Exhibit 10.40

FHLMC Loan No. 487779258
Landmark Apartments

REPAIR
ESCROW Agreement

(REVISION DATE 01-31-2003)

This REPAIR
ESCROW AGREEMENT ("Agreement") is made and entered into, to be effective
as of March 11, 2009, by and between LANDMARK (NC), LLC, a Delaware
limited liability company, d/b/a Landmark-Raleigh (NC), LLC, in
North Carolina("Borrower"), and
CAPMARK BANK, a Utah industrial bank("Lender") and its successors and
assigns.

W I T N E S S E T
H:

WHEREAS, Lender has agreed to make and Borrower
has agreed to accept the Loan, which is to be evidenced by the Note and secured
by the Security Instrument encumbering the Land described on Exhibit "A"
attached to this Agreement; 

WHEREAS, as a condition of making the Loan,
Lender is requiring Borrower to make the Repairs to the Improvements, which
Repairs are generally described in the Schedule of Work attached to this
Agreement as Exhibit "B"; and

WHEREAS, in order to assure that the Repairs are
made and paid for in a timely manner, Lender is requiring Borrower to establish
the Repair Escrow Fund with Lender pursuant to the terms of this
Agreement.

NOW,
THEREFORE, for and in consideration of the Loan, the mutual promises and
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
agree as follows:

1.                 
Definitions.  The following terms used in this Agreement
shall have the meanings set forth below in this Section.  Any term used in
this Agreement and not defined shall have the meaning given to that term in the
Security Instrument.

(a)               
"Completion Date" means the date that is [See Exhibit B] after the
effective date of this Agreement.

(b)              
"Disbursement Request" means Borrower's written requests to Lender in the
form attached to this Agreement as Exhibit "C" for the disbursement of
money from the Repair Escrow Fund pursuant to Section 3 below, which requests
shall not be made more often than once every ninety (90) days during the term of
this Agreement.

(c)               
"Improvements" means the buildings and improvements situated upon the
Land, currently constituting a multifamily apartment project known as Landmark
Apartments.

(d)              
"Loan" means the loan from Lender to Borrower in the original principal
amount of Eight Million Eight Hundred Fifty Thousand and 00/100 Dollars
($8,850,000.00), as evidenced by the Note and secured by the Security
Instrument.

(e)               
"Minimum Disbursement Request Amount" means Two Thousand Five Hundred and
00/100 Dollars ($2,500.00).

(f)                
"Property" means the Land and Improvements.

(g)               
"Repairs" means the repairs to be made to the Property, as described on
the Schedule of Work or as otherwise required by Lender in accordance with this
Agreement.

(h)               
"Repair Escrow Deposit" means the sum of Six Hundred Fifty-Eight Thousand
One Hundred Eighty-Eight and 00/100 Dollars ($658,188.00) deposited into escrow
with Lender as of the effective date of this Agreement, together with interest,
if any, to be held in accordance with the provisions of this Agreement.

(i)                 
"Repair Escrow Fund" means the account established by this Agreement into
which the Repair Escrow Deposit is deposited.

(j)                
"Schedule of Work" means the schedule of work for the Repairs attached to
this Agreement as Exhibit "B".

(k)              
"Security Instrument" means the mortgage, deed of trust, deed to secure
debt, or other similar security instrument encumbering the Property and securing
Borrower's performance of its Loan obligations.

2.                 
Repair Escrow Fund.

(a)               
Establishment.  Lender acknowledges that Borrower has
established the Repair Escrow Fund by depositing the amount of the Repair Escrow
Deposit with Lender.  Borrower and Lender agree that all moneys deposited
into the Repair Escrow Fund shall be held by Lender in an interest bearing
account if Lender estimates that the Repairs will require longer than ninety
(90) days to complete.  Lender shall not be required to hold the Repair
Escrow Deposit in an interest bearing account if the Repairs are required to be
completed in ninety (90) days or less.  Any interest earned on such moneys
shall be added to the principal balance of the Repair Escrow Fund and disbursed
in accordance with the provisions of this Agreement.  Lender shall be
entitled to deduct from the Repair Escrow Fund a one time fee in the amount of
Fifty and 00/100 Dollars ($50.00) for establishing the Repair Escrow Fund. 
Lender shall not be responsible for any losses resulting from investment of
moneys in the Repair Escrow Fund or for obtaining any specific level or
percentage of earnings on such investment.

