeting; (g) removing any shareholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; and (h) recessing or adjourning the meeting to a later date and time and place announced at the meeting.  Unless otherwise determined by the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 6    QUORUM.  At any meeting of shareholders, the presence in person or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter shall constitute a quorum; but this section shall not affect any requirement under any statute or the First Amended and Restated Limited Liability Company Agreement (the “Operating Agreement”) of the Company, dated ________, 2015, for the vote necessary for the adoption of any measure.  If, however, such quorum shall not be present at any meeting of the shareholders, the chairman of the meeting shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting.  At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

The shareholders present either in person or by proxy, at a meeting which has been duly called and convened, may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.
Section 7    VOTING.  A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Operating Agreement of the Company.  Unless otherwise provided by statute or by the Operating Agreement, each outstanding share of limited liability company interest, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.  Voting on any question may be viva voce unless the chairman of the meeting shall order that voting be by ballot.

Section 8    PROXIES.  A shareholder may cast the votes entitled to be cast by the shares of limited liability company interest owned of record by the shareholder in person or by proxy executed by the shareholder or by the shareholder’s duly authorized agent in any manner permitted by law.  Such proxy or evidence of authorization of such proxy shall be filed with the Secretary of the Company before or at the meeting.  No proxy shall be valid more than eleven months after its date, unless otherwise provided in the proxy.

Section 9    VOTING OF SHARES BY CERTAIN HOLDERS.  Shares of limited liability company interest of the Company registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the President or a Vice President, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such shares pursuant to a bylaw or a resolution of the governing body of such corporation or other entity or agreement of the partners of a partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such shares.  Any trustee or other fiduciary may vote shares of beneficial interest registered in his or her name in his or her as such fiduciary, either in person or by proxy.

Shares of limited liability company interest of the Company directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.
The Board of Directors may adopt by resolution a procedure by which a shareholder may certify in writing to the Company that any shares of limited liability company interest registered in the name of the shareholder are held for the account of a specified person other than the shareholder.  The resolution shall set forth the class of shareholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the share transfer books, the time after the record date or closing of the share transfer books within which the certification must be received by the Company; and any other provisions with respect to the procedure which the Board of Directors considers necessary or desirable.  On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the shareholder of record of the specified shares of limited liability company interest in place of the shareholder who makes the certification.
Section 10    INSPECTORS.  The Board of Directors, in advance of any meeting, may, but need not, appoint one or more individual inspectors or one or more entities that designate individuals as inspectors to act at the meeting or any adjourn­ment thereof.  If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors.  In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the chairman of the meeting.  The inspectors, if any, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the vote with fairness to all shareholders.  Each such report shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting.  If there is more than one inspector, the report of a majority shall be the report of the inspectors.  The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.

Section 11    REPORTS TO SHAREHOLDERS.  The Directors shall submit to the shareholders at or before the annual meeting of shareholders a report of the business and operations of the Company and each Series during such fiscal year, containing a balance sheet and a statement of income and surplus of the Company and each Series, accompanied by the certification or certifications of an independent certified public accountant, and such further information as the Directors may determine is required pursuant to any law or regulation to which the Company or any Series is subject.  Within the earlier of 20 days after the annual meeting of shareholders or 120 days after the end of the fiscal year of the Company and the Series, the Directors shall place the annual report on file at the principal office of the Company and the Series and with any governmental agencies as may be required by law and as the Directors may deem appropriate.

Section 12    PROPOSALS BY SHAREHOLDERS.

(a)Annual Meetings of Shareholders.  (1) The proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders (i) pursuant to the Company’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any shareholder of the Company who was a shareholder of record both at the time of giving of notice by the shareholder provided for in this Section 12(a) and at the time of the annual meeting, who is entitled to vote at the meeting and who has complied with this Section 12(a).

