Exhibit 10.7

Loan No. 62-5204531

(NOTE:  THIS PROMISSORY NOTE MAY REQUIRE A BALLOON PAYMENT AT MATURITY)

PROMISSORY NOTE

$13,800,000.00 (U.S.)

September 11, 2008

FOR VALUE RECEIVED, the undersigned ("Borrower") promises to pay to the order of
WASHINGTON MUTUAL BANK, a federal association, at its office at National
Commercial Operations Center, P.O. Box 650528, Dallas, Texas  75265-0528, or at
such other place as the holder of this Note ("Lender") may from time to time
designate in writing, the sum of Thirteen Million Eight Hundred Thousand and
No/100 Dollars ($13,800,000.00) in lawful money of the United States, with
interest thereon from the date of disbursement by Lender (whether into escrow or
otherwise) until paid at the rates set forth below.

Interest accruing on this Note will be calculated on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each ("30/360 Basis").  The
Monthly Payment Amounts (as defined below) will also be calculated on an 30/360
Basis.

SECTION 1.

Interest Rate.  Throughout the term of the Loan, this Note and all amounts owing
under the other Security Documents (hereinafter defined) will bear interest at a
rate of Five and Seventy-Seven Hundredths of One Percent (5.77%).

SECTION 2.

Periodic Payments.

(a)

Interest-Only Period.  Beginning on November 1, 2008 (the "Initial Monthly
Payment Date") and on the same day of each calendar month thereafter until and
including October 1, 2009 (the "Monthly Payment Dates"), Borrower shall make
monthly payments of interest (the "Interest Payment Amounts") to Lender in an
amount sufficient to fully repay any accrued and unpaid interest at the
applicable Interest Rate.

(b)

Amortization Period.  Beginning on November 1, 2009 (the "Initial Amortized
Payment Date") and on each Monthly Payment Date thereafter, Borrower shall make
monthly payments of principal and interest (together with Interest Payment
Amounts, collectively, the "Monthly Payment Amounts") to Lender in an amount
sufficient to fully repay the unpaid principal balance of this Note, together
with interest at the applicable Interest Rate by the end of the Amortization
Period (hereinafter defined) in substantially equal installments.  Each Monthly
Payment Amount will be calculated on the basis of an amortization period of 360
months (the "Amortization Period") ending on the date that is that number of
months after the day that is one month before the Initial Amortized Payment
Date.

(c)

Loan Resize Payment.  Within five (5) business days after September 11, 2010
(the "Resizing Test Date"), Borrower shall provide evidence satisfactory to
Lender of the Debt Service Coverage Ratio for the prior ninety (90) day period.
 To the extent that as of the Resizing Test Date, the Debt Service Coverage
Ratio for the prior ninety (90) day period is less than 1.20, Borrower shall pay
to Lender, in addition to any payments due under Section 2(a) or (b) above, a
principal payment equal to the Resize Payment, such payment to be made to Lender
within sixty (60) days from the Resizing Test Date.  For the purposes of this
Section 2(c), the "Resize Payment" shall be the positive difference, if any,
between (i) the then outstanding principal balance, minus (ii) that amount,
which when used in the Debt Service Coverage Ratio calculation would result in a
Debt Service Coverage Ratio of 1.20.

SECTION 3.

Maturity.

Any and all remaining unpaid principal of and interest on this Note shall be due
and payable in full on September 11, 2013 (the "Maturity Date"), subject,
however, to the right of acceleration as herein provided and as provided in the
Security Documents.

SECTION 4.

Application of Payments.