(b)              
Use.  The Repair Escrow Deposit shall, except as otherwise
stated in this Agreement, be used for the purpose of paying, or reimbursing
Borrower for, the costs of the Repairs.

3.                 
Disbursements.  From time to time, as construction and
completion of the Repairs progresses, upon Borrower's submission of a
Disbursement Request in the form attached to this Agreement as Exhibit C,
and provided that Borrower is in full compliance with all the applicable
conditions set forth in this Agreement and in the other Loan Documents, Lender
shall make disbursements from the Repair Escrow Fund for payment or
reimbursement of the actual costs of the Repairs.  Borrower must sign the
Borrower’s Disbursement Request and Borrower must include with its Disbursement
Request a report setting out the progress of the Repairs and any other reports
or information relating to the construction of the Repairs that may be
reasonably requested by Lender.  Borrower must include with each
Disbursement Request copies of any applicable invoices and/or bills and appropriate lien waivers for the prior period for
which disbursement was made, executed by all contractors and suppliers supplying
labor or materials for the Repairs.  Unless waived by Lender in writing,
Borrower must also include a report prepared by the professional engineer
employed by Lender as to the status of the Repairs.  Except for the final
Disbursement Request, no Disbursement Request shall be for an amount less than
the Minimum Disbursement Request Amount. 

4.                 
Reporting Requirements; Completion.  Prior to receiving the
final disbursement from the Repair Escrow Fund, Borrower must deliver to Lender,
in addition to the information required by Section 3 above, the
following:

(a)               
Contractor's Certificate.  A certificate signed by each major
contractor and supplier of materials, as reasonably determined by Lender,
engaged to provide labor or materials for the Repairs to the effect that such
contractor or supplier has been paid in full for all work completed and that the
portion of the Repairs provided by such contractor or supplier has been fully
completed in accordance with the plans and specifications (if any) provided to
it by Borrower and that such portion of the Repairs is in compliance with all
applicable building codes and other rules and regulations promulgated by
applicable regulatory or governmental authorities;

(b)              
Borrower's Certificate.  A certificate signed by Borrower to
the effect that the Repairs have been fully paid for, that all money disbursed
hereunder has been used for the Repairs and no claim or claims exist against the
Borrower or against the Property out of which a lien based on furnishing labor
or material exists or might ripen.  Borrower may except from the
certificate described in the preceding sentence any claim or claims that
Borrower intends to contest, provided that any such claim or claims are
described in Borrower's certificate and Borrower certifies to Lender that the
money in the Repair Escrow Fund is sufficient to make payment of the full amount
which might in any event be payable in order to satisfy such claim or
claims.  If required by Lender, Borrower also shall certify to Lender that
such portion of the Repairs is in compliance with all applicable zoning
ordinances;

(c)               
Engineer's Certificate.  A certificate signed by the
professional engineer employed by Lender to the effect that the Repairs have
been completed in a good and workmanlike manner in compliance with the Schedule
of Work and all applicable building codes, zoning ordinances and other rules and
regulations promulgated by applicable regulatory or governmental authorities;
and 

(d)              
Other Certificates.  Any other certificates of approval,
acceptance or compliance required by Lender from or by the city, county, state
or federal governmental authorities having jurisdiction over the Property and
the Repairs.

5.                 
Indirect and Excess Disbursements.  Lender, in its sole
judgment, is authorized to hold, use and disburse from the Repair Escrow Fund to
pay any and all costs, charges and expenses whatsoever and howsoever incurred or
required in connection with the construction and completion of the Repairs, or
in the payment or performance of any obligation of Borrower to Lender.  If
Lender, for purposes specified in this Section 5, shall elect to pay any portion
of the money in the Repair Escrow Fund to parties other than Borrower, then
Lender may do so, at any time and from time to time, and the amount of advances
to which Borrower shall be entitled under this Agreement shall be
correspondingly reduced.

