OfferingCircularv29rev1

0001743305-19-000007.txt : 20190520 0001743305-19-000007.hdr.sgml : 20190520 20190517200656 ACCESSION NUMBER: 0001743305-19-000007 CONFORMED SUBMISSION TYPE: 1-A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20190520 DATE AS OF CHANGE: 20190517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Seed Equity Properties LLC CENTRAL INDEX KEY: 0001743305 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 825496781 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 1-A SEC ACT: 1933 Act SEC FILE NUMBER: 024-11003 FILM NUMBER: 19837384 BUSINESS ADDRESS: STREET 1: 1660 SOUTH ALBION STREET STREET 2: SUITE 321 CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 303-848-8312 MAIL ADDRESS: STREET 1: 1660 SOUTH ALBION STREET STREET 2: SUITE 321 CITY: DENVER STATE: CO ZIP: 80222 1-A 1 primary_doc.xml 1-A LIVE 0001743305 XXXXXXXX true false Seed Equity Properties LLC CO 2017 0001743305 6798 82-5496781 0 0 1660 S. Albion St. Suite 321 Denver CO 80222 3039416001 N Nora Nye Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 28602.50 0.00 -28602.50 -286.02 -286.02 N Nora Nye Class A Units 100 N/A N/A 0 0 true true false Tier2 Audited Equity (common or preferred stock) Y N N N N N 5000000 0 10.0000 0.00 0.00 0.00 50000000.00 50000000.00 Kaplan & Associates 50000.00 true false AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA PR RI SC SD TN TX UT VT VA WA WV WI WY A0 A1 A2 A3 A4 A5 A6 A7 A8 A9 B0 Z4 false Seed Equity Properties, LLC Class A Units 100 0 $125,000 Budding Equity Management, Inc. has purchased 100 Class A Units for a purchase price of $95,000 in a private offering. Such issuance was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. PART II AND III 2 OfferingCircularv29rev1.htm OFFERING CIRCULAR V29 REV 5-2019 OfferingCircularv29rev1

AN OFFERING CIRCULAR FOLLOWING THE "OFFERING CIRCULAR" FORMAT OF DISCLOSURE UNDER SEC REGULATION A

SEED EQUITY PROPERTIES LLC
1660 South Albion Street, Suite 321
Denver, Colorado 80222

Offering Amount of up to $50,000,000 in Class B Units
Minimum Offering Amount of $2,250,000
Sales of these securities will commence on approximately June 15, 2019 Capitalized terms used in this Offering Circular are listed on page 7

THIS OFFERING IS INHERENTLY RISKY. SEE "RISK FACTORS" ON PAGE 9

Per Class B Unit

Public Offering Price-$10
Total Minimum-$2,250,000
Total Maximum-$50,000,000
Underwriting Discounts and Commissions

Proceeds to the Company from this Offering to the Public
Public Offering Price-$10
Total Minimum-$2,250,000
Total Maximum-$50,000,000
The price per Class B Unit shown was arbitrarily determined by our Manager and will apply until December 31, 2019. Thereafter, the price per Unit will be adjusted every fiscal quarter and will be based on the greater of (i) $10.00; or (ii) the NAV.

The SEC does not pass upon the merits of or give its approval to any securities offered or the terms of the Offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the SEC; however, the SEC has not made an independent determination that the securities offered are exempt from registration.
Generally, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
An offering statement pursuant to Regulation A relating to these securities has been filed with the SEC. Information contained in this Offering Circular is subject to completion or amendment. The Class B Units may not be sold nor may offers to buy be accepted before the offering statement filed with the SEC is qualified. This Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of the Class B Units in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a final offering circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where such final offering circular or the offering statement in which such final offering circular was filed may be obtained.

Offering Circular v29

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

Please carefully read the information in this Offering Circular. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with different information. This Offering Circular may only be used where it is legal to sell the Class B Units. You should not assume that the information contained in this Offering Circular is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.
This Offering Circular is part of an offering statement that we filed with the SEC, using a continuous offering process. Periodically, as we make material investments, update our NAV per Unit, or have other material developments, we will provide a supplement that may add, update or change information contained in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained in our annual reports, semiannual reports and other reports and information statements that we will file periodically with the SEC.
The offering statement and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov, or on our Manager's website, www.budeq.com. The contents of the Budding Equity website (other than the offering statement, this Offering Circular and the appendices and exhibits thereto and hereto) are not incorporated by reference in or otherwise a part of this Offering Circular.
We will be permitted to make a determination that the purchasers of Class B Units are "qualified purchasers" in reliance on the information and representations provided by the investor regarding such person's financial situation. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

Use of Forecasts or Projections

The use of forecasts or projections in connection with this Offering, except as included in this Offering Circular, is prohibited. Any representations to the contrary and any predictions, written or oral, as to the amount or certainty of any present or future cash benefit or tax consequence which may flow from an investment in the Class B Units are prohibited.

Neither the Company nor its agents make any express or implied representation or warranty as to the attainability of the projected financial information provided in connection herewith or as to the accuracy or completeness of the assumptions from which that projected information is derived. Projections for the Company's future performance are necessarily subject to a high degree of uncertainty and may vary materially from actual results. It is expected that the investors will pursue independent investigation with respect to the projected financial information provided herewith.

CautionaryStatement About Forward-Looking Statements pursuant to the U.S. Private Securities Litigation Reform Act of 1995
All statements in this Offering Circular other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including: any projections of earnings, revenue, results, performance, liquidity, financial condition, management, capitalization, prospects and opportunities, or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed plans, services or developments; any statements
regarding future economic conditions or performance; and any statements of belief, and any statements of assumptions underlying any of the foregoing. These statements are based upon information currently available to the Company and its management and their interpretation of what is believed to be significant factors affecting the business of the Company, including many assumptions regarding future events. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "continue," "target," "goal," "plan," "seek," "believe," "intend," or "project", the negative or other variations of these words, or comparable terminology and expressions.
Actual results, performance, liquidity, financial condition, prospects and opportunities could also differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors including, without limitation, the risks outlined under the heading RISK FACTORS, below and all other matters described in this Offering Circular. Although the Company believes that the expectations reflected in any forward-looking statements in this Offering Circular are reasonably based, in light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Offering Circular will in fact occur. Investors should not place undue reliance on any forward-looking statements. Before deciding whether to invest in the Class B Units, investors should carefully consider the risks outlined under the heading RISK FACTORS, below and all other matters described in this Offering Circular.
We do not intend, nor do we accept such obligation, to undertake to publicly update or revise any forward- looking statements, whether as a result of new information, future events, changed circumstances or any other reason. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on the Company's behalf, are expressly qualified in their entirety by these cautionary statements.
Information contained in this Offering Circular concerning the Company's industry and the market in which it operates, including the Company's general expectations and market position, market opportunity and size, is based on information from various sources, on assumptions that the Company has made based on that data and other similar sources and on the Company's knowledge of the markets for its products. These data involve a number of assumptions and limitations and investors are cautioned not to give undue weight to such estimates or data. The Company has not independently verified any third-party information.

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STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS

The Class B Units are being offered and sold only to "qualified purchasers" (as defined in Regulation A under the Securities Act of 1933, as amended ("Securities Act")). As a Tier 2 offering pursuant to Regulation A under the Securities Act, this Offering will be exempt from state law "Blue Sky" review, subject to meeting certain state filing requirements and complying with certain anti-fraud provisions, to the extent that the Class B Units offered hereby are offered and sold only to "qualified purchasers" or at a time when the Class B Units are listed on a national securities exchange. "Qualified purchasers" include: (i) "accredited investors" under Rule 501(a) of Regulation D and (ii) all other investors so long as their investment in the Class B Units does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons).
However, the Class B Units are being offered and sold only to those investors that are within the latter category (i.e., investors whose investment in the Class B Units does not represent more than 10% of the applicable amount), regardless of an investor's status as an "accredited investor". Accordingly, we reserve the right to reject any investor's subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a "qualified purchaser" for purposes of Regulation A.

To determine whether a potential investor is an "accredited investor" for purposes of satisfying one of the tests in the "qualified purchaser" definition, the investor must be a natural person who has:

1. an individual net worth, or joint net worth with the person's spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person; or
2. earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

If the investor is not a natural person, different standards apply. See Rule 501 of Regulation D for more details.
For purposes of determining whether a potential investor is a "qualified purchaser," annual income and net worth should be calculated as provided in the "accredited investor" definition under Rule 501 of Regulation D.
In particular, net worth in all cases should be calculated excluding the value of an investor's home, home furnishings and automobiles.
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TABLE OF CONTENTS

Contents

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR ii
Table of Contents v
Offering Summary 1
Defined Terms 8
Risk Factors 10
General Risks Related to an Investment in the Company 10
Risks Related to Compliance and Regulation 16
Risks Related to Conflicts of Interest 18
Risks Related to our Investments 19
Risks Related to Economic Conditions 24
Risks Related to our Organization and Structure 25
Risks Related to our status as a REIT 28
Description of the Class B Units 36
General 36
Projected Post-Offering Capitalization 36
Description of Business 37
General 37
Business Model 37
Lending Strategy 39
Lending Criteria 40
Operating Policies 40
Valuation Policies 42
Estimated Use of Proceeds 44
Management's Discussion and Analysis of Financial Condition and Results of Operations 45
General 45
Competition. 45
Liquidity and Capital Resources 46
Results of Operations 46
Market Trends 46
Directors, Executive Officers, and Significant Employees 50
The Manager of the Company 50
Executive Officers of the Manager 50
Directors of the Manager 50
Significant Security Ownership of our Manager 51
Management, Executive Compensation, and Related-party Transactions 53
Management Fees 53
Salary of Manager 55
Other Conflicts of Interest or Related-Party Transactions 55
Tax Considerations 56
Taxation of the Company 57
Taxation of REITs in General 58
Requirements for Qualification as a REIT 59
Taxation of Taxable U.S. Shareholders 75
Taxation of Tax Exempt U.S. Shareholders. 77
Taxation of Non-U.S. Shareholders 77
Backup Withholding and Information Reporting 81
Foreign Accounts and FATCA 81
State, Local and Non-U.S. Taxes 82
Legislative or Other Actions Affecting REITs 82
ERISA Considerations 83
How to Subscribe to this Offering 87
Plan of Distribution of Class B Units 87
Subscription Procedures 87
Minimum Purchase Requirements 88
Additional Information 89
Exhibits 91
Signature Page 92

OFFERING SUMMARY

This offering summary highlights material information regarding our business and this Offering. Because it is a summary, it may not contain all of the information that is important to you. To understand this Offering fully, you should read the entire offering circular carefully, including the "RISK FACTORS" section, below before making a decision to invest in our Class B Units.

Seed Equity Properties LLC

Seed Equity Properties LLC is a recently organized Colorado limited liability company formed to originate commercial loans for real estate and associated projects that have a positive environmental, community, or social impact component. We have operated, and intend to continue to operate, in a manner that allows us to qualify as a REIT for U.S. federal income tax purposes. Among other requirements, REITs are required to distribute to shareholders at least 90% of their annual REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain).
Our office is located at 1660 South Albion Street, Suite 321, Denver, Colorado 80222. Our telephone number is (303)848-8312. Information regarding the Company is also available at www.budeq.com.

Recent Developments

The Company has no operational history as of the date of this Offering Circular.

Capital Raised
As of February 1, 2019, the Company has not raised any capital or otherwise accepted any subscriptions in connection with this Offering.
Assets Acquired
As of February 1, 2019, the Company has not acquired any assets in connection with our Business Plan or otherwise.
Distributions Declared
As of February 1, 2019, the Company has not declared any distributions or dividends. We intend to make distributions of profits to our Members on a quarterly basis.

Investment Strategy

We intend to use substantially all of the proceeds of this offering to originate, invest in and manage a diversified portfolio of commercial real estate loans. We expect to use substantially all of the net proceeds from this offering to originate, acquire and structure single-family, multi-family, and other commercial real estate loans (including senior mortgage loans, subordinated mortgage loans or B-Notes, mezzanine loans, participations in such loans, other commercial real estate-related debt securities (including CMBS, CDOs and REIT senior and junior debt and certain REIT preferred equity securities), and other real estate-related assets.
The goal of our business model is to create and maintain a portfolio of loans that generate a low volatility and predictable income stream that provide attractive and consistent cash distributions for our Members. Our focus on investing in debt and debt-like instruments will emphasize the payment of current returns to Members and the preservation of invested capital, with a lesser emphasis on seeking capital appreciation. We expect that our portfolio of investments will be secured primarily by U.S. based collateral and diversified by security type, property type and geographic location.
We may acquire commercial real estate loans by directly originating the loans or by purchasing them from third-party sellers. Although we generally prefer the benefits of direct origination, the current market conditions have created situations where holders of commercial real estate debt may be in distress and are therefore willing to sell at prices that compensate the buyer for the lack of control typically associated with directly structured investments.

Our Manager intends to directly structure, underwrite and originate many of the debt products in which we invest, as this provides for the best opportunity to control our borrower and partner relationships and optimize the terms of our investments. Our underwriting process will involve comprehensive and systematic financial, structural, operational and legal due diligence of our borrowers and partners in order to identify and structure loans that meet our investment objectives. We feel the market environment offers a broad range of opportunities to source compelling investments with attractive risk-return profiles.
Market Opportunities

We define development projects to include a range of activities from major renovation and lease-up of existing buildings to ground up construction. With demand stoked by demographic trends and supply constrained by economic forces, we believe that that real estate and development projects associated with a positive environmental, community or social impact component present unique market opportunities that may be underserved or neglected by investment capital. While we focus on lending to projects with these characteristics, we may invest in other commercial real estate projects. We plan to diversify our portfolio by investment size, loan duration, and risk-related criteria with the goal of attaining a portfolio of real estate assets that provide attractive and stable returns to our investors.

Our Manager

Our Manager and its affiliates will receive fees and expense reimbursements for services relating to this offering and the investment and management of our assets. The items of compensation are summarized in the following table. Neither our Manager nor its affiliates will receive any selling commissions or dealer manager fees in connection with the offer and sale of our common Units.

Form of Compensation and Recipient
Determination of Amount
Estimated Amount

Organization and Offering Stage

Organization and Offering Expenses - Manager
To date, our Manager has paid organization and offering expenses on our behalf. We will reimburse our Manager for these costs and future organization and offering costs it may incur on our behalf. We expect organization and offering expenses to be approximately $1,000,000 or, if we raise the maximum offering amount, approximately 2% of gross offering proceeds
$1,000,000

Operational Stage

Asset Management Fee - Manager

On a quarterly basis, the Company shall pay the Manager an "Asset Management Fee," which is based on the value of "Assets Under Management" placed under management during the preceding quarter. The Asset Management Fee will be equal to the annualized percentage rates set forth below. Until December 31, 2019, the value of Assets Under Management will be equal to our net offering proceeds as of the last day of each quarter. Beginning January 1, 2020, the value of Assets Under Management will be based on our Net Asset Value ("NAV") as of the final day of the preceding quarter. Actual amounts are dependent upon the offering proceeds we raise (and any leverage we employ) and the results of our operations; we cannot determine these amounts at the present time. However, for purposes of example only, if the minimum offering amount of $2,250,000 is raised in the quarter ending on December 31, 2019,
then the resulting management fee would be equal to 5% of the $2,250,000 raised during the final quarter of 2019 for a total fee of $112,500. The amount of the Asset Management Fee decreases as the value of Assets Under Management increases. See chart below. Value of Assets Under Management: Asset Management Fee:
$0-10M 5%
$10M-$20M 4%
$20M-$30M 3%
$30M-$40M 2%
$40M-$50M 1%

Other Operating Expenses
Manager We will reimburse our Manager for out-of-pocket expenses paid to third party contractors, vendors, and suppliers in connection with providing services to us. This does not include the Manager's overhead or employee costs which are to be borne by the Manager. Actual amounts are dependent upon the results of our operations; we cannot determine these amounts at the present time.

Servicing Fee
Budding Equity Management, Inc. Servicing fee from 0 to 0.5% paid to Budding Equity Management, Inc. for the servicing and administration of certain loans and investments held by us. The servicing fee is calculated as an annual percentage of the stated value of the asset, and is deducted at the time that payments on the asset are made. The fee is deducted in proportion to the split between accrued and current payments. Servicing fee may be waived at Budding Equity Management, Inc.'s sole discretion.
Actual amounts are dependent upon the amount and timing of payments received by us on subject assets; we cannot determine these amounts at the present time.

Special Servicing Fee
Manager or Other Party Quarterly special servicing fee equal to an annualized rate of 1.00% of the original value of a non-performing asset. Whether an asset is deemed to be non-performing is in the sole discretion of our Manager. Actual amounts are dependent upon the occurrence of an asset becoming non-performing, the original value of such asset, and the results of our operation; we cannot determine these amounts at the present time.

Origination Fees Paid by Borrower
Origination fees paid by a borrower of up to three percent (3.0%) of the amount funded to acquire or originate loans or other real estate related assets. Actual amounts are dependent upon the amounts funded; we cannot determine these amounts at the present time.

Summary of Risk Factors
Investing in our Class B Units involves a high degree of risk. You should carefully review the "RISK FACTORS" section of this Offering Circular below, which contains a detailed discussion of the material risks that you should consider before you invest in our Class B Units.

Conflicts of Interest
Our operating agreement allows our Manager, with approval from the Board to enter into transactions between the Company and related parties, including the Manager itself or any Member, provided such transactions adequately compensate the related party for the services being provided or the assets being used or acquired without unreasonable charges to the Company for such services or assets.
While our operating agreement requires the Manager to devote reasonable time and attention to, and use commercially reasonable efforts in conducting, the business of the Company, the Manager is permitted to have other business interests and may engage in other activities, whether or not such activities are in competition with the Company, provided such interests or activities do not adversely affect the Manager's attention to and efforts on behalf of the Company. Despite this, the Company and any Member will not have any right to share or participate in such other investments or activities of the Manager or the income or proceeds derived therefrom.
Additionally, our operating agreement provides our Manager with broad powers and authority which may result in one or more conflicts of interest between your interests and those of the Manager, the principals and its other affiliates. This risk is increased by the Manager being controlled by N. Nora Nye, who is a principal in our Manager and who participates, or expects to participate, directly or indirectly in other offerings associated with our Manager and its affiliates.
Lastly, under the terms of our operating agreement, generally, we will, to the fullest extent permitted by law, indemnify, hold harmless and release our Manager for damages or Claims associated with its role as manager of the Company.

Quarterly Unit Price Adjustments
No later than December 31, 2019, we will file with the SEC on a quarterly basis a supplement to our offering circular. The supplement will contain our quarterly determination of the NAV per share applicable for the fiscal quarter. We post that fiscal quarter's NAV on the Budding Equity Management website, www.budeq.com.
On a quarterly basis, we will disclose the principal valuation components of our NAV. In addition, if a material event occurs in between quarterly updates of NAV that would cause our NAV to change by 5.0 percent or more from the previously disclosed NAV, we will disclose the updated price and the reason for the change in a reasonable timeframe.

Valuation Policies
To calculate the NAV, we will engage an independent valuation firm with expertise in appraising commercial real estate loans, assets, and related liabilities to provide annual/quarterly estimates of value. The valuations will be adjusted for events known to the independent valuation expert that it believes are likely to have a material impact on previously provided estimates of value of the affected investments in commercial real estate assets. Budding Equity Management / the Manager will inform the independent valuation expert if a material event occurs between scheduled annual valuation that we believe may materially affect the value of the investments and underlying assets or liabilities.
Budding Equity Management's / Our sponsor's internal accountants will calculate the NAV per common share using a process that reflects the following:
1. The estimated values of each of our commercial real estate assets, investments, and related liabilities which reflect (i) comparable market data (including comparable transactions, capitalization rates, interest rates, yield on relevant loan rates, and implied net operating income multiples), (ii) default rates, yield of comparable instruments, discount rates, and loss severity rates related to certain liabilities, and (iii) development stage of the underlying assets with consideration to key drivers of value;
2. Updates in the price of liquid assets for which third party market quotes are available;
3. Accruals of any distributions payable; and
4. Estimates of quarterly accruals of our operating revenues, expenses, and fees.
The determination of our NAV may not be indicative of the price that we would receive for our assets at current market conditions. In instances where we determine that an appraisal of the real estate is necessary, including, commercial real estate assets, investments, and related liabilities, or instances where third party market values for comparable properties are either nonexistent or extremely inconsistent, we will engage an appraiser that has expertise in appraising commercial real estate assets, to be our independent valuation expert.
Our goal is to provide a reasonable estimate of the market value of our Units on a quarterly basis. However, the majority of our assets will consist of commercial real estate loans and, as with any commercial real estate valuation protocol, the conclusions reached by our independent valuation expert will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in different estimates of the value of our commercial real estate assets and investments. As a result, the quarterly NAV may not reflect the precise amount that may be paid for your Units in a market transaction. Any potential disparity in our NAV per share may be in favor of either shareholders who redeem their Units, purchase new Units, or continue to hold their current Units.

Voting Rights
Holders of our Class B Units have voting rights only with respect to certain matters, primarily relating to amendments to our operating agreement that would adversely change the rights of the Class B Units, except that the two Class B Members owning the largest and second-largest number of Class B Unit each may appoint one member to the Board. Except for a complete loss of investment in the Class B Units, such Members will not be subject to any other potential liability under state statutes or foreign law.

Investment Company Act Considerations

We intend to conduct our operations so that neither we, nor any of our subsidiaries, is required to register as investment companies under the Investment Company Act of 1940, as amended, or the Investment Company Act. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer's total assets (exclusive of U.S. Government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. Excluded from the term "investment securities," among other things,
are U.S. Government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) of the Investment Company Act.

In connection with the Section 3(a)(1)(C) analysis, the determination of whether an entity is a majority-owned subsidiary of the Company is made by us. The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person. The Investment Company Act further defines voting security as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We intend to treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries. We also intend to treat subsidiaries of which we or our wholly-owned or majority-owned subsidiary is the manager (in a manager-managed entity) or managing member (in a member-managed entity) or
in which our agreement or the agreement of our wholly-owned or majority-owned subsidiary is required for all major decisions affecting the subsidiaries (which we refer to as "Controlled Subsidiaries"), as majority-owned subsidiaries even though none of the interests issued by such Controlled Subsidiaries meets the definition of voting securities under the Investment Company Act. We reached our conclusion on the basis that the interests issued by the Controlled Subsidiaries are the functional equivalent of voting securities. We have not asked the SEC staff for concurrence of our analysis, our treatment of such interests as voting securities, or whether the Controlled Subsidiaries, or any other of our subsidiaries, may be treated in the manner in which we intend, and it is possible that the SEC staff could disagree with any of our determinations. If the SEC staff were to disagree with our treatment of one or more companies as majority-owned subsidiaries,
we would need to adjust our strategy and our assets. Any such adjustment in our strategy could have a material adverse effect on us.

We intend, directly or through our subsidiaries, to use substantially all of the net proceeds from this offering to originate, acquire and structure commercial real estate loans (including senior mortgage loans, subordinated mortgage loans, (also referred to as B-Notes) mezzanine loans, and participations in such loans) and to make other investments in commercial real estate. We may also invest in commercial real estate-related debt securities (including commercial mortgage-backed securities, or CMBS, collateralized debt obligations, or CDOs, and REIT senior unsecured debt and other real estate-related assets, so long as our investments in such commercial real estate-related debt securities is compliant with the 40% test.

We intend to treat as "qualifying real estate interests," interests in real estate mortgage loans that are fully secured by real estate, certain subordinated or mezzanine loans, and certain B-Notes. Commercial real estate-related debt securities, including CMBS, CDOs and REIT senior unsecured debt, subordinated debt, or other preferred securities, will typically be treated as "real estate-related assets."
Generally, our core business model will consist of originating commercial loans for real estate and associated projects that have a positive environmental, community, or social impact component. We intend to qualify was a REIT under the Code. For more detailed information on characteristics associated with REITs, see TAX CONSIDERATIONS - Taxation of REITs in General, below.

The goal of our business model is to create and maintain a portfolio of loans that generate a low volatility and predictable income stream that provide attractive and consistent cash distributions for our Members. Our focus on investing in debt and debt-like instruments will emphasize the payment of current returns to Members and the preservation of invested capital, with a lesser emphasis on seeking capital appreciation. We expect that our portfolio of investments will be secured primarily by U.S. based collateral and diversified by security type, property type and geographic location.

The securities issued by any wholly-owned or majority-owned subsidiary that we may form and that are excluded from the definition of "investment company" based on Section 3(c)(1) or 3(c)(5)(C) of the Investment Company Act, together with any other investment securities we may own, may not have a value in excess of 40% of the value of our total assets on an unconsolidated basis.

The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority- owned subsidiary of such person. We will treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries. The determination of whether an entity is a majority-owned subsidiary of our company is made by us. We also will treat future subsidiaries of which we or our wholly-owned or majority-owned subsidiary is the manager (in a manager-managed entity) or managing member (in a member-managed entity) or in which our agreement or the agreement of our wholly-owned or majority-owned subsidiary is required for all major decisions affecting the subsidiaries (referred to herein as "Controlled Subsidiaries"),
as majority-owned subsidiaries even though none of the interests issued by such Controlled Subsidiaries meets the definition of voting securities under the Investment Company Act.

We reached our conclusion on the basis that the interests issued by the Controlled Subsidiaries are the functional equivalent of voting securities. We have not asked the SEC staff for concurrence of our analysis and it is possible that the SEC staff could disagree with any of our determinations. If the SEC staff were to disagree with our treatment of one or more companies as majority-owned subsidiaries, we would need to adjust our strategy and our assets. Any such adjustment in our strategy could have a material adverse effect on us.

We believe that neither we nor any future subsidiaries that may be owned by us will be considered investment companies for purposes of Section 3(a)(1)(A) of the Investment Company Act because we and they will not engage primarily or hold themselves out as being primarily in the business of investing, reinvesting or trading in securities. Rather, we and such subsidiaries will be primarily engaged in non-investment company businesses related to real estate. Including but not limited to loans to acquire, develop or improve real estate and we are not in the business of investing, reinvesting or trading in securities.

Consequently, we and our future subsidiaries expect to be able to conduct our operations such that none will be required to register as an investment company under the Investment Company Act.

Certain future subsidiaries may also rely upon the exclusion from the definition of investment company under Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires an entity to invest at least 55% of its assets in "mortgages and other liens on and interests in real estate", which we refer to as "qualifying real estate interests", and at least 80% of its assets in qualifying real estate interests plus "real estate-related assets".

Qualification for exemption from registration under the Investment Company Act will limit our ability to make certain investments and will require our Manager to monitor all investments to ensure compliance with the 40% test to maintain our exemption from registration under the Investment Company Act pursuant to Sections 3(c)(1) and/or to ensure compliance with the exclusion from the definition of
investment company under Section 3(c)(5)(C) of the Investment Company Act. To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon such exclusions, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies we have chosen.

To classify the assets held by our subsidiaries as qualifying real estate assets or real estate-related assets, we will rely on no-action letters and other guidance published by the SEC staff regarding those kinds of assets, as well as upon our analyses (in consultation with outside counsel) of guidance published with respect to other types of assets. We cannot assure you that the laws and regulations governing the Investment Company Act status of companies similar to ours, or the guidance from the SEC or its staff regarding the treatment of assets as qualifying real estate assets or real estate-related assets, will not change in a manner that adversely affects our operations. In fact, in August 2011, the SEC published a concept release in which it asked for comments on this exclusion from regulation.
To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon our exemption from the need to register or exclusion under the Investment Company Act, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC staff could further inhibit our ability to pursue the strategies that we have chosen.

On August 31, 2011, the SEC published a concept release entitled "Companies Engaged in the Business of Acquiring Mortgages and Mortgage Related Instruments" (Investment Company Act Rel. No. 29778). The release notes that the SEC is reviewing the Section 3(c)(5)(C) exclusion relied upon by companies similar to the Company that invest in mortgage loans. We cannot assure you that the laws and regulations governing the Investment Company Act status of companies similar to ours, or the guidance from the SEC or its staff regarding the treatment of assets as qualifying real estate assets or real estate-related assets, will not change in a manner that adversely affects our operations as a result of such review.
To the extent that the SEC or its staff provides more specific guidance regarding any of the matters bearing upon our exclusion from the need to register under the Investment Company Act, we may be required to adjust our strategy accordingly, and such adjustment could have a material adverse effect upon us. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the investment strategy that we have chosen.
Furthermore, although we intend to monitor the assets of our subsidiaries regularly, we cannot assure you that our subsidiaries will be able to maintain their exclusion from registration. Any of the foregoing could require us to adjust our strategy, which could limit our ability to make certain investments or require us to sell assets in a manner, at a price or at a time that we otherwise would not have chosen. This could negatively affect the value of our common shares, the sustainability of our business model and our ability to make distributions.

Registration under the Investment Company Act would require us to comply with a variety of substantive requirements that impose, among other things:
- limitations on capital structure;
- restrictions on specified investments;
- restrictions on leverage or senior securities;
- restrictions on unsecured borrowings;
- prohibitions on transactions with affiliates; and
- compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business, and criminal and civil actions could be brought against us.

The loss of our exclusion from regulation pursuant to the Investment Company Act could require us to restructure our operations, sell certain of our assets or abstain from the purchase of certain assets, which could have an adverse effect on our financial condition and results of operations.
Our Manager Intends to Register as a Registered Investment Advisor

Our Manager, Budding Equity Management Inc., is in the process of consulting with appropriate advisors and investigating the steps necessary to register the Manager as a Registered Investment Advisor, and that we anticipate completing the registration documents and process on or before June 30, 2019.

DEFINED TERMS

The following terms below commonly used within this Offering Circular and have the respective meanings listed below. Other capitalized terms may be defined within the Offering Circular and such terms are denoted by bold and italicized type face.
"Budding Equity" means Budding Equity Management, Inc., a Colorado corporation incorporated on September 11, 2016.
"Class A Units" means units of Class A membership interest in the Company, as defined in our operating agreement.
"Class B Units" means units of Class B membership interest in the Company, as defined in our operating agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Seed Equity Properties LLC, a Colorado limited liability company organized on April 17, 2018. When used in this Offering Circular, "we", "us", or "our" also refer to the Company.
"IRS" means the United States Internal Revenue Service.
"Katipult" means Katipult Technology Corp, a Canadian corporation including affiliates thereto such as JOI Media Inc., a Canadian corporation.
"Manager" means the manager of the Company, as defined in our operating agreement. The current Manager is Budding Equity.
"Maximum Offering Amount" means $50,000,000.00 USD.
"Member" means any member of the Company duly admitted pursuant to our operating agreement.
"Minimum Offering Amount" means $2,250,000 USD.
"NAV" means the sum of our net asset value.
"NAV per Unit" means the NAV divided by all Units.
"Offering" means the offering of Class B Units pursuant to Regulation A, promulgated under the Securities Act of 1933 by the SEC.
"Offering Circular" means this offering circular, and any accompanying supplements, in connection with the Offering.
"Offering Date" means June 15, 2019.
"REIT" means real estate investment trust, as defined by the Code.
"REIT Rules" means those provisions of the Code, together with any regulations and proposed regulations promulgated thereunder, any Revenue Rulings or Procedures issued by the US Internal Revenue Service and any administrative rulings or court decisions respecting the requirements and conditions of the qualification and taxation of REITs.
"SEC" means the United States Securities and Exchange Commission.
"TRS" means taxable REIT subsidiary.
"UBTI" means unrelated business taxable income.
"Units" means, collectively, all units of membership interest in the Company, as defined in our operating agreement.
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RISK FACTORS

In addition to the other information in this Offering Circular, the following risk factors should be considered carefully in evaluating the Company and the Offering before investing in the Class B Units.
The risk factors listed below include risks associated with the business and operations of the Company as if the Class B Units had already been acquired as of the Offering Date. The following list of risk factors does not purport to be a complete enumeration or explanation of the risks involved in an investment in the Class B Units. Investors should understand that it is not possible to predict or identify all factors that may adversely impact the Company's operations or results. Investors should read these risks and consult with their own advisors before deciding whether to invest in the Class B Units.
BECAUSE THE CLASS B UNITS ARE HIGHLY SPECULATIVE IN NATURE, INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT IN THE CLASS B UNITS, INVESTORS SHOULD CAREFULLY CONSIDER, ALONG WITH OTHER MATTERS REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY AND THE CLASS B UNITS BEFORE PURCHASING THE CLASS B UNITS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, THE COMPANY'S BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED. IN SUCH CASE, YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.

General Risks Related to an Investment in the Company
The Company has a lack of operating history and thus lack of revenues from operations.
The Company has no operating history and no revenues from operations. Therefore, the Company is subject to many risks common to enterprises with limited or no operating history, including potential under- capitalization, limitations with respect to personnel, financial and other resources, and limited assets and revenue sources. Our ability to successfully generate sufficient revenues from our operations depend on various factors, including availability of funds for current and anticipated operations. There can be no assurance that we will not encounter setbacks with the on-going development and implementation of our business plan. Our ability to achieve profitability will depend primarily on our ability to raise funds in connection with the Offering, to invest in real estate assets, and the performance the Company.
Because no public trading market for the Class B Units currently exists, it will be difficult for you to sell your Class B Units and, if you are able to sell your Class B Units, you will likely sell them at a substantial discount to the public offering price.
Our operating agreement does not require our Manager to seek Member approval to liquidate our assets by a specified date, nor does our operating agreement require our Manager to list our Units for trading on a national securities exchange by a specified date. There is no public market for the Class B Units and we currently have no plans to list any of our Units on a stock exchange or other trading market. Until the Class B Units are listed, if ever, you may not sell your Class B Units unless the buyer meets the applicable suitability and minimum purchase standards in the Manager's sole discretion, including to protect our operations and our nonredeemed Members, to prevent an undue burden on our liquidity or to preserve our status as a REIT Therefore, it will be difficult for you to redeem and/or sell your Class B Units promptly or at all. If you are able to sell your Class B Units, you would likely have to sell them at a substantial discount to their public offering price.
It is also likely that your Class B Units would not be accepted as the primary collateral for a loan. Because of the illiquid nature of our Units, you should purchase Class B Units only as a long-term investment and be prepared to hold them for an indefinite period of time.
If we are unable to find suitable investments, we may not be able to achieve our investment objectives or pay distributions.
Our ability to achieve our investment objectives and to pay distributions depends upon the performance of our Manager in the acquisition of our investments and the ability of our Manager to source investment opportunities for us. The more money we raise in this offering, the greater our challenge will be to invest all of the net offering proceeds on attractive terms. We cannot assure you that our Manager will be successful in obtaining suitable investments on financially attractive terms or that, if our Manager makes investments on our behalf, our objectives will be achieved. If we, through our Manager, are unable to find suitable investments promptly, we will hold the proceeds from this Offering in an interest-bearing account or invest the proceeds in short-term assets in a manner that is consistent with our qualification as a REIT and will require our Manager to monitor all investments to ensure compliance with the 40% test to maintain our exemption from registration
under the Investment Company Act pursuant to Sections 3(c)(1) and/or 3(c)(5)(C) of the Investment Company Act. If we would continue to be unsuccessful in locating suitable investments, we may ultimately decide to liquidate.
In the event we are unable to timely locate suitable investments, we may be unable or limited in our ability to pay distributions and we may not be able to meet our investment objectives.
Uncertainty of profitability.
Our business strategy may result in increased volatility of revenues and earnings. Although we plan to make loans soon after raising the Minimum Offering Amount, depending on a variety of factors, we may not see profits from such loans immediately, if at all, which will hinder our ability to pay distributions according to our distribution plan. See DESCRIPTION OF BUSINESS - Distribution Plan, below.
Our revenues and our profitability may be adversely affected by economic conditions and changes in the real estate market. Our business is also subject to general economic risks that could adversely impact the results of operations and financial condition.
Because of the long-term vision of the Company, it is difficult to accurately forecast revenues and operating results and these items could fluctuate in the future due to various factors including:
Our ability to source strong deals with sufficient risk adjusted returns;
Our ability to manage our capital and liquidity requirements based on changing market conditions generally;
The acceptance of the terms and conditions of our lending opportunities, which may differ from deal to deal;
The amount and timing of operating and other costs and expenses;
Adverse changes in the national and regional economies in which we will participate, including, but not limited to, changes in our performance, capital availability, and market demand; and
Changes in laws, regulations, accounting, taxation, and other requirements affecting our operations and business.
Our operating results may fluctuate from year to year due to the factors listed above and others not listed. At times, these fluctuations may be significant.
Future disruptions in the financial markets or deteriorating economic conditions could adversely impact the commercial real estate market as well as the market for equity-related and debt-related investments generally, which could hinder our ability to implement our business strategy and generate returns to you.
We intend to originate and acquire a diversified portfolio of real estate properties and development projects, with such investments taking the form of commercial real estate equity investments and commercial real estate loans, as well as other commercial real estate debt securities and other real estate-related assets. We
may make our investments through majority-owned subsidiaries, some of which may have rights to receive preferred economic returns. Economic conditions greatly increase the risks of these investments. The success of our business is significantly related to general economic conditions and, accordingly, our business could be harmed by an economic slowdown and downturn in real estate asset values, property sales and leasing activities. Periods of economic slowdown or recession, significantly rising interest rates, declining employment levels, decreasing demand for real estate, declining real estate values, or the public perception that any of these events may occur, can reduce volumes for many of our business lines. These economic conditions could result in a general decline in acquisition, disposition and leasing activity,
as well as a general decline in the value of real estate, which in turn would reduce revenue from property management fees and brokerage commissions derived from property sales, leases and mortgage brokerage as well as revenues associated with investment management and/or development activities. In addition, these conditions could lead to a decline in property sales prices as well as a decline in funds invested in existing commercial real estate assets and properties planned for development.
Future disruptions in the financial markets or deteriorating economic conditions may also impact the market for our investments and the volatility of our investments. The returns available to investors in our targeted investments are determined, in part, by: (i) the supply and demand for such investments and (ii) the existence of a market for such investments, which includes the ability to sell or finance such investments. During periods of volatility, the number of investors participating in the market may change at an accelerated pace. If either demand or liquidity increases, the cost of our targeted investments may increase. As a result, we may have fewer funds available to make distributions to Members.
During an economic downturn, it may also take longer for us to dispose of real estate investments or the selling prices may be lower than originally anticipated. As a result, the carrying value of our real estate investments may become impaired and we could record losses as a result of such impairment or we could experience reduced profitability related to declines in real estate values.
These negative general economic conditions could reduce the overall amount of sale and leasing activity in the commercial real estate industry, and hence the demand for our services. We are unable to predict the likely duration and severity of disruptions in financial markets and adverse economic conditions in the United States and other countries. While it is possible that the increase in the number of distressed sales and resulting decrease in asset prices will eventually translate to greater market activity, an overall reduction in sales transaction volume could materially and adversely impact our business.
All of the factors described above could adversely impact our ability to implement our business strategy and make distributions to our Members and could decrease the value of an investment in us. In addition, in an extreme deterioration of our business, we could have insufficient liquidity to meet our debt service obligations when they come due in future years. If we fail to meet our payment or other obligations under our credit agreement, the lenders under the agreement will be entitled to proceed against the collateral granted to them to secure the debt owed.
Investor funds will be deposited in a non-interest-bearing bank account pending reaching the Minimum Offering Amount.
Investor funds will be held in a non-interest-bearing account if and until the Minimum Offering Amount is met. If we are unable to sell and receive payments for the Minimum Offering Amount by 12 months subsequent to the Offering Date, investor funds will be returned without interest or deduction. Investors in the Class B Units offered hereby may not have the use of such funds or receive interest thereon pending the completion of the Offering. The Minimum Offering Amount is $2,250,000.
We may suffer from delays in locating suitable investments, which could limit or delay our ability to make distributions and lower the overall return on your investment.

We rely upon our Manager to identify suitable investments. To the extent that our Manager's principals face competing demands upon their time in instances when we have capital ready for investment, we may face delays in execution.
Additionally, the current market for properties that meet our investment objectives is highly competitive, as is the leasing market for such properties. The more Class B Units we sell in this Offering, the greater our challenge will be to invest all of the net offering proceeds on attractive terms. Except for investments that may be described in this Offering Circular prior to the date you subscribe for Class B Units, you will have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments. You must rely entirely on the oversight and management ability of our Manager and the performance of any property manager(s). We cannot be sure that our Manager will be successful in obtaining suitable investments on financially attractive terms.
Furthermore, where we acquire properties prior to the start of construction or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, you could suffer delays in the receipt of distributions attributable to those particular properties.
Further, because we are raising a "blind pool" without a significant number of assets, it may be difficult for us to invest the net offering proceeds promptly and on attractive terms. Delays we encounter in the selection and origination of income-producing loans and other assets would likely limit our ability to pay distributions to our Members and lower their overall returns. Similar concerns arise when there are prepayments, maturities or sales of our investments.
We may suffer from delays in locating suitable investments, which could limit our ability to make distributions and lower the overall return on your investment.
We rely upon our Manager's real estate and debt finance professionals, including Ms. N. Nora Nye, Esq., its Co-Founder and Chief Executive Officer, to identify suitable investments. Our sponsor and other Budding Equity Management, Inc. entities also rely on Ms. Nye for investment opportunities. To the extent that our Manager's real estate and debt finance professionals face competing demands upon their time in instances when we have capital ready for investment, we may face delays in execution. Further, because we are raising a "blind pool" without any pre-selected assets, it may be difficult for us to invest the net offering proceeds promptly and on attractive terms. Delays we encounter in the selection and origination of income-producing loans and other assets would likely limit our ability to pay distributions to our shareholders and lower their overall returns. Similar concerns arise when there are prepayments, maturities or sales of our investments.
Because this is a blind pool offering, you will not have the opportunity to evaluate our investments before we make them, which makes your investment more speculative.
Because we have not yet acquired or identified any investments that we may make, we are not able to provide you with any information to assist you in evaluating the merits of any specific investments that we may make, except for investments that may be described in supplements to this offering circular. We will seek to invest substantially all of the offering proceeds available for investment, after the payment of fees and expenses, in commercial real estate loans, commercial real estate and other real estate-related assets so long as such investments permit us to retain our exemptions from registration under the Investment Company Act, which exemptions are more fully discussed above. However, because you will be unable to evaluate the economic merit of assets before we invest in them, you will have to rely entirely on the ability of our Manager to select suitable and successful investment opportunities.
Furthermore, our Manager will have broad discretion in implementing policies regarding mortgagor creditworthiness and you will not have the opportunity to evaluate potential borrowers.
These factors increase the risk that your investment may not generate returns comparable to our competitors.

You may be more likely to sustain a loss on your investment because our Manager does not have as strong an economic incentive to avoid losses as do principals who have made significant equity investments in their companies.
Our Manager has only invested approximately $1,000 in us through the purchase of 100 Class A Units. Therefore, our Manager will have little exposure to loss in the value of our Units. Without this exposure, our investors may be at a greater risk of loss because our Manager does not have as much to lose from a decrease in the value of our Units as do those principals who make more significant equity investments in their companies.
Because we are limited in the amount of funds we can raise, we will be limited in the number and type of investments we make and the value of your investment in us will fluctuate with the performance of the specific assets we acquire.
Under Regulation A, we are only allowed to raise up to $50,000,000 in any 12-month period (although we may raise capital in other ways). We expect the size of the investments that we will make will average about
$1 million to $5 million per asset. As a result, the amount of proceeds we raise in this Offering may be substantially less than the amount we would need to achieve a diversified portfolio of real estate assets and development projects, even if we are successful in raising the Maximum Offering Amount. If we are unable to raise substantial funds, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments that we make. In that case, the likelihood that any single asset's performance would adversely affect our profitability will increase. Your investment in our Class B Units will be subject to greater risk to the extent that we lack a diversified portfolio of investments. Further, we have certain fixed operating expenses, including certain expenses as a public reporting company, regardless of whether we are able to raise substantial funds in this Offering.
Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

You may be required to hold your investment for an indefinite period.
While our Class B Units are being sold through this Offering to the general public, subject to investment qualification requirements, because we do not intend to register any of our Units on any public exchange, your Class B Units may not be freely transferable. As a result, no liquid market for our Units exists, and you may not be able to find a buyer for your Class B Units if you desire to liquidate your holdings in this Company. Thus, the Class B Units should not be purchased by any prospective investors seeking optimal liquidity in an investment as they may be required to hold onto your investment for an indefinite period of time.
We may change our targeted investments and investment guidelines without consent of our Members.
Our Manager may change our targeted investments and investment guidelines at any time without the consent of our Members, which could result in our making investments that are different from, and possibly riskier than, the investments described in this Offering Circular. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our Units and our ability to make distributions to you.
The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.
We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, private real estate funds, and other entities engaged in real estate investment activities. This market is competitive and rapidly changing. We expect competition to persist and intensify in the future.
Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the deployment and support of their business plans. Larger real estate programs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable properties may increase. Any such increase would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties and other investments, our profitability will be reduced and you may experience a lower return on your investment.
Our potential competitors may also have longer operating histories, more extensive customer bases, greater brand recognition and broader customer relationships than we have, which may give them a stronger network within the real estate industry leading to increased deal-flow and perhaps even better investment terms.
If our Manager fails to retain its key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.
Our future depends, in part, on our Manager's ability to attract and retain key personnel. Our future also depends on the continued contributions of the executive officers and other key personnel of our Manager, each of whom would be difficult to replace. In particular, the Founder/Chief Executive Officer N. Nora Nye of our Manager is critical to the management of our business and operations and the development of our strategic direction. The loss of the services of Ms. Nye or other executive officers or key personnel of our Manager and the process to replace any of our Manager's key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.
If our techniques for managing risk are ineffective, we may be exposed to unanticipated losses.
In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to market, operational, legal and reputational risks. Our risk management methods may prove to be ineffective due to their design or implementation or as a result of the lack of adequate, accurate or timely information. If our risk management efforts are ineffective, we could suffer losses or face litigation, particularly from our clients, and sanctions or fines from regulators.
Our techniques for managing risks may not fully mitigate the risk exposure in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Any failures in our risk management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks or to seek positive, risk-adjusted returns. In addition, any risk management failures could cause fund losses to be significantly greater than historical measures predict. Our more qualitative approach to managing those risks could prove insufficient, exposing us to unanticipated losses in our NAV and therefore a reduction in our revenues.
This Offering is focused on attracting a large number of investors that plan on making relatively small investments. An inability to attract such investors may have an adverse effect on the success of the Offering, and we may not raise adequate capital to implement our business strategy.
Our Class B Units are being offered and sold only to "qualified purchasers" (as defined in Regulation A). "Qualified purchasers" include: (i) "accredited investors" under Rule 501(a) of Regulation D (which, in the case of natural persons, (A) have an individual net worth, or joint net worth with the person's spouse, that exceeds $1,000,000 at the time of the purchase, excluding the value of the primary residence of such person, or (B) earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year) and (ii) all other investors so long as their investment in the particular issuer does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons).
However, our Class B Units are currently being offered and sold only to those investors that are within the latter category (i.e., investors whose investment in our Class B Units does not represent more than 10% of the applicable amount), regardless of an investor's status as an "accredited investor." Therefore, our target investor base inherently consists of persons that may not have the high net worth or income that investors in a traditional initial public offerings have, where the investor base is typically composed of "accredited investors."
Our reliance on attracting investors that may not meet the net worth or income requirements of "accredited investors" carries certain risks that may not be present in traditional initial public offerings. For example, certain economic, geopolitical and social conditions may influence the investing habits and risk tolerance of these smaller investors to a greater extent than "accredited investors," which may have an adverse effect on our ability to raise adequate capital to implement our business strategy. Additionally, our focus on investors that plan on making, or are able to make, relatively small investments requires a larger investor base in order to meet our annual goal of raising $50,000,000 in our offering. We may have difficulties in attracting a large investor base, which may have an adverse effect on the success of this offering, and a larger investor base involves increased transaction costs, which will increase our expenses.
We may engage in activities that produce UBTI.
An investment in us may not be suitable for tax-exempt U.S. investors, including IRAs. Tax-exempt U.S. investors should expect to recognize and be taxed on unrelated business taxable income. If you are such a tax-exempt investor we strongly urge you to consult your own tax advisor with respect to the tax consequences to you of an investment in this Offering.

