Exhibit 10.3
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
NORTHSTAR REAL ESTATE INCOME OPERATING PARTNERSHIP II, LP
A DELAWARE LIMITED PARTNERSHIP
October 16, 2015

--------------------------------------------------------------------------------

TABLE OF CONTENTS
AGREEMENT
1
ARTICLE 1 DEFINED TERMS
1
ARTICLE 2 PARTNERSHIP FORMATION AND IDENTIFICATION
12
2.1
Formation.
12
2.2
Name, Office and Registered Agent
12
2.3
Term and Dissolution.
13
2.4
Filing of Certificate and Perfection of Limited Partnership
13
ARTICLE 3 BUSINESS OF THE PARTNERSHIP
13
ARTICLE 4 CAPITAL CONTRIBUTIONS AND ACCOUNTS
14
4.1
Capital Contributions.
14
4.2
Additional Capital Contributions and Issuances of Additional Partnership Units.
14
4.3
Additional Funding.
15
4.4
LTIP Units
16
4.5
Conversion of LTIP Units.
17
4.6
Capital Accounts.
20
4.7
No Interest on Contributions.
20
4.8
Return of Capital Contributions.
20
4.9
No Third Party Beneficiary.
20
4.10
Redemption of REIT Shares
21
ARTICLE 5 PROFITS AND LOSSES; DISTRIBUTIONS
21
5.1
Allocation of Profit and Loss.
21
5.2
Distribution of Cash.
24
5.3
REIT Distribution Requirements
25
5.4
No Right to Distributions in Kind.
26
5.5
Limitations on Return of Capital Contributions
26
5.6
Distributions Upon Liquidation
26
5.7
Substantial Economic Effect.
26
 
 
 
ARTICLE 6 RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER
26
6.1
Management of the Partnership
26
6.2
Delegation of Authority.
28
6.3
Indemnification and Exculpation of Indemnitees
29
6.4
Liability of the General Partner
30
6.5
Reimbursement of General Partner.
31
6.6
Outside Activities.
31
6.7
Employment or Retention of Affiliates.
32
6.8
General Partner Participation.
32
6.9
Title to Partnership Assets
32
6.10
No Duplication of Fees or Expenses.
32
 
 
 
ARTICLE 7 CHANGES IN GENERAL PARTNER
33
7.1
Transfer of the General Partner's Partnership Units.
33
7.2
Admission of a Substitute or Additional General Partner.
33

--------------------------------------------------------------------------------

7.3
Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.
34
7.4
Removal of a General Partner.
34
ARTICLE 8 RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
35
8.1
Management of the Partnership
35
8.2
Power of Attorney.
35
8.3
Limitation on Liability of Limited Partners.
35
8.4
Ownership by Limited Partner of Corporate General Partner or Affiliate.
35
8.5
Limited Partner Right of Redemption.
36
8.6
Redemption of Special Limited Partnership Units.
37
ARTICLE 9 TRANSFERS OF LIMITED PARTNERSHIP UNITS
38
9.1
Purchase for Investment.
38
9.2
Restrictions on Transfer of Limited Partnership Units
39
9.3
Admission of Substitute Limited Partner.
40
9.4
Rights of Assignees of Partnership Units
41
9.5
Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner
41
9.6
Joint Ownership of Units
 
ARTICLE 10 BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
42
10.1
Books and Records.
42
10.2
Custody of Partnership Funds; Bank Accounts
42
10.3
Fiscal and Taxable Year.
42
10.4
Annual Tax Information and Report.
42
10.5
Tax Matters Partner; Tax Elections; Special Basis Adjustments.
43
10.6
Reports to Limited Partners
44
ARTICLE 11 AMENDMENT OF AGREEMENT
44
ARTICLE 12 GENERAL PROVISIONS
44
12.1
Notices
44
12.2
Survival of Rights
44
12.3
Additional Documents
45
12.4
Severability
45
12.5
Entire Agreement.
45
12.6
Pronouns and Plurals
45
12.7
Headings
45
12.8
Counterparts.
45
12.9
Governing Law
45
 
 
 
EXHIBIT A - CONTRIBUTIONS & INTEREST
A-1
EXHIBIT B - NOTICE OF EXERCISE OF REDEMPTION RIGHT
B-1
EXHIBIT C - NOTICE OF ELECTION BY PARTNER TO CONVERT LTIP UNITS
 
 
   INTO LIMITED PARTNERSHIP UNITS
C-1
EXHIBIT D - NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION
 
 
   OF LTIP UNITS INTO LIMITED PARTNERSHIP UNITS
D-1

--------------------------------------------------------------------------------

FORM OF AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
NORTHSTAR REAL ESTATE INCOME OPERATING PARTNERSHIP II, LP
This Amended and Restated Limited Partnership Agreement (this “Agreement”) is
entered into this 16th day of October, 2015 between NorthStar Real Estate Income
II, Inc., a Maryland corporation (the “General Partner”), and the Limited
Partners set forth on Exhibit A attached hereto. Capitalized terms used herein
but not otherwise defined shall have the meanings given them in Article 1.
AGREEMENT
WHEREAS, the General Partner has elected to be treated as a real estate
investment trust under the Internal Revenue Code of 1986, as amended commencing
with the taxable year ended December 31, 2013;
WHEREAS, NorthStar Real Estate Income Operating Partnership II, LP (the
“Partnership”), was formed on December 11, 2012 as a limited partnership under
the laws of the State of Delaware, pursuant to a Certificate of Limited
Partnership filed with the Office of the Secretary of State of the State of
Delaware on December 11, 2012;
WHEREAS, the General Partner and Limited Partners entered into a Limited
Partnership Agreement dated as of May 2, 2013 (the “Original Partnership
Agreement”);
WHEREAS, the General Partner and Limited Partners entered into Amendment One to
the Limited Partnership Agreement as of June 30, 2014;
WHEREAS, the General Partner desires to conduct its current and future business
through the Partnership; and
WHEREAS, the parties hereto desire to reflect certain changes in share
classification and other changes by amending and restating the Limited
Partnership Agreement as previously amended, and entering into an Amended and
Restated Limited Partnership Agreement (the “Amended and Restated Limited
Partnership Agreement”); and
NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between
the parties hereto, and of other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree that
the Amended and Restated Limited Partnership Agreement is hereby entered into
and adopted in its entirety as follows:
ARTICLE 1
DEFINED TERMS
The following defined terms used in this Agreement shall have the meanings
specified below:
“Act” means the Delaware Revised Uniform Limited Partnership Act, as it may be
amended from time to time.
“Additional Funds” has the meaning provided in Section 4.3 hereof.

1

--------------------------------------------------------------------------------

“Adjusted Capital Account” means, with respect to any Partner, the Capital
Account of such Partner as of the end of each Partnership Year (i) increased by
any amounts which such Partner is obligated to restore pursuant to any provision
of this Agreement or is deemed to be obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(ii)(c) and the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(g)(5) and (ii) decreased by the
items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii) (d)(6). The foregoing definition
of Adjusted Capital Account is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
“Adjusted Capital Account Deficit” means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership Year.
“Adjustment Event” has the meaning provided in Section 4.4(b) hereof.
“Administrative Expenses” means (i) all administrative and operating costs and
expenses incurred by the Partnership, (ii) those administrative costs and
expenses of the General Partner, including any salaries or other payments to
directors, officers or employees of the General Partner, and any accounting and
legal expenses of the General Partner, which expenses, the Partners have agreed,
are expenses of the Partnership and not the General Partner, and (iii) to the
extent not included in clause (ii) above, REIT Expenses; provided, however, that
Administrative Expenses shall not include any administrative costs and expenses
incurred by the General Partner that are attributable to Properties or
partnership interests in a Subsidiary Partnership that are owned by the General
Partner directly.
“Advisor” or “Advisors” means the Person or Persons, if any, appointed, employed
or contracted with by the Partnership and responsible for directing or
performing the day-to-day business affairs of the Partnership, including any
Person to whom such Advisor subcontracts substantially all of such functions.
“Advisory Agreement” means the agreement between the General Partner, the
Advisor and the other parties named therein pursuant to which the Advisor will
direct or perform the day-to-day business affairs of the General Partner.
“Affiliate” or “Affiliated” means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person; (ii) any Person directly or indirectly owning, controlling,
or holding with the power to vote 10% or more of the outstanding voting
securities of such other Person; (iii) any legal entity for which such Person
acts as an executive officer, director, trustee, or general partner; (iv) any
Person 10% or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held, with power to vote, by such other Person;
and (v) any executive officer, director, trustee, or general partner of such
other Person.
“Aggregate Share Ownership Limit” has the meaning provided in the Articles of
Incorporation.
“Agreed Value” means (i) in the case of any Contributed Property, the fair
market value of such property as of the time of its contribution to the
Partnership, reduced by any liabilities either assumed by the Partnership upon
such contribution or to which such property is subject when contributed; and
(ii) in the case of any property distributed to a Partner by the Partnership,
the Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder.
“Agreement” means this Amended and Restated Limited Partnership Agreement, as
amended, modified supplemented or restated from time to time, as the context
requires.

2

--------------------------------------------------------------------------------

“Articles of Incorporation” means the Articles of Incorporation of the General
Partner, as amended or restated from time to time, filed with the Maryland State
Department of Assessments and Taxation.
“Capital Account” has the meaning provided in Section 4.6 hereof.
“Capital Account Limitation” has the meaning provided in Section 4.5(b) hereof.
“Capital Contribution” means, with respect to any Partner, the amount of money
and the Agreed Value of Contributed Property which such Partner contributes or
is deemed to contribute to the Partnership pursuant to Section 4.1 or 4.2
hereof. Any reference to the Capital Contribution of a Partner shall include the
Capital Contribution made by a predecessor holder of the Partnership Unit of
such Partner.
“Carrying Value” means, with respect to any asset, the asset's adjusted basis
for federal income tax purposes, except as follows:
(i) The initial Carrying Value of any asset contributed to the Partnership shall
be the gross fair market value of such asset, as agreed by the Contributing
Partner and the General Partner.
(ii) The Carrying Values of all Partnership assets shall be adjusted to equal
their respective gross fair market values, as determined by the General Partner
using such reasonable method of valuation as it may adopt immediately prior to
the following events:
(a)the acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital Contribution or
the provision of services to or for the benefit of the Partnership, if the
General Partner reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Partners in the
Partnership;
(b)the distribution by the Partnership to a Partner of more than a de minimis
amount of property as consideration for an interest in the Partnership, if the
General Partner reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Partners in the
Partnership;
(c)the liquidation of the Partnership within the meaning of Regulations Section
1.704- 1(b)(2)(ii)(g);
(d)the grant of an interest in the Partnership (other than a de minimis
interest) as consideration for the provision of services to or for the benefit
of the Partnership by an existing Partner acting in a partner capacity, or by a
new Partner acting in a partner capacity or in anticipation of becoming a
Partner of the Partnership, if the General Partner reasonably determines that
such adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and
(e)at such other times as the General Partner shall reasonably deem necessary or
advisable if permitted by, or required to comply with, Regulations Sections
1.704-1(b) and 1.704-2.
(iii) The Carrying Value of a Partnership asset distributed to a Partner shall
be the gross fair market value of such asset on the date of distribution, as
agreed by the distributee and the General Partner.
(iv) The Carrying Values of Partnership assets shall be adjusted to reflect any
adjustments to the adjusted basis of such assets pursuant to Code Section 734(b)
or 743(b), but only to the extent that such adjustments are taken into account
in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m); provided, however, that Carrying Values shall not be
adjusted pursuant to this clause (iv) to the extent that the General Partner
reasonably determines that an adjustment pursuant to clause (ii) above is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this clause (iv).
(v) If the Carrying Values of a Partnership asset has been determined or
adjusted pursuant to clause

3

--------------------------------------------------------------------------------

(i), (ii), or (iv) above, such Carrying Values shall thereafter be adjusted by
Depreciation.

“Cash Amount” means an amount of cash equal to the lesser of (i) the Value of
the REIT Shares Amount on the date of receipt by the General Partner of a Notice
of Redemption or (ii) the applicable Redemption Price determined by the General
Partner.
“Certificate” means any instrument or document that is required under the laws
of the State of Delaware, or any other jurisdiction in which the Partnership
conducts business, to be signed and sworn to by the Partners of the Partnership
(either by themselves or pursuant to the power-of-attorney granted to the
General Partner in Section 8.2 hereof) and filed for recording in the
appropriate public offices within the State of Delaware or such other
jurisdiction to perfect or maintain the Partnership as a limited partnership, to
effect the admission, withdrawal, or substitution of any Partner of the
Partnership, or to protect the limited liability of the Limited Partners as
limited partners under the laws of the State of Delaware or such other
jurisdiction.
“Class” means a class of REIT Shares or Partnership Units, as the context may
require.
“Class A REIT Shares” means the REIT Shares classified as “Class A” shares in
the Charter.
“Class A Unit” means a Common Unit entitling the holder thereof to the rights of
a holder of a Class A Unit as provided in this Agreement.
“Class T REIT Shares” means the REIT Shares classified as “Class T” shares in
the Charter.
“Class T Unit” means a Common Unit entitling the holder thereof to the rights of
a holder of a Class T Unit as provided in this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended, and as hereafter
amended from time to time. Reference to any particular provision of the Code
shall mean that provision in the Code at the date hereof and any successor
provision of the Code.
“Commission” means the U.S. Securities and Exchange Commission.
“Common Share Ownership Limit” has the meaning provided in the Articles of
Incorporation.
“Common Unit” means a fractional, undivided share of the Partnership Interests
of all Partners issued pursuant to Article 4 hereof, including Class A Units and
Class T Units, but does not include, unless otherwise provided herein for
specific purposes, any Preferred Unit, Special Limited Partnership Unit, or any
other Partnership Unit specified in a Partnership Unit Designation as being
other than a Common Unit; provided, however, that the General Partner Interest
and the Limited Partner Interests shall have the differences in rights and
privileges as specified in this Agreement.
“Constituent Person” has the meaning provided in Section 4.5 hereof.
“Contributed Property” means each property or other asset contributed to the
Partnership, in such form as may be permitted by the Act, but excluding cash
contributed or deemed contributed to the Partnership.
“Conversion Date” has the meaning provided in Section 4.5(c) hereof.
“Conversion Factor” means 1.0, provided that in the event that the General
Partner (i) declares or pays a dividend on its outstanding REIT Shares wholly or
partly in REIT Shares or makes a distribution to all holders of its outstanding
REIT Shares wholly or partly in REIT Shares, (ii) subdivides its outstanding
REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number
of REIT Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of

4

--------------------------------------------------------------------------------

which shall be the number of REIT Shares issued and outstanding on the record
date for such dividend, distribution, subdivision or combination (assuming for
such purposes that such dividend, distribution, subdivision or combination has
occurred as of such time), and the denominator of which shall be the actual
number of REIT Shares (determined without the above assumption) issued and
outstanding on such date and, provided further, that in the event that an entity
other than an Affiliate of the General Partner shall become General Partner
pursuant to any merger, consolidation or combination of the General Partner with
or into another entity (the “Successor Entity”), the Conversion Factor shall be
adjusted by multiplying the Conversion Factor by the number of shares of the
Successor Entity into which one REIT Share is converted pursuant to such merger,
consolidation or combination, determined as of the date of such merger,
consolidation or combination. Any adjustment to the Conversion Factor shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event; provided, however, that if the
General Partner receives a Notice of Redemption after the record date, but prior
to the effective date of such dividend, distribution, subdivision or
combination, the Conversion Factor shall be determined as if the General Partner
had received the Notice of Redemption immediately prior to the record date for
such dividend, distribution, subdivision or combination.

“Conversion Notice” means the Notice of Election by Partner to Convert LTIP
Units Into Limited Partnership Units substantially in the form attached as
Exhibit C hereto.
“Conversion Right” has the meaning provided in Section 4.5(a) hereof.
“Depreciation” means, for each fiscal year, an amount equal to the federal
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
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 which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
“Director” means a member of the board of directors of the General Partner.
“Distribution Fees” shall have the meaning set forth in the Company’s
Prospectus.
“Economic Capital Account Balance” has the meaning provided in Section 5.1(e)
hereof.
“Event of Bankruptcy” as to any Person, means the filing of a petition for
relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978
or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within 90 days); insolvency or
bankruptcy of such Person as finally determined by a court proceeding; filing by
such Person of a petition or application to accomplish the same or for the
appointment of a receiver or a trustee for such Person or a substantial part of
its assets; commencement of any proceedings relating to such Person as a debtor
under any other reorganization, arrangement, insolvency, adjustment of debt or
liquidation law of any jurisdiction, whether now in existence or hereinafter in
effect, either by such Person or by another, provided that if such proceeding is
commenced by another, such Person indicates its approval of such proceeding,
consents thereto or acquiesces therein, or such proceeding is contested by such
Person and has not been finally dismissed within 90 days.
“Excepted Holder Limit” has the meaning provided in the Articles of
Incorporation.