6.                 
Schedule of Work.  All disbursements from the Repair Escrow
Fund shall be limited to the costs of those items set forth on the Schedule of
Work attached to this Agreement as Exhibit "B".

7.                 
Repairs.  Borrower covenants and agrees with Lender as
follows:

(a)               
Commencement of
Work.  Except as set forth
on Exhibit D, prior to the recordation of the Security Instrument, no work of
any kind has been or will be commenced or performed upon the Property and no
materials or equipment have been or will be delivered to or upon the
Property.  In the event that any work of any kind has been commenced
or performed upon the Property, or in the event that any materials or equipment
have been ordered or delivered to or upon the Property, then (i) prior to the
execution of the Security Instrument the Borrower shall fully disclose in
writing to the title insurance company issuing the mortgagee title insurance
policy insuring the lien of the Security Instrument that work has been commenced
or performed on the Property, or materials or equipment have been ordered or
delivered to or upon the Property, (ii) prior to the execution of the Security
Instrument Borrower shall have obtained and delivered to Lender and the title
company issuing the mortgagee title insurance policy insuring the lien of the
Security Instrument lien waivers from all contractors, subcontractors,
suppliers, or any other applicable party, pertaining to all work commenced or
performed on the Property, or materials or equipment ordered or delivered to or
upon the Property, and (iii) the final mortgagee’s title insurance policy
insuring the lien of the Security Instrument shall take no exception from
coverage for any mechanics or materialmen’s liens.

(b)              
Construction.  Borrower will commence the Repairs as soon as
practicable after the date of this Agreement and will diligently proceed with
and complete the Repairs on or before the Completion Date in a workmanlike
manner and in accordance with the Schedule of Work, good building practices and
all applicable laws, ordinances, rules and regulations.

(c)               
Changes in Schedule of Work.  Without the prior written
consent of Lender, Borrower will make no departures from or alterations to the
Schedule of Work.

(d)              
Inspections.  Borrower will permit Lender or any person
designated by Lender (including without limitation a professional inspection
engineer) and any interested governmental authority, at any time and from time
to time, to inspect the Repairs and Improvements and to examine and copy all of
Borrower's books and records and all contracts and bills pertaining to the
Repairs and Improvements.  Lender shall be entitled to deduct from the
Repair Escrow Fund reasonable fees for performing any such inspections and/or an
amount sufficient to reimburse Lender for all fees and expenses charged by any
professional inspection engineer employed by Lender in connection with any such
inspection.  Borrower agrees to cause the replacement of any material or
work that is defective, unworkmanlike, does not comply with any applicable law,
ordinance, rule or regulation, or does not comply with the requirements of this
Agreement, as determined by Lender.  Prior to and as a condition of the
final disbursement of funds from the Repair Escrow Fund, Lender shall inspect or
cause to be inspected the Repairs and the Improvements to determine that all
Repairs, including but not limited to interior and exterior repairs, have been
completed in a manner acceptable to Lender.

(e)               
Purchases.  Without the prior written consent of Lender, no
materials, machinery, equipment, fixtures or any other part of the Repairs shall
be purchased or installed under conditional sale
contracts or lease agreements, or any other arrangement wherein title to such
Repairs is retained or subjected to a purchase money security interest, or the
right is reserved or accrues to anyone to remove or repossess any such Repairs,
or to consider them as personal property.

8.                 
Lien Protection.  Borrower shall promptly pay or cause to be
paid, when due, all costs, charges and expenses incurred in connection with the
construction and completion of the Repairs, and shall keep the Property free and
clear of any and all liens other than the lien of the Security Instrument and
any other junior lien which may be consented to by Lender.

