Document:

EX-10.7

FIXED+1 MULTIFAMILY NOTE

	 	 	 
	US $10,295,000.00

	 	August 1, 2007

FOR VALUE RECEIVED, the undersigned (“Borrower”) jointly and severally (if more than one)
promises to pay to the order of PNC ARCS LLC, a Delaware limited liability company, the principal
sum of Ten Million Two Hundred Ninety Five Thousand and No/100 Dollars (US $10,295,000.00), with
interest accruing at the Interest Rate on the unpaid principal balance from the Disbursement Date
until fully paid.

1. Defined Terms. In addition to defined terms found elsewhere in this Note, as used in this
Note, the following definitions shall apply:

Adjustable Rate. From and after each Rate Change Date until the next Rate Change
Date, the Adjustable Rate shall be the sum of (i) the Current Index, and (ii) the
Margin, which sum is then rounded to three decimal places, subject to the
limitations that the Adjustable Rate shall not be less than the Margin.

Adjustable Rate Period: The period commencing on the First Rate Change Date and
ending on the Maturity Date.

	 	 	 	Amortization Period: Zero (0) months.

Business Day: Any day other than a Saturday, Sunday or any other day on which
Lender is not open for business.

Current Index: The published Index that is effective on the 15th day before the
applicable Rate Change Date.

Debt Service Amounts: Amounts payable under this Note, the Security Instrument or
any other Loan Document.

Default Rate: A rate equal to the lesser of 4 percentage points above the Interest
Rate or the maximum interest rate which may be collected from Borrower under
applicable law.

Disbursement Date: The date of disbursement of Loan proceeds hereunder.

First Payment Change Date: The first day of September, 2016.

First Payment Date or First Interest Only Payment Date: The first day of September,
2007.

First Principal and Interest Payment Date: N/A

First Rate Change Date: The first day of August, 2016.

Indebtedness: The principal of, interest on, or any other amounts due at any time
under, this Note, the Security Instrument or any other Loan Document, including
prepayment premiums, late charges, default interest, and advances to protect the
security of the Security Instrument under Section 12 of the Security Instrument.

Index: The British Bankers Association fixing of the London Inter-Bank Offered Rate
for 1-month U.S. Dollar-denominated deposits as reported by Telerate through
electronic transmission. If the Index is no longer available, or is no longer
posted through electronic transmission, Lender will choose a new index that is based
upon comparable information and provide notice thereof to Borrower.

	 	 	 	Fixed Rate: The annual rate of Five and Nine Hundred Thirty Five
Thousandths Percent (5.935%).

Last Interest-Only Payment Date: N/A

Lender: The holder of this Note.

Loan: The loan evidenced by this Note.

Loan Term: 120 months.

Margin: The Adjustable Rate Period Mortgage Margin is 2.40%.

Maturity Date: The first day of August, 2017, or any earlier date on which the
unpaid principal balance of this Note becomes due and payable by acceleration or
otherwise.

Payment Change Date: The first day of the month following each Rate Change Date
until this Note is repaid in full.

Property Jurisdiction: The jurisdiction in which the Land is located.

Remaining Amortization Period: For an amortizing Loan, as of each Payment Change
Date, the Amortization Period minus the number of scheduled monthly principal and
interest payments that have elapsed since the date of this Note.

Rate Change Date: The First Rate Change Date and the first day of each month
thereafter until this Note is repaid in full.

Security Instrument: A Multifamily Deed of Trust, Assignment of Rents and Security
Agreement and Fixture Filing dated as of the date of this Note.

Yield Maintenance Period Term or Prepayment Premium Period Term: 108 months.

Yield Maintenance Period End Date or Prepayment Premium Period End Date: The last
day of July, 2016.

Event of Default, Key Principal and other capitalized terms used but not defined in this Note shall
have the meanings given to such terms in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at 26901 Agoura Rd,
Suite 200, Calabasas Hills, CA 91301, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.

3. Payment of Principal and Interest. Principal and interest shall be paid as follows:

(a) Short Month Interest. If disbursement of principal is made by Lender to Borrower on any
day other than the first day of the month, interest for the period beginning on the Disbursement
Date and ending on and including the last day of the month in which such disbursement is made shall
be payable simultaneously with the execution of this Note.

