**Exhibit 10.19**

** **

FHLMCLoan No. 487798287Waterford Place Apartments

 

**MULTIFAMILY NOTEMULTISTATE - FIXED TO FLOAT (REVISION DATE 2-15-2008)**

 

| US $13,245,000.00 |   | Effective Date:  As of March 31, 2008 |
|-------------------|--------|--------------------------------------------|

 

FOR VALUERECEIVED, the undersigned (together with such party’s or parties’ successorsand assigns, **“Borrower”),**jointlyand severally (if more than one) promises to pay to the order of **DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.**,****a Delaware corporation, the principal sumof Thirteen Million Two Hundred Forty-Five Thousand and 00/100 Dollars (US$13,245,000.00), with interest on the unpaid principal balance, as hereinafterprovided.

 

**1.****                         DefinedTerms.**

 

(a)                     As used inthis Note:

 

**“AdjustableInterest Rate”**means the variable annual interest ratecalculated for each Interest Adjustment Period so as to equal the Index Ratefor such Interest Adjustment Period (truncated at the fifth (5th) decimal place if necessary) plus theMargin.

 

**“AmortizationPeriod”**means a period of 360 full consecutive calendarmonths.

 

**“BaseRecourse”**means a portion of the Indebtedness equal to zeropercent (0%) of the original principal balance of this Note.

 

**“BusinessDay”**means any day other than a Saturday, a Sunday or anyother day on which Lender or the national banking associations are not open forbusiness.

 

**“DefaultRate”**means (i) during the Fixed Rate Period, an annualinterest rate equal to four (4) percentage points above the Fixed InterestRate; and (ii) during the Extension Period, a variable annual interestrate equal to four (4) percentage points above the Adjustable InterestRate in effect from time to time. However, at no time will the Default Rateexceed the Maximum Interest Rate.

 

**“ExtendedMaturity Date”**means, if the Extension Period becomeseffective pursuant to this Note, the earlier of (i) May 1, 2014, and (ii) thedate on which the unpaid principal balance of this Note becomes due and payableby acceleration or otherwise pursuant to the Loan Documents or the exercise byLender of any right or remedy thereunder.

 

**“ExtensionPeriod”**means the twelve (12) consecutive calendar monthsperiod commencing on the Scheduled Initial Maturity Date.

 

**“FixedInterest Rate”**means the annual interest rate of five andforty-five hundredths percent (5.45%).

 

**“FixedRate Period”**means the period beginning on the date of thisNote and continuing through April 30, 2013.

 

1

----

 

**“IndexRate”**means, for any Interest Adjustment Period, theReference Bill® Index Rate for such Interest Adjustment Period.

 

**“InitialMaturity Date”**means the earlier of (i) May 1, 2013(the **“Scheduled Initial Maturity Date”),**and(ii) the date on which the unpaid principal balance of this Note becomesdue and payable by acceleration or otherwise pursuant to the Loan Documents orthe exercise by Lender of any right or remedy thereunder.

 

**“InstallmentDue Date”**means, for any monthly installment of interest onlyor principal and interest, the date on which such monthly installment is dueand payable pursuant to Section 3 of this Note. The **“First Installment Due Date”**under thisNote is May 1, 2008.

 

**“InterestAdjustment Period”**means each successive one calendar monthperiod during the Extension Period and until the entire Indebtedness is paid infull.

 

**“Lender”**means the holder from time to time of this Note.

 

**“LIBORIndex”**means the British Bankers Association’s (BBA) one (1) monthLIBOR Rate for United States Dollar deposits, as displayed on the LIBOR Index Page usedto establish the LIBOR Index Rate.

 

**“LIBORIndex Rate”**means, for any Interest Adjustment Period afterthe first Interest Adjustment Period, the BBA’s LIBOR Rate for the LIBOR Indexreleased by the BBA most recently preceding the first day of such InterestAdjustment Period, as such LIBOR Rate is displayed on the LIBOR Index Page. TheLIBOR Index Rate for the first Interest Adjustment Period means the BritishBankers Association’s (BBA) LIBOR Rate for the LIBOR Index released by the BBAmost recently preceding the first day of the month in which the first InterestAdjustment Period begins, as such LIBOR Rate is displayed on the LIBOR IndexPage. “**LIBOR Index Page”**is theBloomberg L.P., page “BBAM”, or such other page for the LIBOR Indexas may replace page BBAM on that service, or at the option of Lender (i) theapplicable page for the LIBOR Index on another service whichelectronically transmits or displays BBA LIBOR Rates, or (ii) anypublication of LIBOR rates available from the BBA. In the event the BBA ceasesto set or publish a LIBOR rate/interest settlement rate for the LIBOR Index,Lender will designate an alternative index, and such alternative index shallconstitute the LIBOR Index Page.

 

**“Loan”**meansthe loan evidenced by this Note.

 

**“Margin”**means two and one-half (2.5) percentage points (250 basispoints).

 

**“MaturityDate”**means the Extended Maturity Date unless pursuant to Section 3(e) ofthis Note the Extension Period does not or cannot become effective, in whichcase the Maturity Date means the Initial Maturity Date.

