ex109.htm


    Exhibit 10.9

    
 


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      PROPERTY MANAGEMENT
AGREEMENT

    

    
      


       

      This
Property Management Agreement is made and entered into as of this 3rd day
of December, 2009, by and between BR SPRINGHOUSE, LLC, a
Delaware limited liability company, having an office at c/o Bluerock Real
Estate, L.L.C., 680 Fifth Avenue, 16th
Floor, New York, NY 10019 (the “Owner”) and HAWTHORNE RESIDENTIAL PARTNERS, LLC,
a North Carolina limited liability company, having an office at 200
Providence Road, Suite 105, Charlotte, NC 28207 (the "Manager").

    

    
      


       

      RECITALS:

    

    
      


       

      A.           Owner
is the owner of the Property, which is commonly known as Springhouse at
Newport Apartments
having 432
units and located at 100 Springhouse Way, Newport News, Virginia
23602.

    

    
      


       

      B.           Owner
desires to engage Manager as an independent contractor to rent, lease,
operate
and manage the Property on the terms and conditions set forth below and Manager
desires
to accept such engagement.

    

    
      


       

      NOW,
THEREFORE, in consideration of the premises, mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Owner and Manager agree as
follows:

    

    
      


       

      1

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


      
 

      
         

        Part I: BASIC
DATA

         

        The
following defined terms shall have the meaning set forth below:

        
          	 
      	 
      
	
                  “Property
      Name”

                	
                  Springhouse
      at Newport Apartments

                
	 
      	 
      
	
                  “Number
      of Units”

                	
                  432

                
	 
      	 
      
	
                  “Commencement
      Date”

                	
                  12/3/09

                
	 
      	 
      
	
                  “Initial
      Term”

                	
                  24
      months [per Sec. 6.1]

                
	 
      	 
      
	
                  “Budget
      Due Date”

                	
                  30
      days prior to start of Fiscal Year

                
	 
      	 
      
	
                  “Management
      Fee Percentage’

                	
                  4.00%

                
	 
      	 
      
	
                  “Incentive
      Management Fee”

                	
                  N/A

                
	 
      	 
      
	
                  “New
      Construction Fee”

                	
                  5%
      for Capital Projects in excess of $10,000

                
	 
      	 
      
	
                  “Capital
      Event Fee”

                	
                  N/A

                
	 
      	 
      
	
                  “Payroll
      Handling Fee”

                	
                  $12-see
      5.5

                
	 
      	 
      


        

         

        
          	
                  “Renovation/Capital
      Projects/Insurance Restoration Fee”

                	
                  N/
      A

                
	
                  ‘Lender”

                   

                	
                  CWCapital/Freddie
      Mac

                
	
                  Manager’s
      Notice Address”

                	 
      
	
                  Hawthorne
      Residential Partners, LLC

                	 
      
	
                  200
      Providence Road

                	 
      
	
                  Charlotte,
      NC 2820

                	 
      
	
                   

                  “Owner’s
      Notice Address”

                	 
      
	
                  c/o
      Bluerock Real Estate, L.L.C.

                	 
      
	
                  680
      Fifth Ave-16th
      Floor

                	 
      
	
                  New
      York, NY 10019

                	 
      


        


        
           

        



    

    
      


       

      2

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      Part
II - STANDARD TERMS

    

    
      


       

      1.
Appointment and General Provisions

    

    
      


       

      1.1           Management
Duties and Authority

    

    
      


       

      Subject
to the provisions of this Agreement and at the direction of Owner, Manager shall
manage, administer the operations of, and lease the Property on behalf of Owner
in a manner consistent with the standard of maintenance generally applied from
time to time during the Term to other similarly-situated residential apartment
properties of similar age, class, and appearance ("Comparable Properties"), in
good order and repair, and in a manner consistent with the Budget and the
Financing Documents and in a manner intended to maximize the cash flow from the
Property, subject to and within the Budgets approved by Owner as provided
herein. Subject to the provisions hereof, and subject to the approved Budgets,
Manager shall provide all services reasonably necessary, proper, desirable and
appropriate for the successful management and operation of the Property,
including, but not limited to the duties and services specified in this
Agreement.

    

    
      


       

      1.2           Independent
Contractor

    

    
      


       

      Except as
otherwise herein provided (including, by way of illustration, Manager's
execution of Contracts pursuant to Section 2.4(C)), Manager's relationship to
Owner hereunder is that of an independent contractor, and neither Manager nor
Owner shall represent to any other person that Manager's relationship to Owner
hereunder is other than that of an independent contractor. All persons employed
by Manager or any Affiliates of Manager in connection with the operation and
maintenance of the Property shall be employees solely of Manager or its
Affiliates and not of Owner and all arrangements with such employees are solely
the concern of Manager. For purposes hereof, "Affiliate" shall mean as to
any person any other person that directly or indirectly controls, is controlled
by, or is under common control with such first person. For the purposes of this
Agreement, a person shall be deemed to control another person if such person
possesses, directly or indirectly, the power to direct or cause the direction of
the management, policies and/or decision making of such other person, whether
through the ownership of voting securities, by contract or
otherwise.

    

    
      


       

      1.3           Indemnification.

    

    
      


       

      
        	
                       (A)   

              	
                Manager
      shall indemnify, defend and hold harmless Owner, and its direct and
      indirect, members, partners, directors, officers, managers, employees,
      agents and Affiliates (each, an “Owner Indemnified Party”)
      from and against any and all claims, actions, suits, proceedings,
      losses, damages, liabilities, costs and expenses, including reasonable
      attorneys' fees and disbursements (“Damages”) (including
      Damages relating to violations of Legal Requirements), arising out or
      resulting from the acts or omissions of Manager and its Affiliates,
      directors, officers, employees, contractors, subcontractors and agents,
      which constitute gross negligence, fraud, malfeasance, breach of fiduciary
      duty, willful, reckless or criminal misconduct, a breach of this
      Agreement, or any actions of Manager (or its Affiliates) beyond the scope
      of the authority conferred upon
Manager

              


      

    

    
      


       

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      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

         

    

    
      


      
        	
                           

              	
                hereunder.
      Manager shall have the right to defend, and shall defend, at its expense
      and by counsel of its own choosing (subject to Owner's approval of such
      counsel, not to be unreasonably withheld, conditioned or delayed), against
      any claim or liability to which the indemnity agreement set forth in this
      Section 1.3(A) would apply. Notwithstanding the foregoing, if (i) Manager
      has failed or refused to diligently defend the action, or has failed or
      refuses to indemnify and hold harmless Owner and any Owner Indemnified
      Party after written notice to Manager, (ii) an Event of Default exists on
      the part of Manager, (iii) Owner or any Owner Indemnified Party to be
      defended hereunder reasonably determines that a conflict of interest
      exists, or (iv) Owner reasonably determines that Manager is insufficiently
      liquid or creditworthy to adequately defend or pay the amount of any
      Damages when due, Owner (or such Owner Indemnified Party) may, in its sole
      and absolute discretion, engage its own attorney and other professionals
      to defend or assist it with respect to such matters, and, at the option of
      Owner (or such Owner Indemnified Party), its attorney shall control the
      resolution of such matters. Manager shall not have the authority to settle
      any claim or liability that is the subject of the indemnification
      agreement provided for in this Section 1.3(A) without first obtaining
      Owner's prior written consent, such consent not to be unreasonably
      withheld. Manager or Owner, as applicable, shall regularly apprise the
      other of the status of all
proceedings.

              


      

       

      
        	
                      (B)    

              	
                Owner
      shall indemnify, defend (through attorneys selected by Owner) and hold
      harmless Manager and its partners, members, stockholders, managers,
      directors, officers, employees and agents (each a “Manager Indemnified Party”)
      from and against any and all Damages arising out of or resulting
      from the acts or omissions of Owner and its directors, officers,
      employees, contractors, subcontractors and agents, which constitute fraud,
      malfeasance, breach of fiduciary duty, willful, reckless or criminal
      misconduct, or a breach of this Agreement. Owner shall have the right to
      defend, and shall defend, at its expense and by counsel of its own
      choosing against any claim or liability to which the indemnity agreement
      set forth in this Section 1.3(B) would apply. Any settlement of any such
      claim or liability by Owner shall be subject to the reasonable approval of
      Manager. Notwithstanding the foregoing, if (i) Owner has failed or refused
      to diligently defend the action, or has failed or refused to indemnify and
      hold harmless Manager and any Manager Indemnified Party after written
      notice to Owner, (ii) an Event of Default exists on the part of Owner,
      (iii) Manager or any Manager Indemnified Party to be defended hereunder
      reasonably determines that a conflict of interest exists, or (iv) Manager
      reasonably determines that Owner is insufficiently liquid or creditworthy
      to adequately defend or pay the amount of any Damages when due, then
      Manager (or such Manager Indemnified Party) may, with the prior, written
      consent of Owner with such consent not to be unreasonably withheld, engage
      its own attorney and other professionals to defend or assist it with
      respect to such matters. Owner or Manager, as applicable, shall regularly
      apprise the other of the status of all such legal
    proceedings.

              


      

    

    
      


             (C)   The
provisions of this Section 1.3 shall survive the expiration or termination of
this Agreement.

    

    
      


       

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      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      2.            Management
Duties and Authority

    

    
      


       

         
 2.1          Property Management Generally

    

    
      


       

      
        	
                     

              	(A) 	
                Manager
      shall, at the expense of Owner, manage, operate and care for the Property
      in a manner consistent with the standard of maintenance and repair of
      Comparable Properties, in accordance with the approved Budgets and the
      terms of any Financing Documents, to the extent that Owner has
      communicated such terms in writing to Manager, and do all things
      necessary, desirable or appropriate therefore or customarily performed by
      managing agents of Comparable Properties. Without limiting the generality
      of the foregoing, Manager shall (subject to any applicable law, covenant
      or restriction):

              


      

    

    
      


       

      
        	
                 

              	(i)	
                advertise
      the Property, displaying signs thereon, and rent the Property including
      the authority to negotiate, execute, extend, and renew leases in the
      Owner's name;

              


      

    

    
      


      
        	
                 

              	(ii) 	
                implement
      approved Budgets;

              


      

       

      
        	
                 

              	(iii) 	
                make
      and renew all contracts (“Contracts”) for water,
      sanitary and storm sewer, drainage, electricity, steam, gas, telephone,
      fuel, cleaning, garbage removal,
      pest control and other utilities and all other services necessary or
      appropriate  for
      the management  and  operation  of the
      Property in accordance
      with the Budgets unless otherwise provided
  herein;

              


      

        

    

    
      
        	
                 

              	(iv)	
                purchase
      all supplies and equipment necessary or appropriate for the management and
      operation of the Property in accordance with the Budgets unless otherwise
      provided herein;

              


      

    

    
       

      
        	
                 

              	(v)	
                if
      appropriate, or directed to do so by Owner, contract a qualified, local
      real estate property tax consultant of the Manager's choice to monitor the
      real estate tax assessments of the Property and the reasonableness thereof
      in comparison with the assessments of Comparable Properties; consult with,
      and make recommendations to, Owner concerning the real estate tax
      assessments of the Property and, at the expense of Owner, authorize the
      designated real estate tax consultant to take such action with respect
      thereto as Owner may direct;

              


      

    

    
      


       

      
        	
                 

              	(vi)	
                make
      or cause to be made all ordinary and extraordinary repairs, decorations
      and alterations of the Property at Owner's expense, subject to the limits
      of the Budgets as set forth in Section
2.6(F).

