** **

**Exhibit 10.5**

** **

**SENIOR MEZZANINE PROMISSORY NOTE**

** **
| $21,043,197 |   | December 31,  2008 |
|-------------|--------|-------------------------|

 

SW 131 ST. ROSE MEZZANINE BORROWER LLC, a Delawarelimited liability company (“**Borrower**”), FORVALUE RECEIVED, promises to pay to the order of BEHRINGER HARVARD ST. ROSE REIT,LLC, a Delaware limited liability company or its assigns (“**Lender**”),at such place as Lender may from time to time designate in writing, theprincipal sum of Twenty One Million Forty Three Thousand One Hundred NinetySeven and No/100 Dollars ($21,043,197) or so much thereof as may from time totime have been advanced to Borrower under this Note, with Interest (as definedbelow) on the outstanding principal amount at the rates set forth herein.  In no event shall the principal amountoutstanding hereunder at any time exceed, when combined with the principalamount outstanding at any time under the Junior Mezzanine Promissory Note,dated December 31, 2008, from Borrower to Lender (the “**Junior Mezzanine Note**”), exceed in the aggregate Twenty OneMillion Forty Three Thousand One Hundred Ninety Seven and No/100 Dollars($21,043,197).  Also, in no event shallthe accrued and unpaid interest under this Note, when combined with the accruedand unpaid interest owing under the Junior Mezzanine Note, exceed the amount ofinterest that would be due (taking into account payments of interest made priorto the time in question) if interest had accrued at the rate applicable fromtime to time under this Note and the Junior Mezzanine Note on a principalbalance equal to the aggregate principal outstanding from time to time underthis Note and the Junior Mezzanine Note.

 

**DEFINITIONS**

** **

For the purpose of this Note capitalized terms notdefined below will be as defined in the Loan Agreement:

 

“**Completion**”shall mean the time when the Project is deemed substantially complete, whichwill occur upon the issuance of the final certificate of occupancy, the receipt ofevidence reasonably satisfactory to Lender that no building has beenconstructed over any easements or setback areas and no other improvementsprohibited by the terms of the easements or setbacks have been constructedwithin such easements or setbacks, as applicable, the issuance of a certificate of substantial completion from theMortgagor’s architect, receipt of a contractor’s release and the receipt oflien waivers or similar evidence of payment from the general contractor and allmajor subcontractor (i.e. subcontractors whose contract amount exceeds$100,000) to Lender’s reasonable satisfaction; provided, however, that ifSender Lender shall deem the Project substantially complete, then Lender shalldeem the Project substantially complete.

 

“**DefaultInterest**” shall mean any interest accruing at the Default InterestRate and payable pursuant to the terms hereof or of the other Loan Documents.

 

“**DefaultInterest Rate**” shall mean a rate of interest per annum equal to thelesser of either (a) fifteen percent (15%) per annum or (b) themaximum rate of interest which may be collected from Borrower under applicablelaw.

 

“**Interest**”shall mean any interest accruing at the Interest Rate or the Default InterestRate, as applicable, and payable pursuant to the terms hereof or of the otherLoan Documents.

 

----

 

“**InterestRate**” shall mean a rate of interest per annum equal to thirteen percent(13%) per annum or, if less, the maximum rate of interest which may becollected from Borrower under applicable law.

 

“**Late Charge**”shall mean the lesser of (a) five percent (5%) of any unpaid amount, or (b) themaximum late charge permitted to be charged under applicable law.

 

“**Loan Agreement**”shall mean that certain Senior Mezzanine Loan Agreement, between Lender andBorrower, dated of even date herewith, corresponding to this Note, as the samemay hereafter be amended, modified and restated from time to time.

 

“**MaturityDate**” shall mean December 31, 2013.

 

“**Net CashFlow**” shall mean the amount by which (i) gross income ofthe Project (which shall include, without limitation, all income received byMortgagor from and in connection with any leasing activity) exceeds (ii) operatingexpenses (which shall mean the actual cash operating expenses of the Projectincurred during the period in question and which are consistent with generallyaccepted operating practices for similar properties plus any payments ofinterest and/or principal pursuant to the Senior Loan and the Junior MezzanineNote) excluding Interest paid or payable under this Note to the extent includedin operating expenses.

 

“**Payment Date**”shall mean the first day of each calendar month, commencing on February 1,2009, and the Maturity Date (or, if any such date is not a Business Day, thenthe first Business Day immediately before such date).

 

**SECTION 1 - STATED MATURITY; INTEREST ANDPRINCIPAL PAYMENTS.**

** **

1.1           Payment of Interest.  Interest shall accrue on this Noteat the Interest Rate or, during any time at which an Event of Default iscontinuing, at the Default Interest Rate. Commencing on the first Payment Date, and continuing monthly onthe same date of each calendar month thereafter up to and until the MaturityDate, an installment of accrued and unpaid Interest shall be due and payable toLender to the extent required by the following:

 

(a)                                  Borrower shall be required to payInterest-only, to the extent proceeds are budgeted therefor in the ConstructionBudget (the amount so budgeted being stipulated to be $6,413,523 and beingherein called the “Interest Reserve”); and

 

(b)                                 After the Interest Reserve has beenexhausted, Borrower shall be required to pay Interest-only in an amount equalto the then available Net Cash Flow, or the total of all accrued Interest thatthen remains unpaid, if less, and the excess of such installment of Interestover the amount of the available Net Cash Flow (if any) so deferred shallaccrue as set forth herein.

 

On the Maturity Date, all accrued but unpaid Interest, shall be due andpayable in full.  It is the intent ofBorrower and Lender that this Note shall be treated as a security thatsatisfies the requirements (the “**Straight Debt Safe Harbor**”)of Section 856(m)(1)(A) and Section 856(m)(2) of theInternal Revenue Code of 1986, as amended (the “**Code**”).  Accordingly, notwithstanding any indicationherein to the contrary, (i) Borrower and Lender

 

2

----

 

agree that the terms of this Note shall be interpretedin such a manner that the Note satisfies the Straight Debt Safe Harbor and (ii) theterms of this Note shall be applied such that the Note has a constant effectiveyield to maturity, as determined under Section 1272 of the Code, at afixed rate over the entire term of the Note equal to the Interest Rate (or, during any time at which an Event of Default iscontinuing, at the Default Interest Rate); provided, however, that suchconstruction shall not alter the dates of the principal or Interest payments,or the amounts of principal or Interest payments required to be paid hereunder.