 

**“MaximumInterest Rate”**means the rate of interest that results in themaximum amount of interest allowed by applicable law.

 

**“PrepaymentPremium Period”**means the period during which, if aprepayment of principal occurs, a prepayment premium will be payable byBorrower to Lender. The Prepayment Premium Period is the period from andincluding the

 

2

----

 

date of this Note untilbut not including the first day of the Window Period. For this Note, thePrepayment Premium Period equals the Yield Maintenance Period.

 

**“ReferenceBills®”**means the unsecured general obligations of theFederal Home Loan Mortgage Corporation **(“FreddieMac”)**designated by Freddie Mac as “Reference Bills® Securities” andhaving original durations to maturity most comparable to the term of theReference Bill Index, and issued by Freddie Mac at regularly scheduledauctions. In the event Freddie Mac shall at any time cease to designate anyunsecured general obligations of Freddie Mac as “Reference Bills Securities”,then at the option of Lender (i) Lender may select from time to timeanother unsecured general obligation of Freddie Mac having original durationsto maturity most comparable to the term of the Reference Bill Index and issuedby Freddie Mac at regularly scheduled auctions, and the term “Reference Bills”as used in this Note shall mean such other unsecured general obligations asselected by Lender; or (ii) for any one or more Interest AdjustmentPeriods, Lender may use the applicable LIBOR Index Rate as the Index Rate forsuch Interest Adjustment Period(s).

 

**“ReferenceBill Index”**means the one-month Reference Bills. One-monthreference bills have original durations to maturity of approximately 30 days.

 

**“ReferenceBill Index Rate”**means, for any Interest Adjustment Periodafter the first Interest Adjustment Period, the Money Market Yield for theReference Bills as established by the Reference Bill auction conducted byFreddie Mac most recently preceding the first day of such Interest AdjustmentPeriod, as displayed on the Reference Bill Index Page. The Reference Bill IndexRate for the first Interest Adjustment Period means the Money Market Yield forthe Reference Bills as established by the Reference Bill auction conducted byFreddie Mac most recently preceding the first day of the month in which thefirst Interest Adjustment Period begins, as displayed on the Reference BillIndex Page. The **“Reference Bill Index Page”**isthe Freddie Mac Debt Securities Web Page (accessed via the Freddie Macinternet site at www.freddiemac.com), or at the option of Lender, anypublication of Reference Bills auction results available from Freddie Mac.However, if Freddie Mac has not conducted a Reference Bill auction within the60-calendar day period prior to the first day of an Interest Adjustment Period,the Reference Bill Index Rate for such Interest Adjustment Period will be theLIBOR Index Rate for such Interest Adjustment Period.

 

**“RemainingAmortization Period”**means, at any point in time, the numberof consecutive calendar months equal to the number of months in theAmortization Period minus the number of scheduled monthly installments of principaland interest that have elapsed since the date of this Note.

 

**“SecurityInstrument”**means the multifamily mortgage, deed to securedebt or deed of trust effective as of the effective date of this Note, fromBorrower to or for the benefit of Lender and securing this Note.

 

**“TreasurySecurity”**means the 4.25% U.S. Treasury Security due August 15,2013.

 

**“WindowPeriod”**means the Extension Period.

 

**“YieldMaintenance Period”**means the period from and including thedate of this Note until but not including the Scheduled Initial Maturity Date.

 

3

----

 

(b)                    Othercapitalized terms used but not defined in this Note shall have the meaningsgiven to such terms in the Security Instrument.

 

**2.****                         Addressfor Payment.**All payments due under this Note shall be payable at OneBeacon Street, 14th Floor, Boston, Massachusetts 02108, or such other place asmay be designated by Notice to Borrower from or on behalf of Lender.

 

**3.****                         Payments.**

 

(a)                     During theFixed Rate Period, interest will accrue on the outstanding principal balance ofthis Note at the Fixed Interest Rate, subject to the provisions of Section 8of this Note. During the Extension Period, interest will accrue on theoutstanding principal balance of this Note at the Adjustable Interest Rate,subject to the provisions of Section 8 of this Note.

 

(b)                    Interest underthis Note shall be computed, payable and allocated on the basis of anactual/360 interest calculation schedule (interest is payable for the actualnumber of days in each month, and each month’s interest is calculated bymultiplying the unpaid principal amount of this Note as of the first day of themonth for which interest is being calculated by the Fixed Interest Rate (duringthe Fixed Rate Period) or the applicable Adjustable Interest Rate (during theExtension Period), dividing the product by 360, and multiplying the quotient bythe number of days in the month for which interest is being calculated). Forconvenience in determining the amount of a monthly installment of principal andinterest under this Note, Lender will use a 30/360 interest calculation paymentschedule (each year is treated as consisting of twelve 30-day months). However,as provided above, the portion of the monthly installment actually payable asand allocated to interest will be based upon an actual/360 interest calculationschedule, and the amount of each installment attributable to principal and theamount attributable to interest will vary based upon the number of days in themonth for which such installment is paid. Each monthly payment of principal andinterest will first be applied to pay in full interest due, and the balance ofthe monthly payment paid by Borrower will be credited to principal.