              


      

    

    
      


       

      2.2           Management
Employees

    

    
      


       

      
        	
                     (A)

              	
                Manager
      shall employ capable personnel for the proper on-site maintenance and
      operation of the Property in accordance with the terms of this Agreement.
      Such on-site personnel shall be employees of Manager and all matters
      pertaining to

              


      

    

    
      


       

    

    


    
      
        
           


            5

          

        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

    

    
      
        	
                 

              	
                
                  such   personnel,   including   their   employment,   supervision,   compensation,
      promotion and discharge, shall be the responsibility of
      Manager.

                

              




       

      
        	
                             (B)  

              	
                Manager
      shall be reimbursed for all of the gross salary or wages, including,
      without limitation, reasonable bonuses, reasonable vacation pay, payroll
      taxes, insurance, worker's compensation, and Manager's standard sick pay,
      and other reasonable benefits and payroll burdens of Manager's employees
      required to properly, adequately, safely and economically manage, operate
      and maintain the Property but excluding any of Manager's management,
      account and office personnel who supervise and direct Manager's on-site
      employees. The number of the on-site employees and amounts of their
      compensation may be adjusted annually, as may be reflected in the Budget
      approved by Owner. Manager is hereby authorized to reimburse itself the
      payroll expense as defined in this Section 2.2(B) from the Operating
      Account no more than three (3) business days prior to each actual payroll
      date.

              


      

    

    
      


       

      
        	
                            (C)  

              	
                Manager
      shall fully comply with all Legal Requirements relating to worker's
      compensation, social security, unemployment insurance, wages, hours,
      working conditions and other matters pertaining to Manager's personnel.
      Manager shall indemnify, defend and hold harmless Owner and any Owner
      Indemnified Party from and against any and all Damages relating to
      Manager's failure to comply with this Section 2.2(C), and Manager's
      obligations to indemnify, defend and hold harmless under this Section
      2.2(C) shall survive the termination or expiration of this
      Agreement.

              


      

    

    
      


       

      
        	
              	
                (D)  

              	
                Manager
      shall be solely responsible for its personnel in the event of the
      termination of this
Agreement.

              


      

    

    
      


       

      2.3           Rent
Collection and Services with Respect to Leases

    

    
      


       

      
        	
                 (A)  

              	
                Manager
      shall perform any duties and exercise any rights conferred upon the Owner,
      as landlord, under all leases covering the
  Property.

              


      

    

    
      


       

      
        	
                 
      (B)  

              	
                Manager
      shall use commercially reasonable efforts to collect all rentals and other
      charges and amounts due or to become due under all leases covering the
      Property (“Leases”).

              


      

    

    
      


       

      
        	
                                     
      (C)  

              	
                Manager
      may institute judicial actions and proceedings as may be reasonably
      necessary to recover rents and other sums due the Owner from the
      Property's tenants (“Tenants”) or to evict
      tenants and regain possession, including the authority, in the Manager's
      reasonable discretion, to settle, compromise and release any and all such
      judicial actions and
proceedings.

              


      

    

    
      


       

      2.4           Services
with Respect to Contracts

    

    
      


       

      
        	
                      (A)

              	
                Manager
      shall, at the expense of the Owner, make contracts for terms no longer
      than (1) year for advertising, electric, gas, oil, water, telephone,
      rubbish hauling,

              


      

    

    
      


       

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      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

    

    
      
        	
                 

              	
                
                  vermin
      extermination, janitorial services, landscaping maintenance and other
      maintenance services for the Property as Manager shall reasonably
      determine to be advisable, unless otherwise provided herein. These
      obligations are cumulative with respect to any such similar obligations
      set forth in Section 2.1(A)(iii) above and any contracts pursuant to this
      Section 2.4(A) shall be included in the defined term “Contracts” as used
      herein.

                

              




       

      
        	
                       (B)  

              	
                Unless
      otherwise provided herein, Manager shall, at the expense of Owner, in
      accordance with the approved Budgets, duly and punctually pay and perform
      on behalf of Owner all of Owner's obligations under the Contracts and use
      its good faith efforts to enforce, preserve and keep unimpaired the rights
      of Owner and the obligations of other parties under the
      Contracts.

              


      

    

    
      


       

      
        	
                       (C)  

              	
                All
      Contracts and purchases made hereunder at the expense of Owner (whether or
      not specifically requiring the approval of Owner pursuant hereto) shall be
      made in the name of the Property and shall be executed by Manager solely
      as Owner's agent, and Property shall retain title to all such property so
      purchased on behalf of and at the expense of Owner. Manager shall use
      commercially reasonable efforts to ensure that all Contracts made
      hereunder contain a provision satisfactory to Owner limiting the liability
      of Owner thereunder to the Property substantially similar to the
      following:

              


      

    

    
      


      
        	
                 

              	
                "Notwithstanding
      any provision to the contrary herein, [Contractor/Vendor] shall look
      solely to the estate and property of Owner in and to the Property in the
      event of any claim against Owner arising out of or in connection with this
      Agreement or the relationship of Owner and [Contractor/Vendor].
      [Contractor/Vendor] further agrees that the liability of Owner arising out
      of or in connection with this Agreement, and the relationship of Owner and
      [Contractor/Vendor], shall be limited to such estate and property of Owner
      in and to the Property. No properties or assets of Owner other than the
      estate and property of Owner in and to the Property and no property owned
      by any partner or member of Owner shall be subject to judgment, levy,
      execution or other judicial enforcement or collection procedures arising
      out of or in connection with this Agreement or any other business
      relationship of Owner and
[Contractor/Vendor]."

              


      

       

    

    
      


       

      
        	
                              
      (D)

              	
                All
      Contracts made with any Affiliate of Manager must be approved by Owner in
      writing,
      such approval not to be unreasonably withheld, conditioned or delayed,
      provided
      that it shall be deemed reasonable for Owner to withhold its approval to
      any
      proposed Affiliate Contract if such Contract shall not be at competitive
      market
      terms and rates and the amount charged thereunder is more than would be
      charged
      by an independent third
      party.

              


      

       

      
      

    

    
      
        	
                              
      (E)

              	
                Subject
      to1
      the provisions hereof, Manager may elect to have the routine maintenance,
      repair, cleaning, landscaping and other services with respect to the Property
      performed by employees of Manager and the reasonable costs of performing
      such services shall be at the expense of Owner; provided, however,
      in

              


      

       

      
      

    

    


    
      
        
           


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      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      any
event, such costs shall not exceed the costs that would have been incurred by
Owner had such services been provided by unrelated third parties, and shall be
incurred in accordance with the approved Budget.

    

    
      


       

      2.5      Services
with Respect to Legal Requirements and Insurance Requirements

    

    
      


       

      
        	
                      (A)  

              	
                Each
      of Manager and Owner shall promptly notify the other upon receiving any
      notice with respect to any Legal Requirement or Insurance Requirement (as
      defined below) (and furnish a copy of the notice received by it with its
      notice to the other party) or upon learning of any default, event of
      default or condition which, with the giving of notice or the passage of
      time, or both, might constitute a default or event of default by Owner
      under any Legal Requirement or Insurance Requirement. In the event of any
      such notice, condition, default or event of default, Manager shall consult
      with Owner concerning the action to be taken with respect thereto and, at
      the expense of Owner, shall take such action with respect thereto as Owner
      shall reasonably direct. As used herein, “Legal Requirements”
      shall mean, with respect to the Property, all federal, state, county,
      municipal and other governmental statutes, laws, rules, orders,
      regulations, ordinances, judgments, decrees and injunctions of
      governmental authorities affecting the Property or any part thereof, or
      the construction, use, alteration or operation thereof, or any part
      thereof, whether now or hereafter enacted and in force, and all permits,
      licenses and authorizations and regulations relating thereto, and all
      covenants, agreements, restrictions and encumbrances contained in any
      instruments, either of record or known to Borrower, at any time in force
      affecting the Property or any part thereof, including, without limitation,
      any which may (a) require repairs, modifications or alterations in or to
      the Property or any part thereof, or (b) in any way limit the use and
      enjoyment thereof.

              


      

    

    
      


       

      
        	
                              
      (B)  

              	
                As
      long as the failure to promptly comply with any notice concerning any
      Legal Requirement or Insurance Requirement shall not subject Manager to
      any liability, Owner may stay Manager's remedial action with respect to
      such notice by instituting, or directing Manager to institute, appropriate
      legal or other proceedings to contest such notice, all at Owner's sole
      expense. In the event Owner directs Manager to institute such proceedings
      to contest such notice, Manager is hereby authorized to prepare, execute
      and file all applications and other documents required for such
      proceedings on Owner's behalf and in Owner's name. Manager shall promptly
      furnish to Owner copies of all such applications and other documents
      prepared, executed or filed by
Manager.

              


      

    

    
      


       

      
        	
                       (C)  

              	
                Manager
      may appear in or commence legal or other proceedings on behalf of Owner in
      Owner's name only upon the direction of Owner, it being understood that
      Owner will pay any costs and fees, including, without limitation,
      attorneys' fees, in connection therewith. However, Manager may appear in
      or commence legal or other proceedings relative to the performance by
      Manager of its duties and obligations hereunder, on its own behalf and at
      its own expense at any time without the direction of Owner, provided that
      the same shall result in no cost or liability to Owner. Manager shall
      promptly notify Owner if it appears in any
such

              


      

    

    
      


       

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      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


             proceedings on its
own behalf and promptly furnish copies of any documents it files in connection
with any such proceedings.

    

    
      
 

      2.6      Records
and Reports

    

    
      


       

      
        	
                       
      (A)  

              	
                Software and Chart of
      Accounts. Manager will prepare rent rolls and monthly operating
      statements for the Property using Manager's selected property management
      and accounting software using the Manager's Chart of
    Accounts.