So long as no Event of Default (as used in this Note, the terms "Event of
Default" and "Default" have the meanings given to those terms in the Security
Instrument described in Section 7) exists, payments under this Note and the
Security Documents shall be applied:  (a) first, to the payment of accrued
interest; (b) second, at the option of Lender, to the payment of any other
amounts owing under this Note or secured by the Security Documents, other than
accrued interest and principal, including, but not limited to advances Lender
may have made for attorneys' fees or for taxes, assessments, insurance premiums,
or other charges on any property given as security for this Note and late
charges due hereunder, all if calculated and/or accrued in accordance with the
Loan Documents; and (c) third, to the reduction of principal of this Note.
 After the occurrence and during the continuance of an Event of Default, Lender
may apply such payments to the obligations secured by the Security Instrument in
such manner as it may elect in its sole discretion, subject to applicable law
and any applicable requirements of the Loan Documents.

SECTION 5.

Prepayment.

Borrower may prepay its obligation under this Note only if, to the extent and on
the terms and subject to the conditions set forth in an addendum to this Note
attached hereto and incorporated herein by this reference.  If no such addendum
is attached to this Note, Borrower may not prepay its obligation under this
Note.  Notwithstanding the foregoing, if no such addendum is attached to this
Note and Lender, in its sole discretion, agrees to permit a prepayment, then it
may do so on such terms and conditions as it may require in its sole discretion.
 No partial prepayment of this Note shall change the date or amount of any
subsequent monthly payment required under the terms of this Note prior to
payment in full of all amounts owing under this Note unless otherwise agreed in
writing by Lender in its sole discretion.

SECTION 6.

Late Charge.

If any amount payable under this Note is not paid within ten (10) days after the
due date thereof, Borrower shall pay a late charge of five percent (5%) of the
delinquent amount as liquidated damages for the extra expense in handling past
due payments; provided, however that no such late charge shall be payable with
respect to any balloon payment due on the Maturity Date.  Any late charge
payable under this section is in addition to any interest payable at the Default
Rate (as defined below).

SECTION 7.

Security.

This Note is secured by a deed of trust, security agreement, assignment of
leases and rents and fixture filing or a mortgage, security agreement,
assignment of leases and rents and fixture filing or similar instrument (the
"Security Instrument") of even date herewith, encumbering the real property
described in the Security Instrument.  The Security Instrument and any and all
other documents securing this Note are collectively referred to as the "Security
Documents"; provided, however, that "Security Documents" specifically shall not
mean and shall not include the certificate and indemnity agreement regarding
hazardous substances being delivered concurrently herewith to Lender by Borrower
(the "Indemnity Agreement").  The real property and the other collateral
provided for in the Security Documents are collectively referred to as the
"Property."

Notwithstanding anything to the contrary in this Note or the Security Documents,
this Note shall not evidence Borrower's obligations under the Indemnity
Agreement and nothing contained in this Note or the Security Documents shall be
deemed to limit or expand Borrower's obligations under such Indemnity Agreement.
 All of such obligations under such Indemnity Agreement shall constitute the
separate, unsecured recourse obligations of Borrower and shall not be deemed to
be evidenced by this Note or secured by the Security Documents.

SECTION 8.

Default; Remedies.

If any amount payable under this Note is not paid within ten (10) days after the
date when due or if any other Event of Default has occurred and is continuing,
then, at the option of Lender, the entire indebtedness evidenced hereby shall
become immediately due and payable.  Upon the occurrence of an Event of Default,
and without notice or demand, all amounts owed under this Note, including all
accrued but unpaid interest, shall thereafter bear interest at 5% per annum
above the Interest Rate that would have been applicable from time to time had
there been no Event of Default (the "Default Rate") until all Events of Default
are cured.  Failure to exercise any option granted to Lender hereunder shall not
waive the right to exercise the same in the event of any subsequent Event of
Default.  Interest at the Default Rate shall commence to accrue upon the
occurrence of any Event of Default, including the failure to pay this Note at
maturity.  Borrower shall pay all interest accrued at the Default Rate on each
Monthly Payment Date or within ten (10) days of demand by Lender.  Any judgment
for amounts owing under this Note or the Security Documents shall bear interest
at the Default Rate.

SECTION 9.

Attorneys' Fees, Etc.