 

(c)                     Unlessdisbursement of principal is made by Lender to Borrower on the first day of acalendar month, interest for the period beginning on the date of disbursementand ending on and including the last day of such calendar month shall bepayable by Borrower simultaneously with the execution of this Note. Ifdisbursement of principal is made by Lender to Borrower on the first day of acalendar month, then no payment will be due from Borrower at the time of theexecution of this Note. The Installment Due Date for the first monthlyinstallment payment under Section 3(d) of interest only or principaland interest, as applicable, will be the First Installment Due Date set forthin Section l(a) of this Note. Except as provided in this Section 3(c) andin Section 10, accrued interest will be payable in arrears.

 

(d)                    Beginning onthe First Installment Due Date, and continuing until and including the monthlyinstallment due on the Initial Maturity Date, principal and accrued interestshall be payable by Borrower in consecutive monthly installments due andpayable on the first day of each calendar month. The amount of the monthlyinstallment of principal and interest payable pursuant to this Section 3(d) onan Installment Due Date shall be Seventy-Four Thousand Seven HundredEighty-Eight and 67/100 Dollars ($74,788.67).

 

(e)                     Except asotherwise provided in this Section 3(e), all remaining Indebtedness,including all principal and interest, shall be due and payable by Borrower onthe Initial Maturity Date. However, so long as (i) the Initial MaturityDate has not occurred prior to the Scheduled Initial Maturity Date, and (ii) noEvent of Default or event or circumstance which, with the giving of notice orpassage of time or both, could constitute an Event of Default exists on theScheduled Initial Maturity Date, then the Extension Period automatically willbecome effective and the date for full payment of the Indebtednessautomatically shall be extended until the Extended Maturity Date. If theExtension Period becomes effective, monthly installments of

 

4

----

 

principal and interest orinterest only will be payable during the Extension Period as provided in Section 3(f).Anything in Section 21 of the Security Instrument to the contrarynotwithstanding, during the Extension Period, Borrower will not request thatLender consent to, and Lender will not consent to, a Transfer that, absent suchconsent, would constitute an Event of Default.

 

(f)                       If theExtension Period becomes effective, beginning on June 1, 2013, andcontinuing until and including the monthly installment due on the ExtendedMaturity Date, principal and accrued interest shall be payable by Borrower inconsecutive monthly installments due and payable on the first day of eachcalendar month. The amount of the monthly installment of principal and interestpayable pursuant to this Section 3(f) on an Installment Due Dateshall be calculated so as to equal the monthly payment amount which would bepayable on the Installment Due Date as if the unpaid principal balance of thisNote as of the first day of the Interest Adjustment Period immediatelypreceding the Installment Due Date was to be fully amortized, together withinterest thereon at the Adjustable Interest Rate in effect for such InterestAdjustment Period, in equal consecutive monthly payments paid on the first dayof each calendar month over the Remaining Amortization Period.

 

(g)                    During theExtension Period, Lender shall provide Borrower with Notice, given in themanner specified in the Security Instrument, of the amount of each monthlyinstallment due under this Note. However, if Lender has not provided Borrowerwith prior notice of the monthly payment due on any Installment Due Date, thenBorrower shall pay on that Installment Due Date an amount equal to the monthlyinstallment payment for which Borrower last received notice. If Lender at anytime determines that Borrower has paid one or more monthly installments in anincorrect amount because of the operation of the preceding sentence, or becauseLender has miscalculated the Adjustable Interest Rate or has otherwisemiscalculated the amount of any monthly installment, then Lender shall givenotice to Borrower of such determination. If such determination discloses thatBorrower has paid less than the full amount due for the period for which thedetermination was made, Borrower, within 30 calendar days after receipt of thenotice from Lender, shall pay to Lender the full amount of the deficiency. Ifsuch determination discloses that Borrower has paid more than the full amountdue for the period for which the determination was made, then the amount of theoverpayment shall be credited to the next installment(s) of interest onlyor principal and interest, as applicable, due under this Note (or, if an Eventof Default has occurred and is continuing, such overpayment shall be creditedagainst any amount owing by Borrower to Lender).

 

(h)                    All paymentsunder this Note shall be made in immediately available U.S. funds.

 

(i)                        Anyregularly scheduled monthly installment of interest only or principal andinterest payable pursuant to this Section 3 that is received by Lenderbefore the date it is due shall be deemed to have been received on the due datefor the purpose of calculating interest due.

 

(j)                        Anyaccrued interest remaining past due for 30 days or more, at Lender’sdiscretion, may be added to and become part of the unpaid principal balance ofthis Note and any reference to “accrued interest” shall refer to accruedinterest which has not become part of the unpaid principal balance. Any amountadded to principal pursuant to the Loan Documents shall bear interest at theapplicable rate or rates specified in this Note and shall be payable with suchinterest upon demand by Lender and absent such demand, as provided in this Notefor the payment of principal and interest.