              


      

    

    
      


       

      
        	
                        
      (B)  

              	
                Monthly Close
      Out. Monthly financial statements for the Property shall be closed
      or "cut-off on the 24th
      of each month. In the event, the 24th
      falls on a weekend, the Property shall close on the Friday prior to the
      24th.

              


      

    

    
      


       

      
        	
                      (C)  

              	
                Distribution of Cash
      Flows. Manager shall remit to Owner the net cash flow generated
      from operating and investing and financing activities for the previous
      month as specified in Exhibit B in
      accordance with wire transfer instructions provided by
    Owner.

              


      

    

    
      


       

      
        	
                       
      (D) 

              	
                Budgets. Not
      later than thirty (30) days from the date hereof and not later than sixty
      (60) days prior to the beginning of each fiscal year (same to be
      determined by Owner), Manager shall submit to Owner for its approval a
      proposed annual budget (each a “Budget” and
      collectively, “Budgets”) for the
      Property for the ensuing Fiscal Year setting forth on a monthly basis
      Manager's good faith estimates of gross revenues, Operating Expenses and
      Debt Service for
      the Property for such Fiscal Year, and the recommended Capital
      Expenditures and extraordinary expenses for such Fiscal Year, in all
      instances described in reasonable detail or with such additional detail as
      Owner may reasonably request.

              


      

    

    
      


       

      
        	
                        
      (E)

              	
                Budget
      Approval. Owner shall approve, disapprove or comment on the
      proposed annual
      and revised Budgets within thirty (30) days after Owner's receipt of such
      Budget.
      Owner may approve, disapprove or modify any Budget in whole or in part.
      Until such Budget has been approved, Manager shall work diligently to
      address
      and resolve Owner's reasonable objectives, until the Budget is fully approved
      by
Owner.

              


      

       

    

    
       

      
        	
                        
      (F)

              	
                Operation Within
      Budget. Manager shall use, manage and operate the Property strictly
      in accordance with the then current approved Budget, provided that, without
      Owner's prior approval, Manager may (i) exceed any pre-approved category
      or line item of the approved Budget for a Fiscal Year by up to $10,000;
      (ii)
      incur expenses in excess of the approved Budget in the event of an
      emergency requiring
      immediate action to" avoid - Imminent personal injury or imminent material
      property damage, provided that Manager notifies Owner as to such emergency,
      the actions taken to address it and the costs of such emergency promptly
      after the occurrence of the same; (iii) incur expenses to comply with
      Legal
      Requirements; and (iv) incur expenses necessary to satisfy Tenant's right
      of quiet
      enjoyment pursuant to a Lease. If a Budget is disapproved by Owner in
      whole
      or in part, or not approved prior to the commencement of the
      ensuing

              


      

       

    

    
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      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


      
         

      

    

    
       

      
        	 
      

                 

              	
                Fiscal
      Year, Manager shall continue to manage and operate the Property pursuant
      to the prior Fiscal Year's approved Budget or the previously approved
      Budget for the current Fiscal Year (except for non-recurring expenditures
      and capital expenditures) until Manager and Owner can resolve their
      differences; provided, however, Manager shall be authorized to pay, as an
      expense of the Property, third party costs outside the control of Manager,
      such as, without limitation, taxes and utilities. Manager has the
      authority to expend funds as provided in Section 2.8 in accordance with
      the provisions of the current approved Budget and in accordance with the
      provisions of this Section 2.6(F), provided that Manager shall not be
      required in any event to expend its own funds if there are insufficient
      funds available for Manager to perform its obligations hereunder.
      Manager's failure to manage the Property in the manner required herein
      shall be excused if Manager is prevented from doing so due to Owner's
      failure or refusal to approve a Budget or to make available funds
      sufficient for Manager to perform its obligations
    hereunder.

              


      

       

      
      

       

      
        	
                                       
      (G)

              	
                Books and
      Records. Manager shall maintain, at Manager's premises, in a manner
      customary and consistent with generally accepted accounting principles,
      accounting records based on Owner's fiscal year
  end.

              


      

    

    
      


       

      
        	
                 

              	(i)	
                Depreciation
      and amortization expense are not to be recorded. Manager will make
      available to Owner or Owner's auditors or tax preparers general ledger and
      invoice details necessary for the preparation of depreciation and
      amortization schedules.

              


      

    

    
      


       

      
        	
                 

              	(ii)	
                Owner
      shall at all times retain title to the information constituting such
      books, records and accounts. Manager shall, during the Term, retain such
      books, records (records to include copies of all Leases and Contracts and
      other written instruments affecting the Property) and accounts and
      maintain same at all times in reasonable condition for proper audit and in
      accordance with the requirements of the Financing Documents while same
      remain in effect. Upon termination, Manager shall, at the expense of
      Owner, deliver such books and records to Owner. Any and all computer
      programs, software and hardware not the property of Owner and utilized by
      Manager to maintain such books, records and accounts shall in all events
      remain the property of
Manager.

              


      

    

    
      


       

      
        	
                 

              	(iii)	
                Upon
      reasonable prior notice to Manager, Owner or its appointed representatives
      may, at Owner's expense, inspect, audit and copy such books, records and
      accounts during regular business hours or during such other time as
      Manager may reasonably direct on a periodic or continuing basis by
      accountants retained by Owner, or other representatives of Owner, and
      Manager shall cooperate in good faith in connection with the same. For
      purposes hereof, Owner's appointed representatives may include, without
      limitation, Lender and its employees or authorized agents (and any advance
      notice requirement contained herein shall not apply if same not provided
      by the terms of the Financing
Documents).

              


      

    

    
      


       

      10

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springfaouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      
        	
                   

              	 (iv)	
                Upon
      commencement of this Agreement, Owner shall coordinate with previous owner
      or manager the delivery of such reports and data as requested by Manager
      for the accurate set up of the Property's books and records on the
      Manager's property management and accounting
  system.

              


      

    

    
      


       

      
        	
                 

              	 (v)	
                In
      the event this Agreement is terminated, the Manager shall deliver such
      books, records and accounts of the Property to Owner at Owner's expense.
      Manager acknowledges that Lender may require Owner (by written demand
      after an event of default has occurred under the Financing Documents) to
      deliver to Lender all books and records relating to the Property or its
      operation, and under such circumstances the Manager shall promptly deliver
      such books, records and accounts of the Property to Owner at Owner's
      expense. Manager shall deliver a final accounting within thirty (30) days
      after the last day of the calendar month in which such termination
      occurs.

              


      

    

    
      


       

      
        	
                 

              	
                (H)

              	
                Monthly/Quarterly
      Reports. Manager shall furnish to Owner monthly reports for the
      Property, which reports shall be prepared showing monthly and year to date
      activity and which shall be furnished (without notice or demand by Owner)
      as specified in Exhibit A. To
      the extent the Financing Documents require monthly reports that differ
      from those specified in Exhibit A.
      Manager shall be required to produce and furnish to Owner such
      Lender-required monthly reports in addition to the monthly reports
      specified in Exhibit A. To
      the extent the Financing Documents require quarterly reports, Manager
      shall furnish to Owner quarterly reports for the Property containing such
      information as is required pursuant to such Financing Documents. An
      officer of Manager shall certify in writing that each report furnished by
      Manager to Owner in accordance with this Section 2.6 (including those that
      will be furnished by Owner to Lender in accordance with the requirements
      of the Financing Documents) is complete and
  accurate.

              


      

    

    
      


       

           
(I)      Annual
Reports.

    

    
      


       

      
        	
                        (i)

              	
                Manager
      shall cooperate in good faith with Owner's accountants in the preparation
      of a year-end statement of continuing operation of the Property, including
      a balance sheet and related statements of income and cash flows, and any other Properly-level reports required by
      the terms of the Financing Documents, all of which shall be
      furnished not later than forty-five (45) days after the end of each Fiscal
      Year.

              


      

    

    
      


       

      
        	
                      
       (ii)

              	
                All such annual reports shall be
      prepared on an accrual basis, and, at Owner's option and expense,
      may be audited by a national firm of
      independent certified public accountants selected by Owner ("Accountant" or "Auditor" as context requires). Owner
      shall be responsible for arranging for such audit, and Manager shall
      cooperate in good faith with Owner's Accountant or Auditor in the
      preparation of Owner's audited financial statements. A draft of the
      Auditor's report for

              


      

    

    
      


       

      11

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

             each Fiscal Year
shall be submitted to Owner for approval by Owner before finalization of the
same.

    

    
      


       

             (J)       Tax Matters
Reporting.

    

    
      


       

      
        	
                                 
      (i)

              	
                Manager
      shall cooperate in good faith and at Owner's expense with Owner's (or
      Owner's appointed Agent) accountants and cooperate in the preparation of
      Owner's tax return including, but not limited to, supplying necessary
      information for preparation of such tax return. The cost of preparation
      and filing of the tax return will be borne by
  Owner.

              


      

    

    
      


       

      
        	
                         (ii)

              	
                As
      reasonably requested by Owner, Manager shall complete all tax-related
      surveys and questionnaires which Owner may reasonably
    require.

              


      

    

    
      


       

      
        	
                                 
      (iii)

              	
                Manager
      shall prepare at Owner's expense all state and local personal property and
      other tax returns, as required by law, which are not prepared by Owner's
      accountant.

              


      

    

    
      


       

      2.7      Bank
Accounts.

    

    
      


       

      
        	
                     
      (A)       

              	
                Manager
      shall establish and maintain an operating account (the “Operating Account”) in
      the name of Owner for the Property for the collection of rents and other
      receipts of the Property and an interest-bearing account for tenant
      security deposits as required by law or by the terms of the Financing
      Documents (the “Security
      Deposit Account”).

              


      

    

    
      


       

      
        	
                (B)     
       

              	
                The
      Operating Account and the Security Deposit Account shall be maintained in
      the name of Owner at an FDIC-insured financial institution selected by the
      Manager (the "Depository"). All
      funds deposited in such accounts or otherwise held by or in the name of
      Manager for the account of Owner shall be held by Manager in trust and
      Manager shall have no equitable interest therein and they shall not be
      commingled with Manager's other funds. Manager shall in no event have any
      liability in the event that the Depository should fail, go into
      receivership or conservatorship or if such funds are otherwise not
      available for reasons beyond Manager's reasonable control. Manager shall
      indemnify and hold harmless Owner from and against any and all Damages
      occurring by reason of any unauthorized application by Manager or its
      directors, officers, employees, agents or representatives of any such
      funds held for the account of Owner, it being agreed that all expenditures
      made by Manager in a reasonable and good faith belief that same are
      authorized hereunder shall not be subject to said
    indemnity.