 

1.2           Payments of Principal. On the Maturity Date, the unpaid principal balance, together with allaccrued but unpaid Interest, shall be due and payable in full.

 

1.3           Paymenton Stated Maturity Date.  Anyremaining unpaid Indebtedness shall be due and payable in full at the MaturityDate.

 

1.4           Computationof Interest.  Subject to theprovisions of Section 1.8, Interest under this Note shall be paid as setforth herein and shall be calculated based on actual days elapsed and a threehundred sixty (360) day year.  Subject tothe provisions of Section 1.8, Interest that becomes due under this Noteand remains unpaid shall be compounded monthly and shall itself bear Interest(without becoming part of the principal balance of this Note) at the InterestRate such that the Note has a constant effective yield to maturity at theInterest Rate as described in Section 1.1. hereof (or, during any time atwhich an Event of Default is continuing, at the Default Interest Rate).

 

1.5           Methodof Payment.  Each payment duehereunder shall not be deemed received by Lender until received on a BusinessDay (as hereafter defined) in Federal funds in lawful money of the UnitedStates of America immediately available to Lender prior to 2:00 p.m. localtime at the place then designated by Lender. Any payment received on a Business Day after the time established by thepreceding sentence, shall be deemed to have been received on the immediatelyfollowing Business Day for purposes of determining interest accruals and LateCharges.

 

1.6           Applicationof Payments.  Payments under thisNote shall be applied first to the payment of Late Charges and Default Interestand other costs and charges due in connection with this Note, as Lenderdetermines in its sole discretion, then to the payment of accrued but unpaidInterest, and then to reduction of the outstanding principal balance.  No principal amount repaid may bereborrowed.  All amounts due under thisNote shall be payable without setoff, counterclaim or any other deductionwhatsoever.

 

1.7           Prepayment.  No prepayment of this Note shallbe permitted without Lender’s approval in writing, in Lender’s sole discretion,except as expressly provided in Section 4(d) of the LoanAgreement.

 

1.8           No Usury.  The provisions of this Note and of all otheragreements between Borrower and Lender, whether now existing or hereafterarising and whether written or oral, including, but not limited to, the LoanDocuments, are hereby expressly limited so that in no contingency or eventwhatsoever, whether by reason of demand or acceleration of the maturity of thisNote or otherwise, shall the amount contracted for, charged, taken, reserved,paid, or agreed 

 

3

----

 

to be paid to Lender forthe use, forbearance, retention or detention of the money loaned under thisNote and related indebtedness exceed the maximum amount permissible underapplicable law.  If, from anycircumstance whatsoever, performance or fulfillment of any provision hereof orof any agreement between Borrower and Lender shall, at the time performance orfulfillment of such provision shall be due, exceed the limit for interestprescribed by law or otherwise transcend the limit of validity prescribed byapplicable law, then ipso facto the obligation to be performed or fulfilledshall be reduced to such limit; and if, from any circumstance whatsoever,Lender shall ever receive anything of value deemed interest by applicable lawin excess of the maximum lawful amount, an amount equal to any excessiveinterest shall be applied to the reduction of the principal balance owing underthis Note in the inverse order of its maturity (whether or not then due) or atthe option of Lender be paid over to Borrower, and not to the payment ofinterest.  All Interest (including anyamounts or payments judicially or otherwise under the law deemed to beinterest) contracted for, charged, taken, reserved, paid or agreed to be paidto Lender shall, to the extent permitted by applicable law, be amortized,prorated, allocated and spread throughout the full term of the Note, includingany extensions or renewals thereof, until payment in full of the Indebtednessso that the Interest thereof for such full period will not exceed at any timethe maximum amount permitted by applicable law. To the extent that Lender is relying on Chapter 303, as amended, ofthe Texas Finance Code to determine the maximum amount of interest permitted byapplicable law on the principal of the Loan, Lender will utilize the weeklyrate ceiling from time to time in effect as provided in such Chapter 303,as amended.  To the extent United Statesfederal law permits a greater amount of interest than is permitted under Texaslaw, Lender will rely on United States federal law instead of suchChapter 303, as amended, for the purpose of determining the maximum amountpermitted by applicable law. Additionally, to the extent permitted by applicable law now or hereafterin effect, Lender may, at its option and from time to time, implement any othermethod of computing the maximum lawful rate under such Chapter 303, asamended, or under other applicable law by giving notice, if required, toBorrower as provided by applicable law now or hereafter in effect.  This Section 1.8 will control allagreements between Borrower and Lender.

 

**SECTION 2 - DEFAULT; REMEDIES**

** **

2.1           Acceleration.  Lender may, by notice to Borrower at any timeduring the existence of an Event of Default, declare immediately due andpayable the entire principal amount outstanding hereunder together with allInterest and other charges due hereunder including, without limitation, allLate Charges and Default Interest.

 

2.2           Default Interest Rate; LateCharges.

 

(a)           Afteran Event of Default, the Default Interest Rate shall apply, in place of theInterest Rate, to all amounts outstanding under the Loan.  Such Default Interest shall be compounded onthe monthly anniversary of such Event of Default until paid in full.

 

(b)           Ifany monthly installment of Interest due hereunder is not received by Lender onor before the tenth (10th) day after such installment becomes due,Borrower shall pay to Lender, immediately and without demand by Lender, theLate Charge on such outstanding monthly installment.  Borrower acknowledges that its failure tomake timely payments will cause Lender to incur additional expenses inservicing and processing the Loan, and that it is extremely 

 

4

----

 

difficultand impractical to determine those additional expenses.  Borrower agrees that any such Late Chargespayable pursuant to this Section 2.2(b) represent a fair andreasonable estimate, taking into account all circumstances existing on the datehereof, of the additional expenses Lender will incur by reason of such latepayment.  Any such Late Charge is payablein addition to, and not in lieu of, any Interest payable at the Default Ratepursuant to Section 2.2(a).