5

--------------------------------------------------------------------------------

“Exchanged REIT Shares” has the meaning set forth in Section 4.10(b) hereof.
“Forced Conversion” has the meaning provided in Section 4.5(d) hereof.
“Forced Conversion Notice” means the Notice of Election by Partnership to Force
Conversion of LTIP Units Into Limited Partnership Units substantially in the
form attached as Exhibit D hereto.
“General Partner” means NorthStar Real Estate Income II, Inc., a Maryland
corporation, and any Person who becomes a substitute or additional General
Partner as provided herein, and any of their successors as General Partner.
“General Partner Loan” has the meaning provided in Section 5.2(c) hereof.

“General Partner Interest” means the entire Partnership Interest held by a
General Partner hereof, which Partnership Interest may be expressed as a number
of Common Units, Preferred Units or any other Partnership Units.
“Indemnitee” means (i) any Person made a party to a proceeding by reason of its
status as the General Partner or a director, officer or employee of the General
Partner or the Partnership, and (ii) such other Persons (including Affiliates of
the General Partner or the Partnership) as the General Partner may designate
from time to time, in its sole and absolute discretion.
“Independent Directors” means a Director who is not on the date of
determination, and within the last two years from the date of determination has
not been, directly or indirectly associated with the Sponsor of the General
Partner or the Advisor by virtue of (i) ownership of an interest in the Sponsor,
the Advisor or any of their Affiliates, other than the General Partner (with the
exception of less than one percent ownership interest in any public company),
(ii) employment by the Sponsor, the Advisor or any of their Affiliates, (iii)
service as an officer or director of the Sponsor, the Advisor or any of their
Affiliates, other than as a Director, (iv) performance of services, other than
as a Director, for the General Partner, (v) service as a director or trustee of
more than three real estate investment trusts organized by the Sponsor or
advised by the Advisor or (vi) maintenance of a material business or
professional relationship with the Sponsor, the Advisor or any of their
Affiliates. A business or professional relationship is considered “material” if
the aggregate gross revenue derived by the Director from the Sponsor, the
Advisor and their Affiliates (excluding fees for serving as an independent
director of the General Partner or other real estate investment trust or real
estate program organized or advised or managed by the Sponsor or its Affiliates)
exceeds five percent of either the Director's annual gross revenue during either
of the last two years or the Director's net worth on a fair market value basis.
An indirect association with the Sponsor or the Advisor shall include
circumstances in which a Director's spouse, parent, child, sibling, mother- or
father-in-law, son- or daughter-in-law or brother- or sister-in-law is or has
been associated with the Sponsor, the Advisor, any of their Affiliates or the
General Partner.
“Investments” means all investments by the Partnership in Properties, Loans and
all other investments (other than short-term investments acquired for purposes
of cash management) in which the Partnership may acquire an interest, either
directly or indirectly, including through ownership interests in a Joint
Venture, pursuant to the Articles of Incorporation, the bylaws of the General
Partner or the investment objectives and policies adopted by the board of
directors of the General Partner.
“Joint Venture” means any joint venture or general partnership arrangement in
which the
Partnership is a co-venturer or general partner which are established to acquire
one or more Investments.
“Junior Share” means a share of capital stock of the General Partner now or
hereafter authorized

6

--------------------------------------------------------------------------------

or reclassified that has dividend rights, or rights upon liquidation, winding up
and dissolution, that are inferior or junior to the REIT Shares.
“Limited Partner” means any Person named as a Limited Partner on Exhibit A
attached hereto, as such exhibit may be amended and restated from time to time,
and any Person who becomes a Substitute Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
“Limited Partner Interest” means a Partnership Interest of a Limited Partner in
the Partnership representing a fractional part of the Partnership Interests of
all Limited Partners and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement.
A Limited Partner Interest may be expressed as a number of Common Units,
Preferred Units or other Partnership Units.
“Limited Partnership Unit” means a Limited Partnership Interest designated as a
Common Unit.
“Listing” means the listing of the REIT Shares on a national securities exchange
or the receipt by holders of the REIT Shares of securities that are listed on a
national securities exchange in exchange for REIT Shares. Upon such Listing, the
shares shall be deemed “Listed.”
“Loans” means mortgage loans and other types of debt financing investments made
by the Partnership, either directly or indirectly, including through ownership
interests in a Joint Venture, including, without limitation, mezzanine loans,
B-notes, bridge loans, convertible debt, wraparound mortgage loans, construction
mortgage loans, loans on leasehold interests, and participations in such loans.
“LTIP Unit” means a Limited Partnership Interest which is designated as an LTIP
Unit and which has the rights, preferences and other privileges designated in
Section 4.4 hereof and elsewhere in this Agreement in respect of holders of LTIP
Units. The allocation of LTIP Units among the Partners shall be set forth on
Exhibit A, as may be amended from time to time.
“LTIP Holder” means a Partner that holds LTIP Units.
“New Securities” means (i) any rights, options, warrants, or convertible or
exchangeable securities having the right to subscribe for or purchase REIT
Shares or Preferred Shares, excluding Preferred Shares and Junior Shares or (ii)
any debt issued by the General Partner that provides any of the rights described
in (i).
“Nonrecourse Deductions” has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
“Nonrecourse Liability” has the meaning provided in Regulations Section
1.704-2(b)(3).
“Notice of Redemption” means the Notice of Exercise of Redemption Right
substantially in the form attached as Exhibit B hereto.
“Offering” means the offer and sale of REIT Shares to the public pursuant to a
registration
statement filed under the Securities Act of 1933, as amended, and declared
effective by the Commission.

7

--------------------------------------------------------------------------------

“Partner” means any General Partner or Limited Partner.
“Partner Minimum Gain” means an amount, with respect to each Partner Nonrecourse
Debt, equal to the Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
“Partner Nonrecourse Debt” has the meaning provided in Regulations Section
1.704-2(b)(4).
“Partner Nonrecourse Debt Minimum Gain” means an amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
“Partner Nonrecourse Deductions” has the meaning provided in Regulations
Sections 1.704-2(i)(1) and 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with Regulations Sections 1.704-2(i)(2).
“Partnership” means NorthStar Real Estate Income Operating Partnership II, LP, a
Delaware limited partnership.
“Partnership Interest” means an ownership interest in the Partnership held by
either a Limited Partner or a General Partner and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. There may be one or more classes or
series of Partnership Interests. A Partnership Interest may be expressed as a
number of Common Units, Preferred Units or other Partnership Units.
“Partnership Loan” has the meaning provided in Section 5.2(c) hereof.
“Partnership Minimum Gain” has the meaning provided in Regulations Sections
1.704-2(b)(2) and 1.704-2(d), and the amount of Partnership Minimum Gain, as
well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
“Partnership Record Date” means the record date established by the General
Partner for the distribution of cash pursuant to Section 5.2 hereof, which
record date generally shall be the same as the record date established by the
General Partner for a distribution to its stockholders of some or all of its
portion of the distribution.
“Partnership Unit” means a Common Unit, a Preferred Unit, a Special Limited
Partnership Unit, an LTIP Unit or any other unit of a fractional, undivided
share of the Partnership Interests that the General Partner has authorized
pursuant to Article 4 hereof, including Class A Units and Class T Units;
provided, however, that Partnership Units comprising a General Partner Interest
or a Limited Partner Interest shall have the differences in rights and
privileges as specified in this Agreement.
“Partnership Unit Economic Balance” has the meaning provided in Section 5.1(e)
hereof.
“Partnership Year” means the fiscal year of the Partnership, which shall be the
calendar year.
“Percentage Interest” means the percentage determined by dividing the number of
Common Units of a Partner by the sum of the Common Units of all Partners.

8

--------------------------------------------------------------------------------

“Person” means any individual, partnership, limited liability company,
corporation, joint venture, trust or other entity.
“Preferred Shares” means a share of capital stock of the General Partner now or
hereafter authorized or reclassified that has dividend rights, or rights upon
liquidation, winding up and dissolution, that are superior or prior to REIT
Shares.
“Preferred Unit” means a fractional, undivided share of the Partnership
Interests that has distribution rights, or rights upon liquidation, winding up
and dissolution, that are superior or prior to the Common Units that the General
Partner has authorized pursuant to Section 4.2 hereof.
“Profit” and “Loss” means, for each Partnership Year or other applicable period,
an amount equal to the Partnership's taxable income or loss for such Partnership
Year, 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),
with the following adjustments:
(i)Any income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Profit and Loss pursuant to this
definition of “Profit” and “Loss” shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code Section 705(a)(2)(B)
or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
Profit or Loss pursuant to this definition of “Profit” and “Loss” shall be
subtracted from such taxable income or loss;
(iii)In the event the Carrying Value of any Partnership asset is adjusted
pursuant to subparagraphs (ii) or (iii) of the definition of Carrying Value, the
amount of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profit and Loss;
(iv)Gain or loss resulting from any disposition of Partnership Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Carrying Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Carrying Value;
(v) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Partnership Year or other
period;
(vi)To the extent an adjustment to the adjusted tax basis of any Partnership
asset pursuant to Code Section 734(b) or Section 743(b) is required pursuant to
Regulations Section 1.704- 1(b)(2)(iv) to be taken into account in determining
Capital Accounts as a result of a distribution other than in liquidation of a
Partner's interest in the Partnership, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Profit or Loss; and
(vii)Notwithstanding any other provision of this definition of “Profit” and
“Loss”, any items that are specially allocated pursuant to Section 5.1(c),
5.1(d), or 5.1(e) hereof shall not be taken into account in computing Profits or
Losses. The amounts of the items of Partnership income, gain, loss, or deduction
available to be specially allocated pursuant to Sections 5.1(c) and 5.1(d)
hereof shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.
“Property” means any real property or properties transferred or conveyed to the
Partnership, either directly or indirectly, including through ownership
interests in a Joint Venture.
“Prospectus” means the same as that term is defined in Section 2(10) of the
Securities Act, including a preliminary prospectus, an offering circular as
described in Rule 256 of the general rules and regulations

9

--------------------------------------------------------------------------------

under the Securities Act, or, in the case of an intrastate offering, any
document by whatever name known, utilized for the purpose of offering and
selling REIT Shares to the public.
“Qualifying Party” means (a) a Person who is admitted to the Partnership
pursuant to Section 4.2 or Section 4.4 and who is shown as such on the books and
records of the Partnership, (b) a transferee in a permitted Transfer or (c) a
Substitute Limited Partner succeeding to all or part of the Limited Partnership
Unit of a Person that meets one of the foregoing criteria in (a) or (b).
“Recapture Income” means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 743 of the Code) upon the
disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
“Received REIT Shares” has the meaning set forth in Section 4.10(b) hereof.
“Redemption Price” means the Value of the REIT Shares Amount on the date of
receipt by the General Partner of a Notice of Redemption multiplied by any
discount determined by the General Partner, including but not limited to, any
discount based upon the combined number of years that the applicable Partner has
held the Partnership Units offered for redemption.
“Redemption Right” has the meaning provided in Section 8.5(a) hereof.
“Regulations” means the Federal income tax regulations promulgated under the
Code, as amended and as hereafter amended from time to time. Reference to any
particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any successor provision of the Regulations.
“REIT” means a real estate investment trust under Sections 856 through 860 of
the Code.
“REIT Expenses” means (i) costs and expenses relating to the formation and
continuity of existence and operation of the General Partner and any
Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be included
within the definition of General Partner), including taxes, fees and assessments
associated therewith, any and all costs, expenses or fees payable to any
director, officer, or employee of the General Partner, (ii) costs and expenses
relating to any public offering and registration of securities by the General
Partner and all statements, reports, fees and expenses incidental thereto,
including, without limitation, underwriting discounts and selling commissions
applicable to any such offering of securities, and any costs and expenses
associated with any claims made by any holders of such securities or any
underwriters or placement agents thereof, (iii) costs and expenses associated
with any repurchase of any securities by the General Partner, (iv) costs and
expenses associated with the preparation and filing of any periodic or other
reports and communications by the General Partner under federal, state or local
laws or regulations, including filings with the Commission, (v) costs and
expenses associated with compliance by the General Partner with laws, rules and
regulations promulgated by any regulatory body, including the Commission and any
securities exchange, (vi) costs and expenses associated with any 401(k) plan,
incentive plan, bonus plan or other plan providing for compensation for the
employees of the General Partner, (vii) costs and expenses incurred by the
General Partner relating to any issuing or redemption of Partnership Units, and
(viii) all other operating or administrative costs of the General Partner
incurred in the ordinary course of its business on behalf of or in connection
with the Partnership.
“REIT Share” means a common share of beneficial ownership in the General Partner
(or successor entity, as the case may be), including Class A REIT Shares and
Class T REIT Shares.
“REIT Shares Amount” means, with respect to Tendered Units of a Class, a number
of REIT Shares of the corresponding REIT Share Class equal to the product of the
number of Partnership Units of such Class

10

--------------------------------------------------------------------------------

offered for exchange by a Tendering Party, multiplied by the Conversion Factor,
as adjusted to and including the Specified Redemption Date; provided that in the
event the General Partner issues to all holders of REIT Shares rights, options,
warrants or convertible or exchangeable securities entitling the stockholders to
subscribe for or purchase REIT Shares, or any other securities or property
(collectively, the “rights”), and the rights have not expired at the Specified
Redemption Date, then the REIT Shares Amount shall also include the rights
issuable to a holder of the REIT Shares.
“Related Party” means, with respect to any Person, any other Person whose
ownership of shares of the General Partner's capital stock would be attributed
to the first such Person under Code Section 544 (as modified by Code Section
856(h)(1)(B)).
“Restriction Notice” has the meaning provided in Section 8.5(c)(vi) hereof.
“Sale” means (i) any transaction or series of transactions whereby: (A) the
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, transfers, conveys, or relinquishes its
ownership of any Investment or portion thereof, including the transfer of any
Property that is the subject of a ground lease, including any event with respect
to any Investment that gives rise to a significant amount of insurance proceeds
or condemnation awards, and including the issuance by one of the General
Partner's subsidiaries of any asset-backed securities or collateralized debt
obligations as part of a securitization transaction; (B) the Partnership
directly or indirectly (except as described in other subsections of this
definition) sells, grants, transfers, conveys, or relinquishes its ownership of
all or substantially all of the interest of the Partnership in any Joint Venture
in which it is a partner; or (C) any Joint Venture in which the Partnership is a
co-venturer or partner, sells, grants, transfers, conveys, or relinquishes its
ownership of any Investment or portion thereof, including any event with respect
to any Investment that gives rise to insurance claims or condemnation awards,
and including the issuance by such Joint Venture or one of its subsidiaries of
any asset-backed securities or collateralized debt obligations as part of a
securitization transaction.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Service” means the U.S. Internal Revenue Service.

“Special Limited Partner” means the holder of Special Limited Partnership Units.
“Special Limited Partnership Unit” means Partnership Units designated as Special
Limited Partnership Units issued pursuant to Section 4.2(c) with the rights and
obligations provided under this Agreement.
“Specified Redemption Date” means the first business day of the month that is at
least sixty (60) business days after the receipt by the General Partner of a
Notice of Redemption.
“Sponsor” means any Person which (a) is directly or indirectly instrumental in
organizing, wholly or in part, the General Partner, (b) will control, manage or
participate in the management of the General Partner, and any Affiliate of any
such Person, (c) takes the initiative, directly or indirectly, in founding or
organizing the General Partner, either alone or in conjunction with one or more
other Persons, (d) receives a material participation in the General Partner in
connection with the founding or organizing of the business of the General
Partner, in consideration of services or property, or both services and
property, (e) has a substantial number of relationships and contacts with the
General Partner, (f) possesses significant rights to control Properties, (g)
receives fees for providing services to the General Partner which are paid on a
basis that is not customary in the industry or (h) provides goods or services to
the General Partner on a basis which was not negotiated at arm's-length with the
General Partner. “Sponsor” does not include any Person whose

11

--------------------------------------------------------------------------------

only relationship with the General Partner is that of an independent property
manager and whose only compensation is as such, or wholly independent third
parties such as attorney, accountants and underwriters whose only compensation
is for professional services.
“Subsidiary” means, with respect to any Person, any corporation or other entity
of which a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests is owned, directly or indirectly, by such
Person.
“Subsidiary Partnership” means any partnership of which the partnership
interests therein are owned by the General Partner or a direct or indirect
subsidiary of the General Partner.
“Substitute Limited Partner” means any Person admitted to the Partnership as a
Limited Partner pursuant to Section 9.3 hereof.
“Tax Matters Partner” has the meaning provided in Section 10.5(a) hereof.
“Tendered Units” has the meaning provided in Section 8.5(a) hereof. “Tendering
Party” has the meaning provided in Section 8.5(a) hereof.
“Termination Event” means the termination or nonrenewal of the Advisory
Agreement (i) in connection with a merger, sale of assets or transaction
involving the General Partner pursuant to which a majority of the Directors then
in office are replaced or removed, (ii) by the Advisor for “good reason” (as
defined in the Advisory Agreement) or (iii) by the General Partner other than
for “cause” (as defined in the Advisory Agreement).
“Transaction” has the meaning provided in Section 4.5(g) hereof. “Transfer” has
the meaning provided in Section 9.2(a) hereof.
“Unvested LTIP Units” has the meaning provided in Section 4.4(d) hereof.