              


      

    

    
      


       

      
        	
                (C)    
        

              	
                Sweep
      accounts (if required by Lender) will be maintained-in the name of the
      Owner in conjunction with the Operating Account in the event the monthly
      balance of the Operating Account exceeds
  $250,000.

              


      

    

    
      


       

      
        	
                (D)    
       

              	
                Manager
      shall ensure that tenant security deposits are deposited promptly in the
      Security Deposit Account, as required by applicable law or by the terms of
      the Financing Documents.  As needed, Manager shall withdraw such
      amounts from

              


      

    

    
      


       

      12

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      the
Security Deposit Account as are necessary to (i) repay a security deposit (or
portion thereof) to a Tenant as required pursuant to the terms of such Tenant's
Lease; and (ii) cause the transfer of a forfeited tenant security deposit (or
portion thereof) to the Operating Account. Manager will prepare and maintain an
itemization of all deposits and withdrawals of the Security Deposit Account,
together with a reference to applicable apartment unit and description of an
application of said funds.

    

    
      


       

      
        	
                                    
      (E)

              	
                Upon
      commencement of this Agreement, Owner shall cause to be delivered to
      Manager a listing showing the current Tenants of the Property who
      previously made security deposits under existing Leases of the Property
      and will deliver the total amount of these security deposits via wire
      transfer to the Security Deposit Account established by the Manager for
      the Property.

              


      

    

    
      


       

      2.8      Payment
of Expenses and Capital Expenditures

    

    
      


       

      
        	
                            
      (A)

              	
                Manager
      shall pay all expenses of operating the Property from the Operating
      Account in such amounts as are necessary to
pay:

              


      

    

    
      


       

      
        	
                (i)

              	
                operating
      expenses actually due and owing for such period (“Operating
      Expenses”);

              


      

    

    
       

      (ii)            Mortgage
interest expense and principal payments (“Debt
Service”);

    

    
       

      (iii)           Lender
required reserves and escrows ("Lender
Reserves");

    

    
       

      (iv)           Management
Fees; and

    

    
      


       

      
        	
                       (v)

              	
                Actual
      capital expenditures for such period ("Capital Expenditures").
      At the discretion of Owner and subject to any Lender requirements,
      Capital Expenditures may be required to be approved by Owner and/or Lender
      prior to payment or be funded separately by Owner or from Lender Reserves.
      If such an election is made, Capital Expenditures are to be requested
      based on actual expenditures and supported by actual invoices and other
      documentation required by the Financing Documents. If and when a
      requisition is made, the Manager must provide the
    following:

              


      

    

    
      


       

      (i)            an
itemization by category of all types of Capital Expenditures;

    

    
      


       

      
        	
                (ii)

              	
                within
      each Capital Expenditure type, there shall be a one-line summary by type
      of improvement of the amount(s) previously spent, the amount of the
      current request and the estimated amount to complete the
      project;

              


      

    

    
      


       

      
        	
                (iii)

              	
                a
      comparison to the original, approved Budget with an explanation for
      material variances; and

              


      

    

    
      


       

      13

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      
        	
                             (iv)

              	
                supporting    documentation,
      such as invoices and other documentation required by the Financing
      Documents.

              


      

    

    
      


       

      
        	
                            
      (B)

              	
                If
      the funds on deposit in the Operating Account are insufficient or
      projected to be insufficient
      to cover the amounts necessary to pay the Operating Expenses, Debt Service,
      Lender Reserves or Capital Expenditures for such
      month,

              


      

       

    

    
      
        	
                             
      (i)

              	
                Manager
      shall promptly notify Owner, and Owner shall promptly make up such
      negative cash flow by depositing an amount equal to the deficit in the
      Operating Account. In such cases, Manager may, but shall not be obligated
      to, advance Manager's own funds on behalf of Owner; and, if Manager makes
      any such advance from Manager's own funds, Owner shall, within five (5)
      days of written demand by Manager, reimburse Manager for any such advance
      plus interest thereon at the rate per annum publicly announced by the
      Depository as its base or prime rate from the date of such advance to, but
      not including, the date of such
reimbursement.

              


      

    

    
      


       

      
        	
                             
      (ii)

              	
                Until
      such time as additional Owner funding (if required) has been received,
      Manager shall prioritize payments from the Operating Account based on the
      following order of priority: (1) Operating Expenses that are necessary to
      maintain the operation of the Property, including but not necessarily
      limited to utility costs, water and sewer charges (that could become a
      lien on the Property), assessments or other charges (that could become a
      lien on the Property) and Manager's costs for property-level employees
      (i.e., wages, payroll handling fee, taxes, insurance, workers compensation
      and other benefits for on-site employees as set forth in Section 2.2(B);
      (2) third party debt service payments, including Lender Reserves; (3)
      insurance premiums, if not included in Lender's Reserves; (4) Management
      Fees; (5) real estate taxes, if not included in Lender's Reserves; (6)
      personal property taxes; and (7) other bills and charges of third parties
      related to the Property or the operation thereof with the oldest charges
      being paid first.

              


      

    

    
      


       

      
        	
                     (C)

              	
                Subject
      to subparagraphs (a) through (c) below, Owner shall reimburse Manager
      for
      all actual, out of pocket expenses incurred and paid by Manager in
      connection 

                  with
      the management and operation of the Property pursuant to the Budget approved
      by Owner. Such expenses shall include but not be limited to Budgeted:
      salary
      and wages, payroll taxes, insurance, workers' compensation,
      payroll handling
      fee and other benefits for Manager's1
      employees working on the Property;
      advertising expenses; court costs; attorney's fees; office supplies; long
      distance
      phone calls; postage; computer fees; overnight courier expense; and
      expenses
      related to training on-site personnel. Such expenses shall not include
      without
      prior consent of Owner (except as specifically provided herein or in the
      Schedules
      attached
hereto):

                

              


      

       

      
      

      14

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      
        	
                (a)  

              	
                the
      cost of salary 'and wages, payroll taxes, insurance, workers compensation
      and other benefits of Manager's management, accounting and office
      personnel unless this personnel is filling a temporary vacancy of an
      approved, budgeted on-site
position;

              


      

    

    
      


       

      
        	
                (b)  

              	
                travel
      expenses by Manager's management, accounting and office personnel unless
      this personnel is filling a temporary vacancy of an approved, budgeted
      on-site position; and

              


      

    

    
      


       

      
        	
                (c)  

              	
                costs
      of providing the reports and documents to be provided pursuant to the
      provisions hereof, other than the costs and expenses incurred by Manager's
      on site staff and the Auditor's services
  hereunder.

              


      

    

    
      


       

      2.9      Services
with Respect to Financing.

    

    
      


       

      
        	
                (A)
             

              	
                Manager
      shall, at the expense of Owner, in accordance with the approved Budgets
      unless otherwise provided herein, duly and punctually pay and perform on
      behalf of Owner all of those Owner's obligations so requested by Owner for
      any Property acquisition financing (or any refinancing thereof) (“Financing”) and shall
      use its commercially reasonable efforts to comply with all of the terms
      and provisions of any documents executed and delivered by Owner relating
      to a Financing (collectively, the "Financing
      Documents").

              


      

    

    
      


       

      
        	
                (B)  
           

              	
                Each
      of Manager and Owner shall promptly notify the other upon learning of any
      default, or event of default or event which, with the giving of notice or
      the passage of time or both, might constitute a default or an event of
      default under any Financing Document. Manager shall consult with Owner
      concerning the action to be taken with respect thereto and, at the expense
      of Owner, take such action as Owner shall
  direct.

              


      

    

    
      


       

      
        	
                (C)     
        

              	
                Without
      the consent of Owner, Manager (i) shall not modify, or in any way alter,
      the provisions of any Financing Documents and (ii) shall not take any
      action, or omit to take any action, or give any notice, the taking,
      omission or giving of which might result in the occurrence of a default by
      Owner under any Financing Documents to the extent such terms and
      provisions are provided by Owner to Manager in
  writing.

              


      

    

    
      


       

      
        	
                (D) 
           

              	
                Each
      of Manager and Owner shall promptly notify the other upon receiving any
      notice under any Financing Documents (and furnish a copy of the notice
      received by it with its notice to the other party) of any default, event
      of default or condition which, with the giving of notice or the passage of
      time or both, might result in a default or event of default by Owner under
      any Financing Documents. Manager shall consult with Owner concerning the
      action to be taken with respect thereto and, at the expense of Owner,
      shall take such reasonable action as Owner shall
  direct.

              


      

    

    
      


       

      15

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      
        	
                (E)      
        

              	
                Upon
      written request by Owner, Manager shall prepare all information, schedules
      and reports necessary to calculate and/or support the covenants in any
      Financing Documents encumbering the Property or as are otherwise required
      to be provided by Owner under such Financing Documents, including, but not
      limited to, preparing rent rolls, delivering historic income and expense
      data for Financings, and providing debt covenant compliance information
      including, but not limited to, rent rolls, annual budgets, audited
      financial statements and debt service coverage ratio
      calculations.

              


      

    

    
      


       

       
2.10    Notification of Sale or Financing
Transaction.

    

    
      


       

      Notwithstanding
anything to the contrary set forth in this Agreement, it shall be a material
covenant of Owner under this Agreement that Owner deliver a written notice to
Manager promptly upon becoming aware that any person is offering or otherwise
marketing the Property for sale or offering the property as collateral in
connection with or arising from any Financing, Owner's failure to comply with
the foregoing covenant shall constitute a material default under this Agreement,
entitling Manager to terminate this Agreement upon not less than 30 days' notice
to Owner.

    

    
      


       

      3.           Services
with Respect to Property Sales and Post Sale-Closing

    

    
      
 

      With
respect to any potential sale of the Property, the Manager shall cooperate in
good faith with Owner during the due diligence process and, as necessary,
perform the following duties and obligations during and after the sale
process:

    

    
      


       

      
        	
                                       (i)

              	
                Prepare
      current rent rolls, historic income and expense data and such other
      materials necessary to offer the Property for
  sale.

              


      

    

    
      


       

      
        	
                             
      (ii)

              	
                Process
      information requests as reasonably requested by Owner, or due diligence
      requests of potential buyers, including providing access to Lease files,
      financial statements, service contracts, and supporting billing and
      disbursement documentation.

              


      

    

    
      


       

      
        	
                             
      (iii)

              	
                Prepare
      and provide schedules and support for closing adjustments, including
      revenue and expense prorations and, if necessary, reconciliations of
      estimated billed recoverable expenses versus actual
    expenses.

