NOTE 10 - MORTGAGE NOTES PAYABLE

On December 18, 2013: (i) Justice Operating Company, LLC, a Delaware limited liability company (“Operating”), entered into a loan agreement (“Mortgage Loan Agreement”) with Bank of America (“Mortgage Lender”); and (ii) Justice Mezzanine Company, a Delaware limited liability company (“Mezzanine”), entered into a mezzanine loan agreement (“Mezzanine Loan Agreement” and, together with the Mortgage Loan Agreement, the “Loan Agreements”) with ISBI San Francisco Mezz Lender LLC (“Mezzanine Lender” and, together with Mortgage Lender, the “Lenders”). The Partnership is the sole member of Mezzanine, and Mezzanine is the sole member of Operating.

The Loan Agreements provide for a $97,000,000 Mortgage Loan and a $20,000,000 Mezzanine Loan. The proceeds of the Loan Agreements were used to fund the redemption of limited partnership interests described above and the pay-off of the prior mortgage.

The Mortgage Loan is secured by the Partnership’s principal asset, the Hilton San Francisco-Financial District (the “Property”). The Mortgage Loan bears an interest rate of 5.28% per annum and matures on January 1, 2024. The term of the Mortgage Loan is 10 years with interest only due in the first three years and equal monthly principal and interest payments based upon a 30 year amortization schedule for the remaining seven years of the Mortgage Loan term. The Mortgage Loan also requires payments for impounds related to property tax, insurance and capital improvement reserves. As additional security for the Mortgage Loan, there is a limited guaranty (“Mortgage Guaranty”) executed by the Company in favor of Mortgage Lender.

The Mezzanine Loan is secured by the Operating membership interest held by Mezzanine and is subordinated to the Mortgage Loan. The Mezzanine Loan bears interest at 9.75% per annum and matures on January 1, 2024. Interest only is payable monthly. As additional security for the Mezzanine Loan, there is a limited guaranty executed by the Company in favor of Mezzanine Lender (the “Mezzanine Guaranty” and, together with the Mortgage Guaranty, the “Guaranties”).

The Guaranties are limited to what are commonly referred to as “bad boy” acts, including: (i) fraud or intentional misrepresentations; (ii) gross negligence or willful misconduct; (iii) misapplication or misappropriation of rents, security deposits, insurance or condemnation proceeds; and (iv) failure to pay taxes or insurance. The Guaranties will be full recourse guaranties under identified circumstances, including failure to maintain “single purpose” status which is a factor in a consolidation of Operating or Mezzanine in a bankruptcy of another person, transfer or encumbrance of the Property in violation of the applicable loan documents, Operating or Mezzanine incurring debts that are not permitted, and the Property becoming subject to a bankruptcy proceeding. Pursuant to the Guaranties, the Company is required to maintain a certain minimum net worth and liquidity. As of June 30, 2014, the Company is in compliance with both requirements.

Each of the Loan Agreements contains customary representations and warranties, events of default, reporting requirements, affirmative covenants and negative covenants, which impose restrictions on, among other things, organizational changes of the respective borrower, operations of the Property, agreements with affiliates and third parties. Each of the Loan Agreements also provides for mandatory prepayments under certain circumstances (including casualty or condemnation events) and voluntary prepayments, subject to satisfaction of prescribed conditions set forth in the Loan Agreements.

In June 2014, the Company obtained a second mortgage on its 151-unit apartment located in Morris County, New Jersey in the amount of $2,740,000. The term of the loan is approximately 8 years with the interest rate fixed at 4.51%. The loan matures in August 2022.

In June 2014, the Company obtained a seven month extension of its $992,000 mortgage note payable on the first commercial building located in Los Angeles, California that matured in June 2014. The loan was extended to January 2015. Interest rate on the note remains the same.

In April 2014, the Company refinanced its $526,000 mortgage note payable on the second commercial building located in Los Angeles, California for a new 3-year interest only mortgage in the amount of $1,100,000. The Company received net proceeds of $556,000. The interest rate on the new loan is fixed at 3.25% per annum and the note matures in May 2017.

In July 2013, the Company refinanced its $466,000 adjustable rate mortgage note payable on its 8-unit apartment located in Los Angeles, California for a new 30-year mortgage in the amount of $500,000. The interest rate on the new loan is fixed at 3.50% per annum for the first five years and variable for the remaining of the term. The note matures in July 2043.

Mortgage notes payable secured by real estate and hotel As of June 30, 2014 and 2013 are summarized as follows:

	As of June 30, 2014
	Number	Note		Note
Property	of Units	Origination Date		Maturity Date		Mortgage Balance		Interest Rate

SF Hotel	543 rooms	December	2013	January	2024	$	97,000,000	5.28	%
SF Hotel	543 rooms	December	2013	January	2024		20,000,000	9.75	%