“Value” means for each Class of REIT Shares, the fair market value of that Class
of REIT Shares which will equal (i) if REIT Shares of that Class are Listed, the
average closing price per share for the previous thirty (30) business days, (ii)
if REIT Shares of that Class are not Listed, the most recent offering price per
share or share equivalent of REIT Shares of that Class, until December 31 of the
year following the year in which the most recently completed offering of REIT
Shares of that Class has expired and (iii) thereafter, such price per REIT Share
if that Class as the management of the General Partner determines in good faith.
“Vested LTIP Units” has the meaning provided in Section 4.4(d) hereof.
“Vesting Agreement” means each or any, as the context implies, Long Term
Incentive Plan (LTIP) Vesting Agreement entered into by a LTIP Holder upon
acceptance of an award of LTIP Units.
ARTICLE 2
PARTNERSHIP FORMATION AND IDENTIFICATION
2.1    Formation.
The Partnership was formed as a limited partnership pursuant to the Act, and all
other pertinent laws of the State of Delaware, for the purposes and upon the
terms and conditions set forth in this Agreement.
2.2    Name, Office and Registered Agent.
The name of the Partnership is NorthStar Real Estate Income Operating
Partnership II, LP. The specified office and place of business of the
Partnership shall be 399 Park Avenue, 18`h Floor, New York,

12

--------------------------------------------------------------------------------

New York 10022. The General Partner may at any time change the location of such
office, provided the General Partner gives notice to the Partners of any such
change. The name and address of the Partnership's registered agent is
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware. The sole duty of the registered agent as such is to forward to the
Partnership any notice that is served on it as registered agent.
2.3    Term and Dissolution.
(a) The term of the Partnership shall continue in full force and effect until
dissolved upon the first to occur of any of the following events:
(i)the occurrence of an Event of Bankruptcy as to a General Partner or the
dissolution, death, removal or withdrawal of a General Partner unless the
business of the Partnership is continued pursuant to Section 7.3(b) hereof;
provided that if a General Partner is on the date of such occurrence a
partnership, the dissolution of such General Partner as a result of the
dissolution, death, withdrawal, removal or Event of Bankruptcy of a partner in
such partnership shall not be an event of dissolution of the Partnership if the
business of such General Partner is continued by the remaining partner or
partners, either alone or with additional partners, and such General Partner and
such partners comply with any other applicable requirements of this Agreement;
(ii)the passage of ninety (90) days after the sale or other disposition of all
or substantially all of the assets of the Partnership (provided that if the
Partnership receives an installment obligation as consideration for such sale or
other disposition, the Partnership shall continue, unless sooner dissolved under
the provisions of this Agreement, until such time as such note or notes are paid
in full); or
(iii)    the election by the General Partner that the Partnership should be
dissolved.
(b) Upon dissolution of the Partnership (unless the business of the Partnership
is continued pursuant to Section 7.3(b) hereof), the General Partner (or its
trustee, receiver, successor or legal representative) shall amend or cancel any
Certificate(s) and liquidate the Partnership's assets and apply and distribute
the proceeds thereof in accordance with Section 5.6 hereof. Notwithstanding the
foregoing, the liquidating General Partner may either (i) defer liquidation of,
or withhold from distribution for a reasonable time, any assets of the
Partnership (including those necessary to satisfy the Partnership's debts and
obligations), or (ii) distribute the assets to the Partners in kind.
2.4    Filing of Certificate and Perfection of Limited Partnership.
The General Partner shall execute, acknowledge, record and file at the expense
of the Partnership, any and all amendments to the Certificate(s) and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state
or other jurisdiction in which the Partnership conducts business.
ARTICLE 3
BUSINESS OF THE PARTNERSHIP
The purpose and nature of the business to be conducted by the Partnership is (i)
to conduct any business that may be lawfully conducted by a limited partnership
organized pursuant to the Act, provided, however, that such business shall be
limited to and conducted in such a manner as to permit the General Partner at
all times to qualify as a REIT, unless the General Partner otherwise ceases to
qualify as a REIT, and in a manner such that the General Partner will not be
subject to any taxes under Section 857 or 4981 of the Code, (ii) to enter into
any partnership, joint venture or other similar arrangement to engage in any of

13

--------------------------------------------------------------------------------

the foregoing or the ownership of interests in any entity engaged in any of the
foregoing and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing, and without limiting the General Partner's right
in its sole and absolute discretion to qualify or cease qualifying as a REIT,
the Partners acknowledge that the General Partner intends to qualify as a REIT
for federal income tax purposes and that such qualification and the avoidance of
income and excise taxes on the General Partner inures to the benefit of all the
Partners and not solely to the General Partner. Notwithstanding the foregoing,
the Limited Partners agree that the General Partner may terminate its status as
a REIT under the Code at any time to the full extent permitted under the
Articles of Incorporation. The General Partner on behalf of the Partnership
shall also be empowered to do any and all acts and things necessary or prudent
to ensure that the Partnership will not be classified as a “publicly traded
partnership” that is taxable as a corporation under Section 7704 of the Code.
ARTICLE 4
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.1    Capital Contributions.
The Partners have heretofore made Capital Contributions to the Partnership. Each
Partner owns Partnership Units in the amount set forth for such Partner on
Exhibit A and shall have a Percentage Interest in the Partnership as set forth
in Exhibit A, as the same may be amended from time to time by the General
Partner to the extent necessary to reflect accurately sales, exchanges or other
Transfers, redemptions, Capital Contributions, the issuance of additional
Partnership Units, or similar events having an effect on a Partner’s ownership
of Partnership Units.
4.2    Additional Capital Contributions and Issuances of Additional Partnership
Units.
Except as provided in this Section 4.2 or in Section 4.3 or applicable law, the
Partners shall have no right or obligation to make any additional Capital
Contributions or loans to the Partnership.
(a)The General Partner is hereby authorized to cause the Partnership to issue
additional Partnership Units for any Partnership purpose at any time or from
time to time to the Partners (including the General Partner) or to other Persons
for such consideration and on such terms and conditions as shall be established
by the General Partner in its sole and absolute discretion, all without the
approval of any Limited Partner. Any additional Partnership Units issued thereby
may be issued in one or more Classes (including the Classes specified in this
Agreement), or one or more series of any of such Classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, all as shall be determined by the General Partner in
its sole and absolute discretion and without the approval of any Limited
Partner, subject to Delaware law, including, without limitation, (i) the
allocations of items of Partnership income, gain, loss, deduction and credit to
each such Class or series of Partnership Units; (ii) the right of each such
Class or series of Partnership Units to share in Partnership distributions; and
(iii) the rights of each such Class or series of Partnership Units upon
dissolution and liquidation of the Partnership. Without limiting the foregoing,
the General Partner is expressly authorized to cause the Partnership to issue
Partnership Units for less than fair market value, so long as the General
Partner concludes in good faith that such issuance is in the best interests of
the General Partner and the Partnership. In the event that the Partnership
issues additional Partnership Units pursuant to this Section 4.2(a), the General
Partner shall make such revisions to this Agreement as it deems necessary to
reflect the issuance of such additional Partnership Units.
(b)No additional Partnership Units shall be issued to the General Partner unless
(i) the additional Percentage Units are issued to all Partners in proportion to
their respective Percentage Interests with respect to the class of Partnership
Units so issued; (ii) (a) the additional Partnership Units are (x) Partnership
Units so issued, issued in connection with an issuance of REIT Shares, or (y)
Partnership Units issued in connection with an issuance of Preferred Shares, New
Securities or other interests in the General

14

--------------------------------------------------------------------------------

Partner (other than REIT Shares), which Preferred Shares, New Securities or
other interests have designations, preferences and other rights, terms and
provisions that are substantially the same as the designations, preferences and
other rights, terms and provisions of the additional Partnership Units issued to
the General Partner (without limiting the foregoing, for example, the
Partnership shall issue Partnership Interests consisting of Class A Units to the
General Partner in connection with the issuance of Class A REIT Shares and shall
issue Partnership Interests consisting of Class T Units to the General Partner
in connection with the issuance of Class T REIT Shares), and (b) the General
Partner contributes to the Partnership the cash proceeds or other consideration
received in connection with the issuance of such REIT Shares, Preferred Shares,
New Securities or other interests in the General Partner, or (iii) the
Additional Partnership Units are issued upon the conversion, redemption or
exchange of debt, Partnership Units or other securities issued by the
Partnership.
(c)The General Partner shall not issue any additional REIT Shares, Preferred
Shares, Junior Shares or New Securities unless the General Partner contributes
the cash proceeds or other consideration received from the issuance of such
additional REIT Shares, Preferred shares, Junior Shares or New Securities, as
the case may be, and from the exercise of the rights contained in any such
additional New Securities, to the Partnership in exchange for (x) in the case of
an issuance of REIT Shares, Partnership Units (without limiting the foregoing,
for example, the Partnership shall issue Partnership Interests consisting of
Class A Units to the General Partner in connection with the issuance of Class A
REIT Shares and shall issue Partnership Interests consisting of Class T Units to
the General Partner in connection with the issuance of Class T REIT Shares), or
(y) in the case of an issuance of Preferred Shares, Junior Shares or New
Securities, Partnership Units with designations, preferences and other rights,
terms and provisions that are substantially the same as the designations,
preferences and other rights, terms and provisions of such Preferred Shares,
Junior Shares or New Securities; provided, however, that notwithstanding the
foregoing, the General Partner may issue REIT Shares, Preferred Shares, Junior
Shares or New Securities (a) pursuant to Section 8.5(b) hereof, (b) pursuant to
a dividend or distribution (including any stock split) of REIT Shares, Preferred
Shares, Junior Shares, or New Securities to all of the holders of REIT Shares,
Preferred Shares, Junior Shares or New Securities, as the case may be, (c) upon
a conversion, redemption or exchange of Preferred Shares, (d) upon a conversion
of Junior Shares into REIT Shares, (e) upon a conversion, redemption, exchange
or exercise of New Securities, or (f) in connection with an acquisition of a
property or other asset to be owned, directly or indirectly, by the General
Partner if the General Partner determines that such acquisition is in the best
interest of the Partnership. In the event of any issuance of additional REIT
Shares, Preferred Shares, Junior Shares, or New Securities by the General
Partner, and the contribution to the Partnership, by the General Partner, of the
cash proceeds or other consideration received from such issuance, if the cash
proceeds actually received by the General Partner are less than the gross
proceeds of such issuance as a result of any underwriter’s discount or other
expenses paid or incurred in connection with such issuance, then the General
Partner shall be deemed to have made a Capital Contribution to the Partnership
in the amount equal to the sum of the cash proceeds of such issuance plus the
amount of such underwriter’s discount and other expenses paid by the General
Partner (which discount and expense shall be treated as an expense for the
benefit of the Partnership), and any such expenses shall be allocable solely to
the Class of Partnership Units issued to the General Partner at such time.
(d)The Partnership issued Special Limited Partnership Units to an Affiliate of
the Advisor in exchange for the cash contribution reflected on Exhibit A hereto
and for services performed or to be performed for the Partnership and its
Subsidiaries, and admitted such Person as the Special Limited Partner. The
Special Limited Partner shall be entitled to certain distributions as provided
in Section 5.2 and certain preferential allocations of items of income and gain
under Section 5.1. The Special Limited Partnership Units will be subject to the
transfer restrictions set forth in Article 9 and will be subject to redemption
pursuant to Section 8.6.
4.3    Additional Funding.    

15

--------------------------------------------------------------------------------

If the General Partner determines that it is in the best interests of the
Partnership to provide for additional Partnership funds (“Additional Funds”) for
any Partnership purpose, the General Partner may (i) cause the Partnership to
obtain such funds from outside borrowings or (ii) elect to have the General
Partner or any of its Affiliates provide such Additional Funds to the
Partnership through loans or otherwise, provided, however, that the Partnership
may not borrow money from its Affiliates, unless a majority of the Directors of
the General Partner (including a majority of Independent Directors) not
otherwise interested in such transaction approve the transaction as being fair,
competitive, and commercially reasonable and no less favorable to the
Partnership than loans between unaffiliated parties under the same
circumstances.
4.4    LTIP Units.
(a)The General Partner may from time to time issue LTIP Units to Persons who
provide services to the Partnership, for such consideration as the General
Partner may determine to be appropriate, and admit such Persons as Limited
Partners. Subject to the following provisions of this Section and the special
provisions of Sections 4.5, 5.1(e), and 8.6, LTIP Units shall be treated as
Limited Partnership Units, with all of the rights, privileges and obligations
attendant thereto. For purposes of computing the Partners' Percentage Interests,
LTIP Units shall be treated as Common Units.
(b)The Partnership shall maintain at all times a one-to-one correspondence
between LTIP Units and Limited Partnership Units for conversion, distribution
and other purposes, including without limitation complying with the following
procedures: If an Adjustment Event (as defined below) occurs, then the General
Partner shall make a corresponding adjustment to the LTIP Units to maintain a
one-for-one conversion and economic equivalence ratio between Limited
Partnership Units and LTIP Units. The following shall be “Adjustment Events:”
(A) the Partnership makes a distribution on all outstanding Limited Partnership
Units, (8) the Partnership subdivides the outstanding Limited Partnership Units
into a greater number of interests or combines the outstanding Limited
Partnership Units into a smaller number of interests, or (C) the Partnership
issues any Limited Partnership Units or General Partnership Units in exchange
for its outstanding Limited Partnership Units by way or reclassification or
recapitalization of its Limited Partnership Units. If more than one Adjustment
Event occurs, the adjustment to the LTIP Units need by made only once using a
single formula that takes into account each and every Adjustment Event as if all
Adjustment Events occurred simultaneously. For the avoidance of doubt, the
following shall not be Adjustment Events: (x) the issuance of Limited
Partnership Units or General Partnership Units in a financing, reorganization,
acquisition or other similar business transaction, (y) the issuance of Limited
Partnership Units or General Partnership Units to any employee benefit or
compensation plan or distribution reinvestment plan, or (z) the issuance of any
Limited Partnership Units or General Partnership Units to the General Partner in
respect of a capital contribution to the Partnership of proceeds from the sale
of securities by the General Partner. If the Partnership takes an action
affecting the Limited Partnership Units other than actions specifically
described above as Adjustment Events and in the opinion of the General Partner
such action would require an adjustment to the LTIP Units to maintain the
one-to-one correspondence described above, the General Partner shall have the
right to make such adjustment to the LTIP Units, to the extent permitted by law,
in such manner and at such time as the General Partner, in its sole discretion,
may determine to be appropriate under the circumstances. If an adjustment is
made to the LTIP Units as herein provided the Partnership shall promptly file in
the books and records of the Partnership an officer's certificate setting forth
such adjustment and a brief statement of the facts requiring such adjustment,
which certificate shall be conclusive evidence of the correctness of such
adjustment absent manifest error. Promptly after filing of such certificate, the
Partnership shall mail a notice to each LTIP Holder setting forth the adjustment
to its LTIP Units and the effective date of such adjustment.
(c)The LTIP Units shall rank pari passu with the Limited Partnership Units as to
the payment of regular and special periodic or other distributions and
distributions of assets upon liquidation, dissolution or winding up. As to the
payment of distributions and as to distribution of assets upon liquidation,
dissolution or winding up, any class or series of Partnership Units which by its
terms specifies that it shall