i.For business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a)(1) of this Section 12, the shareholder must have given timely notice thereof in writing to the Secretary of the Company and such business must otherwise be a proper matter for action by the shareholders.  To be timely, a shareholder’s notice shall set forth all information required under this Section 12 and shall be delivered to the Secretary at the principal executive office of the Company not earlier than the 150th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting not later than 5:00 p.m., Eastern Time, on the 120th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the preceding year’s annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the 150th day prior to the date of such annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th day prior to the date of such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.  The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a shareholder’s notice as described above.  Such shareholder’s notice shall set forth (i) as to any business that the shareholder proposes to bring before the meeting, a description of such business, the reasons for proposing such business at the meeting and any material interest in such business of such shareholder and any Shareholder Associated Person (as defined below), individually or in the aggregate, including any anticipated benefit to the shareholder and the Shareholder Associated Person therefrom; (ii) as to the shareholder giving the notice and any Shareholder Associated Person, the class, series and number of all shares of limited liability company interest of the Company which are owned by such shareholder and by such Shareholder Associated Person, if any, and the nominee holder for, and number of, shares owned beneficially but not of record by such shareholder and by any such Shareholder Associated Person; (iii) as to the shareholder giving the notice and any Shareholder Associated Person covered by clauses (i) or (ii) of this paragraph (2) of this Section 12(a), the name and address of such shareholder, as they appear on the Company’s share ledger and current name and address, if different, and of such Shareholder Associated Person; and (iv) to the extent known by the shareholder giving the notice, the name and address of any other shareholder supporting the proposal of business on the date of such shareholder’s notice.

ii.For purposes of this Section 12, “Shareholder Associated Person” of any shareholder shall mean (i) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (ii) any beneficial owner of shares limited liability company interest of the Company owned of record or beneficially by such shareholder and (iii) any person controlling, controlled by or under common control with such Shareholder Associated Person.

(b)Special Meetings of Shareholders.  Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Company’s notice of meeting.  The public announcement of a postponement or adjournment of a special meeting shall not commence a new time period for the giving of a shareholder’s notice as described above.

(c)General.  (1) Upon written request by the Secretary or the Board of Directors or any committee thereof, any shareholder proposing any proposal for business at a meeting of shareholders shall provide, within five Business Days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory, in the discretion of the Board of Directors or any committee thereof or any authorized officer of the Company or associated with the Series to which such business relates, to demonstrate the accuracy of any information submitted by the shareholder pursuant to this Section 12.  If a shareholder fails to provide such written verification within such period, the information as to which written verification was requested may be deemed not to have been provided in accordance with this Section 12.

i.Only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with this Section 12.  The chairman of the meeting shall have the power to determine whether any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with this Section 12.

ii.For purposes of this Section 12, (a) the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for the applicable annual meeting and (b) “public announcement” shall mean disclosure (i) in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, PR Newswire or comparable news service or (ii) in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to the Exchange Act.

iii.Notwithstanding the foregoing provisions of this Section 12, a shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 12.  Nothing in this Section 12 shall be deemed to affect any right of a shareholder to request inclusion of a proposal in, nor the right of the Company to omit a proposal from, the Company’s proxy statement pursuant to Rule 14a‑8 (or any successor provision) under the Exchange Act.

Section 13    WRITTEN CONSENT BY SHAREHOLDERS.  If provided by any Series Designation or Share Designation (as such terms are defined in the Operating Agreement), any action required or permitted to be taken at a meeting of shareholders holding the shares to which such Share Designation relates or associated with the Series to which such Series Designation relates may be taken without a meeting if a consent in writing, setting forth such action, is signed by each such shareholder entitled to vote on the matter and any other shareholder entitled to notice of a meeting of shareholders (but not to vote thereat) has waived in writing any right to dissent from such action, and such consent and waiver are filed with the minutes of proceedings of the shareholders.

Section 14    TELEPHONE MEETINGS.  The Board of Directors or the chairman of the meeting may permit shareholders to participate in meetings of the shareholders by means of a conference telephone or other communications equipment by which all persons participating in the meeting can hear each other at the same time.  Participation in a meeting by these means constitutes presence in person at the meeting.

Article III
DIRECTORS

Section 1    GENERAL POWERS; QUALIFICATIONS; DIRECTORS HOLDING OVER.  The business and affairs of the Company and each Series shall be managed under the direction of the Board of Directors.

Section 2    RIGHTS OF MANAGING MEMBER.  ETRE Financial, LLC, a Delaware limited liability company, in its capacity as a member of the Company  (the “Managing Member”), shall have the sole power to (i) nominate and elect all Directors to the Board of Directors, (ii) set the number of Directors of the Board of Directors, (iii) remove any Director, with or without cause, at any time and (iv) fill any vacancies on the Board of Directors.

Section 3    NUMBER AND TENURE.  The number of Directors may be increased or decreased by the Managing Member.  The number of Directors may not be fewer than one.  Each of the Directors will hold office for an annual term, or until his or her resignation or removal by the Managing Member.