Risks Related to Compliance and Regulation
We intend to continue to offer our Class B Units pursuant to recent amendments to Regulation A promulgated pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to Tier 2 issuers will make our Class B Units less attractive to investors as compared to a traditional initial public offering.
As a Tier 2 issuer, we are subject to scaled disclosure and reporting requirements, which may make our Class B Units less attractive to compared to a traditional initial public offering and/or to investors who are accustomed to enhanced disclosure and more frequent financial reporting. In addition, given the relative lack of regulatory precedence regarding the recent amendments to Regulation A, there is a significant amount of regulatory uncertainty in regards to how the SEC or the individual state securities regulators will regulate both the offer and sale of our securities, as well as any ongoing compliance that we may be subject to. If our scaled disclosure and reporting requirements, or regulatory uncertainty regarding Regulation A, reduces the attractiveness of our Class B Units, we may be unable to raise the necessary funds necessary to commence operations, or to develop a diversified portfolio real estate assets and development projects, which could severely affect the value of our Class B Units.
Under Section 107 of the JOBS Act, we are permitted to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standard that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B). By electing to extend the transition period for complying with new or revised accounting standards, our financial statements may not be comparable to companies that comply with all public accounting standards.
Our use of Form 1-A and our reliance on Regulation A for this offering may make it more difficult to raise capital as and when we need it, as compared to if we were conducting a traditional initial public offering on Form S-11.
Because of the exemptions from various reporting requirements provided to us under Regulation A and because we are only permitted to raise up to $50,000,000 in any 12-month period under Regulation A (although we may raise capital in other ways), we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
There may be deficiencies with our internal controls that require improvements, and if we are unable to adequately evaluate internal controls, we may be subject to sanctions.
As a Tier 2 issuer, we do not need to provide a report on the effectiveness of our internal controls over financial reporting, and we are exempt from the auditor attestation requirements concerning any such report so long as we are a Tier 2 issuer. We are in the process of evaluating whether our internal control procedures are effective and therefore there is a greater likelihood of undiscovered errors in our internal controls or reported financial statements as compared to issuers that have conducted such evaluations.
Noncompliance with laws and regulations may impair our ability to arrange, service or otherwise manage our loans and other assets.
Failure to comply with the laws and regulatory requirements applicable to our business may, among other things, limit our, or a collection agency's, ability to collect all or part of the payments on our investments. In addition, our noncompliance could subject us to damages, revocation of required licenses or other authorities, class action lawsuits, administrative enforcement actions, and civil and criminal liability, which may harm our business.
Some states may require nonfinancial companies who originate loans and other real estate investments, to obtain a real estate or other license in order to make commercial loans on a regular basis. At this time, we do not intend to finance loans in states where such licenses are required until we obtain any such required licensure. We may, in the future, affiliate with third-parties such as financial institutions in order to be able to arrange loans in jurisdictions where it might otherwise be restricted.
We are not subject to the banking regulations of any state or federal regulatory agency.
We are not subject to the periodic examinations to which commercial banks and other thrift institutions are subject. Consequently, our financing decisions and our decisions regarding establishing loan loss reserves are not subject to periodic review by any governmental agency. Moreover, we are not subject to regulatory oversight relating to our capital, asset quality, management or compliance with laws.
Recent legislative and regulatory initiatives have imposed restrictions and requirements on financial institutions that could have an adverse effect on our business.
The financial industry is highly regulated. There has been, and may continue to be, a related increase in regulatory investigations of the trading and other investment activities of alternative investment funds. Such investigations may impose additional expenses on us, may require the attention of senior management of our Manager and may result in fines if we are deemed to have violated any regulations.
Laws intended to prohibit money laundering may require us to disclose investor information to regulatory authorities.
The Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "PATRIOT Act") requires that financial institutions establish and maintain compliance programs to guard against money laundering activities, and requires the Secretary of the U.S. Treasury ("Treasury") to prescribe regulations in connection with anti-money laundering policies of financial institutions. The Financial Crimes Enforcement Network ("FinCEN"), an agency of the Treasury, has announced that it is likely that such regulations would subject certain pooled investment vehicles to enact anti-money laundering policies. It is possible that there could be promulgated legislation or regulations that would require us or our service providers to share information with governmental authorities with respect to prospective investors in connection with the establishment of anti-money laundering procedures.
Such legislation and/or regulations could require us to implement additional restrictions on the transfer of our Class B Units to comply with such legislation and/or regulations. We reserve the right to request such information as is necessary to verify the identity of prospective Members and the source of the payment of subscription monies, or as is necessary to comply with any customer identification programs required by FinCEN and/or the SEC. In the event of delay or failure by a prospective investor to produce any information required for verification purposes, an application for, or transfer of, our Class B Units may be refused. We do not have the ability to reject a transfer of our Class B Units where all necessary information is provided and any other applicable transfer requirements, including those imposed under the transfer provisions of our operating agreement, are satisfied.

Risks Related to Conflicts of Interest
There are conflicts of interest between us, our Manager and its affiliates.
Our operating agreement allows our Manager, with approval from the Board of Directors (the "Board") to enter into transactions between the Company and related parties, including the Manager itself or any Member, provided such transactions adequately compensate the related party for the services being provided or the assets being used or acquired without unreasonable charges to the Company for such services or assets.
While our operating agreement requires the Manager to devote reasonable time and attention to, and use commercially reasonable efforts in conducting, the business of the Company, the Manager is permitted to have other business interests and may engage in other activities, whether or not such activities are in competition with the Company, provided such interests or activities do not adversely affect the Manager's attention to and efforts on behalf of the Company. Despite this, the Company and any Member will not have any right to share or participate in such other investments or activities of the Manager or the income or proceeds derived therefrom.
Finally, Section 8.3 of our operating agreement allows the Company to indemnify the Manager and make advances for expenses to the maximum extent permitted under our operating agreement and the Colorado Limited Liability Act ("Colorado Act").
Each of these instances may create a conflict of interest between the Manager and the Company.
The interests of the Manager, its principals, and other affiliates may conflict with your interests.
Our operating agreement provides our Manager with broad powers and authority which may result in one or more conflicts of interest between your interests and those of the Manager, the principals and its other affiliates. This risk is increased by the Manager being controlled by N. Nora Nye, who is a principal in our Manager and who participates, or expects to participate, directly or indirectly in other offerings associated with our Manager and its affiliates. Potential conflicts of interest include, but are not limited to, the following:
the Manager, its principals and/or other affiliates are offering, and may continue to originate and offer, other real estate investment opportunities, including additional equity and debt offerings similar to this Offering and may make investments in real estate assets for their own respective accounts, whether or not competitive with our business;
the Manager, its principals and/or other affiliates are not required to disgorge any profits or fees or other compensation they may receive from any other business they own separately from us, and you will not be entitled to receive or share in any of the profits return fees or compensation from any other business owned and operated by the Manager, its principals and/or other affiliates for their own benefit;
we may engage the Manager or affiliates of the Manager to perform services at prevailing market rates. Prevailing market rates are determined by the Manager based on industry standards and expectations of what the Manager would be able to negotiate with third-party on an arm's length basis; and
the Manager, the principals and/or its other affiliates are not required to devote all of their time and efforts to our affairs.
We have agreed to limit remedies available to us and our Members for actions by our Manager that might otherwise constitute a breach of duty.
Our Manager maintains a contractual, as opposed to a fiduciary relationship, with us and our Members. Accordingly, we and our Members only have recourse and are able to seek remedies against our Manager to the extent it breaches its obligations pursuant to our operating agreement. Furthermore, we have agreed to limit the liability of our Manager and to indemnify our Manager against certain liabilities. These provisions are detrimental to Members because they restrict the remedies available to them for actions that without those limitations might constitute breaches of duty, including fiduciary duties. By purchasing our Class B Units, you will be treated as having consented to the provisions set forth in our operating agreement. In addition, we may choose not to enforce, or to enforce less vigorously, our rights under our operating agreement because of our desire to maintain our ongoing relationship with our Manager.

Risks Related to our Investments
If we take control of a real estate asset that underlies one of our loans, it will be subject to the risks typically associated with real estate.
Some of our loans may be secured by an underlying property, which means if the borrower defaults, we may take an ownership interest in the underlying property. If this occurs, such asset will be subject to the risks typically associated with real estate. The value of real estate may be adversely affected by a number of risks, including:
- natural disasters such as hurricanes, earthquakes and floods;
- acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001;
- adverse changes in national and local economic and real estate conditions;
- an oversupply of (or a reduction in demand for) space in the areas where particular properties are located and the attractiveness of particular properties to prospective tenants;
- changes in governmental laws and regulations, fiscal policies, and zoning ordinances and the related costs of compliance therewith and the potential for liability under applicable laws;
- costs of remediation and liabilities associated with environmental conditions affecting properties; and
- the potential for uninsured or underinsured property losses.
The value of each property is affected significantly by its ability to generate cash flow and net income, which in turn depends on the amount of rental or other income that can be generated net of expenses required to be incurred with respect to the property. Many expenditures associated with properties (such as operating expenses and capital expenditures) cannot be reduced when there is a reduction in income from the properties.
In addition, our commercial real estate loans and other debt-related assets will generally be directly or indirectly secured by a lien on real property that, upon the occurrence of a default on the loan, could result in our acquiring ownership of the property. We will not know whether the values of the properties ultimately securing our loans will remain at the levels existing on the dates of origination of those loans. If the values of the mortgaged properties drop, our risk will increase because of the lower value of the security associated with such loans. In this manner, real estate values and prevailing interest rates could impact the values of our loan investments. Our investments in commercial real estate-related debt securities may be similarly affected by real estate property values.
These factors may have a material adverse effect on the value that we can realize from our assets.
Lack of diversification of our investments.
Substantially all of the proceeds from the Offering will be used to make commercial real estate loans, which means that our assets will not be diversified and are more prone to external risks that affect the entire real estate industry. Because of this, even if we are able to execute on our business plan, a general downturn of the real estate market could have a material impact on our operations even if other sectors of the economy are unaffected.
Pursuant to our business plan, we intend to focus our loans within a particular subset of real estate and related projects, which could lead to foregoing more lucrative investment opportunities.
We plan to focus our loans primarily in real estate and associated projects that have a positive environmental, community or social impact component such as projects related to: up-cycled shipping containers; tiny homes; affordable housing; and co-working spaces. While it is our belief that these types of borrowers and projects provide a subset of untapped opportunities that have been underutilized by lenders, by focusing the scope of our investment strategy on a subset of the market as a whole, we may be doing so at the expense of other potential borrowers that fall outside this scope. Such other projects might be better lending opportunities than those to whom we ultimately lend money, which in turn could limit our potential profitability long-term.
Our Manager and its underlying management has limited experience in real estate lending.
While our Manager's executive officers have long careers in the legal services industry, they do not have a background in commercial lending. Since our Manager is responsible for making lending decisions on behalf of the Company, this lack of experience could lead to loans that ultimately are not successful or the Company foregoing lending opportunities that more experienced real estate professionals might otherwise have pursued. This this could lead to less returns for our Members.
The commercial real estate loans we originate or invest in could be subject to delinquency, foreclosure and loss, which could result in losses to us.
Commercial real estate loans are secured by multifamily or commercial property and are subject to risks of delinquency and foreclosure. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower's ability to repay the loan may be impaired. Net operating income of an income- producing property can be affected by, among other things: tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable types of properties, changes in laws that increase operating expenses or limit rents that may be charged, any need to address environmental contamination at the property, the occurrence of any uninsured casualty at the property,
changes in national, regional or local economic conditions and/or specific industry segments, declines in regional or local real estate values, declines in regional or local rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, changes in governmental rules, regulations and fiscal policies, including environmental legislation, natural disasters, terrorism, social unrest and civil disturbances. In addition, to the extent we originate or acquire adjustable rate mortgage loans, such loans may contribute to higher delinquency rates because borrowers with adjustable rate mortgage loans may be exposed to increased monthly payments if the related mortgage interest rate adjusts upward from the initial fixed rate.
In the event of any default under a mortgage loan held directly by us, we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations. We expect that many of the commercial real estate loans that we originate will be fully or substantially nonrecourse. In the event of a default by a borrower on a nonrecourse loan, we will only have recourse to the underlying asset (including any escrowed funds and reserves) collateralizing the loan. If a borrower defaults on one ofour commercial real estate loans and the underlying asset collateralizing the commercial real estate loan is insufficient to satisfy the outstanding balance of the commercial real estate loan, we may suffer a loss of principal or interest. In addition, even if we have recourse to a borrower's assets,
we may not have full recourse to such assets in the event of a borrower bankruptcy.
Foreclosure of a mortgage loan can be an expensive and lengthy process that could have a substantial negative effect on our anticipated return on the foreclosed mortgage loan. In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the mortgaged property at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law. The resulting time delay could reduce the value of our investment in the defaulted mortgage loans, impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan.
Our investments in subordinated commercial real estate loans may be subject to losses.
We may acquire or originate subordinated commercial real estate loans. In the event a borrower defaults on a subordinated loan and lacks sufficient assets to satisfy our loan, we may suffer a loss of principal or interest. In the event a borrower declares bankruptcy, we may not have full recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. If a borrower defaults on our loan or on debt senior to our loan, or in the event of a borrower bankruptcy, our loan will be satisfied only after the senior debt is paid in full. Where debt senior to our loan exists, the presence of inter-creditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through "standstill periods"), and control decisions made in bankruptcy proceedings relating to borrowers.
The mezzanine loans in which we may invest involve greater risks of loss than senior loans secured by the same properties.
We may invest in mezzanine loans that take the form of subordinated loans secured by a pledge of the ownership interests of either the entity owning the real property or an entity that owns (directly or indirectly) the interest in the entity owning the real property. These types of investments may involve a higher degree of risk than long-term senior mortgage lending secured by income-producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt.
As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.
Risks of cost overruns and noncompletion of the construction or renovation of the properties underlying loans we make or acquire may materially adversely affect our investment.
The renovation, refurbishment or expansion by a borrower under a mortgaged or leveraged property involves risks of cost overruns and noncompletion. Costs of construction or improvements to bring a property up to standards established for the market position intended for that property may exceed original estimates, possibly making a project uneconomical. Other risks may include environmental risks and construction, rehabilitation and subsequent leasing of the property not being completed on schedule. If such construction or renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged impairment of net operating income and may not be able to make payments on our investment.
Investments that are not United States government insured involve risk of loss.
We may originate and acquire uninsured loans and assets as part of our investment strategy. Such loans and assets may include mortgage loans, mezzanine loans and bridge loans. While holding such interests, we are subject to risks of borrower defaults, bankruptcies, fraud, losses and special hazard losses that are not covered by standard hazard insurance. In the event of any default under loans, we bear the risk of loss of principal and nonpayment of interest and fees to the extent of any deficiency between the value of the collateral and the principal amount of the loan. To the extent we suffer such losses with respect to our investments in such loans, the value of the Company and the value of our Class B Units may be adversely affected.
Adjustable rate mortgage loans may entail greater risks of default to lenders than fixed rate mortgage loans.
Adjustable rate mortgage loans may contribute to higher delinquency rates. Borrowers with adjustable rate mortgage loans may be exposed to increased monthly payments if the related mortgage interest rate adjusts upward from the initial fixed rate or a low introductory rate, as applicable, in effect during the initial period of the mortgage loan to the rate computed in accordance with the applicable index and margin. This increase in borrowers' monthly payments, together with any increase in prevailing market interest rates, after the initial fixed rate period, may result in significantly increased monthly payments for borrowers with adjustable rate mortgage loans, which may make it more difficult for the borrowers to repay the loan or could increase the risk of default of their obligations under the loan.
Changes in interest rates and/or credit spreads could negatively affect the value of any loans we may make, which could result in reduced earnings or losses and negatively affect the cash available for distribution to our Members.
We may make fixed-rate loans with fixed distribution amounts. Under a normal yield curve, a loan under such a structure will decline in value if long-term interest rates increase or if credit spreads widen. We may also make floating-rate loans, for which decreases in interest rates or narrowing of credit spreads will have a negative effect on value and interest income. Even though a loan or other debt investment may be performing in accordance with its loan agreement and the underlying collateral has not changed, the economic value of the loan may be negatively impacted by the incremental interest foregone from the changes in interest rates or credit spreads. Declines in market value may ultimately reduce earnings or result in losses to us, which may negatively affect cash available for distribution to our Members.
Pre-payments can adversely affect the yields on any loans we may make.
Pre-payments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such pre-payment rates cannot be predicted with certainty. If we are unable to invest the proceeds of such pre-payments received, the yield on our portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, our anticipated yield may be impacted. Under certain interest rate and pre-payment scenarios we may fail to recoup fully our cost of acquisition of certain investments.
Many of our assets will be illiquid and we may not be able to vary our portfolio in response to changes in economic and other conditions.
Many factors that are beyond our control affect the real estate market and could affect our ability to sell our loans for the price, on the terms or within the time frame that we desire. These factors include general economic conditions, the availability of financing, interest rates and other factors, including supply and demand. Because real estate investments are relatively illiquid, we have a limited ability to vary our portfolio in response to changes in economic or other conditions. Moreover, the senior mortgage loans, subordinated loans, mezzanine loans and other loans and investments we may originate or purchase will be particularly illiquid investments due to their short life and the greater difficulty of recoupment in the event of a borrower's default. As a result, we continue to expect that many of our assets will be illiquid, and if we are required to liquidate all or a portion of our assets quickly,
we may realize significantly less than the value at which we have previously recorded our assets and our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited, which could adversely affect our results of operations and financial condition.
A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could harm our operations.
Many of our potential borrowers will be susceptible to economic slowdowns or recessions, which could lead to less demand for our loans and a decrease in revenues, net income and assets. An economic slowdown or recession, in addition to other noneconomic factors such as an excess supply of lenders, could have a material negative impact on the terms under which we could lend our money. Declining real estate values will likely reduce our level of new mortgage loan originations, since borrowers often use increases in the value of their existing properties to support the purchase or investment in additional properties. Borrowers may also be less able to pay principal and interest on our loans if the real estate economy weakens. Further, declining real estate values significantly increase the likelihood that we will incur losses on our loans in the event of default because the value of our collateral may be insufficient to cover our cost on the loan.
Any sustained period of increased payment delinquencies, foreclosures or losses could adversely affect both our net interest income from loans in our portfolio as well as our ability to originate, sell and securitize loans, which would significantly harm our revenues, results of operations, financial condition, business prospects and our ability to make distributions to you.
Insurance may not cover all potential losses on the mortgaged properties that may impair our security and harm the value of our assets.
We require that each of the borrowers under our mortgage loan investments obtain comprehensive insurance covering the mortgaged property, including liability, fire and extended coverage. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, and hurricanes that may be uninsurable or not economically insurable. We may not require borrowers to obtain terrorism insurance if it is deemed commercially unreasonable. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace a property if it is damaged or destroyed. Under such circumstances, the insurance proceeds, if any, might not be adequate to restore the economic value of the mortgaged property, which might impair our security and decrease the value of the property.
If we overestimate the value or income-producing ability or incorrectly price the risks of our investments, we may experience losses.
Analysis of the value or income-producing ability of a commercial property is highly subjective and may be subject to error. Our Manager values our potential investments based on yields and risks, taking into account estimated future losses on the commercial real estate loans and the mortgaged property included in the securitization's pools or select commercial real estate equity investments, and the estimated impact of these losses on expected future cash flows and returns. In the event that we underestimate the risks relative to the price we pay for a particular investment, we may experience losses with respect to such investment.
A borrower's form of entity may cause special risks or hinder our recovery.
Since most of the borrowers for our commercial real estate loan investments are legal entities rather than individuals, our risk of loss may be greater than those of mortgage loans made to individuals. Unlike individuals involved in bankruptcies, most of the entities generally do not have personal assets and credit- worthiness at stake. The terms of the mortgage loans generally require that the borrowers covenant to be single-purpose entities, although in some instances the borrowers are not required to observe all covenants and conditions that typically are required in order for them to be viewed under standard rating agency criteria as "single-purpose entities." Borrowers' organizational documents or the terms of the mortgage loans may limit their activities to the ownership of only the related mortgaged property or properties and limit the borrowers' ability to incur additional indebtedness.
These provisions are designed to mitigate the possibility that the borrowers' financial condition would be adversely impacted by factors unrelated to the mortgaged property and the mortgage loan in the pool.
The bankruptcy of a borrower, or a general partner or managing member of a borrower, may impair the ability of the lender to enforce its rights and remedies under the related mortgage. Borrowers that are not single-purpose entities structured to limit the possibility of becoming insolvent or bankrupt, may be more likely to become insolvent or the subject of a voluntary or involuntary bankruptcy proceeding because the borrowers may be: (i) operating entities with a business distinct from the operation of the mortgaged property with the associated liabilities and risks of operating an ongoing business; or (ii) individuals that have personal liabilities unrelated to the property.
We are exposed to environmental liabilities with respect to properties to which we take title.
In the course of our business, we may take title to real estate, and, if we do take title, we could be subject to environmental liabilities with respect to these properties. In such a circumstance, we may be held liable to a governmental entity or to third-parties for property damage, personal injury, and investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases, at a property. The costs associated with investigation or remediation activities could be substantial. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity, and/or results of operations could be materially and adversely affected.

Risks Related to Economic Conditions
Economic recessions or downturns may have an adverse effect on our business, financial condition and results of operations.
Economic recessions or downturns may result in a prolonged period of market illiquidity, which could have an adverse effect on our business, financial condition and results of operations. Periods of economic slowdown or recession, significantly rising interest rates, declining employment levels, decreasing demand for real estate, or the public perception that any of these events may occur, have resulted in and could continue to result in a general decline in acquisition, disposition and leasing activity, as well as a general decline in the value of real estate and in rents. These events could adversely affect our demand among investors, which will impact our results of operations.
During an economic downturn, it may also take longer for us to dispose of real estate investments, or the disposition prices may be lower than originally anticipated. As a result, the carrying value of such real estate investments may become impaired and we could record losses as a result of such impairment or could experience reduced profitability related to declines in real estate values. These events could adversely affect our performance and, in turn, our business, and negatively impact our results of operations.
Negative general economic conditions could continue to reduce the overall amount of sale and leasing activity in the real estate industry, which may in turn adversely affect our revenues. We are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the United States and other countries.
Further downgrades of the U.S. credit rating, impending automatic spending cuts, or a government shutdown could negatively impact our liquidity, financial condition and earnings.
Recent U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit rating downgrades and economic slowdowns, or a recession in the United States. Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States. The impact of this or any further downgrades to the U.S. government's sovereign credit rating or its perceived creditworthiness could adversely affect the United States and global financial markets and economic conditions. With the improvement of the U.S. economy, the Federal Reserve may continue to raise interest rates, which would increase borrowing costs and may negatively impact our ability to access the debt markets on favorable terms. In addition, disagreement over the federal budget has caused the U.S. federal government to essentially shut down for periods of time.
Continued adverse political and economic conditions could have an adverse effect on our business, financial condition and results of operations.
Global economic, political, and market conditions and economic uncertainty may adversely affect our business, results of operations, and financial condition.
The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world, may continue to contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets, and may cause further economic uncertainties or deterioration in the United States and worldwide. Economic uncertainty can have a negative impact on our business through changing spreads, structures, and purchase multiples, as well as the overall supply of investment capital. Since 2010, several European Union, or EU, countries, including Greece, Ireland, Italy, Spain, and Portugal, have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other EU countries. Additionally, the precise details and the resulting impact of the United Kingdom's vote to leave the EU, commonly referred to as "Brexit," are impossible to ascertain at this point.
The effect on the United Kingdom's economy will likely depend on the nature of trade relations with the EU following its exit, a matter to be negotiated. The decision may cause increased volatility and have a significant adverse impact on world financial markets, other international trade agreements, and the United Kingdom and European economies, as well as the broader global economy for some time. Further, there is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as China, may have a severe impact on the worldwide and United States financial markets. We do not know how long the financial markets will continue to be affected by these events and cannot predict the effects of these or similar events in the future on the United States economy and securities markets or on our investments.
As a result of these factors, there can be no assurance that we will be able to successfully monitor developments and manage our investments in a manner consistent with achieving our investment objectives.

Risks Related to our Organization and Structure
Maintenance of exemption from registration under the Investment Company Act of 1940
We intend to operate our business in a manner that will permit us to maintain an exemption from the Investment Company Act of 1940, because we will not engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, the Company will be primarily engaged in non-investment company businesses related to real estate. Consequently, we expect to be able to conduct our operations such that the Company and our subsidiaries will not be required to register as an investment company under the Investment Company Act. We believe that our organization will be able to maintain an exemption from Investment Company Act of 1940. However, we cannot assure that we will continue to maintain such an exemption because the exemption involves application of highly technical and complex provisions of the Capital C Code and involves the determination of circumstances not entirely within our control.
Future legislation, new regulations, administrative interpretations or court decisions may significantly change the law or application of the law with respect to maintenance of our exemption.

Qualification for exemption from registration under the Investment Company Act will limit our ability to make certain investments. To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon such exclusions, we may be required to adjust our strategy accordingly. Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies we have chosen.

The determination of whether an entity is a majority-owned subsidiary of the Company will be made by our Manager. The Investment Company Act defines a majority-owned subsidiary as an entity where 50% or more of the outstanding voting securities are owned by the parent, or by another company which is itself a majority-owned subsidiary. The Investment Company Act further defines voting securities as any security presently entitling the owner or holder thereof to vote for the election of directors of a company. We will treat companies in which we own at least a majority of the outstanding voting securities as majority-owned subsidiaries. We also will treat subsidiaries of which we or our wholly-owned or majority-owned subsidiary is the manager (in a manager-managed entity) or managing member (in a member-managed entity) or in
which our agreement or the agreement of our wholly-owned or majority-owned subsidiary is required for all major decisions affecting the subsidiaries (which we refer to as "Controlled Subsidiaries"), as majority-owned subsidiaries even though none of the interests issued by such Controlled Subsidiaries meets the definition of voting securities under the Investment Company Act. We will rely upon the advice and counsel of outside legal and accounting advisors in making such determinations, and based upon the substance and form of the organizational structure. The determination of whether an entity is a majority-owned subsidiary of the Company will be made by us, and we will not ask the SEC staff for concurrence of our analysis, our treatment of such interests as voting securities, or whether any Controlled Subsidiary, or any other of our subsidiaries, should be treated in the manner in which we intend.
It is possible that the SEC staff could disagree with any of our determinations, which would require us to adjust our strategy and our assets. Any such adjustment in our strategy could have a material adverse effect on the Company.
Registration under the Investment Company Act would require us to comply with a variety of substantive requirements that impose, among other things:
- limitations on capital structure;
- restrictions on specified investments;
- restrictions on leverage or senior securities;
- restrictions on unsecured borrowings;
- prohibitions on transactions with affiliates; and
- compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.
If we were required to register as an investment company but failed to do so, we could be prohibited from engaging in our business, and criminal and civil actions could be brought against us.
Registration with the SEC as an investment company would be costly, would subject us to a host of complex regulations and would divert attention from the conduct of our business, which could materially and adversely affect us. In addition, if we purchase or sell any real estate assets to avoid becoming an investment company under the Investment Company Act, our NAV, the amount of funds available for investment and our ability to pay distributions to our shareholders could be materially adversely affected.
We anticipate that the Company will directly, or through one or more wholly owned subsidiaries, hold real estate and real estate-related assets described in this offering circular. It is possible that the Company also may own such assets through minority-owned joint venture subsidiaries.

Our Members do not elect or vote on our Manager and have limited ability to influence decisions regarding our business.
Holders of our Class B Units have voting rights only with respect to certain matters, primarily relating to amendments to our operating agreement that would adversely change the rights of the Class B Units, except that the two Class B Members owning the largest and second-largest number of Class B Unit each may appoint one member to the Board. Our operating agreement provides that the assets, affairs and business of the Company are managed under the direction of our Manager and the Board. Our Members do not elect or vote on our Manager, and, unlike the holders of common Units in a corporation, have only limited voting rights on matters affecting our business, and therefore limited ability to influence decisions regarding our business. In addition, our operating agreement requires that the Manager generally operate in a manner that is appropriate to maintain our REIT status, which may further limit decisions regarding our business.
As a non-listed company conducting an exempt offering pursuant to Regulation A, we are not subject to a number of corporate governance requirements, including the requirements for a board of directors or independent board committees.
As a non-listed company conducting an exempt offering pursuant to Regulation A, we are not subject to a number of corporate governance requirements that an issuer conducting an offering on Form S-11 or listing on a national stock exchange would be. Accordingly, we are not required to have: (i) a board of directors of which a majority consists of "independent" directors under the listing standards of a national stock exchange; (ii) an audit committee composed entirely of independent directors and a written audit committee charter meeting a national stock exchange's requirements; (iii) a nominating/corporate governance committee composed entirely of independent directors and a written nominating/corporate governance committee charter meeting a national stock exchange's requirements; (iv) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of a national stock exchange; and (v) independent audits of our internal controls.
Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of a national stock exchange.
Certain provisions of our operating agreement could hinder, delay or prevent a change of control of the Company.
Certain provisions of our operating agreement could have the effect of discouraging, delaying or preventing transactions that involve an actual or threatened change of control of the Company. These provisions include the following:
- Authorization of additional Units, issuances of authorized Units and classification of Units without Member approval. Our operating agreement authorizes us to issue additional Units or other securities of the Company for the consideration and on the terms and conditions established by our Manager without the approval of our Members. In particular, our Manager is authorized to provide for the issuance of an unlimited amount of one or more classes or series of our Units, including preferred Units, and to fix the number of Units, 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 Units and other securities could render more difficult or discourage an attempt to obtain control over the Company by means of a tender offer, merger, or otherwise.
- Ownership limitations. To assist us 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 Code, either more than 9.8% in value or in number of our Units, whichever is more restrictive, or more than 9.8% in value or in number of our Units, whichever is more restrictive. Accordingly, no person may own, or be deemed to own, more than 9.8% in value or in number of our Units, whichever is more restrictive. The ownership limits could have the effect of discouraging a takeover or other transaction in which Members might receive a premium for their Units over the then prevailing market price or which holders might believe to be otherwise in their best interests. Furthermore, we will reject any investor's subscription in whole or in part if we determine that such subscription would violate such ownership limits.
- Exclusive authority of our Manager to amend our operating agreement. Our operating agreement provides that our Manager with approval of our Board has the exclusive power to adopt, alter or repeal any provision of our operating agreement, unless such amendment would adversely change the rights of the Class B Units. Thus, our Members generally may not effect changes to our operating agreement.
The offering price of our Class B Units was not established on an independent basis; the actual value of your investment may be substantially less than what you pay. Until December 31, 2019, we expect to use the price paid to acquire a Class B Unit in this Offering as the estimated value of our Class B Units. Thereafter, when determining the estimated value of our Class B Units, the value of our Class B Units will be based upon a number of assumptions that may not be accurate or complete.
Our Manager established the offering price of our Class B Units on an arbitrary basis. The selling price of our Class B Units bears no relationship to our book or asset values or to any other established criteria for valuing corporate securities. Because the offering price is not based upon any independent valuation, the offering price may not be indicative of the proceeds that you would receive upon liquidation. Further, the offering price may be significantly more than the price at which the Class B Units would trade if they were to be listed on an exchange or actively traded by broker-dealers.
After December 31, 2019, the per Unit purchase price for this offering will be adjusted every fiscal quarter (or as soon as commercially reasonable thereafter), and will equal the greater of (i) $10.00; or (ii) the NAV per Unit. Our Manager will adjust our per Unit purchase price as of the date the new NAV is announced, not the date of such NAV, and investors will pay the most recent publicly announced purchase price as of the date of their subscription. Solely by way of example, if an investor submits a subscription on April 2, such investor will pay the per Unit purchase price previously announced in January, not the per Unit purchase price that would be expected to be announced at a later date in April. Estimates of our NAV per Unit are based on available information and judgment. Therefore, actual values and results could differ from our estimates and that difference could be significant.
This approach to valuing our Class B Units may bear little relationship and will likely exceed what you might receive for your Units if you tried to sell them or if we liquidated our portfolio. In addition, the price you pay for your Units in this offering may be more or less than Members who acquire their Class B Units in the future.

Your interest in us will be diluted if we issue additional Units, which could reduce the overall value of your investment.
Potential investors in this offering do not have preemptive rights to any Units we issue in the future. Under our operating agreement, we have authority to issue an unlimited number of additional Units or other securities, although, under Regulation A, we are only allowed to sell up to $50,000,000 of our Units in any 12-month period (although we may raise capital in other ways). In particular, our Manager is authorized, subject to the restrictions of Regulation A and other applicable securities laws, to provide for the issuance of an unlimited amount of one or more classes or series of Units in the Company, including preferred Units, and to fix the number of Units, 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, without Member approval.
After your purchase in this Offering, our Manager may elect to (i) sell additional Units in this or future public offerings, (ii) issue equity interests in private offerings, or (iii) issue Units to our Manager, or its successors or assigns, in payment of an outstanding fee obligation. To the extent we issue additional equity interests after your purchase in this offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your Units.
Jurisdiction and venue for disputes that are in any way related to the Class B units.
Our Operating Agreement and Subscription Agreement both contain provisions requiring any lawsuit arising out of or related to this Offering Circular, the Operating Agreement, the Subscription Agreement, or in any way related to the Class B units, exclusively brought in the Federal or State courts sitting in Denver, Colorado. By purchasing the Class B units, the purchaser is agreeing to the jurisdiction and venue in such courts. These provisions may discourage claims or limit unitholders' ability to bring a claim in a judicial forum that they find favorable. We believe that such venue, forum and jurisdiction provisions are enforceable under existing federal and Colorado law.

Risks Related to our status as a REIT
Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our Members.
We believe that our organization will be able to meet the requirements for qualification and taxation as a REIT. However, we cannot assure you that we will continue to qualify as such. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT or the U.S. federal income tax consequences of such qualification.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our Members because:
- we would not be allowed a deduction for dividends paid to Members in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;
- we could be subject to the U.S. federal alternative minimum tax and possibly increased state and local taxes; and
- unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.
In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our Class B Units. See TAX CONSIDERATIONS, below, for a discussion of certain U.S. federal income tax considerations relating to us and our Units.
Even if we continue to qualify as a REIT, we may owe other taxes that will reduce our cash flows.
Even if we continue to qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, on taxable income that we do not distribute to our Members, on net income from certain "prohibited transactions," and on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. For example, to the extent we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. We also will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our Members in a calendar year is less than a minimum amount specified under the Code. As another example, we are subject to a 100% "prohibited transaction" tax on any gain from a sale of property that is characterized as held for sale, rather than investment, for U.S. federal income tax purposes,
unless we comply with a statutory safe harbor or earn the gain through a TRS. Further, any TRS that we establish will be subject to regular corporate U.S. federal, state, and local taxes. Any of these taxes would decrease cash available for distribution to Members.
REIT distribution requirements could adversely affect our liquidity and may force us to borrow funds during unfavorable market conditions.
In order to maintain our REIT status and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. In addition, we may need to reserve cash (including proceeds from this offering) to satisfy our REIT distribution requirements, even though there are attractive investment opportunities that may be available. To qualify as a REIT, we generally must distribute to our Members at least 90% of our net taxable income each year, excluding capital gains. In addition, we will be subject to corporate income tax to the extent we distribute less than 100% of our taxable income including any net capital gain. We intend to make distributions to our Members to comply with the requirements of the Code for REITs and to minimize or eliminate our corporate income tax obligation to the extent consistent with our business objectives.
Our cash flows from operations may be insufficient to fund required distributions, for example as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, the effect of nondeductible capital expenditures, the creation of reserves or required debt service or amortization payments. To the extent we invest in debt instruments, we generally will be required to accrue income from mortgage loans, mortgage backed securities, and other types of debt instruments currently over the term of the asset, even if we do not receive the cash payments corresponding to such income until later periods. Thus, all or a part of the anticipated increase in yield on the loans we hold that are attributable to deferred interest, exit fees and/or equity participation features generally must be accrued currently notwithstanding that the corresponding cash payment is deferred or uncertain.
The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. To address and/or mitigate some of these issues, we may make taxable distributions that are in part paid in cash and in part paid in our Class B Units. In such cases our Members may have tax liabilities from such distributions in excess of the cash they receive. The treatment of such taxable share distributions is not clear, and it is possible the taxable distribution will not count towards our distribution requirement, in which case adverse consequences could apply.
If we fail to invest a sufficient amount of the net proceeds from selling our Class B Units in real estate assets within one year from the receipt of the proceeds, we could fail to qualify as a REIT.
Temporary investment of the net proceeds from sales of our Class B Units in short-term securities and income from such investment generally will allow us to satisfy various REIT income and asset requirements, but only during the one-year period beginning on the date we receive the net proceeds. If we are unable to invest a sufficient amount of the net proceeds from sales of our Class B Units in qualifying real estate assets within such one-year period, we could fail to satisfy one or more of the gross income or asset tests and/or we could be limited to investing all or a portion of any remaining funds in cash or cash equivalents. If we fail to satisfy any such income or asset test, unless we are entitled to relief under certain provisions of the Code, we could fail to qualify as a REIT. See TAX CONSIDERATIONS - Requirements for Qualification as a REIT, below.

If we form a TRS, our overall tax liability could increase.
Any TRS we form will be subject to U.S. federal, state and local income tax on its taxable income. Accordingly, although our ownership of any TRSs may allow us to participate in the operating income from certain activities that we could not participate in without violating the REIT income tests requirements of the Code or incurring the 100% tax on gains from prohibited transactions, the TRS through which we earn such operating income or gain will be fully subject to corporate income tax. The after-tax net income of any TRS would be available for distribution to us; however, any dividends received by us from our domestic TRSs will only be qualifying income for the 95% REIT income test, not the 75% REIT income test. If we have any non-U.S. TRSs, they may be subject to tax in jurisdictions where they operate and under special rules dealing with foreign subsidiaries, and they may generate income that is nonqualifying for either of the REIT income tests.
Although our use of TRSs may partially mitigate the impact of meeting certain requirements necessary to maintain our qualification as a REIT, there are limits on our ability to own and engage in transactions with TRSs, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.
A REIT may own up to 100% of the stock or securities of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. A TRS also may sell assets without incurring the 100% tax on prohibited transactions. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% (for taxable years beginning before January 1, 2018) or 20% (for taxable years beginning on or after January 1, 2018) of the value of a REIT's assets may consist of stock or securities of one or more TRSs. In addition, the rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation.
The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm's length basis (for example if we charged our TRS interest in excess of an arm's length rate). We may jointly elect with one or more subsidiaries for those subsidiaries to be treated as TRSs for U.S. federal income tax purposes. These TRSs will pay U.S. federal, state, and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but is not required to be distributed to us. We will monitor the value of our respective investments in any TRSs we may form for the purpose of ensuring compliance with TRS ownership limitations and intend to structure our transactions with any such TRSs on terms that we believe are arm's length to avoid incurring the 100% excise tax described above. There can be no assurance, however,
that we will be able to comply with the 25% (for taxable years beginning before January 1, 2019) or 20% (for taxable years beginning on or after January 1, 2019) TRS limitation or to avoid application of the 100% excise tax.
Dividends payable by REITs generally do not qualify for reduced tax rates under current law.
The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. shareholders that are individuals, trusts, and estates generally is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore may be subject to a 37% maximum U.S. federal income tax rate on ordinary income when paid to such Members. The more favorable rates applicable to regular corporate dividends under current law could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates 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 stock of REITs, including our Class B Units.
Complying with REIT requirements may cause us to forego otherwise attractive opportunities, to liquidate otherwise attractive investments, or to otherwise deviate from our business plan.
To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our Members and the ownership of our Units. We may be required to make distributions to our Members at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may, for instance, hinder our ability to make certain otherwise attractive investments or undertake other activities that might otherwise be beneficial to us and our Members, or may require us to borrow or liquidate investments in unfavorable market conditions and, therefore, may hinder our investment performance. As a REIT, at the end of each calendar quarter, at least 75% of the value of our assets must consist of cash, cash items, U.S. Government securities and qualified "real estate assets." These requirements are in addition to the requirements
necessary to maintain our exemption from registration as an investment company pursuant to the exemptions set forth in Sections 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act.
The remainder of our investments in securities (other than cash, cash items, U.S. Government securities, securities issued by a TRS and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than cash, cash items,
U.S. Government securities, securities issued by a TRS and qualified real estate assets) can consist of the securities of any one issuer, no more than 25% (for taxable years beginning before January 1, 2019) or 20% (for taxable years beginning on or after January 1, 2019) of the value of our total securities can be represented by securities of one or more TRSs, and no more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or real property interests. After meeting these requirements at the close of a calendar quarter, if we fail to comply with these requirements at the end of any subsequent calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate from our portfolio,
forego otherwise attractive investments, or invest in assets that otherwise deviate from our business plan. These actions could have the effect of reducing our income and amounts available for distribution to our Members.

You may be restricted from acquiring or transferring certain amounts of our Class B Units.
In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding Units may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which a REIT election is made. To assist us in qualifying as a REIT, our operating agreement contains an aggregate Unit ownership limit and a Class B Unit ownership limit. Generally, any of our Units owned by affiliated owners will be added together for purposes of the aggregate Unit ownership limit, and any Units owned by affiliated owners will be added together for purposes of the Unit ownership limit.
If anyone attempts to transfer or own Units in a way that would violate the aggregate Unit ownership limit or the Class B Unit ownership limit (or would prevent us from continuing to qualify as a REIT), unless such ownership limits have been waived by our Manager, those Units instead will be deemed transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by us or sold to a person whose ownership of the Units will not violate the aggregate Units ownership limit or the Class B Units ownership limit and will not prevent us from qualifying as a REIT. If this transfer to a trust fails to prevent such a violation or our disqualification as a REIT, then the initial intended transfer or ownership will be null and void from the outset. Anyone who acquires or owns Units in violation of the aggregate Unit ownership limit or the Class B Unit ownership limit, unless such ownership limit or limits have been waived by our Manager,
or the other restrictions on transfer or ownership in our operating agreement, bears the risk of a financial loss when the Units are redeemed or sold, if the NAV per Unit falls between the date of purchase and the date of redemption or sale.
The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.
We may acquire mezzanine loans, for which the IRS has provided a safe harbor but not rules of substantive law. Pursuant to the safe harbor, if a mezzanine loan meets certain requirements, it will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from the mezzanine loan will be treated as qualifying mortgage interest for purposes of the REIT 75% income test. To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans may not be real estate assets and could adversely affect our REIT status.
We make certain other investments through subsidiaries (with rights to receive preferred economic returns) and may invest in "kickers" with respect to certain investments that we determine to hold outside of a TRS so long as these other investments through subsidiaries allow us to maintain our exemption from registration as an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act. The character of such investments for REIT purposes may depend on the assets and operations of the issuer, which we generally will not control. Thus, no assurance can be given that any such issuer will not operate in a manner that causes us to fail an income or asset test requirement. In addition, the proper treatment of certain investments, including investments through subsidiaries (with rights to receive preferred economic returns) and "kickers," for U.S. federal income tax purposes is unclear.
If the IRS were to successfully challenge our characterization of an investment, it could adversely affect our REIT status.
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code substantially limit our ability to hedge our liabilities. Generally, income from a hedging transaction we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets or to offset certain other positions does not constitute "gross income" for purposes of the 75% or 95% gross income tests, provided certain circumstances are satisfied. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for purposes of both of the gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on income or gains resulting from hedges entered into by it or
expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our TRSs will generally not provide any tax benefit, except for being carried forward for use against future taxable income in the TRSs.
Our qualification as a REIT and avoidance of 100% tax may depend on the characterization of loans that we make as debt for U.S. federal income tax purposes.
For U.S. federal income tax purposes, the IRS or a court may treat a loan with sufficient equity characteristics as equity for tax purposes. We may obtain equity participation rights with respect to our loans, and we may make loans with relatively high loan-to-value ratios and/or high yields, which are among the features that can cause a loan to be treated as equity for U.S. federal income tax purposes. Although we intend to structure each of our loans so that the loan should be respected as debt for U.S. federal income tax purposes, it is possible that the IRS or a court could disagree and seek to recharacterize the loan as equity. Recharacterization of one of our loans as equity for U.S. federal income tax purposes generally would require us to include our share of the gross assets and gross income of the borrower in our REIT asset and income tests. Inclusion of such items could jeopardize our REIT status.
Moreover, to the extent our borrowers hold their assets as dealer property or inventory, if we are treated as holding equity in a borrower for U.S. federal income tax purposes, our share of gains from sales by the borrower would be subject to the 100% tax on prohibited transactions (except to the extent earned through a TRS).
The failure of a loan to qualify as an obligation secured by a mortgage on real property within the meaning of the REIT rules could adversely affect our ability to qualify as a REIT.
We may make investments in loans whose qualification as a real estate mortgage loan for REIT purposes is uncertain or which are treated in part as qualifying mortgage loans and in part as unsecured loans. The failure of a loan that we treated as a qualifying mortgage loan to qualify as such for REIT purposes could cause us to fail one or more of the REIT income or asset tests, and thereby cause us to fail to qualify as a REIT unless certain relief provisions also apply.
In general, interest income accrued on a loan that is secured by real property and personal property during a taxable year constitutes qualifying mortgage interest in its entirety for purposes of the 75% gross income test only if the loan is secured by a mortgage on real property with a value (at the time we committed to acquire the loan) at least equal to the highest outstanding principal amount of the loan during such taxable year. In the case of loans to improve or develop real property, the value of the real property collateral when we commit to acquire a loan is deemed to include the reasonably estimated cost of the improvements or developments (other than personal property) which will secure the loan and which will be constructed from the proceeds of the loan. Subject to an exemption discussed in TAX CONSIDERATIONS - Requirements for Qualification as a REIT, below, if the outstanding principal balance of a
mortgage loan during the taxable year exceeds the deemed value of the real property securing the loan at the time we committed to acquire the loan, a portion of the interest accrued during the year will not be qualifying mortgage interest for the 75% income test and a portion of such loan likely will not be a qualifying real estate asset. In that case, we could earn income that is not qualifying for the 75% income test and be treated as holding a non- real estate investment in whole or part, which could result in our failure to qualify as a REIT.
The "taxable mortgage pool" rules may increase the taxes that we or our Members may incur, and may limit the manner in which we effect future securitizations.
Any borrowings incurred by us could result in the creation of taxable mortgage pools for U.S. federal income tax purposes. Except as provided below, we generally would not be adversely affected by the characterization as a taxable mortgage pool so long as we own 100% of the equity interests in a taxable mortgage pool. Certain categories of Members, however, such as non-U.S. Members eligible for treaty or other benefits, Members with net operating losses, and certain U.S. tax-exempt Members that are subject to unrelated business income tax, could be subject to increased taxes on a portion of their dividend income from us that is attributable to the taxable mortgage pool. In addition, to the extent that our Units are owned by tax-exempt "disqualified organizations," such as certain government-related entities and charitable remainder trusts that are not subject to tax on unrelated business income, we may incur a corporate level tax on a portion of our income from the taxable mortgage pool.
In that case, we may reduce the amount of our distributions to any disqualified organization whose Unit ownership gave rise to the tax. Moreover, we would be precluded from selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for U.S. federal income tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.
The ability of our Manager to revoke our REIT qualification without Member approval may cause adverse consequences to our Members.
Our operating agreement provides that our Manager may revoke or otherwise terminate our REIT election, without the approval of our Members, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to Members in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates, as well as state and local taxes, which may have adverse consequences on our total return to our Members.
We may be subject to a 100% penalty tax on any prohibited transactions that we enter into, or may be required to forego certain otherwise beneficial opportunities in order to avoid the penalty tax on prohibited transactions.
If we are found to have held, acquired or developed property primarily for sale to customers in the ordinary course of business, we may be subject to a 100% "prohibited transactions" tax under U.S. federal tax laws on the gain from disposition of the property unless: (i) the disposition qualifies for a safe harbor exception for properties that have been held by us for at least two years (generally for the production of rental income) and that satisfy certain additional requirements; or (ii) the disposition is made through a TRS and, therefore, is subject to corporate U.S. federal income tax.
Under existing law, whether property is held primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances. Our opportunistic business strategy may include investments that risk being characterized as investments in properties held primarily for sale to customers in the ordinary course of a trade or business. We intend to continue to comply with the statutory safe harbor when selling properties (or when our joint ventures sell properties) outside of our TRSs that we believe might reasonably be characterized as held for sale, but compliance with the safe harbor may not always be practical. Moreover, because the determination of whether property is held primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances, the IRS might disagree with our characterization of sales outside the safe harbor.
Thus, we may be subject to the 100% penalty tax on the gain from dispositions of property.
Additionally, we could be subject to this tax if we were to dispose of or securitize loans (or portions thereof) in a manner that was treated as a sale of the loans for U.S. federal income tax purposes. Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in certain sales of loans at the REIT level (and may conduct such sales through a TRS), and may limit the structures we utilize for any securitization transactions, even though the sales or structures might otherwise be beneficial to us.
The potential application of the prohibited transactions tax could cause us to forego potential dispositions of other property or to forego other opportunities that might otherwise be attractive to us, or to hold investments or undertake such dispositions or other opportunities through a TRS, which would generally result in corporate income taxes being incurred.
Possible legislative, regulatory or other actions affecting REITs could adversely affect our Members and us.
The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our Members or us. We cannot predict whether, when, in what forms, or with what effective dates, tax laws, regulations, and rulings may be enacted, promulgated or decided, which could result in an increase in our or our Members' tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income or be subject to additional restrictions.
These increased tax costs could, among other things, adversely affect our financial condition, the results of operations, and/or the amount of cash available for the payment of dividends.
Members are urged to consult with their own tax advisors with respect to the impact that legislation may have on their investment and the status of legislative, regulatory, or administrative developments and proposals and their potential effect on their investment in our Units.
A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a Member's investment in our Class B Units and may trigger taxable gain.
A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes. As a general matter, a portion of our distributions will be treated as a return of capital for U.S. federal income tax purposes if the aggregate amount of our distributions for a year exceeds our 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 Units, 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 Units.
Our Manager and its affiliates have limited experience managing a portfolio of assets owned by a REIT.
REITs are subject to numerous complex requirements in order to maintain their REIT status, including income and asset composition tests. Our Manager and its affiliates have limited experience managing a portfolio in the manner intended to comply with such requirements. To the extent our Manager and its affiliates manage us in a manner that causes us to fail to be a REIT, it could adversely affect the value of our Units.
Property taxes could increase due to property tax rate changes or reassessment, which could impact our cash flow.
Even if we qualify as a REIT for U.S. federal income tax purposes, we generally will be required to pay state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. If the property taxes we pay increase, our financial condition, results of operations, cash flow, per Unit trading price of our Class B Units and our ability to satisfy our principal and interest obligations and to make distributions to our Members could be adversely affected.
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DESCRIPTION OF THE CLASS B UNITS

The rights, restrictions, and preferences that Members holding Class B Units will be entitled to are specified in our operating agreement and summarized as follows:

General
Voting Rights. Holders of our Class B Units have voting rights only with respect to certain matters, primarily relating to amendments to our operating agreement that would adversely change the rights of the Class B Units, except that the two Class B Members owning the largest and second-largest number of Class B Unit each may appoint one member to the Board. Except for a complete loss of investment in the Class B Units, such Members will not be subject to any other potential liability under state statutes or foreign law.