              


      

    

    
      


       

      
        	
                              (iv)

              	
                Prepare
      final accounting for the sale of the Property and, as necessary,
      participate in the fieldwork and preparation of the financial statements
      or audited financial statements to be prepared by the Auditor,
      including, but not limited to, providing access to the Property's books
      and records and having qualified personnel available during normal
      business hours to answer any questions which may arise during the
      fieldwork.

              


      

    

    
      


       

      
        	
                        (v)

              	
                Prepare
      the final expense and recoverable expense reconciliations relating to the
      proration of revenues and expenses for the sale of the
      Property.

              


      

    

    
      


       

      16

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      
        	
                            
      (vi)

              	
                Process
      any invoices, if applicable and as approved by Owner, for payments made
      relating to property expenses for a period not to exceed sixty (60) days
      after the sale date.

              


      

    

    
      


       

      
        	
                            
      (vii)

              	
                Prepare,
      upon the request of Owner, a final schedule of distributions to be
      made.

              


      

    

    
      


       

      
        	
                            
      (viii)

              	
                After
      processing property disbursements and distributions, Manager shall close
      all bank accounts for which it has
  authorization.

              


      

    

    
      


       

      
        	
                        (ix)

              	
                Aid
      in the preparation of any buyer (or its lender) required third party
      reports.

              


      

    

    
      


      
        	
                            
      (x)

              	
                Aid
      in site visits and/or due diligence requests of buyers (or their
      lenders).

              


      

                          

    

    
       

      Post-closing
duties and obligations may span a period not to exceed sixty (60) days. The
monthly Management Fee covering the post-closing period shall be the greater of
50% of the previous 12 month average Management Fee or $ 1,500 paid monthly for
such 60 days.

    

    
      


       

      4.           Insurance

    

    
      


       

      4.1      Owner’s
Insurance

    

    
      


       

      Owner
shall maintain in full force and effect with respect to the Property and any
personal property of Owner located at the Property and used in connection
therewith, insurance policies satisfactory to Owner (or as required under any
Financing Documents) issued by insurance companies having an A.M. Best General
Policyholder's Service rating of not less than "A-,Vin" (or otherwise
satisfactory to Owner), which are licensed, or approved to do business, in the
state in which the Property is located and which are otherwise satisfactory to
Owner. Manager shall obtain same at Owner's expense, subject to the review and
acceptance of all coverage by Owner. All policies maintained by or for the
benefit of Owner shall provide the following
coverages:   .

    

    
      


       

      
        	
                (A)    
        

              	
                "All
      Risk" property damage insurance including, without limitation, fire,
      flood, sprinkler leakage, water damage and earthquake coverage, if
      applicable and available at commercially reasonable rates, in an amount
      and with an agreed amount endorsement equal to the lesser of (i) an amount
      sufficient to prevent Owner from becoming a co-insurer in any loss under
      the policy or (ii) equal to the replacement cost of the Property, and a
      deductible reasonably approved by Owner. The policies of insurance carried
      in accordance with this Section 4.1(A) shall contain (y) a replacement
      cost endorsement without deduction for depreciation or obsolescence and
      (z) a waiver of subrogation clause, all in form reasonably satisfactory to
      Owner and Lender;

              


      

    

    
      


       

      
        	
                (B)      
       

              	
                Rental
      value insurance on the Property, if applicable, with a minimum twelve (12)
      month indemnity period;

              


      

    

    
      


       

      17

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      
        	
                (C)      
       

              	
                Business
      Interruption Insurance, if applicable, on an eighty percent (80%) Gross
      Earnings Form, with a minimum twelve (12) month indemnity period and
      including ordinary payroll
coverages;

              


      

    

    
      


       

      
        	
                (D)     
       

              	
                Commercial
      General and Excess Liability Insurance, written on an occurrence basis,
      including blanket contractual liability, products and completed operations
      and personal injury coverage with a combined single limit for any one
      occurrence of $5,000,000 or such higher limit as Owner may from time to
      time reasonably request. Such requirement may be satisfied by a layering
      of Commercial General Liability, Umbrella and Excess Liability policies,
      but in no event will the liability insurance be written for an amount less
      than $5,000,000 combined single limit for bodily injury and property
      damage liability.

              


      

    

    
      


       

      
        	
                              
      (E)

              	
                Boiler
      and Machinery Breakdown Direct Damage Insurance and third party liability
      coverage (if not covered under the Commercial General Liability Policy)
      with
      full comprehensive coverage on a repair and replacement basis for all HVAC
      equipment,
      electrical equipment, boilers and machinery which form a part of the Property
      including Business Interruption Coverage for Loss of Rental Income in
      connection
      therewith in accordance with Section 4.1(C)
      hereof;

              


      

       

      
      

       

    

    
      
        	
                              
      (F)

              	
                During
      the course of any construction or repair of Improvements or during the
      course
      of Restoration on the Property (other man Tenant leasehold Improvements),
      Builder's Risk Insurance on a completed value basis and on a non-reporting
      form against "all risks of physical loss," including flood (if available
      at commercially reasonable rates), earthquake (if available at commercially
      reasonable rates), collapse and transit coverage (if available at commercially
      reasonable rates), during construction of such Improvements or Restoration,
      with deductibles reasonably satisfactory to Owner, covering the replacement
      cost value of work performed and the equipment, supplies and materials
      furnished (unless such equipment, supplies and materials are required to
      be
      insured by contractors or vendors) and rent loss insurance for a period
      not less than
      twelve (12) months in an amount reasonably satisfactory to Owner. Such
      policy
      of insurance shall contain a permission to occupy upon completion of work
      or occupancy" endorsement, a waiver of coinsurance or an agreed amount
      endorsement
      and an agreement by the insurer that following a loss, the insurer will
      pay to the insured (i) the full value of the loss (less the deductible),
      provided that
      Owner is required to or elects to rebuild or (ii) the actual cash value of
      the loss
      in the event Owner is not required to or does not elect to rebuild;
      and

              


      

       

    

    
       

      
        	
                             
      (G)

              	
                Such
      other insurance with respect to the Property, in such amounts as Owner (or
      any
      Lender in connection with a Financing) from time to time may require
      against such
      other insurable hazards which at the time are commonly insured against for
      Comparable
      Properties.

              


      

       

    

    
       

      Manager
shall submit all insurance policies it obtains on behalf of Owner pursuant to
this Section 4.1 for Owner's and Lender's, if applicable, review and approval.
Manager will obtain and maintain all insurance coverages referenced in this
Section 4.1 so as to be in

    

    
      


       

      18

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

       

    

    
      
        	
                 

              	
                compliance
      with Financing Document requirements (in the event of any conflict between
      the provisions set forth in this Section 4.1 and the insurance
      requirements imposed under the Financing Documents, the insurance
      requirements imposed under the Financing Documents shall govern and
      control).

              




       

      4.2      Manager's
Insurance

    

    
      


       

      Manager
shall, at the expense of Manager, maintain in full force and effect insurance
policies with respect to^ the employees of Manager in form reasonably
satisfactory to Owner (or as required under any Financing Documents) and issued
by insurance companies having: an A.M. Best General Policyholder's Service
rating of not less than "A-,VTII" which are licensed in the state in which the
Property is located and which are otherwise reasonably satisfactory to Owner.
Such policies shall provide the following coverage:

    

    
      


       

      
        	
                (A)    
       

              	
                Worker's
      compensation and employer's liability insurance subject to the statutory
      limits of the state in which the Property is located. Manager shall
      provide Owner with a certificate evidencing such
  coverage.

              


      

    

    
      


       

      
        	
                (B)    
       

              	
                Comprehensive
      automobile liability insurance covering owned, non-owned, and hired
      vehicles in an amount not less than $1,000,000 combined single limit for
      bodily injury and property damage. Such requirements may be satisfied by
      layering of comprehensive automobile liability, umbrella and excess
      liability policies.

              


      

    

    
      


       

      
        	
                (C)    
       

              	
                Fidelity
      bond and computer crime insurance with an annual limit of a minimum of
      $1,000,000 for each director, officer, employee or agent of Manager
      associated with the management of the Property including the handling of
      receipts and disbursements.

              


      

    

    
      


       

      
        	
                (D)  
        

              	
                Commercial
      general and umbrella liability insurance, written on an occurrence -
      basis, in an amount not less than $1,000,000 and $10,000,000,
      respectively. Such umbrella liability insurance shall apply in excess of
      the commercial general liability insurance and the insurance required in
      Sections 4.2(a) and 4.2(b).

              


      

       

      
      

    

    
       

      
        	
                (E)   
       

              	
                Professional
      liability insurance with an annual limit not less than $1,000,000 per
      occurrence
      and in the aggregate with an extended period of indemnity. Such insurance
      policy shall survive the termination or expiration of this Agreement for
      a
      minimum period of two (2) years following the expiration or termination of
      this Agreement.

              


      

       

      
      

       

    

    
      Manager
will obtain and maintain all insurance coverages referenced in this Section 4.2
so as to be in compliance with Financing Document requirements (in the event of
any conflict between the provisions set forth in this Section 4.2 and the
insurance requirements imposed under the Financing Documents, the insurance
requirements imposed under the Financing Documents shall govern and
control).

    

    
      


       

      19

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      4.3           Blanket
Insurance

    

    
      


       

      Subject
to Owner's (and Lender's, if applicable) prior consent, Manager may effect any
coverage required under this Article 4 under a blanket insurance policy
reasonably satisfactory to Owner, provided that (i) any such policy of blanket
insurance either shall specify therein, or the insurer under such policy shall
certify to Owner, (a) the maximum amount of the total insurance afforded by the
blanket policy allocated to the Property and (b) any sublimits in such blanket
policy applicable to the Property, which amounts shall not be less than the
amounts required pursuant to this Article 4; (ii) any such policy of blanket
insurance shall comply in all respects with the other provisions of this Article
4; (iii) the protection
afforded under any policy of blanket insurance hereunder shall be no less than
that which would have been afforded under a separate policy or policies relating
only to the Property, and (iv) the coverages under such blanket policies
otherwise conform in all respect to the insurance requirements imposed by the
Financing Documents.

    

    
      


       

      4.4           Policies

    

    
      


       

      
        	
                (A)   
        

              	
                The
      insurance maintained under Section 4.1 shall name Owner as the Insured and
      Manager, Lender and such other affiliated parties as additional insureds
      as their interests may appear. Such insurance may also be extended to name
      other persons as Owner may specify or as Lender may require, from time to
      time, as additional insureds as their interests may
  appear.