 

2.3           Remedies.  The remedies of Lender as provided herein, orin the Loan Documents, or at law or in equity shall be cumulative andconcurrent, and may be pursued singularly, successively, or together at thesole discretion of Lender, and may be exercised as often as occasion thereforshall occur.  The failure at any time toexercise any right or remedy shall not constitute a waiver of the right toexercise the right or remedy at any other time.

 

**SECTION 3 - SECURITY**

** **

Borrower’s obligations under this Note are securedby, among other instruments, the Security Instrument and other LoanDocuments.  The covenants of the SecurityInstrument and the Loan Agreement, to the extent to be performed by Borrower,are incorporated by reference into this Note.

 

**SECTION 4 - WAIVER**

** **

Presentment for payment, demand, notice of dishonor,protest, and notice of protest and stay of execution are hereby waived byBorrower.  No extension or indulgence orrelease of collateral granted from time to time shall be construed as anovation of this Note or as a reinstatement of the indebtedness evidencedhereby or as a waiver of the rights of Lender herein.

 

**SECTION 5 - EXCULPATION**

** **

5.1           LenderExculpation.  Notwithstandinganything to the contrary contained in this Note, no present or futureshareholder, director, officer, member or partner of Lender or of any entitywhich is now or hereafter a shareholder, director, officer, member or partnerof Lender (or of any entity which is now or hereafter a shareholder, director,officer, member or partner of a shareholder, director, officer, member orpartner of Lender) shall have any personal liability, directly or indirectly,under or in connection with this Note or any agreement made or entered intounder or in connection with the provisions of this Note, or any amendment or amendmentsto any of the foregoing made at any time or times, heretofore or hereafter, andBorrower hereby forever and irrevocably waives and releases any and all suchpersonal liability.  In addition, neitherLender nor any successor or assign of Lender shall have at any time or timeshereafter any personal liability, directly or indirectly, under or inconnection with any agreement, lease, instrument, encumbrance, claim or rightaffecting or relating to the Project or to which the Project is now or hereaftersubject.  The limitation of liabilityprovided in this paragraph is in addition to, and not in limitation of, anylimitation on liability applicable to Lender provided by law or by any othercontract, agreement or instrument.

 

5.2           BorrowerExculpation.  Borrower’s liability inconnection with this Note and the other Loan Documents (including Borrower’sliability for all amounts due hereunder or thereunder) is collectible only fromthe collateral against which a security interest is created by the Security Instrument.  In no case will any person who holds a director indirect ownership 

 

5

----

 

interestin Borrower, or any officer, director, manager, trustee, employee, agent oraffiliate of Borrower or any such direct or indirect owner, have anyresponsibility for Borrower’s obligations in connection with this Note and theother Loan Documents (including Borrower’s liability for any amounts duehereunder or thereunder); provided, however, that nothing in this Section 5.2limits the liability of any person under a guaranty or other agreement executedby such person.

 

**SECTION 6 - GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OFJURY TRIAL; SEVERABILITY**

** **

6.1           GoverningLaw.  This Note shall be governed by,and construed in accordance with, the substantive law of the State of Texaswithout regard to the application of choice of law principles.

 

6.2           **SUBMISSION TOJURISDICTION/SERVICE OF PROCESS. BORROWER HEREBY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THESTATE COURTS OF THE STATE OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS FOR THEPURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPONTHIS NOTE, THE SUBJECT MATTER HEREOF, OR THE LOAN. BORROWER TO THE EXTENTPERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT,BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHERPROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECTPERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION ORPROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,ACTION OR PROCEEDING IS IMPROPER OR THAT THIS NOTE, THE SUBJECT MATTER HEREOF, OR THE OTHER LOAN (AS APPLICABLE) MAY NOTBE ENFORCED IN OR BY SUCH COURT AND (B) HEREBY WAIVES THE RIGHT TO REMOVEANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY LENDER IN THE ABOVE NAMEDCOURTS.  BORROWER HEREBY CONSENTS TOSERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TOIT PURSUANT TO SECTION 7 HEREOF, BUT SERVICE SO MADE WILL BE EFFECTIVEONLY ON DELIVERY AT SUCH ADDRESS. BORROWER AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TOSERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF LENDER.  FINAL JUDGMENT AGAINST BORROWER IN ANY SUCH ACTION,SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHERJURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, ACERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OFTHE AMOUNT OF INDEBTEDNESS OR LIABILITY OF BORROWER THEREIN DESCRIBED, OR (Y) INANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHERJURISDICTION.  THE LENDER MAY AT ITSOPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST BORROWER ORANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF**

 

6

----

 

**ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCHASSETS MAY BE FOUND.**

 

6.3           WAIVERWITH RESPECT TO DAMAGES.  BORROWERACKNOWLEDGES THAT LENDER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP WITH, ORFIDUCIARY DUTY TO, BORROWER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE ORANY OTHER LOAN DOCUMENT AND THE RELATIONSHIP BETWEEN LENDER AND BORROWER INCONNECTION HEREWITH AND THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,BORROWER SHALL NOT ASSERT, AND BORROWER HEREBY WAIVES, ANY CLAIMS AGAINSTLENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVEDAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTIONWITH, OR AS A RESULT OF, THIS NOTE, ANY OTHER LOAN DOCUMENT, ANY AGREEMENT ORINSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONS CONTEMPLATEDHEREBY OR THEREBY.

 

6.4           WAIVEROF JURY TRIAL.  BORROWER HEREBYKNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT BORROWER MAY HAVETO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THISNOTE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OFTHE LENDER IN CONNECTION WITH THIS NOTE OR ANY OF THE OTHER LOANDOCUMENTS.  BORROWER ACKNOWLEDGES THATTHIS WAIVER IS A MATERIAL INDUCEMENT FOR THE LENDER TO DISBURSE THE MONEYEVIDENCED BY THIS NOTE AND TO ENTER INTO THE OTHER LOAN DOCUMENTS.