16

--------------------------------------------------------------------------------

rank junior to, on parity with, or senior to the Limited Partnership Units shall
also rank junior to, or pari passu with, or senior to, as the case may be, the
LTIP Units.
(d)LTIP Units shall be subject to the following special provisions:
(i)LTIP Units may, in the sole discretion of the General Partner, be issued
subject to vesting, forfeiture and additional restrictions on transfer pursuant
to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be
modified by the General Partner from time to time in its sole discretion,
subject to any restrictions on amendment imposed by the relevant Vesting
Agreement, if applicable. LTIP Units that have vested under the terms of a
Vesting Agreement are referred to as “Vested LTIP Units;” all other LTIP Units
shall be treated as “Unvested LTIP Units.” Subject to the terms of any Vesting
Agreement, a LTIP Holder shall be entitled to Transfer its LTIP Units to the
same extent, and subject to the same restrictions as holders of Limited
Partnership Units are entitled to Transfer their Limited Partnership Units
pursuant to Article 9.
(ii)Unless otherwise specified in the Vesting Agreement, upon the occurrence of
any event specified in a Vesting Agreement as resulting in either the right of
the Partnership or the General Partner to repurchase LTIP Units at a specified
purchase price or some other forfeiture of any LTIP Units, then if the
Partnership or the General Partner exercises such right to repurchase or
forfeiture in accordance with the applicable Vesting Agreement, then the
relevant LTIP Units shall immediately, and without further action, be treated as
cancelled and no longer outstanding for any purpose. Unless otherwise specified
in the Vesting Agreement, no consideration or other payment shall be due with
respect to any LTIP Units that have been forfeited, other than any distributions
declared with respect to a Partnership Record Date prior to the effective date
of the forfeiture. In connection with any repurchase or forfeiture of LTIP
Units, the balance of the portion of the Capital Account of the holder that is
attributable to all of its LTIP Units shall be reduced by the amount, if any, by
which it exceeds the target balance contemplated by Section 5.1(e), calculated
with respect to the holder's remaining LTIP Units, if any.
(i)LTIP Units shall generally be treated as Limited Partnership Units for
purposes of Article 5, but shall also be entitled to certain special allocations
of gain under Section 5.1(e).
(ii)The Redemption Right provided to Limited Partners under Section 8.5 shall
not apply with respect to LTIP Units unless and until they are converted to
Limited Partnership Units as provided in Section 4.5.
(iii)Any certificate evidencing an LTIP Unit shall bear an appropriate legend
indicating that additional terms, conditions and restrictions on Transfer,
including without limitation any Vesting Agreement, apply to the LTIP Unit.
(iv)Vested LTIP Units are eligible to be converted into Limited Partnership
Units under Section 4.5.
4.5    Conversion of LTIP Units.
(a)An LTIP Holder shall have the right (the “Conversion Right”), at its option,
at any time to convert all or a portion of its Vested LTIP Units into Limited
Partnership Units; provided, however, that an LTIP Holder may not exercise the
Conversion Right for fewer than one thousand (1,000) Vested LTIP Units or, if
such LTIP Holder holds fewer than one thousand (1,000) Vested LTIP Units, all of
the LTIP Holder's Vested LTIP Units. LTIP Holders shall not have the right to
convert Unvested LTIP Units into Limited Partnership Units until they become
Vested LTIP Units; provided, however, that when a LTIP Holder is notified of the
expected occurrence of an event that will cause its Unvested LTIP Units to
become Vested LTIP Units, such Person may give the Partnership a Conversion
Notice conditioned upon and effective as

17

--------------------------------------------------------------------------------

of the time of vesting, and such Conversion Notice, unless subsequently revoked
by the LTIP Holder, shall be accepted by the Partnership subject to such
condition. The General Partner shall have the right at any time to cause a
conversion of Vested LTIP Units into Limited Partnership Units. In all cases,
the conversion of any LTIP Units into Limited Partnership Units shall be subject
to the conditions and procedures set forth in this Section 4.5.
(b)A holder of Vested LTIP Units may convert such interests into an equal number
of fully paid and non-assessable Limited Partnership Units, giving effect to all
adjustments (if any) made pursuant to Section 4.4(b). Notwithstanding the
foregoing, in no event may a holder of Vested LTIP Units convert an amount of
Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such
holder, to the extent attributable to its ownership of LTIP Units, divided by
(y) the Limited Partnership Unit Economic Balance, in each case as determined as
of the effective date of conversion (the “Capital Account Limitation”).
(c)In order to exercise its Conversion Right, a LTIP Holder shall deliver a
notice (a “Conversion Notice”) to the Partnership (with a copy to the General
Partner) not less than 10 nor more than 60 days prior to a date (the “Conversion
Date”) specified in such Conversion Notice; provided, however, that if the
General Partner has not given to the LTIP Holders notice of a proposed or
upcoming Transaction (as defined below) at least thirty (30) days prior to the
effective date of such Transaction, then the LTIP Holders shall have the right
to deliver a Conversion Notice until the earlier of (x) the tenth (10th) day
after such notice from the General Partner of a Transaction or (y) the third
business day immediately preceding the effective date of such Transaction. A
Conversion Notice shall be provided in the manner provided in Section 12.1. Each
LTIP Holder covenants and agrees with the Partnership that all Vested LTIP Units
to be converted pursuant to this Section 4.5 shall be free and clear of all
liens. Notwithstanding anything herein to the contrary, a LTIP Holder may
deliver a Redemption Notice pursuant to Section 8.5 relating to those Limited
Partnership Units that will be issued to such holder upon conversion of such
LTIP Units into Limited Partnership Units in advance of the Conversion Date;
provided, however, that the redemption of such Limited Partnership Units by the
Partnership shall in no event take place until after the Conversion Date. For
clarity, it is noted that the objective of this paragraph is to put an LTIP
Holder in a position where, if he or she so wishes, the Limited Partnership
Units into which its Vested LTIP Units will be converted can be redeemed by the
Partnership simultaneously with such conversion, with the further consequence
that, if the General Partner elects to assume the Partnership's redemption
obligation with respect to such Limited Partnership Units under Section 8.5 by
delivering to such holder REIT Shares rather than cash, then such holder can
have REIT Shares issued to it simultaneously with the conversion of its Vested
LTIP Units into Limited Partnership Units. The General Partner shall cooperate
with an LTIP Holder to coordinate the timing of the different events described
in the foregoing sentence.
(d)The Partnership, at any time at the election of the General Partner, may
cause any number of Vested LTIP Units held by an LTIP Holder to be converted (a
“Forced Conversion”) into an equal number of Limited Partnership Units, giving
effect to all adjustments (if any) made pursuant to Section 4.4(b); provided,
that the Partnership may not cause a Forced Conversion of any LTIP Units that
would not at the time be eligible for conversion at the option of such LTIP
Holder pursuant to paragraph (b) above. In order to exercise its right of Forced
Conversion, the Partnership shall deliver a notice (a “Forced Conversion
Notice”) to the applicable holder not less than 10 nor more than 60 days prior
to the Conversion Date specified in such Forced Conversion Notice. A Forced
Conversion Notice shall be provided in the manner provided in Section 12.1.
(e)A conversion of Vested LTIP Units for which a holder has given a Conversion
Notice or the Partnership has given a Forced Conversion Notice shall occur
automatically after the close of business on the applicable Conversion Date
without any action on the part of such LTIP Holder, as of which time such LTIP
Holder shall be credited on the books and records of the Partnership with the
issuance as of the opening of business on the next day of an equal number of
Limited Partnership Units issuable upon such

18

--------------------------------------------------------------------------------

conversion. After the conversion of LTIP Units as aforesaid, the Partnership
shall deliver to such LTIP Holder, upon its written request, a certificate of
the General Partner certifying its Limited Partnership Units and remaining LTIP
Units, if any, immediately after such conversion.
(f)For purposes of making future allocations under Section 5.1(e) and applying
the Capital Account Limitation, the portion of the Economic Capital Account
balance of the applicable holder that is treated as attributable to its LTIP
Units shall be reduced, as of the date of conversion, by the product of the
number of LTIP Units converted and the Limited Partnership Unit Economic
Balance.
(g)If the Partnership or the General Partner shall be a party to any transaction
(including without limitation a merger, consolidation, interest exchange, self
tender offer for all or substantially all Limited Partnership Units or other
business combination or reorganization, or sale of all or substantially all of
the Partnership's assets, but excluding any transaction which constitutes an
Adjustment Event), in each case as a result of which Limited Partnership Units
shall be exchanged for or converted into the right, or the holders such
interests shall otherwise be entitled, to receive cash, securities or other
property or any combination thereof (each of the foregoing being referred to
herein as a “Transaction”), then the General Partner shall, immediately prior to
the Transaction, exercise its right to cause a Forced Conversion with respect to
the LTIP Units then eligible for conversion, taking into account any allocations
that occur in connection with the Transaction or that would occur in connection
with the Transaction if the assets of the Partnership were sold at the
Transaction price or, if applicable, at a value determined by the General
Partner in good faith using the value attributed to the Partnership Units in the
context of the Transaction (in which case the Conversion Date shall be the
effective date of the Transaction).
In anticipation of such Forced Conversion and the consummation of the
Transaction, the Partnership shall use commercially reasonable efforts to cause
each LTIP Holder to be afforded the right to receive in connection with such
Transaction in consideration for the Limited Partnership Units into which its
LTIP Units will be converted into the same kind and amount of cash, securities,
and other property (or any combination thereof) receivable upon the consummation
of such transaction by a holder of the same number of Limited Partnership Units,
assuming such holder of Limited Partnership Units is not a Person with which the
Partnership consolidated or into with the Partnership merged or which merged
into the Partnership or to which such sale or transfer was made, as the case may
be (a “Constituent Person”), or an affiliate of a Constituent Person. In the
event that holders of Limited Partnership Units have the opportunity to elect
the form or type of consideration to be received upon consummation of the
Transaction, prior to such Transaction the General Partner shall give prompt
written notice to each LTIP Holder of such election and shall use commercially
reasonable efforts to afford such holders the right to elect, by written notice
to the General Partner, the form or type of consideration to be received upon
conversion of the LTIP Units held by such holder into Limited Partnership Units
in connection with such Transaction. If an LTIP Holder fails to make such an
election, such LTIP Holder (and any of its transferees) shall receive upon
conversion of the LTIP Units held by it (or by any of its transferees) the same
kind and amount of consideration that a holder of Limited Partnership Units
would receive if such holder of Limited Partnership Units failed to make such an
election.
Subject to the rights of the Partnership and the General Partner under any
Vesting Agreement, the Partnership shall use commercially reasonable efforts to
cause the terms of the Transaction to be consistent with the provisions of this
Section 4.5 and to enter into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of any LTIP Holders whose LTIP Units
will not be converted into Limited Partnership Units in connection with the
Transaction that will (i) contain provisions enabling the LTIP Holders with
outstanding LTIP Units after such Transaction to convert their LTIP Units into
securities as comparable as reasonably possible under the circumstances to
Limited Partnership Units and (ii) preserve as far as reasonably possible under
the circumstances the distribution, special allocation, conversion, and other
rights set forth in the Agreement for the benefit of LTIP Holders.

19

--------------------------------------------------------------------------------

4.6    Capital Accounts.
(a)The Partnership shall maintain for each Partner a separate Capital Account in
accordance with the rules of Regulations Section 1.704-1(b)(2)(iv). Each
Partner's Capital Account shall be increased by (i) the amount of such Partner's
Capital Contributions and (ii) Profit allocated to such Partner and all items of
Partnership income and gain allocated to such Partner pursuant to Sections
5.1(c), 5.1(d) and 5.1(e) and decreased by (x) the amount of cash or Agreed
Value of all actual and deemed distributions of cash or property made to such
Partner pursuant to this Agreement and (y) Loss allocated to such Partner and
all items of Partnership deduction and loss allocated to such Partner pursuant
to Section 5.1(c).
(b)In the event any interest in the Partnership is Transferred in accordance
with the terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred interest.
(c)The provisions of the Agreement relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704-1(b), and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto
(including, without limitation, debits or credits relating to liabilities which
are secured by contributed or distributed property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in order
to comply with such Regulations, the General Partner may make such modification,
provided that it is not likely to have a material effect on the amounts
distributable to any Person upon the dissolution of the Partnership. The General
Partner also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(g)
and (ii) make appropriate modifications in the event that unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b) or 1.704-2.
4.7    No Interest on Contributions.
No Partner shall be entitled to interest on its Capital Contribution.
4.8    Return of Capital Contributions.
No Partner shall be entitled to withdraw any part of its Capital Contribution or
its Capital Account or to receive any distribution from the Partnership, except
as specifically provided in this Agreement. Except as otherwise provided herein,
there shall be no obligation to return to any Partner or withdrawn Partner any
part of such Partner's Capital Contribution for so long as the Partnership
continues in existence.
4.9    No Third Party Beneficiary.
No creditor or other third party having dealings with the Partnership shall have
the right to enforce the right or obligation of any Partner to make Capital
Contributions or loans or to pursue any other right or remedy hereunder or at
law or in equity, it being understood and agreed that the provisions of this
Agreement shall be solely for the benefit of, and may be enforced solely by, the
parties hereto and their respective successors and assigns. None of the rights
or obligations of the Partners herein set forth to make Capital Contributions or
loans to the Partnership shall be deemed an asset of the Partnership for any
purpose by any creditor or other third party, nor may such rights or obligations
be sold, transferred or assigned by the Partnership or pledged or encumbered by
the Partnership to secure any debt or other obligation of the Partnership or of
any of the Partners. In addition, it is the intent of the parties hereto that no
distribution to any Limited Partner shall be deemed a return of money or other
Property in violation of the Act. However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, any

20

--------------------------------------------------------------------------------

Limited Partner is obligated to return such money or Property, such obligation
shall be the obligation of such Limited Partner and not of the General Partner.
Without limiting the generality of the foregoing, a deficit Capital Account of a
Partner shall not be deemed to be a liability of such Partner nor an asset or
Property of the Partnership.
4.10    Redemptions and Exchanges of REIT Shares.
(a)Redemptions. If, at any time, any shares of capital stock of the General
Partner are redeemed by the General Partner for cash, the Partnership shall,
immediately prior to such redemption, redeem an equal number of equivalent
Partnership Units (taking into account any relevant Conversion Factor for that
Class of Partnership Units) held by the General Partner that have the same Class
designation as the redeemed REIT Shares upon the same terms and for the same
price per Partnership Unit as such Capital Shares are redeemed.
(b)Exchanges. If the General Partner exchanges any REIT Shares of any Class
(“Exchanged REIT Shares”) for REIT Shares of a different Class (“Received REIT
Shares”), then the General Partner shall, and shall cause the Partnership to,
exchange a number of Partnership Units having the same Class designation as the
Exchanged REIT Shares, as determined based on the application of the Conversion
Factor for that Class of Partnership Units, for Partnership Units having the
same Class designation as the Received REIT Shares on the same terms that the
General Partner exchanged the Exchanged REIT Shares. The exchange of Partnership
Units shall occur automatically after the close of business on the applicable
date of the exchange of REIT Shares, as of which time the holder of Class of
Partnership Units having the same designation as the Exchanged REIT Shares shall
be credited on the books and records of the Partnership with the issuance, as of
the opening of business on the next day, of the applicable number of Partnership
Units having the same designation as the Received REIT Shares.
ARTICLE 5
PROFITS AND LOSSES; DISTRIBUTIONS
5.1    Allocation of Profit and Loss.
Profit and Loss of the Partnership shall be determined and allocated with
respect to each Partnership Year as of the end of each such year, provided that
the General Partner may in its discretion allocate Profit and Loss for a shorter
period as of the end of such period (and, for purposes of this Article 5,
references to the term “Partnership Year” may include such shorter periods).
(a)Profit.
After giving effect to the special allocations in Sections 5.1(c), 5.1(d) and
5.1(e),Profit of the Partnership for each Partnership Year or other applicable
period of the Partnership shall be allocated to the Partners in the following
order and priority:
(i)Profit shall be allocated to the General Partner until the cumulative Profit
allocated to the General Partner pursuant to this Section 5.1(a)(i) equals the
cumulative Loss allocated to the General Partner pursuant to Section 5.1(b)(ii).
(ii)Profit shall be allocated to the Partners (other than the Special Limited
Partner) in accordance with their Percentage Interests.
(b)
Loss.

After giving effect to the special allocations in Sections 5.1(c), 5.1(d),
5.1(e) and 5.1(h),

21

--------------------------------------------------------------------------------

Loss of the Partnership for each Partnership Year or other applicable period of
the Partnership shall be allocated to the Partners in the following order and
priority:
(i)Loss shall be allocated to the Partners (other than the Special Limited
Partner) in accordance with their Percentage Interests, provided that Loss shall
not be allocated to a Partner pursuant to this Section 5.1(b)(i) to the extent
that such allocation would cause or increase an Adjusted Capital Account Deficit
at the end of any fiscal year.
(ii)Loss shall be allocated to the General Partner.
(c)Special Allocations. The following regulatory allocations shall be made in
the following order and priority:
(i)Minimum Gain Chargeback. Notwithstanding the provisions of Section 5.1 of the
Agreement, if there is a net decrease in Partnership Minimum Gain during any
Partnership Year, each Partner shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Partner's share of the net decrease in Partnership Minimum Gain,
as determined under Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Section 1.704-2(0(6). This
Section 5.1(c)(i) is intended to comply with the minimum gain chargeback
requirements in Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(ii)Partner Minimum Gain Chargeback. Notwithstanding any other provision of
Section 5.1 of this Agreement, if there is a net decrease in Partner Minimum
Gain attributable to a Partner Nonrecourse Debt during any Partnership Year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 5.1(c)(ii) is intended to
comply with the minimum gain chargeback requirement in Regulations Section
1.704-2(i) and shall be interpreted consistently therewith.
(iii)Qualified Income Offset. In the event any Partner unexpectedly receives any
adjustments, allocations or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-I(b)(2)(ii)(d)(6) and
such Partner has an Adjusted Capital Account Deficit, items of Partnership
income and gain (consisting of a pro rata portion of each item of Partnership
income, including gross income and gain for the Partnership Year) shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, its Adjusted Capital
Account Deficit created by such adjustments, allocations or distributions as
quickly as possible. This Section 5.1(c)(iii) is intended to constitute a
“qualified income offset” under Regulations Section I.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
(iv)No Excess Deficit. To the extent that any Partner has or would have, as a
result of an allocation of Net Loss (or item thereof), an Adjusted Capital
Account Deficit, such amount of Net Loss (or item thereof) shall be allocated to
the other Partners in accordance with Section 5.1(b), but in a manner which will
not produce an Adjusted Capital Account Deficit as to such Partners. To the
extent such allocation would result in all Partners having Adjusted Capital
Account Deficits, such Net Loss (or item thereof) shall be allocated to the
General Partner.