              


      

    

    
      


       

      
        	
                (B)    
       

              	
                The
      insurance maintained under Section 4.2 shall name Manager as the insured
      thereunder. The insurance maintained under Section 4.2(B) and (D) shall
      name Owner, Lender and such other persons as Owner may specify or as
      Lender may require, from time to time, as additional insureds as their
      interests might appear.

              


      

    

    
      


       

      
        	
                (C)  
        

              	
                All
      insurance maintained under this Article 4 shall provide that (i) no
      cancellation or reduction thereof shall be effective until at least thirty
      (30) days after receipt by Owner, Lender and Manager of written notice
      thereof and (ii) all losses shall be payable notwithstanding any act or
      negligence of any Tenant (or its guests or invitees) or Manager or its
      partners, directors, officers, employees or agents which might, absent
      such agreement, result in a forfeiture of all or part of such insurance
      payment and notwithstanding (a) the occupation or use of the Property for
      purposes more hazardous than permitted by the terms of such policy, or (b)
      any foreclosure or other action or proceeding taken pursuant to the
      provision of any mortgage with respect to the Property or (c) any change
      in title or ownership of the Property. As used herein, the term “Insurance Requirements”
      shall mean the terms and conditions of the insurance policies
      required to be obtained and maintained by Manager under this Article 4 and
      the insurance requirements of the Financing
  Documents.

              


      

    

    
      


       

      
        	
                (D)   
       

              	
                Manager
      shall furnish to Owner and Lender, upon request, certificates of insurance
      or other evidence satisfactory to Owner of the renewal thereof, and
      evidence satisfactory to Owner and Lender of payment of the premiums
      therefor.

              


      

    

    
      


       

      20

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

    

    
      


      
        	
                 

              	
                
                  Upon
      Owner's request, Manager shall deliver a copy of each policy certified to
      be a true copy by the insurer or insurance broker with respect to such
      policy.

                

              


      

       

      
        	
                (E)    
       

              	
                Manager
      shall also cooperate with Owner in procuring and maintaining Law/Ordinance
      Insurance for Zoning/Parking issues, as and where required by Lender or
      Owner.

              


      

    

    
      


       

      4.5           Payment
of Premiums by Owner

    

    
      


       

      If
Manager fails to maintain the insurance required to be maintained under this
Article 4 or fails to deliver evidence of insurance, Owner may, but shall not be
obligated to, obtain such insurance and pay the premiums therefore and in the
case of the insurance described in Section 4.2 or the duplication of any other
insurance described in Article 4, Manager shall, on demand, reimburse Owner for
all actual sums advanced and reasonable expenses incurred in connection
therewith.

    

    
      


       

      4.6           Claims

    

    
      


       

      In the
event of a loss related to the Property under any of the insurance policies
described in Sections 4.1 and 4.2(B), (C) and (D), Manager shall, if Manager has
knowledge of the loss, promptly after learning of same, file a claim on behalf
of Owner (and any other party that is also named insured) and use commercially
reasonable efforts to diligently monitor such claim on behalf of such insured
party and cooperate in good faith with any appointed representatives,
consultants and adjusters retained by or on behalf of the insurance companies'
interests. Manager shall also notify Lender of such loss to the extent notice is
required under any Financing Documents.

    

    
      


       

             
4.7       Subrogation                                 [Intentionally
Deleted]

       

      5.         Manager's
Compensation

    

    
      


       

          5.1      Management
Fees

    

    
      


       

      
        	
                (A)    
       

              	
                Owner
      shall pay Manager, and Manager shall accept, as compensation for Manager's
      management services during the Term a fee on a monthly basis in an amount
      equal to four percent (4%) of Gross Receipts actually collected by Manager
      during that month (the “Management Fee”).
      Notwithstanding the foregoing, Manager acknowledges that the Financing
      Documents may impose limitations on Owner's ability to pay such Management
      Fee under certain enumerated conditions, with Owner not to be considered
      in default of this Agreement should the full Management Fee not be paid to
      Manager when such conditions
exist.

              


      

    

    
      


       

      
        	
                (B)      

              	
                The
      Management Fee for any month shall be estimated and paid as an Operating
      Expense on the 10th day of the month to which it relates. Reconciliation
      and true up of the Management Fee estimate will be calculated as part of
      the month end close out and will be paid as an Operating Expense on the
      10th
      day of the

              


      

    

    
      


       

      21

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

       
following month.  Subject to  Section 2.8(B) and (C),
Manager is hereby authorized to pay itself the Management Fee from the Operating
Account.

    

    
      


       

      
        	
                (C)  

              	
                For
      the purposes of this Section 5.1, the term “Gross Receipts” shall
      mean all amounts actually collected as rents or other charges for use or
      occupancy of space or facilities in the Property, including furniture
      rental, forfeited security deposits, pet fees, non-refundable application
      fees, decorating fees, late charges, collections from residents for water,
      sewer, electric, gas, oil and trash, royalties received for laundry
      equipment/services, cable/telephone/Internet services, insurance proceeds
      received as business loss compensation (to the extent Lender allows same
      to be collected by Owner), and all other miscellaneous income with respect
      to the Property, but excluding other receipts, such as interest or
      investment income, tenant security deposits (unless and until forfeited),
      insurance proceeds received as replacement cost, tax refunds, condemnation
      awards, dividends on insurance policies and proceeds of any other capital
      event or sale of the Property or related personal property (or any portion
      thereof).

              


      

    

    
      


       

      
        	
                (D)  

              	
                Manager
      shall pay to BR Springhouse Managing Member, LLC ("Managing Member LLC")
      an "Oversight Fee"
      of one percent (1%) payable from the Management Fee earned each month as
      defined above (for the avoidance of doubt the amount re-allowed to
      Managing Member LLC will be the equivalent of 25% of the Management Fee,
      so that Managing Member LLC has been re-allowed 1% of the monthly Gross
      Receipts and Manager has been compensated 3% of the monthly Gross
      Receipts).

              


      

    

    
      


       

      5.2            Construction
Management Fees

    

    
      


       

      Five
Percent (5%) of the cost of any capital project exceeding $10,000 (which items
have been approved by Owner and have been itemized in the approved Budget) but
not including regular recurring interior capital replacements such as carpet,
floor vinyl and appliance replacements. Additionally, if the services of a
capital projects manager is required and has been approved by Owner, such
capital projects manager will charge to the Property $40.00 per hour for time
worked plus travel time, travel expenses and accommodations
expenses.

    

    
      


       

      5.3            Renovation/Capital
Projects/Insurance Rehabilitation Fees

    

    
       

       
Not Applicable.

    

    
      


       

      5.4 For Capital Event (Refinance, Sale,
etc.) 

       

      Not
applicable.

    

    
      


       

      5.5 Payroll
Handling Fee

    

    
      


       

      $12.00
per employee per payroll period.

    

    
      


       

      22

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      5.6      Training

    

    
      


       

      As
approved in advance in writing by Owner, Manager will charge the Property for
the direct costs of travel and accommodations for Manager's on-site personnel
for attendance at required training and corporate conference
events,

    

    
      


       

      6.        Term

    

    
      


       

      6.1           Term

    

    
      


       

      The term
shall commence as of the date hereof and shall expire on the second (2nd)
anniversary of the date hereof (the "Initial Term")* unless
extended or sooner terminated as hereinafter provided.

    

    
      


       

      6.2           Extension

    

    
      


       

      After the
expiration of the Initial Term, subject to termination under Section 6.3, the
term of this Agreement ("Term")
shall be automatically extended on an annual basis unless terminated by
Owner or Manager by written notice to the other party given not less than thirty
(30) days' prior to the end of the Initial Term or the then current Term, as
applicable.

    

    
      


       

      6.3           Termination

    

    
      


       

      
        	
                (A)    
       

              	
                In
      the event of the sale of all or substantially all of Owner's interest in
      the Property (including any sale by agreement, foreclosure or otherwise),
      this Agreement shall terminate upon the consummation of such
      sale.

              


      

    

    
      


       

      
        	
                (B)    
        

              	
                If
      any one or more of the following events (each an "Event of Default")
      shall occur and be
continuing:

              


      

    

    
      


       

      
        	
                (i)     
        

              	
                if
      Manager shall assign this Agreement or delegate its duties hereunder
      without the prior written consent of
Owner;

              


      

    

    
      


       

      
        	
                (ii)     
       

              	
                if
      any material license, permit or qualification held by Manager and
      necessary for the performance of its duties or services hereunder shall be
      terminated or suspended, and such termination or suspension, as the case
      may be, is not reversed within fifteen (15) days following notice thereof
      by the applicable licensing authority or
Owner;

              


      

    

    
      


       

      
        	
                (iii)
            

              	
                if
      Manager or any of its Affiliates or any of their directors, partners,
      officers agents, representatives, contractors or employees shall
      misappropriate any funds of Owner or otherwise be guilty of gross
      negligence, willful misconduct, bad faith, fraud, malfeasance, breach of
      fiduciary duty, or criminal misconduct in connection with Manager's duties
      hereunder;

              


      

    

    
      


       

      23

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      
        	
                (iv)    
       

              	
                if
      Manager or Owner shall fail to pay any amount payable to the other party
      under this Agreement when due and such default shall continue for ten (10)
      days after notice thereof to the defaulting
  party;

              


      

    

    
      


       

      
        	
                (v)    
        

              	
                (a)
      if Manager or Owner shall fail to comply with any provision of this
      Agreement (other than those described in Section 6.3(B)(i) through (iv)
      and (vi) through (viii)) and such default shall continue for ten (10) days
      after notice of such default is given by Owner to Manager; or (b) if such
      default cannot reasonably be cured within such ten (10) day period, if
      Manager or Owner shall fail to commence the curing of such default within
      such ten (10) day period (and to notify the other party within such ten
      (10) day period that Manager or Owner has commenced such cure and will
      prosecute such cure diligently and complete the same, which notice shall
      specify Manager's or Owner's estimate of the time period within which such
      cure will be completed) or, thereafter, shall fail to prosecute such cure
      diligently and complete the same within sixty (60) days; or (c) if, after
      the ten (10) day period described in clause (a) of this Section 6.3(B)(v),
      the other party is subject to any criminal liability or unbonded civil
      liability, the Property is subject to any unbonded Lien or the
      non-defaulting party or the Property is subject to any material risk of
      loss by reason of the defaulting party's failure to comply with such
      provision of this Agreement;

              


      

    

    
      


       

      
        	
                (vi)    
        

              	
                if
      Manager shall fail to follow any lawful direction of Owner or Lender with
      respect to the Property which direction complies with this Agreement and
      such default shall continue for three (3) Business Days after notice of
      such default is given by Owner to
Manager;