Section 4    ANNUAL AND REGULAR MEETINGS.  An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of shareholders, no notice other than this Bylaw being necessary.  In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors.  The Board of Directors may provide, by resolution, the time and place for the holding of regular meetings of the Board of Directors without other notice than such resolution.

Section 5    SPECIAL MEETINGS.  Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer, the President or by a majority of the Directors then in office.  The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them.  The Board of Directors may provide, by resolution, the time and place for the holding of special meetings of the Board of Directors without other notice than such resolution.

Section 6    NOTICE.  Notice of any special meeting of the Board of Directors shall be delivered personally or by telephone, electronic mail, facsimile transmission, United States mail or courier to each Director at his or her business or residence address.  Notice by personal delivery, telephone, electronic mail or facsimile transmission shall be given at least 24 hours prior to the meeting.  Notice by United States mail shall be given at least three days prior to the meeting.  Notice by courier shall be given at least two days prior to the meeting.  Telephone notice shall be deemed to be given when the Director or his or her agent is personally given such notice in a telephone call to which the Director or his or her agent is a party.  Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Company by the Director.  Facsimile transmission notice shall be deemed to be given upon completion of the transmission of the message to the number given to the Company by the Director and receipt of a completed answer‑back indicating receipt.  Notice by United States mail shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid.  Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed.  Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be stated in the notice, unless specifically required by statute or these Bylaws.

Section 7    QUORUM.  A majority of the Directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, provided  that, if less than a majority of such Directors are present at said meeting, a majority of the Directors present may adjourn the meeting from time to time without further notice, and provided further  that if, pursuant to applicable law, the Operating Agreement of the Company or these Bylaws, the vote of a majority of a particular group of Directors is required for action, a quorum must also include a majority of such group.

The Directors present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough Directors to leave less than a quorum.
Section 8    VOTING.  The action of the majority of the Directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Operating Agreement or these Bylaws.  If enough Directors have withdrawn from a meeting to leave less than a quorum but the meeting is not adjourned, the action of the majority of that number of Directors necessary to constitute a quorum at such meeting shall be the action of the Board of Directors, unless the concurrence of a greater proportion is required for such action by applicable law, the Operating Agreement or these Bylaws.

Section 9    ORGANIZATION.  At each meeting of the Board of Directors, the Chairman of the Board or, in the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall act as chairman of the meeting.  In the absence of both the Chairman of the Board and Vice Chairman of the Board, the Chief Executive Officer or in the absence of the Chief Executive Officer, the President or in the absence of the President, a Director chosen by a majority of the Directors present, shall act as chairman of the meeting.  The Secretary or, in his or her absence, an Assistant Secretary of the Company, or in the absence of the Secretary and all Assistant Secretaries, a person appointed by the Chairman, shall act as Secretary of the meeting.

Section 10    TELEPHONE MEETINGS.  Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.  Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 11    CONSENT BY DIRECTORS WITHOUT A MEETING.  Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the Board of Directors and is filed with the minutes of proceedings of the Board of Directors.

Section 12    VACANCIES.  If for any reason any or all the Directors cease to be Directors, such event shall not terminate the Company or any Series or affect these Bylaws or the powers of the remaining Directors hereunder (even if fewer than three Directors remain).  Any vacancy on the Board of Directors may be filled only by the Managing Member.  Any Director elected to fill a vacancy shall serve for the remainder of the full term of the Director for which the vacancy occurred and until a successor is elected and qualified.

Section 13    COMPENSATION; FINANCIAL ASSISTANCE.  Directors shall not receive any stated salary for their services as Directors but, by resolution of the Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by any Series and for any service or activity they performed or engaged in as Directors.  Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Directors or of any committee thereof; and for their expenses, if any, in connection with each property visit and any other service or activity performed or engaged in as Directors; but nothing herein contained shall be construed to preclude any Directors from serving the Company and the Series in any other capacity and receiving compensation therefor.

Section 14    REMOVAL OF DIRECTORS.  The Managing Member may, at any time, with or without cause, remove any Director.

Section 15    LOSS OF DEPOSITS.  No Director shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or shares of limited liability company interest have been deposited.

Section 16    SURETY BONDS.  Unless required by law, no Director shall be obligated to give any bond or surety or other security for the performance of any of his or her duties.