Distributions. Members holding Class B Units will be entitled to distributions from the Company pari passu with all Members pro rata based on the percentage of such Units held divided by all outstanding Units.

Liquidation Rights. Members holding Class B Units will be entitled to liquidation distributions from the Company pari passu with all Members pro rata based on the percentage of such Units held divided by all outstanding Units.

Restrictions on Ownership and Transfer. No more than 50% in value of our outstanding Units may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which a REIT election is made. Therefore, Members may not own an aggregate number of Units (of any Class) in excess of the amount permitted under the Code and REIT Rules. Units owned by affiliated owners will be added together for purposes of determining the Unit ownership limit.

Members may only transfer Units in accordance with our operating agreement.

Ownership restrictions may be applicable to certain entities. See ERISA CONSIDERATIONS, below.

Projected Post-Offering Capitalization
In exchange for 100 Class A Units, Budding Equity made a capital contribution to the Company in the amount of $30,000. Prior to the Offering, the Company did not have any other Members.

Class of Units - Class A
Owner - Budding Equity Management, Inc.
Units Issued - 100
Price per Unit - $300.00
Proceeds - $30,000.00

Class of Units - Class B
Owner - General Public
Units Issued - 5,000,000.00
Price per Unit - $10.00
Proceeds - $50,000,000.00

Totals:

Units - 5,000,100

Proceeds - $50,030,000.00

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DESCRIPTION OF BUSINESS

General
The Company was formed on April 17, 2018 and has no operational history. The Company is managed by our Manager, which also does not have any operational history and only employs three individuals who substantially run all of the day-to-day operations of the Manager and in turn the Company. For more information regarding our management, see DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES, below.
We have not had any material legal proceedings such as: bankruptcy, receivership or similar proceedings; corporate events such as mergers or reorganizations; or any actual or threatened litigation. While the Company plans to eventually own real property outside of the investment context, as of the Offering Date, it has only entered into a lease for a 300 square foot office space.

Business Model
Generally, our core business model will consist of originating commercial loans for real estate and associated projects that have a positive environmental, community, or social impact component. We intend to qualify was a REIT under the Code. We intend to operate our business in a manner that will qualify us for an exemption from registration as an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act. For more detailed information on characteristics associated with REITs, see TAX CONSIDERATIONS - Taxation of REITs in General, below and see also, Investment Company Act Considerations, above.

We may acquire commercial real estate loans by directly originating the loans or by purchasing them from third-party sellers. Although we generally prefer the benefits of direct origination, the current market conditions have created situations where holders of commercial real estate debt may be in distress and are therefore willing to sell at prices that compensate the buyer for the lack of control typically associated with directly structured investments.
Our primary focus is to originate and invest in the following types of commercial real estate loans:
- Senior Mortgage Loans. We may invest in senior mortgage loans that are predominantly three to five year term loans providing capital for the acquisition, refinancing or repositioning of quality real estate and development projects and may be fixed or floating rate loans that immediately provide us with current income, which we refer to as current-pay loans. We expect that our senior mortgage loans will be primarily backed by properties located in the U.S. We expect to invest in senior mortgage loans with low loan-to-value ratios. We may selectively syndicate portions of these loans, including senior or junior participations that will effectively provide permanent financing or optimize returns which may include interest-only portions.

Senior mortgage loans provide for a higher recovery rate and lower defaults than other debt positions due to the lender's favorable control features which at times means control of the entire

capital structure. Because of these attributes, this type of investment receives favorable treatment from third-party rating agencies and financing sources, which should increase the liquidity of these investments.

- Subordinated Mortgage Loans, or B-Notes. We may also invest in structurally subordinated first mortgage loans and junior participations in first mortgage loans or participations in these types of assets, commonly referred to as B-Notes, secured by real estate and development projects. We may create subordinated mortgage loans by creating participations of our directly originated first mortgage loans generally through syndications of senior interests or co-origination with a senior lender or we may buy such assets directly from third-party originators. Further, we expect that the reemergence of the commercial mortgage-backed securities market will allow us to originate first mortgage loans to property owners with near-term liquidity issues and will allow us to contribute the senior AAA rated proceeds of the origination for inclusion in securitizations while retaining the subordinate debt at attractive returns.
Due to the current credit market weakness and resulting dearth of capital available in this part of the capital structure, we believe that the opportunities to both directly originate and to buy subordinated mortgage investments from third-parties on favorable terms will continue to be attractive.

Investors in subordinated mortgage loans are compensated for the increased risk of such assets from a pricing perspective as compared to first mortgage loans but still benefit from a lien on the related property. Investors typically receive principal and interest payments at the same time as senior debt unless a default occurs, in which case these payments are made only after any senior debt is paid in full. Rights of holders of subordinated mortgage loans are usually governed by participation and other agreements that, subject to certain limitations, typically provide the holders with the ability to cure certain defaults and control certain decisions of holders of senior debt secured by the same properties (or otherwise exercise the right to purchase the senior debt), which provides for additional downside protection and higher recoveries.

- Mezzanine Loans. These are loans secured by one or more direct or indirect ownership interests in an entity that directly or indirectly owns commercial real property. We may own mezzanine loans directly or we may hold a participation in a mezzanine loan or a sub-participation in a mezzanine loan. Mezzanine loans may be either short (three to five year) or longer (up to 10 year) terms and may be fixed or floating rate. These loans are predominantly current-pay loans (although there may be a portion of the interest that accrues if cash flow generated by the related property is not sufficient to pay current interest) and may provide for participation in the value or cash flow appreciation of the underlying property, which participation is known as an "equity kicker" as described below. We believe that opportunities to both directly originate and to buy mezzanine loans from third-parties on favorable terms will continue to be attractive.
In the current market, mezzanine loans can be the key piece of capital to bridge the gap between senior debt and borrower equity during a refinance or acquisition. Therefore, we expect to achieve favorable terms - both economic and structural - on the mezzanine loans in which we invest.
Investors in mezzanine loans are compensated for the increased risk of such assets from a pricing perspective and still benefit from the right to foreclose, in many instances more efficiently than senior mortgage debt. Upon a default by the borrower under the mezzanine loan, the mezzanine lender generally can take control on an expedited basis of the property-owning entity, subject to the rights of the holders of debt senior in priority on the property. Rights of holders of mezzanine loans are usually governed by inter-creditor or inter-lender agreements that provide such holders with the right to cure certain defaults and control certain decisions of holders of any senior debt secured by the same properties (or otherwise exercise the right to purchase the senior debt), which provides for additional downside protection and higher recoveries.
Nonetheless, these types of investments involve a higher degree of risk relative to a senior mortgage secured by the underlying real property because the investment may become unsecured as a result of foreclosure by the senior lender if the mezzanine lender is unable to cure senior mortgage defaults. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy the mezzanine loan. If a borrower defaults on our mezzanine loans or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt has been repaid.

Other Possible Investments
Although we expect that most of our investments will be of the types described above, we may make other investments, such as international investments. In fact, we may invest in whatever types of interests in real estate- or debt- related assets that we believe are in our best interests. Although we can purchase any type of interest in real estate- or debt- related assets, our conflicts of interest policy and operating agreement do limit certain types of investments involving our Manager, its officers or any of their affiliates. Furthermore, the types of interests in real estate or debt-related assets we may purchase must comply with the requirements necessary to maintain our exemption from registration as an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act.

Lending Strategy
While our Manager has substantial discretion with respect to the selection of specific loans that we make, we believe that a successful lending approach requires the implementation of strategies that permit favorable originations, effective asset management and timely disposition of those assets. As such, we have developed a disciplined approach that emphasizes thorough market research, stringent underwriting standards and an extensive downside analysis of the risks of each loan. The approach also includes active and aggressive management of each asset acquired.
We believe that active management is critical to creating value. We will develop a well-defined exit strategy for each loan we make. Specifically, we assign an exit or refinance timeline to each asset we acquire prior to its purchase as part of the original business plan for the asset. We then continually reevaluate the exit strategy of each asset in response to the performance of the individual asset, market conditions, and our overall portfolio objectives to determine the optimal time to sell the asset.
To execute our disciplined investment approach we seek to adhere to the following practices:
Local Market Research. We will extensively research the acquisition and/or origination and underwriting of each transaction, utilizing both real time market data and our transactional knowledge.
Underwriting Discipline. We will follow a tightly controlled and managed process to examine all elements of a potential investment, including, with respect to the underlying real property, its location, income- producing capacity, prospects for long-range appreciation, income tax considerations and liquidity. Only those assets meeting our investment criteria will be accepted for inclusion in our portfolio. In an effort to keep an asset in compliance with those standards, we remain involved through the investment life cycle of the asset and consult with the other professionals as necessary.
Risk Management. Risk management is a fundamental principle in our construction of portfolios and in the management of each asset. Operating or performance risks arise at the investment level and often require real estate operating experience to cure. To the extent that these risks are present, we will engage the requisite real estate professionals for guidance as necessary. Additionally, we will review the operating performance and history of borrowers and any joint-venture or development partners against projections and provide the oversight necessary to detect and resolve issues as they arise.

Lending Criteria
Our Manager has the authority to make all the decisions regarding our loans consistent with the lending strategy set forth above and subject to the limitations in our operating agreement. In selecting lending opportunities for us, the underwriting criteria that we consider when evaluating prospective borrowers include:
- macroeconomic conditions that may influence operating performance;
- real estate market factors that may influence real estate valuations, real estate lending and/or economic performance of real estate generally;
- fundamental analysis of the real estate, including tenant rosters, lease terms, zoning, operating costs and the asset's overall competitive position in its market;
- the operating expertise and financial strength of the sponsor or borrower;
- real estate and leasing market conditions affecting the real estate;
- the cash flow in place and projected to be in place over the expected hold period of the real estate;
- the appropriateness of estimated costs and timing associated with capital improvements of the real estate;
- a valuation of the investment, investment basis relative to its value and the ability to liquidate an investment through a sale or refinancing of the real estate;
- review of third-party reports, including appraisals, engineering and environmental reports;
- physical inspections of the real estate and analysis of markets; and
- the overall structure of the investment and rights in the transaction documentation.
If a potential lending opportunity meets the above underwriting criteria, our Manager will then review the proposed transaction structure, taking into account criteria that includes:
- distributions and waterfall criteria;
- governance and control rights;
- buy-sell provisions;
- recourse provisions;
- underlying security features;
- reserve requirements;
- cash flow sweeps;
- call protection;
- recourse provisions;
- the asset's position within the overall capital structure (i.e., our rights in relation to other partners or capital tranches); and
- the potential loan's risk-return profile.
Further, our Manager will review financing sources, if applicable, to ensure that the investment fits within the parameters of financing facilities and to ensure performance of the real estate asset or underlying real estate collateral.
Lastly, our Manager will evaluate all potential opportunities to ensure that we maintain compliance with the requirements necessary to maintain our exemption from registration as an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act.

Operating Policies

Borrowing Policy. We believe that our Manager's ability to obtain both competitive interim and term financings and its relationships with top tier financial institutions should continue to allow our Manager to successfully employ moderate levels of borrowing in order to enhance our returns to Members. Although our investment strategy is not contingent on financing our assets in the capital markets, such an event our Manager work to obtain conservatively structured term financing for our investments, to the extent available, through capital markets and other financing transactions.
Leverage Policy. We may employ leverage in order to provide more funds available for investment. We believe that careful use of conservatively structured leverage helps us to achieve our diversification goals
and potentially enhance the returns on our investments. We expect that once we have fully invested the proceeds of this Offering, our debt financing, on a portfolio-wide basis, will be between 50-85% of the greater of the cost (before deducting depreciation or other noncash reserves) or fair market value of our assets, although it may exceed this level during our offering stage. Our Manager may from time to time modify our leverage policy in its discretion. However, other than during our initial period of operations, it is our policy to not borrow more than 85% of the greater of cost (before deducting depreciation or other noncash reserves) or fair market value of our assets. We cannot exceed the leverage limit of our leverage policy unless any excess in borrowing over such level is approved by our Manager's investment committee.
Credit Risk Management. We may be exposed to various levels of credit and special hazard risk depending on the nature of our assets and the nature and level of credit enhancements supporting our assets. Our Manager will review and monitor credit risk and other risks of loss associated with each investment. In addition, we seek to diversify our portfolio of assets to avoid undue issuer, industry and certain other types of concentrations. Our Manager monitors the overall portfolio risk and levels of provision for loss.
Interest Rate Risk Management. To the extent consistent with maintaining our qualification as a REIT, we follow an interest rate risk management policy intended to mitigate the negative effects of major interest rate changes. We intend to minimize our interest rate risk from borrowings by attempting to "match-fund", which means our Manager seeks to structure the key terms of our borrowings to generally correspond with the expected holding period of our assets and their underlying leases and through hedging activities.
Hedging Activities. We may engage in hedging transactions to protect our investment portfolio and variable rate leverage from interest rate fluctuations and other changes in market conditions. These transactions may include interest rate swaps, the purchase or sale of interest rate collars, caps or floors, options, mortgage derivatives and other hedging instruments. These instruments may be used to hedge as much of the interest rate risk as we determine is in our best interests, given the cost of such hedges, the need to maintain our qualification as a REIT and the need to maintain compliance with the requirements necessary to maintain our exemption from registration as an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act. We may from time to time enter into interest rate swap agreements to offset the potential adverse effects of rising interest rates under certain short-term repurchase agreements.
We may elect to bear a level of interest rate risk that could otherwise be hedged when our Manager believes, based on all relevant facts, that bearing such risk is advisable or economically unavoidable.
Equity Capital Policies. Under our operating agreement, we have authority to issue an unlimited number of additional Units or other securities. In particular, our Manager with approval of the Board is authorized to provide for the issuance of an unlimited amount of one or more classes or series of Units in the Company, including preferred Units, and to fix the number of Units, 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, without Member approval. After your purchase in this Offering, our Manager may elect to: (i) sell additional Units in this or future public offerings, (ii) issue equity interests in private offerings or (iii) issue Units to our Manager, or its successors or assigns, in payment of an outstanding fee obligation. To the extent we issue additional equity interests
after your purchase in this Offering, your percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your Units.

Disposition Policies. As each of our investments reach what we believe to be its optimum value during the expected life of the Company, we will consider disposing of the investment and may do so for the purpose of either distributing the net sale proceeds to our Members or investing the proceeds in other assets that we believe may produce a higher overall future return to our Members. We anticipate that any such dispositions typically would occur during the period within approximately five years from the termination of this Offering (subject to pursuing alternative means of providing liquidity). However, in accordance with our investment objective of achieving maximum capital appreciation, we may sell a particular property or other asset before or after this anticipated holding period if, in the judgment of our Manager selling the asset is in our best interest. The determination of when a particular investment should be sold or otherwise disposed
of is made after consideration of relevant factors, including prevailing and projected economic conditions, whether the value of the property or other investment is anticipated to decline substantially, whether we could apply the proceeds from the sale of the asset to make other investments consistent with our investment objectives, whether disposition of the asset would allow us to increase cash flow, and whether the sale of the asset would constitute a prohibited transaction under the Code or would impact our status as a REIT and the need to maintain compliance with the requirements necessary to maintain our exemption from registration as an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act. Our ability to dispose of property during the first few years following its acquisition is restricted to a substantial extent as a result of our REIT status.
Under applicable provisions of the Code regarding prohibited transactions, a REIT that sells a property, other than foreclosure property, that is deemed to be inventory or property held primarily for sale in the ordinary course of business is deemed a "dealer" with respect to any such property and is subject to a 100% penalty tax on the net income from any such transaction unless the sale qualifies for a statutory safe harbor from application of the 100% tax. As a result, our Manager attempts to structure any disposition of our properties with respect to which our Manager believes we could be viewed as a dealer in a manner to avoid this penalty tax through reliance on the safe harbor available under the Code or through the use of a TRS. See TAX CONSIDERATIONS, below. Alternatively, the risk of incurring the 100% tax may require the Manager to forgo an otherwise attractive sale opportunity.
When we determine to sell a particular property or other investment, we seek to achieve a selling price that maximizes the capital appreciation for investors based on then-current market conditions. We cannot assure you that this objective will be realized. For example, the selling price of a leased office, retail or industrial property is determined in large part by the amount of rent payable by the tenants. With respect to apartment communities, the selling price is determined in large part by the amount of rent payable by the residents. When determining the selling price of other types of real estate assets, such as recreation and leisure properties, we consider such factors as expected future cash flow from the properties as well as industry- specific information. The terms of payment are affected by custom in the area in which the property being sold is located and the then prevailing economic conditions.
Depending upon then prevailing market conditions, and subject to our consideration of alternative liquidity events, it is our intention to consider beginning the process of liquidating our assets and distributing the net proceeds to our Members within approximately five years after the termination of this Offering. However, our Manager may determine to defer such liquidation beyond the fifth anniversary of the termination of this Offering.
Market conditions, our status as a REIT and other factors could cause us to delay the commencement of our liquidation or other liquidity event. Even after we decide to liquidate, we are under no obligation to conclude our liquidation within a set time because the timing of the sale of our assets depends on real estate and financial markets, economic conditions of the areas in which the properties are located and U.S. federal income tax effects on Members that may prevail in the future, and we cannot assure you that we will be able to liquidate our assets. After commencing a liquidation, we would continue in existence until all properties are sold and our other assets are liquidated. In general, the U.S. federal income tax rules applicable to REITs will require us to complete our liquidation within 24 months following our adoption of a plan of liquidation. Compliance with this 24-month requirement could require us to sell assets at unattractive prices,
distribute unsold assets to a "liquidating trust" with potentially unfavorable tax consequences for our Members, or terminate our status as a REIT.

Valuation Policies
Quarterly Valuations - Calculation of NAV
No later than December 31, 2019, we will file with the SEC on a quarterly basis a supplement to our offering circular. The supplement will contain our quarterly determination of the NAV per share applicable for the fiscal quarter. We post that fiscal quarter's NAV on the Budding Equity Management website, www.budeq.com.

On a quarterly basis, we will disclose the principal valuation components of our NAV. In addition, if a material event occurs in between quarterly updates of NAV that would cause our NAV to change by 5.0 percent or more from the previously disclosed NAV, we will disclose the updated price and the reason for the change in a reasonable timeframe.
Process
To calculate the NAV, we will engage an independent valuation firm with expertise in appraising commercial real estate loans, assets, and related liabilities to provide annual/quarterly estimates of value. The valuations will be adjusted for events known to the independent valuation expert that it believes are likely to have a material impact on previously provided estimates of value of the affected investments in commercial real estate assets. Budding Equity Management / the Manager will inform the independent valuation expert if a material event occurs between scheduled annual valuation that we believe may materially affect the value of the investments and underlying assets or liabilities.
Budding Equity Management's / Our sponsor's internal accountants will calculate the NAV per common share using a process that reflects the following:
1. The estimated values of each of our commercial real estate assets, investments, and related liabilities which reflect (i) comparable market data (including comparable transactions, capitalization rates, interest rates, yield on relevant loan rates, and implied net operating income multiples), (ii) default rates, yield of comparable instruments, discount rates, and loss severity rates related to certain liabilities, and (iii) development stage of the underlying assets with consideration to key drivers of value;
2. Updates in the price of liquid assets for which third party market quotes are available;
3. Accruals of any distributions payable; and
4. Estimates of quarterly accruals of our operating revenues, expenses, and fees.
The determination of our NAV may not be indicative of the price that we would receive for our assets at current market conditions. In instances where we determine that an appraisal of the real estate is necessary, including, commercial real estate assets, investments, and related liabilities, or instances where third party market values for comparable properties are either nonexistent or extremely inconsistent, we will engage an appraiser that has expertise in appraising commercial real estate assets, to be our independent valuation expert.
Our goal is to provide a reasonable estimate of the market value of our Units on a quarterly basis. However, the majority of our assets will consist of commercial real estate loans and, as with any commercial real estate valuation protocol, the conclusions reached by our independent valuation expert will be based on a number of judgments, assumptions and opinions about future events that may or may not prove to be correct. The use of different judgments, assumptions or opinions would likely result in different estimates of the value of our commercial real estate assets and investments. As a result, the quarterly NAV may not reflect the precise amount that may be paid for your Units in a market transaction. Any potential disparity in our NAV per share may be in favor of either shareholders who redeem their Units, purchase new Units, or continue to hold their current Units.
Management and Personnel
A large factor in our success will be the management team of our Manager, who brings a diverse set of legal knowledge and experiences setting them apart from others in the highly competitive real estate industry. Depending on our ability to raise capital through this Offering, if we substantially exceed the Minimum Offering Amount, our Manager will strongly consider hiring additional individuals who can help with deal-flow for real estate projects.

ESTIMATED USE OF PROCEEDS

Regardless of the amount raised in this Offering, substantially all of the proceeds will be used to make real estate investments described in more detail under the DESCRIPTION OF BUSINESS section of this Offering Circular, above. The number and diversity of investments will be directly related to the amounts raised in connection with this Offering, such that the more money raised, the greater the number and diversity of the investments that the Company can make in various projects.
This is a blind pool offering meaning that because we have not yet acquired or identified any investments that we may make, we are not able to provide you with any information to assist you in evaluating the merits of any specific investments that we may make, except for investments that may be described in supplements to this offering circular. We will seek to invest substantially all of the offering proceeds available for investment, after the payment of fees and expenses, in commercial real estate loans, commercial real estate and other real estate-related assets. However, because you will be unable to evaluate the economic merit of assets before we invest in them, you will have to rely entirely on the ability of our Manager to select suitable and successful investment opportunities. Furthermore, our Manager will have broad discretion in implementing policies regarding mortgagor creditworthiness and you will not have the opportunity to evaluate potential borrowers.
These factors increase the risk that your investment may not generate returns comparable to our competitors.
The table below sets forth our estimated use of proceeds from this Offering, assuming we sell in this Offering: (i) the Minimum Offering Amount (not including capital contributions received by Budding Equity), the amount we need to start operations and the Minimum Offering Amount; and (ii) the Maximum Offering Amount. Class B Units will be offered at $10.00 per Unit until December 31, 2019. Thereafter, the price per Unit will be equal to the greater of $10.00 or an amount based on our NAV as of the end of the prior semi-annual period (or such other period as determined by the Manager in its sole discretion, but no less frequently than annually).

Minimum
Offering(1) Amount
Maximum
Offering Amount
Gross Offering Proceeds
$2,250,000
$50,000,000
Less:

Organization and Offering Expenses(2)
($250,000)
($250,000)
Net Proceeds from this Offering
$2,000,000
$49,750,000
Net Proceeds from Capital Contributions
$30,000
$30,000
Estimated Amount Available for Investments
$2,030,000
$49,780,000

(1) We will not start operations or draw down on investors' funds and admit investors as Members until we have raised at least $2,250,000 in this Offering (not including the capital contribution for the Class A Units). Until the Minimum Offering Amount is met, investors' funds will be revocable and will remain at the investors' bank/financial institution. If we do not raise $2,250,000 within 12 months, we will cancel this Offering and release all investors from their commitments.
(2) These expenses include the following items and estimated amounts:
a. $30,000 for marketing and a cash reserve for contingencies
b. $8,000 for travel expenses
c. $38,000 for web design and software licensing associated with this Offering
d. $74,000 for staff supporting this Offering
Although we have a strong commitment to our current business plan, the above information is an estimated use of proceeds from this Offering and we expressly reserve the right to change any information in this section at any time.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General
The Company was organized on April 17, 2018 as a Colorado limited liability company formed to originate, acquire, and manage a diversified portfolio of commercial real estate loans and debt instruments primarily in real estate and associated projects that has a positive environmental, community or social impact component such as projects related to: up-cycled shipping containers; tiny homes; affordable housing; and co-working spaces.
We define development projects to include a range of activities from major renovation and lease-up of existing buildings to ground up construction. With demand stoked by demographic trends and supply constrained by economic forces, we believe that that real estate and development projects associated with a positive environmental, community or social impact component present unique market opportunities that may be underserved or neglected by investment capital. While we focus on lending to projects with these characteristics, we may invest in other commercial real estate projects. We plan to diversify our portfolio by investment size, loan duration, and risk-related criteria with the goal of attaining a portfolio of real estate assets that provide attractive and stable returns to our investors. We plan to operate our business in a manner which will enable us to maintain our exemption from registration as
an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act.

Budding Equity Management, Inc. serves as our Manager. As our Manager, it manages our day-to-day operations and our portfolio of commercial real estate loans and other select real estate-related assets. Our Manager also has the authority to make all of the decisions regarding our investments, subject to the limitations in our operating agreement.
We plan to elect to be treated as a REIT under the Code, commencing with our taxable year ended December 31, 2019. If we qualify as a REIT for U.S. federal income tax purposes, we generally are not subject to U.S. federal income tax to the extent we distribute qualifying dividends to our Members. If we fail to qualify as a REIT in any taxable year after electing REIT status, we will be subject to U.S. federal income tax on our taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and cash available for distribution. However, we are organized and plan to operate in a manner that should enable us to qualify for treatment as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2019,
and we intend to continue to operate so as to remain qualified as a REIT for U.S. federal income tax purposes thereafter.

To maintain qualification as a REIT, we are required to make aggregate annual distributions to our Members of at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding net capital gain), and to avoid federal income and excise taxes on retained taxable income and gains we must distribute 100% of such income and gains annually. Our Manager may authorize distributions in excess of those required for us to maintain REIT status and/or avoid such taxes on retained taxable income and gains depending on our financial condition and such other factors as our Manager deems relevant. Provided we have sufficient available cash flow, we intend to continue to authorize and declare distributions based on daily record dates and pay distributions on a quarterly or other periodic basis. We have not established a minimum distribution level.
Competition
Our net income depends, in large part, on our ability to source, acquire, and manage our loans with attractive risk-adjusted yields. We compete with many other entities engaged in similar activities, including individuals, corporations, bank and insurance company investment accounts, other REITs, private real estate funds, and other entities engaged in real estate investment activities, many of which have greater
financial resources and lower costs of capital available to them than we have. In addition, there are numerous REITs with lending objectives similar to ours, and others may be organized in the future, which may increase competition for the investments suitable for us. Competitive variables include market presence and visibility, amount of capital to be invested per project and underwriting standards. To the extent that a competitor is willing to risk larger amounts of capital in a particular transaction or to employ more liberal underwriting standards when evaluating potential investments than we are, our investment volume and profit margins for our investment portfolio could be impacted. Our competitors may also be willing to accept lower returns on their investments and may succeed in lending to borrowers that we targeted for loans. Although we believe that we are well positioned to compete effectively in each facet of our business,
there is enormous competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter increased competition in the future that could limit our ability to conduct our business effectively.
Liquidity and Capital Resources
We are dependent upon the net proceeds from this Offering to conduct our proposed operations. We plan to obtain the capital required to originate our loans and conduct our operations from the proceeds of this Offering and any future offerings we may conduct, as well as from secured or unsecured financings from banks and other lenders and from any undistributed funds from our operations. We currently have not made any loans. We anticipate that proceeds from this Offering will provide sufficient liquidity to meet future funding commitments and costs of operations through December 31, 2019. For information regarding the anticipated use of proceeds from this Offering, see ESTIMATED USE OF PROCEEDS, above.
If we are unable to fully raise the Maximum Offering Amount, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments we make and the value of an investment in us will fluctuate with the performance of the specific assets we acquire. Further, we have certain direct and indirect operating expenses. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.
Results of Operations
The Company was formed on April 17, 2018 and as of the Offering Date, does not have any operating results as of the Offering Date.
Market Trends
As a REIT, among other requirements, a substantial portion of our: (a) income must be derived from investments relating to real property or mortgages on real property; and (b) assets must be in the form of "real estate assets," cash, cash items and U.S. Government securities. Additionally, we have noted that millennials have been the largest group of home buyers since 2013.1 If this trend continues, we believe that alternatives to the less traditional real estate and related projects will flourish, thus, as part of our core business model, we plan to target real estate and related projects that have a positive environmental, community or social impact component such as projects related to: up-cycled shipping containers; tiny homes; affordable housing; and co-working spaces.
Up-cycled Shipping Containers
Shipping containers are versatile and sturdy instruments for transporting large amounts of cargo intermodally between countries. However, they have traditionally had short lifespans and are generally not reusable for shipping since sending back these containers to their origin countries is more costly than

1 See https://www.forbes.com/sites/christinecarter/2017/07/26/how-real-estate-investing-is-spurring- millennial-home-ownership/#3fe0b292d445

building new shipping containers. Not only is this wasteful, but it creates a potential surplus of leftover raw materials. With sustainability on many people's minds these days, shipping containers have had a renaissance of their own with new use cases for these sturdy structures. In many parts of the world, reusing shipping containers as homes and communities has been a source of goodwill and camaraderie, helping communities thrive. The three real world examples below demonstrate the creative uses of up-cycling shipping containers in a real estate-related context. These case studies give us confidence in the viability and potential growth in their use:
- Market 707 in Toronto, Canada. Originally, the Scadding Court neighborhood in downtown Toronto was a quiet and rather desolate place. Entrepreneur Kevin Lee brought the idea of up- cycling shipping containers to this neighborhood in 2010, inviting other entrepreneurs to rent out the shipping container kiosks for less than $25 per day to sell their wares. Eight years later, Market 707 is now a busy market with a diverse mix of 23 businesses. This market hub has created a booming economy in this area of downtown Toronto.

While the investment into this sort of community can range from $20,000 - $30,000 upfront (to clean out the containers and make them safe to use), Lee was able to see a return on investment in his concept in as little as three years. He now uses the money earned from Market 707 to fund recreational and after-school programs for the community.2

- Containertopia in Oakland, California. Rent in the San Francisco Bay Area has skyrocketed past New York City within the last several years; instead of settling to pay a whopping $3,500 per month on a one-bedroom apartment in San Francisco, Luke Iseman and Heather Stewart launched Containertopia in 2015, purchasing a used shipping container for $2,300 and investing an additional
$12,000 in the structure to refurbish it and make it a livable space in Oakland. Containertopia's shipping container homes are built to withstand inclement weather and can be rented for as little as
$600 per month.

While Containertopia's original concept was meant as an outdoor shipping container village, currently Containertopia's shipping container homes are housed within a large warehouse due to residential zoning restrictions. The adjacent lot is used as a vegetable garden for the residents of the community.3

- Mobile Medical Clinics from Clinic In A Can. Wichita, Kansas-based Clinic In A Can up-cycles shipping containers as mobile, relocatable medical clinics. These mobile health units are able to serve communities that are otherwise underserved. Clinic In A Can now has units in over ten countries, including Sierra Leone, Ecuador, and Haiti. Clinic In A Can units are solar powered and able to accommodate various medical uses, including surgery, emergency medicine, and primary care.4
There have been a number of other recent creative and successful uses of up-cycled shipping containers including as classrooms, storefronts, and indoor gardens. Shipping container prices are a huge investment upfront-at least $15,000-in addition to the cost of labor and equipment involved to refurbish these structures. However, shipping containers are well worth the investment to give second lives to shipping containers and grow communities. We believe that given the low cost and the social impact of using up- cycled shipping containers in connection with real estate projects provides a terrific opportunity, which at

2 See http://www.scaddingcourt.org/market_707.
3 Seehttp://www.dailymail.co.uk/news/article-3277963/The-600-month-shipping-container-village-young- professionals-getting-creative-avoid-staggering-rents-San-Francisco.html
4 See http://www.clinicinacan.org/

this point has been largely untapped. We hope to take advantage of this opportunity to provide returns to our Members.
Tiny Homes
The tiny home movement is a fairly recent phenomenon that has been steadily gaining momentum within the last several years due to the public's interest in sustainability and minimalism. More than a dozen cities in the United States have become tiny-home friendly, with over fifty of these tiny home communities located from Florida to Washington state.5
For people who flock to tiny home communities, they crave a sense of belonging. Most of the tiny home communities in North America have regular meetups for its neighbors, potlucks, and urban gardens that the community can enjoy.6 Since tiny homes usually average about 400 square feet, many of the tiny home residents in these enclaves spend more time outside of their homes with their neighbors, tilling their community gardens and enjoying conversations over the firepit.
Tiny home communities may often be new developments in cities, but some areas of the country are seeing tiny homes grow in once-abandoned neighborhoods. For instance, in Orlando, the Lakefront R.V. Park has a second life as a tiny house community.7
Two out of every five tiny home owners is over 50 years old,8 since tiny homes generally require less money and maintenance than a typical home. A tiny home is a great option for older Americans who require live- in caretakers, have grown adult children living with them, or who have special needs relatives.
Tiny house communities have also been a top trend for combating homelessness in the United States, with tiny home communities focused on providing affordable housing for the homeless or low-income residents in cities such as Detroit, Nashville, and Los Angeles.9 These tiny homes are equipped with full amenities and sometimes have the rent-to-own option for its residents. Tiny home communities focused on this demographic are often built by volunteers in the community with supply donations.
On the other end of the spectrum, tiny home communities have also been of interest to luxury-minded consumers, with tiny home resorts popping up in Jackson Hole, Wyoming, and ski towns in Colorado. These tiny homes for sale can often be vacation cabins or second homes for the wealthy, starting at
$100,000,10 with amenities such as private golf courses and beaches.
Building a tiny home is significantly less than a standard home, usually starting at around $23,000.11 However, large developments have hopped onto this movement by building planned communities, such as the community of fifty tiny homes being planned outside of San Diego. Micro houses in planned communities can cost at around $60,000 to buy.
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5 See https://www.trulia.com/blog/what-its-like-to-live-in-a-tiny-house-community/
6 See https://www.msn.com/en-us/money/realestate/tiny-home-communities-youll-want-to-live-in/ss- AAsNiNK
7 See https://www.thespruce.com/livable-tiny-house-communities-3984833
8 See https://www.aarp.org/livable-communities/housing/info-2015/tiny-houses-are-becoming-a-big- deal.html
9 See https://www.curbed.com/maps/tiny-houses-for-the-homeless-villages
10 See https://www.thespruce.com/livable-tiny-house-communities-3984833
11 See https://www.aarp.org/livable-communities/housing/info-2015/tiny-houses-are-becoming-a-big- deal.html

In tiny home communities focused on the homeless and low-income population, non-profit organizations have raised money through private donations,12 local government grants, and even through crowdfunding platforms.
Given the diversity in the demographics who have found the appeal for tiny homes, we see growth in this subsector of the market as imminent.
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12 See https://www.curbed.com/maps/tiny-houses-for-the-homeless-villages

DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES

The Manager of the Company
Pursuant to our operating agreement, our Manager, who controls our day-to-day operations and makes substantially all decisions related to the business of the Company, is elected by a majority vote of the holders of Class A Units and may only be removed for cause upon such a vote. Accordingly, we have included pertinent information about our Manager's executive officers and directors below.
Executive Officers of the Manager

Name
Age
Position
N. Nora Nye
50
President & Chief Executive Officer
James R. Carr
45
Vice President & Chief Operations Officer
Peter Albertsson
57
Chief Financial Officer

N. Nora Nye
Ms. Nye currently serves as President & Chief Executive Officer of our Manager. She is currently a practicing attorney with a successful solo practice in Denver, Colorado, which she formed in 2005 and which specializes in advising clients on matters focusing on employment law, consumer bankruptcy, and consumer debt settlement.
Prior to private practice, Ms. Nye served as a staff attorney first for the American Federation of State County Municipal Employees from 2001 to 2003, and next for the Colorado Federation of Public Employees from 2004 to 2005.
Ms. Nye currently serves as Treasurer andboard member of the Washington Street Community Center .
Ms. Nye received her juris-doctorate degree from the University of Denver College of Law in 1998 and her bachelor of arts in Psychology from the University of Colorado Boulder.
James R. Carr
Mr. Carr serves as Vice-President & Chief Operations Officer of our Manager. He is currently a practicing attorney and has had a varied practice in both New York and Florida, each of which he is licensed to practice, since 2001. Mr. Carr's practice has focused on a wide array of matters including consumer protection, residential real estate bankruptcy, public housing, foreclosure, bankruptcy, social security, and immigration.
Mr. Carr received his juris doctorate degree from the City University of New York School of Law in 2001 and his bachelor of arts in History from Lawrence University.
Peter Albertsson
Peter Albertsson has over 30 years' experience in accounting and finance. Mr. Albertsson has worked in manufacturing, real estate development, direct marketing, and service business. He has a strong technical background in IT, accounting and finance. He currently is based in Miami, FL.
Directors of the Manager

Name
Age
Position
N. Nora Nye
50
Director
James R. Carr
45
Director

Peter Albertsson
57
Director
Dara Ceccarelli
53
Director
LaTonya McPherson
50
Director

N. Nora Nye
See biographical information above under Executive Officers of the Manager.
James R. Carr
See biographical information above under Executive Officers of the Manager.
Peter Albertsson
See biographical information above under Executive Officers of the Manager.
Dara Ceccarelli
Dara Ceccarelli has 25+ years of administrative, marketing and sales assistant experience for all different industries, including real estate development, financial services, advertising and career placement. Ms. Ceccarelli currently resides in Milwaukee, Wisconsin.
LaTonya McPherson
LaTonya McPherson has 10+ years in executive administration, corporate services support, office management and coordination. Additionally, she has served as a human resources generalist managing a variety of tasks including onboarding, employee relations, training and development. Ms. McPherson lives in Denver, Colorado.
Note, none of the above executive officers or directors have any family relationships (except for Ms. Nye and Ms. Ceccarelli are siblings) nor do any of them have any current material legal proceedings against them.
Significant Security Ownership of our Manager
The following table sets forth the beneficial ownership of our common Units as of the date of this Offering Circular for each person or group that holds more than 5% of our common Units, for each director and executive officer of our sponsor and for the directors and executive officers of our sponsor as a group. To our knowledge, each person that beneficially owns our common Units has sole voting and disposition power with regard to such Units.

Unless otherwise indicated below, each person or entity has an address in care of our principal executive offices at 1660 S. Albion St., Suite 321, Denver, CO 80222.

Name of Beneficial Owner(1)
Number of Units Beneficially Owned
Percent of All Units
Budding Equity Management, Inc.
100 (Class A Units)
100% (Class A Units)
N. Nora Nye, Esq.
0
0
James R. Carr, Esq.
0
0
All directors and executive officers of our manager as a group (6 persons)
0
0

(1) Under SEC rules, a person is deemed to be a "beneficial owner" of a security if that person has or Units "voting power," which includes the power to dispose of or to direct the disposition of such security. A person also is deemed to be a beneficial owner of any securities which that person has a right to acquire within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he or she has no economic or pecuniary interest.

(2) As of the date of this Offering Circular, Budding Equity Management, Inc. owns all our issued and outstanding Class A Units.

(3) All voting and investment decisions with respect to our Class A Units that are held by Budding Equity Management, Inc. are controlled by the board of directors of Budding Equity Management, Inc. The board is comprised of five (5) members, N. Nora Nye, James R. Carr, Peter Albertsson, Dara Ceccarelli and LaTonya McPherson, all of whom are elected by all the shareholders voting as a single class. The Board of Directors of Budding Equity Management, Inc. are the natural persons with dispositive control of the Class A Units held by Budding Equity Management, Inc. See Directors of the Manager, above.

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MANAGEMENT, EXECUTIVE COMPENSATION, AND RELATED-PARTY TRANSACTIONS

Management Fees
The Manager will not receive any fees: (i) based on the amount of assets under management of the Company, commonly referred to as "management fees"; (ii) compensation tied to transactions undertaken by the Company; or (iii) otherwise not listed in this section.
Our Manager and its affiliates will receive fees and expense reimbursements for services relating to this offering and the investment and management of our assets. The items of compensation are summarized in the following table. Neither our Manager nor its affiliates will receive any selling commissions or dealer manager fees in connection with the offer and sale of our common Units.

Form of Compensation and Recipient
Determination of Amount
Estimated Amount

Organization and Offering Stage

Asset Management Fee - Manager

On a quarterly basis, the Company shall pay the Manager an "Asset Management Fee," which is based on the value of "Assets Under Management" placed under management during the preceding quarter. The Asset Management Fee will be equal to the annualized percentage rates set forth below. Until December 31, 2019, the value of Assets Under Management will be equal to our net offering proceeds as of the last day of each quarter. Beginning January 1, 2020, the value of Assets Under Management will be based on our Net Asset Value ("NAV") as of the final day of the preceding quarter. Actual amounts are dependent upon the offering proceeds we raise (and any leverage we employ) and the results of our operations; we cannot determine these amounts at the present time. However, for purposes of example only, if the minimum offering amount of $2,250,000 is raised in the quarter ending on December 31, 2019,
then the resulting management fee would be equal to 5% of the $2,250,000 raised during the final quarter of 2019 for a total fee of $112,500. The amount of the Asset Management Fee decreases as the value of Assets Under Management increases. See chart below.
Value of Assets Under Management and Asset Management Fee:
$0-10M 5%
$10M-$20M 4%
$20M-$30M 3%
$30M-$40M 2%
$40M-$50M 1%

Salary of Manager
Neither the Company nor our Manager have paid any cash or other compensation to any of its personnel, including our Manager's executive officers. As a salary for the Managers' duties to the Company, please see above table.

Other Conflicts of Interest or Related-Party Transactions
Indemnification Obligations of Company
Under the terms of our operating agreement, generally, we will, to the fullest extent permitted by law, indemnify, hold harmless and release our Manager for, from and against all claims, demands, liabilities, costs, expenses, damages, losses, suits, proceedings and actions, whether judicial, administrative, investigative or otherwise, of whatever nature, known or unknown, liquidated or unliquidated ("Claims"), that may accrue to or be incurred by the Manager, or in which the Manager may become involved, as a party or otherwise, or with which the Manager may be threatened, relating to or arising out of the business and affairs of, or activities undertaken in connection with, the Company, except: (a) to the extent that it is ultimately determined that such Claims arose from a material violation of our operating agreement by acts of gross negligence, embezzlement, fraud, or willful misconduct, after notice and an opportunity to cure and/or contest same as provided elsewhere herein by the Manager;
or (b) as long as the we qualify as a REIT, Claims arising from or out of an alleged violation of federal or state securities laws by the Manager unless: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (ii) such Claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims and finds that indemnification of the settlement and related costs should be made and the court considering the request has been advised of the position of the SEC and the published position of any state securities regulatory authority in which securities of the Company were offered and sold as to indemnification for securities law violations.

We must advance amounts to the Manager for legal and other expenses and costs incurred as a result of any legal action for which indemnification is being sought only in accordance with the Company's insurance policies and, as long as the Company qualifies as a REIT, only if all of the following conditions are satisfied:
(i) the legal action relates to acts or omissions with respect to the performance of duties or services by the Manager for or on behalf of the Company; (ii) the legal action is initiated by a third-party who is not a Member or the legal action is initiated by a Member acting in his or her capacity as such and a court of competent jurisdiction specifically approves advancement; and (iii) the Manager receiving these advances undertakes in writing to repay the advanced funds to the Company, together with interest at the applicable legal rate thereon, if the Manager is found not to be entitled to indemnification.

Under our operating agreement, the Manager has been empowered to purchase insurance policies and coverage as the Manager determines to be necessary or desirable to protect the Company and/or its assets, which may include directors and officers insurance to satisfy the above indemnity obligations.