In the event of any Default, or in the event that any dispute arises relating to
the interpretation, enforcement, or performance of this Note, Lender shall be
entitled to collect from Borrower within ten (10) days of demand all reasonable
fees and expenses incurred in connection therewith, including but not limited to
reasonable fees of attorneys, accountants, appraisers, environmental inspectors,
consultants, expert witnesses, arbitrators, mediators, and court reporters.
 Without limiting the generality of the foregoing, Borrower shall pay all such
costs and expenses incurred in connection with: (a) arbitration or other
alternative dispute resolution proceedings, trial court actions, and appeals;
(b) bankruptcy or other insolvency proceedings of Borrower, any guarantor or
other party liable for any of the obligations of this Note or any party having
any interest in any security for any of those obligations; (c) judicial or
nonjudicial foreclosure on, or appointment of a receiver for, any property
securing this Note; (d) postjudgment collection proceedings; (e) all
unsuccessful claims, counterclaims, cross-claims, and defenses asserted by
Borrower or any guarantor in any of the foregoing whether or not they arise out
of or are related to this Note or any security for this Note; (f) all
preparation for any of the foregoing; and (g) all settlement negotiations with
respect to any of the foregoing.

SECTION 10.

Maximum Interest.  

No provision of this Note, the Security Instrument or the other Security
Documents shall require the payment or permit the collection of interest in
excess of the maximum permitted by law.  If any excess of interest in such
respect is herein provided for, neither Borrower nor its successors or assigns
shall be obligated to pay that portion of such interest that is in excess of the
maximum permitted by law, and the right to demand the payment of any such excess
shall be and is hereby waived and this Section 10 shall control any provision of
this Note, the Security Instrument or the other Security Documents that is
inconsistent herewith.  If, notwithstanding the foregoing, Lender receives any
payment that constitutes interest in an amount in excess of the maximum amount
allowed by applicable law, the excess shall be applied to reduce the principal
balance of the Secured Obligations (as defined in the Security Instrument)
without payment of a prepayment premium.  Borrower and Lender intend at all
times to comply with applicable laws governing the maximum rate or amount of
interest payable on or in connection with the Secured Obligations.  If the
applicable law is ever judicially interpreted so as to render usurious any
amount payable under this Note, the Security Instrument or any other Security
Document, or contracted for, charged, taken, reserved or received with respect
to the Secured Obligations, or if acceleration of the maturity of the Secured
Obligations, or if any prepayment by Borrower results in Borrower having paid
any interest in excess of that permitted by applicable law, then Borrower and
Lender expressly intend that all excess amounts collected by Lender shall be
applied to reduce the unpaid principal balance of the Secured Obligations (or,
if the Secured Obligations have been or would thereby be paid in full, shall be
refunded to Borrower), and the provisions of this Note, the Security Instrument
and the other Security Documents immediately shall be deemed reformed and the
amounts thereafter collectible under this Note, the Security Instrument and the
other Security Documents reduced, without the necessity of the execution of any
new documents, so as to comply with applicable law, but so as to permit the
recovery of the fullest amount otherwise payable under this Note, the Security
Instrument and the other Security Documents.  The right to accelerate the
maturity of the Secured Obligations does not include the right to accelerate any
interest that has not otherwise accrued on the date of such acceleration, and
Lender does not intend to collect any unearned interest in the event of
acceleration.  All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the Secured Obligations shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of the Secured Obligations until payment in full so
that the rate or amount of interest on account of the Secured Obligations does
not exceed the applicable usury ceiling.  Notwithstanding any provision
contained in this Note, the Security Instrument or any other Security Document
that permits the compounding of interest, including any provision by which any
accrued interest is added to the principal amount of the Secured Obligations,
the total amount of interest that Borrower is obligated to pay and Lender is
entitled to receive with respect to the Secured Obligations shall not exceed the
amount calculated on a simple (i.e., noncompounded) interest basis at the
maximum rate on principal amounts actually advanced to or for the account of
Borrower, including all current and prior advances and any advances made
pursuant to this Note, the Security Instrument or any other Security Document.