22

--------------------------------------------------------------------------------

(v)Nonrecourse Deductions. Nonrecourse Deductions for any Partnership Year shall
be allocated to the Partners (other than the Special Limited Partner) in
accordance with their respective Percentage Interests. If the General Partner
determines in its good faith discretion that the Partnership's Nonrecourse
Deductions must be allocated in a different ratio to satisfy the safe harbor
requirements of the Regulations promulgated under Section 704(b) of the Code,
the General Partner is authorized, upon notice to the Limited Partners, to
revise the prescribed ratio for such Partnership Year to the numerically closest
ratio which would satisfy such requirements.
(vi)Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any
Partnership Year shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Regulations
Sections 1.704-2(b)(4) and 1.704-2(i).
(vii)Code Section 754 Adjustments. To the extent an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the
Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such section of the
Regulations.
(d)Priority Allocations to the Special Limited Partner. Notwithstanding the
provisions of Sections 5.1(a) and 5.1(b) above, the Special Limited Partner
shall be allocated on a priority basis items of income or gain, including,
without limitation, items of gain from a Sale (including but not limited to net
capital gain realized in connection with the adjustment to the Carrying Value of
Partnership assets under Section 704(b) of the Code) on a cumulative basis
pursuant to this Section 5.1(d) in an amount equal to the amount of
distributions made (or in connection with a Sale or winding up or liquidation of
the Partnership, to be made) to such Partner.
(e)Special Allocations Regarding LTIP Units. Subject to the terms of any
Partnership Units ranking senior to the LTIP Units with respect to return of
capital or any preferential or priority return, any Liquidating Capital Gains
shall first be allocated to the LTIP Holders until the Economic Capital Account
Balances of such holders, to the extent attributable to their ownership of LTIP
Units, are equal to (i) the Partnership Unit Economic Balance, multiplied by
(ii) the number of LTIP Units; provided that no such Liquidating Capital Gains
will be allocated with respect to any particular LTIP Unit unless and to the
extent that the Partnership Unit Economic Balance exceeds the Partnership Unit
Economic Balance in existence at the time such LTIP Unit was issued. For this
purpose, “Liquidating Capital Gains” means net capital gains realized in
connection with the actual or hypothetical sale of all or substantially all of
the assets of the Partnership, including but not limited to net capital gain
realized in connection with an adjustment to the Carrying Value of the
Partnership assets under Section 704(b) of the Code. The “Economic Capital
Account Balances” of the LTIP Holders will be equal to their Capital Account
balances, plus the amount of their shares of any Partner Nonrecourse Debt
Minimum Gain or Partnership Minimum Gain, in either case to the extent
attributable to their ownership of LTIP Units. Similarly, the “Partnership Unit
Economic Balance” shall mean (i) the Capital Account Balance of the General
Partner, plus the amount of the General Partner's share of any Partner
Nonrecourse Debt Minimum Gain or Partnership Minimum Gain, in either case to the
extent attributable to the General Partner's ownership of Partnership Units and
computed on a hypothetical basis after taking into account all allocations
through the date on which any allocation is made under this Section 5.1(e),
divided by (ii) the number of General Partner's Partnership Units. Any such
allocations shall be made among the LTIP Holders in proportion to the amounts
required to be allocated to each under this Section 5.1(e). The parties agree
that the intent of this Section 5.1(e) is to make the Capital Account balance
associated with each LTIP Unit to be economically equivalent to the Capital
Account balance associated

23

--------------------------------------------------------------------------------

with the Partnership Units (on a per-Unit basis), but only if and to the extent
the Capital Account balance associated with the General Partner's Partnership
Units has increased on a per-Unit basis since the issuance of the relevant LTIP
Unit.
(f)Recapture Income. Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible after
taking into account other required allocations of gain pursuant to Section
5.1(c), be characterized as Recapture Income in the same proportions and to the
same extent as such Partners have been allocated any deductions directly or
indirectly giving rise to the treatment of such gains as Recapture Income.
(g)Allocations Between Transferor and Transferee. If a Partner transfers any
part or all of its Partnership Unit or if Percentage Interests vary during a
Partnership Year, the General Partner, in its sole and absolute discretion,
shall determine which method authorized under the Code and the Regulations shall
be used to allocate the distributive shares.
(h)Special Allocations of Class-Specific Items. To the extent that any items of
income, gain, loss or deduction of the General Partner are allocable to a
specific Class or Classes of REIT Shares as provided in the Prospectus,
including, without limitation, the Distribution Fees, such items, or an amount
equal thereto, shall be specially allocated to the Class or Classes of
Partnership Units corresponding to such Class or Classes of REIT Shares.
(i)Allocations for Tax Purposes. All allocations for federal income tax purposes
shall be consistent with all allocations in this Section 5.1, except as
otherwise required by Section 704(c) of the Code and Regulations Section
1.704-1(b)(4). The General Partner shall have the authority to elect the method
to be used by the Partnership for allocating items of income, gain, and expense
as required by Section 704(c) of the Code including a method that may result in
a Partner receiving a disproportionately larger share of the Partnership tax
depreciation deductions, and such election shall be binding on all Partners.
(j)Revisions to Allocations to Reflect Issuance of Additional Partnership Units.
In the event that the Partnership issues additional Partnership Units to the
General Partner or any Additional Limited Partner pursuant to Article 4 hereof,
the General Partner shall make such revisions to this Section 5.1 as it deems
necessary to reflect the terms of the issuance of such additional Partnership
Units, including making preferential allocations to classes of Partnership Units
that are entitled thereto. Such revisions shall not require the consent or
approval of any other Partner.
5.2    Distribution of Cash.
(a)The Partnership shall distribute cash on a quarterly (or, at the election of
the General Partner, more frequent) basis, in an amount determined by the
General Partner in its sole and absolute discretion, to the Partners who are
Partners on the Partnership Record Date with respect to such quarter (or other
distribution period) in accordance with Section 5.2(b).
(b)Except for distributions pursuant to Section 5.6 of this Agreement in
connection with the dissolution and liquidation of the Partnership and subject
to the provisions of Section 5.2(c), 5.2(d), 5.3 and 5.5 of this Agreement,
distributions shall be made (i) first, 100% to the Partners (other than Special
Limited Partner) in accordance with their respective Percentage Interests on the
Partnership Record Date until the Limited Partners (other than the Special
Limited Partner) have received cumulative distributions under this Section
5.2(b) equal to the aggregate Capital Contributions made by the Limited Partners
(other than the Special Limited Partner) to the Partnership plus a cumulative,
noncompounded pre-tax rate of return thereon of 7.00% per annum, determined by
taking into account the dates on which all such Capital Contributions and
distributions were made and (ii) second, (A) 85% to the Partners (other than the
Special Limited Partner), in accordance with their respective Percentage
Interests on the Partnership Record Date

24

--------------------------------------------------------------------------------

and (B) 15% to the Special Limited Partner.
In applying this Section 5.2(b), and notwithstanding anything to the contrary
above, the amount distributed per Class T Partnership Unit shall be reduced by
the allocable share of the Distribution Fees payable by the General Partner with
respect to the Class T REIT Shares with respect to such record date (or prior
record dates to the extent the aggregate Distribution Fees payable with respect
to the prior record dates exceeds the aggregate reduction in distributions with
respect to such periods) .
(c)Notwithstanding any other provision of this Agreement, the General Partner is
authorized to take any action that it determines to be necessary or appropriate
to cause the Partnership to comply with any withholding requirements established
under the Code or any other federal, state or local law including, without
limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the
extent that the Partnership is required to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to
any Partner or assignee (including by reason of Section 1446 of the Code),
either (i) if the actual amount to be distributed to the Partner equals or
exceeds the amount required to be withheld by the Partnership, the amount
withheld shall be treated as a distribution of cash in the amount of such
withholding to such Partner, or (ii) if the actual amount to be distributed to
the Partner is less than the amount required to be withheld by the Partnership,
the actual amount shall be treated as a distribution of cash in the amount of
such withholding and the additional amount required to be withheld shall be
treated as a loan (a “Partnership Loan”) from the Partnership to the Partner on
the day the Partnership pays over such amount to a taxing authority. A
Partnership Loan shall be repaid through withholding by the Partnership with
respect to subsequent distributions to the applicable Partner or assignee. In
the event that a Limited Partner (a “Defaulting Limited Partner”) fails to pay
any amount owed to the Partnership with respect to the Partnership Loan within
fifteen (15) days after demand for payment thereof is made by the Partnership on
the Limited Partner, the General Partner, in its sole and absolute discretion,
may elect to make the payment to the Partnership on behalf of such Defaulting
Limited Partner. In such event, on the date of payment, the General Partner
shall be deemed to have extended a loan (a “General Partner Loan”) to the
Defaulting Limited Partner in the amount of the payment made by the General
Partner and shall succeed to all rights and remedies of the Partnership against
the Defaulting Limited Partner as to that amount. Without limitation, the
General Partner shall have the right to receive any distributions that otherwise
would be made by the Partnership to the Defaulting Limited Partner until such
time as the General Partner Loan has been paid in full, and any such
distributions so received by the General Partner shall be treated as having been
received by the Defaulting Limited Partner and immediately paid to the General
Partner.
Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to
this Section 5.2(c) shall bear interest at the lesser of (i) the base rate on
corporate loans at large United States money center commercial banks, as
published from time to time in The Wall Street Journal, or (ii) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date the Partnership or the General Partner, as applicable, is deemed to extend
the loan until such loan is repaid in full.
(d)In the event that the Partnership issues additional Partnership Units to the
General Partner or any Additional Limited Partner pursuant to Article 4 hereof,
the General Partner shall make such revisions to this Section 5.2 as it deems
necessary to reflect the issuance of such additional Partnership Units.
5.3    REIT Distribution Requirements.
The General Partner shall use its commercially reasonable efforts to cause the
Partnership to distribute amounts sufficient to enable the General Partner to
make stockholder distributions that will allow the General Partner to (i) meet
its distribution requirement for qualification as a REIT as set forth in Section

25

--------------------------------------------------------------------------------

857 of the Code and (ii) avoid any federal income or excise tax liability
imposed by the Code.
5.4    No Right to Distributions in Kind.
No Partner shall be entitled to demand Property other than cash in connection
with any distributions by the Partnership.
5.5    Limitations on Return of Capital Contributions.
Notwithstanding any of the provisions of this Article 5, no Partner shall have
the right to receive, and the General Partner shall not have the right to make,
a distribution that includes a return of all or part of a Partner's Capital
Contributions, unless after giving effect to the return of a Capital
Contribution, the sum of all Partnership liabilities, other than the liabilities
to a Partner for the return of its Capital Contribution, does not exceed the
fair market value of the Partnership's assets.
5.6    Distributions Upon Liquidation.
Upon liquidation of the Partnership, after payment of, or adequate provision
for, debts and obligations of the Partnership, including any Partner loans, any
remaining assets of the Partnership shall be distributed to all Partners in
accordance with their Capital Accounts. To the extent deemed advisable by the
General Partner, appropriate arrangements (including the use of a liquidating
trust) may be made to assure that adequate funds are available to pay any
contingent debts or obligations.
5.7    Substantial Economic Effect.
It is the intent of the Partners that the allocations of Profit and Loss under
this Agreement have substantial economic effect (or be consistent with the
Partners' interests in the Partnership in the case of the allocation of losses
attributable to nonrecourse debt) within the meaning of Section 704(b) of the
Code as interpreted by the Regulations promulgated pursuant thereto. Article 5
and other relevant provisions of this Agreement shall be interpreted in a manner
consistent with such intent.
ARTICLE 6
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER
6.1    Management of the Partnership.
(a)Except as otherwise expressly provided in this Agreement, the General Partner
shall have full, complete and exclusive discretion to manage and control the
business of the Partnership for the purposes herein stated, and shall make all
decisions affecting the business and assets of the Partnership. Subject to the
restrictions specifically contained in this Agreement, the powers of the General
Partner shall include, without limitation, the authority to take the following
actions on behalf of the Partnership:
(i)to acquire, purchase, own, operate, lease and dispose of any Investments that
the General Partner determines are necessary or appropriate or in the best
interests of the business of the Partnership;
(ii)to authorize, issue, sell, redeem or otherwise purchase any Partnership
Units or any securities (including secured and unsecured debt obligations of the
Partnership, debt obligations of the Partnership convertible into any Class or
series of Partnership Units, or options, rights, warrants or appreciation rights
relating to any Partnership Units) of the Partnership;
(iii)to borrow or lend money for the Partnership, issue or receive evidences of

26

--------------------------------------------------------------------------------

indebtedness in connection therewith, refinance, increase the amount of, modify,
amend or change the terms of, or extend the time for the payment of, any such
indebtedness, and secure such indebtedness by mortgage, deed of trust, pledge or
other lien on the Partnership's assets;
(iv)to pay, either directly or by reimbursement, for all operating costs and
general administrative expenses of the Partnership to third parties or to the
General Partner or its Affiliates as set forth in this Agreement;
(v)to guarantee or become a co-maker of indebtedness of the General Partner or
any Subsidiary thereof, refinance, increase the amount of, modify, amend or
change the terms of, or extend the time for the payment of, any such guarantee
or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of
trust, pledge or other lien on the Partnership's assets;
(vi)to use assets of the Partnership (including, without limitation, cash on
hand) for any purpose consistent with this Agreement, including, without
limitation, payment, either directly or by reimbursement, of all operating costs
and general administrative expenses of the General Partner, the Partnership or
any Subsidiary of either, to third parties or to the General Partner as set
forth in this Agreement;
(vii)to lease all or any portion of any of the Partnership's assets, whether or
not the terms of such leases extend beyond the termination date of the
Partnership and whether or not any portion of the Partnership's assets so leased
are to be occupied by the lessee, or, in turn, subleased in whole or in part to
others, for such consideration and on such terms as the General Partner may
determine;
(viii)to prosecute, defend, arbitrate, or compromise any and all claims or
liabilities in favor of or against the Partnership, on such terms and in such
manner as the General Partner may reasonably determine, and similarly to
prosecute, settle or defend litigation with respect to the Partners, the
Partnership, or the Partnership's assets;
(ix)to file applications, communicate, and otherwise deal with any and all
governmental agencies having jurisdiction over, or in any way affecting, the
Partnership's assets or any other aspect of the Partnership business;
(x)to make or revoke any election permitted or required of the Partnership by
any taxing authority;
(xi)to maintain such insurance coverage for public liability, fire and casualty,
and any and all other insurance for the protection of the Partnership, for the
conservation of Partnership assets, or for any other purpose convenient or
beneficial to the Partnership, in such amounts and such types, as it shall
determine from time to time;
(xii)to determine whether or not to apply any insurance proceeds for any
Property to the restoration of such Property or to distribute the same;
(xiii)to establish one or more divisions of the Partnership, to hire and dismiss
employees of the Partnership or any division of the Partnership, and to retain
legal counsel, accountants, consultants, real estate brokers, and such other
persons, as the General Partner may deem necessary or
appropriate in connection with the Partnership business and to pay therefor such
remuneration as the General Partner may deem reasonable and proper;
(xiv)to retain other services of any kind or nature in connection with the
Partnership business, and to pay therefor such remuneration as the General
Partner may deem reasonable

27

--------------------------------------------------------------------------------

and proper;
(xv)to negotiate and conclude agreements on behalf of the Partnership with
respect to any of the rights, powers and authority conferred upon the General
Partner;
(xvi)to maintain accurate accounting records and to file promptly all federal,
state and local income tax returns on behalf of the Partnership;
(xvii)to distribute Partnership cash or other Partnership assets in accordance
with this Agreement;
(xviii)to form or acquire an interest in, and contribute Property to, any
further limited or general partnerships, joint ventures or other relationships
that it deems desirable (including, without limitation, the acquisition of
interests in, and the contributions of Property to, its Subsidiaries and any
other Person in which it has an equity interest from time to time);
(xix)to establish Partnership reserves for working capital, capital
expenditures, contingent liabilities, or any other valid Partnership purpose;
(xx)to merge, consolidate or combine the Partnership with or into another
Person;
(xxi)to do any and all acts and things necessary or prudent to ensure that the
Partnership will not be classified as a “publicly traded partnership” that is
taxable as a corporation under Section 7704 of the Code; and
(xxii)to take such other action, execute, acknowledge, swear to or deliver such
other documents and instruments, and perform any and all other acts that the
General Partner deems necessary or appropriate for the formation, continuation
and conduct of the business and affairs of the Partnership (including, without
limitation, all actions consistent with allowing the General Partner at all
times to qualify as a REIT unless the General Partner voluntarily terminates its
REIT status) and to possess and enjoy all of the rights and powers of a general
partner as provided by the Act.
(b)Except as otherwise provided herein, to the extent the duties of the General
Partner require expenditures of funds to be paid to third parties, the General
Partner shall not have any obligations hereunder except to the extent that
Partnership funds are reasonably available to it for the performance of such
duties, and nothing herein contained shall be deemed to authorize or require the
General Partner, in its capacity as such, to expend its individual funds for
payment to third parties or to undertake any individual liability or obligation
on behalf of the Partnership.
6.2    Delegation of Authority.
The General Partner may delegate any or all of its powers, rights and
obligations hereunder, and may appoint, employ, contract or otherwise deal with
any Person for the transaction of the business of the Partnership, which Person
may, under supervision of the General Partner, perform any acts or services for
the Partnership as the General Partner may approve.