 

(k)                     In accordancewith Section 14, interest charged under this Note cannot exceed theMaximum Interest Rate. If the Adjustable Interest Rate at any time exceeds theMaximum Interest Rate, resulting in the charging of interest hereunder to belimited to the Maximum Interest Rate, then any subsequent reduction in theAdjustable Interest Rate shall not reduce the rate at which interest under thisNote accrues below the Maximum Interest Rate until the total

 

5

----

 

amount of interestaccrued hereunder equals the amount of interest which would have accrued hadthe Adjustable Interest Rate at all times been in effect.

 

**4.****                         Applicationof Payments.**If at any time Lender receives, from Borrower or otherwise,any amount applicable to the Indebtedness which is less than all amounts dueand payable at such time, Lender may apply the amount received to amounts thendue and payable in any manner and in any order determined by Lender, in Lender’sdiscretion. Borrower agrees that neither Lender’s acceptance of a payment fromBorrower in an amount that is less than all amounts then due and payable norLender’s application of such payment shall constitute or be deemed toconstitute either a waiver of the unpaid amounts or an accord and satisfaction.

 

**5.****                         Security.**The Indebtedness is secured by, among other things, the SecurityInstrument, and reference is made to the Security Instrument for other rightsof Lender as to collateral for the Indebtedness.

 

**6.****                         Acceleration.**If an Event of Default has occurred and is continuing, the entire unpaidprincipal balance, any accrued interest, any prepayment premium payable under Section 10,and all other amounts payable under this Note and any other Loan Document,shall at once become due and payable, at the option of Lender, without anyprior notice to Borrower (except if notice is required by applicable law, thenafter such notice). Lender may exercise this option to accelerate regardless ofany prior forbearance. For purposes of exercising such option, Lender shallcalculate the prepayment premium as if prepayment occurred on the date ofacceleration. If prepayment occurs thereafter, Lender shall recalculate theprepayment premium as of the actual prepayment date.

 

**7.****                         LateCharge.**

 

(a)                     If anymonthly installment of interest or principal and interest or other amountpayable under this Note or under the Security Instrument or any other LoanDocument is not received in full by Lender (i) during the Fixed RatePeriod, within ten (10) days after the installment or other amount is due,or (ii) during the Extension Period, within five (5) days after theinstallment or other amount is due, counting from and including the date suchinstallment or other amount is due (unless applicable law requires a longerperiod of time before a late charge may be imposed, in which event such longerperiod shall be substituted), Borrower shall pay to Lender, immediately andwithout demand by Lender, a late charge equal to five percent (5%) of suchinstallment or other amount due (unless applicable law requires a lesser amountbe charged, in which event such lesser amount shall be substituted).

 

(b)                    Borroweracknowledges that its failure to make timely payments will cause Lender toincur additional expenses in servicing and processing the Loan and that it isextremely difficult and impractical to determine those additional expenses.Borrower agrees that the late charge payable pursuant to this Section representsa fair and reasonable estimate, taking into account all circumstances existingon the date of this Note, of the additional expenses Lender will incur byreason of such late payment. The late charge is payable in addition to, and notin lieu of, any interest payable at the Default Rate pursuant to Section 8.

 

**8.****                         DefaultRate.**

 

(a)                     So long as (i) anymonthly installment under this Note remains past due for thirty (30) days or moreor (ii) any other Event of Default has occurred and is continuing, thennotwithstanding anything in Section 3 of this Note to the contrary,interest under this Note shall accrue on the unpaid principal balance from theInstallment Due Date of the first such unpaid monthly installment or theoccurrence of such other Event of Default, as applicable, at the Default Rate.

 

6

----

 

(b)                    From and afterthe Maturity Date, the unpaid principal balance shall continue to bear interestat the Default Rate until and including the date on which the entire principalbalance is paid in full.

 

(c)                     Borroweracknowledges that (i) its failure to make timely payments will causeLender to incur additional expenses in servicing and processing the Loan, (ii) duringthe time that any monthly installment under this Note is delinquent for thirty(30) days or more, Lender will incur additional costs and expenses arising fromits loss of the use of the money due and from the adverse impact on Lender’sability to meet its other obligations and to take advantage of other investmentopportunities; and (iii) it is extremely difficult and impractical todetermine those additional costs and expenses. Borrower also acknowledges that,during the time that any monthly installment under this Note is delinquent forthirty (30) days or more or any other Event of Default has occurred and iscontinuing, Lender’s risk of nonpayment of this Note will be materiallyincreased and Lender is entitled to be compensated for such increased risk.Borrower agrees that the increase in the rate of interest payable under thisNote to the Default Rate represents a fair and reasonable estimate, taking intoaccount all circumstances existing on the date of this Note, of the additionalcosts and expenses Lender will incur by reason of the Borrower’s delinquentpayment and the additional compensation Lender is entitled to receive for theincreased risks of nonpayment associated with a delinquent loan.