SECTION 11.

Definitions.  For purposes of the Loan Documents, the following terms have the
meanings set forth below

(a)

“Adjusted Actual Operating Expenses” means the actual operating expenses of the
Property for the applicable period adjusted for a stabilized property assuming
ninety percent (90%) occupancy, as reasonably determined by Lender and as
further adjusted to include: (i) an annual replacement reserve expense of $200
per year per rental unit in the Project (prorated for any applicable period that
is less than one (1) year); and (ii) a management fee equal to five percent (5%)
of Gross Operating Income.

(b)  “Annualized Net Operating Income” means the difference between Gross
Operating Income for the ninety (90) day period immediately preceding the
applicable Determination Date, multiplied by four (4) and Adjusted Actual
Operating Expenses for the same period, multiplied by four (4).

(c)

"As Is" Appraised Value" means the appraised value of the Property as reflected
in the most recent Project Appraisal estimated on an "as-is" basis.

(d)

“Assumed Debt Service” means the sum of all principal and interest payments that
would be due and payable during the period of twelve (12) consecutive months
ending on the last day of the most recent month before the applicable
Determination Date if the Loan and the Unsecured Affiliate Debt (as defined in
the Security Instrument), were fixed-rate, fully-amortizing term loans providing
for an annual rate of interest equal to the Interest Rate and equal monthly
principal and interest payments sufficient to fully amortize the outstanding
principal balance of the Loan and the Unsecured Affiliate Debt at the applicable
Determination Date over thirty (30) years

(e)

“Debt Service Coverage Ratio” means the result, expressed in terms of a ratio,
determined by dividing the Annualized Net Operating Income for the applicable
period by the Assumed Debt Service.

(f)

“Determination Date” means any date on which the Debt Service Coverage Ratio is
to be calculated for purposes of this Agreement.

(g)

“Gross Operating Income” means the sum of any and all amounts, payments, fees,
rentals, additional rentals, expense reimbursements (including, without
limitation, all reimbursements by tenants, lessees, licensees and other users of
the Property) discounts or credits to Borrower, income, interest and other
monies directly or indirectly received by or on behalf of or credited to
Borrower from any Person with respect to Borrower’s ownership, use, development,
operation, leasing, franchising, marketing or licensing of the Property.  Gross
Operating Income will be computed on a cash basis and will include all amounts
actually received in the applicable period whether or not such amounts are
attributable to a charge arising in such period.

(h)

“Holdback Amount” means $1,116,857.85.

(i)

“Loan-to-Value Percentage” means the quotient of (i) the sum of (A) the
outstanding principal balance of this Note, plus (B) the outstanding principal
and interest balance of any Unsecured Affiliate Debt; divided by (ii) the
“As-Is” Appraised Value.

(j)

“Project Appraisal” means a written appraisal of the Property ordered by Lender
and prepared by an appraiser satisfactory to Lender, as such appraisal is
reviewed, adjusted and approved by Lender in its sole and absolute discretion.

SECTION 12.

Miscellaneous.

(a)

Every person or entity at any time liable for the payment of the indebtedness
evidenced hereby waives presentment for payment, demand, and notice (except for
any notices expressly provided for in the Loan Documents) of nonpayment of this
Note.  Every such person or entity further hereby consents to any extension of
the time of payment hereof or other modification of the terms of payment of this
Note, the release of all or any part of the security herefor or the release of
any party liable for the payment of the indebtedness evidenced hereby at any
time and from time to time at the request of anyone now or hereafter liable
�herefore.  Any such extension or release may be made without notice to any of
such persons or entities and without discharging their liability.

(b)

The headings to the various sections have been inserted for convenience of
reference only and do not define, limit, modify, or expand the express
provisions of this Note.

(c)

Time is of the essence under this Note and in the performance of every term,
covenant and obligation contained herein.

(d)

This Note is made with reference to and is to be construed in accordance with
the laws of the state where the Property is located.