9.                 
Adverse Claims.  Borrower shall promptly advise Lender in
writing of any litigation, liens, or claims affecting the Property and of all
complaints and charges made by any governmental authority or any governmental
department, bureau, commission or agency exercising supervision or control over
Borrower or its business, which may delay or adversely affect the
Repairs.

10.             
Compliance With Laws; Insurance Requirements.

(a)               
Compliance With Laws.  All Repairs shall comply with all
applicable laws, ordinances, rules and regulations of all governmental
authorities having jurisdiction over the Property, and with all applicable
insurance requirements including, without limitation, applicable building codes,
special use permits, environmental regulations, and requirements of insurance
underwriters.

(b)              
Insurance Requirements.  In addition to any insurance
required under the Loan Documents, Borrower shall provide or cause to be
provided workers' compensation, builder's risk (if required by Lender), and
public liability insurance and other insurance required under applicable law in
connection with any of the Repairs.  All such policies shall be in form and
amount satisfactory to Lender.  All such policies that can be endorsed with
standard mortgage clauses making losses payable to Lender or its assigns shall
be so endorsed.  The originals of such policies shall be deposited with
Lender.

11.             
Use of Repair Escrow Fund.  Borrower will accept
disbursements from the Repair Escrow Fund in accordance with the provisions of
this Agreement and will use, or cause to be used, each such disbursement solely
to pay for materials, labor and services, or to pay costs and expenses for which
such disbursement is requested.

12.             
Conditions Precedent.  Lender shall not be obligated to make
any disbursement from the Repair Escrow Fund to or for the benefit of Borrower
unless at the time of each Disbursement Request all of the following conditions
prevail:

(a)               
No Default.  There shall exist no condition, event or act
that would constitute a default (with or without notice and/or lapse of time)
under this Agreement or any other Loan Document.

(b)              
Representations and Warranties.  All representations and
warranties of Borrower set forth in this Agreement and in the Loan Documents are
true.

(c)               
Continuing Compliance.  Borrower shall be in full compliance
with the provisions of this Agreement, the other Loan Documents and any request
or demand by Lender permitted hereby.

(d)              
No Lien Claim.  No lien or claim based on furnishing labor or
materials has been filed or asserted against the Property, unless Borrower has
properly provided bond or other security against loss in accordance with
applicable law.

(e)               
Approvals.  All licenses, permits, and approvals of
governmental authorities required for the Repairs as completed to the applicable
stage have been obtained.

(f)                
Legal Compliance.  The Repairs as completed to the applicable
stage do not violate any laws, ordinances, rules or regulations, or building
lines or restrictions applicable to the Property.

13.             
Right to Complete Repairs.  If Borrower abandons or fails to
proceed diligently with the Repairs or otherwise is in default under this
Agreement, Lender shall have the right (but not the obligation) to enter upon
the Property and take over and cause the completion of the Repairs.  Any
contracts entered into or indebtedness incurred upon the exercise of such right
may be in the name of Borrower, and Lender is hereby irrevocably appointed the
attorney in fact of Borrower, such appointment being coupled with an interest,
to enter into such contracts, incur such obligations, enforce any contracts or
agreements made by or on behalf of Borrower (including the prosecution and
defense of all actions and proceedings in connection with the Repairs and the
payment, settlement, or compromise of all claims for materials and work
performed in connection with the Repairs) and do any and all things necessary or
proper to complete the Repairs including signing Borrower's name to any
contracts and documents as may be deemed necessary by Lender.  In no event
shall Lender be required to expend its own funds to complete the Repairs, but
Lender may, in Lender's sole discretion, advance such funds.  Any funds
advanced shall be added to the outstanding balance of the Note, secured by the
Security Instrument and payable to Lender by Borrower in accordance with the
provisions of the Security Instrument pertaining to the protection of Lender's
security and advances made by Lender.  Borrower waives any and all claims
it may have against Lender for materials used, work performed or resultant
damage to the Property.