Section 17    RELIANCE.  Each Director, officer, employee and agent of the Company or associated with a Series shall, in the performance of his or her duties with respect to the Company and the Series, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Company and the Series, upon an opinion of counsel or upon reports made to the Company by any of the officers or employees of the Company or associated with a Series or by the advisers, accountants, appraisers or other experts or consultants selected by the Board of Directors or officers of the Company or associated with a Series, regardless of whether such counsel or expert may also be a Director.

Section 18    CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.  The Directors shall have no responsibility to devote their full time to the affairs of the Company or any Series.  Any Director or officer, employee or agent of the Company or associated with a Series, in his or her personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to, in addition to or in competition with those of or relating to the Company or any Series.

Article IV
COMMITTEES

Section 1    NUMBER, TENURE AND QUALIFICATIONS.  The Board of Directors may appoint from among its members, an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and other committees, composed of one or more Directors, to serve at the pleasure of the Board of Directors.

Section 2    POWERS.  The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors.

Section 3    MEETINGS.  Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors.  A majority of the members of the committee shall constitute a quorum for the transaction of business at any meeting of the committee.  The act of majority of the committee members present at a meeting shall be the act of such committee.  The Board of Directors may designate a chairman of any committee, and such chairman or, in the absence of a chairman, any two members of any committee (if there are at least two members of the committee) may fix the time and place of its meeting unless the Board shall otherwise provide.  In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another Director to act in the place of such absent member.  Each committee shall keep minutes of its proceedings.

Section 4    TELEPHONE MEETINGS.  Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone or other communications equipment if all persons participating in the meeting can hear each other at the same time.  Participation in a meeting by these means shall constitute presence in person at the meeting.

Section 5    CONSENT BY COMMITTEES WITHOUT A MEETING.  Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent in writing or by electronic transmission to such action is given by each member of the committee and is filed with the minutes of proceedings of such committee.

Section 6    VACANCIES.  Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.

Article V
OFFICERS

Section 1    GENERAL PROVISIONS.  The officers of the Company (and the Series) shall include a Chief Executive Officer, a Secretary and a Treasurer and may include a Chairman of the Board, a Vice Chairman of the Board, a President, one or more Vice Presidents, a Chief Operating Officer, a Chief Financial Officer, one or more Assistant Secretaries and one or more Assistant Treasurers.  In addition, the Board of Directors may from time to time elect such other officers with such powers and duties as they shall deem necessary or desirable.  All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any two or more offices except President and Vice President may be held by the same person.  Election of an officer or agent shall not of itself create contract rights between the Company or any Series and such officer or agent.

Section 2    REMOVAL AND RESIGNATION.  Any officer or agent of the Company or associated with a Series may be removed, with or without cause, by the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.  Any officer of the Company or associated with a Series may resign at any time by giving written notice of his or her resignation to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or the Secretary.  Any resignation shall take effect immediately upon its receipt or at such later time specified in the notice of resignation.  The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation.  Such resignation shall be without prejudice to the contract rights, if any, of the person so resigning.
Section 3    VACANCIES.  A vacancy in any office may be filled by the Board of Directors.

Section 4    CHIEF EXECUTIVE OFFICER.  The Board of Directors may designate a chief executive officer (the “Chief Executive Officer”).  In the absence of such designation, the Chairman of the Board shall be the chief executive officer of the Company (and the Series).  The Chief Executive Officer shall have general responsibility for implementation of the policies of the Company and the Series, as determined by the Board of Directors, and for the management of the business and affairs of the Company and the Series.  In the absence of a designation of a President, the Chief Executive Officer shall be the President.  He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by the Operating Agreement or these Bylaws to some other officer or agent of the Company or associated with a Series or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time.

Section 5    CHIEF OPERATING OFFICER.  The Board of Directors may designate a chief operating officer (the “Chief Operating Officer”).  The Chief Operating Officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer.

Section 6    CHIEF FINANCIAL OFFICER.  The Board of Directors may designate a chief financial officer (the “Chief Financial Officer”).  The Chief Financial Officer shall have the responsibilities and duties as set forth by the Board of Directors or the Chief Executive Officer.

Section 7    CHAIRMAN OF THE BOARD AND VICE CHAIRMAN OF THE BOARD.  The Board of Directors shall designate a chairman of the board (the “Chairman of the Board”).  The Chairman of the Board shall preside over the meetings of the Board of Directors and of the shareholders at which he or she shall be present.  The Chairman of the Board shall perform such other duties as may be assigned to him or her by the Board of Directors.