If Lender at any time discovers that this Note or any of the Security Documents
contains any error that was caused by a clerical mistake, calculation error,
computer error, printing error or similar error, Borrower shall, upon reasonable
demand by Lender re-execute any such documents as are necessary or appropriate
to correct any such error and Lender shall have no liability to Borrower or any
other person or entity as a result of such error, provided that Borrower's
obligation or liability under the Security Documents shall not be increased and
provided that Borrower shall not be required to bear any expense in connection
therewith.  If this Note or any of the Security Documents are lost, stolen,
mutilated or destroyed and Lender delivers to Borrower an indemnification
agreement indemnifying Borrower against any loss or liability resulting
therefrom, Borrower will execute and deliver to Lender a replacement thereof in
form and content identical to the original document which will have the effect
of the original for all purposes.

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DATED effective as of the day and year first above written.

 

BORROWER:

FOX STRATEGIC HOUSING INCOME PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP

By:

Fox Partners VIII,

a California general partnership,

its general partner

By:

Fox Capital Management Corporation,

a California corporation,

its managing general partner

By: /s/Patti K. Fielding

Name:

Patti K. Fielding

Title:

Executive Vice President and Treasurer

Loan No. 62-5204531

PREPAYMENT ADDENDUM TO PROMISSORY NOTE

(Yield Maintenance Prepayment Premium)

This Addendum is attached to, incorporated into and forms an integral part of,
the Promissory Note dated September 11, 2008 made by the undersigned in favor of
Washington Mutual Bank, a federal association, as if the following terms and
provisions were set forth in full in the body thereof:

1.

Prepayment Premium.  Borrower may, upon thirty (30) days' prior written notice
to Lender, prepay its obligation under this Note in full, but not in part, but
(subject to the Prepayment Window described below) only upon payment of a
premium (the "Prepayment Premium") equal to the greater of:

(i)

1% of the amount of principal being prepaid;

or

(ii)

The product obtained by multiplying:

(A)

the amount of principal being prepaid,

times

(B)

the difference obtained by subtracting from the Note Rate the yield rate (the
"Yield Rate") on the 4.25% U.S. Treasury Security due November 2013 (the
"Specified U.S. Treasury Security"), on the twenty-fifth Business Day (as
defined below) preceding the Prepayment Date (as defined below) as the Yield
Rate is reported in The Wall Street Journal,

times

(C)

the present value factor calculated using the following formula:

[1-(1+r)-(n/12)]/r

where:

r =

Yield Rate

n =

the number of months remaining between the Prepayment Date and the Maturity
Date.

In the event that no Yield Rate is published for the Specified U.S. Treasury
Security, then the nearest equivalent U.S. Treasury Security shall be selected
at Lender's discretion.  If the publication of such Yield Rates in The Wall
Street Journal is discontinued, Lender shall determine such Yield Rates from
another source selected by Lender.

For purposes of this Addendum, the "Prepayment Date" shall be (x) in the case of
a voluntary prepayment, the date on which the prepayment is made, and (y) in any
other case, the date on which Lender accelerates the unpaid principal balance of
this Note or, if no acceleration has occurred, the

date on which Lender first applies any collateral or other security to the
unpaid principal balance of this Note.

As used herein, "Business Day" means any day other than a Saturday, a Sunday or
any other day on which Lender is not open for business at the office from which
Lender from time to time services the loan evidenced by this Note.

2.