 

**9.****                         Limits onPersonal Liability.**

 

(a)                     Except asotherwise provided in this Section 9, Borrower shall have no personalliability under this Note, the Security Instrument or any other Loan Documentfor the repayment of the Indebtedness or for the performance of any otherobligations of Borrower under the Loan Documents and Lender’s only recourse forthe satisfaction of the Indebtedness and the performance of such obligationsshall be Lender’s exercise of its rights and remedies with respect to theMortgaged Property and to any other collateral held by Lender as security forthe Indebtedness. This limitation on Borrower’s liability shall not limit orimpair Lender’s enforcement of its rights against any guarantor of theIndebtedness or any guarantor of any other obligations of Borrower.

 

(b)                    Borrower shallbe personally liable to Lender for the amount of the Base Recourse, plus anyother amounts for which Borrower has personal liability under this Section 9.

 

(c)                     In additionto the Base Recourse, Borrower shall be personally liable to Lender for therepayment of a further portion of the Indebtedness equal to any loss or damagesuffered by Lender as a result of the occurrence of any of the followingevents:

 

(i)                     Borrowerfails to pay to Lender upon demand after an Event of Default all Rents to whichLender is entitled under Section 3(a) of the Security Instrument andthe amount of all security deposits collected by Borrower from tenants then inresidence. However, Borrower will not be personally liable for any failuredescribed in this subsection (i) if Borrower is unable to pay to Lenderall Rents and security deposits as required by the Security Instrument becauseof a valid order issued in a bankruptcy, receivership, or similar judicialproceeding.

 

(ii)                  Borrower failsto apply all insurance proceeds and condemnation proceeds as required by theSecurity Instrument. However, Borrower will not be personally liable for anyfailure described in this subsection (ii) if Borrower is unable to applyinsurance or condemnation proceeds as required by the Security Instrumentbecause of a valid order issued in a bankruptcy, receivership, or similarjudicial proceeding.

 

7

----

 

(iii)               Borrower fails tocomply with Section 14(g) or (h) of the Security Instrumentrelating to the delivery of books and records, statements, schedules andreports.

 

(iv)              Borrower fails topay when due in accordance with the terms of the Security Instrument the amountof any item below marked “Deferred”; provided however, that if no item ismarked “Deferred”, this Section 9(c)(iv) shall be of no force oreffect.

 
| [Deferred] | Hazard Insurance  premiums or other insurance premiums,                            |
|------------|------------------------------------------------------------------------------------|
| [Deferred] | Taxes,                                                                             |
| [Deferred] | water and sewer charges  (that could become a lien on the Mortgaged Property),     |
| [Deferred] | ground rents,                                                                      |
| [Deferred] | assessments or other  charges (that could become a lien on the Mortgaged Property) |

 

(d)                    In addition tothe Base Recourse, Borrower shall be personally liable to Lender for:

 

(i)                          theperformance of all of Borrower’s obligations under Section 18 of theSecurity Instrument (relating to environmental matters);

 

(ii)                       the costsof any audit under Section 14(g) of the Security Instrument; and

 

(iii)                    any costs andexpenses incurred by Lender in connection with the collection of any amount forwhich Borrower is personally liable under this Section 9, includingAttorneys’ Fees and Costs and the costs of conducting any independent audit ofBorrower’s books and records to determine the amount for which Borrower haspersonal liability.

 

(e)                     All paymentsmade by Borrower with respect to the Indebtedness and all amounts received byLender from the enforcement of its rights under the Security Instrument and theother Loan Documents shall be applied first to the portion of the Indebtedness forwhich Borrower has no personal liability.

 

(f)                       Notwithstandingthe Base Recourse, Borrower shall become personally liable to Lender for therepayment of all of the Indebtedness upon the occurrence of any of thefollowing Events of Default:

 

(i)                          Borrower’sownership of any property or operation of any business not permitted by Section 33of the Security Instrument;

 

(ii)                       a Transfer(including, but not limited to, a lien or encumbrance) that is an Event ofDefault under Section 21 of the Security Instrument, other than a Transferconsisting solely of the involuntary removal or involuntary withdrawal of ageneral partner in a limited partnership or a manager in a limited liabilitycompany; or

 

(iii)                    fraud orwritten material misrepresentation by Borrower or any officer, director,partner, member or employee of Borrower in connection with the application foror creation of the Indebtedness or any request for any action or consent byLender.

 

8

----

 

(g)                    To the extentthat Borrower has personal liability under this Section 9, Lender mayexercise its rights against Borrower personally without regard to whetherLender has exercised any rights against the Mortgaged Property or any othersecurity, or pursued any rights against any guarantor, or pursued any otherrights available to Lender under this Note, the Security Instrument, any otherLoan Document or applicable law. To the fullest extent permitted by applicablelaw, in any action to enforce Borrower’s personal liability under this Section 9,Borrower waives any right to set off the value of the Mortgaged Propertyagainst such personal liability.