The Board of Directors may designate a vice chairman of the board (the “Vice Chairman of the Board”).  In the absence of the Chairman of the Board or in the event of a vacancy in such office, the Vice Chairman of the Board shall perform the duties of the Chairman of the Board and when so acting shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board; and shall perform such other duties as from time to time may be assigned to him or her by the Chairman of the Board or by the Board of Directors.
Section 8    PRESIDENT.  In the absence of a Chief Executive Officer or in the event of a vacancy in such officer, the president (the “President”) shall in general supervise and control all of the business and affairs of the Company and the Series.  In the absence of a designation of a chief operating officer by the Board of Directors, the President shall be the chief operating officer.  He or she may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by the Operating Agreement or these Bylaws to some other officer or agent of the Company or associated with a Series or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.

Section 9    VICE PRESIDENTS.  In the absence of the President or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents (any such vice president, a “Vice President”) in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President; and shall perform such other duties as from time to time may be assigned to such Vice President by the President or by the Board of Directors.  The Board of Directors may designate one or more Vice Presidents as executive vice president, senior vice president, or as vice president for particular areas of responsibility.

Section 10    SECRETARY.  The secretary (the “Secretary”) shall (a) keep the minutes of the proceedings of the shareholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the company records and of the seal of the Company; (d) be custodian of the series records of the Series; (e) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (f) have general charge of the share transfer books of the Company; and (g) in general perform such other duties as from time to time may be assigned to him by the Chief Executive Officer, the President or by the Board of Directors.

Section 11    TREASURER.  The treasurer (the “Treasurer”) shall have the custody of the funds and securities of the Series and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Series and shall deposit all moneys and other valuable effects in the name and to the credit of the Series in such depositories as may be designated by the Board of Directors.  In the absence of a designation of a Chief Financial Officer by the Board of Directors, the Treasurer shall be the Chief Financial Officer of the Company (and the Series).

The Treasurer shall disburse the funds of the Series as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his or her transactions as Treasurer and of the financial condition of the Series.
If required by the Board of Directors, the Treasurer shall give a Series a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to such Series, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his or her possession or under his or her control belonging to such Series.
Section 12    ASSISTANT SECRETARIES AND ASSISTANTTREASURERS.  The assistant secretaries (any such assistant secretary, an “Assistant  Secretary”) and assistant treasurers (any such assistant treasurer, an “Assistant Treasurer”), in general, shall perform such duties as shall be assigned to them by the Secretary or Treasurer, respectively, or by the President or the Board of Directors.  The Assistant Treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors.

Section 13     SALARIES.  The salaries and other compensation of the officers, if any, shall be fixed from time to time by the Board of Directors and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he or she is also a Director.

Article VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1    CONTRACTS.  The Board of Directors or any committee of the Board of Directors within the scope of its delegated authority may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Company or any Series and such authority may be general or confined to specific instances.  Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Company or any such Series when duly authorized or ratified by action of the Board of Directors or any such committee thereof and executed by an authorized person.

Section 2    CHECKS AND DRAFTS.  All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of a Series shall be signed by such officer or agent of the Company or associated with such Series in such manner as shall from time to time be determined by the Board of Directors.

Section 3    DEPOSITS.  All funds of the Series not otherwise employed shall be deposited from time to time to the credit of such Series in such banks, trust companies or other depositories as the Board of Directors may designate.

Article VII
SHARES

Section 1    CERTIFICATES.  Except as may be otherwise provided by the Operating Agreement or the Board of Directors, shareholders of the Company are not entitled to certificates evidencing the shares of limited liability company interest held by them.  In the event that the Company issues shares evidenced by certificates, such certificates shall be signed by the officers of the Company in the manner permitted by Delaware Law and contain the statements and information required by Delaware law.  In the event that the Company issues shares without certificates, the Company shall provide to record holders of such shares a written statement of the information required by Delaware law to be included on share certificates.

Section 2    TRANSFERS.  If any shares are evidenced by certificates, upon surrender to the Company or the transfer agent of the Company of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Company shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

The Company shall be entitled to treat the holder of record of any share or shares of limited liability company interest as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
Notwithstanding the foregoing, transfers of shares of any class of shares of limited liability company interest will be subject in all respects to the Operating Agreement of the Company and all of the terms and conditions contained therein.
Section 3    REPLACEMENT CERTIFICATE.  Any officer designated by the Board of Directors may direct a new certificate to be issued in place of any certificate previously issued by the Company alleged to have been lost, stolen or destroyed in accordance with the terms of the Operating Agreement.