TAX CONSIDERATIONS

The following is a summary of certain tax considerations relating to our qualification and taxation as a REIT and the acquisition, holding, and disposition of our Class B Units. This summary is based upon the Code, the regulations promulgated by the U.S. Treasury Department, 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 considerations described below. No advance ruling has been or will be sought from the IRS regarding any matter discussed in this summary.
The summary is also based upon the assumption that the operation of the Company, and of any subsidiaries and other lower-tier affiliated entities, will be in accordance with its applicable organizational documents and as described in this Offering Circular. This summary is for general information only, and does not purport to discuss all aspects of taxation that may be important to a particular Member in light of its investment or tax circumstances or to Members subject to special tax rules, such as:
- U.S. expatriates;
- persons who mark-to-market our Class B Units;
- subchapter S corporations;
- U.S. shareholders who are U.S. persons (as defined below) whose functional currency is not the
U.S. dollar;
- financial institutions;
- insurance companies;
- broker-dealers;
- REITs;
- regulated investment companies;
- trusts and estates;
- holders who receive our Class B Units through the exercise of employee stock options or otherwise as compensation;
- persons holding our Class B Units as part of a "straddle," "hedge," "short sale," "conversion transaction," "synthetic security" or other integrated investment;
- persons subject to the alternative minimum tax provisions of the Code;
- persons holding our Class B Units through a partnership or similar pass-through entity;
- persons holding a 10% or more (by vote or value) beneficial interest in the Company;
- tax exempt organizations, except to the extent discussed below in Taxation of Tax-Exempt U.S. Shareholders; and
- non-U.S. persons (as defined below), except to the extent discussed below in Taxation of Non-
U.S. Shareholders.
This summary assumes that Members will hold our Class B Units as capital assets within the meaning of Section 1221 of the Code, which generally means as property held for investment.
IMPORTANT NOTE: For the purposes of this TAX CONSIDERATIONS section, any reference to the term "shareholder" should be read to include the defined term Member, used elsewhere in this Offering Circular; and for the purposes of this summary, a U.S. person is a beneficial owner of our Class B Units who for U.S. federal income tax purposes is:
- a citizen or resident of the United States;
- 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 United States 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
- 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.
For the purposes of this summary, a U.S. shareholder is a beneficial owner of our Class B Units who is a
U.S. person. A tax-exempt organization is a U.S. person who is exempt from U.S. federal income tax under Section 401(a) or 501(a) of the Code. For the purposes of this summary, a non-U.S. person is a beneficial owner of our Class B Units who is a nonresident alien individual or a non-U.S. corporation for U.S. federal income tax purposes, and a non-U.S. shareholder is a beneficial owner of our Class B Units who is a non-
U.S. person. The term corporation includes any entity treated as a corporation for U.S. federal income tax purposes, and the term partnership includes any entity treated as a partnership for U.S. federal income tax purposes.
The information in this section is based on the current Code, current, temporary and proposed Treasury Regulations, the legislative history of the Code, current administrative interpretations and practices of the IRS, including its practices and policies as endorsed in private letter rulings, which are not binding on the IRS except in the case of the taxpayer to whom a private letter ruling is addressed, and existing court decisions. Future legislation, regulations, administrative interpretations and court decisions could change current law or adversely affect existing interpretations of current law, possibly with retroactive effect. Any change could apply retroactively. We have not obtained any rulings from the IRS concerning the tax treatment of the matters discussed below. Thus, it is possible that the IRS could challenge the statements in this discussion that do not bind the IRS or the courts and that a court could agree with the IRS.
THE U.S. FEDERAL INCOME TAX TREATMENT OF HOLDERS OF OUR CLASS B UNITS 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 OUR CLASS B UNITS TO ANY PARTICULAR MEMBER WILL DEPEND ON THE MEMBER'S PARTICULAR TAX CIRCUMSTANCES. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES TO YOU, IN LIGHT OF YOUR PARTICULAR INVESTMENT OR TAX CIRCUMSTANCES, OF ACQUIRING, HOLDING, AND DISPOSING OF OUR CLASS B UNITS.

Taxation of the Company
We elected to be taxed as a REIT under the Code, commencing with the taxable year ended December 31, 2019. A REIT generally is not subject to U.S. federal income tax on the income that it distributes to its shareholders if it meets the applicable REIT distribution and other requirements for qualification. We believe that we have been organized, owned and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our proposed ownership, organization and method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Code. However, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances or applicable law, no assurance can be given by us that we will so qualify for any particular year or that the IRS will not
challenge our conclusions with respect to our satisfaction of the REIT requirements.
Qualification and taxation as a REIT depend on our ability to meet, on a continuing basis, through actual results of operations, distribution levels, diversity of share ownership and various qualification requirements imposed upon REITs by the Code, discussed below. In addition, our ability to qualify as a
REIT may depend in part upon the operating results, organizational structure and entity classification for
U.S. federal income tax purposes of certain entities in which we invest, which we may not control. Our ability to qualify as a REIT also requires that we satisfy certain asset and income tests, some of which depend upon the fair market values of assets directly or indirectly owned by us or which serve as security for loans made by us. Such values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy the requirements for qualification and taxation as a REIT.

Taxation of REITs in General
Provided that we continue to qualify as a REIT, we will generally be entitled to a deduction for dividends that we pay and, therefore, will not be subject to U.S. federal corporate income tax on our net taxable income that is currently distributed to our shareholders. This treatment substantially eliminates the "double taxation" at the corporate and shareholder levels that results generally from investment in a corporation. Rather, income generated by a REIT is generally taxed only at the shareholder level, upon a distribution of dividends by the REIT.
Even if we continue to qualify for taxation as a REIT, we will be subject to U.S. federal income taxation as follows:
- We will be taxed at regular U.S. federal corporate rates on any undistributed income, including undistributed cashless income such as accrued but unpaid interest.
- We may be subject to the "alternative minimum tax" on our items of tax preference, if any.
- If we have 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, such income will be subject to a 100% tax. See Prohibited Transactions and Foreclosure Property, below.
- If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or from certain leasehold terminations as "foreclosure property," we 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) treating any income from such property as nonqualifying for purposes of the REIT gross income tests discussed below, provided however, that the gain from the sale of the property or net income from the operation of the property that would not otherwise qualify for the 75% income test but for the foreclosure property election will be subject to U.S. federal corporate income tax at the highest applicable rate (currently 21%).
- If we fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because other requirements are met, we will be subject to a 100% tax on an amount equal to (1) the greater of (A) the amount by which we fail the 75% gross income test or (B) the amount by which we fail the 95% gross income test, as the case may be, multiplied by (2) a fraction intended to reflect profitability.
- If we fail to satisfy any of the REIT asset tests, as described below, other than a failure of the 5% or 10% REIT asset tests that do not exceed a statutory de minimis amount as described more fully below, but our failure is due to reasonable cause and not due to willful neglect and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required to pay a tax equal to the greater of $50,000 or the highest corporate tax rate (currently 21%) of the net income generated by the nonqualifying assets during the period in which we failed to satisfy the asset tests.
- If we fail to satisfy any provision of the Code that would result in our failure to qualify as a REIT (other than a gross income or asset test requirement) and the violation is due to reasonable cause and not due to willful neglect, we may retain our REIT qualification but we will be required to pay a penalty of $50,000 for each such failure.
- If we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95% of our REIT capital gain net income for such year and (3) any undistributed taxable income from prior periods (or the required distribution), we 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 income tax is paid at the corporate level.
- We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet recordkeeping requirements intended to monitor our compliance with rules relating to the composition of our shareholders, as described below in Requirements for Qualification as a REIT.
- A 100% excise tax may be imposed on some items of income and expense that are directly or constructively paid between us and any TRS and between any other TRSs we may own if and to the extent that the IRS successfully adjusts the reported amounts of these items because the reported amounts were not consistent with arm's length amounts.
- If we acquire appreciated assets from a corporation that is not a REIT in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the non-REIT corporation, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during the five-year period following their acquisition from the non- REIT corporation.
- We may elect to retain and pay U.S. federal income tax on our net long-term capital gain. In that case, a shareholder would include its proportionate share of our undistributed long-term capital gain in its income (to the extent we make a timely designation of such gain to the shareholder), would be deemed to have paid the tax that it paid on such gain, and would be allowed a credit for its proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the shareholder's basis in our Class B Units.
- We may own subsidiaries that will elect to be treated as TRSs and we may hold investments through such TRSs, the earnings of which will be subject to U.S. federal corporate income tax.
- We will generally be subject to tax on the portion of any excess inclusion income derived from an investment in residual interests in real estate mortgage investment conduits ("REMICs") or "taxable mortgage pools" to the extent our Units are held in record name by specified tax exempt organizations not subject to tax on UBTI or non-U.S. sovereign investors.
In addition, we may be subject to a variety of taxes other than U.S. federal income tax, including state, local, and non-U.S. income, franchise property, and other taxes.

Requirements for Qualification as a REIT
The 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 Units or by transferable certificates of beneficial interest;
(3) that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT under Sections 856 through 860 of the Code;
(4) that is neither a financial institution nor an insurance company subject to specific provisions of the Code;
(5) commencing with its second REIT taxable year, 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, commencing with its second REIT 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 Code to include specified entities (the "5/50 Test");
(7) that makes an election to be 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 at the close of any taxable year;
(9) that uses the calendar year for U.S. federal income tax purposes and complies with the record keeping requirements of the Code and Treasury Regulations promulgated 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.

For purposes of condition (1), "directors" generally means persons treated as "directors" for purposes of the Investment Company Act, which we believe includes our Manager. Our Units are generally freely transferable, and we believe that the restrictions on ownership and transfers of our Units do not prevent us from satisfying condition (2). Although we are organized as a limited liability company, for U.S. federal income tax purposes we elected to be classified as a corporation in compliance with condition (3). We believe that the Class B Units sold in this Offering will allow us to timely comply with conditions (5) and (6). However, depending on the number of Members who subscribe for Class B Units in this Offering and the timing of subscriptions, we may need to conduct an additional offering of Units to timely comply with (5). For purposes of determining stock ownership under condition (6) above, a supplemental unemployment compensation benefits plan,
a private foundation and a portion of a trust permanently set aside or used exclusively for charitable purposes generally are each considered an individual. A trust that is a qualified trust under Code Section 401(a) generally is not considered an individual, and beneficiaries of a qualified trust are treated as holding Units of a REIT in proportion to their actuarial interests in the trust for purposes of condition (6) above. To monitor compliance with the Unit ownership requirements, we are generally required to maintain records regarding the actual ownership of our Units. Provided we comply with these record keeping requirements and that we would not otherwise have reason to believe we fail the 5/50 Test after exercising reasonable diligence, we will be deemed to have satisfied the 5/50 Test. In addition, our operating agreement provides restrictions regarding the ownership and transfer of our Units, which are intended to assist us in satisfying the Unit ownership requirements described above.
For purposes of condition (9) above, we will have used and will continue to use a calendar year for U.S. federal income tax purposes, and we intend to continue to comply with the applicable recordkeeping requirements.
Effect of Subsidiary Entities
Ownership of Partnership Interests
In the case of a REIT that is a partner in an entity that is treated as a partnership for U.S. federal income tax purposes, 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 Code. For purposes of determining the amount of the REIT's taxable income that must be distributed, or is subject to tax, the REIT's share of partnership income is determined under the partnership tax provisions of the Code and
will reflect any special allocations of income or loss that are not in proportion to capital interests. Income earned through partnerships retains its character for U.S. federal income tax purposes when allocated among its
partners. We intend to obtain covenants from any partnerships in which we invest but do not control to operate in compliance with the REIT requirements, but we may not control any particular partnership into which we invest, and thus no assurance can be given that any such partnerships will not operate in a manner that causes us to fail an income or asset test requirement. In general, partnerships are not subject to U.S. federal income tax. However, under recently enacted rules that take effect for taxable years beginning after December 31, 2019, a partnership in which we invest may be required to pay the hypothetical increase in partner-level taxes resulting from an adjustment of partnership tax items on audit.

Disregarded Subsidiaries
If a REIT owns a corporate subsidiary that is a "qualified REIT subsidiary," 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 itself, including for purposes of the gross income and asset tests applicable to REITs, as summarized below. A qualified REIT subsidiary is any corporation, other than a TRS, that is wholly-owned by a REIT, by other disregarded subsidiaries of a REIT or by a combination of the two. Single member limited liability companies or other domestic unincorporated entities 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 unless they elect TRS status. Disregarded subsidiaries,
along with partnerships in which we hold an equity interest, are sometimes referred to herein as "pass-through subsidiaries."
In the event that a disregarded subsidiary cease to be wholly-owned by us (for example, if any equity interest in the subsidiary is acquired by a person other than us or another disregarded subsidiary of ours), the subsidiary's separate existence would no longer be disregarded for U.S. federal income tax purposes. Instead, it would have multiple owners and would be treated as either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our ability to 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 Asset Tests and Gross Income Tests, below.

Taxable REIT Subsidiaries
A REIT, in general, 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 U.S. federal income tax on its taxable income, which may reduce the cash flow generated by us and our subsidiaries in the aggregate and our ability to make distributions to our shareholders.
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 generally recognizes dividend income when it receives distributions of earnings from the subsidiary. This treatment can affect the gross income and asset test calculations that apply to the REIT, as described below. Because a parent REIT does not include the assets and income of its TRSs in determining the parent REIT's compliance with the REIT requirements, such entities may be used by the parent REIT to undertake indirectly activities that the REIT rules might otherwise preclude the parent REIT from doing directly or through passthrough subsidiaries. If dividends are paid to us by one or more domestic TRSs we may own, then a portion of the dividends that we distribute to shareholders 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 Taxable U.S. Shareholders and Annual Distribution Requirements.

We may hold certain investments through one or more TRSs, including property that we believe would be treated as held primarily for sale to customers in the ordinary course of our trade or business for U.S. federal income tax purposes and that cannot be sold within a statutory safe harbor to avoid the 100% tax on "prohibited transactions" that otherwise would apply to gain from the sale of such property. Generally, a TRS can perform impermissible tenant services without causing us to receive impermissible tenant services income from those services under the REIT income tests. A TRS may also engage in other activities that, if conducted by us other than through a TRS, could result in the receipt of nonqualified income or the ownership of nonqualified assets. However, several provisions regarding the arrangements between a REIT and its TRSs ensure that a TRS will be subject to an appropriate level of U.S. federal income taxation. For example,
a TRS is limited in its ability to deduct interest payments made to us in excess of a certain amount. In addition, we will be obligated to pay a 100% penalty tax on some payments that we receive or certain other amounts or on certain expenses deducted by the TRS if the economic arrangements among us, our tenants and/or the TRS are not comparable to similar arrangements among unrelated parties. While we intend to manage the size of our TRSs and dividends from our TRSs in a manner that permits us to qualify as a REIT, it is possible that the equity investments appreciate to the point where our TRSs exceed the thresholds mandated by the REIT rules. In such cases, we could lose our REIT status if we are unable to satisfy certain exceptions for failing to satisfy the REIT income and asset tests. In any event, any earnings attributable to equity interests held in TRSs or origination activity conducted by TRSs will be subject to
U.S. federal corporate income tax, and the amount of such taxes could be substantial.
To the extent we hold an interest in a non-U.S. TRS, we may be required to include our portion of its earnings in our income irrespective of whether or not such non-U.S. TRS has made any distributions. Any such income will not be qualifying income for purposes of the 75% gross income test and may not be qualifying income for purposes of the 95% gross income test.

Taxable Mortgage Pools
We may enter into transactions that could result in us being considered to own interests in one or more taxable mortgage pools. An entity, or a portion of an entity, is classified as a taxable mortgage pool under the Code if:
- substantially all of its assets consist of debt obligations or interests in debt obligations;
- more than 50% of those debt obligations are real estate mortgage loans or interests in real estate mortgage loans as of specified testing dates;
- the entity has issued debt obligations that have two or more maturities; and
- the payments required to be made by the entity on its debt obligations "bear a relationship" to the payments to be received by the entity on the debt obligations that it holds as assets.
A taxable mortgage pool generally is treated as a corporation for U.S. federal income tax purposes. However, special rules apply to a REIT, a portion of a REIT, or a qualified REIT subsidiary that is a taxable mortgage pool. If a REIT owns, directly or indirectly through one or more qualified REIT subsidiaries or other entities that are disregarded as a separate entity for U.S. federal income tax purposes, 100% of the equity interests in the taxable mortgage pool, the taxable mortgage pool will be a qualified REIT subsidiary and, therefore, ignored as an entity separate from the REIT for U.S. federal income tax purposes and would not generally affect the tax qualification of the REIT. Rather, the consequences of the taxable mortgage pool classification would generally, except as described below, be limited to the REIT's shareholders. See Excess Inclusion Income.

Certain Equity Investments and Kickers
We expect to hold certain equity investments (with rights to receive preferred economic returns) in entities treated as partnerships for U.S. federal income tax purposes and may hold "kickers" in entities treated as partnerships for U.S. federal income tax purposes (and may hold such a kicker outside of a TRS). When we
hold investments treated as equity in partnerships, as discussed above, for purposes of the REIT income and asset tests we are required to include our proportionate share of the assets and income of the partnership, based on our share of partnership capital, as if we owned such share of the issuer's assets directly. As a result, any nonqualifying income generated, or nonqualifying assets held, by the partnerships in which we hold such equity could jeopardize our compliance with the REIT income and asset tests. We intend to obtain covenants from our equity issuers (including a kicker issuer if the kicker is held outside of a TRS) to operate in compliance with the REIT requirements, but we generally will not control such issuers, and thus no assurance can be given that any such issuers will not operate in a manner that causes us to fail an income or asset test requirement. Moreover, at least one IRS internal memorandum would treat the
preferred return on certain equity investments as interest income for purposes of the REIT income tests, which treatment would cause such amounts to be nonqualifying income for purposes of the 75% gross income test. Although we do not believe that interest income treatment is appropriate, and that analysis was not followed in subsequent IRS private letter rulings, the IRS could reassert that position.
In some, or many, cases, the proper characterization of certain equity investments (with rights to receive preferred economic returns) as unsecured indebtedness or as equity for U.S. federal income tax purposes may be unclear. Characterization of such an equity investment as unsecured debt for U.S. federal income tax purposes would subject the investment to the various asset test limitations on investments in unsecured debt, and our preferred return would be treated as nonqualifying income for purposes of the 75% gross income test (but we would not have to include our share of the underlying assets and income of the issuer in our tests). Thus, if the IRS successfully challenged our characterization of an investment as equity for
U.S. federal income tax purposes, or successfully treated a preferred return as interest income, we could fail an income or asset test. In that event, we could face substantial penalty taxes to cure the resulting violations, as described in Failure to Qualify, below, or, if we were deemed to have acted unreasonably in making the investment, lose our REIT status.

Gross Income Tests
In order to maintain our qualification as a REIT, we must annually satisfy two gross income tests. First, at least 75% of our gross income for each taxable year, excluding gross income from sales of inventory or dealer property in "prohibited transactions" 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 gains from the disposition of other Units of REITs, interest income derived from mortgage loans secured by real property, and gains from the sale of real estate assets (other than certain debt instruments of publicly offered REITs), as well as income from certain kinds of temporary investments. Interest and gain on debt instruments issued by publicly offered REITs that are not secured by mortgages on real property or interests in real property are not qualifying income for purposes of the 75% income test.
Second, at least 95% of our 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% income test, gain from the sale or disposition of a debt instrument of publicly offered REITs that are not secured by mortgages on real property or interests in real property is nonqualifying income.

Rental Income
Rents we receive will qualify as rents from real property in satisfying the gross income requirements for a REIT described above only if several conditions are met. First, the amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term "rents from real property" solely by reason of being based on a fixed percentage or percentages of receipts or sales. Second, rents received from a "related party tenant" will not qualify as rents from real property in satisfying the gross income tests unless the tenant is a TRS and either
(i) 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, or (ii) the property leased is a "qualified lodging facility," as defined in Section 856(d)(9)(D) of the Code, or a "qualified health care property," as defined in Section 856(e)(6)(D)(i) of the Code, and certain other conditions are satisfied. A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively owns 10% or more of the tenant. Third, if rent attributable to personal property, leased in connection with a lease of real property, is greater than 15% of the total rent received under the lease, then the portion of rent attributable to the personal property will not qualify as rents from real property.
Generally, for rents to qualify as rents from real property for the purpose of satisfying the gross income tests, we may provide directly only an insignificant amount of services, unless those services are "usually or customarily rendered" in connection with the rental of real property and not otherwise considered "rendered to the occupant." Accordingly, we may not provide "impermissible services" to tenants (except through an independent contractor from whom we derive no revenue and that meets other requirements or through a TRS) without giving rise to "impermissible tenant service income." Impermissible tenant service income is deemed to be at least 150% of the direct cost to us of providing the service. If the impermissible tenant service income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property. If the total amount of impermissible tenant service income from a
property does not exceed 1% of our total income from the property, the services will not disqualify any other income from the property that qualifies as rents from real property, but the impermissible tenant service income will not qualify as rents from real property.
We do not anticipate in the future deriving rents based in whole or in part on the income or profits of any person, rents from related party tenants, and/or rents attributable to personal property leased in connection with real property that exceeds 15% of the total rents from that property, in sufficient amounts to jeopardize our status as REIT. We also have not in the past and do not anticipate in the future deriving impermissible tenant service income that exceeds 1% of our total income from any property if the treatment of the rents from such property as nonqualifying rents would jeopardize our status as a REIT.

Interest Income
Except as provided below, interest income constitutes qualifying mortgage interest for purposes of the 75% gross income test to the extent that the obligation is secured by a mortgage on real property. If we receive interest income with respect to a mortgage loan that is secured by both real property and other property and the highest outstanding balance of the loan during a taxable year exceeds the fair market value of the real property on the date of our commitment to make or purchase the mortgage loan, the interest income will be apportioned between the real property and the other property, and our income from the arrangement will qualify for purposes of the 75% gross income test only to the extent that the interest is allocable to the real property. With respect to loans to develop or improve real property, we are permitted to include as real property collateral for the foregoing apportionment purposes the sum of the fair market value of the
undeveloped land plus the reasonably estimated cost of the improvements or developments (other than personal property) which will secure the loan and which are to be constructed from the proceeds of the loan. The failure of a loan to qualify as an obligation secured by a mortgage on real property within the meaning of the REIT rules could adversely affect our ability to qualify as a REIT. Notwithstanding the foregoing, a mortgage loan secured by both real property and personal property shall be treated as a wholly qualifying real estate asset (as discussed below under Asset Tests) and all interest shall be qualifying income for the purposes of the 75% income test if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property, even if the real property collateral value is less than the outstanding principal balance of the loan.
In the event a mortgage loan is modified, with the exception of loans secured by both real property and personal property in which the fair market value of the personal property does not exceed 15% of the total
fair market value of all such property, we may be required to retest the loan under the apportionment rules discussed above by comparing the outstanding balance of the modified loan to the fair market value of the collateral real property at the time of modification.
Even if a loan is not secured by real property or is under-secured, the income that it generates may nonetheless qualify for purposes of the 95% gross income test.
To the extent that the terms of a loan provide for contingent interest that is based on the cash proceeds realized upon the sale of the property securing the loan (or a shared appreciation provision), income attributable to the participation feature will be treated as gain from sale of the underlying property for purposes of the income tests, and generally will be qualifying income for purposes of both the 75% and 95% gross income tests, provided that the property is not inventory or dealer property in the hands of the borrower or us. To the extent that we derive interest income from a loan where all or a portion of the amount of interest payable is contingent, such income generally will qualify for purposes of the gross income tests only if it is based upon the gross receipts or sales and not the net income or profits of any person. This limitation does not apply, however, to a mortgage loan where the borrower derives substantially
all of its income from the property from the leasing of substantially all of its interest in the property to tenants, to the extent that the rental income derived by the borrower would qualify as rents from real property had it been earned directly by us.
Any amount includible in our gross income with respect to a regular or residual interest in a REMIC generally is treated as interest on an obligation secured by a mortgage on real property. If, however, less than 95% of the assets of a REMIC consists of real estate assets (determined as if we held such assets), we will be treated as receiving directly our proportionate share of the income of the REMIC for purposes of determining the amount that is treated as interest on an obligation secured by a mortgage on real property.
Among the assets we may hold are certain mezzanine loans secured by equity interests in a pass-through entity that directly or indirectly owns real property, rather than a direct mortgage on the real property. The IRS issued Revenue Procedure 200365, which provides a safe harbor pursuant to which a mezzanine loan, if it meets each of the requirements contained in the Revenue Procedure, will be treated by the IRS as a real estate asset for purposes of the REIT asset tests, and interest derived from it will be treated as qualifying mortgage interest for purposes of the 75% gross income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. Structuring a mezzanine loan to meet the requirements of the safe harbor may not always be practical, and the mezzanine loans that we acquire may not meet all of the requirements for reliance on this safe harbor.
Hence, there can be no assurance that the IRS will not challenge the qualification of such assets as real estate assets or the interest generated by these loans as qualifying income under the 75% gross income test. To the extent we make corporate mezzanine loans or acquire other commercial real estate corporate debt, such loans will not qualify as real estate assets and interest income with respect to such loans will not be qualifying income for purposes of the 75% gross income test.
We may hold indirect participation interests in some loans, rather than direct ownership of the loan. The borrower on the underlying loan is typically not a party to the participation agreement. The performance of this investment depends upon the performance of the underlying loan and, if the underlying borrower defaults, the participant typically has no recourse against the originator of the loan. The originator often retains a senior position in the underlying loan and grants junior participations which absorb losses first in the event of a default by the borrower. We generally expect to treat our participation interests as an undivided ownership interest in the underlying loan, and thus as a qualifying real estate asset for purposes of the REIT asset tests that also generates qualifying mortgage interest for purposes of the 75% gross income test, to the extent that the loan underlying the participation is a qualifying real estate asset that generates qualifying income for such purposes.
The appropriate treatment of participation interests for U.S. federal income tax purposes is not entirely certain, however, and no assurance can be given that the IRS will not challenge our treatment of our participation interests. In the event of a determination that such
participation interests do not qualify as real estate assets, or that the income that we derive from such participation interests does not qualify as mortgage interest for purposes of the REIT asset and income tests, we could be subject to a penalty tax, or could fail to qualify as a REIT.
We expect that any mortgage backed securities that we invest in will be treated either as interests in a grantor trust or as interests in a REMIC for U.S. federal income tax purposes and that all interest income from such mortgage backed securities will be qualifying income for the 95% gross income test. In the case of mortgage backed securities treated as interests in grantor trusts, we would be treated as owning an undivided beneficial ownership interest in the mortgage loans held by the grantor trust. The interest on such mortgage loans, and any mortgage loans that we own directly, would be qualifying income for purposes of the 75% gross income test to the extent that the obligation is adequately secured by real property, as discussed above. In the case of mortgage backed securities treated as interests in a REMIC for U.S. federal income tax purposes, income derived from REMIC interests will generally be treated as qualifying income for purposes of the 75% and 95% gross income tests.
However, if less than 95% of the assets of the REMIC are real estate assets, then only a proportionate part of our interest in the REMIC and income derived from the interest will qualify for purposes of the 75% gross income test. We expect that any interest income from mortgage backed securities that are not treated as an interest in a grantor trust or an interest in a REMIC will not be qualifying income for purposes of the 75% gross income test. Mortgage loans that may be held by a grantor trust or REMIC may not necessarily qualify as "real estate assets" for purposes of the REIT rules. As a result, it may be difficult, if not impossible, to determine whether income from certain commercial mortgage-backed securities investments will be qualifying 75% gross income. In addition, some REMIC securitizations include imbedded interest swap or cap contracts or other derivative instruments that potentially could produce nonqualifying income for the holder of the related REMIC securities.

Fee Income
Although not currently contemplated, we may receive various fees and expense reimbursements from borrowers in connection with originating loans. Fees that are for entering into agreements to make loans are qualifying income for both gross income tests. Other fees that are treated as "points" are treated as additional interest on the loan and are qualifying or nonqualifying based on whether the loan is a real estate asset. However, fees for services will not be qualifying income for purposes of both the 75% and 95% gross income tests. In addition, certain expense reimbursements received from the borrower, and even certain expenses paid by the borrower directly to a third-party service provider, may result in nonqualifying income for both gross income tests to the extent such amounts are reimbursements for expenses that benefit us. Any fees earned by a TRS will not be included for purposes of the gross income tests but the use of a TRS to
originate loans to avoid such nonqualifying income may increase the taxes paid by the TRS.

Dividend Income
We may receive material distributions from our TRSs. These distributions are generally classified as dividend income to the extent of the earnings and profits of the distributing corporation. Such distributions generally constitute qualifying income for purposes of the 95% gross income test, but not the 75% gross income test.
If we invest in an entity treated as a "passive investment foreign company" or "controlled foreign corporation" for U.S. federal income tax purposes, which could include a collateralized debt obligation investment, we could be required to include our portion of its earnings in our income prior to the receipt of any distributions. Any such income inclusions would not be treated as qualifying income for purposes of the 75% gross income test and may not be qualifying income for purposes of the 95% gross income test.

Sale-Leaseback Transactions
We may enter into sale-leaseback transactions. It is possible that the IRS could take the position that specific sale-leaseback transactions (or certain other leases) we treat as true leases are not true leases for U.S. federal income tax purposes but are, instead, financing arrangements or loans. Successful recharacterization of a sale-leaseback transaction (or any other lease) as a financing arrangement or loan could jeopardize our REIT status.
Treatment of Certain Debt Instruments as Equity
We may hold loans with relatively high loan-to-value ratios and/or high yields. Additionally, we may receive equity interests in our borrowers in connection with originating our loans. These features can cause a loan to be treated as equity for U.S. federal income tax purposes. Although we intend to structure each of our loans so that the loan should be respected as debt for U.S. federal income tax purposes, there can be no assurance that the IRS will not challenge our treatment of one or more of our loans as debt for U.S. federal income tax purposes. In the event the IRS were successful in such a challenge, all or a portion of the income from such loans could be viewed as guaranteed payments under the partnership tax rules, in which case such income may not be qualifying income for the REIT income tests, and in any event such income will likely be income from a prohibited transaction, which is excluded from the REIT income tests.
As a result, such a recharacterization could adversely affect our ability to qualify as a REIT.

Phantom Income
Due to the nature of the assets in which we may invest, we may be required to recognize taxable income from those assets in advance of our receipt of cash flow on or proceeds from disposition of such assets and may be required to report taxable income in early periods that exceeds the economic income ultimately realized on such assets. For example, we may originate debt instruments or mortgage backed securities at a discount from face value. To the extent we originate any instruments at a discount or purchase such instruments at a discount in connection with their original issuance, the discount will be "original issue discount" if it exceeds certain de minimis amounts, which must be accrued on a constant yield method even though we may not receive the corresponding cash payment until maturity. In such cases, the value of the equity interest would result in discount that must be accrued over the life of the loan.
We may also acquire debt instruments that provide for interest that accrues or is payable in kind, in which case we will be required to include that income for tax purposes as it accrues rather than when it is paid in cash. To the extent we purchase debt instruments at a discount after their original issuance, the discount may represent "market discount." Unlike original issue discount, market discount is not required to be included in income on a constant yield method. However, we will be required to treat a portion of any principal payments as ordinary income in an amount equal to the market discount that has accrued while we held the debt instrument. If we ultimately collect less on a debt instrument than our purchase price and any original issue discount or accrued market discount that we have included in income, there may be limitations on our ability to use any losses resulting from that debt instrument.
We may make loans that provide us with rights to participate in the appreciation of the collateral real property securing our debt instrument at specified times or that provide for other contingent payments based on the borrower's performance. In circumstances where such equity features are part of the loan and not treated as a separate equity investment, we generally will be required to accrue for tax purposes the projected increase in the yield on the loan attributable to the participation feature or contingent payments over the term of the loan, even though we do not receive any cash attributable to the participation feature or contingent payments until some point in the future, if ever. In circumstances where our equity participation is structured as a separate interest from the loans, we will be required to allocate the amount we pay for the loan and the equity interest between those securities and, depending on the circumstances,
such allocation may result in additional discount on the loan that must be accrued for tax purposes over the life of the loan (even though no corresponding cash payment is made until later).
We may also acquire debt instruments below par that are subsequently modified by agreement with the borrower. Under applicable Treasury Regulations, these modifications may be treated as a taxable event in which we exchange the old debt instrument for a new debt instrument, the value of which may be treated as equal to the face amount of the new debt instrument. Because our tax basis in such debt instruments may be substantially less than the face value, we could have significant income without any corresponding receipt of cash. Such a modification also may require us to re-test the status of the modified loan for purposes of determining whether the loan is fully secured by real property.
In addition, in the event that any debt instruments acquired by us are delinquent as to mandatory principal and interest payments, or in the event payments with respect to a particular debt instrument are not made when due, we may nonetheless be required to continue to accrue the unpaid interest as taxable income.
Finally, we may be required under the terms of our indebtedness to use cash received from interest payments to make nondeductible principal payments on that indebtedness, with the effect of recognizing income but not having a corresponding amount of cash available for distribution to our Members.
Due to each of these potential timing differences between income recognition or expense deduction and cash receipts or disbursements, there is a significant risk that we may have substantial taxable income in excess of cash available for distribution. In that event, we may need to borrow funds or take other action to satisfy the REIT distribution requirements for the taxable year in which this "phantom income" is recognized. See Annual Distribution Requirements.
Failure to Satisfy the Gross Income Tests
We monitor our sources of income, including any nonqualifying income received by us, and manage our assets so as to ensure our compliance with the gross income tests. We cannot assure you, however, that we will be able to satisfy the gross income tests. If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may still qualify as a REIT for the year if we are entitled to relief under applicable provisions of the Code. These relief provisions will generally be available if our failure to meet these tests was due to reasonable cause and not due to willful neglect and, following the identification of such failure, we set forth a description of each item of our 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 we would be entitled to the benefit of these relief provisions in all circumstances.
If these relief provisions are inapplicable to a set of circumstances involving us, we will not qualify as a REIT. As discussed above under 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 we fail to satisfy the particular gross income test.

Asset Tests
At the close of each calendar quarter, we must also satisfy five tests relating to the nature of our assets. First, at least 75% of the value of our total assets must be represented by some combination of "real estate assets," cash, cash items and U.S. Government securities. For this purpose, real estate assets include interests in real property (such as land, buildings, leasehold interests in real property and personal property leased with real property if the rents attributable to the personal property would be rents from real property under the income tests discussed above), interests in mortgages on real property or on interests in real property, mortgage loans secured by real property, certain mezzanine loans and mortgage-backed securities as described below, Units in other qualifying REITs, debt instruments issued by publicly offered REITs, and stock or debt instruments held for less than one year purchased with the proceeds from an offering of Units of our stock, Units, or certain debt.
Second, not more than 25% of our assets may be represented by securities other than those in the 75% asset class. Third, assets that do not qualify for purposes of the 75% test and that are not securities of our TRSs are subject to the additional following asset tests: (i) the value of any one issuer's securities owned by us may not exceed 5% of the value of our gross assets, and (ii) we
generally, 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 TRSs held by us may not exceed 25% (for taxable years beginning before January 1, 2018) or 20% (for taxable years beginning on or after January 1, 2018) of the value of our gross assets. Fifth, not more than 25% of the value of our gross assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or interests in real property.
Securities for purposes of the asset tests may include debt securities that are not fully secured by a mortgage on real property (or treated as such). However, the 10% value test does not apply to certain "straight debt" and other excluded securities, as described in the Code, including any loan to an individual or an estate, any obligation to pay rents from real property and any security issued by a REIT. In addition, (1) a REIT's interest as a partner in a partnership is not considered a security for purposes of applying the 10% value test; (2) any debt instrument issued by a partnership (other than straight debt or other excluded security) 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% REIT gross income test; and (3) any debt instrument issued by a partnership (other than straight debt or other 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 (1) the debt is not convertible, directly or indirectly, into stock and (2) 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 Code. In the case of an issuer which is a corporation or a partnership, securities that otherwise would be considered straight debt will not be so considered if we, and any of our "controlled taxable REIT subsidiaries" as defined in the 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, our interest as a partner in the partnership). As a result, the straight debt exception would not be available to us with respect to a loan where we also hold an equity participation in the borrower through a TRS.
Except as provided below, a real estate mortgage loan that we own generally will be treated as a real estate asset for purposes of the 75% REIT asset test if, on the date that we acquire or originate the mortgage loan, the value of the real property securing the loan is equal to or greater than the principal amount of the loan. Existing IRS guidance provides that certain rules described above that are applicable to the gross income tests may apply to determine what portion of a mortgage loan will be treated as a real estate asset if the mortgage loan is secured both by real property and other assets. Under special guidance issued by the IRS, if the value of the mortgage loan exceeds the greater of the current value of the real property securing the loan and the value of the real property securing the loan at the time we committed to acquire the loan, such excess will not be a qualifying real estate asset.
Furthermore, we may be required to retest modified loans to determine if the modified loan is adequately secured by real property as of the modification date if the modification results in a taxable exchange. However, under special guidance issued by the IRS, if a loan modification occurred as a result of default or we reasonably believed that there was a significant risk of default and the modification reduced such risk, we generally would not be required to retest such modified loan. Notwithstanding the foregoing, as discussed above under Gross Income Tests - Interest Income, a mortgage loan secured by both real property and personal property shall be treated as a wholly qualifying real estate asset if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property, even if the real property collateral is less than the outstanding principal balance on the loan.
As discussed above under Gross Income Tests, certain loans that we might originate could be at risk of being treated as equity interests in the borrower for U.S. federal income tax purposes. In such cases, we
would likely be treated as owning our proportionate share of the borrower's assets (if the borrower is a pass-through entity) or as owning corporate stock (if the borrower is a corporation), which could adversely affect our ability to comply with the asset tests.
As discussed above under Gross Income Tests, there may be circumstances in which our mezzanine loans do not comply with the safe harbor under Revenue Procedure 200365. To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor set forth in the Revenue Procedure, such loans may not be real estate assets and could adversely affect our REIT status.
As discussed above under Gross Income Tests, participation interests in loans that we acquire may not be treated as direct interests in the underlying mortgage loan, which may cause the participation interest to not qualify as a real estate asset. While we intend that any such participation interests will be structured in a manner so as to be treated for REIT purposes as equivalent to a direct interest in the loan, and therefore, as a real estate asset, there can be no guarantee that such treatment is respected by the IRS.
Regular or residual interests in REMICs are generally treated as a real estate asset. If, however, less than 95% of the assets of a REMIC consists of real estate assets (determined as if we held such assets), we will be treated as owning our proportionate share of the assets of the REMIC. The IRS has issued guidance providing that, among other things, if a REIT holds a regular or residual interest in an "eligible REMIC" that informs the REIT that at least 80% of the REMIC's assets constitute real estate assets, then the REIT may treat 80% of the value of the interest in the REMIC as a real estate asset for the purpose of the REIT asset tests. The remaining 20% of the value of the REIT's interest in the REMIC would not qualify as a real estate asset for purposes of the REIT asset tests and could adversely affect our ability to qualify as a REIT. In the case of interests in grantor trusts, we will be treated as owning an undivided beneficial interest in the mortgage loans held by the grantor trust.
Such mortgage loans will generally qualify as real estate assets for purposes of the 75% asset test to the extent they are secured by real property. Investments in mortgage backed securities that are not interests in a grantor trust or REMIC or government securities will not be treated as qualifying assets for purposes of the 75% asset test and will be subject to the 5% asset test, the 10% value test, the 10% vote test and the 25% securities test described above.
We may enter into repurchase agreements under which we will nominally sell certain of our assets to a counterparty and simultaneously enter into an agreement to repurchase the sold assets. We generally believe that we will be treated for U.S. federal income tax purposes as the owner of the assets that are the subject of any such repurchase agreement and the repurchase agreement will be treated as a secured lending transaction notwithstanding that we may transfer record ownership of the assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could successfully assert that we did not own the assets during the term of the repurchase agreement, which could impact our REIT status.
We believe that our assets and loan holdings have complied or will comply with the above asset tests commencing with the close of our first calendar quarter and that we can operate so that we can continue to comply with those tests. However, our ability to satisfy these asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. For example, we may hold significant assets through our TRSs, and we cannot provide any assurance that the IRS will not disagree with our determinations.

Failure to Satisfy Asset Tests
After initially meeting the asset tests at the close of any quarter, we will not lose our 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. If we fail to satisfy the asset tests because we acquire assets during a quarter, we can cure this failure by disposing of sufficient nonqualifying assets within 30 days after the close of that quarter. If we fail the 5% asset test, or the 10% vote or value asset tests at the end of any quarter and such failure is not cured within
30 days thereafter, we may dispose of sufficient assets (generally within six months after the last day of the quarter in which the identification of the failure to satisfy these asset tests occurred) to cure such a violation that does not exceed the lesser of 1% of our assets at the end of the relevant quarter or $10 million. If we fail any of the other asset tests or our failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as such failure was due to reasonable cause and not willful neglect, we are 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 test (generally within six months after the last day of the quarter in which we identified the failure to satisfy the REIT asset test) and paying a tax equal to the greater of $50,000 or the highest corporate income tax rate
(currently 21%) of the net income generated by the nonqualifying assets during the period in which we failed to satisfy the asset test.

Hedging Transactions
We may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swap agreements, interest rate cap agreements, options, forward rate agreements or similar financial instruments. Except to the extent provided by Treasury Regulations, any income from a hedging transaction, including gain from the sale or disposition of such a transaction, will not constitute gross income for purposes of the 75% or 95% gross income test if
(i) we enter into the hedging transaction in the normal course of 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 and the hedge is clearly identified as specified in Treasury Regulations before the close of the day on which it was acquired, originated, or entered into, (ii) we enter into the hedging transaction 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% gross income tests or (iii) we enter into the hedging transaction that hedges against transactions described in clause (i) or (ii) and is entered into in connection with the extinguishment of debt or sale of property that are being hedged against by the transactions described in clauses (i) or (ii) and the hedge complies with certain identification requirements.
To the extent that we enter into other types of hedging transactions, including hedges of interest rates on any debt we acquire as assets, the income from those transactions is likely to be treated as nonqualifying income for purposes of both of the 75% and 95% gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize its qualification as a REIT, but there can be no assurance that we will be successful in this regard.
Annual Distribution Requirements
In order to qualify as a REIT, we are required to distribute dividends, other than capital gain dividends, to our shareholders in an amount at least equal to:
(a) the sum of:
- 90% of our "REIT taxable income" (computed without regard to its deduction for dividends paid and its net capital gains); and
- 90% of the net income (after tax), if any, from foreclosure property (as described below); minus
(b) the sum of specified items of noncash income that exceeds a percentage of our income.
These distributions must be paid 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 shareholders 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 us and received by each shareholder on December 31 of the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared before we timely file our tax return for the year and be paid with or before the 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 our shareholders in the
year in which paid, even though the distributions relate to our prior taxable year for purposes of the 90% distribution requirement.
In order for distributions to be counted towards our distribution requirement and to give rise to a tax deduction by us, they must not be "preferential dividends." A dividend is not a preferential dividend if it is pro rata among all outstanding Units of stock within a particular class and is in accordance with the preferences among different classes of stock as set forth in the organizational documents. To avoid paying preferential dividends, we must treat every shareholder of the class of Units with respect to which we make a distribution the same as every other shareholder of that class, and we must not treat any class of Units other than according to its dividend rights as a class. Under certain technical rules governing deficiency dividends, we could lose our ability to cure an under-distribution in a year with a subsequent year deficiency dividend if we pay preferential dividends. Accordingly, we intend to pay dividends pro rata within each class,
and to abide by the rights and preferences of each class of our Units if there is more than one. If, however, we qualify as a "publicly offered REIT" (within the meaning of Section 562(c) of the Code) in the future, the preferential dividend rules will cease to apply to us. In addition, the IRS is authorized to provide alternative remedies to cure a failure to comply with the preferential dividend rules, but as of the date hereof, no such authorized procedures have been promulgated.
To the extent that we distribute at least 90%, but less than 100%, of our "REIT taxable income," as adjusted, we will be subject to tax at ordinary U.S. federal corporate tax rates on the retained portion. In addition, we may elect to retain, rather than distribute, our net long-term capital gains and pay tax on such gains. In this case, we could elect to have our shareholders include their proportionate share of such undistributed long- term capital gains in income and receive a corresponding credit or refund, as the case may be, for their proportionate share of the tax paid by us. Our Members would then increase the adjusted basis of their stock in us by the difference between the designated amounts included in their long-term capital gains and the tax deemed paid with respect to their proportionate Units.
If we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95% of our REIT capital gain net income for such year and (3) any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of such required distribution over the sum of (x) the amounts actually distributed (taking into account excess distributions from prior periods) and (y) the amounts of income retained on which we have paid corporate income tax. We intend to continue to make timely distributions so that we are not subject to the 4% excise tax.
It is possible that we, from time to time, may not have sufficient cash from operations to meet the distribution requirements, for example, due to timing differences between the actual receipt of cash and the inclusion of the corresponding items in income by us for U.S. federal income tax purposes prior to receipt of such income in cash or nondeductible expenditures. See Gross Income Tests - Phantom Income, above. In the event that such shortfalls occur, to meet our distribution requirements it might be necessary to arrange for short-term, or possibly long-term, borrowings, use cash reserves, liquidate noncash assets at rates or times that we regard as unfavorable or pay dividends in the form of taxable stock dividends. In the case of a taxable stock dividend, shareholders 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.
We may be able to rectify a failure to meet the distribution requirements for a year by paying "deficiency dividends" to shareholders in a later year, which may be included in our deduction for dividends paid for the earlier year. In this case, we may be able to avoid losing our qualification as a REIT or being taxed on amounts distributed as deficiency dividends. However, we will be required to pay interest and a penalty based on the amount of any deduction taken for deficiency dividends.
In the event that we undertake a transaction (such as a tax-free merger) in which we succeed to earnings and profits of a taxable corporation, in addition to the distribution requirements above we also must distribute such non-REIT earnings and profits to our shareholders by the close the taxable year of the transaction. Such additional dividends are not deductible against our REIT taxable income. We may be able to rectify a failure to distribute any such non-REIT earnings and profits by making distributions in a later year comparable to deficiency dividends noted above and paying an interest charge.
Liquidating distributions generally will be treated as dividends for purposes of the above rules to the extent of current earnings and profits in the year paid provided we complete our liquidation within 24 months following our adoption of a plan of liquidation. Compliance with this 24-month requirement could require us to sell assets at unattractive prices, distribute unsold assets to a "liquidating trust" for the benefit of our shareholders, or terminate our status as a REIT. The U.S. federal income tax treatment of a beneficial interest in a liquidating trust would vary significantly from the U.S. federal income treatment of ownership of our Units.

Excess Inclusion Income
If we directly or indirectly acquire a residual interest in a REMIC or equity interests in a taxable mortgage pool, a portion of our income from such arrangements may be treated as "excess inclusion income." See Effect of Subsidiary Entities - Taxable Mortgage Pools, above. We are required to allocate any excess inclusion income to our shareholders in proportion to their dividends. We would be subject to U.S. corporate tax to the extent of any excess inclusion income from the REMIC residual interest or taxable mortgage pool that is allocable to the percentage of our Units held in record name by "disqualified organizations," which are generally certain cooperatives, governmental entities and tax-exempt organizations that are exempt from tax on unrelated business taxable income. Our operating agreement allows us to deduct such taxes from the distributions otherwise payable to the responsible disqualified organizations.
Because this tax would be imposed on the Company, however, unless we can recover the tax out of distributions to the disqualified holders, all of our investors, including investors that are not disqualified organizations, would bear a portion of the tax cost associated with the classification of the Company or a portion of our assets as a taxable mortgage pool.
Shareholders who are not disqualified organizations will have to treat our dividends as excess inclusion income to the extent of their allocable Units of our excess inclusion income. This income cannot be offset by net operating losses of our shareholders. If the shareholder is a tax-exempt entity and not a disqualified organization, then this income is fully taxable as UBTI under Section 512 of the Code. If the shareholder is a foreign person, it would be subject to U.S. federal income tax withholding on this income without reduction or exemption pursuant to any otherwise applicable income tax treaty. If the shareholder is a REIT, a regulated investment company, common trust fund or other passthrough entity, the shareholder's allocable share of our excess inclusion income could be considered excess inclusion income of such entity.

Prohibited Transactions
Net income we derive from a prohibited transaction outside of a TRS is subject to a 100% tax unless the transaction qualifies for a statutory safe harbor discussed below. 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. For purposes of this 100% tax, income earned from a shared appreciation provision in a mortgage loan (see below) is treated as if the REIT sold an interest in the underlying property (thus subjecting such income to 100% tax if we hold the shared appreciation mortgage outside of a TRS and the underlying property is inventory or held for sale). The 100% tax will not apply to gains from the sale of property held through a TRS or other taxable corporations (which are taxed at regular corporate rates).
Thus, we conduct our operations so that loans or other assets owned by us (or assets that are the subject of a shared appreciation provision that we own) that are inventory or held primarily for sale to customers in the ordinary course of
business are held through a TRS. 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, and no assurance can be given that we will be successful in isolating all investments subject to the 100% tax in our TRSs or that we will not engage in prohibited transactions outside of our TRSs. With respect to kickers treated as equity for U.S. federal income tax purposes, as well as any loans treated as equity interests in our borrowers for U.S. federal income tax purposes (see, Gross Income Tests - Treatment of Certain Debt Instruments as Equity), our income from such interests may be income from a prohibited transaction subject to the 100% tax if the underlying real property is treated as held as inventory or primarily for sale to customers.
With respect to our equity investments, our opportunistic business strategy includes investments that risk being characterized as investments in properties held primarily for sale to customers in the ordinary course of a trade or business. Thus, we intend to comply with the statutory safe harbor when selling properties outside of a TRS (or when our joint ventures sell properties outside of a TRS) that we believe might reasonably be characterized as held primarily for sale to customers in the ordinary course of a trade or business for U.S. federal income tax purposes, but compliance with the safe harbor may not always be practical. Moreover, because the determination of whether property is held primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances, the IRS or a court might disagree with our determination that any particular property was not
so held and therefore assert that a non-safe harbored sale of such property was subject to the 100% penalty tax on the gain from the disposition of the property. One of the factors considered by the courts in determining whether a taxpayer held property primarily for sale to customers in the ordinary course of a trade or business is the frequency and continuity of sales. While the 100% tax will not apply to a safe- harbored sale, safe-harbored sales generally would be taken into account in assessing the frequency and continuity of our sales activity for purposes of analyzing sales outside of the safe harbor.
The potential application of the prohibited transactions tax could cause us to forego potential dispositions of other property or to forego other opportunities that might otherwise be attractive to us (such as developing property for sale), or to undertake such dispositions or other opportunities through a TRS, which would generally result in corporate income taxes being incurred. The amount of such TRS taxes could be substantial.