 

**10.****                  Voluntary andInvoluntary Prepayments.**

 

(a)                     Any receiptby Lender of principal due under this Note prior to the Maturity Date, otherthan principal required to be paid in monthly installments pursuant to Section 3,constitutes a prepayment of principal under this Note. Without limiting theforegoing, any application by Lender, prior to the Maturity Date, of anyproceeds of collateral or other security to the repayment of any portion of theunpaid principal balance of this Note constitutes a prepayment under this Note.

 

(b)                    Borrower mayvoluntarily prepay all of the unpaid principal balance of this Note on anInstallment Due Date so long as Borrower designates the date for suchprepayment in a Notice from Borrower to Lender given at least 30 days prior tothe date of such prepayment. If an Installment Due Date (as defined in Section l(a)) falls on a day which is not a Business Day, then with respect to paymentsmade under this Section 10 only, the term “Installment Due Date” shallmean the Business Day immediately preceding the scheduled Installment Due Date.

 

(c)                     Notwithstandingsubsection (b) above, Borrower may voluntarily prepay all of the unpaidprincipal balance of this Note on a Business Day other than an Installment DueDate if Borrower provides Lender with the Notice set forth in subsection (b) andmeets the other requirements set forth in this subsection. Borrower acknowledgesthat Lender has agreed that Borrower may prepay principal on a Business Dayother than an Installment Due Date only because Lender shall deem anyprepayment received by Lender on any day other than an Installment Due Date tohave been received on the Installment Due Date immediately following suchprepayment and Borrower shall be responsible for all interest that would havebeen due if the prepayment had actually been made on the Installment Due Dateimmediately following such prepayment.

 

(d)                    Unlessotherwise expressly provided in the Loan Documents, Borrower may notvoluntarily prepay less than all of the unpaid principal balance of this Note.In order to voluntarily prepay all or any part of the principal of this Note,Borrower must also pay to Lender, together with the amount of principal beingprepaid, (i) all accrued and unpaid interest due under this Note, plus (ii) allother sums due to Lender at the time of such prepayment, plus (iii) anyprepayment premium calculated pursuant to Section 10(e).

 

(e)                     Except asprovided in Section 10(f), a prepayment premium shall be due and payableby Borrower in connection with any prepayment of” principal under this Noteduring the Prepayment Premium Period. The prepayment premium shall be whicheveris the greater of subsections (A) and (B) below:

 

(A)      1.0%of the amount of principal being prepaid; or

 

(B)       theproduct obtained by multiplying:

 

(1)                     the amount ofprincipal being prepaid or accelerated,

 

*by*

 

9

----

 

(2)                     the excess(if any) of the Monthly Note Rate over the Assumed Reinvestment Rate,

 

*by*

 

(3)                     the PresentValue Factor.

 

For purposes ofsubsection (B), the following definitions shall apply:

 

**Monthly Note Rate:**one-twelfth (1/12) ofthe Fixed Interest Rate, expressed as a decimal calculated to five digits.

 

**Prepayment Date:**in the case of a voluntaryprepayment, the date on which the prepayment is made; in the case of theapplication by Lender of collateral or security to a portion of the principalbalance, the date of such application.

 

**Assumed Reinvestment Rate:**one-twelfth(1/12) of the yield rate, as of the close of the trading session which is 5Business Days before the Prepayment Date, on the Treasury Security, as reportedin *The Wall Street Journal,*expressedas a decimal calculated to five digits. In the event that no yield is publishedon the applicable date for the Treasury Security, Lender, in its discretion,shall select the non-callable Treasury Security maturing in the same year asthe Treasury Security with the lowest yield published in *The Wall Street Journal*as of theapplicable date. If the publication of such yield rates in *The Wall Street Journal*is discontinuedfor any reason, Lender shall select a security with a comparable rate and termto the Treasury Security. The selection of an alternate security pursuant tothis Section shall be made in Lender’s discretion.

 

**Present Value Factor:**the factor thatdiscounts to present value the costs resulting to Lender from the difference ininterest rates during the months remaining in the Yield Maintenance Period,using the Assumed Reinvestment Rate as the discount rate, with monthlycompounding, expressed numerically as follows:

 

 

**n**= the number of months remaining in YieldMaintenance Period; provided, however, if a prepayment occurs on an InstallmentDue Date, then the number of months remaining in the Yield Maintenance Periodshall be calculated beginning with the month in which such prepayment occursand if such prepayment occurs on a Business Day other than an Installment DueDate, then the number of months remaining in the Yield Maintenance Period shallbe calculated beginning with the month immediately following the date of suchprepayment.

 

**ARR**= Assumed Reinvestment Rate

 

10

----

 

(f)                       Notwithstandingany other provision of this Section 10, no prepayment premium shall bepayable with respect to (i) any prepayment made during the Window Period,or (ii) any prepayment occurring as a result of the application of anyinsurance proceeds or condemnation award under the Security Instrument.