Section 4    CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.  The Board of Directors may set, in advance, a record date for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or determining shareholders entitled to receive payment of any distribution or the allotment of any other rights, or in order to make a determination of shareholders for any other proper purpose.  Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of shareholders, not less than ten days, before the date on which the meeting or particular action requiring such determination of shareholders of record is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that the share transfer books shall be closed for a stated period but not longer than 20 days.  If the share transfer books are closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the share transfer books are not closed for the determination of shareholders, (a) the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of shareholders entitled to receive payment of a distribution or dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Directors, declaring the distribution or allotment of rights, is adopted.
When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.
Section 5    SHARE LEDGER.  The Company shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each shareholder and the number of shares of each class held by such shareholder.

Section 6    FRACTIONAL SHARES; ISSUANCE OF UNITS.  Subject to the provisions of the Operating Agreement, the Board of Directors may issue fractional shares or provide for the issuance of scrip, all on such terms and under such conditions as they may determine.  Notwithstanding any other provision of these Bylaws, but subject to the terms of the Operating Agreement, the Board of Directors may issue units consisting of different securities of the Company associated with a Series.  Any security issued in a unit shall have the same characteristics as any identical securities issued by the Company associated with a Series, except that the Board of Directors may provide that for a specified period securities of the Company associated with a Series issued in such unit may be transferred on the books of the Company only in such unit.

Article VIII
DISTRIBUTIONS

Section 1    AUTHORIZATION.  Distributions upon the shares of limited liability company interest of the Company may be authorized by the Board of Directors, subject to the provisions of law and the Operating Agreement of the Company.  Distributions may be paid in cash, property or shares of limited liability company interest of the Company, subject to the provisions of law and the Operating Agreement.

Section II    CONTINGENCIES.  Before payment of any distributions, there may be set aside out of any assets of a Series available for such distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing distributions, for repairing or maintaining any property of such Series or for such other purpose as the Board of Directors shall determine to be in the best interest of such Series, and the Board of Directors may modify or abolish any such reserve.

Article IX
CERTAIN POLICIES

Section 1    GENERAL AUTHORITY.  Subject to the provisions of the Operating Agreement, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to (i) the relationships between, and conflicts of interests among, the Series, (ii) the shares or other securities of the Company associated with any Series, including, without limitation, with respect to distributions on, or tender offers in respect of, any such shares or securities, and (iii) the investments, leasing or operations of or by any Series as the Board of Directors shall deem appropriate in its sole discretion.

Section 2    INTER-SERIES POLICY.  Subject to the provisions of the Operating Agreement, the Board of Directors may from time to time adopt, amend, revise or terminate an inter-series relationship, conflicts of interest and opportunity allocation policy of the Company (the “Inter-Series Policy”).  The Board of Directors may delegate to the Administrative Agent and/or the Inter-Series Committee the authority to, and, if so delegated, the Administrative Agent and/or the Inter-Series Committee will have the authority to, (i) interpret, make determinations under, and oversee the implementation of the policies set forth in the Inter-Series Policy; (ii) review the policies, programs and practices of the Company and the Series relating to (a) the business and financial relationships between the Series, and (b) any matters arising in connection therewith, all to the extent the Administrative Agent and/or the Inter-Series Committee may deem appropriate; and (iii) recommend to the Board of Directors such changes in such policies, programs and practices as the Administrative Agent and/or the Inter-Series Committee may deem appropriate.    For purposes of this Section 2, (a) the “Administrative Agent” means ETRE Asset Management LLC, a Delaware limited liability company, together with its successors and assigns, and (b) the “Inter-Series Committee” means any inter-series conflict resolution committee established by the Administrative Agent to administer, on behalf of the Administrative Agent, certain provisions of the Inter-Series Policy.

Article X
SEAL

Section 1    SEAL.  The Directors may authorize the adoption of a seal by the Company.  The seal shall contain the name of the Company and the year of its formation and the word “Delaware.”  The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.

Section 2    AFFIXING SEAL.  Whenever the Company is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Company.