              


      

    

    
      


       

      
        	
                (vii)     

              	
                (a)
      if Manager or Owner shall commence a voluntary case or other proceeding
      seeking liquidation, reorganization or other relief with respect to itself
      or its debts under any bankruptcy, insolvency, reorganization or other
      similar law now or hereafter in effect or seeking the appointment of a
      trustee, receiver, liquidation, custodian or other similar official of its
      or any substantial part of its property, or shall consent to any such
      relief or to the appointment of or taking possession by any such official
      in an involuntary case or other proceeding commenced against it, or shall
      make a general assignment for the benefit of creditors, or shall fail
      generally to pay its debts as they become due, or shall take any corporate
      action to authorize any of the foregoing; or (b) if an involuntary case or
      other proceeding shall be commenced against Manager or Owner seeking
      liquidation, reorganization or other relief with respect to it or its
      debts under any bankruptcy, insolvency, reorganization or other similar
      law now or hereafter in effect or seeking the appointment of a trustee,
      receiver, liquidate, custodian or other similar official of it or any
      substantial part of its property, and such involuntary case or other
      proceeding shall remain undismissed and unstayed for a period of sixty
      (60) days; or (c) if an order for relief shall be entered against
      Manager  or Owner under
any

              


      

    

    
      


       

      24

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      bankruptcy,
insolvency, reorganization or other similar law now or hereafter in
effect;

    

    
      


       

      
        	
                (viii)
          

              	
                if
      there shall be a dissolution or termination of the corporate existence of
      Manager or Owner by merger, consolidation or otherwise;
  or

              


      

    

    
      


       

      
        	
                (ix)     
        

              	
                if
      (a) Manager shall fail to provide Owner with any report required under
      Section 2.6 hereof and same causes Owner to be in default under the terms
      of the Financing Documents or (b) if fraud or any material
      misrepresentation or material omission by Manager in connection with any
      report required under Section 2.6 hereof leads to a corresponding
      declaration of a default by Owner under the terms of the Financing
      Documents, or (c) if Manager fails to deliver the books, records and
      accounts of the Property to Owner when required to do pursuant to Section
      2.6(G)(v) above.

              


      

    

    
      


       

      then,
while any such Event of Default shall be continuing, the non-defaulting party
shall have the right to terminate this Agreement by notice to the defaulting
party and to exercise any and all other rights and remedies available under this
Agreement and at law or in equity. Notwithstanding anything to the contrary
contained herein while any such Event of Default shall be continuing beyond any
applicable cure period, the non-defaulting party may, at its option, elect to
terminate this Agreement. In the case of an Event of Default specified in
Paragraph 6.3(B)(ix)(a) or (c), the Manager shall be responsible for
reimbursement of any personal liability incurred by Owner, or the guarantors of
the Financing, under the Financing Documents relating
thereto.

    

    
      


       

      
        	
                (C)  
        

              	
                Notwithstanding
      anything to the contrary contained herein, Owner shall have the right to
      terminate this Agreement upon thirty (30) days' prior notice' to the
      Manager, with or without
cause.

              


      

    

    
      


       

      
        	
                (D) 
         

              	
                Notwithstanding
      anything to the contrary contained herein, Manager shall have the right to
      terminate this Agreement upon sixty (60) days' prior notice to the Owner,
      with or without cause.

              


      

    

    
      


       

      
        	
                (E) 
          

              	
                In
      the case of an Event of Default under Sections 6.3 (B) (vii) (a) or (c),
      the notice of
      termination shall be deemed to have been given upon the occurrence of such
      Event
      of Default.

              


      

       

      
      

       

    

    
      
        	
                (F)  
         

              	
                Following
      the expiration or termination of this Agreement, Manager shall cooperate
      in good faith with Owner and Owner's agents, employees and representatives
      (and Lender and its representatives, where applicable) to effectuate
      an orderly transition in connection with the management and/or operation
      of the Property. Following the expiration or termination of this Agreement,
      Manager shall promptly deliver to Owner (or such other party as is designated
      by any Lender) (i) all books, records, leases, agreements, and other documents
      and instruments in Manager's possession or control relating to
      the

              


      

       

      
      

    

    
       

      25

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      Property,
or the management or operation thereof, (ii) the unused inventory of all
supplies, materials, tools and equipment owned by Owner and used in connection
with the management and/or operation of the Property, and (hi) all keys to any
locks on the Property and security codes then in the possession of Manager,
together with any plans and specifications pertaining to the Property then in
the possession of Manager. The provisions of this Section 6.3(F) shall survive
the expiration or termination of this Agreement.

    

    
      


       

      7.           Miscellaneous

    

    
      


       

      7.1           Notices

    

    
      


       

      All
notices, requests, permissions, waivers and other communications (individually
and collectively, a “Notice”) to either party
hereunder shall be in writing and, unless otherwise specified herein, shall be
delivered by hand, facsimile, United States registered or certified mail, return
receipt requested, United States Express Mail, Federal Express, Airborne Express
or any other national overnight express delivery service (in each case postage
or delivery charges paid by the party giving such communication) addressed to
the party to whom such communication is given at its address or facsimile number
set forth in Part I.

       

      Unless
otherwise specified herein, each such Notice addressed and given as set forth
above shall be effective (i) the date of receipt of such Notice, or attempted
delivery of such Notice if receipt is refused; and (ii) if sent by mail as
aforesaid, the date which is seventy-two (72) hours after such Notice is
deposited in the mail, postage prepaid as aforesaid. Owner or Manager may change
its address under this Section 7.1 by delivering Notice to the other party
provided that no such address shall be located outside of the United States of
America. . -.

    

    
      


       

      7.2           Representations
and Warranties

    

    
      


       

      
        	
                (A)     
      

              	
                Manager
      represents and warrants to Owner that (i) Manager is a limited
      liability company
      duly organized and validly existing and in good standing under the laws of
      the State
      of North Carolina and has all requisite power and authority to
      carry on its business as now conducted and to execute, deliver and perform
      its obligations under this Agreement; (ii) the execution, delivery and
      performance by Manager of this Agreement are within its power, have been
      authorized by all necessary corporate action and do not contravene any
      provision of its operating agreement or certificate of formation; (iii)
      this Agreement has been duly executed and delivered by Manager; (iv) this
      Agreement is a valid and binding obligation of Manager; (v) the execution,
      delivery and performance by Manager of this Agreement does not conflict
      with or result in a breach of any of the provisions of, or constitute a
      default under, any bond, note or other evidence of indebtedness,
      indenture, mortgage, deed of trust, loan agreement or similar instrument,
      any Lease or any other material agreement or contract by which Manager, or
      its activities or the Property, is bound or any applicable law or order,
      rule or regulation of any court or governmental authority having
      jurisdiction over Manager, its activities or the Property; and (vii) to
      Manager's knowledge, no order, permission, consent, approval, license
      (other than those already held
by

              


      

    

    
      


       

      26

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      Manager),
authorization, registration or filing by or with any governmental authority
having jurisdiction over Manager, its activities or the Property is required for
the execution, delivery or performance by Manager of this
Agreement.

    

    
      


       

      
        	
                (B)    
        

              	
                Owner
      represents and warrants to Manager that (i) Owner is duly organized and
      validly existing and in good standing under the laws of the State of
      Delaware and has all requisite power and authority to carry on its
      business as now conducted and to execute, deliver and perform its
      obligations under this Agreement; (ii) the execution, delivery and
      performance by Owner of this Agreement are within its power, have been
      authorized by all necessary corporate action and do not contravene any
      provision of its operating agreement or certificate of formation; (iii)
      this Agreement has been duly executed and delivered by Owner; (iv) this
      Agreement is a valid and binding obligation of Owner; (v) the execution,
      delivery and performance by Owner of this Agreement do not conflict with
      or.result in a breach of any of the provisions of, or constitute a default
      under, any bond, note or other evidence of indebtedness, indenture,
      mortgage, deed of trust, loan agreement or similar instrument, any Lease
      or any other material agreement or contract by which Owner, or its
      activities or the Property is bound or any applicable law or order, rule
      or regulation of any court or governmental authority having jurisdiction
      over Owner, its activities or the Property; and (vii) to Owner's
      knowledge, no order, permission, consent, approval, license (other than
      those already held by Owner), authorization, registration or filing by or
      with any governmental authority having jurisdiction over Owner, its
      activities or the Property is required for the execution, delivery or
      performance by Owner of this
Agreement.

              


      

    

    
      


       

      7.3           No
Partnership, etc.

    

    
      


       

      Nothing
in this Agreement shall be construed as making Owner or Manager partners, joint
ventures or members of a joint enterprise or as creating between Owner and
Manager any employer employee relationship.

    

    
      


       

      7.4           Severability

    

    
      


       

      If any
provision of this Agreement or the application thereof to any person or
circumstances shall be held invalid, or unenforceable, the other provisions of
this Agreement or the application of such provision to other persons or
circumstances shall not be effected thereby but shall continue to be valid and
enforceable to the fullest extent permitted under applicable
law.

    

    
      


       

      7.5           Modification

    

    
      


       

      Except as
specified herein, no provision of this Agreement shall be modified, waived or
terminated except by an instrument in writing signed by the party against whom
such modification, waiver or termination is to be enforced.

    

    
      


       

      27

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      7.6           Successors
and Assigns

    

    
      


       

      
        	
                (A)    
       

              	
                This
      Agreement shall be binding upon and inure to the benefit of Manager and
      Owner and their respective successors and permitted assigns, and all
      references in this Agreement to "Manager" and "Owner" shall include
      the respective successors and permitted assigns of such
      parties.

              


      

    

    
      


       

      
        	
                (B)   
        

              	
                Notwithstanding
      anything to the contrary contained herein, Manager shall not assign this
      Agreement or delegate its duties and obligations hereunder without the
      prior written consent of Owner, which consent may be granted or withheld
      in the sole and absolute discretion of Owner, and without the prior
      written consent of Lender should such consent be required pursuant to the
      terms of the Financing
Documents.

              


      

    

    
      


       

      7.7           Limitation
of Liability

    

    
      


       

      Notwithstanding
anything to the contrary, if Manager shall recover any judgment against Owner in
connection with this Agreement, Manager shall look solely to Owner's interest in
the Property for the collection or enforcement of any such judgment, and no
other assets of Owner shall be subject to levy, execution or other process for
the satisfaction or enforcement of such judgment, and neither Owner nor any
person having an interest in Owner shall be liable for any deficiency. Manager's
employees, officers, directors, members and shareholders shall not be personally
liable for any of Manager's liabilities arising under this
Agreement.