14.             
Insufficient Account.  If Lender determines in its reasonable
discretion that the money in the Repair Escrow Fund is insufficient to pay for
the Repairs, Lender shall so notify Borrower, in writing, and as soon as
possible (but in no event later than twenty (20) days after such notice)
Borrower shall pay to Lender an amount, in cash, equal to such deficiency, which
amount shall be placed in the Repair Escrow Fund by Lender.

15.             
Security Agreement.  To
secure Borrower's obligations under this Agreement and to further secure
Borrower's obligations under the Note, Security Instrument and other Loan
Documents, Borrower hereby conveys, pledges, transfers and grants to Lender a
security interest pursuant to the Uniform Commercial Code of the Jurisdiction
and other applicable laws in and to all money in the Repair Escrow Fund as such
may increase or decrease from time to time, and all interest and dividends
thereon and all proceeds thereof.

16.             
Post Default.  If Borrower defaults in the performance of its
obligations under this Agreement or under the Note, Security Instrument or any
other Loan  Document, Lender shall have all remedies available to them
under Article 9 of the Uniform Commercial Code of the Jurisdiction and under any
other applicable laws and, in addition, may retain all moneys in the Repair
Escrow Fund, including interest, and in Lender's discretion, may apply such
amounts, without restriction and without any specific order of priority, to the
payment of any and all indebtedness or obligations of Borrower set forth in the
Note, Security Instrument or other Loan Documents, including, but not limited
to, principal, interest, taxes, insurance, reasonable attorneys' fees actually
incurred and/or repairs to the Property.

17.             
Termination.  This Agreement shall terminate upon the
completion of the Repairs in accordance with this Agreement and Lender’s
satisfaction, and the full disbursement by Lender of the Repair Escrow
Fund.  In the event there are funds remaining in the Repair Escrow Fund
after the Repairs have been completed in accordance with this Agreement, and
provided no default by Borrower exists under this Agreement or under any other
Loan Documents, such funds remaining in the Repair Escrow Fund shall be refunded by Lender to the Borrower.

18.             
No Amendment.  Nothing contained in this Agreement shall be
construed to amend, modify, alter, change or supersede the terms and provisions
of the Note, Security Instrument or any other Loan Document and, if there shall
exist a conflict between the terms and provisions of this Agreement and those of
the Note, Security Instrument or other Loan Documents, then the terms and
provisions of the Note, Security Instrument and other Loan Documents shall
control.

19.             
Release; Indemnity.

(a)               
Release.  Borrower covenants and agrees that, in
performing any of its duties under this Agreement, none of  Lender, and
Loan Servicer or any of their respective agents or employees, shall be liable
for any losses, costs or damages which may be incurred by any of them as a
result thereof, except that no party will be released from liability for any
losses, costs or damages arising out of the willful misconduct or gross
negligence of such party.

(b)              
Indemnity.  Borrower hereby agrees to indemnify and
hold harmless Lender, Loan Servicer, and their respective agents and employees,
against any and all losses, claims, damages, liabilities and expenses including,
without limitation, reasonable attorneys' fees and costs, which may be imposed
or incurred by any of them in connection with this Agreement, except that no
such party will be indemnified from any losses, claims, damages, liabilities and
expenses arising out of the willful misconduct or gross negligence of such
party.

20.             
Choice of Law.  This Agreement shall be construed and
enforced in accordance with the laws of the Property Jurisdiction.

21.             
Successors and
Assigns.  Lender may
assign its rights and interests under this Agreement in whole or in part and
upon any such assignment, all the terms and provisions of this Agreement shall
inure to the benefit of such assignee to the extent so assigned.  The terms
used to designate any of the parties herein shall be deemed to include the
heirs, legal representatives, successors and assigns of such parties; and the
term "Lender" shall also include any lawful owner, holder or pledgee of
the Note.  Reference herein to “person” or “persons” shall be deemed to
include individuals and entities.  Borrower may not assign its rights, interests, or
obligations under this Agreement without first obtaining Lender's prior written
consent.

22.             
Attorneys' Fees.  In the event that Lender shall engage the
services of an attorney at law to enforce the provisions of this Agreement
against Borrower, then Borrower shall pay all costs of such enforcement,
including any reasonable attorneys' fees and costs (including those of Lender’s
in-house counsel) actually incurred.