(b) Interest Computation. Interest under this Note shall be computed on the basis of (check
one only):

30/360. A 360-day year consisting of twelve 30-day months.

	 	 	 	[ X ] Actual/360. A 360-day year. The amount of each monthly
payment made by Borrower pursuant to Paragraph 3(d) below that is allocated to
interest will be based on the actual number of calendar days during such month
and shall be calculated by multiplying the unpaid principal balance of this
Note by the per annum Interest Rate, dividing the product by 360 and
multiplying the quotient by the actual number of days elapsed during the month.
Borrower understands that the amount allocated to interest for each month will
vary depending on the actual number of calendar days during such month.

(c) Interest Accrual. Interest shall accrue on the unpaid principal balance of this Note at
the Fixed Rate or the Adjustable Rate, as applicable. Interest shall accrue at the Fixed Rate
until the First Rate Change Date. Thereafter, interest shall accrue at the Adjustable Rate.
During the Adjustable Rate Period, the Adjustable Rate shall change on each Rate Change Date until
the loan is repaid in full. 

(d) Monthly Installments.

(1) Fixed Rate Period. (Check one only.)

Amortizing Loan.

Consecutive monthly installments of principal and interest, each in
the amount of      
Dollars (US $     ), shall be payable on the
First Payment Date and on the first day of every month thereafter,
until and including the First Rate Change Date

	 	 	 	[ X ] Interest Only Loan. (Check one
only)

30/360. If interest accrues based on a 30/360 interest
computation, then consecutive monthly installments of
interest only, each in the amount of
     Dollars (US
$     ), shall be payable on the First
Payment Date and on the first day of every month thereafter,
until and including the First Rate Change Date.

	 	 	 	[ X ] Actual/360. If interest
accrues based on an Actual/360 interest computation, the amount
of Fifty Two Thousand Six Hundred Fourteen and 60/100 Dollars
(US $52,614.60), shall be payable on the First Payment Date and
thereafter consecutive monthly installments of interest only,
shall be payable as follows:

	 	(1)	 	Forty Seven
Thousand Five Hundred Twenty Two and 86/100 Dollars (US
$47,522.86), shall be payable on the first day of each
month during the term hereof which follows a 28-day
month;

	 	(2)	 	Forty Nine
Thousand Two Hundred Twenty and 11/100 Dollars (US
$49,220.11), shall be payable on the first day of each
month during the term hereof which follows a 29-day
month,

	 	(3)	 	Fifty Thousand
Nine Hundred Seventeen and 35/100 Dollars (US
$50,917.35), shall be payable on the first day of each
month during the term hereof which follows a 30-day
month, or

	 	(4)	 	Fifty Two
Thousand Six Hundred Fourteen and 60/100 Dollars (US
$52,614.60), shall be payable on the first day of each
month during the term hereof which follows a 31-day
month,

until and including the First Rate Change Date.

Partial Interest Only Loan.

	 	(1)	 	Interest Only Period. Commencing
on the First Interest Only Payment Date and on the first day of
every month until and including the Last Interest Only Payment
Date, consecutive monthly installments of interest only shall be
payable and in an amount equal to one of the following (check
one only):

30/360. If interest accrues based on a 30/360
interest computation, then consecutive monthly
installments of interest only, each in the amount of
     
     Dollars (US
$     ).

Actual/360. If interest accrues based on an
Actual/360 interest computation, the amount of
     Dollars
(US $     ) shall be payable on the
First Interest Only Payment Date and thereafter
consecutive monthly installments of interest only
shall be payable as follows:

	 	 	 	(i)
     Dollars
(US $     ), shall be payable on
the first day of each month during the term
hereof which follows a 28-day month;

	 	 	 	(ii)
     Dollars
(US $     ), shall be payable on
the first day of each month during the term
hereof which follows a 29-day month,

	 	 	 	(iii)
     Dollars
(US $     ), shall be payable on
the first day of each month during the term
hereof which follows a 30-day month, or

	 	 	 	(iv)
     Dollars
(US $     ), shall be payable on
the first day of each month during the term
hereof which follows a 31-day month,

	 	(2)	 	Amortizing
Period. Commencing on the First Principal and Interest
Payment Date and on the first day of every month
thereafter, until and including the First Rate Change
Date, consecutive monthly installments of principal and
interest shall be due and payable, each in the amount of
     Dollars (US
$     ).