 

(g)                    Unless Lenderagrees otherwise in writing, a permitted or required prepayment of less thanthe unpaid principal balance of this Note shall not extend or postpone the duedate of any subsequent monthly installments or change the amount of suchinstallments.

 

(h)                    Borrowerrecognizes that any prepayment of any of the unpaid principal balance of thisNote, whether voluntary or involuntary or resulting from an Event of Default byBorrower, will result in Lender’s incurring loss, including reinvestment loss,additional expense and frustration or impairment of Lender’s ability to meetits commitments to third parties. Borrower agrees to pay to Lender upon demanddamages for the detriment caused by any prepayment, and agrees that it isextremely difficult and impractical to ascertain the extent of such damages.Borrower therefore acknowledges and agrees that the formula for calculatingprepayment premiums set forth in this Note represents a reasonable estimate ofthe damages Lender will incur because of a prepayment. Borrower furtheracknowledges that any lockout and the prepayment premium provisions of thisNote are a material part of the consideration for the Loan, and that the termsof this Note are in other respects more favorable to Borrower as a result ofthe Borrower’s voluntary agreement to the lockout and prepayment premiumprovisions.

 

**11.****                  Costs andExpenses.** To the fullest extent allowed by applicable law, Borrower shallpay all expenses and costs, including Attorneys’ Fees and Costs incurred byLender as a result of any default under this Note or in connection with effortsto collect any amount due under this Note, or to enforce the provisions of anyof the other Loan Documents, including those incurred in post-judgmentcollection efforts and in any bankruptcy proceeding (including any action forrelief from the automatic stay of any bankruptcy proceeding) or judicial ornon- judicial foreclosure proceeding.

 

**12.****                  Forbearance.**Any forbearance by Lender in exercising any right or remedy under this Note,the Security Instrument, or any other Loan Document or otherwise afforded byapplicable law, shall not be a waiver of or preclude the exercise of that orany other right or remedy. The acceptance by Lender of any payment after thedue date of such payment, or in an amount which is less than the requiredpayment, shall not be a waiver of Lender’s right to require prompt payment whendue of all other payments or to exercise any right or remedy with respect toany failure to make prompt payment. Enforcement by Lender of any security forBorrower’s obligations under this Note shall not constitute an election byLender of remedies so as to preclude the exercise of any other right or remedyavailable to Lender.

 

**13.****                  Waivers.**Borrower and all endorsers and guarantors of this Note and all other thirdparty obligors waive presentment, demand, notice of dishonor, protest, noticeof acceleration, notice of intent to demand or accelerate payment or maturity,presentment for payment, notice of nonpayment, grace, and diligence incollecting the Indebtedness.

 

**14.****                  Loan Charges.**Neitherthis Note nor any of the other Loan Documents shall be construed to create acontract for the use, forbearance or detention of money requiring payment ofinterest at a rate greater than the Maximum Interest Rate. If any applicablelaw limiting the amount of interest or other charges permitted to be collectedfrom Borrower in connection with the Loan is interpreted so that any interestor other charge provided for in any Loan Document, whether consideredseparately or together with other charges provided for in any other LoanDocument, violates that law, and Borrower is entitled to the benefit of thatlaw, that interest or charge is hereby reduced to the extent necessary toeliminate that violation. The amounts, if any, previously paid to Lender inexcess of the permitted amounts shall be applied by Lender to reduce the unpaidprincipal balance of this Note. For the purpose of determining whether any

 

11

----

 

applicable law limitingthe amount of interest or other charges permitted to be collected from Borrowerhas been violated, all Indebtedness that constitutes interest, as well as allother charges made in connection with the Indebtedness that constituteinterest, shall be deemed to be allocated and spread ratably over the statedterm of this Note. Unless otherwise required by applicable law, such allocationand spreading shall be effected in such a manner that the rate of interest socomputed is uniform throughout the stated term of this Note.

 

**15.****                  CommercialPurpose.**Borrower represents that Borrower is incurring the Indebtednesssolely for the purpose of carrying on a business or commercial enterprise, andnot for personal, family, household, or agricultural purposes.

 

**16.****                  Counting ofDays.**Except where otherwise specifically provided, any reference in thisNote to a period of “days” means calendar days, not Business Days.

 

**17.****                  Governing Law.**ThisNote shall be governed by the law of the Property Jurisdiction.

 

**18.****                  Captions.**Thecaptions of the Sections of this Note are for convenience only and shall bedisregarded in construing this Note.

 

**19.****                  Notices; WrittenModifications.**

 

(a)                     All Notices,demands and other communications required or permitted to be given pursuant tothis Note shall be given in accordance with Section 31 of the SecurityInstrument.

 

(b)                    Anymodification or amendment to this Note shall be ineffective unless in writingsigned by the party sought to be charged with such modification or amendment;provided, however, that in the event of a Transfer under the terms of theSecurity Instrument that requires Lender’s consent, any or some or all of theModifications to Multifamily Note set forth in Exhibit A to this Note maybe modified or rendered void by Lender at Lender’s option, by Notice toBorrower and the transferee, as a condition of Lender’s consent.