23.             
Remedies Cumulative.  In the event of Borrower's default
under this Agreement, Lender may exercise all or any one or more of its rights
and remedies available under this Agreement, at law or in equity.  Such
rights and remedies shall be cumulative and concurrent, and may be enforced
separately, successively or together, and Lender's exercise of any particular
right or remedy shall not in any way prevent Lender from exercising any other right or remedy available to
Lender.  Lender may exercise any such remedies from time to time as often
as may be deemed necessary by Lender.

24.             
Determinations by Lender.  In any instance where the consent
or approval of Lender may be given or is required, or where any determination,
judgment or decision is to be rendered by Lender under this Agreement, the
granting, withholding or denial of such consent or approval and the rendering of
such determination, judgment or decision shall be made or exercised by Lender
(or its designated representative) at its sole and exclusive option and in its
sole and absolute discretion.

25.             
Completion of Repairs.  Lender's disbursement of moneys in
the Repair Escrow Fund or other acknowledgment of completion of any Repair in a
manner satisfactory to Lender shall not be deemed a certification by Lender that
the Repair has been completed in accordance with applicable building, zoning or
other codes, ordinances, statutes, laws, regulations or requirements of any
governmental authority or agency.  Borrower shall at all times have the
sole responsibility for insuring that all Repairs are completed in accordance
with all such governmental requirements.

26.             
No Agency or Partnership.  Nothing contained in this
Agreement shall constitute Lender as a joint venturer, partner or agent of
Borrower, or render Lender liable for any debts, obligations, acts, omissions,
representations or contracts of Borrower.

27.             
Entire
Agreement.  This
Agreement and the other Loan Documents represent the final agreement between the
parties and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements.  There are no unwritten oral agreements between
the parties.  All prior or contemporaneous agreements, understandings,
representations, and statements, oral or written, are merged into this Agreement
and the other Loan Documents.  Neither this Agreement nor any of its
provisions may be waived, modified, amended, discharged, or terminated except in
writing signed by the party against which the enforcement of the waiver,
modification, amendment, discharge, or termination is sought, and then only to
the extent set forth in that writing;
provided, however, that in the event of a Transfer
requiring Lender’s consent under the terms of the Security Instrument, any one
or more, or all, of the Modifications to Agreement set forth in Exhibit
"E" (if any) may be modified or rendered void by Lender at Lender’s option
by notice to Borrower/transferee. 


28.             
Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall constitute an original document and all of
which together shall constitute one agreement.

ATTACHED
EXHIBITS.  The following Exhibits are attached to this Agreement:

	
X
	
 
	
Exhibit
A
	
Legal
Description of Land (required)

	
 
	
 
	
 
	
 

	
X
	
 
	
Exhibit
B
	
Schedule
of Work (required)

	
 
	
 
	
 
	
 

	
X
	
 
	
Exhibit
C
	
Disbursement
Request (required)

	
 
	
 
	
 
	
 

	
X
	
 
	
Exhibit
D
	
Work
Performed or Commenced and Material

	
 
	
 
	
 
	
or
Equipment Ordered (required, if none, state “None”)

	
 
	
 
	
 
	
 

	
 
	
 
	
Exhibit
E
	
Modifications
to Agreement



IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the day and year first above
written.


BORROWER:

LANDMARK (NC), LLC, a Delaware limited liability
company, d/b/a Landmark-Raleigh (NC), LLC, in North Carolina

 

By: 
Angeles Income Properties, LTD. II, a California limited partnership, its
member

 

By: 
Angeles Realty Corporation II, a California corporation, its managing general
partner

 

 

 

By:
/s/Patti K. Fielding

Patti
K. Fielding

Executive
Vice President and Treasurer

 

 


LENDER:

CAPMARK
BANK, a Utah industrial bank

 

 

 

By: /s/Max W. Foore

Max
W. Foore

Limited Signer