Provisions Applicable to All Prepayments.  Borrower expressly waives any right
to prepay this Note except as provided in this Addendum.  Therefore, if the
maturity of this Note is accelerated for any reason, including, without
limitation, the occurrence of any Event of Default, including without limitation
an Event of Default under Section 4.13 of the Security Instrument, then any
subsequent tender of payment of this Note, including any redemption following
foreclosure of the Security Instrument, shall constitute an evasion of the
restrictions on prepayment set forth herein and shall be deemed a voluntary
prepayment.  Accordingly, Lender may impose as a condition to accepting any such
tender, and may bid at any sheriff's or trustee's sale under the Security
Instrument, and/or include in any complaint for judicial foreclosure or any
claim in bankruptcy, as part of the indebtedness evidenced by this Note and
secured by the Security Instrument, the Prepayment Premium that would have
otherwise been payable hereunder for prepayment of this Note occurring on the
date of such acceleration.  The Prepayment Premium will not be payable for
prepayment of this Note made with insurance or condemnation proceeds or for any
involuntary prepayment pursuant to Section 10 of the Note. Subject to the
Prepayment Window described below, the Prepayment Premium will be payable with
respect to any other prepayment made from any collateral for this Note.  No
partial prepayment of this Note shall change the date or amount of any
subsequent monthly payment required under the terms of this Note prior to
payment in full of all amounts owing under this Note unless otherwise agreed in
writing by Lender in its sole discretion.

Acceptance by Lender of any one or more prepayments without concurrent payment
of any applicable Prepayment Premium or other amount provided for above will not
constitute a waiver of Lender's right to require payment of any Prepayment
Premium or other amount provided for above.

Borrower acknowledges that: (a) it is a knowledgeable real estate investor,
(b) it fully understands the effect of the waivers set forth in this Addendum,
(c) the making of the loan evidenced by this Note at the interest rates set
forth in this Note is sufficient consideration for such waivers, and (d) Lender
would not make the loan evidenced by this Note without such waivers.

Borrower acknowledges that any statement made by Lender setting forth the amount
of the Prepayment Premium shall only be binding upon Lender if such statement is
made in writing and that the amount of the Prepayment Premium set forth in such
statement is subject to change and is valid only for the date of such statement.

Notwithstanding the foregoing, Borrower may prepay its obligation under this
Note in full or in part at any time during the ninety (90) days preceding the
Maturity Date of this Note (the "Prepayment Window") without payment of a
Prepayment Premium.

3.

Resize Payment.  Notwithstanding anything to the contrary in the Note or in this
Prepayment Addendum to Promissory Note, no Prepayment Premium shall be due based
solely upon the payment by Borrower of a Resize Payment made pursuant to
Section 2(c) of the Note.

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DATED as of the date of the Note to which this Addendum is attached.

 

BORROWER:

FOX STRATEGIC HOUSING INCOME PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP

By:

Fox Partners VIII,

a California general partnership,

its general partner

By:

Fox Capital Management Corporation,

a California corporation,

its managing general partner

By: /s/Patti K. Fielding

Name:

Patti K. Fielding

Title:

Executive Vice President and Treasurer

NON-RECOURSE ADDENDUM

This Addendum is attached to, incorporated into and forms an integral part of,
that certain Secured Promissory Note dated as of September 11, 2008, executed by
FOX STRATEGIC HOUSING INCOME PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP, for the
benefit of WASHINGTON MUTUAL BANK, as if the following terms and provisions were
set forth in full in the body thereof:

1.1

Limitation on Borrower's Liability.  Notwithstanding any provision to the
contrary in the Note or the Loan Documents and except as otherwise provided for
in Section 1.2 below, the liability of Borrower under the Loan Documents shall
be limited to the interest of Borrower in the Premises, the Collateral, the
Rents and any other property or interests of Borrower or any other Person in
which Lender now or hereafter holds a lien or security interest to secure this
Note.  In the event of foreclosure of the liens and security interests evidenced
by the Loan Documents, no recourse judgment for any deficiency upon the
Indebtedness evidenced by the Loan Documents shall be sought or obtained by
Lender against Borrower.  Except as expressly set forth in the Loan Documents to
the contrary, nothing herein shall in any manner limit or impair: (i) the lien
or enforcement of the Loan Documents pursuant to the terms thereof, or (ii) the
obligations of any indemnitor or Guarantor under the Loan Documents, if any.

1.2

Exceptions.