 

6.5           Severability. If any provision of this Note is held tobe invalid or unenforceable by a court of competent jurisdiction, the otherprovisions of this Note shall remain in full force and effect.

 

**SECTION 7 - NOTICES**

** **

7.1           Notices.  All notices, demands and other communications(“**Notice**”) under or concerning this Noteshall be in writing.  Each Notice shallbe addressed to the intended recipient at its address set forth in the LoanAgreement.  Each Notice shall be deemedgiven on the earliest to occur of (1) the date when the Notice is receivedby the addressee; (2) the first (1st) Business Day after the Notice isdelivered to a recognized overnight courier service, with arrangements made forpayment of charges, for next Business Day delivery; or (3) the thirdBusiness Day after the Notice is deposited in the United States mail withpostage prepaid, certified mail, return receipt requested.

 

7.2           Anyparty to this Agreement may change the address to which Notices intended for itare to be directed by means of Notice given to the other party in accordancewith this Section 7.  Each partyagrees that it will not refuse or reject delivery of any Notice given inaccordance with this Section 7, that it will acknowledge, in writing, thereceipt of any Notice upon request by the other party and that any Noticerejected or refused by it shall be deemed for 

 

7

----

 

purposesof this Section 7 to have been received by the rejecting party on the dateso refused or rejected, as conclusively established by the records of the U.S.Postal Service or the courier service. Any Notice under any other Loan Documentwhich does not specify how Notices are to be given shall be given in accordancewith this Section 7.

 

**SECTION 8 - MISCELLANEOUS**

** **

8.1           Costs.  If, and as often as, this Note is referred toan attorney for the collection of any sum payable hereunder, or to defend orenforce any of Lender’s rights hereunder, or to commence an action,cross-claim, third-party claim or counterclaim by Lender against Borrowerrelating to this Note, Borrower agrees to pay to Lender all costs reasonablyincurred in connection therewith, including reasonable attorney’s fees(including such fees incurred in appellate, bankruptcy or insolvencyproceedings), with or without the institution of any action or proceeding.

 

8.2           Modification.  Neither this Note nor any of the terms hereofmay be terminated, amended, supplemented, waived or modified orally, but onlyby an instrument in writing executed by the party against which enforcement ofthe termination, amendment, supplement, waiver or modification is sought.

 

8.3           Successors.  As used herein, the terms “Borrower” and “Lender”shall be deemed to include their respective successors and assigns whether byvoluntary action of the parties or by operation of law.  All of the rights, privileges and obligationshereof shall inure to the benefit of and bind such successors and assigns.

 

8.4           LoanAgreement.  To the extent notexpressly stated otherwise herein, all of the terms and conditions of the LoanAgreement shall survive the execution of this Note and shall remain in fullforce and effect; provided, however, to the extent of any irreconcilableconflict between the terms and conditions of the Loan Agreement and this Note,the terms and provisions of this Note shall govern and control.

 

8.5           NoWaiver.  No failure or delay byLender in exercising any right, power or privilege hereunder shall operate as awaiver thereof, nor shall any single or partial exercise of any right, power orprivilege hereunder preclude any other or further exercise thereof or theexercise of any other right, power or privilege.  Without limiting the foregoing, nodisbursement by Lender after a default by Borrower hereunder shall constitute awaiver of any of the Lender’s remedies established or referred to hereunder orshall obligate Lender to make any further disbursement.  No waiver, consent or approval of any kind byLender shall be effective unless (and it shall be effective only to the extent)expressly set out in a writing signed and delivered by Lender.  No notice to or demand on Borrower in anycase shall entitle Borrower to any other notice or demand in similar or othercircumstances, nor shall such notice or demand constitute a waiver of therights of Lender to any other or further actions.  In its sole discretion, Lender may, at anytime and from time to time, waive any one or more of the requirements containedherein, but such waiver in any instance or under any particular circumstancesshall not be considered a waiver of such requirement or requirements in anyother instance or under any other circumstance.

 

8

----

 

8.6           Soleand Absolute Discretion.  Any option,consent, approval, discretion or similar right of Lender set forth in this Notemay be exercised by Lender in its sole and absolute discretion, unless theprovisions of this Note or another Loan Document specifically require anotherstandard.

 

[THEREMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

 

9

----

 

IN WITNESS WHEREOF, the undersigned has dulyexecuted and delivered this Note as of the date first set forth above.

 
|   |   |   | BORROWER:                                |
|--------|--------|--------|------------------------------------------|
|   |   |   |                                     |
|   |   |   | SW  131 ST. ROSE MEZZANINE BORROWER LLC, |
|   |   |   | a  Delaware limited liability company    |
|   |   |   |                                     |   |
|   |   |   | By:                                      | SW  130 St. Rose Limited Partnership, a Delaware |
|   |   |   |                                     | limited  partnership, its sole member |
|   |   |   |                                     |   |   |
|   |   |   |                                     | By: | SW  129 St. Rose Limited Partnership, a |
|   |   |   |                                     |   | Delaware  limited partnership, its general |
|   |   |   |                                     |   | partner |
|   |   |   |                                     |   |   |   |
|   |   |   |                                     |   | By: | SW  104 Development GP LLC, a |
|   |   |   |                                     |   |   | Delaware  limited liability company, its |
|   |   |   |                                     |   |   | general  partner |
|   |   |   |                                     |   |   |   |   |
|   |   |   |                                     |   |   | By: | /s/  Timothy J. Hogan |
|   |   |   |                                     |   |   |   | Timothy  J. Hogan, Vice President |

 

----

** **

**JUNIOR MEZZANINE PROMISSORY NOTE**

** **
| $21,043,197 |   | December 31,  2008 |
|-------------|--------|-------------------------|

 