28

--------------------------------------------------------------------------------

6.3    Indemnification and Exculpation of Indemnitees.
(a)The Partnership shall indemnify an Indemnitee from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
reasonable legal fees and expenses), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the operations
of the Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, Property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. Any indemnification pursuant to
this Section 6.3 shall be made only out of the assets of the Partnership.
(b)The Partnership shall reimburse an Indemnitee for reasonable expenses
incurred by an Indemnitee who is a party to a proceeding in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the lndemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.3 has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(c)The indemnification provided by this Section 6.3 shall be in addition to any
other rights to which an Indemnitee or any other Person may be entitled under
any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity.
(d)The Partnership may purchase and maintain insurance, on behalf of the
Indemnitees and such other Persons as the General Partner shall determine,
against any liability that may be asserted against or expenses that may be
incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
(e)For purposes of this Section 6.3, the Partnership shall be deemed to have
requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of this Section 6.3; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
(f)In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g)An Indemnitee shall not be denied indemnification in whole or in part under
this Section 6.3 because the Indemnitee had an interest in the transaction with
respect to which the indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
(h)The provisions of this Section 6.3 are for the benefit of the Indemnitees,
their heirs, successors, assigns and administrators and shall not be deemed to
create any rights for the benefit of any other Persons.

29

--------------------------------------------------------------------------------

(i)Notwithstanding the foregoing, the Partnership may not indemnify or hold
harmless an Indemnitee for any liability or loss unless all of the following
conditions are met: (i) the Indemnitee has determined, in good faith, that the
course of conduct that caused the loss or liability was in the best interests of
the Partnership; (ii) the Indemnitee was acting on behalf of or performing
services for the Partnership; (iii) the liability or loss was not the result of
(A) negligence or misconduct, in the case that the Indemnitee is a director of
the General Partner (other than an Independent Director), the Advisor or an
Affiliate of the Advisor or (B) gross negligence or willful misconduct, in the
case that the Indemnitee is an Independent Director; and (iv) the
indemnification or agreement to hold harmless is recoverable only out of net
assets of the Partnership. In addition, the Partnership shall not provide
indemnification for any loss, liability or expense 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 Indemnitee; (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to the
Indemnitee; or (iii) a court of competent jurisdiction approves a settlement of
the claims against the Indemnitee and finds that indemnification of the
settlement and the related costs should be made, and the court considering the
request for indemnification has been advised of the position of the Commission
and of the published position of any state securities regulatory authority in
which securities of the General Partner or the Partnership were offered or sold
as to indemnification for violations of securities laws.
6.4    Liability of the General Partner.
(a)Notwithstanding anything to the contrary set forth in this Agreement, the
General Partner shall not be liable for monetary damages to the Partnership or
any Partners for losses sustained or liabilities incurred as a result of errors
in judgment or of any act or omission if the General Partner acted in good
faith. The General Partner shall not be in breach of any duty that the General
Partner may owe to the Limited Partners or the Partnership or any other Persons
under this Agreement or of any duty stated or implied by law or equity provided
the General Partner, acting in good faith, abides by the terms of this
Agreement.
(b)The Limited Partners expressly acknowledge that the General Partner is acting
on behalf of the Partnership, itself and its stockholders collectively, that the
General Partner is under no obligation to consider the separate interests of the
Limited Partners (including, without limitation, the tax consequences to Limited
Partners or the tax consequences of some, but not all, of the Limited Partners)
in deciding whether to cause the Partnership to take (or decline to take) any
actions. In the event of a conflict between the interests of its stockholders on
one hand and the Limited Partners on the other, the General Partner shall
endeavor in good faith to resolve the conflict in a manner not adverse to either
its stockholders or the Limited Partners; provided, however, that for so long as
the General Partner directly owns a controlling interest in the Partnership, any
such conflict that the General Partner, in its sole and absolute discretion,
determines cannot be resolved in a manner not adverse to either its stockholders
or the Limited Partner shall be resolved in favor of the stockholders. The
General Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided that the General Partner has acted in good faith.
(c)Subject to its obligations and duties as General Partner set forth in Section
6.1 hereof, the General Partner may exercise any of the powers granted to it
under this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith.

30

--------------------------------------------------------------------------------

(d)Notwithstanding any other provisions of this Agreement or the Act, any action
of the General Partner on behalf of the Partnership or any decision of the
General Partner to refrain from acting on behalf of the Partnership, undertaken
in the good faith belief that such action or omission is necessary or advisable
in order (i) to protect the ability of the General Partner to continue to
qualify as a REIT or (ii) to prevent the General Partner from incurring any
taxes under Section 857, Section 4981, or any other provision of the Code, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
(e) Any amendment, modification or repeal of this Section 6.4 or any provision
hereof shall be prospective only and shall not in any way affect the limitations
on the General Partner's liability to the Partnership and the Limited Partners
under this Section 6.4 as in effect immediately prior to such amendment,
modification or repeal with respect to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when claims
relating to such matters may arise or be asserted.
6.5    Reimbursement of General Partner.
(a)Except as provided in this Section 6.5 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
(b)The General Partner shall be reimbursed on a monthly basis, or such other
basis as the General Partner may determine in its sole and absolute discretion,
for all Administrative Expenses incurred by the General Partner. Reimbursement
of Administrative Expenses shall be treated as an expense of the Partnership and
not as distributions of allocable income.
6.6    Outside Activities.
Subject to Section 6.8 hereof, the Articles of Incorporation and any agreements
entered into by the General Partner or its Affiliates with the Partnership or a
Subsidiary, any officer, director, employee, agent, trustee, Affiliate or
stockholder of the General Partner, the General Partner shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Partnership, including business interests and activities
substantially similar or identical to those of the Partnership. None of the
Partnership, Limited Partners or any other Person shall have any rights by
virtue of this Agreement or the partnership relationship established hereby in
any such business ventures, interests or activities, and the General Partner
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures, interests and activities to the Partnership or any
Limited Partner, even if such opportunity is of a character which, if presented
to the Partnership or any Limited Partner, could be taken by such Person.

31

--------------------------------------------------------------------------------

6.7    Employment or Retention of Affiliates.
(a)Any Affiliate of the General Partner may be employed or retained by the
Partnership and may otherwise deal with the Partnership (whether as a buyer,
lessor, lessee, manager, furnisher of goods or services, broker, agent, lender
or otherwise) and may receive from the Partnership any compensation, price, or
other payment therefor which the General Partner determines to be fair and
reasonable.
(b)The Partnership may lend or contribute to its Subsidiaries or other Persons
in which it has an equity investment, and such Persons may borrow funds from the
Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create any
right or benefit in favor of any Subsidiary or any other Person.
(c)The Partnership may transfer assets to joint ventures, other partnerships,
corporations or other business entities in which it is or thereby becomes a
participant upon such terms and subject to such conditions as the General
Partner deems are consistent with this Agreement, applicable law and the REIT
status of the General Partner.
(d)Except as expressly permitted by this Agreement, neither the General Partner
nor any of its Affiliates shall sell, transfer or convey any Property to, or
purchase any Property from, the Partnership, directly or indirectly, except
pursuant to transactions that are, in the General Partner's sole discretion, on
terms that are fair and reasonable to the Partnership.
6.8    General Partner Participation.
The General Partner agrees that all business activities of the General Partner,
including activities pertaining to the acquisition, development or ownership of
any Investment, shall be conducted through the Partnership, a Subsidiary, a
Subsidiary Partnership or a taxable REIT subsidiary (within the meaning of
Section 856(1) of the Code); provided, however, that the General Partner is
allowed to hold cash and liquid investments to fund its expenses, including
redemptions of shares of common stock of the General Partner.
6.9    Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be held by the General Partner for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. All Partnership assets shall be recorded as the Property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
6.10    No Duplication of Fees or Expenses.
The Partnership may not incur or be responsible for any fee or expense (in
connection with the Offering or otherwise) that would be duplicative of fees and
expenses paid by the General Partner.

32

--------------------------------------------------------------------------------

ARTICLE 7
CHANGES IN GENERAL PARTNER
7.1    Transfer of the General Partner's Units.
(a)The General Partner shall not transfer all or any portion of its Units or
withdraw as General Partner except as provided in, or in connection with a
transaction contemplated by, Section 7.1(c).
(b)Except as otherwise provided in Section 7.1(c) hereof, the General Partner
shall not engage in any merger, consolidation or other combination with or into
another Person or the sale of all or substantially all of its assets (other than
in connection with a change in the General Partner's state of incorporation or
organizational form), in each case which results in a change of control of the
General Partner (a “Transaction”), unless the consent of Limited Partners
holding more than 50% of the Percentage Interests of the Limited Partners is
obtained.
(c)Notwithstanding Section 7.1(a) or 7.1(b),
(i)a General Partner may transfer all or any portion of its General Partnership
Units to (A) a wholly owned Subsidiary of such General Partner or (B) the owner
of all of the ownership interests of such General Partner, and following a
transfer of all of its General Partnership Units, may withdraw as General
Partner; and
(ii)the General Partner may engage in a transaction not required by law or by
the rules of any national securities exchange on which the General Partner's
shares are listed to be submitted to the vote of the holders of the General
Partner's shares.
7.2    Admission of a Substitute or Additional General Partner.
A Person shall be admitted as a substitute or additional General Partner of the
Partnership only if the following terms and conditions are satisfied:
(a)the Person to be admitted as a substitute or additional General Partner shall
have accepted and agreed to be bound by all the terms and provisions of this
Agreement by executing a counterpart thereof and such other documents or
instruments as may be required or appropriate in order to effect the admission
of such Person as a General Partner, and a certificate evidencing the admission
of such Person as a General Partner shall have been filed for recordation and
all other actions required by Section 2.4 hereof in connection with such
admission shall have been performed;
(b)if the Person to be admitted as a substitute or additional General Partner is
a corporation or a partnership it shall have provided the Partnership with
evidence satisfactory to counsel for the Partnership of such Person's authority
to become a General Partner and to be bound by the terms and provisions of this
Agreement; and
(c)counsel for the Partnership shall have rendered an opinion (relying on such
opinions from other counsel as may be necessary) that (x) the admission of the
Person to be admitted as a substitute or additional General Partner is in
conformity with the Act and (y) none of the actions taken in connection with the
admission of such Person as a substitute or additional General Partner will
cause (i) the Partnership to be classified other than as a partnership for
federal tax purposes, or (ii) the loss of any Limited Partner's limited
liability.

33

--------------------------------------------------------------------------------

7.3    Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General
Partner.
(a)Upon the occurrence of an Event of Bankruptcy as to a General Partner (and
its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal
or dissolution of a General Partner (except that, if a General Partner is on the
date of such occurrence a partnership, the withdrawal, death, dissolution, Event
of Bankruptcy as to, or removal of a partner in, such partnership shall be
deemed not to be a dissolution of such General Partner if the business of such
General Partner is continued by the remaining partner or partners), the
Partnership shall be dissolved and terminated unless the Partnership is
continued pursuant to Section 7.3(b) hereof. The merger of the General Partner
with or into any entity that is admitted as a substitute or successor General
Partner pursuant to Section 7.2 hereof shall not be deemed to be the withdrawal,
dissolution or removal of the General Partner.
(b)Following the occurrence of an Event of Bankruptcy as to a General Partner
(and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal,
removal or dissolution of a Genera] Partner, the Limited Partners, within ninety
(90) days after such occurrence, may elect to continue the business of the
Partnership for the balance of the term specified in Section 2.4 hereof by
selecting, subject to Section 7.2 hereof and any other provisions of this
Agreement, a substitute General Partner by consent of a majority in interest of
the Limited Partners. If the Limited Partners elect to continue the business of
the Partnership and admit a substitute General Partner, the relationship with
the Partners and of any Person who has acquired an interest of a Partner in the
Partnership shall be governed by this Agreement.
7.4    Removal of a General Partner.
(a)Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a
General Partner, such General Partner shall be deemed to be removed
automatically. The Limited Partners may not remove the General Partner, with or
without cause.
(b)If a General Partner has been removed pursuant to this Section 7.4 and the
Partnership is continued pursuant to Section 7.3 hereof, such General Partner
shall promptly transfer and assign its General Partnership Units in the
Partnership to the substitute General Partner approved by a majority in interest
of the Limited Partners in accordance with Section 7.3(b) hereof and otherwise
be admitted to the Partnership in accordance with Section 7.2 hereof. At the
time of assignment, the removed General Partner shall be entitled to receive
from the substitute General Partner the fair market value of the General
Partnership Units of such removed General Partner as reduced by any damages
caused to the Partnership by such General Partner. Such fair market value shall
be determined by an appraiser mutually agreed upon by the General Partner and a
majority in interest of the Limited Partners within ten (10) days following the
removal of the General Partner. In the event that the parties are unable to
agree upon an appraiser, the removed General Partner and a majority in interest
of the Limited Partners each shall select an appraiser. Each such appraiser
shall complete an appraisal of the fair market value of the removed General
Partner's General Partnership Units within thirty (30) days of the General
Partner's removal, and the fair market value of the removed General Partner's
General Partnership Unit shall be the average of the two appraisals; provided,
however, that if the higher appraisal exceeds the lower appraisal by more than
20% of the amount of the lower appraisal, the two appraisers, no later than
forty (40) days after the removal of the General Partner, shall select a third
appraiser who shall complete an appraisal of the fair market value of the
removed General Partner's General Partnership Units no later than sixty (60)
days after the removal of the General Partner. In such case, the fair market
value of the removed General Partner's General Partnership Units shall be the
average of the two appraisals closest in value.

34

--------------------------------------------------------------------------------

(c)The General Partnership Units of a removed General Partner, during the time
after default until transfer under Section 7.4(b), shall be converted to that of
a Limited Partner; provided, however, such removed General Partner shall not
have any rights to participate in the management and affairs of the Partnership,
and shall not be entitled to any portion of the income, expense, profit, gain or
loss allocations or cash distributions allocable or payable, as the case may be,
to the Limited Partners. Instead, such removed General Partner shall receive and
be entitled only to retain distributions or allocations of such items that it
would have been entitled to receive in its capacity as General Partner, until
the transfer is effective pursuant to Section 7.4(b).
(d) All Partners shall have given and hereby do give such consents, shall take
such actions and shall execute such documents as shall be legally necessary,
desirable and sufficient to effect all the foregoing provisions of this Section.

ARTICLE 8
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
8.1    Management of the Partnership.
The Limited Partners shall not participate in the management or control of
Partnership business nor shall they transact any business for the Partnership,
nor shall they have the power to sign for or bind the Partnership, such powers
being vested solely and exclusively in the General Partner.
8.2    Power of Attorney.
Each Limited Partner hereby irrevocably appoints the General Partner its true
and lawful attorney-in-fact, who may act for each Limited Partner and in its
name, place and stead, and for its use and benefit, to sign, acknowledge, swear
to, deliver, file or record, at the appropriate public offices, any and all
documents, certificates, and instruments as may be deemed necessary or desirable
by the General Partner to carry out fully the provisions of this Agreement and
the Act in accordance with their terms, which power of attorney is coupled with
an interest and shall survive the death, dissolution or legal incapacity of the
Limited Partner, or the transfer by the Limited Partner of any part or all of
its Partnership Units.
8.3    Limitation on Liability of Limited Partners.
No Limited Partner shall be liable for any debts, liabilities, contracts or
obligations of the Partnership. A Limited Partner shall be liable to the
Partnership only to make payments of its Capital Contribution, if any, as and
when due hereunder. After its Capital Contribution is fully paid, no Limited
Partner shall, except as otherwise required by the Act, be required to make any
further Capital Contributions or other payments or lend any funds to the
Partnership.
8.4    Ownership by Limited Partner of Corporate General Partner or Affiliate.
No Limited Partner shall at any time, either directly or indirectly, own any
stock or other interest in the General Partner or in any Affiliate thereof, if
such ownership by itself or in conjunction with other stock or other interests
owned by other Limited Partners would, in the opinion of counsel for the
Partnership, jeopardize the classification of the Partnership as a partnership
for federal tax purposes. The General Partner shall be entitled to make such
reasonable inquiry of the Limited Partners as is required to establish
compliance by the Limited Partners with the provisions of this Section.