Foreclosure Property
Foreclosure property is 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 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 U.S. federal corporate rate (currently 21%) 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 is in effect will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or property held for sale in the hands of the selling REIT.

Shared Appreciation Mortgages/Equity Participations
In connection with our acquisition and/or origination of loans, we could obtain rights to share in the appreciation of the underlying collateral real property securing the mortgage loan. These participation features may be structured as "shared appreciation provisions" that are in connection with the loan itself or as a severable contingent right on the collateral. The participation features are sometimes referred to as
"kickers." To the extent the shared appreciation provision is in connection with the loan secured by real property, any income derived from the shared appreciation provision will be treated as gain from the sale of the collateral property for REIT income test purposes and for purposes of determining whether such income is income from a prohibited transaction. However, this treatment will not impact the character of the shared appreciation payment as contingent interest for other tax purposes. To the extent a participation feature is structured as a severable contingent right in the collateral property, or otherwise does not meet the definition of "shared appreciation provision," we may either be treated as owning an equity interest in the collateral property for the REIT income and asset tests or as holding a loan that provides for interest based on net profits, which would not be qualifying income for both the 75% and 95% REIT income tests.
We may hold severable contingent rights through a TRS, in which case they will be subject to corporate tax but will not generate nonqualifying income (except to the extent of TRS dividends for the 75% income test) or nonqualifying assets (except to the extent of the additional value in the TRS stock).

Failure to Qualify
In the event that we violate a provision of the Code that would result in our failure to qualify as a REIT, we may nevertheless continue to qualify as a REIT under specified relief provisions available to us to avoid such disqualification if (i) the violation is due to reasonable cause and not due to willful neglect, (ii) we pay a penalty of $50,000 for each failure to satisfy a requirement for qualification as a REIT and (iii) 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 our disqualification as a REIT for violations due to reasonable cause. If we fail to qualify for taxation as a REIT in any taxable year and none of the relief provisions of the Code apply, we will be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates.
Distributions to our shareholders in any year in which we are not a REIT will not be deductible by us, nor will they be required to be made. In this situation, to the extent of current or accumulated earnings and profits, and, subject to limitations of the Code, distributions to our shareholders will generally be taxable in the case of
U.S. shareholders (as defined above) who individuals at a maximum rate of are 20%, and dividends in the hands of our corporate U.S. shareholders may be eligible for the dividends received deduction. Unless we are entitled to relief under the specific statutory provisions, we will also be disqualified from reelecting to be taxed as a REIT for the four taxable years following a year during which qualification was lost. It is not possible to state whether, in all circumstances, we will be entitled to statutory relief.
Taxation of Taxable U.S. Shareholders
This section summarizes the taxation of U.S. shareholders that are not tax-exempt organizations.

Distributions
Provided that we qualify as a REIT, distributions made to our taxable U.S. shareholders out of our current or accumulated earnings and profits, and not designated as capital gain dividends, will generally be taken into account by them as ordinary dividend income and will not be eligible for the dividends received deduction for corporations. Dividends received from REITs are generally not eligible to be taxed at the preferential qualified dividend income rates applicable to individual U.S. shareholders who receive dividends from taxable subchapter C corporations. As discussed above, if we realize excess inclusion income from a residual interest in REMIC or a taxable mortgage pool and allocate such excess inclusion income to a taxable U.S. shareholder, that income cannot be offset by net operating losses of such shareholder. Distributions from us that are designated as capital gain dividends will be taxed to U.S. shareholders as long-term capital gains,
to the extent that they do not exceed our actual net capital gain for the taxable year, without regard to the period for which the U.S. shareholder has held our Units. To the extent that we elect under the applicable provisions of the Code to retain our net capital gains, U.S. shareholders will be treated as having received, for U.S. federal income tax purposes, our undistributed capital gains as well as a corresponding credit or refund, as the case may be, for taxes paid by us on such
retained capital gains. U.S. shareholders will increase their adjusted tax basis in our Class B Units by the difference between their allocable share of such retained capital gain and their share of the tax paid by us. Corporate U.S. shareholders 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
U.S. shareholders who are individuals and 21% for C corporations. Capital gains attributable to the sale of depreciable real property held for more than 12 months generally are subject to a 25% maximum U.S. federal income tax rate for U.S. shareholders who are individuals, to the extent of previously claimed depreciation deductions.
Distributions from us in excess of our current or accumulated earnings and profits will not be taxable to a
U.S. shareholder to the extent that they do not exceed the adjusted tax basis of the U.S. shareholder's Class B Units in respect of which the distributions were made, but rather will reduce the adjusted tax basis of these Units. To the extent that such distributions exceed the adjusted tax basis of a U.S. shareholder's Class B Units, they will be treated as gain from the disposition of the Units and thus will be included in income as long-term capital gain, or short-term capital gain if the Units have been held for one year or less.
To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that must be made in order to comply with the REIT distribution requirements. See "-Taxation of The Company" and "-Annual Distribution Requirements." Such losses, however, are not passed through to U.S. shareholders and do not offset income of U.S. shareholders from other sources, nor do they affect the character of any distributions that are actually made by us.

Dispositions of Class B Units
In general, capital gains recognized by individuals and other noncorporate U.S. shareholders upon the sale or disposition of our Class B Units will be subject to a maximum U.S. federal income tax rate of 20%, if such Units were held for more than one year, and will be taxed at ordinary income rates (of up to 37%) if such Units were held for one year or less. Gains recognized by U.S. shareholders that are corporations are subject to U.S. federal income tax at a maximum rate of 21%, whether or not classified as long-term capital gains.
Capital losses recognized by a U.S. shareholder upon the disposition of our Class B Units held for more than one year at the time of disposition will be considered long-term capital losses (or short-term capital losses if the Units have not been held for more than one year), and are generally available only to offset capital gain income of the U.S. shareholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of Class B Units by a U.S. shareholder who has held the Units 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 us that were required to be treated by the U.S. shareholder as long-term capital gain.

Liquidating Distributions
Once we have adopted (or are deemed to have adopted) a plan of liquidation for U.S. federal income tax purposes, liquidating distributions received by a U.S. shareholder with respect to our Class B Units will be treated first as a recovery of the shareholder's basis in the Units (computed separately for each block of Units) and thereafter as gain from the disposition of our Class B Units. In general, the U.S. federal income tax rules applicable to REITs require us to complete our liquidation within 24 months following our adoption of a plan of liquidation. Compliance with this 24-month requirement could require us to distribute unsold assets to a "liquidating trust." Each shareholder would be treated as receiving a liquidating distribution equal to the value of the liquidating trust interests received by the shareholder. The U.S. federal income tax treatment of ownership an interest in any such liquidating trust would differ materially from the
U.S. federal income tax treatment of an investment in our Units.

Medicare Tax on Unearned Income
U.S. shareholders that are individuals, estates or trusts may be required to pay an additional 3.8% tax on, among other things, dividends on and capital gains from the sale or other disposition of stock. U.S. shareholders should consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of our Class B Units.
Taxation of Tax-Exempt U.S. Shareholders
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 UBTI. While many investments in real estate may generate UBTI, the IRS has ruled that regular 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. shareholder has not held our Class B Units as "debt financed property" within the meaning of the Code (that is, where the acquisition or holding of the property is financed through a borrowing by the tax exempt shareholder) and (2) we do not hold REMIC residual interests or interests in a taxable mortgage pool that gives rise to "excess inclusion income," distributions from us and income from the sale of our Class B Units generally should not give rise to UBTI to a tax exempt U.S. shareholder.
Excess inclusion income from REMIC residual interests or interests in a taxable mortgage pool, if any, that we allocate to a tax-exempt U.S. shareholder will be treated as UBTI (or, in the case of a disqualified organization, taxable to us). See Requirements for Qualification as a REIT - Excess Inclusion Income, above.
Tax-exempt U.S. shareholders 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 Code, respectively, are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI.
A pension trust (1) that is described in Section 401(a) of the Code, (2) is tax exempt under Section 501(a) of the Code, and (3) that owns more than 10% of our Units could be required to treat a percentage of the dividends from us as UBTI if we are a "pension-held REIT." We will not be a pension-held REIT unless
(1) either (A) one pension trust owns more than 25% of the value of our Units, or (B) a group of pension trusts, each individually holding more than 10% of the value of our Units, collectively owns more than 50% of such stock; and (2) we would not have satisfied the 5/50 Test but for a special rule that permits us to "look-through" such trusts to the ultimate beneficial owners of such trusts in applying the 5/50 Test.
In general, the U.S. federal income tax rules applicable to REITs require us to complete our liquidation within 24 months following our adoption of a plan of liquidation. Compliance with this 24-month requirement could require us to distribute unsold assets to a liquidating trust. The U.S. federal income tax treatment of ownership an interest in any such liquidating trust would differ materially from the U.S. federal income tax treatment of an investment in our Units, including the potential incurrence of income treated as UBTI.
Tax exempt U.S. shareholders are urged to consult their tax advisors regarding the U.S. federal, state, local and non-U.S. tax consequences of owning our Class B Units.
Taxation of Non-U.S. Shareholders
General
In general, non-U.S. shareholders are not considered to be engaged in a U.S. trade or business solely as a result of their ownership of our Class B Units. In cases where a non-U.S. shareholder's investment in our Class B Units is, or is treated as, effectively connected with the non-U.S. shareholder's conduct of a U.S. trade or business, dividend income received in respect of our Class B Units and gain from the sale of our Class B Units generally is "effectively connected income" ("ECI") subject to U.S. federal income tax at graduated rates in the same manner as if the non-U.S. shareholder were a U.S. shareholder, and such dividend income may also be subject to the 30% branch profits tax (subject to possible reduction under a treaty) on the income after the application of the income tax in the case of a non-U.S. shareholder that is a corporation. Additionally, non-U.S. shareholders that are nonresident alien individuals who are
present in the U.S. for 183 days or more during the taxable year and have a "tax home" in the U.S. are subject to a 30% withholding tax on their capital gains. The remaining discussion below assumes the dividends and gain generated in respect of our Class B Units is not effectively connected to a U.S. trade or business of the non-U.S. shareholder and that the non-U.S. shareholder is not present in the U.S. for more than 183 days during any taxable year.
FIRPTA
Under the Foreign Investment in Real Property Tax Act ("FIRPTA"), gains from U.S. real property interests ("USRPIs") are generally treated as ECI subject to U.S. federal income tax at graduated rates in the same manner as if the non-U.S. shareholder were a U.S. shareholder (and potentially branch profits tax to non-U.S. corporations), and will generate return filing obligations in the United States for such non-U.S. shareholders. USRPIs for purposes of FIRPTA generally include interests in real property located in the United States and loans that provide the lender with a participation in the profits, gains, appreciation (or similar arrangements) of real property located in the United States. Loans secured by real property located in the United States that do not provide the lender with a participation in profits, gains, appreciation (or similar arrangements) of the real property are generally not treated as USRPIs.
In addition, stock (or Units) of a domestic corporation (including a REIT such as us) will be a USRPI if at least 50% of its real property assets and assets used in a trade or business are USRPIs at any time during a prescribed testing period. Notwithstanding the foregoing rule: (i) our Class B Units will not be a USRPI if we are "domestically-controlled;" (ii) our Class B Units will not be a USRPI with respect to a selling non-
U.S. shareholder if the Units sold are of a class that is regularly traded on an established securities market and the selling non-U.S. shareholder owned, actually or constructively, 5% or less of our outstanding stock of that class at all times during a specified testing period (generally the lesser of the five-year period ending on the date of disposition or the period of our existence); (iii) with respect to a selling non-U.S shareholder that is a "qualified shareholder" (as described below); or (iv) with respect to a selling non-U.S. shareholder that is a "qualified foreign pension fund" (as described below).
A domestically controlled REIT is a REIT in which, at all times during a specified testing period (generally the lesser of the five-year period ending on the date of disposition of the REIT's Class B Units or the period of the REIT's existence), less than 50% in value of its outstanding Units of common Units is held directly or indirectly by non-U.S. persons. For these purposes, a person holding less than 5% of our Class B Units for five years will be treated as a U.S. person unless we have actual knowledge that such person is not a
U.S. person. We cannot assure you that we will be domestically-controlled at all times in the future.
Our Units are not currently traded on an established securities market, and we have no current intent to list our Units for trading. We also cannot assure you that we will be domestically-controlled at all times in the future. Thus, we cannot assure you that our Units is not or will not become a USRPI in the future.
Ordinary Dividends
The portion of dividends received by non-U.S. shareholders payable out of our earnings and profits that are not attributable to gains from sales or exchanges of USRPIs will generally 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 addition, any portion of the dividends paid to non-U.S. shareholders that are treated as excess inclusion income from REMIC residual interests or interests in a taxable mortgage pool will not be eligible for exemption from the 30% withholding tax or a reduced treaty rate.

Non-Dividend Distributions
A non-U.S. shareholder should not incur tax on a distribution in excess of our current and accumulated earnings and profits if the excess portion of the distribution does not exceed the adjusted basis of its Class B Units. Instead, the excess portion of the distribution will reduce the adjusted basis of its Class B Units. A non-U.S. shareholder generally will not be subject to U.S. federal income tax on a distribution that exceeds both our current and accumulated earnings and profits and the adjusted basis of its Class B Units unless our Class B Units constitute a USRPI and no other exception applies to the selling non-U.S. shareholder. If our Units are a USRPI and no other exception applies to the selling non-U.S. shareholder, distributions in excess of both our earnings and the non-U.S. shareholder's basis in our Units will be treated as ECI subject to U.S. federal income tax. Regardless of whether the distribution exceeds basis,
we will be required to withhold 15% of any distributions to non-U.S. shareholders in excess of our current year and accumulated earnings (i.e., including distributions that represent a return of the non-U.S. shareholder's tax basis in our Class B Units). The withheld amounts will be credited against any U.S. tax liability of the non-U.S. shareholder, and may be refundable to the extent such withheld amounts exceed the shareholder's actual U.S. federal income tax liability. Even in the event our Class B Units are not a USRPI, we may choose to withhold on the entire amount of any distribution at the same rate as we would withhold on a dividend because we may not be able to determine at the time we make a distribution whether or not the distribution will exceed our current and accumulated earnings and profits. However, a non-U.S. shareholder may obtain a refund of amounts that we withhold if we later determine that a distribution in fact exceeded our current and accumulated earnings and profits,
to the extent such withheld amounts exceed the shareholder's actual U.S. federal income tax liability.
Capital Gain Dividends and Distributions of FIRPTA Gains

Subject to the exceptions that may apply if our Class B Units are regularly traded on an established securities market or if the selling non-U.S. shareholder is a "qualified shareholder" or a "qualified foreign pension fund," each as described below, under a FIRPTA "look-through" rule any of our distributions to non-U.S. shareholders of gain attributable to the sale of a USRPI will be treated as ECI and subject to 35% withholding, regardless of whether our Class B Units constitute a USRPI. Amounts treated as ECI under the look-through rule may also be subject to the 30% branch profits tax (subject to possible reduction under a treaty), after the application of the income tax to such ECI, in the case of a non-U.S. shareholder that is a corporation. In addition, we will be required to withhold tax equal to 35% of the maximum amount that could have been designated as capital gains dividends.
Capital gain dividends received by a non-U.S. shareholder that are attributable to dispositions of our assets other than USRPIs are not subject to U.S. federal income tax. This FIRPTA look-through rule also applies to distributions in redemption of Units and liquidating distributions, to the extent they represent distributions of gain attributable to the sale of a USRPI.A distribution that would otherwise have been treated as gain from the sale of a USRPI under the FIRPTA look-through rule will not be treated as ECI, and instead will be treated as otherwise described herein without regard to the FIRPTA look-through rule, if (i) the distribution is received with respect to a class of stock that is regularly traded on an established securities market located in the United States, and (ii) the recipient non-U.S. shareholder does not own more than 10% of that class of stock at any time during the one-year period ending on the date on which the distribution is received.
We currently are not publicly traded, and such rules will not apply unless and until our Class B Units become "regularly traded" on an established securities exchange in the future.
Dispositions of Class B Units
A sale of Class B Units by a non-U.S. shareholder generally will not be subject to U.S. federal income tax unless our Units are a USRPI. Subject to the exception that may apply if our Class B Units were regularly traded on an established securities market (as described above), if our Units are a USRPI, gain from the sale of our Units would be ECI to the non-U.S. shareholder unless such non-U.S. shareholder were a qualified shareholder or qualified foreign pension fund, each as described below. If our Units are not a USRPI, gain from the sale of our Units would not be subject to U.S. federal income tax.
To the extent Class B Units are held directly (or indirectly through one or more partnerships) by a "qualified shareholder," Class B Units will not be treated as a USRPI. Further, to the extent such treatment applies, any distribution to such shareholder will not be treated as gain recognized from the sale or exchange of a USRPI. For these purposes, a qualified shareholder is generally a non-U.S. shareholder that (i)(A) is eligible for treaty benefits under an income tax treaty with the United States that includes an exchange of information program, and the principal class of interests of which is listed and regularly traded on one or more stock exchanges or (B) is a foreign limited partnership organized in a jurisdiction with an exchange of information agreement with the United States and that has a class of regularly traded limited partnership units (having a value greater than 50% of the value of all partnership units) on the New York Stock Exchange or Nasdaq,
(ii) is a "qualified collective investment vehicle" (within the meaning of Section 897(k)(3)(B) of the Code) and (iii) maintains records of persons holding 5% or more of the class of interests described in clauses (i)(A) or (i)(B) above, however, in the case of a qualified shareholder having one or more "applicable investors," the exception described in the first sentence of this paragraph will not apply with respect to a portion of the qualified shareholder's Class B Units (determined by applying the ratio of the value of the interests held by applicable investors in the qualified shareholder to the value of all interests in the qualified shareholder and applying certain constructive ownership rules). Such ratio applied to the amount realized by a qualified shareholder on the disposition of our Units or with respect to a distribution from us attributable to gain from the sale or exchange of a USRPI will be treated as amounts realized from the disposition of USRPIs.
For these purposes, an "applicable investor" is person who holds an interest in the qualified shareholder and holds more than 10% of Class B Units applying certain constructive ownership rules.
FIRPTA will not apply to any USRPI held directly (or indirectly through one or more partnerships) by, or to any distribution received from a REIT by, a "qualified foreign pension fund" or any entity all of the interests of which are held by a qualified foreign pension fund. For these purposes, a "qualified foreign pension fund" is an organization or arrangement (i) created or organized in a foreign country, (ii) established to provide retirement or pension benefits to current or former employees (or their designees) of one or more employers for services rendered, (iii) which does not have a single participant or beneficiary that has a right to more than 5% of its assets or income, (iv) which is subject to government regulation and provides annual information reporting about its beneficiaries to relevant local tax authorities and
(v) with respect to which, under its local laws, contributions that would otherwise be subject to tax are deductible or excluded from its gross income or taxed at a reduced rate, or taxation of its income is deferred or taxed at a reduced rate.
Redemptions and Liquidating Distributions
A redemption of Class B Units by a non-U.S. shareholder is treated as a regular distribution or as a sale or exchange of the redeemed Units under the same rules of Section 302 of the Code that apply to U.S. shareholders and which are discussed above under "Taxation of Taxable U.S. Shareholders-Redemptions of Class B Units." Subject to the FIRPTA look-through rule: (i) if our Units are a USRPI, gain from a redemption treated as a sale or exchange of our Units would be ECI to the non-U.S. shareholder unless such non-U.S. shareholder were a qualified shareholder or qualified foreign pension fund, as described above; and (ii) if our Units are not a USRPI, gain from a redemption treated as a sale or exchange of our Units would not be subject to U.S. federal income tax.
Once we have adopted (or are deemed to have adopted) a plan of liquidation for U.S. federal income tax purposes, liquidating distributions received by a non-U.S. shareholder with respect to Class B Units will be treated first as a recovery of the shareholder's basis in the Units (computed separately for each block of Units) and thereafter as gain from the disposition of our Class B Units. Subject to the FIRPTA look-through rule: (i) if our Units are a USRPI, gain from a liquidating distribution with respect our Units would be ECI to the non-U.S. shareholder unless such non-U.S. shareholder were a qualified shareholder or qualified foreign pension fund, as described above; and (ii) if our Units are not a USRPI, gain from a liquidating distribution with respect to our Units would not be subject to U.S. federal income tax. In general, the U.S. federal income tax rules applicable to REITs will require us to complete
our liquidation within 24 months following our adoption of a plan of liquidation. Compliance with this 24-month requirement could require us to distribute unsold assets to a "liquidating trust." The U.S. federal income tax treatment of ownership an interest in any such liquidating trust would differ materially from the U.S. federal income tax treatment of an investment in our Units, including the potential incurrence of income treated as ECI and the likely requirement to file U.S. federal income tax returns.
The IRS takes the view that under the FIRPTA look-through rule, but subject to the exceptions described above that may apply to a holder of no more than 10% of Class B Units if Class B Units are regularly traded on an established securities market, to a qualified shareholder or to a qualified foreign pension fund, distributions in redemption of our Class B Units and liquidating distributions to non-U.S. shareholders will be treated as ECI and subject to 35% withholding, and also potentially subject to branch profits tax in the case of corporate non-U.S. shareholders, to the extent that the distributions are attributable to gain from the sale of a USRPI, regardless of whether our Units is a USRPI and regardless of whether the distribution is otherwise treated as a sale or exchange.
Backup Withholding and Information Reporting
We report to our U.S. shareholders and the IRS the number of dividends paid during each calendar year and the amount of any tax withheld. Under the backup withholding rules, a U.S. shareholder may be subject to backup withholding with respect to dividends paid unless the holder is a corporation or comes within other exempt categories and, when required, demonstrates this fact or provides a taxpayer identification number or social security number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A U.S. shareholder that does not provide his or her correct taxpayer identification number or social security number may also be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. In addition, we may be required to withhold a portion of dividends or capital gain distribution to any U.S. shareholder who fails to certify their nonforeign status.
We must report annually to the IRS and to each non-U.S. shareholder the number 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. shareholder resides under the provisions of an applicable income tax treaty. A non-U.S. shareholder may be subject to backup withholding unless applicable certification requirements are met.
Payment of the proceeds of a sale of Class B Units within the United States is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is a non-U.S. shareholder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person) or the holder otherwise establishes an exemption. Payment of the proceeds of a sale of Class B Units conducted through certain U.S. related financial intermediaries is subject to information reporting (but not backup withholding) unless the financial intermediary has documentary evidence in its records that the beneficial owner is a non-U.S. shareholder 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.
Foreign Accounts and FATCA
The U.S. Foreign Account Tax Compliance Act ("FATCA") currently imposes withholding taxes on certain
U.S. source passive payments to "foreign financial institutions" and certain other non-U.S. entities and will impose withholding taxes with respect to payments of disposition proceeds of U.S. securities realized after December 31, 2019. Under this legislation, the failure to comply with additional certification, information reporting and other specified requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to U.S. shareholders who own Class B Units through foreign accounts or foreign intermediaries and certain non-U.S. shareholders. The legislation imposes a 30% withholding tax on dividends currently on, and will impose a 30% withholding tax on gross proceeds from the sale or other disposition of, Class B Units paid to a foreign financial institution or to a foreign entity other than a financial institution, unless: (i) the foreign financial institution undertakes certain diligence and reporting obligations;
or (ii) the foreign entity is not a financial institution and either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner. If the payee is a foreign financial institution (that is not otherwise exempt), it must either: (1) enter into an agreement with the U.S. Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S. owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements; or (2) in the case of a foreign financial institution that is resident in a jurisdiction that has entered into an intergovernmental agreement to implement FATCA, comply with the revised diligence and reporting obligations of such intergovernmental agreement. Prospective investors should consult their tax advisors regarding this legislation.
State, Local and Non-U.S. Taxes
We and our shareholders may be subject to state, local or non-U.S. taxation in various jurisdictions, including those in which it or they transact business, own property or reside. The state, local or non-U.S. tax treatment of us and our shareholders may not conform to the U.S. federal income tax treatment discussed above. Any non-U.S. taxes incurred by us would not pass through to shareholders as a credit against their
U.S. federal income tax liability. Prospective investors should consult their tax advisors regarding the application and effect of state, local and non-U.S. income and other tax laws on an investment in the Class B Units.
Legislative 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. Department of the Treasury. In addition, according to publicly released statements, a top legislative priority of the Trump administration and the current Congress may be significant reform of the Code, including significant changes to taxation of business entities and the deductibility of interest expense. There is a substantial lack of clarity around the likelihood, timing and details of any such tax reform and the impact of any potential tax reform on our business and an investment in the Class B Units. No assurance can be given as to whether, when, or in what form, U.S. federal income tax laws applicable to us and our shareholders may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal income tax laws could adversely affect an investment in our Class B Units.
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ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), is a broad statutory framework that governs most U.S. retirement and other U.S. employee benefit plans. ERISA and the rules and regulations of the Department of Labor (the "DOL") under ERISA contain provisions that should be considered by fiduciaries of employee benefit plans subject to the provisions of Title I of ERISA ("ERISA Plans") and their legal advisors. In particular, a fiduciary of an ERISA Plan should consider whether an investment in the Class B Units (or, in the case of a participant-directed defined contribution plan (a "Participant-Directed Plan"), making our Class B Units available for investment under the Participant- Directed Plan) satisfies the requirements set forth in Part 4 of Title I of ERISA, including the requirements that (1) the investment satisfy the prudence and diversification standards of ERISA,
(2) the investment be in the best interests of the participants and beneficiaries of the ERISA Plan, (3) the investment be permissible under the terms of the ERISA Plan's investment policies and governing instruments and (4) the investment does not give rise to a nonexempt prohibited transaction under ERISA or Section 4975 of the Code.
In determining whether an investment in our Class B Units (or making our Units available as an investment option under a Participant-Directed Plan) is prudent for ERISA purposes, a fiduciary of an ERISA Plan should consider all relevant facts and circumstances including, without limitation, possible limitations on the transferability of our Class B Units, whether the investment provides sufficient liquidity in light of the foreseeable needs of the ERISA Plan (or the participant account in a Participant-Directed Plan), and whether the investment is reasonably designed, as part of the ERISA Plan's portfolio, to further the ERISA Plan's purposes, taking into consideration the risk of loss and the opportunity for gain (or other return) associated with the investment. It should be noted that we invest our assets in accordance with the investment objectives and guidelines described herein,
and that neither our Manager nor any of its affiliates has any responsibility for developing any overall investment strategy for any ERISA Plan (or the participant account in a Participant-Directed Plan) or for advising any ERISA Plan (or participant in a Participant-Directed Plan) as to the advisability or prudence of an investment in us. Rather, it is the obligation of the appropriate fiduciary for each ERISA Plan (or participant in a Participant-Directed Plan) to consider whether an investment in the Class B Units by the ERISA Plan (or making such Units available for investment under a Participant-Directed Plan in which event it is the obligation of the participant to consider whether an investment in the Class B Units is advisable), when judged in light of the overall portfolio of the ERISA Plan, will meet the prudence, diversification and other applicable requirements of ERISA.
Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan, as well as those plans that are not subject to ERISA but that are subject to Section 4975 of the Code, such as individual retirement accounts ("IRAs") and non-ERISA Keogh plans (collectively with ERISA Plans, "Plans"), and certain persons (referred to as "parties in interest" for purposes of ERISA or "disqualified persons" for purposes of the Code) having certain relationships to Plans, unless a statutory or administrative exemption is applicable to the transaction. A party in interest or disqualified person who engages in a nonexempt prohibited transaction may be subject to nondeductible excise taxes and other penalties and liabilities under ERISA and the Code, and the transaction might have to be rescinded.
In addition, a fiduciary who causes an ERISA Plan to engage in a nonexempt prohibited transaction may be personally liable for any resultant loss incurred by the ERISA Plan and may be subject to other potential remedies.
A Plan that proposes to invest in the Class B Units (or to make our Units available for investment under a Participant-Directed Plan) may already maintain a relationship with our Manager or one or more of its affiliates, as a result of which our Manager or such affiliate may be a "party in interest" under ERISA or a "disqualified person" under the Code, with respect to such Plan (e.g., if our Manager or such affiliate provides investment management, investment advisory or other services to that Plan). ERISA (and the Code) prohibits plan assets from being used for the benefit of a party in interest (or disqualified person).
This prohibition is not triggered by "incidental" benefits to a party in interest (or disqualified person) that result from a transaction involving the Plan that is motivated solely by the interests of the Plan. ERISA (and the Code) also prohibits a fiduciary from using its position to cause the Plan to make an investment from which the fiduciary, its affiliates or certain parties in which it has an interest would receive a fee or other consideration or benefit. In this circumstance, Plans that propose to invest in our Class B Units should consult with their counsel to determine whether an investment in the Class B Units would result in a transaction that is prohibited by ERISA or Section 4975 of the Code.
If our assets were considered to be assets of a Plan (referred to herein as "Plan Assets"), our management might be deemed to be fiduciaries of the investing Plan. In this event, the operation of the Company could become subject to the restrictions of the fiduciary responsibility and prohibited transaction provisions of Title I of ERISA and/or the prohibited transaction rules of Section 4975 of the Code.
The DOL has promulgated a final regulation under ERISA, 29 C.F.R. Section 2510.3101 (as modified by Section 3(42) of ERISA, the "Plan Assets Regulation"), that provides guidelines as to whether, and under what circumstances, the underlying assets of an entity will be deemed to constitute Plan Assets for purposes of applying the fiduciary requirements of Title I of ERISA (including the prohibited transaction rules of Section 406 of ERISA) and the prohibited transaction provisions of Code Section 4975.
Under the Plan Assets Regulation, the assets of an entity in which a Plan or IRA makes an equity investment will generally be deemed to be assets of such Plan or IRA unless the entity satisfies one of the exceptions to this general rule. Generally, the exceptions require that the investment in the entity be one of the following:
- in securities issued by an investment company registered under the Investment Company Act;
- in "publicly offered securities," defined generally as interests that are "freely transferable," "widely held" and registered with the SEC;
- in an "operating company" which includes "venture capital operating companies" and "real estate operating companies;" or
- in which equity participation by "benefit plan investors" is not significant.
The Units will constitute an "equity interest" for purposes of the Plan Assets Regulation, and the Units may not constitute "publicly offered securities" for purposes of the Plan Assets Regulation. In addition, the Units will not be issued by a registered investment company.
The 25% Limit. Under the Plan Assets Regulation, and assuming no other exemption applies, an entity's assets would be deemed to include "plan assets" subject to ERISA on any date if, immediately after the most recent acquisition of any equity interest in the entity, 25% or more of the value of any class of equity interests in the entity is held by "benefit plan investors" (the "25% Limit"). For purposes of this determination, the value of equity interests held by a person (other than a benefit plan investor) that has discretionary authority or control with respect to the assets of the entity or that provides investment advice for a fee with respect to such assets (or any affiliate of such a person) is disregarded. The term "benefit plan investor" is defined in the Plan Assets Regulation as (a) any employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(b) any plan that is subject to Section 4975 of the Code and (c) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (to the extent of such plan's investment in the entity). Thus, while our assets would not be considered to be "plan assets" for purposes of ERISA so long as the 25% Limit is not exceeded. Our operating agreement provides that if benefit plan investors exceed the 25% Limit, we may redeem their interests at a price equal to the then current NAV per Unit. We intend to rely on this aspect of the Plan Assets Regulation.
Operating Companies. Under the Plan Assets Regulation, an entity is an "operating company" if it is primarily engaged, directly or through a majority-owned subsidiary or subsidiaries, in the production or
sale of a product or service other than the investment of capital. In addition, the Plan Assets Regulation provides that the term operating company includes an entity qualifying as a real estate operating company ("REOC") or a venture capital operating company ("VCOC"). An entity is a REOC if: (i) on its "initial valuation date and on at least one day within each annual valuation period," at least 50% of the entity's assets, valued at cost (other than short-term investments pending long-term commitment or distribution to investors) are invested in real estate that is managed or developed and with respect to which such entity has the right to substantially participate directly in management or development activities; and (ii) such entity in the ordinary course of its business is engaged directly in the management and development of real estate during the 12-month period.
The "initial valuation date" is the date on which an entity first makes an investment that is not a short-term investment of funds pending long-term commitment. An entity's "annual valuation period" is a preestablished period not exceeding 90 days in duration, which begins no later than the anniversary of the entity's initial valuation date. Certain examples in the Plan Assets Regulation clarify that the management and development activities of an entity looking to qualify as a REOC may be carried out by independent contractors (including, in the case of a partnership, affiliates of the general partner) under the supervision of the entity. An entity will qualify as a VCOC if (i) on its initial valuation date and on at least one day during each annual valuation period, at least 50% of the entity's assets, valued at cost, consist of "venture capital investments,"
and (ii) the entity, in the ordinary course of business, actually exercises management rights with respect to one or more of its venture capital investments. The Plan Assets Regulation defines the term "venture capital investments" as investments in an operating company (other than a VCOC) with respect to which the investor obtains management rights.
If the 25% Limit is exceeded and we do not exercise our right to redeem benefit plan investors as described above, we may try to operate in a manner that will enable us to qualify as a VCOC or a REOC or to meet such other exception as may be available to prevent our assets from being treated as assets of any investing Plan for purposes of the Plan Assets Regulation. Accordingly, we believe, on the basis of the Plan Assets Regulation, that our underlying assets should not constitute "plan assets" for purposes of ERISA. However, no assurance can be given that this will be the case.
If our assets are deemed to constitute "plan assets" under ERISA, certain of the transactions in which we might normally engage could constitute a nonexempt "prohibited transaction" under ERISA or Section 4975 of the Code. In such circumstances, in our sole discretion, we may void or undo any such prohibited transaction, and we may require each investor that is a "benefit plan investor" to redeem their Units upon terms that we consider appropriate.
Prospective investors that are subject to the provisions of Title I of ERISA and/or Code Section 4975 should consult with their counsel and advisors as to the provisions of Title I of ERISA and/or Code Section 4975 relevant to an investment in the Class B Units.
As discussed above, although IRAs and non-ERISA Keogh plans are not subject to ERISA, they are subject to the provisions of Section 4975 of the Code, prohibiting transactions with "disqualified persons" and investments and transactions involving fiduciary conflicts. A prohibited transaction or conflict of interest could arise if the fiduciary making the decision to invest has a personal interest in or affiliation with the Company or any of its respective affiliates. In the case of an IRA, a prohibited transaction or conflict of interest that involves the beneficiary of the IRA could result in disqualification of the IRA. A fiduciary for an IRA who has any personal interest in or affiliation with the Company or any of its respective affiliates, should consult with his or her tax and legal advisors regarding the impact such interest may have on an investment in our Units with assets of the IRA.
Units sold by us may be purchased or owned by investors who are investing Plan assets. Our acceptance of an investment by a Plan should not be considered to be a determination or representation by us or any of our respective affiliates that such an investment is appropriate for a Plan. In consultation with its advisors, each prospective Plan investor should carefully consider whether an investment in the Company is appropriate for, and permissible under, the terms of the Plan's governing documents.
Governmental plans, foreign plans and most church plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Code Section 4975, may nevertheless be subject to local, foreign, state or other federal laws that are substantially similar to the foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should consult with their counsel and advisors before deciding to invest in the Class B Units.
The DOL has issued a final regulation significantly expanding the concept of "investment advice" for purposes of determining fiduciary status under ERISA. The DOL recognized that transactions such as the mere offering of the Units to sophisticated Plans could be characterized as fiduciary investment advice under this new regulation absent an exception and that such potential for fiduciary status would not be appropriate in these contexts. Accordingly, the DOL provided an exception based upon satisfaction of certain factual conditions. As the final regulation became effective in April 2017, we may elect to ensure these conditions are satisfied in connection with the Offering. Finally, fiduciaries of Plans should be aware that the Manager is not undertaking to provide impartial investment advice or to give advice in a fiduciary capacity in connection with the Offering or purchase of Units
and that the Manager has financial interests associated with the purchase of Units including the fees and other allocations and distributions they may receive from us as a result of the purchase of Units by a Plan.
Form 5500. Plan administrators of ERISA Plans that acquire Units may be required to report compensation, including indirect compensation, paid in connection with the ERISA Plan's investment in Units on Schedule C of Form 5500 (Annual Return/Report of Employee Benefit Plan). The descriptions in this memorandum of fees and compensation, including the fees paid to the Manager, are intended to satisfy the disclosure requirement for "eligible indirect compensation," for which an alternative reporting procedure on Schedule C of Form 5500 may be available.
[remainder of page intentionally left blank]

HOW TO SUBSCRIBE TO THIS OFFERING

Plan of Distribution of Class B Units
We are offering up to $50,000,000 in the Class B Units pursuant to this Offering Circular. The Class B Units subject to this Offering be primarily offered by our Manager in reliance on the exemption from registration contained in Rule 3a4-1 of the Securities Exchange Act of 1934 ("Exchange Act").
Our Manager has licensed a software platform from Katipult, Inc. which will be the sole method of distribution of the Class B Units in connection with this Offering ("Platform"), who, aside from a license fee, will receive no commission or other remuneration from this Offering. Through the Platform, Class B Units will be sold directly to the investor without the use of a broker or middleman.
The Platform is not subject to the registration requirements of Section 304 of the JOBS Act because it does not offer and sell securities pursuant to Section 4(a)(6) of the Securities Act, and, therefore, does not meet the definition of a "funding portal."
This Offering Circular and supplements hereto will be furnished to prospective investors upon their request via electronic PDF format and will be available for viewing and download 24 hours per day, 7 days per week on Budding Equity's website, as well as on the SEC's website at www.sec.gov.
No present holder of Units will be selling any securities in connection with this Offering. We are exempt from registration as an investment company under the Investment Company Act and our Manager will monitor all of our business activities so that we are in compliance with the requirements necessary to maintain our exemption from registration as an investment company pursuant to the exemptions set forth in Section 3(c)(1) and/or Section 3(c)(5)(C) of the Investment Company Act.
We do not issue certificates. Instead, the Class B Units are recorded and maintained on the Company's membership register.

Subscription Procedures
Investors seeking to purchase the Class B Units who satisfy the "qualified purchaser" standards should proceed as follows:
- Read this entire Offering Circular and any supplements accompanying this Offering Circular.
- Electronically complete and execute a copy of the subscription agreement. A specimen copy of the subscription agreement, including instructions for completing it, is included in this Offering Circular.
- Electronically provide ACH instructions to us for the full purchase price of our Class B Units being subscribed for; note, however, for subscriptions in excess of $100,000, we will require that the purchase price of our Class B Units be provided via bank wire.
In order to subscribe to purchase the Class B Units, a prospective investor must electronically complete, sign and deliver to us an executed subscription agreement like the one attached to this Offering Circular, and wire funds for its subscription amount in accordance with the instructions provided therein. Settlement may occur up to 45 days after a prospective investor submits a subscription agreement, depending on the volume of subscriptions received.
Prospective investors who have submitted subscription agreements will not become Members until the Minimum Offering Amount is met and at any time prior, they may revoke their subscriptions. Until the Company raises the Minimum Offering Amount or if the Offering terminates because the Company has not raised the Minimum Offering Amount, the Company will hold all investor funds in a non-interest-bearing account and will endeavor to promptly return all investor funds in the event that the Minimum Offering Amount is not raised by 12 months subsequent to the Offering Date.
If the Company raises funds at least or above the Minimum Offering Amount, an investor will become a Member, including for tax purposes, and the Class B Units will be issued, as of the date of settlement. Settlement will not occur until an investor's funds have cleared and the Manager accepts the investor as a Member. The number of Class B Units issued to an investor will be calculated based on the price per Unit in effect on the date we receive the subscription.
We reserve the right to reject any investor's subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a "qualified purchaser" for purposes of Section 18(b)(4)(D)(ii) of the Securities Act. If the Offering terminates or if any prospective investor's subscription is rejected, all funds received from such investors will be returned without interest or deduction.
By executing the subscription agreement and paying the total purchase price for the Class B Units subscribed for, each investor agrees to accept the terms of the subscription agreement and attests that the investor meets the minimum standards of a "qualified purchaser", and that such subscription for the Class B Units does not exceed 10% of the greater of such investor's annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). Subscriptions will be binding upon investors but will be effective only upon our acceptance and we reserve the right to reject any subscription in whole or in part.
We will not draw funds from any subscriber until the date your subscription is accepted. If we accept your subscription, we will email you a confirmation.
Minimum Purchase Requirements You must initially purchase at least 100 Class B Units in this Offering, or $1,000 based on the current per Unit price. If you have satisfied the applicable minimum purchase requirement, any additional purchase must be in amounts of at least $10 (or the then NAV per Unit). However, in certain instances we may revise the minimum purchase requirements in the future or elect to waive the minimum purchase requirement, such as for individuals who participate in different plans established by our Manager. In addition, in order to help protect us from the risk of chargebacks, we require that any subscription in excess of $100,000 of the Class B Units be funded through a bank wire transfer and not an ACH electronic fund transfer.
[remainder of page intentionally left blank]

ADDITIONAL INFORMATION

We have filed with the SEC an offering statement under the Securities Act on Form 1-A regarding this Offering. This Offering Circular, which is part of the offering statement, does not contain all the information set forth in this offering statement and the exhibits related thereto filed with the SEC, reference to which is hereby made. Upon the qualification of this offering statement, we became subject to the informational reporting requirements of the Exchange Act that are applicable to Tier 2 companies whose securities are registered pursuant to Regulation A, and accordingly, we will file annual reports, semiannual reports and other information with the SEC. You may read and copy the offering statement, the related exhibits and the reports and other information we file with the SEC at the SEC's public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549.
You can also request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information regarding the operation of the public reference rooms. The SEC also maintains a website at www.sec.gov that contains reports, information statements and other information regarding issuers that file with the SEC.
You may also request a copy of these filings at no cost, by writing, emailing or telephoning us at:

Seed Equity Properties LLC
c/o Budding Equity Management, Inc.
1660 South Albion Street, Suite 321
Denver, Colorado 80222
info@budeq.com
(303)848-8312
www.budeq.com

Within 120 days after the end of each fiscal year we provide to our Members of record an annual report. The annual report contains audited financial statements and certain other financial and narrative information that we are required to provide to Members.
[end of document]

Part F/S

PART III-EXHIBITS

Index to Exhibits

Exhibit No. Description
2.1 Articles of Organization
2.2 Form of Operating Agreement
4.1 Form of Subscription Agreement
6.1 Form of Management Agreement between Seed Equity Properties LLC and Budding Equity Management LLC
6.2 Form of Software License Agreement between Budding Equity Management, LLC and JOI Media Inc.

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Denver, Colorado., on May 16, 2019.

Seed Equity Properties, LLC
By: Budding Equity Management, Inc.
By:/s/ N. Nora Nye

Name:
N. Nora Nye

Title: Chief Executive Officer
This offering statement has been signed by the following persons in the capacities and on the dates indicated.

Signature
Title
Date May 16, 2019

/s/ N. Nora Nye Chief Executive Officer of Budding Equity Management, Inc.
(Principal Executive Officer)

/s/ Peter Albertsson
Chief Financial Officer and Treasurer of Budding Equity Management, Inc.
Peter Albertsson
(Principal Financial Officer and Principal Accounting Officer)

By: /s/ N. Nora Nye
Attorney-in-fact

EX1A-15 ADD EXHB
3
ManagementAgreementv11rev1.htm
MANAGEMENT AGREEMENT V11 REV 5-2019

ManagementAgreementv11rev1

MANAGEMENT AGREEMENT

This Agreement is entered into by and between BUDDING EQUITY MANAGEMENT, INC., a
Colorado corporation ("Manager"), and SEED EQUITY PROPERTIES LLC, a Colorado
limited liability company (the "Company").
In consideration of the mutual covenants herein, the Company and Manager agree as follows:

1. Services.

The Company retains Manager to render investment management
services and to manage the Company's:

(i) day-to-day operations;
(ii) portfolio of commercial
real estate loans (including the origination of such loans) ("Loans"); and
(iii) other select real
estate-related assets (collectively, "Assets").

Manager also has the authority to make all of the
decisions regarding Loans and Assets on behalf of the Company, subject to the limitations in the
Company's operating agreement ("Operating Agreement"). In connection therewith, Manager is
authorized to select and engage one or more banks, trust companies and brokerage firms as
custodians or brokers for funds or Assets and to instruct such custodians and brokers with respect
to the purchase, sale, exchange, delivery or other disposition of such Assets and disbursements
relating thereto.
Notwithstanding anything in this Agreement to the contrary, Manager shall have
no authority hereunder to take or have possession of any Assets or to direct delivery of any
Assets or payment of any funds associated therewith to itself or to direct any disposition of such
Assets or funds except to the Company.

2. Power of Attorney.

To enable Manager to exercise fully its discretion and
authority as provided in Section 1, the Company hereby appoints Manager as the Company's
agent and attorney-in-fact with full power and authority for the Company and on the Company's
behalf to:
(a) lend money under terms and to such recipients in Manager's reasonable discretion,
limited by the Company's direction as required under Section 3;
(b) buy, sell and otherwise deal
in the Assets; and
(c) enter into contracts necessary to achieve the foregoing objectives. This
power of attorney is coupled with an interest and shall terminate only on termination of this
Agreement or on receipt by Manager of written notice from the Company.

3. Company Information.

The Company shall promptly and regularly advise
Manager of (a) its lending and investment objectives; (b) any changes or modifications to those
objectives; and (c) any specific investment restrictions relating to Loans or Assets. The Company
shall promptly notify Manager in writing if the Company considers any Loans made or the
acquisition or disposition of any Assets violate such objectives or restrictions. The Company
may at any time direct Manager to sell any Assets or Loans, or to lend money in a particular
manner or take such other lawful actions as the Company may specify to effect compliance with
the Company's investment objectives, and Manager shall promptly follow those instructions.

The Company agrees promptly to furnish, or to cause the Company's custodian or agent to
furnish, to Manager all data and information Manager may reasonably request to render the
management services described above. The Company shall be solely responsible for the
completeness and accuracy of the data and information furnished to Manager hereunder.

4. Fees.

As compensation for the Manager's performance of its duties to the Company required by
this Agreement, the Company shall pay the following fees to Manager:

Fee Description
Determination of Fee Amount
Asset Management Fee
On a quarterly basis, the Company shall pay the Manager
an "Asset Management Fee," which is based on the value
of "Assets Under Management" placed under
management during the preceding quarter. The Asset
Management Fee will be equal to the annualized
percentage rates set forth below.
Until December 31,
2019, the value of Assets Under Management will be
equal to the Company's net offering proceeds as of the
last day of each quarter. Beginning January 1, 2020, the
value of Assets Under Management will be based on the
Net Asset Value ("NAV") of the assets placed under
management during the preceding quarter.