SW 131 ST. ROSE MEZZANINE BORROWER LLC, a Delawarelimited liability company (“**Borrower**”), FORVALUE RECEIVED, promises to pay to the order of BEHRINGER HARVARD ST. ROSEREIT, LLC, a Delaware limited liability company or its assigns (“**Lender**”), at such place as Lender may from time to timedesignate in writing, the principal sum of Twenty One Million Forty ThreeThousand One Hundred Ninety Seven and No/100 Dollars ($21,043,197) or so much thereofas may from time to time have been advanced to Borrower under this Note, withInterest (as defined below) on the outstanding principal amount at the ratesset forth herein.  In no event shall theprincipal amount outstanding hereunder at any time, when combined with theprincipal amount outstanding at any time under the Senior Mezzanine PromissoryNote, dated December 31, 2008, from Borrower to Lender (the “**Senior Mezzanine Note**”), exceed in the aggregate Twenty OneMillion Forty Three Thousand One Hundred Ninety Seven and No/100 Dollars($21,043,197).  Also, in no event shallthe accrued and unpaid interest under this Note, when combined with the accruedand unpaid interest owing under the Senior Mezzanine Note, exceed the amount ofinterest that would be due (taking into account payments of interest made priorto the time in question) if interest had accrued at the rate applicable fromtime to time under this Note and the Senior Mezzanine Note on a principalbalance equal to the aggregate principal outstanding from time to time underthis Note and the Senior Mezzanine Note.

 

**DEFINITIONS**

** **

For the purpose of this Note capitalized terms notdefined below will be as defined in the Loan Agreement:

 

“**Completion**”shall mean the time when the Project is deemed substantially complete, whichwill occur upon the issuance of the final certificate of occupancy, the receipt ofevidence reasonably satisfactory to Lender that no building has beenconstructed over any easements or setback areas and no other improvementsprohibited by the terms of the easements or setbacks have been constructedwithin such easements or setbacks, as applicable, the issuance of a certificate of substantial completion from theMortgagor’s architect, receipt of a contractor’s release and the receipt oflien waivers or similar evidence of payment from the general contractor and allmajor subcontractor (i.e. subcontractors whose contract amount exceeds$100,000) to Lender’s reasonable satisfaction; provided, however, that ifSender Lender shall deem the Project substantially complete, then Lender shalldeem the Project substantially complete.

 

“**DefaultInterest**” shall mean any interest accruing at the Default InterestRate and payable pursuant to the terms hereof or of the other Loan Documents.

 

“**DefaultInterest Rate**” shall mean a rate of interest per annum equal to thelesser of either (a) fifteen percent (15%) per annum or (b) themaximum rate of interest which may be collected from Borrower under applicablelaw.

 

“**Interest**”shall mean any interest accruing at the Interest Rate or the Default InterestRate, as applicable, and payable pursuant to the terms hereof or of the otherLoan Documents.

 

----

 

“**InterestRate**” shall mean a rate of interest per annum equal to thirteenpercent (13%) per annum or, if less, the maximum rate of interest which may becollected from Borrower under applicable law.

 

“**Late Charge**”shall mean the lesser of (a) five percent (5%) of any unpaid amount, or (b) themaximum late charge permitted to be charged under applicable law.

 

“**Loan Agreement**”shall mean that certain Junior Mezzanine Loan Agreement, between Lender andBorrower, dated of even date herewith, corresponding to this Note, as the samemay hereafter be amended, modified and restated from time to time.

 

“**MaturityDate**” shall mean December 31, 2013.

 

“**Net CashFlow**” shall mean the amount by which (i) gross income ofthe Project (which shall include, without limitation, all income received byMortgagor from and in connection with any leasing activity) exceeds (ii) operatingexpenses (which shall mean the actual cash operating expenses of the Projectincurred during the period in question and which are consistent with generallyaccepted operating practices for similar properties plus any payments ofinterest and/or principal pursuant to the Senior Loan and the Senior MezzanineNote) excluding Interest paid or payable under this Note to the extent includedin operating expenses.

 

“**Payment Date**”shall mean the first day of each calendar month, commencing on February 1,2009, and the Maturity Date (or, if any such date is not a Business Day, thenthe first Business Day immediately before such date).

 

**SECTION 1 - STATED MATURITY; INTEREST ANDPRINCIPAL PAYMENTS.**

** **

1.1           Payment of Interest.  Interest shall accrue on this Noteat the Interest Rate or, during any time at which an Event of Default iscontinuing, at the Default Interest Rate. Commencing on the first Payment Date, and continuing monthly onthe same date of each calendar month thereafter up to and until the MaturityDate, an installment of accrued and unpaid Interest shall be due and payable toLender to the extent required by the following:

 

(a)                                  Borrower shall be required to payInterest-only, to the extent proceeds are budgeted therefor in the ConstructionBudget (the amount so budgeted being stipulated to be $6,413,523 and beingherein called the “Interest Reserve”); and

 

(b)                                 After the Interest Reserve has beenexhausted, Borrower shall be required to pay Interest-only in an amount equalto the then available Net Cash Flow, or the total of all accrued Interest thatthen remains unpaid, if less, and the excess of such installment of Interestover the amount of the available Net Cash Flow (if any) so deferred shallaccrue as set forth herein.

 

On the Maturity Date, all accrued but unpaid Interest, shall be due andpayable in full.  It is the intent ofBorrower and Lender that this Note shall be treated as a security thatsatisfies the requirements (the “**Straight Debt Safe Harbor**”)of Section 856(m)(1)(A) and Section 856(m)(2) of theInternal Revenue Code of 1986, as amended (the “**Code**”).  Accordingly, notwithstanding any indicationherein to the contrary, (i) Borrower and Lender 

 

2

----

 

agreethat the terms of this Note shall be interpreted in such a manner that the Notesatisfies the Straight Debt Safe Harbor and (ii) the terms of this Noteshall be applied such that the Note has a constant effective yield to maturity,as determined under Section 1272 of the Code, at a fixed rate over theentire term of the Note equal to the Interest Rate (or, during any time at which an Event of Default is continuing, at theDefault Interest Rate); provided, however, that such construction shallnot alter the dates of the principal or Interest payments, or the amounts ofprincipal or Interest payments required to be paid hereunder.