(2) Adjustable Rate Period. (Check one only)

Amortizing Loan. If the Loan is an amortizing Loan, consecutive
monthly installments of principal and interest, each in the amount of
the Required Monthly Payment (defined below), shall be payable on the
first day of each month beginning on the First Payment Change Date
and on each Payment Change Date thereafter until the entire unpaid
principal balance evidenced by this Note is fully paid. The initial
Required Monthly Payment shall be the amount required to pay the
unpaid principal balance of this Note in equal monthly installments,
including accrued interest at the Adjustable Rate over the Remaining
Amortization Period. Thereafter, to the extent that the Adjustable
Rate has changed, the Required Monthly Payment shall change on each
Payment Change Date, and shall be in such amount as shall cause the
unpaid principal balance of the Note to be amortized over the
Remaining Amortization Period. Notwithstanding the interest accrual
method selected in paragraph 3(b) above, the amount of the initial
and all other Required Monthly Payments shall be calculated utilizing
a 30/360 interest calculation payment schedule whether the amount
allocated to interest on the loan is based on a 360-day year
consisting of twelve 30-day months or on a 360-day year consisting of
the actual number of days in each month. Any remaining principal and
interest, if not sooner paid, shall be due and payable on the
Maturity Date.

	 	 	 	[ X ] Interest-Only Loan. If the Loan is an
interest-only Loan, consecutive monthly installments of interest only,
each in the amount of the Required Monthly Payment (defined below),
shall be payable on the First Payment Change Date and on each Payment
Change Date thereafter until the entire unpaid principal balance
evidenced by this Note is fully paid. The initial Required Monthly
Payment shall be calculated based on the outstanding principal balance
and the then-applicable Adjustable Rate. Thereafter, to the extent
that the Adjustable Rate has changed, the Required Monthly Payment
shall change on each Payment Change Date based on the then-applicable
Adjustable Rate. The amount of the initial and any changed Required
Monthly Payment shall be calculated utilizing the interest accrual
method selected in paragraph 3(b) above. The entire unpaid principal
balance and accrued but unpaid interest, if not sooner paid, shall be
due and payable on the Maturity Date.

(i) Adjustable Rate. The Adjustable Rate shall be in effect beginning
on the First Rate Change Date. From and after each Rate Change Date until
the next Rate Change Date, the Adjustable Rate shall be the sum of (a) the
Current Index, and (b) the Margin, which sum is then rounded to three
decimal places, subject to the limitations that the Adjustable Rate shall
not be less than the Margin. Accrued interest on this Note shall be paid in
arrears.

(ii) Notice of Interest Rate Change. Before each Payment Change Date,
Lender shall re-calculate the Adjustable Rate and shall notify Borrower (in
the manner specified in the Security Instrument for giving notices) of any
change in the Adjustable Rate and the Required Monthly Payment.

(iii) Correction to Required Monthly Payment. If Lender at any time
determines, in its sole but reasonable discretion, that it has miscalculated
the amount of the Required Monthly Payment (whether because of a
miscalculation of the Adjustable Rate or otherwise), then Lender shall give
notice to Borrower of the corrected amount of the Required Monthly Payment
(and the corrected Adjustable Rate, if applicable) and (a) if the corrected
amount of the Required Monthly Payment represents an increase, then Borrower
shall, within 30 calendar days thereafter, pay to Lender any sums that
Borrower would have otherwise been obligated under this Note to pay to
Lender had the amount of the Required Monthly Payment not been
miscalculated, or (b) if the corrected amount of the Required Monthly
Payment represents a decrease thereof and Borrower is not otherwise in
breach or default under any of the terms and provisions of the Note, the
Security Instrument or any other loan document evidencing or securing the
Note, then Borrower shall thereafter be paid the sums that Borrower would
not have otherwise been obligated to pay to Lender had the amount of the
Required Monthly Payment not been miscalculated.

(e) Payments Before Due Date. Any regularly scheduled monthly installment of principal and
interest that is received by Lender before the date it is due shall be deemed to have been received
on the due date solely for the purpose of calculating interest due.