Value of Assets Under
Management and Asset Management Fee:

$0-10M 5%
$10M-$20M 4%
$20M-$30M 3%
$30M-$40M 2%
$40M-$50M 1%

Servicing Fee
Servicing fee from 0 to 0.5% paid to Manager for the
servicing and administration of certain loans and
investments held by the Company. The servicing fee is
calculated as an annual percentage of the stated value of
the asset, and is deducted at the time that payments on
the asset are made. The fee is deducted in proportion to
the split between accrued and current payments.
Servicing fee may be waived in Manager's sole
discretion.

Special Servicing Fee:
The Company shall pay the Manager a quarterly special
servicing fee equal to an annualized rate of 1.00% of the
original value of a non-performing asset. Whether an
asset is deemed to be non-performing is in the sole
discretion of the Manager.

Origination Fee

: The Company shall charge an "Origination Fee" to each
borrower, in an amount to be designated in Manager's
sole discretion, of up to three percent (3.0%) of the
amount funded to acquire or originate loans or other real
estate related assets. The Company shall collect the
Origination Fee at the closing of each loan or real estate
transaction and pay such fee to Manager within ten (10)
days of the closing.

5. Responsibility for Expenses.

The Company shall be responsible for all expenses
related to the operation of the Company's business including, but not limited to services
provided by third-party contractors, vendors, and suppliers. The Company shall also be
responsible for all expenses related to trading Assets or the making of any Loans, including, but
not limited to, interest on margin borrowing, dividends payable with respect to Assets sold short,
custodial fees, brokerage commissions, bank service fees, and interest on Asset-related loans and
debit balances.

6. Payment of Fees.

Manager shall bill the Company for Fees, Expenses, or other
amounts due to Manager from Company under this Agreement, in which case the Company shall
pay such amount to Manager within ten (10) days of receipt of such bill.

7. Account Losses.

To the extent permitted under applicable law, the Company
agrees that Manager will not be liable to the Company for any losses incurred by the Company
that arise out of or are in any way connected with any recommendation or other act or failure to
act of Manager under this Agreement, including, but not limited to, any error in judgment with
respect to the Loans or the Assets, so long as such recommendation or other act or failure to act
does not constitute a breach of Manager's fiduciary duty to the Company.
The Company shall
indemnify and defend Manager and its officers and employees and hold them harmless from and
against any and all claims, losses, damages, liabilities and expenses, as they are incurred, by
reason of any act or omission of the Company or any custodian, broker, agent or other third party
selected by Manager in a commercially reasonable manner or selected by the Company, except
such as arise from Manager's breach of fiduciary duty to the Company. Anything in this Section
7 or otherwise in this Agreement to the contrary notwithstanding, however, nothing herein shall
constitute a waiver or limitation of any rights that the Company may have under any federal or
state securities laws.

8. Termination, Withdrawals.

This Agreement may be terminated by Manager with
or without cause by written notice to the other party, effective 25 days after receipt of such notice
by the addressee or such later date as may be specified in such notice. This Agreement may be
terminated by Company only for cause, as more fully described in the Company's Operating
Agreement.

9. Independent Contractor.

Manager is and will hereafter act as an independent
contractor and not as an employee of the Company, and nothing in this Agreement may be
interpreted or construed to create any employment, partnership, joint venture or other
relationship between Manager and the Company.

10. Assignment.

Manager may not assign this Agreement without the prior consent of
the Company. This Agreement shall bind and inure to the benefit of and be enforceable by the
parties and their respective successors and assigns.

11. Effective Date of Agreement.

Notwithstanding the date that this Agreement is
signed or delivered by either party, the "Effective Date" shall be June 8, 2018.

12. Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF COLORADO.

13. Notices.

All communications under this Agreement must be in writing and will be
deemed duly given and received when delivered personally, when sent by facsimile transmission,
three days after being sent by first class mail, or one business day after being deposited for next-
day delivery with Federal Express or another nationally recognized overnight delivery service,
all charges or postage prepaid, properly addressed to the party to receive such notice at the
party's address indicated below that party's signature on this Agreement, or at any other address
that either party may designate by notice to the other.

14. Severability.

The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any and all other provisions hereof.

15. Entire Agreement.

This Agreement is the entire agreement of the parties and
supersedes all prior or contemporaneous written or oral negotiations, correspondence,
agreements and understandings (including any and all pre-existing investment management
agreements, which are hereby cancelled), regarding the subject matter hereof.

16. Counterparts.

This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall constitute one and the
same instrument.

17. No Third-Party Beneficiaries.

Neither party intends for this Agreement to benefit
any third-party not expressly named in this Agreement.

[signature page follows]

IN WITNESS WHEREOF, this Agreement has been duly signed by or on behalf of the
parties hereto on the dates set forth below their respective signatures.

"MANAGER"
BUDDING EQUITY MANAGEMENT, INC.,
a Colorado corporation

By: /s/N. Nora Nye
Dated: May 16, 2019
Name: N. Nora Nye

Title: President/CEO

Address: 1660 S. Albion Street, Suite 321

Denver, CO 80222

Telephone: 303-848-8312

Facsimile: 303-957-5714

"COMPANY"
SEED EQUITY PROPERTIES LLC,
a Colorado limited liability company

By: /s/N. Nora Nye

Dated: May 16, 2019

Name: N. Nora Nye

Title: President/CEO of its Manager and
Chair of Board of Directors

Address: 1660 S. Albion Street, Suite 321
Denver, CO 80222

Telephone: 303-848-8312

Facsimile: 303-957-5714

EX1A-2B BYLAWS
4
OperatingAgreementv6rev6.htm
OPERATING AGREEMENT V6 REV 12-2018

OperatingAgreementv6rev6

OPERATING AGREEMENT OF
SEED EQUITY PROPERTIES, LLC,
a Colorado Limited Liability Company
(Effective Date: April 10, 2018)
OPERATING AGREEMENT OF
SEED EQUITY PROPERTIES, LLC,
a Colorado Limited Liability Company

THIS OPERATING AGREEMENT (this "Agreement") of SEED EQUITY PROPERTIES, LLC, a Colorado limited liability company (the "Company") is entered into effective as of the 10th day of April, 2018 (the "Effective Date") by and among the undersigned members, as the Members of the Company (each of them a "Member" and collectively, the "Members") and the undersigned Manager (the "Manager") of the Company. The Members and Manager are collectively referred to herein as the "Parties" and may be referred to individually as a "Party." Definitions for initially capitalized terms used herein, which are not otherwise immediately defined, are set forth in Article I of this Agreement.

RECITALS:

A. The Company was formed to qualify as a Real Estate Investment Trust under the Code, and to make loans for the acquisition and development of real estate;

B. The parties set forth on Exhibit A hereto, in their respective capacities as Member and/or Manager now desire to enter into and establish this Agreement as the operating agreement of the Company.

AGREEMENT:

NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE I
DEFINITIONS
1.1 General. The capitalized terms listed below shall have the following meanings when used in this Agreement:
(a) "Act" means the Colorado Limited Liability Company Act, Section 7-80-101, et seq., C.R.S. (or any corresponding provisions of succeeding law), and all references to specific sections thereof shall include any amended or successor provisions thereto;
(b) "Affiliate" means any Person directly or indirectly controlling, controlled by, or under common control with another Person. "Control," "controlled" and "controlling" means the power to direct or cause the direction of the management and policies of a Person.
(c) "Agreed Value" with respect to any single Unit means an amount equal to the amount that would be received by the Member or Unit Holder whose Units are being transferred, on a per Unit basis, assuming: (i) all Company assets including its intangible assets, were sold for cash equal to their fair market value; (ii) all Company liabilities were satisfied to the extent required by their terms; and (iii) the net assets of the Company were distributed to all Members and Unit Holders pursuant to Article XII hereof. For purposes of clarification, because the Agreed Value of a Member's or Unit Holder's Units takes into consideration the Contribution Account, Preference Account, and Capital Account applicable to such Units, the Agreed Value per Unit for one Member or Unit Holder may not necessarily be the same as the Agreed Value for another Member or Unit Holder. For purposes of this definition, the "fair market value" of each Company asset is the highest price available in an open and unrestricted market between informed, prudent parties, acting at arm's length and under no compulsion to act, expressed in terms of money or money's worth, as would be evidenced by a written offer to purchase such asset by an unrelated third-party, and will disregard any value that might be assigned by a purchaser with a special interest. If the transferor and transferee of a Unit cannot agree as to the fair market value of any Company asset, then the fair market value of such asset shall be its Appraised Fair Market Value.
(d) "Appraised Fair Market Value" of any Company asset means the fair market value of such asset determined by an independent appraiser mutually selected by the transferor and transferee. If the transferor and transferee of a Unit cannot mutually select an appraiser, within 21 days of the event triggering the need for an appraisal, then the transferor and transferee shall each identify one appraiser by written notice to the other party. The appraisers so selected shall independently appraise the asset(s) in dispute within 48 days of their selection. Within 14 days of the date written notice of completion of both appraisals, the parties shall meet and discuss the appraisals to determine a mutually acceptable valuation. If there is no agreement, then the identified appraisers shall mutually select a third appraiser, who shall independently appraise the asset(s) in dispute within 35 days of the date of selection and whose appraisal shall be controlling upon the affected parties. If either the transferor or transferee fails to timely identify an appraiser, or an appraiser fails to meet the appraisal deadline, such failure shall be deemed a waiver of the failing party's rights under this section, and the appraisal of the appraiser who was timely identified, or who timely appraised, shall appraise the asset(s) in dispute. The transferor and transferee shall pay for the fees and costs incurred with respect to their identified appraiser. Transferor and transferee shall equally divide the fees and costs of any third appraiser selected by the parties' appraisers, in the event the parties are unable to agree on the value of the asset(s) in dispute, as more fully described above.
(e) "Board" or "Board of Directors" means a governing board, comprised of the Directors, functioning in substantially the same manner as a board of directors of a corporation, being delegated the power and authority such that the business and affairs of the Company shall be generally managed by the Board of Managers as more particularly set forth in Article 4.2.
(f) "Budget" means the budget for the operation of the Company and any operating subsidiaries approved as part of the Business Plan in the manner required by this Agreement, which, so long as the over Budget is not exceeded by more than five percent (5%) and no line item is exceeded by more than ten percent (10%), after application of any contingency provided and/or cost savings achieved, such expenditures shall be deemed compliant with the Budget. Projected costs and expenses of the Company shall not be included in the Budget.
(g) "Business Day" means any day that is not a Saturday, Sunday, or "legal holiday" as more fully described in Colorado Rule of Civil Procedure 6(a)(2).
(h) "Business Plan" means the operating plan for the Company and any operating subsidiaries approved in the manner required by this Agreement. So long as actions do not cause a substantial variance from the provisions which are part of the Business Plan, such actions shall be deemed in compliance therewith.
(i) "Capital Account" means the Capital Account which shall be maintained for each Class A Member in accordance with the provisions of Treas. Reg. Section 1.704-1.
(j) "Capital Contribution" means any contribution to the capital of the Company, whenever made.
(k) "Claims" is defined in Article 8.3(a)
(l) "Class A Co-Seller" is defined in Article 11.9.
(m) "Class A Director" is defined in Article 4.4.
(n) "Class A Member" means a Member who owns one or more Class A Units and for whom a Capital Account is established.
(o) "Class A Percentage Interest" means, at any particular time, the percentage interest of each Class A Member or Class A Unit Holder of the Company determined with respect to a particular Class A Member or Class A Unit Holder by dividing the number of Class A Units owned by such Class A Member or Class A Unit Holder by the aggregate number of outstanding Class A Units.
(p) "Class A Units" means Units designated as Class A Units by this Agreement.
(q) "Class A Unit Holder" means a Person who owns Class A Units of the Company but who is not a Class A Member, including, except as otherwise provided herein, a Class A Member who becomes a Withdrawn Member.
(r) "Class A Withdrawal Purchase Option" is defined in Article 10.4(b)(i).
(s) "Class A Withdrawal Purchase Option Notice" is defined in Article 10.4(c)(i).
(t) "Class B Member" means a Member who owns one or more Class B Units.
(u) "Class B Percentage Interest" means, at any particular time, the percentage interest of each Class B Member or Class B Unit Holder of the Company determined with respect to a particular Class B Member or Class B Unit Holder by dividing the number of Class B Units owned by such Class B Member or Class B Unit Holder by the aggregate number of outstanding Class B Units.
(v) "Class B Units" means Units designated as Class B Units by this Agreement.
(w) "Class B Unit Holder" means a Person who owns Class B Units of the Company but who is not a Class B Member, including, except as otherwise provided herein, a Class B Member who becomes a Withdrawn Member.
(x) "Code" means the Internal Revenue Code of 1986, as amended from time to time. All references herein to sections of the Code include any corresponding provision or provisions of succeeding law.
(y) "Company" means Seed Equity Properties, LLC, a Colorado limited liability company.
(z) "Company Property" means assets owned by the Company, whether tangible or intangible, which may be more particularly identified on Exhibit B to this Agreement.
(aa) "Company Withdrawal Purchase Option" is defined in Article 10.4(b)(ii).
(bb) "Company Withdrawal Purchase Option Notice" is defined in Section 10.4(c)(ii).
(cc) "Compliance Committee" is defined in Article 4.11.
(dd) "Confidential Information" means: (i) the terms of this Agreement (except as contemplated in Article 4.3); (ii) information that the Company (or one of its subsidiaries) maintains in confidence from third parties; (iii) information that the Person knows to be proprietary to the Company or one of its subsidiaries, Members, Unit Holders, Directors, or Manager; (iv) financial information relating to the Company, its subsidiaries, to the Members, Unit Holders, Directors, or Manager; (v) information relating to the Company's (or its subsidiaries') marketing and business plans and strategies; (vi) information concerning the methods of providing the Company's (or its subsidiaries') services; (vii) information in Company (or subsidiary) personnel files and similar files relating to the Company's (or its subsidiaries') Members, Unit Holders, Directors, Manager, officers, and employees; (ix) information entrusted to the Company (or its subsidiaries) in confidence by third parties; and (x) information reasonably designated by Manager or any Director as Confidential Information.
(ee) "Contribution Account" of a Class A Member or Class A Unit Holder means, at any given time, an amount equal to the excess, if any, of: (i) the aggregate amount of Capital Contributions made by such Person less (ii) the aggregate amount of distributions previously distributed to such Person, at such point in time, pursuant to Article 5.1 (a) and Article 12.2(c).
(ff) "Covered Person" means a Member, a Unit Holder, a Manager, a Director or an Affiliate of any of them, and, directly or indirectly, the respective officers, directors, shareholders, partners, members, trustees, beneficiaries, employees, representatives or agents of a Member, a Unit Holder, a Manager, or an Affiliate of any of them.
(gg) "Damages" is defined in Article 8.3(a).
(hh) "Default Interest Rate" means the lesser of :(i) the rate per annum equal to "The Wall Street Journal Prime Rate of Interest" as quoted in the Money Rates section of The Wall Street Journal; or (ii) eight per cent (8%) per annum.
(ii) "Depreciation" means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if such depreciation, amortization or other cost recovery deductions with respect to any such asset for federal income tax purposes is zero for any Fiscal Year, Depreciation shall be determined with reference to the asset's Gross Asset Value at the beginning of such year using any reasonable method reasonably selected by the Board.
(jj) "Directors" means those persons serving on the Board as further provided in Article IV hereof.
(kk) "Disabling Conduct" means a material violation of this Agreement by acts of gross negligence, embezzlement, fraud, or willful misconduct, after notice and an opportunity to cure and/or contest same as provided elsewhere herein.
(ll) "Disposing Class A Member" is defined in Article 11.4(b).
(mm) "Disposing Class B Member" is defined in Article 11.4(b).
(nn) "Disposing Member" means either a Disposing Class A Member or a Disposing Class B Member, as the case may be.
(oo) "Disposition Notice" is defined in Article 11.4(b).
(pp) "Effective Date" is defined in the opening paragraph to this Agreement.
(qq) "FCPA" means the United States Foreign Corrupt Practices Act of 1977, as amended and in effect from time to time, or the corresponding provisions of any successor statute, and the rules and regulations promulgated thereunder.
(rr) "Fiscal Year" means the Company's taxable year, which shall be a calendar year except as otherwise required by law.
(ss) "IRS" means the Internal Revenue Service.
(tt) "Losses" is defined in Section A1 of Appendix A.
(uu) "Majority of the Board" means the consent of Directors comprising more than fifty-percent (50%) of the total number of Directors on the Board.
(vv) "Majority-in-Interest of the Members" or "Majority-in-Interest" means the written consent of Members whose Percentage Interest exceeds fifty percent (50%), which consent, except as otherwise provided herein, may be given in such Member's sole and absolute discretion.
(ww) "Majority-in-Interest of the Class A" means the consent of Class A Members and Class A Unit Holders whose Class A Percentage Interest exceeds fifty- percent (50%).
(xx) "Majority-in-Interest of the Class B" means the consent of Class B Members whose Class B Percentage Interest exceeds fifty- percent (50%).
(yy) "Manager" means Budding Equity Management, Inc., a Colorado corporation, until such Person is no longer the Manager, and each other Person who becomes Manager of the Company in accordance with this Agreement, until such Person is no longer a Manager.
(zz) "Marital Dissolution Notice" is defined in Article 10.5(b).
(aaa) "Marital Dissolution Purchase Notice" is defined in Article 10. 5(c).
(bbb) "Member(s)" means (i) the Members executing this Agreement or a counterpart hereof, until such time, if any, that any such Member becomes a Withdrawn Member; (ii) any Person acquiring Units directly from the Company in accordance with this Agreement until such time, if any, that any such Person becomes a Withdrawn Member; and (iii) any Person who acquires Units in the Company pursuant to a Permitted Transfer and who is deemed, or is admitted as, a Substitute Member until such time, if any, that such Person becomes a Withdrawn Member.
(ccc) ''Net Available Cash Flow" means, with respect to any period, the Company's gross cash receipts derived from any source whatsoever (not including Capital Contributions), reduced by the portion thereof used to pay or establish reasonable reserves for all Company expenses, including, but not limited to, debt payments and accrued interest, contingencies, proposed acquisitions and payment of indemnities pursuant to the provisions of this Agreement, all as reasonably determined by the Manager pursuant to Article 4.1. "Net Available Cash Flow" shall not be reduced by depreciation, amortization, cost recovery deductions, or similar allowances.
(ddd) "Percentage Interest" means at any particular time the percentage interest of each Member or Unit Holder of the Company determined with respect to a particular Member or Unit Holder by dividing the number of Units owned by such Member or Unit Holder by the aggregate total number of Units then outstanding (the combined number of outstanding units of all Classes).
(eee) "Permitted Transfer" means a transfer as defined in Article 11 .2.
(fff) "Person" means any individual, firm, corporation, partnership, limited liability company, trust, estate, association, or other legal entity.
(ggg) "Proceeding" is defined in Article 8.3(a).
(hhh) "Profits" "Profits" or "Losses" means, for each Fiscal Year or other period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Code section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code section 703(a)(1) shall be included in taxable income or loss).
(iii) "Recipient" is defined in Article 13.15(b).
(jjj) "REIT" means a real estate investment company as defined under Sections 856-860 of the Code.
(kkk) "REIT Rules" means those provisions of the Code, Regulations and proposed regulations promulgated thereunder, any Revenue Rulings or Procedures issued by the Service and any administrative rulings or court decisions respecting the requirements and conditions of the qualification and taxation of REITs.
(lll) "Regulations" or "Treas. Reg." means the regulations issued by the United States Department of the Treasury under the Code.
(mmm) "Sale Notice" is defined in Article 11.9.
(nnn) "Seller" is defined in Article 11.9.
(ooo) "Special Purchase Right Upon Marital Dissolution" is defined in Article 10.5(a).
(ppp) "Substitute Member" means a Person who acquires Units from a Member and who satisfies all of the applicable conditions set forth in this Agreement, including, but not limited to the applicable provisions set forth in Articles 11.3 and 11.5 hereof.
(qqq) "Taxing Jurisdiction" means any federal, state, local or foreign government that collects tax, interest, and penalties, however designated, on any Member's share of income or gain attributable to the Company.
(rrr) "Tax Matters Partner" is defined in Article 9.3(d).
(sss) "Transfer" means, when used as a noun, any assignment, conveyance, disposition, sale, gift, or other transfer, and when used as a verb, to assign, convey, dispose of, gift, sell, or otherwise transfer, in each case, whether voluntarily or involuntarily, directly or indirectly.
(ttt) "Unit" means the economic interest in the Company acquired by a Member or unit Holder representing the economic rights of a member or Unit Holder and the Member's or Unit Holder's permitted assignees and successors to share in the distributions of cash and other property from the Company pursuant to the Act and this Agreement, together with the Member's or Unit Holder's distributive share of the Company's Profits and Losses.
(uuu) "Unit Holder" means a Person who owns Units of the Company but who is not a Member, including, except as otherwise provided herein, a Member who becomes a Withdrawn Member.
(vvv) "Withdrawal Event" means the occurrence of any of the following events:
a. A Member voluntarily withdraws from the Company;
b. A Member does any of the following:
i. Makes an assignment for the benefit of creditors;
ii. Files an voluntary petition in bankruptcy;
iii. Is adjudicated as bankrupt or insolvent;
iv. Files a petition or answer seeking the Member's own reorganization, arrangement, composition, readjustment, liquidation, or similar relief under any statute, law, or rule;
v. Files an answer or other pleading admitting or failing to contest the material allegations of a petition field against the Member in a bankruptcy, insolvency, reorganization, or similar proceeding;
vi. Seeks, consents, or acquiesces in the appointment of a trustee, receiver, or liquidator of the Member or any substantial part of the Member's property;
c. If such Member is a natural person: (i) such Member's death; or (ii) entry of an order or judgment by a court of competent jurisdiction adjudicating such Member incompetent to manage such Member's affairs or estate, such as an order appointing a conservator for such Member;
d. If such Member is acting as a Member by virtue of being a trustee of a trust, the termination of the trust, but not merely the substitution of a new trustee;
e. If such Member is a general or limited partnership, the dissolution and winding up of the partnership;
f. If such Member is a corporation, the filing of articles of termination, certificate of dissolution, or its equivalent for the corporation or revocation of its charter;
g. If such Member is an estate, the distribution by the fiduciary of the estate's entire interest in the Company;
h. If such Member is a limited liability company, the filing of articles of dissolution or termination or their equivalent for the foreign or domestic limited liability company.
(www) "Withdrawn Member" means a Member following the occurrence of a Withdraw Event with respect to that Member
(xxx) "Withdrawal Notice" is defined in Article 10.4(a),
ARTICLE II
FORMATION OF THE COMPANY
2.1 Formation. The Company was formed pursuant to the Act effective upon the filing of the Articles of Organization with the Colorado Secretary of State. The Manager shall execute and acknowledge any and all certificates and instruments and do all filing, recording, and other acts as may be necessary or appropriate to comply with the requirements of the Act relating to the formation, operation, and maintenance of the Company in accordance with the terms of this Agreement, and, to the extent necessary, each Member and Unit Holder shall execute and acknowledge any such instruments or acts as reasonably requested by the Manager.
2.2 Name. The name of the Company is SEED EQUITY PROPERTIES, LLC and the business of the Company shall be carried on in this name with such variations and changes as the Manger deems necessary and appropriate, including to comply with requirements of the jurisdictions in which the Company's operations are conducted.
2.3 Purposes and Powers. The Company is authorized to, and shall be engaged in the business of making loans in furtherance of the acquisition and development of real property. Subject to approval of the Board, the Company may form additional wholly-owned subsidiaries to provide additional related services within the same industry; provided, however, the pursuit of any new business ventures unrelated to the industry described above shall require the approval by a Majority in Interest of the Class A Members.
2.4 Known Place of Business. The Company's known place business shall be located at 1660 S. Albion St., Suite 321, Denver, CO 80222. The Manager may change the location of the Company's known place of business.
2.5 Registered Agent. The name and address of the Company's Registered Agent for service of process on the Company in the State of Colorado is: N. Nora Nye, Esq. 1660 S. Albion St., Suite 321, Denver, CO 80222.
2.6 Authorization to do Business Outside Colorado; Filings. The Manager is authorized to execute, shall execute, shall cause to be filed, and is authorized to take and shall take any and all other actions as the Manager and attorney(s) for the Company deem reasonably necessary to prefect and maintain the Company as a limited liability company qualified and authorized to do business in good standing in every jurisdiction that the Manager deems necessary for the business of the Company. And, to the extent necessary, each Member and Unit Holder shall execute and acknowledge any such instruments or acts as reasonably requested by the Manager.
2.7 Term. The Company's term commenced upon the filing of the Articles of Organization and is perpetual, unless earlier terminated in accordance with Article XII hereof or in accordance with the Act.
2.8 Company Classification. The Members intend that the Company always be operated as a corporation and in a manner consistent with its treatment REIT under the Code and REIT Rules for federal and state income tax purposes. The Members also intend that the Company not be operated or treated as a partnership for purposes of Section 303 of Title 11 of the United States Code (relating to bankruptcy). The Members intend for the Company to qualify as a REIT under the relevant provisions of the Code. The Members intend for the Company to follow the REIT Rules in order to qualify as a REIT and to maintain such status for the life of the Company, once such status is realized. However, the foregoing sentence notwithstanding, the Manager, with consent of a majority of the Board may revoke or terminate the Company's REIT election/qualification in the event that the Board and the Manager determine that it is no longer in the Company's best interest to continue to qualify and operate as a REIT. The Company is not a partnership for purposes of any state law partnership act or limited partnership act and the Members are not partners for the purposes of such acts.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Capital Contributions. The Class A Members of the Company contributed or caused to be contributed to the capital of the Company with the property, services, or cash identified in Exhibits A and B attached hereto.
3.2 Additional Capital Contributions.
(a) If the Board and a Majority in Interest of the Class A agree, in each instance in the sole absolute discretion of each applicable Person, then the holders of Class A Units may make, but shall not be obligated to make an additional Capital Contribution to the Company in an aggregate amount to be agreed upon by the Board and the Majority in Interest of the Class A; provided, however, if Company and the operating subsidiaries have incurred material operating losses not provided for in the Business Plan and Budget at or prior to the time any such additional Capital Contributions are sought, approval of such additional Capital Contributions shall also require the approval of each of the Class A Directors. Upon payment of such additional Capital Contribution, the Company shall issue additional Class A Units to each contributing Person, each new Class A Unit issued for its fair market value. The fair market value of an additional Class A Unit issued pursuant to paragraph shall be determined by dividing the Company's fair market value immediately prior to such additional capital contribution by the number of units outstanding immediately prior to such issuance. The Company's fair market value shall be reasonably determined by the Board. Immediately before issuing Class A Units, the Gross Asset Value of the Company's assets will be adjusted in a manner provided under subsection (b) of the definition of Gross Asset Value in Appendix A hereof, and each Member's and Unit Holder's Capital Account will reflect such adjusted Gross Asset Value as required under Regulations Section1.704-1(b)(iv). Each Class A Unit Holder's Contribution Account shall also be adjusted.
(b) If the holders of a Majority in Interest of Class A do not approve any requested additional Capital Contribution, and a Majority of the Board, together with the concurrence of each Class A Director, determines that an additional Capital Contributions are needed to enable the Company to conduct its business, in such event the Board may authorize issuance of additional Units, and the Board will determine the rights to be granted the additional Units and will give notice to the Members in writing at least 30 days before the date on which the Members may make such additional capital contributions. Without the approval of a Majority in Interest of the Class A Members, no such issuance shall affect the rights of the Class A Members as to distribution priorities. The notice shall set for the amount of additional Capital Contributions needed, the purpose for which such contributions are needed, and the date by which the Members may contribute such additional amounts. No Member shall be required to make any such additional Capital Contribution. Upon payment of the additional Capital Contribution, the Company shall issue additional non-Class A or B Units to each contributing member, each new Unit issued for its fair market value. The fair market value of such non-Class A or B Units issued pursuant to this paragraph shall be determined by dividing the company's fair market value immediately prior to such additional Capital Contribution by the number of non-Class A or B Units outstanding immediately prior to such issuance. The Company's fair market value shall be reasonably determined by the Board after consulting with either an independent appraiser reasonably selected by the Board or the Company's accountants or financial advisors, if any. In addition, immediately before issuing such additional Units, the Gross Asset Value of the Company's assets will be adjusted in the manner provided under subsection (b) of the definition of Gross Asset Value in Appendix A hereof, and each Member's and Unit Holder's Capital Account will reflect such adjusted Gross Asset Value as required under Regulations Section1.704-1(b)(iv).
3.3 Units. Unless increased by the Board, the total number of Units of the Company (all classes collectively) shall be five million, one hundred (5,000,100) Units, consisting of 100 Class A Units and Five Million (5,000.000) Class B Units. The name and address of each Member or Unit Holder and the number and Class of Units held by each of them is set forth on Exhibit A hereto. Such list shall reflect any additional Units issued by the Company, any Units transferred in accordance with this Agreement and any Person admitted as a Member. Members and Unit Holders shall advise the Company of any change in address. Any reference to Exhibit A in this Agreement means Exhibit A as amended to reflect any changes in the information specified herein. The Manager shall be authorized to issue certificates reflecting the number of Units held by each Member or Unit Holder of the Company set forth on Exhibit A.
3.4 Use of Capital Contributions. All Capital Contributions shall be expended only in furtherance of the business purpose(s) of the Company, as set forth in Article 2.3 hereof.
3.5 No Unauthorized Withdrawals of Capital Contributions. No Member or Unit Holder shall have the right to withdraw or to be repaid any of such Person's Capital Contributions, except as specifically provided in this Agreement.
3.6 Return of Capital. No Member or Unit Holder shall be entitled to the return of that Member's or Unit Holder's Capital Contributions. No Manager or member thereof, nor Member shall have personal liability for the repayment of the Capital Contributions made by any Member or Unit Holder, it being agreed that any return of Capital Contributions or distributions shall be made solely from the assets of the Company.
3.7 Third-Party Rights. Nothing contained in this Agreement is or will be deemed to benefit any creditor of the Company, nor will any creditor of the Company be entitled to require the Manager to solicit or demand Capital Contributions from any Member or Unit Holder.
3.8 Pre-Emptive Rights.
(a) The Company hereby grants to each Class A Member a preemptive right to purchase its proportionate share, based on such Class A Member's Contribution Account balance, of any Class A Units which the Company may, from time to time, propose to sell and issue, subject to the terms and conditions set forth below.
i. If the Company intends to issue and sell additional Class A Units, and such issuance is by a Majority-In-Interest of the Class A, the Company shall give each Class A Member notice of such intention, describing the general terms and conditions upon Company proposes to effectuate such issuance, including the purchase price for such additional Class A Units and the closing date for the sale and issuance of such Class A Units. Each Class A Member shall have thirty-five (35) days from the date of any such notice to agree to purchase all or part of its proportionate share of such Class A Units, based on the Member's Contribution Account balance, for the price and upon the general terms and conditions specified in the Company's notice by giving written notice to the Company, stating the quantity of Class A Units to be so purchased. If the Class A Members, as a group, have elected to purchase some but not all of the Class A Units within such thirty (30)-day period, those Class A Members that have elected to purchase a portion of the Class A Units shall have an additional fourteen (14) day period to elect to purchase the balance of the Class A Units, which right to purchase shall be allocated among them, proportionately based on their respective Contribution Account balance.
ii. If any Class A Member fails to exercise the foregoing preemptive right with respect to any Class A Units within such initial thirty-five (35)-day period (with any nonresponse by a Member constituting a deemed failure to exercise), the Company may within one hundred twenty (120) days thereafter sell any or all of such Class A Units not agreed to be purchased by the Class A Members, at a price and upon general terms no more favorable to the purchasers thereof than specified in the notice given to each Class A Member pursuant to Article 3.9(a). In the event the Company has not sold such Class A Units within such one hundred twenty (120) day period, the Company shall not thereafter issue or sell any Class A Units without again first offering such Class A Units to the Class A Members in the manner provided above.
(b) The Company hereby grants to each Member a preemptive right to purchase its proportionate share, based on such Member's Percentage Interest, of any Units which the Company may, from time to time, propose to sell and issue (other than Class A or B Units), subject to the terms and conditions set forth below. The rights granted by this Article 3.8(b) shall not apply to Class A or B Units.
i. If, after receiving any necessary approvals, the Company intends to issue and sell additional Units, the Company shall give each Member written notice of such intention, describing the general terms and conditions upon which the Company proposes to affect such issuance, including the purchase price for such additional Units and the closing date for the sale and issuance of such Units. Each Member shall have thirty-five (35) days from the date of any such notice to agree to purchase all or part of its proportionate share of such Units, based on such Member's Percentage Interest, for the price and upon the general terms and conditions specified in the Company's notice by giving written notice to the Company stating the quantity of Units to be so purchased. If the Members, as a group, have elected to purchase some but not all of the Units within such thirty-five (35)-day period, those Members that have elected to purchase a portion of the Units shall have an additional fourteen (14) day period to elect to purchase the balance of the Units, which right to purchase shall be allocated among them, proportionately based on their respective Percentage Interests.
ii. If any Member fails to exercise the foregoing preemptive right with respect to any Units within such initial thirty-five (35)-day period (with any non-response by a Member constituting a deemed failure to exercise), the Company may within one hundred twenty-six (126) days thereafter sell any or all of such Units not agreed to be purchased by the Members, at a price and upon general terms no more favorable to the purchasers thereof than specified in the notice given to each Member pursuant to this Article 3.8(b). In the event the Company has not sold such Units within such one hundred twenty-six (126) day period, the Company shall not thereafter issue or sell any Units without again first offering such Units to the Members in the manner provided above.
ARTICLE IV
MANAGEMENT AND OPERATION OF THE COMPANY
4.1 Limited Management by Manager. Except as set forth elsewhere herein, the day-to-day business and affairs of the Company shall be managed by the Manager, as more particularly set forth and limited in Article IV. The Manager shall be selected and appointed by vote of a Majority in Interest of the Class A Members. Subject to this Article IV, and as otherwise specifically stated in this Agreement, the Manager shall have only the discretion with respect to determinations, decisions, consents, approvals, actions and the like to be made or taken by the Company pursuant to and in furtherance of the Business Plan, the Budget, and other day-to-day matters as may arise. Without limiting the generality of the foregoing, in addition to the rights and obligations of the Manager provided for elsewhere in this Agreement. Subject to Article 4.2, the Members hereby authorize the Manager:
(a) To supervise the business of the Company in accordance with and in furtherance of the Business Plan and the Budget, and to make those general, day-to-day decisions regarding the affairs of the Company;
(b) To preside or approve another Person to preside at all Company meetings;
(c) To open accounts in the name of the Company with banks and other financial institutions and to designate, replace, and remove from time to time all signatories on such bank accounts;
(d) To the extent there are excess funds of the Company which, in the Manager's reasonable judgment, are not required in connection with the business of the Company, temporarily invest or cause to be invested such excess funds in United States Treasury obligations, certificates of deposit, or deposit of other obligations of national banks in FDIC insured accounts;
(e) To incur and pay all bills by and behalf of the Company not in excess of the amounts provided in the Business Plan or the Budget and properly incurred in connection with the Business Plan or the Budget;
(f) To comply with or cause to be complied with, all provisions of the Act governing the administration of a limited liability company, including but not limited to filing documents with the Colorado Secretary of State;
(g) To execute on behalf of the Company all agreements, contracts, instruments and documents including, without limitation, checks, drafts, notes and other negotiable instruments, documents providing for the acquisition of the Company's assets, assignments, bills of sale, and any other instruments or documents in connection with the business of the Company, consistent, in each instance with the terms of this Agreement and the Business Plan;
(h) To employ accountants, legal counsel, consultants, independent contractors and other Persons to perform services for the Company and to compensate such Persons from Company funds;
(i) To purchase policies of insurance coverage as the Manager shall determine to be necessary or desirable to protect the Company and/or its assets;
(j) To keep all books of account and other records required by the Company, keep vouchers, statements, receipted bills and invoices and all other records, covering all collections, disbursements, and other data in connection with the Company;
(k) To compromise and settle claims against the Company to the extent not in excess of $50,000.00;
(l) To confess or cause a confession of a judgment against the Company to the extent not in excess of $50,000.00;
(m) To accomplish and carry out those matters set forth above with respect to any subsidiary of the Company; and
(n) To perform such other and further actions as may be required by the Act, the laws of the State of Colorado, the laws of the United States of America, this Agreement, or any other agreements to which the Company is a party and which arise out of or concern any of the foregoing matters.
4.2 Management by the Board. Except as set forth in Articles 4.1, 4.3, 4.11 or as otherwise provided in this Agreement, the business and affairs of the Company shall be managed by the Board, as more particularly set forth in this Article IV. Subject to Articles, 4.1, 4.3, 4.11 or as otherwise stated in this Agreement, the Board shall have sole and unfettered discretion with respect to all determinations, decisions, consents, approvals, actions, and the like to be made or taken by the Board pursuant to this Agreement or the Act. Without limiting the generality of the foregoing, in additional to the rights and obligations of the Board provided for elsewhere in this Agreement, subject to Article 4.3, the Members hereby authorize the Board:
(a) To supervise the business of the Company and to make those general decisions regarding the affairs of the Company, other than matters considered day-to-day;
(b) To amend, supplement, and/or approve modifications to the Business Plan and/or the Budget as further provided in Article 4.16;
(c) To incur all bills, invoices, and expenses by and on behalf of the Company in excess of the amounts set forth in the Budget and/or Business Plan;
(d) To determine Net Available Cash Flow of the Company or any component thereof;
(e) To determine, in accordance with Article 3.2, the need and amount, if any, of Additional Capital Contributions;
(f) Subject to the necessary approvals provided in Article 3.2, to create, authorize the creation of, or issue additional Units of the Company or admit or cause to the admission of additional or Substitute Members of the Company;
(g) To compromise and settle claims against Company in excess of $50,000.00;
(h) To confess or cause a confession of judgment against the Company in excess of $50,000.00
(i) To enter into or cause either the Company or any subsidiary to enter any joint venture investment that is within the purpose set forth in Article 2.3 with any unrelated Person;
(j) To perform such other acts as are set forth in this Agreement, or as the Board determines necessary or appropriate in connection with the Company's business;
(k) To guarantee indebtedness for trade accounts incurred in the ordinary course of the Company's business;
(l) To hire, fire, or change the compensation of executive officers of the Company (or any subsidiary), other than the Manager;
(m) Except for payments to the Manager of the management fee(s) set forth herein, with the concurrence of each Class A Director, make any payment or distribution to any Member other than a pro rata distribution;
(n) With the concurrence of each Class A Director, to lend money to any Member, Manager, or their Affiliate;
(o) To make or approve material amendments, revisions, modifications, and changes to the Business Plan or the Budget;
(p) With the concurrence of each Class A director, to enter into any transaction with any Member (or Affiliate thereof) which transaction shall also require compliance with Article 4.8;
(q) To perform such other acts as set forth in this Agreement, the Act, state or federal law, or otherwise as the Board determines necessary or appropriate in connection with the business of the Company, any subsidiaries and/or Affiliates.
4.3 Prohibited Acts. The Board shall not have authority to do or authorize any of the following acts on behalf of the Company and shall not without the approval of a Majority-in-Interest of the Class A:
(a) Possess Company Property or assign the right of the Company in specific Company Property for any purpose inconsistent with the purpose for which the Company was formed;
(b) Do any act for which the consent of the Members is required by this Agreement and/or the Act;
(c) Terminate, liquidate and wind up the Company, except as otherwise provided in Article 12.1 of this Agreement;
(d) Do any act that would make it impossible to carry on the Company purposes and business of the Company;
(e) Engage in any business activity other than that which is consistent with the Company purposes;
(f) Knowingly perform any act that contravenes the provisions of this Agreement;
(g) To change the principal business of the Company or make a material change to the type or nature of the Business of the Company;
(h) Voluntarily wind up, dissolve or liquidate the Company;
(i) Acquire, merge, or consolidate the Company with another business or acquire substantially all the assets thereof or transfer, dispose of or sell all or substantially all of the Company's assets or business
(j) To sell or cause the sale of all or substantially all of the property of the Company, or to license, pledge, or encumber technology or intellectual property other than in the ordinary course of operations;
(k) To file or cause the filing of a voluntary petition, or consent to the involuntary filing of a petition, in bankruptcy or seek the reorganization or the appointment of a receiver on behalf of Company;
(l) To distribute or cause the distribution of any property in kind in redemption of the Units of any Member, Unit Holder or assignee of either, whether or not in connection with the liquidation of the Company other than an interest redeemed from a former employee or consultant in connection with the cessation of services; and
(m) To guarantee any indebtedness, except for trade accounts incurred in the ordinary course of business.
4.4 Board of Directors.
(a) Number of Directors; Appointment; Meetings. The number of individuals on the Board of Directors shall be fixed at five (5). The identities of the Directors shall be set forth on Schedule 4.4, as amended from time to time to reflect any change. Three (3) of the five (5) Directors shall be appointed by Class A Member, Budding Equity Management, Inc., for as long as such Class A Member owns more than ten percent (10%) of the Class A Units. The Directors appointed by such Class A Member shall each be a "Class A Director." The remaining two (2) of the five (5) members of the Board of Directors shall be appointed one (1) each by the Class B Members owning the (i) largest and (ii) second largest number of Class B Units, for so long as such Members continue to remain the Class B Members owning the largest and second largest number of Class B Units. Any reference to a specific Member above shall include such Member's successors and assigns, provided same have been approved as Members as otherwise required by this Agreement. The Board of Directors shall meet at least quarterly, unless otherwise agreed by the Board. Meetings may occur via conference call, video conference, or other electronic means as may be agreed upon by the Board.
(b) Vacancy and Appointment.
i. Any vacancy occurring in the office of any Director appointed by any named Member may be filled only by such Member.
ii. If any Member named in 4.4(a) above, as holding Class A Units, or its approved successors and assigns, ceases to hold the required percentage of Class A Units as set forth above, any vacancy occurring in the office of a Director appointed solely by such Class A Member, as contemplated by Article 4.4(a) shall be filled by a Majority-in-Interest of the Class A Members.
iii. If any Member named in Article 4.4(a) above, as holding Class B Units, or its approved successors or assigns, ceases to hold the requisite percentage of Class B Units, any vacancy occurring the in the office of a Director appointed solely by such Class B Member(s) as contemplated by Article 4.4(a) shall be filled by appointment of such replacement Class B Member(s) holding the requisite percentage of Class B Units, or in the event that no one Class B Member holds the requisite number of Class B Units, by a vote of the Majority-in-Interest of the Class B Members.
(c) Approval and Consent of Board of Directors
i. General. Each Director shall have one (1) vote. Meetings of the Board of Directors may be called by any Director on at least forty-eight (48) hours advance notice. Any Director may appear at a meeting of the Board of Directors by way of proxy, telephone, teleconference, video conference, or other electronic means approved in advance by the Board. A quorum for a meeting of the Board of Directors shall be at least four (4) Directors, of which two shall be Class A Directors.
ii. Majority of the Board. Except as required by the Act, or as specifically set forth in this Agreement, action with or without a meeting of the Board of Directors shall be, in each instance, by a consent of the majority of the Board. Any reference in this Agreement to action or approval by or of the Board shall mean such action or approval was authorized by a vote of the Majority of the Board. A proxy may be appointed in writing by any Director, and any Person, including another Director may serve as a proxy for an appointing Director. Except as set forth in Article 4.1, the Board shall have the power to delegate, in writing, to the Manager, such rights and powers to manage and control the business and affairs of the Company as are possessed by the Board. Such delegation may be provided or revoked in writing in the Board's sole and absolute discretion.
4.5 Salary and Expenses. Each director shall be reimbursed for his or her reasonable expenses incurred in rendering services to the Company in his or her capacity as a Director of the Company. Except as approved by a Majority in Interest of the Class A Members and provided in the immediately preceding sentence, no Director shall receive compensation for rendering services to the Company.
4.6 Manager, Tenure, Qualifications, and Manner of Acting. Each Manager and each Director shall hold office until the earlier of his or her resignation, removal, or replacement. No Manager or Director shall be required to be a resident of the State of Colorado.
4.7 No Exclusive Duty to Company. The Manager and Directors shall not be required to serve the Company as the Managers or Directors sole and exclusive function. The Manager and Directors may have other business interests and may engage in other activities in addition to those relating to the Company. Neither the Company nor any Member or Unit Holder, nor any Person who is directly or indirectly affiliated with or related to any of them shall have any right, by virtue of this Agreement, to share or participate in such other activities of the Manager or Directors or to the income or proceeds derived therefrom.
4.8 Transactions with Affiliates. The Board, with the concurrence of each Class A Director, may cause the Company to enter into transactions with a Director or Persons affiliated with or related to a Director as long as the terms of such transaction(s) are similar to those that would result from arms length negotiations with unaffiliated or unrelated third parties.
4.9 No Obligation to Consider Separate Interests of Members or Unit Holders. The Members and Unit Holders expressly acknowledge that each Director is acting on behalf of the Company, and that except to the extent set forth in this Agreement or as specifically set forth in any ancillary document between each Director and any other Person, the Director is under no obligation to consider the separate interests of the Members or Unit Holders (including, without limitation, the tax consequences to the Members or Unit Holders) in deciding whether to cause the Company to take (or decline to take) any actions which the Director has undertaken in good faith (or, in good faith, declined to take) on behalf of the Company, except as set forth in Article VIII of this Agreement that the Director shall not be liable for monetary damages or otherwise for losses sustained, liabilities incurred, or benefits not derived by Members or Unit Holders in connection with such decision.
4.10 Officers; Committees. The Company may have such officers as are appointed from time to time by the Board. Without limiting the generality of the foregoing, the Company may have a Chairperson, a President, a Chief Executive Officer, a Chief Financial Officer, one or more Vice Presidents and a Secretary, each of whom shall, unless otherwise directed by the Board, have the powers normally associated with such officers of a Colorado corporation. Any number of offices may be held by the same person, as the Board may determine. Unless otherwise provided in the appointment of any officer, each officer shall be chosen for a term which shall continue until such officer's successor shall have been chosen and qualified or such officer's earlier resignation or removal by the Board. The Company shall have such committees as are created from time to time by the Board; provided, however, that the Manager is included on each committee.
4.11 Proxy. Each Director may, in such Director's sole and absolute discretion, grant a proxy to any other Director, entitling such other Director to vote or cause to be voted the first Director's vote on any matters arising under this Agreement. No such proxy shall be valid after the one-year anniversary of the date of such proxy.
4.12 Resignation. Any Director may resign at any time by delivering written notice to the Manager and all other Directors. Such resignation of the Director shall be effective upon receipt notice thereof or at such later time as specified in the notice; and unless specified in the notice acceptance of the resignation shall not be necessary to make it effective. Such resignation shall not affect the Director's rights and liabilities as a Member, if any. However, if a Member is also a Director, then a Withdrawal Event with respect to such Member shall constitute an automatic resignation of such Person from such Person's position as Director.
4.13 Removal. The Manager may be removed only "for cause" by the affirmative vote of a Majority of the Board, after Manager has had the opportunity to arbitrate the existence of "cause" as provided hereunder. "Cause" for purposes of this Agreement shall mean any willful misconduct of the Manager (or its Affiliate) and/or any action of fraud or gross negligence of the Manager, which failure or acts are not remedied or corrected within thirty-five (35) days following receipt of direction from the Board.
4.14 Management Fee and Expenses. Manager shall receive a management fee at the prevailing market rate. Manager shall also be reimbursed for its reasonable expenses incurred in rendering services to the Company in its capacity as Manager of the Company.
4.15 Annual Business Plan Adoption/Quarterly Update and Revision. No later than the first day of November of each year, the Manager shall cause the Company to deliver to the Board, for its reasonable approval, a proposed revision to the Business Plan and a proposed revision to the Budget for the development, management, and operation of the Company. Proposed revisions to the Business Plan and Budget shall identify and set for the Managers best estimates, after due consideration, of all revenue, costs, and expenses. If the Board rejects any such proposed revisions to the Business Plan or Budget, the Manager shall cause the Company to promptly amend, revise and resubmit for approval a revised Business Plan and/or Budget, as applicable, making such changes as are necessary to address the known reasons for the disapproval, and the process shall continue in this manner until approved by the Board. Once such proposed revisions are approved by the Board, the revised documents shall constitute the Business Plan and/or Budget as referred to herein. Until the following year's Business Plan and Budget are approved by the Board, the Company shall be managed and operated in accordance with the most recent Business Plan and Budget approved by the Board. The parties acknowledge that the Business Plan and Budget will likely require quarterly updates and revisions, which shall be prepared and proposed by the Manager for approval by the Board.
4.16 Company to Qualify and Maintain REIT Qualifications; Restrictions on Operation of Company Under REIT Rules.
(a) Company to Qualify as REIT. The Members acknowledge that the Company intends to qualify as a REIT under the REIT Rules, and agree that the Company (and any Affiliates or Subsidiaries) shall be operated in a manner that will enable the Company to so qualify; provided, however, in no event shall the foregoing require any loss of voting or decision rights to the Class A Members or result in any adverse effect on the economic rights of the Class A Members. Except as disclosed to the Company the Members (a) shall not fund any Capital Contribution with the 'plan assets' of any 'employee benefit plan' within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, or any 'plan' as defined by Section 4975 of the Internal Revenue Code of 1986, as amended.
(b) Restrictions on Company's Operation. Except for Company Property, neither the Company nor its Subsidiaries shall hold any investment, incur any indebtedness or otherwise take any action that would cause any Member of the Company (or any Person holding an indirect interest in the Company through an entity or series of entities treated as partnerships for U.S. federal income tax purposes) to realize any "unrelated business taxable income" as such term is defined in Code Sections 511 through 514, unless specifically agreed to by a Majority-in-Interest of the Board, in writing. No Manager or Member shall be liable for any income or other taxes, damages, costs or expenses incurred by the Company or any Member by reason of the recognition by the Company of UBTI, unless caused by its own willful misconduct or gross negligence and not related to the Company Property.
(c) Company Prohibited from Engaging in REIT Prohibited Transactions. The Company (and any direct or indirect Subsidiary of the Company) may not engage in any activities or hold any assets that would constitute or result in the occurrence of a REIT Prohibited Transaction as defined herein. Notwithstanding anything to the contrary contained in this Agreement, during the time the Company maintains its status as a REIT or another REIT is a Member of the Company, none of the Company, any direct or indirect Subsidiary of the Company, nor any Member of the Company shall take or refrain from taking any action which, or the effect of which, would constitute or result in the occurrence of a REIT Prohibited Transaction by the Company or any direct or indirect Subsidiary thereof, including without limiting the generality of the foregoing, but in amplification thereof:
i. Entering into any lease, license, concession or other agreement or permitting any sublease, license, concession or other agreement that provides for rent or other payment based in whole or in part on the income or profits of any person, excluding for this purpose a lease that provides for rent based in whole or in part on a fixed percentage or percentages of gross receipts or gross sales of any person without reduction for any costs of the lessee (and in the case of a sublease, without reduction for any sublessor costs);
ii. Leasing, as a lessor, personal property, excluding for this purpose a lease of personal property that is entered into in connection with a lease of real property where the rent attributable to the personal property is less than fifteen percent (15%) of the total rent provided for under the lease;
iii. Acquiring or holding any debt investments, excluding for these purposes "debt" solely between wholly-owned Subsidiaries of the Company, unless (1) the amount of interest income received or accrued by the Company under such loan does not, directly or indirectly, depend in whole or in part on the income or profits of any person, and (2) the debt is fully secured by mortgages on real property or on interests in real property. Notwithstanding anything to the contrary herein, in the case of debt issued to the Company by a Subsidiary which is treated as a "taxable REIT subsidiary" of the REIT Member, such debt shall be secured by a mortgage or similar security interest, or by a pledge of the equity ownership of a subsidiary of such taxable REIT subsidiary;
iv. Acquiring or holding, directly or indirectly, more than ten percent (10%) of the outstanding securities of any one issuer (by vote or value) other than an entity which either (1) is taxable as a partnership or a disregarded entity for United States federal income tax purposes, (2) has properly elected to be a taxable REIT subsidiary of the REIT Member by jointly filing with REIT, IRS Form 8875, or (3) has properly elected to be a real estate investment trust for U.S. federal income tax purposes;
v. Entering into any agreement where the Company receives amounts, directly or indirectly, for rendering services to the tenants of any property that is owned, directly or indirectly, by the Company other than (1) amounts received for services that are customarily furnished or rendered in connection with the rental of real property of a similar class in the geographic areas in which the Property is located where such services are either provided by (A) an Independent Contractor (as defined in Section 856(d)(3) of the Code) who is adequately compensated for such services and from which the Company or REIT Member do not, directly or indirectly, derive revenue or (B) a taxable REIT subsidiary of REIT Member who is adequately compensated for such services or (2) amounts received for services that are customarily furnished or rendered in connection with the rental of space for occupancy only (as opposed to being rendered primarily for the convenience of the Property's tenants);
vi. Entering into any agreement where a material amount of income received or accrued by the Company under such agreement, directly or indirectly, does not qualify as either (1) "rents from real property" or (2) "interest on obligations secured by mortgages on real property or on interests in real property," in each case as such terms are defined in Section 856(c) of the Code;
vii. Holding cash of the Company available for operations or distribution in any manner other than a traditional bank checking or savings account;
viii. Selling or disposing of any property, subsidiary or other asset of the Company prior to (1) the completion of any holding period required under the Code, with such period to begin on the date the Company acquires a direct or indirect interest in such property and begins to hold such property, subsidiary or asset for the production of rental income, and (2) the satisfaction of any other requirements under Section 857 of the Code necessary for the avoidance of a prohibited transaction tax on the REIT; provided, that such restriction shall not affect, restrict or be deemed to modify a Member's right to exercise its buy-sell rights set forth in this Agreement; or
ix. Failing to make current cash distributions to Members each year in an amount which does not at least equal the taxable income allocable to the Members such year.
(d) REIT-Related Restrictions on Acquiring and Transferring Units. In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding Units may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which a REIT election is made. Therefore, Members may not own an aggregate number of Units (of any Class) in excess of the amount permitted under the Code and REIT Rules. Units owned by affiliated owners will be added together for purposes of determining the Unit ownership limit.
ARTICLE V
PAYMENTS AND DISTRIBUTIONS
5.1 Distributions of Net Available Cash Flow. Except as provided in Section 12.2 (dissolution of the Company), distributions of Net Available Cash Flow shall be made on at least a quarterly basis (or more frequently as the Board may determine) to the Members, pro rata, in accordance with their Ownership Percentage Interests, or as otherwise required under the Code in order to qualify and maintain the Company's status as a REIT.
5.2 Taxes on Distributions. Members are responsible for the calculation of the amount of tax due on any distributions, and Members are responsible for payment of any taxes due on any distributions.
5.3 Distributions in Liquidation. Following dissolution of the Company and commencement of winding up and the liquidation of its assets, distributions to the Members shall be governed by Article 12.2.
5.4 No Amounts Withheld. Except as otherwise required by this Agreement or order of a court of competent jurisdiction, the Company shall not withhold any amounts from distributions paid to Members for taxes or any other purposes, but shall distribute the entire amount of any distribution to the Member.
5.5 General Distribution Rules.
(a) For purposes of determining the Members entitled to receive a distribution, the date on which the Manager determines to make such distribution shall be the record date for such determination.
(b) Except as otherwise set forth in this Agreement, the Company shall not distribute any asset other than cash without the unanimous consent of a Majority in Interest of the Class A Members, consent of the Board, and consent of the Manager. No Member may be compelled to accept a distribution of any asset in kind from the Company to the extent that the percentage of the asset distributed to such Member differs from the Member's Percentage Interest.
(c) No distribution shall be made by the Company to the extent that, after giving effect to the distribution, the liabilities of the Company would exceed the fair market value of the Company's assets.
(d) All distributions to the Members are subject to set-off by the Company for any amount owed the Company by the Member or any assignor of such Member, other than amounts owed by any Member in the ordinary course of business operations with the Company.
(e) No distributions shall be made if the Company fails to qualify as a REIT nor any distributions made which are not permitted under the Code provisions applicable to REITs.
5.6 Inclusion of Unit Holder. Except as otherwise provided herein, the term "Member" for purposes of this Article V only, shall include a Unit Holder.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES
6.1 Profit and Loss Allocations.
(a) Profits. After making any special allocations required under Appendix A, Profits shall be allocated among the Members (and credited to their respective capital accounts) in the following order and priority:
i. First, to the Members, pro rata, in accordance with the amount of Losses being offset, until the cumulative Profits allocated pursuant to this Article are equal to the cumulative Losses, if any, previously allocated to the Members pursuant to Article 6.1(b)(iii) for all prior periods; and
ii. Thereafter, to the Members, pro rata, in accordance with their respective Percentage Interests, until the cumulative Profits allocated pursuant to this Article are equal to (1) the cumulative Losses under Article 6.1(b)(iii) that were applied to offset Profits previously allocated under this Article 6.1(b)(ii), with such Profits being allocated against prior Losses on a last-in-first-out basis, and (2) the amounts received by such parties pursuant to Article 5.1(b) above.
(b) Losses. After making any special allocations required under Appendix A, Losses for each Fiscal Year (and each loss and deduction entering into the computation thereof) shall be allocated among the Members (and charged to their respective Capital Accounts) in the following order and priority:
i. First, to the Members, pro rata, in accordance with the amount of Profits being offset, until the cumulative Losses allocated pursuant to this Article are equal to the cumulative Profits, if any, previously allocated to the Members pursuant to Article 6.1(a)(ii) for all prior periods in proportion to the Members' respective shares of the Profits being offset; and
ii. Thereafter, if any, to the Members, pro rata, in accordance with their Contribution Account balances as of the end of the period to which the allocation of Losses under this Article relates to Members, pro rata, in accordance with their Percentage Interests, in the manner as to amounts as provided in Article 5.1(b) above.
iii. Losses allocated hereunder shall not exceed the maximum amount of Losses that can be so allocated without causing an Adjusted Capital Account Balance deficit with respect to such Capital Account. This limitations shall be applied individually with respect to each Member un order to permit the allocation pursuant to this Article of the maximum amount of Losses permissible under Regulations Section1.704-1(b)(2)(ii)(d), All losses in excess of the limitation set forth in this Article, shall be allocated solely to those Members that bear the economic risk for such additional Losses within the meaning of Code Section704(b) and the Regulations thereunder. If its necessary to allocate Losses under the preceding sentence, then the Board shall, in accordance with the Regulations promulgated under Code Section704(b), determine the Members that bear the economic risk of such additional Losses.
(c) Allocations Relating to Last Fiscal Year (and Open Years). Notwithstanding Articles 6.1(a) and (b), if upon the dissolution and termination of the Company pursuant to Article XII, and after all other allocations provided for in Articles 6.1(a) and (b) have been tentatively made (as if this Article 6.1(c) did not exist in this Agreement), a distribution pursuant to Article 12.2(d) would be different from a distribution to the members pursuant to Article 6.1(d), then Profits (and items thereof) and Losses (and items thereof) for the Fiscal Year in which the Company dissolves and terminates pursuant to Article XII, shall be allocated among the members in a manner such that the Capital Account of each Member, immediately after giving effect to such allocation, is, as nearly as possible, equal (proportionately) to the amount of the distributions that would be made to such Member during such Fiscal Year pursuant to Article 6.1(d). The Board may, in its discretion, apply the principles of this Article 6.1(c) to any Fiscal Year preceding the Fiscal Year in which the Company dissolves and terminates (including through application of Code Section706(e)) if delaying the application of the principles of this Article would likely result in distributions under Article XII that are materially different from distributions under Article 6.1(d) in the Fiscal Year in which the Company dissolves and terminates.
(d) Intended Priority of Distributions Upon a Liquidation under Article XII. It is the intent of the Members that allocations pursuant to Article 6.1(c) are made in a manner such that, to the extent possible, the Capital Account of each Member, immediately after giving effect to the allocations under Article 6.1(c), is, as nearly as possible, equal (proportionately) to the amount of the distributions that would be made to such Member during the Fiscal Year of the liquidation to the Members, pro rata, in accordance with their Percentage Interests.
6.2 Tax Allocations.
(a) Except as otherwise provided in Article 6.2(b) hereof, for income tax purposes, all items of income, gain, loss, deduction and credit of the Company for any tax period shall be allocated among the Members in accordance with the allocation of Pro?ts and Losses prescribed in this Article VI.
(b) In accordance with Code Section704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value under the Traditional Method as de?ned under Regulations Section1.704-3 (b). If the Gross Asset Value of any Company asset is adjusted pursuant to the applicable provisions of the Code, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section704(c) and the Regulations thereunder; provided, however, that unless otherwise determined by the Board, the Manager shall not adopt the Traditional Method with Curative Allocations as de?ned under Regulations Sectionl.704-3(c) or the Remedial Method as de?ned under Regulations Sectionl.704-3(d). Allocations pursuant to this Article 6.2 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Pro?ts, Losses or other items or distributions pursuant to any other provision of this Agreement.
6.3 Knowledge of Tax Consequences. The Members are aware of the income tax consequences of the allocations made by this Article VI and hereby agree to be bound by the provisions of this Article VI hereto in reporting their distributive shares of the Company's taxable income and loss for income tax purposes.
6.4 Transferor/Transferee Allocations. Income, gain, loss, deduction or credit attributable to any Units that have been transferred shall be allocated between the transferor and the transferee under any method allowed under Code Section706 and the Regulations thereunder as agreed by the transferor and the transferee.
6.5 Rights of Unit Holders. Except as otherwise provided herein the term "Member" for purposes of this Article VI shall include a Unit Holder.
ARTICLE VII
LIABILITIES, RIGHTS, AND OBLIGATIONS OF MEMBERS AND UNIT HOLDERS
7.1 Limitation of Liability. Each Member's and Unit Holder's liability for the debts and obligations of the Company shall be limited as set forth in the Act and other applicable law. The provisions of this Article 7.1 shall not be deemed to limit in any way the liabilities of any Member or Unit Holder to the Company and/or to the other Members and Unit Holders arising from a breach of this Agreement.
7.2 Members' Access to Company Records. Upon the written request, any Member (but not any Unit Holder) or such Member's designated representative shall have the right, at any reasonable time to both the Board and such Member, to have access to and may inspect and copy the contents of the Company records required to be maintained pursuant to Section 9. 1, including all information that may be required for investigating and verifying the affairs of the Company and its subsidiaries (if any), and, in each instance, such entity's assets, liabilities, and ?nancial position including, without prejudice to the generality of the foregoing, full and free access to all bank statements, ?nancial records and contracts. The cost of such inspection and copying shall be borne by the requesting Member.
7.3 No Authority to Bind the Company; Management Authority. Unless authorized in writing to do so by this Agreement or by the Board, no Member or Unit Holder or group of Members or Unit Holders shall have any power or authority to bind the Company in any way, to pledge the Company's credit, to render the Company liable for any purpose, or to otherwise engage in the management of the Company.
7.4 Waiver of Action for Partition. Each Member and Unit Holder irrevocably waives during the term of the Company any right that such Member or Unit Holder may have to maintain any action for partition with respect to Company property or other assets of the Company.
7.5 Cooperation With Tax Matters Partner. Each Member and Unit Holder agrees to cooperate with the Tax Matters Partner and to do or refrain from doing any or all things reasonably required by the Tax Matters Partner in connection with the conduct of any proceedings involving the Tax Matters Partner.
7.6 Acknowledgment of Liability for State and Local Taxes. To the extent required by the laws of any Taxing Jurisdiction, each Member and Unit Holder requested to do so by the Board shall submit an agreement indicating that such Member or Unit Holder shall make timely income tax payments to the Taxing Jurisdiction and that the Member or Unit Holder accepts personal jurisdiction of the Taxing Jurisdiction with regard to the collection of income taxes, interest, and penalties attributable to the Member's or Unit Holder's income. If a Member or Unit Holder fails to provide such agreement, the Company may withhold or pay over to such Taxing Jurisdiction the amount of tax, penalty, and interest determined under the laws of the Taxing Jurisdiction with respect to such income. Any such payments shall be treated as distributions for purposes of Article V.
7.7 Limitation On Bankruptcy Proceedings. No Member or Unit Holder, without the consent of the Board, shall ?le or cause to be ?led any action in bankruptcy involving the Company.
7.8 Voting Rights. The Members shall have the right to Vote on the matters speci?cally reserved for their approval or consent set forth in this Agreement. Except as otherwise provided, each Member entitled to vote shall have a vote equal to the number of Units that the Member holds in the Company. For purposes of clari?cation, Unit Holders that are not Members shall have no right to vote.
7.9 Voting Procedure. Under any circumstances requiring approval or consent by the Members, such approval or consent shall, except as otherwise provided to the contrary in this Agreement, be given or withheld, in the sole and absolute discretion of the Members, by conveying in writing to the Manager not later than 15 days after such approval or consent was requested by the Manager or Board in a written notice directed to the Members; provided, however, that the Board may require a response within a shorter period, but not less than 5 days after request by the Manager. If the Manager or Board receives the necessary approval or consent of the Members to such action, then the Manager or Board shall be authorized to implement such action without further authorization by the Members.
7.10 Meetings of Members. The Manager or Board may convene a meeting of the Members upon the request of the Manager, Board or any Members or group of Members holding at least ten percent (10%) of the Percentage Interest. Any such meeting shall be held not less than ?ve days following request therefor, nor more than 15 days later than the request for a meeting. Any meeting of Members shall be held at the known place of business of the Company or at such other place as the Board, together with a Majority-in-Interest of the Members shall agree. Any Member may participate in any meeting of Members by means of a conference telephone, video conference, or similar communication equipment. Any action may be taken by the Members without a meeting provided the requisite number of Members provides their prior written approval with respect to such action. For purposes of clari?cation, Unit Holders that are not Members shall have no right to request, attend or otherwise participate in any such meeting.
7.11 Foreign Corrupt Practices Act (FCPA)
(a) Compliance with FCPA. In compliance with the Foreign Corrupt Practices Act, the Board, the Manager, and each Member will not, and will ensure that its officers, directors, employees, shareholders, members, agents and Affiliates, acting on its behalf or on the behalf of the Company or any of its Subsidiaries or Affiliates do not, for a corrupt purpose, offer, directly or indirectly, promise to pay, pay, promise to give, give or authorize the paying or giving of anything of value to any official representative or employee of any government agency or instrumentality, any political party or officer thereof or any candidate for office in any jurisdiction, except for any facilitating or expediting payments to government officials, political parties or political party officials the purpose of which is to expedite or secure the performance of a routine governmental action by such government officials or political parties or party officials. The term "routine governmental action" for purposes of this provision shall mean an action which is ordinarily and commonly performed by the applicable government official in (i) obtaining permits, licenses, or other such official documents which such Person is otherwise legally entitled to; (ii) processing governmental papers; (iii) providing police protection, mail pick-up and delivery or scheduling inspections associated with contract performance or inspections related to transit of goods across country; (iv) providing phone service, power and water supply, loading and unloading of cargo, or protecting perishable products or commodities from deterioration; or (v) actions of a similar nature. The term routine governmental action does not include any decision by a government official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by an official involved in the decision making process to encourage a decision to award new business to or continue business with a particular party. Each Member agrees to notify immediately the Board, Manager, and other Members of any request that such Member or any of its officers, directors, employees, shareholders, members, agents or Affiliates, acting on its behalf, receives to take any action that may constitute a violation of the Foreign Corrupt Practices Act.
(b) "Routine Governmental Action" Defined. The term routine governmental action does not include any decision by a government official whether, or on what terms, to award new business to or to continue business with a particular party, or any action taken by an official involved in the decision making process to encourage a decision to award new business to or continue business with a particular party.
(c) Duty to Notify. Each Member agrees to notify immediately the Board, the Manager, and the other Members of any request that such Member or any of its officers, directors, employees, shareholders, members, agents or Affiliates, acting on its behalf, receives to take any action that may constitute a violation of the Foreign Corrupt Practices Act
ARTICLE VIII
LIABILITY, EXCULPATION AND INDEMNIFICATION
8.1 Liability. Except as otherwise provided by the Act or pursuant to any agreement, 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 no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered Person.
8.2 Exculpation. No Covered Person shall be liable to the Company or any Member or Unit Holder for any act or omission taken or suffered by such Covered Person in good faith and in the reasonable belief that such act or omission is in or is not contrary to the best interest of the Company and is within the scope of authority granted to such Covered Person by this Agreement; provided, however, that such act or omission does not violate this Agreement nor constitute Disabling Conduct by the Covered Person.
8.3 Indemni?cation.
(a) The Company shall, to the fullest extent permitted by the Act and other applicable law, indemnify, hold harmless and release each Covered Person for, from and against all claims, demands, liabilities, costs, expenses, damages, losses, suits, proceedings and actions, whether judicial, administrative, investigative or otherwise, of whatever nature, known or unknown, liquidated or unliquidated ("Claims"), that may accrue to or be incurred by any Covered Person, or in which any Covered Person may become involved, as a party or otherwise, or with which any Covered Person may be threatened, relating to or arising out of the business and affairs of, or activities undertaken in connection with, the Company, including, but not limited to, amounts paid in satisfaction of judgments, in compromise, or as ?nes or penalties and counsel fees and expenses incurred in connection with the preparation for or defense or disposition of any investigation, action, suit, arbitration or other proceeding (a "Proceeding"), whether civil or criminal (all of such Claims and amounts covered by this Article 8.3 and all expenses referred to in Article 8.3(b), are referred to as "Damages"), except to the extent that it is ultimately determined that such Damages arose from Disabling Conduct by such Covered Person. The termination of any Proceeding by settlement shall not, of itself, create a presumption that any Damages relating to such settlement arose from Disabling Conduct of any Covered Person. Managers, Members and Unit Holders shall not indemnify any Covered Person.
(b) Expenses incurred by a Covered Person in defense or settlement of any Claim that may be subject to a right of indemni?cation hereunder shall be advanced by the Company prior to the ?nal disposition thereof upon receipt of an undertaking by or on behalf of the Covered Person to repay such amount if it is ultimately determined that the Covered Person is not entitled to be indemni?ed hereunder. The right of any Covered Person to the indemni?cation provided herein shall be cumulative with, and in addition to, any and all rights to which such Covered Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to such Covered Person's heirs, personal representatives, successors and assigns.
(c) Promptly after receipt by a Covered Person of notice of the commencement of any Proceeding, such Covered Person shall, if a claim for indemni?cation in respect thereof is to be made against the Company, give written notice to the Company of the commencement of such Proceeding, provided that the failure of any Covered Person to give notice as provided herein shall not relieve the Company of its obligations under this Article Section 8.3 except to the extent that the Company is actually prejudiced by such failure to give notice. In case any such Proceeding is brought against a Covered Person (other than a derivative suit in right of the Company), the Company will be entitled to participate in and to assume the defense thereof to the extent that the Company may wish, with counsel reasonably satisfactory to such Covered Person. After notice from the Company to such Covered Person of the Company's election to assume the defense thereof, the Company will not be liable for expenses subsequently incurred by such Covered Person in connection with the defense thereof. The Company will not consent to the entry of any judgment or enter into any settlement that (i) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Covered Person of a release from all liability in respect to such Claim, or (ii) requires any action (or inaction) by the Covered Person other than: (1) the execution of documents related to such settlement and/or (2) payment of money.
8.4 Restrictions on Indemnification under REIT Rules.
(a) The foregoing sections of this Article XII notwithstanding, as long as the we qualify as a REIT, we may not indemnify an Indemnified Party for losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims and finds that indemnification of the settlement and related costs should be made and the court considering the request has been advised of the position of the Commission and the published position of any state securities regulatory authority in which securities of the Company were offered and sold as to indemnification for securities law violations.
(b) We must advance amounts to an Indemnified Party for legal and other expenses and costs incurred as a result of any legal action for which indemnification is being sought only in accordance with the Company's commercial/general liability (CGL) insurance policies and, as long as the Company qualifies as a REIT, only if all of the following conditions are satisfied: (i) the legal action relates to acts or omissions with respect to the performance of duties or services by the Indemnified Party for or on behalf of the Company; (ii) the legal action is initiated by a third party who is not a Stockholder or the legal action is initiated by a Stockholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves advancement; and (iii) the Indemnified Party receiving these advances undertakes in writing to repay the advanced funds to the Company, together with interest at the applicable legal rate thereon, if the Indemnified Party is found not to be entitled to indemnification.
ARTICLE IX
BOOKS AND RECORDS; REPORTS; TAX ACCOUNTING; BANKING
9.1 Books and Records. The Manager, at the expense of the Company, shall keep or cause to be kept adequate books and records for the Company (and any subsidiary(ies)) which contain an accurate account of all business transactions arising out of and in connection with the conduct of the Company or such subsidiary (as applicable), and as otherwise required by the Act. The ?nancial books and records of the Company and each subsidiary shall be kept on the method of accounting as determined by the Manager after consulting with the Company's accountants. The Manager, after consultation with the Company's accountants, shall also determine the method of accounting to be followed by the Company and each subsidiary for federal income tax purposes. Additionally, at the Company's expense, the Manager shall maintain or cause to be maintained the following records at the Company's known place of business, or at such other location determined by the Manager:
(a) A list of the full name and last known business, residence, or mailing address of each Member, Unit Holder Director, and Manager, both past and present;
(b) A copy of the state law formation documents (e.g., articles of organization, certi?cate of formation, annual ?lings, etc.) and any other similar documents for the Company (any each subsidiary, if any) and all amendments thereto;
(c) Copies of the Company's and each subsidiary's currently effective operating agreement and all amendments thereto, copies of any prior agreements no longer in effect, and copies of any writings permitted or required with respect to a Member's or Unit Holder's obligation to contribute cash, property, or services;
(d) Copies of the Company's federal, state, and local income tax returns and reports for the six (6) most recent years;
(e) Copies of ?nancial statements of the Company (and of each subsidiary, if any) for the six (6) most recent years;
(f) Minutes of every meeting of the Board and/or the Members;
(g) Any written consents or approvals obtained from Members or Manager for actions taken by the Board;
(h) Copies of any documents required to be maintained by applicable federal, state, or local laws; and
(i) Any written consents or approvals obtained from Members and/or the Board for actions taken without a meeting.
9.2 Reports to Members. Within a reasonable period after the end of each Fiscal Year, the Manager, at the expense of the Company, may, in its reasonable discretion, cause to be prepared and furnished to each Member (but not any Unit Holder) an annual report containing a balance sheet as of the end of such Fiscal Year and statements of income and expense for the year then ended, in each instance, for the Company (and any subsidiary(ies).
9.3 Tax Matters.
(a) The Manager, Board, Members and Unit Holders intend that the Company shall be operated in a manner consistent with its treatment as a partnership and a REIT for federal and state income tax purposes. The Members and Unit Holders shall not take any action inconsistent with this expressed intent. The Tax Matters Partner shall take no action to cause the Company to elect to be taxed as a corporation pursuant to Regulations Section301.7701-3(a) or any counterpart under state law. Each Manager, each Member and each Unit Holder agrees not to make any election for the Company to be excluded from the application of the provisions of Subchapter K of the Code.
(b) The Manager shall cause the accountants for the Company to prepare and timely ?le all tax returns required to be ?led by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. The Manager and/or Board shall instruct the Company's accountants to prepare and deliver all necessary tax returns and information to each Member and Unit Holder within a reasonable period following the end of each Fiscal Year.
(c) The Manager may, with consent of a Majority of the Board and where permitted by the rules of a Taxing Jurisdiction, ?le a composite, combined, or aggregate tax return re?ecting the income of the Company, and pay the tax, interest, and penalties of some or all of the Members and Unit Holders on such income to the Taxing Jurisdiction, in which case the Company shall inform the Members and Unit Holders of the amount of such tax, interest, and penalties so paid.
(d) The Board shall designate a Manager, Director, or Class A Member to be the be the "Tax Matters Partner" of the Company pursuant to Code Section6231(a)(7) and Regulations Section301.6231(a)(7)-2 (addressing the designation or selection of the tax matters partner for a limited liability company). Any Person so designated as the "tax matters partner" shall receive no compensation (other than compensation, if any, otherwise speci?ed in this Agreement) from the Company or its Members or Unit Holders for its services in that capacity. The Manager is hereby designated as the initial Tax Matters Partner of the Company and shall be authorized and required to represent the Company in connection with all examinations of the Company's affairs by tax authorities (Federal, state and local), including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. The Tax Matters Partner may only be removed if (i) a mediator determines that the Tax Matters Partner has engaged in Disabling Conduct; or (ii) it is reasonably determined by the Manager (or a mediator, if necessary) that a new Tax Matters Partner should be appointed to comply with applicable law.
(e) The Tax Matters Partner may, with respect to the Company, make the election provided under Code Section754 of the Code and any corresponding provision of applicable state law.
(f) Each Member and Unit Holder covenants to report all Company items on such Person's income tax return in a manner consistent with the tax return of the Company. However, if a Member or Unit Holder reports a Company item on such Person's income tax return in a manner inconsistent with the tax return of the Company, then such Person shall notify the Manager and the other Members and Unit Holders of such treatment before ?ling such Person's income tax return. If a Member or Unit Holder engages in any such inconsistent reporting, then such Person shall be liable to the Company, and each Member and Unit Holder for any expenses, including professionals' fees, tax, interest, penalties, or litigation costs, that may arise as a consequence of such inconsistent reporting, such as an audit by a Taxing Jurisdiction. The obligations of any Member or Unit Holder set forth in this Article 9.3(f) shall apply on a ?ow through basis and apply to the ultimate bene?cial owners of Units.
9.4 Bank Accounts. All funds of the Company shall be deposited in the name of the Company in an account or accounts maintained with such bank or banks selected by the Board. The funds of the Company shall not be commingled with the funds of any other Person. Checks shall be drawn upon the Company account or accounts only for the purposes of the Company and shall be signed by authorized Persons on behalf of the Company.
ARTICLE X
ADMISSIONS, WITHDRAWALS AND REDEMPTIONS
10.1 Admission of Member. Persons may be admitted as Members as a result of the issuance of Units only with the prior written consent of the Board pursuant to Article 4.2. Additionally, no Person shall be admitted as a Member of the Company after the date of this Agreement as a result of a Transfer of Units, except in accordance with the provisions of this Agreement.
10.2 Right to Withdraw. A Member may withdraw from the Company at any time by mailing or delivering a written notice of withdrawal to the Board. If the withdrawing Member is also a Manager, such Member may withdraw by mailing or delivering a written notice of withdrawal to the Company and to the other Members at their last known addresses set forth in Exhibit A.
10.3 Rights of Withdrawn Member. Upon the occurrence of a Withdrawal Event with respect to a Member, the Withdrawn Member (or the Withdrawn Member's personal representative or other successor if applicable) shall cease to have any rights of a Member, except the right to receive distributions and allocations of Pro?ts and Losses occurring at the times and equal in amounts to those that the Withdrawn Member would otherwise have received or been allocated if a Withdrawal Event had not occurred. For purposes of clarification and illustration only, such Person shall cease to have a right to vote, a right to inspect the books and records of the Company and all other rights afforded Members (as opposed to Unit Holders) under this Agreement. If there are no remaining Members or Unit Holders, distributions and allocations to any Withdrawn Member shall be governed by Article 12.2. A Withdrawn Member who continues to own Units is referred to as a Unit Holder.
10.4 Option to Purchase the Interest of a Member upon a Withdrawal Event.
(a) Within 30 days from the occurrence of a Withdrawal Event with respect to any Member, the Withdrawn Member (or the Withdrawn Member's personal representative or other successor if applicable) shall provide the Company with written notice of the Withdrawal Event ("Withdrawal Notice").
(b) The Members and the Company may respond to such Withdrawal Notice as follows:
i. The Members shall have the option to purchase all, but not less than all, of the Withdrawn Member's Units ("Withdrawal Purchase Option") pursuant to Articles 10.4(c)(i) and 10.4(d).
ii. If the Members fail to exercise the Withdrawal Purchase Option, then the Company shall have the option to purchase all, but not less than all, of the Withdrawn Member's Units ("Company Withdrawal Purchase Option") pursuant to Articles 10.4(c)(ii) and 10.4(d) in the place of making distributions to the Withdrawn Member (or the Withdrawn Member's personal representative or other successor if applicable) as set forth in Article 10.3.
iii. If more than one Member wishes to exercise the Withdrawal Purchase Option pursuant to Article 10.4(b)(i), then each such Member shall be entitled to purchase a portion of the Withdrawn Member's Units on a pro rata basis, based on the Member's relative Percentage Interests.
(c) The Withdrawal Purchase Option or Company Withdrawal Purchase Option, as applicable, shall be exercisable as follows:
i. The Withdrawal Purchase Option shall be exercisable at any time during the 35-day period following receipt of the Withdrawal Notice by delivery of written notice (the "Withdrawal Purchase Option Notice") to the Withdrawn Member (or the Withdrawn Member's personal representative or other successor if applicable) and only if all, but not less than all, of the Withdrawn Member's Units are purchased by one or more Members.
ii. The Company Withdrawal Purchase Option shall be exercisable at any time during the 63-day period following the Company's receipt of the Withdrawal Notice by delivery of written notice (the "Company Withdrawal Purchase Option Notice") to the Withdrawn Member (or the Withdrawn Member's personal representative or other successor if applicable) and only if all, but not less than all, of the Withdrawn Member's Units are purchased by the Company.
(d) The Withdrawal Purchase Option Notice or the Company Withdrawal Purchase Option Notice, as applicable, shall indicate the date the purchase is to be effected (such date to be not less than seven (7) days, nor more than twenty-eight (28) days, after the date of the Withdrawal Purchase Option Notice or Company Withdrawal Purchase Option Notice, as applicable), and the amount which the Member(s) or the Company, as applicable, proposes to pay for the Units. If the Withdrawn Member (or the Withdrawn Member's personal representative or other successor if applicable) does not agree to the amount proposed to be paid, and the parties are unable to agree on a purchase price for the Units of the Withdrawn Member, then the Withdrawn Member shall be free to sell the Units to any third-party, subject to the purchaser's agreement to the terms of this Operating Agreement, and subject to approval of the Board.
(e) The purchase price for the Withdrawn Member's interest shall be payable in cash or, at the option of the purchaser(s), in the form of a ?ve (5) year (60 month) nonnegotiable promissory note bearing interest at the Default Interest Rate compounded annually on each anniversary of the note. The note shall be payable in monthly installments of principal and interest accrued to date, with payments determined necessary to fully amortize the note with equal payments of principal and interest over the ?ve-year term of the note. Interest shall be computed on the basis of a computational year of 360 days of equal 30-day months. The purchaser(s) shall be permitted to prepay the principal, in part or in whole, without penalty. If the note is made by a Member, then the note shall be secured by the Units being purchased by such Member. If the note is made by the Company, then the note shall be secured by the Company's assets, as reasonably determined by the Board so as to cause such obligation to be secured as of the closing. All other terms of the note shall be reasonably determined by the Board.
(f) If neither the Withdrawal Purchase Option nor the Company Withdrawal Purchase are exercised by the Members or the Company, then, to the extent permitted by law, a Withdrawn Member shall always have and retain the option to surrender such Person's Units (and any other interests in the Company at any time held by such Person) and return the same, for no consideration, to the Company for cancellation.
10.5 Marital Dissolution or Legal Separation.
(a) Grant. The Company shall have the right (the "Special Purchase Right Upon Marital Dissolution"), exercisable at any time during the 49-day period following the Company's receipt of the required Marital Dissolution Notice under Article 10.5(b) to purchase from the Member's or Unit Holder's spouse, in accordance with the provisions of Article 10.5(c) any or all of the Member's or Unit Holder's Units which would otherwise be awarded to such spouse incident to the dissolution of marriage or legal separation in settlement of any community property or other marital property rights such spouse may have or obtain in the Member's or Unit Holder's Units. The Special Purchase Right Upon Marital Dissolution shall not apply to any Units retained by the Member or Unit Holder.
(b) Notice of Decree or Agreement. Each Member and Unit Holder shall promptly provide the Company with written notice (the "Marital Dissolution Notice") of (i) the entry of any judicial decree or order resolving the property rights of the Member or Unit Holder and the Member's or Unit Holder's spouse in connection with their marital dissolution or legal separation, or (ii) the execution of any contract or agreement relating to the distribution or division of such property rights. The Marital Dissolution Notice shall be accompanied by a copy of the actual decree of dissolution or settlement agreement between the Member or Unit Holder and the Member's or Unit Holder's spouse, which provides for the award to the spouse of any Units in settlement of any community property or other marital property rights such spouse may have in such Units.
(c) Exercise of Special Purchase Right Upon Marital Dissolution. The Special Purchase Right Upon Marital Dissolution shall be exercisable by delivery of written notice (the "Marital Dissolution Purchase Notice") to the Member or Unit Holder and the Member's or Unit Holder's spouse within forty-two (42) days after the Company's receipt of the Marital Dissolution Notice. The Marital Dissolution Purchase Notice shall indicate the date the purchase is to be effected (such date to be not less than fourteen (14) nor more than forty-two (42) days after the date of the Marital Dissolution Purchase Notice), and the amount which the Company proposes to pay for the Units. If the Member's or Unit Holder's spouse does not agree to the amount proposed to be paid by the Company, then the price to be paid shall be the Agreed Value. The purchase price shall be payable in cash or, at the Company's option, in the form of a seven (7) year (84-month) nonnegotiable promissory note bearing interest at the Default Interest Rate compounded annually on each anniversary of the note. The note shall be payable in monthly installments of principal and interest accrued to date, with payments as necessary to fully amortize the note with equal payments of principal and interest over the 7-year/84-month note term. Interest shall be computed on the basis of a computational year of 360 days of equal 30-day months.
ARTICLE XI
TRANSFERABILITY
11.1 General Restriction on Transfer or Encumbering. No Member or Unit Holder shall be authorized to Transfer all or a portion of such Member's or Unit Holder's Units, or any interest therein, unless the Transfer constitutes a Permitted Transfer. No Member or Unit Holder shall be authorized to leverage, pledge, hypothecate, or otherwise encumber all or a portion of such Member's or Unit Holder's Units, or any interest therein, for any purpose, without the prior consent of the Board, which consent may be given or withheld in the Board's sole and absolute discretion.
11.2 Permitted Transfer. Subject to the conditions and restrictions set forth in Article 11.3, a Transfer of Units shall constitute a Permitted Transfer provided that:
(a) The Transfer is made to another Member in compliance with this Agreement; or
(b) The right of ?rst refusal set forth in Article 11.8.
11.3 Conditions to a Permitted Transfer of Units.
(a) General. Subject to compliance with Article 11.8, if applicable, a Transfer of Units will be treated as a Permitted Transfer if all of the following conditions are satis?ed:
i. The Transfer complies with this Agreement, to the extent applicable;
ii. The Board consents in writing to the Transfer, which consent may be given or withheld in the Board's sole and absolute discretion; and
iii. The Board shall have received an opinion of counsel, acceptable to the Board, in its reasonable discretion, that the Transfer will not violate any applicable federal or state securities laws; and
iv. The transferor and transferee reimburse the Company for all costs that the Company incurs in connection with such Transfer;
v. The Transfer does not violate any of the Code provisions applicable REITs or the REIT Rules; and
vi. The transferor and transferee agree to execute such documents and other instruments as the Board, in its reasonable discretion, determines are necessary or appropriate to con?rm such Transfer.
(b) Transfers to Other Members. The transferee of Units in a Permitted Transfer under Article 11.2(a) shall automatically become a Substitute Member unless the transferor determines to the contrary. If the transferee of Units in a Permitted Transfer shall not become a Substitute Member, then the transferee, in its capacity as such, shall have only the rights set forth in Article 11.6 hereof.
11.4 Admission as a Substitute Member.
(a) General Treatment of' Transferee. Except as otherwise provided in Section 11.5(b), a transferee of Units who is not a Member shall be admitted to the Company as a Substitute Member only upon satisfaction of the following conditions:
i. The Units with respect to which the transferee is being admitted were acquired by means of a Permitted Transfer;
ii. The transferee becomes a party to this Agreement and executes such documents and instruments as the Board determines are necessary or appropriate to con?rm such transferee as a Member and such transferee's agreement to be bound by the terms of this Agreement; and
iii. The Board gives its consent to the admission of the transferee as a Substitute Member.
(b) Special Treatment of Certain Transferees. A transferee of Units in a Permitted Transfer under Article 11.2(a) shall automatically become a Substitute Member unless the transferor, in its sole and absolute discretion, directs in writing to the contrary.
11.5 Rights of Unit Holders. Each (i) Member-transferee that is not admitted as a Substitute Member as a result of the directions of a transferor pursuant to Article 11.5(b), and (ii) Person who is not a Member who acquires Units, but which Person is not admitted as a Substitute Member, shall have only the right to receive the distributions and allocations of Pro?ts and Losses to which the transferor would have been entitled under this Agreement with respect to the transferred Units, but shall have no right to vote or otherwise participate in the management of the Company, no right to inspect the books and records of the Company, and no other rights afforded to Members under this Agreement. Any distributions to such purported transferee may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities for damages that the transferor or transferee may have to the Company. A transferee of Units in a Permitted Transfer who is not admitted as a Substitute Member is referred to as a Unit Holder.
11.6 Prohibited Transfers. Any purported Transfer of Units that is not a Permitted Transfer shall be null and void and of no force and effect whatsoever. In the case of an attempted Transfer that is not a Permitted Transfer, the Persons engaging in or attempting to engage in such Transfer shall be liable to and shall indemnify and hold harmless the Company and the Members and Unit Holders from all loss, cost, liability and damages that the Company or any Member or Unit Holder shall incur as a result of such attempted Transfer.
11.7 Legends. Each Member understands that the certi?cates (if any) evidencing the Units shall bear the following legend and any other restrictive legend determined by the Board or required by applicable state securities laws:
The transferability of Units represented by this document is restricted. Such Units may not be sold, resold, assigned, gifted, transferred, pledged, or otherwise disposed, nor will the vendee, assignee, bene?ciary, or transferee be recognized as having acquired such Units for any purposes, unless (a) a registration statement under the Securities Act with respect to such Units shall then be in effect and such has been quali?ed under all applicable state securities laws, or (b) the availability of an exemption from such registration and qualification shall be established to the satisfaction of counsel for the Company.
The Units represented by this document are subject to further restriction as to their sale, transfer, hypothecation, pledge, or assignment as set forth in the Operating Agreement of the Company and agreed to by each Member and Unit Holder of the Company. This restriction provides, among other things, that generally no Unit may be transferred without the consent of the Board, and that generally no bene?ciary, transferee, or assignee shall have the right to become a "Substitute Member" without the consent of the Board.
11.8 Right of First Refusal.
(a) Class A Units. If an owner of Class A Units desires to Transfer all or a portion of such Person's Class A Units to any Person who is not a Class A Member or Class A Unit Holder, then such Transfer shall not constitute a Permitted Transfer unless such transfer fully complies with this Agreement, the Redemption Plan, and unless the transferee shall afford the Company and the Class A Member and Class A Unit Holders a right of first refusal pursuant to this Article 11.8.
i. Notice. A Person desiring to Transfer Class A Units shall first provide to the other holders of Class A Units and the Company (but not any other Member or Unit Holder) at least 180 days' prior written notice of the Person's intent to Transfer Class A Units (the "Disposition Notice"). The Person desiring to Transfer Class A Units shall be known as the "Disposing Class A Member" for purposes of this Agreement (notwithstanding that such Person may be a Unit Holder). In the Disposition Notice, the Disposing Class A Member shall specify the price at which the Class A Units are proposed to be sold or transferred to the proposed bona fide purchaser, the portion of the Disposing Class A Member's Class A Units to be sold or transferred, the identity of the proposed bona-fide purchaser or transferee, and the terms and conditions of the proposed Transfer.
(b) Class B Units. If an owner of Class B Units desires to Transfer all or a portion of such Person's Class B Units to any Person who is not a Class B Member or Class B Unit Holder, then such Transfer shall not constitute a Permitted Transfer unless such transfer occurs in full compliance with the terms of this Agreement.
i. Notice. A Person desiring to Transfer Class B Units shall first provide to the other holders of Class B Units and the Company (but not any other Member or Unit Holder) at least 180 days' prior written notice of the Person's intent to Transfer Class B Units (the "Disposition Notice"). The Person desiring to Transfer Class B Units shall be known as the "Disposing Class B Member" for purposes of this Agreement (notwithstanding that such Person may be a Unit Holder). In the Disposition Notice, the Disposing Class B Member shall specify the price at which the Class B Units are proposed to be sold or transferred to the proposed bona fide purchaser, the portion of the Disposing Class B Member's Class B Units to be sold or transferred, the identity of the proposed bona-?de purchaser or transferee, and the terms and conditions of the proposed Transfer.
(c) Option to Other Holders of Units in the Same Class. Other Holders of Units in the same class may elect, within 63 days after receiving the Disposition Notice, to purchase some or all of the Units proposed to be Transferred by the Disposing Member at the proposed price as contained in the Disposition Notice. The terms and conditions of the purchase by such other Holders shall be the terms and conditions of the proposed Transfer as set forth in the Disposition Notice. If such other Holders do not elect to purchase all of the Units proposed to be disposed of by the Disposing Member, then the Company shall promptly (but in no event later than 14 days after its decision not to purchase the offered Units) send written notice to that effect to holders of Units of the same class (i.e., Class A or Class B) as those Units proposed to be Transferred, and then such Persons shall have the right to purchase such Units by delivery of written notice to the Company and the Disposing Member within 21 days after receiving notice from the Company. If more than one eligible purchaser elects to purchase the Units, then each such Person shall be entitled to purchase a portion of such Units on a pro rata basis, based on the relative Class A Percentage Interests or relative Class B Percentage Interests, as applicable, of the applicable Persons wishing to purchase the Units, and each such Person shall indicate in its written notice to the Company what portion of its allocation of Units it is willing to purchase. For purposes of clari?cation only, a Member or Unit Holder shall only have rights under this Section 11.4 to acquire Units that are in the same class as those Units then owned by such Person.
(d) Option to Company of Units in the Same Class. The Company may elect, within 63 days after receiving the Disposition Notice, to purchase some or all of the Units proposed to be Transferred by the Disposing Member at the proposed price as contained in the Disposition Notice. The terms and conditions of the purchase by the Company shall be the terms and conditions of the proposed Transfer as set forth in the Disposition Notice. If the Company does not elect to purchase all of the Units proposed to be disposed of by the Disposing Member, then the Company shall promptly (but in no event later than 14 days after its decision not to purchase the offered Units) send written notice to that effect to holders of Units of the same class (i.e., Class A or Class B) as those Units proposed to be Transferred, and then such Persons shall have the right to purchase such Units by delivery of written notice to the Company and the Disposing Member within 21 days after receiving notice from the Company. If more than one eligible purchaser elects to purchase the Units, then each such Person shall be entitled to purchase a portion of such Units on a pro rata basis, based on the relative Class A Percentage Interests or relative Class B Percentage Interests, as applicable, of the applicable Persons wishing to purchase the Units, and each such Person shall indicate in its written notice to the Company what portion of its allocation of Units it is willing to purchase. For purposes of clari?cation only, a Member or Unit Holder shall only have rights under this Section 11.4 to acquire Units that are in the same class as those Units then owned by such Person.
(e) Transfer to Third-Party. If the Company, or the other holders of Units in the same class as the Disposing Members' Units proposed to be Transferred do not purchase all of the Disposing Members' Units covered by the Disposition Notice as provided in the foregoing subsections of this Section 11.4, then the Disposing Member may, provided the conditions of Article XI are satis?ed, sell its remaining Units to the proposed purchaser or transferee identi?ed in the Disposition Notice, on the terms and conditions set forth in the Disposition Notice. Any such sale must be consummated within the 126 day notice period.
11.9 Drag-Along Rights.
(a) In the event that the Board and the Members, with the approval required by Article 4.3, approve a transaction or series of related transactions involving a party or a group of related parties that are unaf?liated with any Member or the Company, that would constitute a sale of all or substantially all of the assets of the Company (the "Transaction"), each Unit Holder hereby agrees with respect to all Units that he, she or it holds and any other Company securities over which he, she or it otherwise exercises dispositive power:
i. In the event such Transaction requires the approval of Unit Holders or Members, (1) if the matter is to be brought to a Vote at a meeting of Unit Holders or Members, after receiving proper notice of any such meeting, to vote on the approval of a such Transactions to be present, in person or by proxy, as necessary, as a holder of Units, at all such meetings and be counted for the purposes of determining the presence of a quorum at such meetings; and (2) to vote (in person, by proxy or by action by written consent, as applicable) all Units in favor of such Transaction and in opposition of any and all other proposals that could reasonably be expected to delay or impair the ability of the Company to consummate such Transaction.
ii. In the event that the Transaction is to be effected by the sale of Units without the need for approval of the Unit Holders or Members, each Unit Holder or Member agrees to sell all Units of the Company bene?cially held by such Unit Holder or Member (or in the event that the selling Unit holders or Members are selling fewer than all of their Units of the Company, Units in the same proportion as the selling Unit Holders or Members are selling) to the person to whom the selling Unit Holders or Members propose to sell their Units, for the same per-Unit consideration and on the same terms and conditions as the Selling Unit Holders or Members, after taking into account the provisions of Section 11.10(b), except that Unit Holders and Members will not be required to sell their Units unless the liability for indemni?cation, if any, of each Unit Holder or Member in such Transaction is several, not joint, and is pro rata in accordance with such Unit Holder's or Member's relative ownership of the Company, and will not exceed the consideration payable to such Unit Holder or Member, if any, in such transaction (except in the case of potential liability for fraud or willful misconduct by such Unit Holder or Member);
iii. To refrain from exercising any dissenters' rights or rights of appraisal under applicable law at any time with respect to such Change of Control;
iv. To execute and deliver all related documentation and take such other action in support of the Transaction as shall reasonably be requested by the Company; and
v. Not to deposit, and to cause their af?liates not to deposit, any voting securities owned by such party or affiliate in a voting trust or subject any such voting securities to any arrangement or agreement with respect to the voting of such Units, unless speci?cally requested to do so by the acquirer in connection with a Transaction.
(b) A sale pursuant to this Article 11.9 shall be deemed to be for the same terms and conditions regarding consideration if the proceeds of such sale are allocated in the manner that would result if such consideration were distributed to the Members as if the Company were hypothetically liquidated and the consideration provided for in the sale was distributed to the selling Members as provided and required by the provisions of Article 12.2 of this Agreement according to the provisions in effect immediately prior to such sale as long as the nature of that consideration (e.g., cash, promissory notes, or other property) is received in the same proportionate amounts among the various Units.
11.10 Distributions in Respect of Transferred Units. If any Units in the Company are Transferred during any accounting period in compliance with the provisions of this Article XI, all distributions on or before the date of such Transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee.
11.11 Additional Transfer Restrictions on Units.
(a) No Transfer will be effective if such Transfer would, in the opinion of counsel to the Company, result in the termination of the Company's status as a REIT under the Code;
(b) A transfer may be rejected if it would cause 25% or more of the issued and outstanding Units to be held by Tax-Exempt Entities that are considered "benefit plan investors" under ERISA or otherwise cause the assets of the Company to be Plan Assets; and
(c) No transfer will be effected if the transfer would, to the knowledge of the Company, violate the provisions of any applicable federal or state securities laws.
(d) The Board or Manager may require the provision of a certificate (to be provided at the expense of the transferor or transferee) as to the legal nature and composition of a proposed transferee of an Interest of a Member and from any Member as to its legal nature and composition and shall be entitled to rely on any such certificate in making such determinations under this Article 11.12.
ARTICLE XII
DISSOLUTION AND TERMINATION
12.1 Dissolution. The Company shall be dissolved upon the first to occur of any of the following events:
(a) The written consent of a Majority-in-Interest of the Members;
(b) The entry of a decree of judicial dissolution under the Act, or an administrative dissolution of the Company pursuant to the Act;
(c) The sale, exchange, or other disposition of all or substantially all the assets of the Company.
The Company shall not be dissolved upon the occurrence of a Withdrawal Event with respect to any Member unless there is no remaining Member or Unit Holder.
12.2 Liquidation Winding Up and Distribution of Assets. The Board shall, upon dissolution of the Company, proceed to liquidate the Company's assets and properties, discharge the Company's obligations, and wind up the Company's business and affairs as promptly as is consistent with obtaining the fair value thereof. The proceeds of liquidation of the Company's assets, to the extent suf?cient therefor, shall be applied and distributed as follows:
(a) First, to the payment and discharge of all of the Company's secured debts and liabilities, then to the payment and discharge of the Company's unsecured debts and liabilities, or to the establishment of any reasonable reserves for contingent or unliquidated debts and liabilities;
(b) Second, to the payment of any accrued interest owing on any debts and liabilities owing to Members in proportion to the amount due and owing to each Member;
(c) Third, to the Class A Members, pro rata in accordance with their respective Contribution Account balances until the Contribution Account balances of all Class A Members have been reduced to zero;
(d) Thereafter, to the Members, pro rata in accordance with their Percentage Interests.
12.3 Liquidating Trust. Distributions required by Article 12.2 may be distributed to a trust established for the bene?t of the Members for the purposes of liquidating Company property, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or of the Board arising out of or in connection with the Company. In such case, the assets of such trust shall be distributed to the Members from time to time, in the discretion of the Board, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to this Agreement.
12.4 De?cit Capital Accounts. No Member shall have any obligation to contribute or advance any funds or other property to the Company by reason of any negative or de?cit balance in such Member's Capital Account during or upon completion of winding up or at any other time except to the extent that a de?cit balance is directly attributable to a distribution of cash or other property in violation of this Agreement.
12.5 Articles of Dissolution. When all the remaining property and assets have been applied and distributed in accordance with Article 12.2 hereof, the Board (or such other Person designated by the Members) shall cause Articles of Termination or similar ?lings to be executed and ?led with the Colorado Secretary of State.
12.6 Return of Contribution NonRecourse to Other Members. Except as provided by law, upon dissolution, each Member shall look solely to the assets of the Company for the return of the Member's Capital Contributions. If the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insuf?cient to return the cash or other property contribution of one or more Members, such Member or Members shall have no recourse against the Board or any other Member.
12.7 In-Kind Distributions. A Member shall have no right to demand and receive any distribution from the Company in any form other than cash. However, a Member may be compelled to accept a distribution of an asset in kind if the Company is unable to dispose of all of its assets for cash.
12.8 Inclusion of Unit Holder. Except as otherwise provided herein, the term "Member" for purposes of this Article XII, other than Article 12.1, shall include a Unit Holder.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Notices. All notices, requests, demands, claims or communications permitted or required to be given under this Agreement must be in writing and shall be deemed to have been suf?ciently given, served and received (i) if sent by personal delivery, when so delivered to the address of the intended recipient (as set forth below), (ii) if mailed, three (3) business days after having been sent by registered or certi?ed mail, return receipt requested, postage prepaid and addressed to the intended recipient (as set forth below), (iii) if sent by email or facsimile, upon completed transmission to the email address or fax number of the recipient (as set forth below), or (iv) if sent by overnight delivery service in circumstances to which such service guaranties next day delivery, the next business day (or day, if earlier delivered) following being so sent:
(a) If to the Company or its Board, addressed to the Company's known place of business; and
(b) If to any Member or Unit Holder, to the address of such Person as currently on file in the Company records, as amended from time to time, or as such Person has otherwise requested in writing.
13.2 Governing Law. Except as to matters including the formation or existence of the Company, which shall be governed under the Act, this Agreement and the rights of the parties hereunder will be governed by, interpreted, and enforced in accordance with the laws of the State of Colorado, including all matters of construction, validity, performance and enforcement, without regard to con?icts-of-laws principles that would require the application of any other law. To the extent permitted by governing law, this Agreement shall constitute a waiver by each party hereto of all rights under the Act that are inconsistent with the provisions of this Agreement, and to the extent permitted by governing law, the provisions of this Agreement shall override the provisions of the Act to the extent of such inconsistency or contradiction.
13.3 Amendments; Priority. This Agreement constitutes the entire agreement between the parties hereto concerning the matters set forth herein, and may not be amended except by the consent of a Majority-in-Interest of the Members; provided, however any proposed amendment to this Agreement that affects the rights, privileges and powers of the Class B Members shall require the consent of (i) a Majority-in-Interest of the Members, and (ii) a Majority-in-Interest of the Class B Members. In each instance, the consent given under this Section may not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, the Board shall be authorized to make any amendments to this Agreement which, in the opinion of counsel to the Company, are necessary to maintain the status of the Company as a limited liability company under applicable state laws or treatment of the Company as a REIT for federal and state income tax purposes. In the event of any con?ict between the provisions of this Agreement and the provisions of any other agreement between the parties hereto, the provisions of this Agreement shall prevail.
13.4 Additional Documents and Acts. Each Member and Unit Holder agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and the transactions contemplated hereby.
13.5 Headings and Construction. The headings of Articles, Sections and subsections in this Agreement (including any appendices, exhibits and schedules) are provided for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof and shall not affect the construction or interpretation of any provision thereof. References herein to any gender shall include the other gender and the neuter, as applicable. References herein to the singular number shall include the plural number, and vice-versa. The words "hereunder," "hereof", "hereto," and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article or other provision hereof, or any Exhibit attached hereto. When used in this Agreement, the word "including" and with correlative meaning "include" and "includes") means including, without limiting the generality of any description preceding such term, and shall be deemed to be followed by the words "without limitation" wherever found in this Agreement.
13.6 Severability. If any provision (or portion thereof) of this Agreement, or the application of any such provision to any Person or circumstance, is held to be unenforceable or invalid by any court of competent jurisdiction or arbitrator or under any applicable law, the parties hereto shall negotiate an equitable adjustment to the provisions of this Agreement with the view to effecting, to the greatest extent possible, the original purpose and intent of this Agreement, and in any event, the validity and enforceability of the remaining provisions (or portions thereof) of this Agreement shall not be affected thereby, and will remain in full force and effect. Without limiting the generality of the foregoing, the covenants and obligations contained in this Agreement shall be construed as separate covenants and obligations, covering their respective subject matters. Each breach of a covenant or obligation set forth in this Agreement shall give rise to a separate and independent cause of action.
13.7 Heirs. Successors. and Assigns. No party hereto may assign any of such Person's rights or delegate or cause to be assumed any of such Person's obligations under this Agreement. Any purported assignment or delegation shall be null and void ab initio and of no force and effect whatsoever. Subject to the preceding sentence, each and all of the covenants, terms, provisions, and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement and by applicable law, their respective heirs, legal representatives, successors, and assigns. Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the parties hereto any legal or equitable right, remedy or claim under or with respect to this Agreement, except such rights as shall inure to an heir, executor, personal representative, successor, or permitted assign pursuant to this paragraph.
13.8 No Third-Party Rights; Creditors. None of the provisions of this Agreement shall be for the benefit of, or enforceable, by any third-party including any creditor of the Company, any Member or Unit Holder.
13.9 Article, Section, and Other References. Except to the extent provided, references to the terms "Article" "Section," "Schedule," "Exhibit," or "Appendix" mean to the corresponding Articles, Sections, Schedules, Exhibits, or Appendices attached to or referred to in this Agreement.
13.10 Authority to Adopt Agreement. By execution hereof, each Member and Unit Holder represents and covenants as follows:
(a) Such Person has full legal right, power, and authority to deliver this Agreement and to perform such Person's obligations hereunder;
(b) This Agreement constitutes the legal, valid, and binding obligation of such Person enforceable in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy and other laws of general application relating to creditors' rights or general principles of equity;
(c) This Agreement does not violate, con?ict with, result in a breach of the terms, conditions or provisions of, or constitute a default or an event of default under any other agreement of which the such Person is a party; and
(d) Such Person's investment in Units in the Company is made for such Person's own account for investment purposes only and not with a view to the resale or distribution of such Units.
13.11 Joint Preparation: Independent Counsel.
(a) Joint Preparation. This Agreement shall be considered, for all purposes, as having been prepared through the joint efforts of the parties to this Agreement. No presumption shall apply in favor of or against any party in the interpretation of this Agreement or any such other agreement or instrument, or in the resolution of any ambiguity of any provision hereof or thereof, based on the preparation, substitution, submission, or other event of negotiation, drafting or execution hereof or thereof.
(b) Independent Counsel. Each party to this Agreement understands, acknowledges and agrees that each of them is entitled to and has been afforded the opportunity to consult legal and tax counsel of the party's choice regarding the terms, conditions and legal effects of this Agreement as well as the advisability and propriety thereof. Each party to this Agreement further understands and acknowledges that having so consulted with legal and tax counsel of its choosing, such Person hereby waives any right to raise or rely upon the lack of representation or effective representation in any future proceedings or in connection with any future claim resulting from this Agreement or the formation of the Company. The Members, Unit Holders and each Manager acknowledge that (i) the Law Offices of Bradley Betterton-Fike, LLC has represented the Class A Member and Manager with respect to the preparation of this Agreement, (ii) no other party to this Agreement has sought or obtained legal advice from the Law Offices of Bradley Betterton-Fike, LLC related to this Agreement or the transactions contemplated herein, and (iii) Law Offices of Bradley Betterton-Fike, LLC has not rendered any advice to or represented any other party to this Agreement.
(c) The parties hereto agree that the representation by the Law Offices of Bradley Betterton-Fike, LLC, as provided in (b) above, shall not preclude representation of the Company by the Law Offices of Bradley Betterton-Fike, LLC; provided, however, that any such representation of the Company shall not preclude the Company from representing the Class A Members and Manager in the event of a dispute between Members.
13.12 Venue and Forum. In the event it is necessary to bring any court action for any relief concerning the relationship among the Parties or in any way arising out of or related to this Agreement, then the Parties agree that such action shall be brought exclusively in either the state or federal courts sitting in Denver, Colorado. Further, the parties hereby agree that such venue is convenient and hereby waive any and all rights to remove such action to a different forum or venue, and hereby submit themselves to the jurisdiction of said courts and consent to venue and forum in said courts. The Parties agree that any action commenced which is not in conformity with this Article shall be dismissed upon motion of any party to such action and further agree that the court shall award to the defendants in such action their reasonable attorney's fees incurred in defense of such action, in addition to any other relief awarded by the court.
13.13 Con?dentiality.
1. Each Member, Unit Holder, Director and Manager:
i. Shall maintain the con?dentiality of Con?dential Information;
ii. Except as required in conducting the business and internal affairs of the Company, shall not disclose Con?dential Information to any third-party;
iii. Shall make copies of documents and other media containing Con?dential Information only for the bene?t of the Company;
iv. Shall use Con?dential Information only for the bene?t of the Company; and
v. Promptly after ceasing to be a Member, Unit Holder, Director or Manager (as the case may be), shall return to the Company all documents and other media containing Con?dential Information.
2. The provisions of this Section 13.16 shall not apply to information:
i. That the Member, Unit Holder, Director or Manager in question (the "Recipient") already lawfully possesses at the time of its disclosure to the Member, Unit Holder, Director or Manager by the Company or which the Recipient lawfully obtains thereafter;
ii. That is already in the public domain at the time of its disclosure to the Recipient or which thereafter enters the public domain through no fault of the Member, Unit Holder, Director or Manager;
iii. The disclosure of which is required by ?nal order of a court of competent jurisdiction;
iv. The disclosure of which is made on a con?dential basis to a mediator in mediation or an arbitrator in an arbitration, as applicable, and pursuant to a protective order entered for such purposes; or
v. That the Company discloses without restriction to any person other than the Recipient.
This Section 13.16 shall bind each Recipient even after the Recipient ceases to be a Member, Unit Holder, Director or Manager, as applicable. Subject to any contrary arrangement with a third-party, this Article 13.16 shall terminate upon the termination of the legal existence of the Company.
13.14 Execution of Agreement; Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed an original, and all of such counterparts, when taken together, shall constitute or be deemed to constitute one and the same Agreement. The exchange of copies of this Agreement and of executed signature pages by facsimile or electronic transmission (e.g., .pdf, click-through acknowledgment, etc.) shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or electronic transmission (e.g., DocuSign, .pdf, click-through) shall be deemed to be their original signatures for all purposes.
13.15 Public Announcements. No Member, Unit Holder, Director or Manager nor any of their Affiliates shall, without the prior approval of the Board and Manager, issue any press releases or otherwise make any public statements with respect to the Company or the transactions contemplated by this Agreement, except as may be required by applicable law or regulation or by obligations pursuant to any listing agreement with any national securities exchange so long as such Member or such Affiliate has used reasonable efforts to obtain the approval of the other Members prior to issuing such press release or making such public disclosure.
13.16 No Waiver. One or more waivers of the breach of any provision of this Agreement by any party shall not be construed as a waiver of a subsequent breach of the same or any other provision, nor shall any delay or omission by a party to seek a remedy for any breach of this Agreement or to exercise the rights accruing to a party by reason of such breach be deemed a waiver by any party of its remedies and rights with respect to such breach.
13.17 Incorporation by Reference. Every Exhibit and Annex attached to this Agreement is incorporated in this Agreement by reference.
13.18 Remedies Cumulative. Except as otherwise expressly provided in this Agreement, the rights and remedies given in this Agreement and by law to the parties shall be deemed cumulative, and the exercise of one of such remedies shall not operate to bar the exercise of any other rights and remedies reserved to a party under the provisions of this Agreement or given to a party by law.
13.19 No Waiver. By agreeing to the provisions stated in this Agreement, investors will not be deemed to have waived the Company's compliance with the federal securities laws and the rules and regulations promulgated thereunder.
[SIGNATURES APPEAR ON FOLLOWING PAGE]