 

1.2           Payments of Principal. On the Maturity Date, the unpaid principal balance, together with allaccrued but unpaid Interest, shall be due and payable in full.

 

1.3           Paymenton Stated Maturity Date.  Anyremaining unpaid Indebtedness shall be due and payable in full at the MaturityDate.

 

1.4           Computationof Interest.  Subject to theprovisions of Section 1.8, Interest under this Note shall be paid as setforth herein and shall be calculated based on actual days elapsed and a threehundred sixty (360) day year.  Subject tothe provisions of Section 1.8, Interest that becomes due under this Noteand remains unpaid shall be compounded monthly and shall itself bear Interest(without becoming part of the principal balance of this Note) at the InterestRate such that the Note has a constant effective yield to maturity at theInterest Rate as described in Section 1.1. hereof (or, during any time atwhich an Event of Default is continuing, at the Default Interest Rate).

 

1.5           Methodof Payment.  Each payment duehereunder shall not be deemed received by Lender until received on a BusinessDay (as hereafter defined) in Federal funds in lawful money of the UnitedStates of America immediately available to Lender prior to 2:00 p.m. localtime at the place then designated by Lender. Any payment received on a Business Day after the time established by thepreceding sentence, shall be deemed to have been received on the immediatelyfollowing Business Day for purposes of determining interest accruals and LateCharges.

 

1.6           Applicationof Payments.  Payments under thisNote shall be applied first to the payment of Late Charges and Default Interestand other costs and charges due in connection with this Note, as Lenderdetermines in its sole discretion, then to the payment of accrued but unpaidInterest, and then to reduction of the outstanding principal balance.  No principal amount repaid may bereborrowed.  All amounts due under thisNote shall be payable without setoff, counterclaim or any other deductionwhatsoever.

 

1.7           Prepayment.  No prepayment of this Note shallbe permitted without Lender’s approval in writing, in Lender’s sole discretion,except as expressly provided in Section 4(d) of the LoanAgreement.

 

1.8           No Usury.  The provisions of this Note and of all otheragreements between Borrower and Lender, whether now existing or hereafterarising and whether written or oral, including, but not limited to, the LoanDocuments, are hereby expressly limited so that in no contingency or eventwhatsoever, whether by reason of demand or acceleration of the maturity of thisNote or otherwise, shall the amount contracted for, charged, taken, reserved,paid, or agreed 

 

3

----

 

to be paid to Lender forthe use, forbearance, retention or detention of the money loaned under thisNote and related indebtedness exceed the maximum amount permissible underapplicable law.  If, from any circumstancewhatsoever, performance or fulfillment of any provision hereof or of anyagreement between Borrower and Lender shall, at the time performance orfulfillment of such provision shall be due, exceed the limit for interestprescribed by law or otherwise transcend the limit of validity prescribed byapplicable law, then ipso facto the obligation to be performed or fulfilledshall be reduced to such limit; and if, from any circumstance whatsoever,Lender shall ever receive anything of value deemed interest by applicable lawin excess of the maximum lawful amount, an amount equal to any excessiveinterest shall be applied to the reduction of the principal balance owing underthis Note in the inverse order of its maturity (whether or not then due) or atthe option of Lender be paid over to Borrower, and not to the payment ofinterest.  All Interest (including anyamounts or payments judicially or otherwise under the law deemed to beinterest) contracted for, charged, taken, reserved, paid or agreed to be paidto Lender shall, to the extent permitted by applicable law, be amortized,prorated, allocated and spread throughout the full term of the Note, includingany extensions or renewals thereof, until payment in full of the Indebtednessso that the Interest thereof for such full period will not exceed at any timethe maximum amount permitted by applicable law. To the extent that Lender is relying on Chapter 303, as amended, ofthe Texas Finance Code to determine the maximum amount of interest permitted byapplicable law on the principal of the Loan, Lender will utilize the weeklyrate ceiling from time to time in effect as provided in such Chapter 303,as amended.  To the extent United Statesfederal law permits a greater amount of interest than is permitted under Texaslaw, Lender will rely on United States federal law instead of suchChapter 303, as amended, for the purpose of determining the maximum amountpermitted by applicable law. Additionally, to the extent permitted by applicable law now or hereafterin effect, Lender may, at its option and from time to time, implement any othermethod of computing the maximum lawful rate under such Chapter 303, asamended, or under other applicable law by giving notice, if required, toBorrower as provided by applicable law now or hereafter in effect.  This Section 1.8 will control allagreements between Borrower and Lender.

 

**SECTION 2 - DEFAULT; REMEDIES**

** **

2.1           Acceleration.  Lender may, by notice to Borrower at any timeduring the existence of an Event of Default, declare immediately due andpayable the entire principal amount outstanding hereunder together with allInterest and other charges due hereunder including, without limitation, allLate Charges and Default Interest.

 

2.2           Default Interest Rate; LateCharges.

 

(a)           Afteran Event of Default, the Default Interest Rate shall apply, in place of theInterest Rate, to all amounts outstanding under the Loan.  Such Default Interest shall be compounded onthe monthly anniversary of such Event of Default until paid in full.

 

(b)           Ifany monthly installment of Interest due hereunder is not received by Lender onor before the tenth (10th) day after such installment becomes due,Borrower shall pay to Lender, immediately and without demand by Lender, theLate Charge on such outstanding monthly installment.  Borrower acknowledges that its failure tomake timely payments will cause Lender to incur additional expenses inservicing and processing the Loan, and that it is extremely 

 

4

----

 

difficultand impractical to determine those additional expenses.  Borrower agrees that any such Late Chargespayable pursuant to this Section 2.2(b) represents a fair andreasonable estimate, taking into account all circumstances existing on the datehereof, of the additional expenses Lender will incur by reason of such latepayment.  Any such Late Charge is payablein addition to, and not in lieu of, any Interest payable at the Default Ratepursuant to Section 2.2(a).