 

**20.****                  Consent toJurisdiction and Venue.**Borrower agrees that any controversy arising underor in relation to this Note may be litigated in the Property Jurisdiction. Thestate and federal courts and authorities with jurisdiction in the PropertyJurisdiction shall have jurisdiction over all controversies that shall ariseunder or in relation to this Note. Borrower irrevocably consents to service,jurisdiction, and venue of such courts for any such litigation and waives anyother venue to which it might be entitled by virtue of domicile, habitualresidence or otherwise. However, nothing in this Note is intended to limit anyright that Lender may have to bring any suit, action or proceeding relating tomatters arising under this Note in any court of any other jurisdiction.

 

**21.****                  WAIVER OF TRIALBY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURYWITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEENTHE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVESANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANYSUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURYIS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFITOF COMPETENT LEGAL COUNSEL.**

 

**22.****                  State-SpecificProvisions.**If a guarantor is liable for only a portion of theIndebtedness, Borrower hereby waives its rights under California Civil Code Section 2822(a) todesignate the portion of the Indebtedness that shall be satisfied by Borrower’spartial payment.

 

12

----

 

**ATTACHEDEXHIBIT.** The Exhibit noted below, if marked with an “X”in the space provided, is attached to this Note:

 
| x |   | Exhibit A | Modifications to  Multifamily Note |
|---|--------|----------------|------------------------------------|

 

**INWITNESS WHEREOF**, and in consideration of the Lender’sagreement to lend Borrower the principal amount set forth above, Borrower hassigned and delivered this Note under seal or has caused this Note to be signedand delivered under seal by its duly authorized representative.

 

**[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]**

** **

**13**

----

 
| ** ** | **WATERFORD PLACE APARTMENTS, LLC**, a California limited liability  company |
|------------|------------------------------------------------------------------------------|
|       |                                                                         |   |
|       | By:                                                                          | Shea Properties  Management Company, Inc., a Delaware corporation, its manager |
|       |                                                                         |   |   |
|       |                                                                         |   |   |
|       |                                                                         | By: | /s/ James G. Shontere |
|       |                                                                         |   | James G. Shontere |
|       |                                                                         |   | Secretary |
|       |                                                                         |   |   |
|       |                                                                         |   |   |
|       |                                                                         | By: | /s/ Robert R. O’Dell |
|       |                                                                         |   | Robert R. O’Dell |
|       |                                                                         |   | Treasurer |
|       |                                                                         |   |   |
|       |                                                                         |   |   |
|       | 95-4869325                                                                   |
|       | Borrower’s Social  Security/Employer ID Number                          |

 

14

----

 

Endorsement page tothat Multifamily Note dated as of March 31, 2008 in the amount of$13,245,000.00

 

PAY TO THE ORDER OFFEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE.

 
| **DEUTSCHE BANK BERKSHIRE MORTGAGE, INC.**, a Delaware corporation |                                |
|--------------------------------------------------------------------|-------------------------------------|
| ** **                                                         |                                |
| ** **                                                         |                                |
| By:                                                                | /s/ Thomas J. White                 |   |
|                                                               | Name: **Thomas J. White**           |   |
|                                                               | Title: **Vice President**           |   |
|                                                               |                                |   |
|                                                               |                                |   |
| By:                                                                | /s/ Heidi Marrin                    |   |
|                                                               | Name: **Heidi Marrin**              |   |
|                                                               | Title: **Assistant Vice President** |   |

 

 

FHLMC Loan No. 487798287

 

15

----

** **

**EXHIBIT A**

** **

MODIFICATIONS TO MULTIFAMILY NOTE

 

The followingmodifications are made to the text of the Note that precedes this Exhibit.

 

1.                          Afterthe word “prepayment” in the third sentence of Section 10(h), insert thefollowing: “, and such prepayment premium shall be the only amount payable byBorrower with respect to any damages Lender may incur because of a prepayment.”

 

2.                          Afterthe second reference to “Lender” in the third sentence of Paragraph 14, insertthe following: “,without prepayment premium or penalty,”.

 

3.                          The modificationsset forth in this Exhibit A shall become ineffective upon a Transfer underthe Security Instrument that requires Lender’s consent or upon any Transferthat constitutes an Event of Default under Section 21(e) of theSecurity Instrument.

 

4.                          The followingmodification may be made to the exhibit to the Note:

 

A new Section 9(h) isadded as follows:

 

“(h)             Notwithstanding anyprovision in this Section 9 to the contrary, Lender’s recourse for any andall obligations of Borrower under this Section 9 shall be limited to (i) theassets of Borrower, (ii) the assets of J.F. Shea Co., Inc., a Nevadacorporation, as guarantor of Borrower’s obligations hereunder and (iii) theassets of any other guarantors of Borrower’s obligations hereunder, and in noevent shall Lender have recourse to the assets of any of the general partnersof Borrower in satisfaction of any such obligations of Borrower.”

 

A-1

----

** **