Article XI
WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the Operating Agreement of the Company or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.  Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute.  The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Article XII
AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws, provided  that, notwithstanding any provision in these Bylaws to the contrary, no amendment to these Bylaws may be made that would adversely affect the Managing Member’s right to appoint, remove or nominate Directors, set the number of Directors or fill vacancies on the Board of Directors, without the prior written approval of the Managing Member.
Article XIII
MISCELLANEOUS

All references to the Operating Agreement shall include any amendments, modifications or supplements thereto or restatements thereof.  In the event of any conflict between any provision in these Bylaws and in the Operating Agreement, the provision in the Operating Agreement shall control.





EX-3.1.1 5 exhibit311.htm EXHIBIT 3.1.1 Exhibit


Exhibit 3.1.1
CERTIFICATE OF AMENDMENT
OF
ETRE Residential, LLC
 
1.         The name of the limited liability company is ETRE Residential, LLC.
2.         The Certificate of Formation of the limited liability company is hereby amended to include the following additional Article FOURTH:
"FOURTH:    Pursuant to Section 18-215(b) of the Delaware Limited Liability Company Act, the debts, liabilities, obligations and expenses incurred by, contracted for or otherwise existing with respect to a particular series of the limited liability company, whether such series is now authorized and existing pursuant to the limited liability company agreement of the limited liability company (such agreement, as the same may be amended, modified, restated or supplemented from time to time, the "Operating Agreement") or is hereafter authorized and existing pursuant to the Operating Agreement, shall be enforceable against the assets associated with that particular series only, and not against the assets associated with any other series of the limited liability company (or against the assets of the limited liability company generally), and, subject to the terms of the Operating Agreement, none of the debts, liabilities, obligation and expenses incurred by, contracted for or otherwise existing with respect to the limited liability company generally or any other series thereof shall be enforceable against the assets of that particular series."
 
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment on May 14, 2015.
 
/s/ Paul Frischer                                              
Authorized Person
Name:  Paul Frischer




EX-23.3 6 exhibit233.htm EXHIBIT 23.3 Exhibit


Exhibit 23.3


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form S-11 of ETRE Residential, LLC of our report dated May 29, 2015 relating to the balance sheet of ETRE Residential, LLC, Series R-1 appearing in the Prospectus, which is part of such Registration Statement, and to the reference to us under the heading “Experts” in such Prospectus.

/s/ DELOITTE & TOUCHE LLP
New York, New York
September 22, 2015



EX-23.4 7 exhibit234.htm EXHIBIT 23.4 Exhibit


Exhibit 23.4

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Registration Statement on Form S-11 of ETRE Residential, LLC of our report dated May 29, 2015 relating to the combined balance sheet of ETRE Residential, LLC and ETRE Residential, LLC Series R-1 appearing in the Prospectus, which is part of such Registration Statement, and to the reference to us under the heading “Experts” in such Prospectus.

/s/ DELOITTE & TOUCHE LLP
New York, New York
September 22, 2015




EX-23.5 8 exhibit235.htm EXHIBIT 23.5 Exhibit


Exhibit 23.5


CONSENT OF INDEPENDENT AUDITORS

We consent to the use in this Registration Statement on Form S-11 of ETRE Residential, LLC of our report dated May 29, 2015 related to the statement of revenue and certain operating expenses of Penn Treaty Village Pennthouses (which report expresses an unmodified opinion and includes an emphasis-of-matter paragraph referring to the purpose and basis of presentation of the Statement) appearing in the Prospectus, which is part of such Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus.

/s/ DELOITTE & TOUCHE LLP
New York, New York
September 22, 2015



EX-99.1 9 exhibit991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

CONSENT OF DIRECTOR NOMINEE
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to the use of his name as a Director Nominee in the registration statement on FormS-11, and any amendments thereto, to be filed by ETRE Residential, LLC.

/s/ Jay Anderson
Jay Anderson
Dated: September 18, 2015



EX-99.2 10 exhibit992.htm EXHIBIT 99.2 Exhibit


Exhibit 99.1

CONSENT OF DIRECTOR NOMINEE
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to the use of his name as a Director Nominee in the registration statement on FormS-11, and any amendments thereto, to be filed by ETRE Residential, LLC.

/s/ Mark Filanowski
Mark Filanowski
Dated: September 18, 2015



EX-99.3 11 exhibit993.htm EXHIBIT 99.3 Exhibit


Exhibit 99.1

CONSENT OF DIRECTOR NOMINEE
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, the undersigned hereby consents to the use of his name as a Director Nominee in the registration statement on FormS-11, and any amendments thereto, to be filed by ETRE Residential, LLC.

/s/ Samuel Fuller
Samuel Fuller
Dated: September 18, 2015



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