 

2.3           Remedies.  The remedies of Lender as provided herein, orin the Loan Documents, or at law or in equity shall be cumulative andconcurrent, and may be pursued singularly, successively, or together at thesole discretion of Lender, and may be exercised as often as occasion thereforshall occur.  The failure at any time toexercise any right or remedy shall not constitute a waiver of the right toexercise the right or remedy at any other time.

 

**SECTION 3 - SECURITY**

** **

Borrower’s obligations under this Note are securedby, among other instruments, the Security Instrument and other LoanDocuments.  The covenants of the SecurityInstrument and the Loan Agreement, to the extent to be performed by Borrower,are incorporated by reference into this Note.

 

**SECTION 4 - WAIVER**

** **

Presentment for payment, demand, notice of dishonor,protest, and notice of protest and stay of execution are hereby waived byBorrower.  No extension or indulgence orrelease of collateral granted from time to time shall be construed as anovation of this Note or as a reinstatement of the indebtedness evidencedhereby or as a waiver of the rights of Lender herein.

 

**SECTION 5 - EXCULPATION**

** **

5.1           LenderExculpation.  Notwithstandinganything to the contrary contained in this Note, no present or futureshareholder, director, officer, member or partner of Lender or of any entitywhich is now or hereafter a shareholder, director, officer, member or partnerof Lender (or of any entity which is now or hereafter a shareholder, director,officer, member or partner of a shareholder, director, officer, member orpartner of Lender) shall have any personal liability, directly or indirectly,under or in connection with this Note or any agreement made or entered intounder or in connection with the provisions of this Note, or any amendment oramendments to any of the foregoing made at any time or times, heretofore orhereafter, and Borrower hereby forever and irrevocably waives and releases anyand all such personal liability.  Inaddition, neither Lender nor any successor or assign of Lender shall have atany time or times hereafter any personal liability, directly or indirectly,under or in connection with any agreement, lease, instrument, encumbrance,claim or right affecting or relating to the Project or to which the Project isnow or hereafter subject.  The limitationof liability provided in this paragraph is in addition to, and not inlimitation of, any limitation on liability applicable to Lender provided by lawor by any other contract, agreement or instrument.

 

5.2           BorrowerExculpation.  Borrower’s liability inconnection with this Note and the other Loan Documents (including Borrower’sliability for all amounts due hereunder or thereunder) is collectible only fromthe collateral against which a security interest is created by the SecurityInstrument.  In no case will any personwho holds a direct or indirect ownership 

 

5

----

 

interestin Borrower, or any officer, director, manager, trustee, employee, agent oraffiliate of Borrower or any such direct or indirect owner, have anyresponsibility for Borrower’s obligations in connection with this Note and theother Loan Documents (including Borrower’s liability for any amounts duehereunder or thereunder); provided, however, that nothing in this Section 5.2limits the liability of any person under a guaranty or other agreement executedby such person.

 

**SECTION 6 - GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OFJURY TRIAL; SEVERABILITY**

** **

6.1           GoverningLaw.  This Note shall be governed by,and construed in accordance with, the substantive law of the State of Texaswithout regard to the application of choice of law principles.

 

6.2           **SUBMISSION TOJURISDICTION/SERVICE OF PROCESS. BORROWER HEREBY IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THESTATE COURTS OF THE STATE OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS FOR THEPURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPONTHIS NOTE, THE SUBJECT MATTER HEREOF, OR THE LOAN. BORROWER TO THE EXTENTPERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT,BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR OTHERPROCEEDING BROUGHT IN THE ABOVE-NAMED COURTS ANY CLAIM THAT IT IS NOT SUBJECTPERSONALLY TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDINGIS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION ORPROCEEDING IS IMPROPER OR THAT THIS NOTE, THE SUBJECT MATTER HEREOF, OR THE OTHER LOAN (AS APPLICABLE) MAY NOTBE ENFORCED IN OR BY SUCH COURT AND (B) HEREBY WAIVES THE RIGHT TO REMOVEANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY LENDER IN THE ABOVE NAMEDCOURTS.  BORROWER HEREBY CONSENTS TOSERVICE OF PROCESS BY MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN TOIT PURSUANT TO SECTION 7 HEREOF, BUT SERVICE SO MADE WILL BE EFFECTIVEONLY ON DELIVERY AT SUCH ADDRESS. BORROWER AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TOSERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF LENDER.  FINAL JUDGMENT AGAINST BORROWER IN ANY SUCHACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANYOTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, ACERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OFTHE AMOUNT OF INDEBTEDNESS OR LIABILITY OF BORROWER THEREIN DESCRIBED, OR (Y) INANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHERJURISDICTION.  THE LENDER MAY AT ITSOPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS, AGAINST BORROWER ORANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF**

 

6

----

 

**ANY COUNTRY OR PLACE WHERE THE SUBMITTING PARTY OR SUCHASSETS MAY BE FOUND.**

 

6.3           WAIVERWITH RESPECT TO DAMAGES.  BORROWERACKNOWLEDGES THAT LENDER DOES NOT HAVE ANY FIDUCIARY RELATIONSHIP WITH, ORFIDUCIARY DUTY TO, BORROWER ARISING OUT OF OR IN CONNECTION WITH THIS NOTE ORANY OTHER LOAN DOCUMENT AND THE RELATIONSHIP BETWEEN LENDER AND BORROWER INCONNECTION HEREWITH AND THEREWITH IS SOLELY THAT OF DEBTOR AND CREDITOR.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,BORROWER SHALL NOT ASSERT, AND BORROWER HEREBY WAIVES, ANY CLAIMS AGAINSTLENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL ORPUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, INCONNECTION WITH, OR AS A RESULT OF, THIS NOTE, ANY OTHER LOAN DOCUMENT, ANYAGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, OR THE TRANSACTIONSCONTEMPLATED HEREBY OR THEREBY.