35

--------------------------------------------------------------------------------

8.5    Limited Partner Right of Redemption.
(a)Subject to Sections 8.5(b), 8.5(c), 8.5(d), 8.5(e) and 8.5(f) and the
provisions of any agreements between the Partnership and one or more Limited
Partners with respect to the Limited Partnership Units held by them, a
Qualifying Party, but no other Limited Partner or Assignee, shall, after holding
their Limited Partnership Units for at least one year, have the right (subject
to the terms and conditions set forth herein) to require the Partnership to
redeem (a “Redemption”) all or a portion of such Limited Partnership Units (the
“Tendered Units”) held by such Limited Partner (a “Redemption Right”) in
exchange for REIT Shares having the same Class designation as the Partnership
Units subject to the Redemption Right, issuable on, or the Cash Amount payable
on, or a combination thereof having an equivalent value to the REIT Shares
issuable on, or the Cash Amount payable on, the Specified Redemption Date, as
determined by the General Partner in its sole discretion. Any Redemption Right
shall be exercised pursuant to a Notice of Redemption delivered to the
Partnership (with a copy to the General Partner) by the Limited Partner
exercising the Redemption Right (the “Tendering Party”). No Limited Partner may
deliver more than two Notices of Redemption during each calendar year. A Limited
Partner may not exercise the Redemption Right for less than 1,000 Limited
Partnership Units or, if such Limited Partner holds less than 1,000 Limited
Partnership Units, all of the Limited Partnership Units held by such Partner.
The Tendering Party shall have no right, with respect to any Limited Partnership
Units so redeemed, to receive any distribution paid with respect to Limited
Partnership Units if the record date for such distribution is on or after the
Specified Redemption Date.
(b)If the General Partner elects to redeem Tendered Units for REIT Shares having
the same Class designation as the Tendered Units rather than cash, then the
Partnership shall direct the General Partner to issue and deliver such REIT
Shares to the Tendering Party pursuant to the terms set forth in this Section
8.5(b), in which case, (i) the General Partner, acting as a distinct legal
entity, shall assume directly the obligation with respect thereto and shall
satisfy the Tendering Party's exercise of its Redemption Right, and (ii) such
transaction shall be treated, for federal income tax purposes, as a transfer by
the Tendering Party of such Tendered Units to the General Partner in exchange
for REIT Shares. The percentage of the Tendered Units tendered for Redemption by
the Tendering Party for which the General Partner elects to issue REIT Shares
(rather than cash) is referred to as the “Applicable Percentage.” In making such
election to acquire Tendered Units, the Partnership shall act in a fair,
equitable and reasonable manner that neither prefers one group or class of
Limited Partners over another nor discriminates against a group or class of
Limited Partners. If the Partnership elects to redeem any number of Tendered
Units for REIT Shares having the same Class designation as the Tendered Units,
rather than cash, on the Specified Redemption Date, the Tendering Party shall
sell such number of the Tendered Units to the General Partner in exchange for a
number of REIT Shares equal to the product of the REIT Shares Amount and the
Applicable Percentage. The product of the Applicable Percentage and the REIT
Shares Amount, if applicable, shall be delivered by the General Partner as duly
authorized, validly issued, fully paid and accessible REIT Shares having the
same Class designation as the Tendered Units, free of any pledge, lien,
encumbrance or restriction, other than the Aggregate Share Ownership Limit and
other restrictions provided in the Article of Incorporation, the bylaws of the
General Partner, the Securities Act and relevant state securities or “blue sky”
laws. Notwithstanding the provisions of Section 8.5(a) and this Section 8.5(b),
the Tendering Parties shall have no rights under this Agreement that would
otherwise be prohibited under the Articles of Incorporation.
(c)In connection with an exercise of Redemption Rights pursuant to this Section
8.5, the Tendering Party shall submit the following to the General Partner, in
addition to the Notice of Redemption:
(i)A written affidavit, dated the same date as the Notice of Redemption, (a)
disclosing the actual and constructive ownership, as determined for purposes of
Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) such Tendering Party
and (ii) any Related Party and (b) representing that, after giving effect to the
Redemption and assuming that the General Partner elects to exchange REIT Shares
for all

36

--------------------------------------------------------------------------------

Tendered Units, neither the Tendering Party nor any Related Party will own REIT
Shares in excess of the Aggregate Share Ownership Limit (or, if applicable the
Excepted Holder Limit);
(ii)A written representation that neither the Tendering Party nor any Related
Party has any intention to acquire any additional REIT Shares prior to the
closing of the Redemption on the Specified Redemption Date;
(iii)An undertaking to certify, at and as a condition to the closing of the
Redemption on the Specified Redemption Date, that either (a) the actual and
constructive ownership of REIT Shares by the Tendering Party and any Related
Party remain unchanged from that disclosed in the affidavit required by Section
8.5(c)(1) or (b) after giving effect to the Redemption, neither the Tendering
Party nor any Related Party shall own REIT Shares in violation of the Aggregate
Share Ownership Limit (or, if applicable, the Excepted Holder Limit); and
(iv)Any other documents as the General Partner may reasonably require in
connection with the issuance of REIT Shares upon the exercise of the Redemption
Right.
(v)Any Cash Amount to be paid to a Tendering Party pursuant to this Section 8.5
shall be paid on the Specified Redemption Date; provided, however, that the
General Partner may elect to cause the Specified Redemption Date to be delayed
for up to an additional 180 days to the extent required for the General Partner
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount. Notwithstanding the foregoing, the General
Partner agrees to use its best efforts to cause the closing of the acquisition
of Tendered Units hereunder to occur as quickly as reasonably possible.
(vi)Notwithstanding any other provision of this Agreement, the General Partner
shall restrict the ability of the Limited Partners to exercise their Redemption
Rights to prevent, among other things, (a) any person from owning shares in
excess of the Common Share Ownership Limit, the Aggregate Share Ownership Limit
and the Excepted Holder Limit, (b) the General Partner's common stock from being
owned by less than 100 persons, (c) the General Partner from being “closely
held” within the meaning of section 856(h) of the Code, and (d) to ensure that
the Partnership does not constitute a “publicly traded partnership” under
section 7704 of the Code. If and when the General Partner determines that
imposing such restrictions is necessary, the General Partner shall give prompt
written notice thereof (a “Restriction Notice”) to each of the Limited Partners
holding Partnership Units, which notice shall be accompanied by a copy of an
opinion of counsel to the Partnership which states that, in the opinion of such
counsel, restrictions are necessary in order to avoid having the Partnership be
treated as a “publicly traded partnership” taxable as a corporation under
section 7704 of the Code.
(vii)A redemption fee may be charged in connection with an exercise of
Redemption Rights pursuant to this Section 8.5.
8.6    Redemption of Special Limited Partnership Units.
Upon the earliest to occur of (a) the termination or nonrenewal of the Advisory
Agreement for “cause” (as defined in the Advisory Agreement), (b) a Termination
Event, or (c) the Listing, the Special Limited Partnership Units will be
redeemed.
(a)If the Advisory Agreement is terminated or not renewed by the General Partner
for “cause” (as defined in the Advisory Agreement), all of the Special Limited
Partnership Units shall be redeemed by the Partnership for $1 within thirty (30)
days after the termination or nonrenewal of the Advisory Agreement.

37

--------------------------------------------------------------------------------

(b)Upon the occurrence of a Termination Event or the Listing, the Special
Limited Partnership Units shall be redeemed for an aggregate amount equal to the
amount that would have been distributed to the Special Limited Partner under
Section 5.2(b) if all assets of the Partnership had been sold for their fair
market value and all liabilities of the Partnership had been satisfied in full
according to their terms. Such redemption shall occur no later than thirty (30)
days after the date of a Termination Event and no later than 240 days after the
Listing. In determining the fair market value of the assets of the Partnership,
(i) in connection with a Termination Event, the General Partner shall obtain an
appraisal of the assets of the Partnership (excluding any assets which may be
readily marked to market) and (ii) in connection with the Listing, the General
Partner shall make such determination (a) taking into account, in the event of a
Listing on a national securities exchange only, the market value of the General
Partner's listed shares based upon the average closing price, or average of bid
and asked prices, as the case may be, during a period of thirty (30) days during
which such shares are traded beginning one hundred and twenty (120) days after
the Listing or (b) taking into account the value of the General Partner's shares
based upon the initial public offering price in the event of an underwritten
public offering. Payment to the Special Limited Partner upon a Termination Event
or a Listing shall be paid, at the Special Limited Partner's discretion, in the
form of (a) shares of the General Partner's common stock or (b) a promissory
note bearing interest at a rate deemed fair and reasonable by a majority of the
Independent Directors. In the event the Advisor elects to receive shares of the
General Partner's common stock and the General Partner's shares are not listed
on a national securities exchange, at the option of the Advisor, the Advisor and
the General Partner shall enter into an agreement whereby the General Partner
shall register such shares of common stock with the Commission. However, any
payments under a promissory note may not be made in connection with a
Termination Event until either (a) the closing of asset sales that result in
aggregate, cumulative distributions to the Partners (other than the Special
Limited Partner) of the Partnership from operating income, sales proceeds and
other sources in an amount equal to their Capital Contributions to the
Partnership plus a 7.00% cumulative non-compounded annual pre-tax return
thereon, or (b) a Listing (each a “Subsequent Liquidity Event”). In addition,
the principal amount of the promissory note issued in connection with a
Termination Event will be subject to reduction as of the date of the Subsequent
Liquidity Event by an amount that will ensure that, in connection with the
Subsequent Liquidity Event, the Special Limited Partner does not receive in
excess of 15% of the distributions that are made or are deemed to be made by the
Partnership after the Partners (other than the Special Limited Partner) have
received or are deemed to have received aggregate, cumulative distributions
equal to their Capital Contributions to the Partnership plus a 7.00% cumulative
non-compounded annual pre-tax return thereon.
ARTICLE 9
TRANSFERS OF LIMITED PARTNERSHIP UNITS
9.1    Purchase for Investment.
(a)Each Limited Partner hereby represents and warrants to the General Partner
and to the Partnership that the acquisition of its Partnership Units is made as
a principal for its account for investment purposes only and not with a view to
the resale or distribution of such Partnership Units.
(b)Each Limited Partner agrees that he will not sell, assign or otherwise
transfer its Partnership Units or any fraction thereof, whether voluntarily or
by operation of law or at judicial sale or otherwise, to any Person who does not
make the representations and warranties to the General Partner set forth in
Section 9.1(a) above and similarly agree not to sell, assign or transfer such
Partnership Units or fraction thereof to any Person who does not similarly
represent, warrant and agree.

38

--------------------------------------------------------------------------------

9.2    Restrictions on Transfer of Limited Partnership Units.
(a)Subject to the provisions of 9.2(b) and (c), no Limited Partner may offer,
sell,assign, hypothecate, pledge or otherwise transfer all or any portion of its
Limited Partnership Units, or any of such Limited Partner's economic rights as a
Limited Partner, whether voluntarily or by operation of law or at judicial sale
or otherwise (collectively, a “Transfer”) without the consent of the General
Partner, which consent may be granted or withheld in its sole and absolute
discretion. Any such purported transfer undertaken without such consent shall be
considered to be null and void ab initio and shall not be given effect. The
General Partner may require, as a condition of any Transfer to which it
consents, that the transferor assume all costs incurred by the Partnership in
connection therewith.
(b)No Limited Partner may withdraw from the Partnership other than as a result
of a permitted transfer (i.e., a Transfer consented to as contemplated by clause
(a) above or clause (c) below or a Transfer pursuant to Section 9.5 below) of
all of its Partnership Units pursuant to this Article 9 or pursuant to a
redemption of all of its Partnership Units pursuant to Section 8.5 or pursuant
to the redemption of the Limited Partner's Special Partnership Units pursuant to
Section 8.6. Upon the permitted transfer or redemption of all of a Limited
Partner's Partnership Units, such Limited Partner shall cease to be a Limited
Partner.
(c)Notwithstanding Section 9.2(a) and subject to Sections 9.2(d), (e) and (f)
below, a Limited Partner may Transfer, without the consent of the General
Partner, all or a portion of its Partnership Units to (i) a parent or parent's
spouse, natural or adopted descendant or descendants, spouse of such descendant,
or brother or sister, or a trust created by such Limited Partner for the benefit
of such Limited Partner and/or any such person(s), of which trust such Limited
Partner or any such person(s) is a trustee, (ii) a corporation controlled by a
Person or Persons named in (i) above, or (iii) if the Limited Partner is an
entity, its beneficial owners.
(d)No Limited Partner may effect a Transfer of its Limited Partnership Units, in
whole or in part, if, in the opinion of legal counsel for the Partnership, such
proposed Transfer would require the registration of the Limited Partnership
Units under the Securities Act or would otherwise violate any applicable federal
or state securities or blue sky law (including investment suitability
standards).
(e)No Transfer by a Limited Partner of its Partnership Units, in whole or in
part, may be made to any Person if (i) in the opinion of the General Partner
based on the advice of legal counsel for the Partnership, if appropriate, the
transfer would result in the Partnership's being treated as an association
taxable as a corporation (other than a qualified REIT subsidiary within the
meaning of Section 856(i) of the Code), (ii) in the opinion of the General
Partner based on the advice of legal counsel for the Partnership, if
appropriate, it would adversely affect the ability of the General Partner to
continue to qualify as a REIT or subject the General Partner to any additional
taxes under Section 857 or Section 4981 of the Code, (iii) such transfer is
effectuated through an “established securities market” or a “secondary market
(or the substantial equivalent thereof)” within the meaning of Section 7704 of
the Code, (iv) such Transfer would cause the General Partner to own 10% or more
of the ownership interests of any tenant of a Property held by the partnership
within the meaning of Section 856(d)(2)(B) of the Code, or (v) such Transfer
would result in the General Partner being “closely held” within the meaning of
Section 856(h) of the Code.
(f)No transfer by a Limited Partner of any Partnership Units may be made to a
lender to the Partnership or any Person who is related (within the meaning of
Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
which may be withheld in its sole and absolute discretion, provided that as a
condition to such consent the lender will be required to enter into an
arrangement with the Partnership and the General Partner to exchange or redeem
any Partnership Units in which a security interest is held for cash in an amount
equal to such Partner's Capital Account allocable (in the reasonable
determination of the General Partner) to such

39

--------------------------------------------------------------------------------

exchanged or redeemed Partnership Units, simultaneously with the time at which
such lender would be deemed to be a Partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
(g)Any Transfer in contravention of any of the provisions of this Article 9
shall be void and ineffectual and shall not be binding upon, or recognized by,
the Partnership.
(h)Prior to the consummation of any Transfer under this Article 9, the
transferor
and/or the transferee shall deliver to the General Partner such opinions,
certificates and other documents as the General Partner shall request in
connection with such Transfer.
9.3    Admission of Substitute Limited Partner.
(a)Subject to the other provisions of this Article 9, an assignee of the Limited
Partnership Units of a Limited Partner (which shall be understood to include any
purchaser, transferee, donee, or other recipient of any disposition of such
Limited Partnership Units) shall be deemed admitted as a Limited Partner of the
Partnership only with the consent of the General Partner and upon the
satisfactory completion of the following:
(i)The assignee shall have accepted and agreed to be bound by the terms and
provisions of this Agreement by executing a counterpart or an amendment thereof,
including a revised Exhibit A, and such other documents or instruments as the
General Partner may require in order to effect the admission of such Person as a
Limited Partner.
(ii)To the extent required, an amended Certificate evidencing the admission of
such Person as a Limited Partner shall have been signed, acknowledged and filed
for record in accordance with the Act.
(iii)The assignee shall have delivered a letter containing the representation
set forth in Section 9.1(a) hereof and the agreement set forth in Section 9.1(b)
hereof.
(iv)If the assignee is a corporation, partnership or trust, the assignee shall
have provided the General Partner with evidence satisfactory to counsel for the
Partnership of the assignee's authority to become a Limited Partner under the
terms and provisions of this Agreement.
(v)The assignee shall have executed a power of attorney containing the terms and
provisions set forth in Section 8.2 hereof.
(vi)The assignee shall have paid all legal fees and other expenses of the
Partnership and the General Partner and filing and publication costs in
connection with its substitution as a Limited Partner.
(vii)The assignee has obtained the prior written consent of the General Partner
to its admission as a Substitute Limited Partner, which consent may be given or
denied in the exercise of the General Partner's sole and absolute discretion.
(b)For the purpose of allocating Profits and Losses and distributing cash
received by the Partnership, a Substitute Limited Partner shall be treated as
having become, and appearing in the records of the Partnership as, a Partner
upon the filing of the Certificate described in Section 9.3(a)(ii) hereof or, if
no such filing is required, the later of the date specified in the transfer
documents or the date on which the General Partner has received all necessary
instruments of transfer and substitution.