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

By execution below, each of the undersigned agrees to the terms and provisions of the foregoing Operating Agreement of Seed Equity Properties, LLC, a Colorado limited liability company.

CLASS A MEMBER:
Budding Equity Management, Inc., a Colorado corporation

By: /s/ N. Nora Nye
Its: President and CEO

MANAGER:
Budding Equity Management, Inc., a Colorado corporation

By: /s/N. Nora Nye
Its: President and CEO

CLASS B MEMBERS:
(Signatures for each Class B Member to are separately maintained in electronic format and deemed affixed hereto pursuant to this Agreement)

EXHIBIT A
MEMBERS, CAPITAL CONTRIBUTIONS, UNITS
Member & Address Contribution Account Total Units
(and Class) Class A Percentage Interest Class B Percentage Interest Percentage Interest
Budding Equity Management, Inc.
1660 S. Albion St.
Suite 321
Denver, CO 80222 $1,000.00 100
Class A 100 0 100% of Class A

EXHIBIT B
COMPANY PROPERTY
1. TBD

EX1A-4 SUBS AGMT
5
SubscriptionAgreementv4rev2.htm
SUBSCRIPTION AGREEMENT V4 REV 12-2018

SubscriptionAgreementv4rev2

APPENDIX B

FORM OF SUBSCRIPTION AGREEMENT

SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this "Agreement" or this "Subscription") is made and entered into as of the date of full execution, by and between the undersigned (the "Subscriber," "Investor," or "you") and Seed Equity Properties LLC, a Colorado limited liability company ("Seed Equity" or "we" or "us" or "our"), with reference to the facts set forth below.

WHEREAS, subject to the terms and conditions of this Agreement, the Subscriber wishes to irrevocably subscribe for and purchase (subject to acceptance of such subscription by Seed Equity) certain Class B Units (the "Class B Units"), as set forth in Section 1 and on the signature page hereto ("Purchase"), offered pursuant to that certain Offering Circular, dated as of [DATE] (the "Offering Circular") of Seed Equity.

NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual representations, warranties, covenants and agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

NOTE TO INVESTORS WHO SUBSCRIBE PRIOR TO OUR RAISING THE MINIMUM OFFERING AMOUNT

Notwithstanding anything in this Subscription Agreement to the contrary, we may not accept subscriptions until such time as we have received subscriptions equaling the minimum offering amount, which is $2,250,000. Until the minimum threshold is met, Investors' funds will remain at the Investors' bank/financial institution and Investors will not be admitted as members. The funds will be drawn by us using an ACH electronic fund transfer through the Automated Clearing House network only after the $2,250,000 minimum threshold has been met.

Prior to our achieving the minimum offering amount, subscribers may revoke their subscription by providing us with a written notice requesting such rescission, to be sent to the following address:

Seed Equity Properties LLC
1660 South Albion Street, Suite 321
Denver, Colorado 80222

1. Subscription for and Purchase of the Class B Units.
1.1. Subject to the express terms and conditions of this Agreement, the Subscriber hereby irrevocably subscribes for and agrees to purchase the Class B Units (the "Purchase") in the amount of the purchase price (the "Purchase Price") set forth on the signature page to this Agreement.
1.2. The Subscriber must initially purchase at least 100 Class B Units in this offering. There is no minimum subscription requirement on additional purchases once the Subscriber has purchased the requisite minimum of 100 Class B Units.
1.3. The offering of Class B Units is described in the Offering Circular, that is available through the online website platform www.budeq.com (the "Site"), which is owned and operated by Budding Equity Management, Inc., ("Budding Equity") Seed Equity's manager, as well as on the SEC's EDGAR website. Please read this Agreement, the Offering Circular, and Seed Equity's Operating Agreement (the "Operating Agreement"). While they are subject to change, as described below, Seed Equity advises you to print and retain a copy of these documents for your records. By signing electronically below, you agree to the following terms together with the Terms and Conditions and the Terms of Use, consent to Budding Equity's Privacy Policy, and agree to transact business with us and to receive communications relating to the Class B Units electronically.
1.4. Seed Equity has the right to reject this Subscription in whole or in part for any reason. The Subscriber may not cancel, terminate or revoke this Agreement, which, in the case of an individual, shall survive his death or disability and shall be binding upon the Subscriber, his heirs, trustees, beneficiaries, executors, personal or legal administrators or representatives, successors, transferees and assigns.
1.5. Once you make a funding commitment to purchase the Class B Units, it is irrevocable until the Class B Units are issued, the Purchase is rejected by Seed Equity, or Seed Equity otherwise determines not to consummate the transaction.
1.6. The undersigned has received and read a copy of the Seed Equity's Operating Agreement and agrees that its execution of this Agreement constitutes its consent to such Operating Agreement, and, that upon acceptance of this Agreement by Seed Equity, the undersigned will become a member of Seed Equity as a holder of Class B Units. When this Agreement is countersigned by the Company, the Operating Agreement shall be binding upon the undersigned as of the settlement date.
2. Purchase of the Class B Units.
2.1. The Subscriber understands that the Purchase Price is payable with the execution and submission of this Agreement, and accordingly, is submitting herewith to Seed Equity the Purchase Price as agreed to by Seed Equity on the Site.
2.2. If Seed Equity returns the Subscriber's Purchase Price to the Subscriber, Seed Equity will not pay any interest to the Subscriber.
2.3. If this Subscription is accepted by Seed Equity, the Subscriber agrees to comply fully with the terms of this Agreement, the Class B Units and all other applicable documents or instruments of Seed Equity, including the Operating Agreement. The Subscriber further agrees to execute any other necessary documents or instruments in connection with this Subscription and the Subscriber's purchase of the Class B Units.
2.4. In the event that this Subscription is rejected in full or the offering is terminated, payment made by the Subscriber to Seed Equity for the Class B Units will be refunded to the Subscriber without interest and without deduction, and all of the obligations of the Subscriber hereunder shall terminate. To the extent that this Subscription is rejected in part, Seed Equity shall refund to the Subscriber any payment made by the Subscriber to Seed Equity with respect to the rejected portion of this Subscription without interest and without deduction, and all of the obligations of Subscriber hereunder shall remain in full force and effect except for those obligations with respect to the rejected portion of this Subscription, which shall terminate.
3. Investment Representations and Warranties of the Subscriber. The Subscriber represents and warrants to Seed Equity the following:
3.1. The information that the Subscriber has furnished herein, including (without limitation) the information furnished by the Subscriber to Budding Equity, upon signing up for the Site regarding whether Subscriber qualifies as (i) an "accredited investor" as that term is defined in Rule 501 under Regulation D promulgated under the Securities Act of 1933, as amended (the "Act") and/or (ii) a "qualified purchaser" as that term is defined in Regulation A promulgated under the Act, is correct and complete as of the date of this Agreement and will be correct and complete on the date, if any, that Seed Equity accepts this subscription. Further, the Subscriber shall immediately notify Seed Equity of any change in any statement made herein prior to the Subscriber's receipt of Seed Equity's acceptance of this Subscription, including, without limitation, Subscriber's status as an "accredited investor" and/or "qualified purchaser". The representations and warranties made by the Subscriber may be fully relied upon by Seed Equity and by any investigating party relying on them.
3.2. The Subscriber, if an entity, is, and shall at all times while it holds Class B Units remain, duly organized, validly existing and in good standing under the laws of the state or other jurisdiction of the United States of America of its incorporation or organization, having full power and authority to own its properties and to carry on its business as conducted. The Subscriber, if a natural person, is eighteen (18) years of age or older, competent to enter into a contractual obligation, and a citizen or resident of the United States of America. The principal place of business or principal residence of the Subscriber is as shown on the signature page of this Agreement.
3.3. The Subscriber has the requisite power and authority to deliver this Agreement, perform his, her or its obligations set forth herein, and consummate the transactions contemplated hereby. The Subscriber has duly executed and delivered this Agreement and has obtained the necessary authorization to execute and deliver this Agreement and to perform his, her or its obligations herein and to consummate the transactions contemplated hereby. This Agreement, assuming the due execution and delivery hereof by Seed Equity, is a legal, valid and binding obligation of the Subscriber enforceable against the Subscriber in accordance with its terms.
3.4. At no time has it been expressly or implicitly represented, guaranteed or warranted to the Subscriber by Seed Equity or any other person that:
(a) A percentage of profit and/or amount or type of gain or other consideration will be realized as a result of this investment; or
(b) The past performance or experience on the part of Seed Equity and/or its officers or directors does not in any way indicate the predictable or probable results of the ownership of the Class B Units or the overall Seed Equity venture.
3.5. The Subscriber has received this Agreement, the Offering Circular and the Operating Agreement. The Subscriber and/or the Subscriber's advisors, who are not affiliated with and not compensated directly or indirectly by Seed Equity or an affiliate thereof, have such knowledge and experience in business and financial matters as will enable them to utilize the information which they have received in connection with Seed Equity and its business to evaluate the merits and risks of an investment, to make an informed investment decision and to protect Subscriber's own interests in connection with the Purchase.
3.6. The Subscriber understands that the Class B Units being purchased are a speculative investment which involves a substantial degree of risk of loss of the Subscriber's entire investment in the Class B Units, and the Subscriber understands and is fully cognizant of the risk factors related to the purchase of the class B Units. The Subscriber has read, reviewed and understood the risk factors set forth in the Offering Circular.
3.7. The Subscriber understands that any forecasts or predictions as to Seed Equity's performance are based on estimates, assumptions and forecasts that Seed Equity believes to be reasonable but that may prove to be materially incorrect, and no assurance is given that actual results will correspond with the results contemplated by the various forecasts.
3.8. The Subscriber is able to bear the economic risk of this investment and, without limiting the generality of the foregoing, is able to hold this investment for an indefinite period of time. The Subscriber has adequate means to provide for the Subscriber's current needs and personal contingencies and has a sufficient net worth to sustain the loss of the Subscriber's entire investment in Seed Equity.
3.9. The amount of Class B Units being purchased by the Subscriber does not exceed 10% of the greater of the Subscriber's annual income or net worth (for natural persons), or 10% of the greater of the Subscriber's annual revenue or net assets at fiscal year-end (for non-natural persons).
3.10. The Subscriber has had an opportunity to ask questions of Seed Equity or anyone acting on its behalf and to receive answers concerning the terms of this Agreement and the Class B Units, as well as about Seed Equity and its business generally, and to obtain any additional information that Seed Equity possesses or can acquire without unreasonable effort or expense, that is necessary to verify the accuracy of the information contained in this Agreement. Further, all such questions have been answered to the full satisfaction of the Subscriber.
3.11. The Subscriber agrees to provide any additional documentation Seed Equity may reasonably request, including documentation as may be required by Seed Equity to form a reasonable basis that the Subscriber qualifies as an "accredited investor" as that term is defined in Rule 501 under Regulation D promulgated under the Act, or otherwise as a "qualified purchaser" as that term is defined in Regulation A promulgated under the Act, or as may be required by the securities administrators or regulators of any state, to confirm that the Subscriber meets any applicable minimum financial suitability standards and has satisfied any applicable maximum investment limits.
3.12. The Subscriber understands that no state or federal authority has scrutinized this Agreement or the Class B Units offered pursuant hereto, has made any finding or determination relating to the fairness for investment of the Class B Units, or has recommended or endorsed the Class B Units, and that the Class B Units have not been registered or qualified under the Act or any state securities laws, in reliance upon exemptions from registration thereunder.
3.13. The Subscriber understands that Seed Equity has not been registered under the Investment Company Act of 1940. In addition, the Subscriber understands that Seed Equity is not registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
3.14. The Subscriber is subscribing for and purchasing the Class B Units without being furnished any offering literature, other than the Offering Circular, the Operating Agreement and this Agreement, and such other related documents, agreements or instruments as may be attached to the foregoing documents as exhibits or supplements thereto, or as the Subscriber has otherwise requested from Seed Equity in writing, and without receiving any representations or warranties from Seed Equity or its agents and representatives other than the representations and warranties contained in said documents, and is making this investment decision solely in reliance upon the information contained in said documents and upon any investigation made by the Subscriber or Subscriber's advisors.
3.15. The Subscriber's true and correct full legal name, address of residence (or, if an entity, principal place of business), phone number, electronic mail address, United States taxpayer identification number, if any, and other contact information are accurately provided on signature page hereto. The Subscriber is currently a bona fide resident of the state or jurisdiction set forth in the current address provided to Seed Equity. The Subscriber has no present intention of becoming a resident of any other state or jurisdiction.
3.16. The Subscriber is subscribing for and purchasing the Class B Units solely for the Subscriber's own account, for investment purposes only, and not with a view toward or in connection with resale, distribution (other than to its shareholders or members, if any), subdivision or fractionalization thereof. The Subscriber has no agreement or other arrangement, formal or informal, with any person or entity to sell, transfer or pledge any part of the Class B Units, or which would guarantee the Subscriber any profit, or insure against any loss with respect to the Class B Units, and the Subscriber has no plans to enter into any such agreement or arrangement.
3.17. The Subscriber represents and warrants that the execution and delivery of this Agreement, the consummation of the transactions contemplated thereby and hereby and the performance of the obligations thereunder and hereunder will not conflict with or result in any violation of or default under any provision of any other agreement or instrument to which the Subscriber is a party or any license, permit, franchise, judgment, order, writ or decree, or any statute, rule or regulation, applicable to the Subscriber. The Subscriber confirms that the consummation of the transactions envisioned herein, including, but not limited to, the Subscriber's Purchase, will not violate any foreign law and that such transactions are lawful in the Subscriber's country of citizenship and residence.
3.18. Seed Equity's intent is to comply with all applicable federal, state and local laws designed to combat money laundering and similar illegal activities, including the provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "PATRIOT Act"). Subscriber hereby represents, covenants, and agrees that, to the best of Subscriber's knowledge based on reasonable investigation:
(a) None of the Subscriber's funds tendered for the Purchase Price (whether payable in cash or otherwise) shall be derived from money laundering or similar activities deemed illegal under federal laws and regulations.
(b) To the extent within the Subscriber's control, none of the Subscriber's funds tendered for the Purchase Price will cause Seed Equity or any of its personnel or affiliates to be in violation of federal anti-money laundering laws, including (without limitation) the Bank Secrecy Act (31 U.S.C. 5311 et seq.), the United States Money Laundering Control Act of 1986 or the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, and/or any regulations promulgated thereunder.
(c) When requested by Seed Equity, the Subscriber will provide any and all additional information, and the Subscriber understands and agrees that Seed Equity may release confidential information about the Subscriber and, if applicable, any underlying beneficial owner or Related Person to U.S. regulators and law enforcement authorities, deemed reasonably necessary to ensure compliance with all applicable laws and regulations concerning money laundering and similar activities. Seed Equity reserves the right to request any information as is necessary to verify the identity of the Subscriber and the source of any payment to thereto. In the event of delay or failure by the Subscriber to produce any information required for verification purposes, the subscription by the Subscriber may be refused.
(d) Neither the Subscriber, nor any person or entity controlled by, controlling or under common control with the Subscriber, any of the Subscriber's beneficial owners, any person for whom the Subscriber is acting as agent or nominee in connection with this investment nor, in the case of an Subscriber which is an entity, any Related Person is:
(i) a Prohibited Investor;
(ii) a Senior Foreign Political Figure, any member of a Senior Foreign Political Figure's "immediate family," which includes the figure's parents, siblings, spouse, children and in-laws, or any Close Associate of a Senior Foreign Political Figure, or a person or entity resident in, or organized or chartered under, the laws of a Non-Cooperative Jurisdiction;
(iii) a person or entity resident in, or organized or chartered under, the laws of a jurisdiction that has been designated by the U.S. Secretary of the Treasury under Section 311 or 312 of the PATRIOT Act as warranting special measures due to money laundering concerns; or Bank without a physical presence in any country, but does not include a regulated affiliate; "Foreign Bank" shall mean an organization that (i) is organized under the laws of a foreign country, (ii) engages in the business of banking, (iii) is recognized as a bank by the bank supervisory or monetary authority of the country of its organization or principal banking operations, (iv) receives deposits to a substantial extent in the regular course of its business, and (v) has the power to accept demand deposits, but does not include the U.S. branches or agencies of a foreign bank; "Non-Cooperative Jurisdiction" shall mean any foreign country that has been designated as noncooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Task Force on Money Laundering, of which the U.S. is a member and with which designation the U.S. representative to the group or organization continues to concur; "Prohibited Investor" shall mean a person or entity whose name appears on (i) the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control; (ii) other lists of prohibited persons and entities as may be mandated by applicable law or regulation; or (iii) such other lists of prohibited persons and entities as may be provided to Seed Equity in connection therewith; "Related Person" shall mean, with respect to any entity, any interest holder, director, senior officer, trustee, beneficiary or grantor of such entity; provided that in the case of an entity that is a publicly traded company or a tax qualified pension or retirement plan in which at least 100 employees participate that is maintained by an employer that is organized in the U.S. or is a U.S. government entity, the term "Related Person" shall exclude any interest holder holding less than 5% of any class of securities of such publicly traded company and beneficiaries of such plan; "Senior Foreign Political Figure" shall mean a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a Senior Foreign Political Figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a Senior Foreign Political Figure.
(iv) a person or entity who gives Subscriber reason to believe that its funds originate from, or will be or have been routed through, an account maintained at a Foreign Shell Bank, an "offshore bank," or a bank organized or chartered under the laws of a Non-Cooperative Jurisdiction.
(e) The Subscriber hereby agrees to immediately notify Seed Equity if the Subscriber knows, or has reason to suspect, that any of the representations in this Section 3.18 have become incorrect or if there is any change in the information affecting these representations and covenants.
(f) The Subscriber agrees that, if at any time it is discovered that any of the foregoing anti-money laundering representations are incorrect, or if otherwise required by applicable laws or regulations, Seed Equity may undertake appropriate actions, and the Subscriber agrees to cooperate with such actions, to ensure compliance with such laws or regulations, including, but not limited to segregation and/or redemption of the Subscriber's interest in the Class B Units.
3.19. The Subscriber confirms that the Subscriber has been advised to consult with the Subscriber's independent attorney regarding legal matters concerning Seed Equity and to consult with independent tax advisers regarding the tax consequences of investing through Seed Equity. The Subscriber acknowledges that Subscriber understands that any anticipated United States federal or state income tax benefits may not be available and, further, may be adversely affected through adoption of new laws or regulations or amendments to existing laws or regulations. The Subscriber acknowledges and agrees that Seed Equity is providing no warranty or assurance regarding the ultimate availability of any tax benefits to the Subscriber by reason of the Purchase.
4. Ownership Limitation. The Subscriber acknowledges and agrees that, pursuant to the terms of the Operating Agreement, the Subscriber generally cannot own, or be deemed to own by virtue of certain attribution provisions of the Internal Revenue Code of 1986, as amended (the "Code") and as set forth in the Operating Agreement, either more than 9.8% in value or in number of our Class B Units, whichever is more restrictive, or more than 9.8% in value or in number of our units, whichever is more restrictive. The Operating Agreement will include additional restrictions on ownership, including ownership that would result in (i) us being "closely held" within the meaning of Section 856(h) of the Code, (ii) us failing to qualify as a REIT or (iii) our units being beneficially owned by fewer than 100 persons (as determined under Section 856(a)(5) of the Code). The Subscriber also acknowledges and agrees that, pursuant to the terms of the Operating Agreement, the Subscriber's ownership of our Class B Units cannot cause any other person to violate the foregoing limitations on ownership.
5. Tax Forms. The Subscriber will also need to complete an IRS Form W-9 or the appropriate Form W-8, which should be returned directly to us via the Seed Equity Platform. The Subscriber certifies that the information contained in the executed copy (or copies) of IRS Form W-9 or appropriate IRS Form W-8 (and any accompanying required documentation), as applicable, when submitted to us will be true, correct and complete. The Subscriber shall (i) promptly inform us of any change in such information, and (ii) furnish to us a new properly completed and executed form, certificate or attachment, as applicable, as may be required under the Internal Revenue Service instructions to such forms, the Code or any applicable Treasury Regulations or as may be requested from time to time by us.
6. No Advisory Relationship. You acknowledge and agree that the purchase and sale of the Class B Units pursuant to this Agreement is an arms-length transaction between you and Seed Equity. In connection with the purchase and sale of the Class B Units, Seed Equity is not acting as your agent or fiduciary. Seed Equity assumes no advisory or fiduciary responsibility in your favor in connection with the Class B Units or the corresponding project investments. Seed Equity has not provided you with any legal, accounting, regulatory or tax advice with respect to the Class B Units, and you have consulted your own respective legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate.
7. Bankruptcy. In the event that you file or enter bankruptcy, insolvency or other similar proceeding, you agree to use the best efforts possible to avoid Seed Equity being named as a party or otherwise involved in the bankruptcy proceeding. Furthermore, this Agreement should be interpreted so as to prevent, to the maximum extent permitted by applicable law, any bankruptcy trustee, receiver or debtor-in-possession from asserting, requiring or seeking that (i) you be allowed by Seed Equity to return the Class B Units to Seed Equity for a refund or (ii) Seed Equity be mandated or ordered to redeem or withdraw Class B Units held or owned by you.
8. Miscellaneous Provisions.
8.1. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado (without regard to the conflicts of laws principles thereof).
8.2. All notices and communications to be given or otherwise made to the Subscriber shall be deemed to be sufficient if sent by electronic mail to such address as set forth for the Subscriber at the records of Seed Equity (or that you submitted to us via the Site). You shall send all notices or other communications required to be given hereunder to Seed Equity via email at info@budeq.com (with a copy to be sent concurrently via prepaid certified mail to: Seed Equity Properties LLC, 1660 South Albion Street, Suite 321, Denver, Colorado 80222, Attention: Investor Support.
Any such notice or communication shall be deemed to have been delivered and received on the first business day following that on which the electronic mail has been sent (assuming that there is no error in delivery). As used in this Section, "business day" shall mean any day other than a day on which banking institutions in the State of Delaware are legally closed for business.
8.3. This Agreement, or the rights, obligations or interests of the Subscriber hereunder, may not be assigned, transferred or delegated without the prior written consent of Seed Equity. Any such assignment, transfer or delegation in violation of this section shall be void ab initio.
8.4. The parties agree to execute and deliver such further documents and information as may be reasonably required in order to effectuate the purposes of this Agreement.
8.5. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of each of the parties hereto.
8.6. If one or more provisions of this Agreement are held to be unenforceable under applicable law, rule or regulation, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
8.7. In the event that either party hereto shall commence any suit, action or other proceeding to interpret this Agreement, or determine to enforce any right or obligation created hereby, then such party, if it prevails in such action, shall recover its reasonable costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorney's fees and expenses and costs of appeal, if any.
8.8. This Agreement (including the exhibits and schedules attached hereto) and the documents referred to herein (including without limitation the Class B Units) constitute the entire agreement among the parties and shall constitute the sole documents setting forth terms and conditions of the Subscriber's contractual relationship with Seed Equity with regard to the matters set forth herein. This Agreement supersedes any and all prior or contemporaneous communications, whether oral, written or electronic, between us.
8.9. This Agreement may be executed in any number of counterparts, or facsimile counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
8.10. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. The singular number or masculine gender, as used herein, shall be deemed to include the plural number and the feminine or neuter genders whenever the context so requires.
8.11. The parties acknowledge that there are no third-party beneficiaries of this Agreement, except for any affiliates of Seed Equity that may be involved in the issuance or servicing of Class B Units on Budding Equity's platform, which the parties expressly agree shall be third party beneficiaries hereof.
9. Consent to Electronic Delivery. The Subscriber hereby agrees that Seed Equity may deliver all notices, financial statements, valuations, reports, reviews, analyses or other materials, and any and all other documents, information and communications concerning the affairs of Seed Equity and its investments, including, without limitation, information about the investment, required or permitted to be provided to the Subscriber under the Operating Agreement or hereunder by means e-mail or by posting on an electronic message board or by other means of electronic communication. Because Seed Equity operates principally on the internet, you will need to consent to transact business with us online and electronically. As part of doing business with us, therefore, we also need you to consent to our giving you certain disclosures electronically, either via the Site or to the email address you provide to us. By entering into this Agreement, you consent to receive electronically all documents, communications, notices, contracts, and agreements arising from or relating in any way to your or our rights, obligations or services under this Agreement (each, a "Disclosure"). The decision to do business with us electronically is yours. This document informs you of your rights concerning Disclosures.
9.1. Scope of Consent. Your consent to receive Disclosures and transact business electronically, and our agreement to do so, applies to any transactions to which such Disclosures relate.
9.2. Consenting to Do Business Electronically. Before you decide to do business electronically with us, you should consider whether you have the required hardware and software capabilities described below.
9.3. Hardware and Software Requirements. In order to access and retain Disclosures electronically, you must satisfy the following computer hardware and software requirements: access to the internet; an email account and related software capable of receiving email through the internet; a web browser which is SSL-compliant and supports secure sessions; and hardware capable of running this software.
9.4. How to Contact Us Regarding Electronic Disclosures. You can contact us via email at info@budeq.com. You may also reach us in writing at the following address: Seed Equity Properties LLC, 1660 South Albion Street, Suite 321, Denver, Colorado 80222, Attention: Investor Support. You agree to keep us informed of any change in your email or home mailing address so that you can continue to receive all Disclosures in a timely fashion. If your registered e-mail address changes, you must notify us of the change by sending an email to info@budeq.com. You also agree to update your registered residence address and telephone number on the Site if they change. You will print a copy of this Agreement for your records, and you agree and acknowledge that you can access, receive and retain all Disclosures electronically sent via email or posted on the Site.
10. Consent to Electronic Delivery of Tax Documents.
10.1. Please read this disclosure about how we will provide certain documents that we are required by the Internal Revenue Service (the "IRS") to send to you ("Tax Documents") in connection with your Class B Units. A Tax Document provides important information you need to complete your tax returns. Tax Documents include Form 1099. Occasionally, we are required to send you CORRECTED Tax Documents. Additionally, we may include inserts with your Tax Documents. We are required to send Tax Documents to you in writing, which means in paper form. When you consent to electronic delivery of your Tax Documents, you will be consenting to delivery of Tax Documents, including these corrected Tax Documents and inserts, electronically instead of in paper form.
10.2. Agreement to Receive Tax Documents Electronically. By executing this Agreement on the Budding Equity Platform, you are consenting in the affirmative that we may send Tax Documents to you electronically, and acknowledging that you are able to access Tax Documents from the site which are made available under www.budeq.com/documents/index. If you subsequently withdraw consent to receive Tax Documents electronically, a paper copy will be provided. Your consent to receive the Tax Documents electronically continues for every tax year until you withdraw your consent.
10.3. How We Will Notify You That a Tax Document is Available. On or before the required IRS-designated due date for your Tax Document, you will receive an electronic notification via email when your Tax Documents are ready for access on the Site. Your Tax Documents are maintained on the Site through at least October 15 of the applicable tax year, at a minimum, should you ever need to access them again.
10.4. Your Option to Receive Paper Copies. To obtain a paper copy of your Tax Documents, you can print one by visiting the Budding Equity web site. You can also contact us at info@budeq.com and request a paper copy.
10.5. Withdrawal of Consent to Receive Electronic Notices. You can withdraw your consent before the Tax Document is furnished by mailing a letter including your name, mailing address, effective tax year, and indicating your intent to withdraw consent to the electronic delivery of Tax Documents to:
Seed Equity Properties LLC
1660 South Albion Street
Suite 321
Denver, Colorado 80222
Attention: Investor Support

If you withdraw consent to receive Tax Documents electronically, a paper copy will be provided. Your consent to receive the Tax Documents electronically continues for every tax year until you withdraw your consent.

10.6. Termination of Electronic Delivery of Tax Documents. We may terminate your request for electronic delivery of Tax Documents without your withdrawal of consent in writing in the following instances:
(a) You don't have a password for your Budding Equity account
(b) Your Budding Equity account is closed
(c) You were removed from the Budding Equity account
(d) Your role or authority on the Budding Equity account changed in a manner that no longer allows you to consent to electronic delivery
(e) We received three consecutive email notifications that indicate your email address is no longer valid
(f) We cancel the electronic delivery of Tax Documents
10.7. You Must Keep Your E-mail Address Current With Us. You must promptly notify us of a change of your email address. If your mailing address, email address, telephone number or other contact information changes, you may also provide updated information by contacting us at info@budeq.com.
10.8. Hardware and Software Requirements. In order to access and retain Tax Documents electronically, you must satisfy the computer hardware and software requirements as set forth above in Section 9.3 of this Agreement. You will also need a printer if you wish to print Tax Documents on paper, and electronic storage if you wish to download and save Tax Documents to your computer.
11. Limitations on Damages. IN NO EVENT SHALL WE BE LIABLE TO THE SUBSCRIBER FOR ANY LOST PROFITS OR SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING SHALL BE INTERPRETED AND HAVE EFFECT TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, RULE OR REGULATION.
12. Venue and Forum. In the event it is necessary to bring any court action for any relief concerning the relationship among the Parties or in any way arising out of or related to this Agreement, then the Parties agree that such action shall be brought exclusively in either the state or federal courts sitting in Denver, Colorado. Further, the parties hereby agree that such venue is convenient and hereby waive any and all rights to remove such action to a different forum or venue, and hereby submit themselves to the jurisdiction of said courts and consent to venue and forum in said courts. The Parties agree that any action commenced which is not in conformity with this paragraph shall be dismissed upon motion of any party to such action and further agree that the court shall award to the defendants in such action their reasonable attorney's fees incurred in defense of such action, in addition to any other relief awarded by the court.
13. Authority. By executing this Agreement, you expressly acknowledge that you have reviewed this Agreement and the Offering Circular for this particular subscription.
14. No Waiver. By agreeing to the provisions stated in this Agreement, investors will not be deemed to have waived the Company's compliance with the federal securities laws and the rules and regulations promulgated thereunder.

[signature page follows]

IN WITNESS WHEREOF, the Subscriber, or its duly authorized representative(s), hereby acknowledges that it has read and understood the risk factors set forth in the Offering Circular, and has hereby executed and delivered this Agreement, and executed and delivered herewith the Purchase Price, as of the date set forth above.

THE SUBSCRIBER:

Print Name of Subscriber

Description of Entity (if applicable)

Signature of Subscriber

Name of Person Signing on behalf of Subscriber

Title (if applicable)

Address of Subscriber:

Telephone:

Email:
Number of Class B Units Purchased:
Purchase Price:

(Signature Page to Agreement)

AGREED AND ACCEPTED BY

Seed Equity Properties LLC

By: Budding Equity Management, Inc.
a Colorado corporation
Title: Manager

Name: /s/ N. Nora Nye
Title: Chief Executive Officer

Seed Equity Properties LLC
1660 South Albion Street, Suite 321
Denver, Colorado 80222
info@budeq.com
(303)848-8312