 

6.4           WAIVEROF JURY TRIAL.  BORROWER HEREBYKNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT BORROWER MAY HAVETO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THISNOTE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OFTHE LENDER IN CONNECTION WITH THIS NOTE OR ANY OF THE OTHER LOANDOCUMENTS.  BORROWER ACKNOWLEDGES THATTHIS WAIVER IS A MATERIAL INDUCEMENT FOR THE LENDER TO DISBURSE THE MONEYEVIDENCED BY THIS NOTE AND TO ENTER INTO THE OTHER LOAN DOCUMENTS.

 

6.5           Severability.  If any provision of this Note is held to beinvalid or unenforceable by a court of competent jurisdiction, the otherprovisions of this Note shall remain in full force and effect.

 

**SECTION 7 - NOTICES**

** **

7.1           Notices.  All notices, demands and other communications(“**Notice**”) under or concerning this Noteshall be in writing.  Each Notice shallbe addressed to the intended recipient at its address set forth in the LoanAgreement.  Each Notice shall be deemedgiven on the earliest to occur of (1) the date when the Notice is receivedby the addressee; (2) the first (1st) Business Day after the Notice isdelivered to a recognized overnight courier service, with arrangements made forpayment of charges, for next Business Day delivery; or (3) the thirdBusiness Day after the Notice is deposited in the United States mail withpostage prepaid, certified mail, return receipt requested.

 

7.2           Anyparty to this Agreement may change the address to which Notices intended for itare to be directed by means of Notice given to the other party in accordancewith this Section 7.  Each partyagrees that it will not refuse or reject delivery of any Notice given inaccordance with this Section 7, that it will acknowledge, in writing, thereceipt of any Notice upon request by the other party and that any Noticerejected or refused by it shall be deemed for 

 

7

----

 

purposesof this Section 7 to have been received by the rejecting party on the dateso refused or rejected, as conclusively established by the records of the U.S.Postal Service or the courier service. Any Notice under any other Loan Documentwhich does not specify how Notices are to be given shall be given in accordancewith this Section 7.

 

**SECTION 8 - MISCELLANEOUS**

** **

8.1           Costs.  If, and as often as, this Note is referred toan attorney for the collection of any sum payable hereunder, or to defend orenforce any of Lender’s rights hereunder, or to commence an action,cross-claim, third-party claim or counterclaim by Lender against Borrowerrelating to this Note, Borrower agrees to pay to Lender all costs reasonablyincurred in connection therewith, including reasonable attorney’s fees(including such fees incurred in appellate, bankruptcy or insolvencyproceedings), with or without the institution of any action or proceeding.

 

8.2           Modification.  Neither this Note nor any of the terms hereofmay be terminated, amended, supplemented, waived or modified orally, but onlyby an instrument in writing executed by the party against which enforcement ofthe termination, amendment, supplement, waiver or modification is sought.

 

8.3           Successors.  As used herein, the terms “Borrower” and “Lender”shall be deemed to include their respective successors and assigns whether byvoluntary action of the parties or by operation of law.  All of the rights, privileges and obligationshereof shall inure to the benefit of and bind such successors and assigns.

 

8.4           LoanAgreement.  To the extent notexpressly stated otherwise herein, all of the terms and conditions of the LoanAgreement shall survive the execution of this Note and shall remain in fullforce and effect; provided, however, to the extent of any irreconcilableconflict between the terms and conditions of the Loan Agreement and this Note,the terms and provisions of this Note shall govern and control.

 

8.5           NoWaiver.  No failure or delay byLender in exercising any right, power or privilege hereunder shall operate as awaiver thereof, nor shall any single or partial exercise of any right, power orprivilege hereunder preclude any other or further exercise thereof or theexercise of any other right, power or privilege.  Without limiting the foregoing, nodisbursement by Lender after a default by Borrower hereunder shall constitute awaiver of any of the Lender’s remedies established or referred to hereunder orshall obligate Lender to make any further disbursement.  No waiver, consent or approval of any kind byLender shall be effective unless (and it shall be effective only to the extent)expressly set out in a writing signed and delivered by Lender.  No notice to or demand on Borrower in anycase shall entitle Borrower to any other notice or demand in similar or othercircumstances, nor shall such notice or demand constitute a waiver of therights of Lender to any other or further actions.  In its sole discretion, Lender may, at anytime and from time to time, waive any one or more of the requirements containedherein, but such waiver in any instance or under any particular circumstancesshall not be considered a waiver of such requirement or requirements in anyother instance or under any other circumstance.

 

8

----

 

8.6           Soleand Absolute Discretion.  Any option,consent, approval, discretion or similar right of Lender set forth in this Notemay be exercised by Lender in its sole and absolute discretion, unless theprovisions of this Note or another Loan Document specifically require anotherstandard.

 

[THE REMAINDER OF THIS PAGEIS INTENTIONALLY LEFT BLANK]

 

9

----

 

IN WITNESS WHEREOF, the undersigned has dulyexecuted and delivered this Note as of the date first set forth above.

 
|   |   |   | BORROWER:                                |
|--------|--------|--------|------------------------------------------|
|   |   |   |                                     |
|   |   |   | SW  131 ST. ROSE MEZZANINE BORROWER LLC, |
|   |   |   | a  Delaware limited liability company    |
|   |   |   |                                     |
|   |   |   | By:                                      | SW  130 St. Rose Limited Partnership, a Delaware |
|   |   |   |                                     | limited  partnership, its sole member |
|   |   |   |                                     |   |
|   |   |   |                                     | By: | SW  129 St. Rose Limited Partnership, a |
|   |   |   |                                     |   | Delaware  limited partnership, its general |
|   |   |   |                                     |   | partner |
|   |   |   |                                     |   |   |
|   |   |   |                                     |   | By: | SW  104 Development GP LLC, a |
|   |   |   |                                     |   |   | Delaware  limited liability company, its |
|   |   |   |                                     |   |   | general  partner |
|   |   |   |                                     |   |   |   |
|   |   |   |                                     |   |   | By: | /s/  Timothy J. Hogan |
|   |   |   |                                     |   |   |   | Timothy  J. Hogan, Vice President |

 

----