40

--------------------------------------------------------------------------------

(c)The General Partner shall cooperate with the Person seeking to become a
Substitute Limited Partner by preparing the documentation required by this
Section and making all official filings and publications. The Partnership shall
take all such action as promptly as practicable after the satisfaction of the
conditions in this Article 9 to the admission of such Person as a Limited
Partner of the Partnership.
9.4    Rights of Assignees of Partnership Units.
(a)Subject to the provisions of Sections 9.1 and 9.2 hereof, except as required
by operation of law, the Partnership shall not be obligated for any purposes
whatsoever to recognize the assignment by any Limited Partner of its Partnership
Units until the Partnership has received notice thereof.
(b)Any Person who is the assignee of all or any portion of a Limited Partner's
Limited Partnership Units, but does not become a Substitute Limited Partner and
desires to make a further assignment of such Limited Partnership Units shall be
subject to all the provisions of this Article 9 to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of its Limited
Partnership Units.
9.5    Effect of Bankruptcy, Death, Incompetence or Termination of a Limited
Partner.
The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a
Limited Partner or a final adjudication that a Limited Partner is incompetent
(which term shall include, but not be limited to, insanity) shall not cause the
termination or dissolution of the Partnership, and the business of the
Partnership shall continue if an order for relief in a bankruptcy proceeding is
entered against a Limited Partner, the trustee or receiver of his estate or, if
he dies, his executor, administrator or trustee, or, if he is finally
adjudicated incompetent, his committee, guardian or conservator, shall have the
rights of such Limited Partner for the purpose of settling or managing his
estate property and such power as the bankrupt, deceased or incompetent Limited
Partner possessed to assign all or any part of its Partnership Units and to join
with the assignee in satisfying conditions precedent to the admission of the
assignee as a Substitute Limited Partner.
9.6    Joint Ownership of Units.
A Partnership Unit may be acquired by two individuals as joint tenants with
right of survivorship, provided that such individuals either are married or are
related and share the same home as tenants in common. The written consent or
vote of both owners of any such jointly held Partnership Unit shall be required
to constitute the action of the owners of such Partnership Unit; provided,
however, that the written consent of only one joint owner will be required if
the Partnership has been provided with evidence satisfactory to the counsel for
the Partnership that the actions of a single joint owner can bind both owners
under the applicable laws of the state of residence of such joint owners. Upon
the death of one owner of a Partnership Unit held in a joint tenancy with a
right of survivorship, the Partnership Unit shall become owned solely by the
survivor as a Limited Partner and not as an assignee. The Partnership need not
recognize the death of one of the owners of a jointly-held Partnership Unit
until it shall have received notice of such death. Upon notice to the General
Partner from either owner, the General Partner shall cause the Partnership Unit
to be divided into two equal Partnership Units, which shall thereafter be owned
separately by each of the former owners.

41

--------------------------------------------------------------------------------

ARTICLE 10
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.1    Books and Records.
At all times during the continuance of the Partnership, the Partners shall keep
or cause to be kept at the Partnership's specified office true and complete
books of account in accordance with generally accepted accounting principles,
including: (a) a current list of the full name and last known business address
of each Partner, (b) a copy of the Certificate of Limited Partnership and all
Certificates of amendment thereto, (c) copies of the Partnership's federal,
state and local income tax returns and reports, (d) copies of this Agreement and
amendments thereto and any financial statements of the Partnership for the three
most recent years and (e) all documents and information required under the Act.
Any Partner or its duly authorized representative, upon paying the costs of
collection, duplication and mailing, shall be entitled to inspect or copy such
records during ordinary business hours.
10.2    Custody of Partnership Funds; Bank Accounts.
(a)All funds of the Partnership not otherwise invested shall be deposited in one
or more accounts maintained in such banking or brokerage institutions as the
General Partner shall determine, and withdrawals shall be made only on such
signature or signatures as the General Partner may, from time to time,
determine.
(b)All deposits and other funds not needed in the operation of the business of
the Partnership may be invested by the General Partner in investment grade
instruments (or investment companies whose portfolio consists primarily
thereof), government obligations, certificates of deposit, bankers' acceptances
and municipal notes and bonds. The funds of the Partnership shall not be
commingled with the funds of any other Person except for such commingling as may
necessarily result from an investment in those investment companies permitted by
this Section 10.2(b).
10.3    Fiscal and Taxable Year.
The fiscal and taxable year of the Partnership shall be the calendar year.
10.4    Annual Tax Information and Report.
Within seventy-five (75) days after the end of each fiscal year of the
Partnership, the General Partner shall furnish to each person who was a Limited
Partner at any time during such year the tax information necessary to file such
Limited Partner's individual tax returns as shall be reasonably required by law.

42

--------------------------------------------------------------------------------

10.5    Tax Matters Partner; Tax Elections; Special Basis Adjustments.
(a)The General Partner shall be the Tax Matters Partner of the Partnership
within the meaning of Section 6231(a)(7) of the Code. As Tax Matters Partner,
the General Partner shall have the right and obligation to take all actions
authorized and required, respectively, by the Code for the Tax Matters Partner.
The General Partner shall have the right to retain professional assistance in
respect of any audit of the Partnership by the Service and all out-of-pocket
expenses and fees incurred by the General Partner on behalf of the Partnership
as Tax Matters Partner shall constitute Partnership expenses. In the event the
General Partner receives notice of a final Partnership adjustment under Section
6223(a)(2) of the Code, the General Partner shall either (i) file a court
petition for judicial review of such final adjustment within the period provided
under Section 6226(a) of the Code, a copy of which petition shall be mailed to
all Limited Partners on the date such petition is filed, or (ii) mail a written
notice to all Limited Partners, within such period, that describes the General
Partner's reasons for determining not to file such a petition.
(b)All elections required or permitted to be made by the Partnership under the
Code or any applicable state or local tax law shall be made by the General
Partner in its sole and absolute discretion.
(c)In the event of a transfer of all or any part of the Partnership Units of any
Partner, the Partnership, at the option of the General Partner, may elect
pursuant to Section 754 of the Code to adjust the basis of the Partnership's
assets. Each Partner will furnish the Partnership with all information necessary
to give effect to such election.
(d)By executing this Agreement, each Partner authorizes and directs the
Partnership to elect to have the “Safe Harbor” described in the proposed Revenue
Procedure set forth in Internal revenue Service Notice 2005-43 (the “Notice”)
apply to any interest in the Partnership transferred to a service provider by
the Partnership on or after the effective date of such Revenue Procedure in
connection with services provided to the Partnership. For purposes of making
such Safe harbor election, the General Partner is hereby designated as the
“partner who has responsibility for federal income tax reporting” by the
Partnership and, accordingly, execution of such Safe Harbor election by the
General Partner constitutes execution of a “Safe Harbor Election” in accordance
with Section 3.03(1) of the Notice. The partnership and each Partner hereby
agrees to comply with all requirements of the Safe Harbor described in the
Notice, including the requirement that each Partner shall prepare and file all
U.S. federal income tax returns reporting the income tax effects of each Safe
Harbor Partnership Unit issued by the Partnership in a manner consistent with
the requirements of the Notice. A Partner's obligations to comply with the
requirements of this Section 10.5(d) shall survive such Partner's ceasing to be
a Partner of the Partnership and/or the termination, dissolution, liquidation
and winding up of the Partnership, and, for purposes of this Section 10.5(d),
the Partnership shall be treated as continuing in existence. Each partner
authorizes the General Partner to amend this Section 10.5(d) to the extent
necessary to achieve substantially the same tax treatment with respect to any
interest in the Partnership transferred to a service provider by the Partnership
in connection with services provided to the Partnership as set forth in Section
4 of the Notice (e.g., to reflect changes from the rules set forth in the Notice
in subsequent Internal Revenue Service guidance); provided that such amendment
is not materially adverse to such Partner (as compared with the after-tax
consequences that would result if the provisions of the Notice applied to all
interests in the Partnership transferred to a service provider by the
Partnership in connection with services provided to the Partnership). Each
Limited Partner further agrees to execute any forms or documents reasonably
necessary to effectuate any of the foregoing provisions of this Section 10.5(d).

43

--------------------------------------------------------------------------------

10.6    Reports to Limited Partners.
(a)As soon as practicable after the close of each fiscal year, the General
Partner shall cause to be mailed to each Limited Partner an annual report
containing financial statements of the Partnership, or of the General Partner if
such statements are prepared solely on a consolidated basis with the General
Partner, for such fiscal year, presented in accordance with generally accepted
accounting principles. The annual financial statements shall be audited by
accountants selected by the General Partner.
(b)Any Partner shall further have the right to a private audit of the books and
records of the Partnership at the expense of such Partner, provided such audit
is made for Partnership purposes and is made during normal business hours.
ARTICLE 11
AMENDMENT OF AGREEMENT
The General Partner's consent shall be required for any amendment to this
Agreement. The General Partner, without the consent of the Limited Partners, may
amend this Agreement in any respect; provided, however, that the following
amendments shall require the consent of Limited Partners holding more than 50%
of the Percentage Interests of the Limited Partners:
(a)any amendment affecting the operation of the redemption right or conversion
right set forth in Section 8.5 in a manner adverse to the Limited Partners;
(b)any amendment that would adversely affect the rights of the Limited Partners
to receive the distributions payable to them hereunder, other than with respect
to the issuance of additional Partnership Units pursuant to Section 4.2 hereof;
(c)any amendment that would alter the Partnership's allocations of Profit and
Loss to the Limited Partners, other than with respect to the issuance of
additional Partnership Units pursuant to Section 4.2 hereof; or
(d)any amendment that would impose on the Limited Partners any obligation to
make additional Capital Contributions to the Partnership.

ARTICLE 12
GENERAL PROVISIONS
12.1    Notices.
All communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or upon
deposit in the United States mail, registered, postage prepaid return receipt
requested, to the Partners at the addresses set forth in Exhibit A attached
hereto; provided, however, that any Partner may specify a different address by
notifying the General Partner in writing of such different address. Notices to
the Partnership shall be delivered at or mailed to its specified office.
12.2    Survival of Rights.

44

--------------------------------------------------------------------------------

Subject to the provisions hereof limiting transfers, this Agreement shall be
binding upon and inure to the benefit of the Partners and the Partnership and
their respective legal representatives, successors, transferees and assigns.
12.3    Additional Documents.
Each Partner agrees to perform all further acts and execute, swear to,
acknowledge and deliver all further documents which may be reasonable,
necessary, appropriate or desirable to carry out the provisions of this
Agreement.
12.4    Severability.
If any provision of this Agreement shall be declared illegal, invalid, or
unenforceable in any jurisdiction, then such provision shall be deemed to be
severable from this Agreement (to the extent permitted by law) and in any event
such illegality, invalidity or unenforceability shall not affect the remainder
hereof.
12.5    Entire Agreement.
This Agreement and exhibits attached hereto constitute the entire Agreement of
the Partners and supersede all prior written agreements and prior and
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
12.6    Pronouns and Plurals.
When the context in which words are used in the Agreement indicates that such is
the intent, words in the singular number shall include the plural and the
masculine gender shall include the neuter or female gender as the context may
require.
12.7    Headings.
The Article headings or sections in this Agreement are for convenience only and
shall not be used in construing the scope of this Agreement or any particular
Article.
12.8    Counterparts.
This Agreement may be executed in several counterparts, each of which shall be
deemed to be an original copy and all of which together shall constitute one and
the same instrument binding on all parties hereto, notwithstanding that all
parties shall not have signed the same counterpart.
12.9    Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Delaware; provided, however, that any cause of action for violation
of federal or state securities laws shall not be governed by this Section 12.9.

[Remainder of Page intentionally Left blank]

45

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures
to this Amended and Restated Agreement of Limited Partnership Agreement, all as
of the 16th day of October, 2015.
GENERAL PARTNER:
NorthStar Real Estate Income II, Inc.

By: ____/s/ Jenny B. Neslin_
Name: Jenny B. Neslin
Title: General Counsel and Secretary
    
LIMITED PARTNER:
NorthStar Real Estate Income Advisor II, LLC

By: ____/s/ Jenny B. Neslin______
Name: Jenny B. Neslin
Title: Associate General Counsel and Assistant Secretary
               
SPECIAL LIMITED PARTNER

NorthStar OP Holdings II, LLC

By: ____/s/ Jenny B. Neslin______
Name: Jenny B. Neslin
Title: Associate General Counsel and Assistant Secretary

 

46

--------------------------------------------------------------------------------

EXHIBIT A
CONTRIBUTIONS & INTERESTS
As of June 30, 2015

Partner
Address
 
Cash
Contribution
Common Units
 
Special
Partnership
Units

Special
Percentage Interest
Class A
 
Class T
Percentage Interest

GENERAL PARTNER:
 
 
 
 
 
 
 
NorthStar Real Estate Income II, Inc.
399 Park Avenue, 18th Floor
New York, New York 10022
$
200,007

22,223

 
--
0.03
%
--

--
 
 
 
 
 
 
 
 
LIMITED PARTNERS:
 
 
 
 
 
 
 
NorthStar Real Estate Income II, Inc
399 Park Avenue, 18th Floor
New York, New York 10022
$
587,824,929

65,313,881

 
--
99.97
%
--

--
 
 
 
 
 
 
 
 
 
 
NorthStar Real Estate Income Advisor II, LLC
399 Park Avenue, 18th Floor
New York, New York 10022
$
1,000

100

 
--
<0.001%

--

--
 
 
 
 
 
 
 
 
NorthStar OP Holdings II, LLC
(Special Limited Partner)
399 Park Avenue, 18th Floor New York, New York 10022
$
1,000

--

 
--
<0.001%

100

100%
 
 
 
 
 
 
 
 
Totals
 
$
588,026,936

65,336,204

 
--
 
100

100%

-A-1

--------------------------------------------------------------------------------

EXHIBIT B
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section 8.5 of the Limited Partnership Agreement (the
“Agreement”) of NorthStar Real Estate Income Operating Partnership II, LP, the
undersigned hereby irrevocably (i) presents for redemption Limited Partnership
Units in NorthStar Real Estate Income Operating Partnership II, LP in accordance
with the terms of the Agreement and the Redemption Right referred to in Section
8.5 thereof, (ii) surrenders such Limited Partnership Units and all right, title
and interest therein, and (iii) directs that the Cash Amount or REIT Shares
Amount (as defined in the Agreement) as determined by the General Partner
deliverable upon exercise of the Redemption Right be delivered to the address
specified below, and if REIT Shares (as defined in the Agreement) are to be
delivered, such REIT Shares be registered or placed in the name(s) and at the
address(es) specified below.
Dated:
(Name of Limited Partner)
(Signature of Limited Partner)
(Mailing Address)
(City)    (State)    (Zip Code)
Signature Guaranteed by:
If REIT Shares are to be issued, issue to:
Name:
Social Security or Tax I.D. Number:    

-B-1

--------------------------------------------------------------------------------

EXHIBIT C
NOTICE OF ELECTION BY PARTNER TO CONVERT LTIP UNITS INTO LIMITED
PARTNERSHIP UNITS
The undersigned LTIP Holder hereby irrevocably (i) elects to convert the number
of LTIP Units in NorthStar Real Estate Income Operating Partnership II, LP (the
“Partnership”) set forth below into Limited Partnership Units in accordance with
the terms of the Agreement of Limited Partnership of the Partnership, as
amended; and (ii) directs that any cash in lieu of Limited Partnership Units
that may be deliverable upon such conversion be delivered to the address
specified below.
The undersigned hereby represents, warrants, and certifies that the undersigned
(a) has title to such LTIP Units, free and clear of the rights or interests of
any other person or entity other than the Partnership; (b) has the full right,
power, and authority to cause the conversion of such LTIP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, having the right to consent or approve such conversion.
Name of Holder:
(Please Print: Exact Name as Registered with Partnership) Number of LTIP Units
to be Converted:
Date of this Notice:
(Signature of Holder: Sign Exact Name as Registered with Partnership)
(Street Address)
(City)    (State)    (Zip Code)
Signature Guaranteed by:

-C-1

--------------------------------------------------------------------------------

EXHIBIT D
NOTICE OF ELECTION BY PARTNERSHIP TO FORCE CONVERSION OF LTIP UNITS INTO
LIMITED PARTNERSHIP UNITS
NorthStar Real Estate Income Operating Partnership II, LP (the “Partnership”)
hereby irrevocably elects to cause the number of LTIP Units held by the LTIP
Holder set forth below to be converted into Limited Partnership Units in
accordance with the terms of the Agreement of Limited Partnership of the
Partnership, as amended.
Name of Holder:
(Please Print: Exact Name as Registered with Partnership) Number of LTIP Units
to be Converted:
Date of this Notice:

-D-1