    

    
      


       

      7.8           Governing
Law

    

    
      


       

      This
Agreement shall be governed by and construed in accordance with the laws of the
State in which the Property is located, without regard to principles of
conflicts of laws. Manager and Owner, after consulting or having had the
opportunity to consult with counsel, knowingly, voluntarily and intentionally
waive any right they may have to a trial by jury in any action brought with
respect to this Agreement or any of the transactions contemplated by this
Agreement or any course of conduct, dealing, statements (whether oral or
written) or actions of any party to this Agreement. Manager and Owner shall not
seek to consolidate, by counterclaim or otherwise, any such action in which a
jury trial has been waived with any other action in which a jury trial cannot be
or has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by either party except by a written
instrument executed by such party.

    

    
      


       

      7.9           Counterparts

    

    
      


       

      This
Agreement maybe signed in any number of counterparts, each of which shall be
deemed to be an original, with the same effect as if the signatures thereto and
hereto were on the same instrument.

    

    
      


       

      28

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      7.10           Exclusive
Benefit

    

    
      


       

      Neither
this Agreement nor any provision hereof nor any service, relationship or other
matter alluded to herein shall inure to the benefit of any third party (except a
successor or assign of Owner and its mortgagees, if any), to any trustee in
bankruptcy, to any assignee for the benefit of creditors, to any receiver by
reason of insolvency, to any other fiduciary or officer representing a bankrupt
or insolvent estate of either party, or to the creditors or claimants in such an
estate. Without limiting the generality of the foregoing sentence, it is
specifically understood and agreed that insolvency or bankruptcy of either party
hereto shall, at the option of the other party, void all rights of such
insolvent or bankrupt party hereunder (or as many of such rights as the other
party shall elect to void) except to receive any moneys which are due to the
insolvent or bankrupt party.

    

    
      


       

      7.11           Attorneys'
Fees

    

    
      


       

      If either
party hereto shall obtain a judgment against the other party in connection with
a dispute arising under or in connection with this Agreement (whether in an
action or through arbitration), such party shall be entitled to recover its
court (or arbitration) costs, and reasonable attorneys' fees and disbursements
incurred in connection therewith and in any appeal or enforcement proceeding
thereafter, in addition to all other recoverable costs. Similarly, should either
party hereto be made a party to, or otherwise is required to participate to
protects its interests hereunder in, any proceeding described in Section
6.3(B)(vii) involving the other party hereto, then such party shall be entitled
to recover its court costs, and reasonable attorneys' fees and disbursements
incurred in connection therewith and in any appeal or enforcement proceeding
thereafter, in addition to all other recoverable costs.

    

    
      


       

      7.12           Nondiscrimination

    

    
      


       

      Manager
hereby agrees, warrants and assures that no person shall be excluded from
participation in, be denied benefits of, or be otherwise subjected to
discrimination in the performance of this Agreement or in the employment
practices of Manager on the grounds of disability, age, race, color, religion,
sex, national origin, or any other classification protected by Federal or state
constitutional or statutory law. Manager shall, upon request, show proof of such
nondiscrimination and shall post in conspicuous places, available to all
employees and applicants, notices of nondiscrimination as required by any
applicable Federal or state constitutional or statutory law.

    

    
      


       

      [SIGNATURES ON FOLLOWING
PAGE]

    

    
      


       

      29

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property
Management Agreement for Sprmghouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      


         

         

        IN
WITNESS WHEREOF, Owner and Manager have executed and delivered this Agreement as
of the date first above written.

         

        
          	 
      	 
      	 
      
	 
      	
                  Owner:

                	 
      
	 
      	 
      	 
      
	 
      	
                  BR
      SPRINGHOUSE. LLC

                
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  BR
      SPRINGHOUSE KB, LLC,

                  a
      Delaware limited liability company,

                  its
      Manager

                
	 
      	 
      	 
      
	 
      	 
      	
                  By:
      __________________

                
	 
      	
                   

                	
                  Name:
      _________________

                
	 
      	 
      	
                  Title:
      _________________

                
	 
      	
                  Manager:

                
	 
      	 
      	 
      
	 
      	
                  HAWTHORNE
      RESIDENTIAL PARTNERS. LLC

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/
      Edward M.
      Harrington

                
	 
      	 
      	 
      
	 
      	 
      	
                  Name:
      Edward M.
      Harrington

                
	 
      	 
      	 
      
	 
      	 
      	
                  Title:
      Managing Member

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                  MANAGING
      MEMBER LLC (as to Section 5.1 (D)):

                
	 
      	 
      	 
      
	 
      	
                  BR
      SPRINGHOUSE MANAGING MEMBER, LLC

                
	 
      	 
      	 
      
	 
      	
                  By:

                	
                  BLUEROCK
      REAL ESTATE, L.L.C.,

                  a
      Delaware limited liability company,

                  its
      Manager

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
                  Jordan
      B. Ruddy

                  President

                


        



    

    
       

      30

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    
 

    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

      

        


         

                  IN
WITNESS WHEREOF, Owner and Manager have executed and delivered this Agreement as
of the date first above written.

        
          	 
      	 
      	 
      	 
      
	 
      	
                  OWNER:

                
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                  BR
      SPRINGHOUSE, LLC,

                  a
      Delaware limited liability company

                
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                  BR
      SPRINGHOUSE KB, LLC,

                  a
      Delaware limited liability company,

                  its
      Manager

                
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	 
      
	 
      	 
      	 
      	/s/  
      Jordan B. Ruddy
	 
      	 
      	 
      	
                  Jordan
      B. Ruddy

                  President

                
	 
      	
                  MANAGER:

                
	 
      	 
      	 
      	 
      
	 
      	
                  HAWTHORNE
      RESIDENTIAL PARTNERS, LLC,

                  a
      North Carolina limited liability company

                
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	 
      	 
      
	 
      	 
      	
                   

                   Name

                	 
      
	 
      	 
      	
                   

                
	 
      	 
      	 
      Title:	 
      
	 
      	 
      	
                   

                
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                  MANAGING MEMBER LLC (as to Section 5.1
      (D)):

                
	 
      	 
      	 
      	 
      
	 
      	
                  BR
      SPRINGHOUSE MANAGING MEMBER, LLC, a Delaware limited liability
      company

                
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                  BLUEROCK
      SPECIAL OPPORTUNITY + 

                  INCOME
      FUND, LLC, 

                  a
      Delaware limited liability company, 

                  its
      Manager

                
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  BLUEROCK
      REAL ESTATE, L.L.C., 

                  a
      Delaware limited liability company, 

                  its
      Manager

                
	 
      	 
      	 
      	
                   

                  /s/  
      Jordan B. Ruddy

                
	 
      	 
      	 
      	
                  Jordan
      B. Ruddy

                  President

                


        



    

    
       

      30

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia

    

    
      


       

      Exhibit
A

    

    
      Monthly
Reporting Package Due Date:   15th of each
month

      Delivery
Method: Electronic

    

    
      Monthly
Reporting Package Table of Contents

       

    

    
      (1) Balance
Sheet

       

      (2) Month-to-Date
and Year-to-Date Budget Comparison Report;

       

      (3) 13 Month
Rolling Profit and Loss Statement;

       

      (4) Statement
of Cash Flows;

       

    

    
      (5) Comparative
Balance Sheet showing current month and prior month balances; . 

       

      (6)  General
Ledger for the current month;

    

     

    
      (7) Variance
Report with narrative explanations of all material variances (*i.e, those exceeding the lesser of five
percent (5%) or $1,000 of an individual Budget category of income or expense
(actual compared to Budget) for the reporting period on a monthly and Fiscal
Year to date basis;

    

    
       

      (8) Rent Roll
as of month end close out;


    

    
       

      (9) Aged
Accounts Receivable Summary (i.e. Tenant Delinquent Report);

    

    
       

      (10) Accounts
Receivable activity statement itemizing for the reporting period the opening
rents receivable balance, the collected and billed rents, the closing rents
receivable balance and any advanced rent and security deposit
balances;

    

    
       

      (11) Monthly
Management Fee Calculation and Fiscal Year to date
reconciliation;

    

    
       

      (12) Aged
Payables schedule;


    

    
       

      (13) Market
Survey detailing leasing activity at the Property, the competitive environment
vacancy rate for the relevant market in which the Property is locate for the
current month.

    

    
       

      (14) Narrative/Executive
Summary reporting (i) general operations and performance; (ii) marketing/leasing
activity: (iii) monthly site activity; (iv) capital improvements in progress;
(v) pending marketing and management plans for upcoming month and
quarter

    

    
      


       

      Each of
the above-described monthly reports shall be prepared, where applicable, on an
accrual
basis of
accounting or on such other basis set forth in Section
2.6(G).

    

    
      


       

      31

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    
      


        
          Property Management
Agreement for Springhouse at Newport Apartments, Newport News,
Virginia



         

        Exhibit
B

         

        Monthly
Cash Flow Distribution Calculation:

        
          	 
      	 
      	 
      	 
      	 
      
	
                  Distributable Funds Worksheet
      

                  As
      of____________

                	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Operating
      Cash Balance (as__________ of)

                	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Security
      Deposit (MM Acct) Cash Balance Excess Cash

                	 
      	 
      	 
      	 
      
	
                  Self-Managed
      Repair Escrow

                	 
      	 
      	 
      	 
      
	
                  Insurance
      Capital Reserve 2009

                	 
      	 
      	
                  -

                	 
      
	
                  Franchise
      tax 2009

                	 
      	 
      	 
      	 
      
	
                  Security
      Deposit Liability

                	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Excess
      Cash Available

                	 
      	
                  $

                	
                  -

                	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Total
      Cash Available

                	 
      	 
      	
                  -

                	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Reserve
      for Utilities

                	 
      	 
      	
                  -

                	 
      
	
                  Reserve
      for Payroll

                	 
      	 
      	 
      	 
      
	
                  Reserve
      for Outstanding Checks

                	 
      	 
      	 
      	 
      
	
                  Reserve
      for Vendor Payables

                	 
      	 
      	 
      	 
      
	
                  Tax
      Escrow shortage

                	 
      	 
      	 
      	 
      
	
                  Transfer
      to/(from) Parent

                	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Total
      Reserves

                	 
      	
                  $

                	
                  -

                	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Excess
      Cash

                	 
      	 
      	
                  -

                	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Working
      Capital Cushion

                	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                  Distributable
      Funds

                	 
      	
                  $

                	
                  -

                	 
      
	 
      	 
      	 
      	 
      	 
      


        

        32