(A)

Nothing contained in Section 1.1 or elsewhere in this Addendum or the other Loan
Documents, however, shall limit in any way the personal liability of Borrower
owed to Lender for any and all liabilities, obligations, losses, damages,
expenses or claims incurred by Lender (including, without limitation, any
reasonable attorneys' fees and expenses and together with interest thereon at
the Interest Rate) resulting from any of the following, and Borrower shall be
personally liable for and shall pay, indemnify and hold Lender harmless, upon
Lender's demand, from and against any and all such liabilities, obligations,
losses, damages, expenses and claims resulting from any of the following:
(i) Borrower's failure to pay property or other taxes, assessments or charges
(other than amounts paid to Lender for taxes, assessments or charges pursuant to
Tax Escrows and Insurance Escrows) which may create liens senior to the lien of
the Mortgage on all or any portion of the Premises; (ii) Borrower's failure to
insure the Premises in compliance with the provisions of the Loan Documents;
(iii) the material physical waste of the Premises or the Collateral or
Borrower's failure to restore the Premises or the Collateral in accordance with
any Loan Document; (iv) any Rents or other income regardless of type or source
of payment or other considerations in lieu thereof (including, but not limited
to, royalties, accounts, revenues, income, issues, profits, common area
maintenance charges, lease termination or modification payments, refunds of any
type, prepayment of rents, settlements of litigation, or settlements of past due
rents) from the Premises which Borrower receives after an Event of Default under
the Loan Documents which are not applied to (a) payment of principal, interest
and other charges when due under the Loan Documents or (b) payment of normal and
necessary operating expenses of the Premises ("Operation Expenses"), or (c) in
such other manner (if any) as may be expressly permitted under the Loan
Documents; (v) misappropriation of any insurance or condemnation proceeds or
awards or any Security Deposits of tenants, in violation of the terms of the
Loan Documents; (vi) misapplication or misappropriation of tax reserve accounts,
tenant improvement reserve accounts, Security Deposits, letters of credit,
prepaid rents, insurance or condemnation proceeds or other similar sums paid to
or held by Borrower or any other Person in connection with the operation of the
Premises; (vii) the loss of Lender's perfection or priority of its security
interest in personal property or fixtures covered under any UCC financing
statement due to Borrower's failure to notify Lender of a change in its State of
location (as provided in the version of Uniform Commercial Code Section 9-307
enacted in any relevant State); or (viii) any fraud or material or willful
misrepresentation by or on behalf of Borrower or any Guarantor regarding the
Premises, the making or delivery of any of the Loan Documents or in any
materials or information provided by or on behalf of Borrower or any Guarantor
in connection with the Loan.

(B)

Notwithstanding anything to the contrary in the Loan Documents, the limitation
on liability contained in Section 1.1 SHALL BECOME NULL AND VOID and shall be of
no further force and effect in the event of: (i) a Transfer, other than a
Permitted Transfer; (ii) the failure of Borrower to remain a Single-Purpose
Entity in accordance with the representations, warranties and covenants
contained in the Security Instrument, subject to Borrower’s right to cure such a
failure as provided for in the Security Instrument; or (iii) the Premises or the
Collateral becoming an asset in (a) a voluntary bankruptcy or insolvency
proceeding or (b) an involuntary bankruptcy or insolvency proceeding (other than
one filed by Lender) which is not dismissed within ninety (90) days of filing.

(C)

Borrower's personal liability pursuant to subsections (A) and (B) above are
referred to in the Loan Documents as the "Recourse Obligations."

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IN WITNESS WHEREOF, Borrower has hereunto caused this Addendum to be executed on
the date of the Note of which it forms a part.

 

BORROWER:

FOX STRATEGIC HOUSING INCOME PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP

By:

Fox Partners VIII,

a California general partnership,

its general partner

By:

Fox Capital Management Corporation,

a California corporation,

its managing general partner

By: /s/Patti K. Fielding

Name:

Patti K. Fielding

Title:

Executive Vice President and Treasurer