		Mortgage notes payable - hotel				$	117,000,000

Austin	249	June	2003	July	2023	$	6,505,000	5.46	%
Florence	157	June	2005	July	2015		3,722,000	4.96	%
Las Colinas	358	November	2012	December	2022		18,970,000	3.73	%
Morris County	151	July	2012	July	2022		10,279,000	3.51	%
Morris County	151	June	2014	August	2022		2,740,000	4.51	%
St. Louis	264	May	2013	May	2023		5,943,000	4.05	%
Los Angeles	4	September	2012	September	2042		383,000	4.25	%
Los Angeles	2	September	2012	September	2042		388,000	4.25	%
Los Angeles	1	August	2012	September	2042		417,000	4.25	%
Los Angeles	31	January	2010	December	2020		5,475,000	4.85	%
Los Angeles	30	August	2007	September	2022		6,399,000	5.97	%
Los Angeles	27	November	2010	December	2020		3,085,000	4.85	%
Los Angeles	14	April	2011	March	2021		1,780,000	5.89	%
Los Angeles	12	December	2011	January	2022		2,008,000	4.25	%
Los Angeles	9	April	2011	May	2021		1,427,000	5.60	%
Los Angeles	9	April	2011	March	2021		1,213,000	5.89	%
Los Angeles	8	July	2013	July	2043		491,000	3.50	%
Los Angeles	7	August	2012	September	2042		949,000	3.85	%
Los Angeles	4	August	2012	September	2042		649,000	3.85	%
Los Angeles	1	September	2012	September	2042		445,000	4.25	%
Los Angeles	Office	March	2009	March	2015		992,000	5.02	%
Los Angeles	Office	April	2014	May	2017		1,100,000	3.25	%

		Mortgage notes payable - real estate				$	75,360,000

	As of June 30, 2013
	Number	Note		Note
Property	of Units	Origination Date		Maturity Date		Mortgage Balance		Interest Rate

SF Hotel	543 rooms	July	2005	August	2015	$	26,043,000	5.22	%
SF Hotel	543 rooms	March	2005	August	2015		17,370,000	6.42	%

		Mortgage notes payable - hotel				$	43,413,000

Austin	249	June	2003	July	2023	$	6,694,000	5.46	%
Florence	157	June	2005	July	2014		3,802,000	4.96	%
Las Colinas	358	November	2012	December	2022		19,326,000	3.73	%
Morris County	151	July	2012	July	2022		10,556,000	3.51	%
St. Louis	264	May	2013	May	2023		6,045,000	4.05	%
Los Angeles	4	September	2012	September	2042		390,000	4.25	%
Los Angeles	2	September	2012	September	2042		395,000	4.25	%
Los Angeles	1	August	2012	September	2042		425,000	4.25	%
Los Angeles	31	January	2010	December	2020		5,570,000	4.85	%
Los Angeles	30	August	2007	September	2022		6,505,000	5.97	%
Los Angeles	27	November	2010	December	2020		3,138,000	4.85	%
Los Angeles	14	April	2011	March	2021		1,805,000	5.89	%
Los Angeles	12	December	2011	January	2022		2,045,000	4.25	%
Los Angeles	9	April	2011	May	2021		1,447,000	5.60	%
Los Angeles	9	April	2011	March	2021		1,230,000	5.89	%
Los Angeles	8	May	2001	November	2029		466,000	2.49	%
Los Angeles	7	August	2012	September	2042		967,000	3.85	%
Los Angeles	4	August	2012	September	2042		661,000	3.85	%
Los Angeles	1	September	2012	September	2042		453,000	4.25	%
Los Angeles	Office	March	2009	March	2014		1,036,000	5.02	%
Los Angeles	Office	September	2000	December	2013		556,000	6.00	%

		Mortgage notes payable - real estate				$	73,512,000

In May 2013, the Company refinanced its $5,671,000 mortgage note payable on its 264-unit apartment building located in St. Louis, Missouri for a new 10-year mortgage in the amount of $6,045,000. The interest rate on the new loan is fixed at 4.05% per annum for ten years, with monthly principal and interest payments based on a 30-year amortization schedule. The note matures in May 2023.

In November 2012, the Company refinanced its $17,509,000 mortgage note payable on its 358-unit apartment building located in Las Colinas, Texas for a new 10-year mortgage in the amount of $19,500,000. The interest rate on the new loan is fixed at 3.73% per annum for ten years, with monthly principal and interest payments based on a 30-year amortization schedule. The note matures in December 2022. The Company received net proceeds of approximately $529,000 from the refinancing.

In September 2012, the Company refinanced its $388,000 adjustable rate mortgage note payable on its 2-unit apartment located in Los Angeles, California for a new 30-year fixed rate mortgage in the amount of $400,000. The interest rate on the new loan is 4.25% per annum. The note matures in September 2042.

In July 2012, the Company refinanced its $9,010,000 mortgage note payable on its 151-unit apartment building located in Morris County, New Jersey for a new 10-year mortgage in the amount of $10,780,000. The interest rate on the new loan is fixed at 3.51% per annum for ten years, with monthly principal and interest payments based on a 25-year amortization schedule. The note matures in August 2022. The Company received net proceeds of approximately $1,513,000 from the refinancing.

In August 2012, the Company refinanced two mortgages on two properties located in Los Angeles, California with mortgage note payable balances totaling $1,583,000 for two new 30-year mortgages totaling $1,650,000. The interest rate on the two loans is fixed at 3.85% for the first five years and variable thereafter, with monthly principal and interest payments based on a 30-year amortization schedule. The notes mature in September 2042.

In August 2012, the Company refinanced three mortgages on three properties located in Los Angeles, California with mortgage note payable balances totaling $1,243,000 for three new 30-year mortgages totaling $1,285,000. The interest rate on the three loans is fixed at 4.25% for the first five years and variable thereafter, with monthly principal and interest payments based on a 30-year amortization schedule. The notes mature in September 2042.

Future minimum payments for all notes payable are as follows:

For the year ending June 30,
2015	$	2,845,000
2016		5,130,000
2017		2,339,000
2018		3,088,000
2019		3,239,000
Thereafter		176,001,000
	$	192,642,000