(f) Accrued Interest. Any accrued interest remaining past due for 30 days or more shall be
added to and become part of the unpaid principal balance and shall bear interest at the rate or
rates specified in this Note. Any reference herein to “accrued interest” shall refer to accrued
interest which has not become part of the unpaid principal balance. Any amount added to principal
pursuant to the Loan Documents shall bear interest at the applicable rate or rates specified in
this Note and shall be payable with such interest upon demand by Lender and absent such demand, as
provided in this Note for the payment of principal and interest.

4. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any
amount applicable to the Indebtedness which is less than all amounts due and payable at such time,
Lender may apply that payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s acceptance of
a payment from Borrower in an amount that is less than all amounts then due and payable nor
Lender’s application of such payment shall constitute or be deemed to constitute either a waiver of
the unpaid amounts or an accord and satisfaction.

5. Security. The Indebtedness is secured, among other things, by the Security Instrument, and
reference is made to the Security Instrument for other rights of Lender concerning the collateral
for the Indebtedness.

6. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid
principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any,
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 any prior notice to Borrower. Lender may exercise
this option to accelerate regardless of any prior forbearance.

7. Late Charge. If any monthly installment due hereunder is not received by Lender on or
before the 10th day of each month or if any other amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within 10 days after the
date such amount is due, counting from and including the date such amount is due, Borrower shall
pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such
monthly installment or other amount due. Borrower acknowledges that its failure to make timely
payments will cause Lender to incur additional expenses in servicing and processing the Loan and
that it is extremely difficult and impractical to determine those additional expenses. Borrower
agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this Note, of the
additional expenses Lender will incur by reason of such late payment. The late charge is payable
in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph
8.

8. Default Rate. So long as any monthly installment or any other payment due under this Note
remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal
balance from the earlier of the due date of the first unpaid monthly installment or other payment
due, as applicable, at the Default Rate. If the unpaid principal balance and all accrued interest
are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest
shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that
its failure to make timely payments will cause Lender to incur additional expenses in servicing and
processing the Loan, that, during the time that any monthly installment or payment under this Note
is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from
its loss of the use of the money due and from the adverse impact on Lender’s ability to meet its
other obligations and to take advantage of other investment opportunities, and that it is extremely
difficult and impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment or other payment due under this
Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will be
materially increased and Lender is entitled to be compensated for such increased risk. Borrower
agrees that the increase in the rate of interest payable under this Note to the Default Rate
represents a fair and reasonable estimate, taking into account all circumstances existing on the
date of this Note, of the additional costs and expenses Lender will incur by reason of the
Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.

9. Limits on Personal Liability.

(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no personal
liability under this Note, the Security Instrument or any other Loan Document for the repayment of
the Indebtedness or for the performance of any other obligations of Borrower under the Loan
Documents, and Lender’s only recourse for the satisfaction of the Indebtedness and the performance
of such obligations shall be Lender’s exercise of its rights and remedies with respect to the
Mortgaged Property (as such term is defined in the Security Instrument) and any other collateral
held by Lender as security for the Indebtedness. This limitation on Borrower’s liability shall not
limit or impair Lender’s enforcement of its rights against any guarantor of the Indebtedness or any
guarantor of any obligations of Borrower.

(b) Borrower shall be personally liable to Lender for the repayment of a portion of the
Indebtedness equal to any loss or damage suffered by Lender as a result of:

(1) failure of Borrower to pay to Lender upon demand after an Event of Default, all
Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the
amount of all security deposits collected by Borrower from tenants then in residence;

(2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as
required by the Security Instrument;

(3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument
relating to the delivery of books and records, statements, schedules and reports;

(4) fraud or written material misrepresentation by Borrower, Key Principal or any
officer, director, partner, member or employee of Borrower in connection with the
application for or creation of the Indebtedness or any request for any action or consent by
Lender; or

(5) failure to apply Rents, first, to the payment of reasonable operating expenses
(other than Property management fees that are not currently payable pursuant to the terms of
an Assignment of Management Agreement or any other agreement with Lender executed in
connection with the Loan) and then to Debt Service Amounts, except that Borrower will not be
personally liable (i) to the extent that Borrower lacks the legal right to direct the
disbursement of such sums because of a bankruptcy, receivership or similar judicial
proceeding, or (ii) with respect to Rents that are distributed in any calendar year if
Borrower has paid all operating expenses and Debt Service Amounts for that calendar year.

(c) Borrower shall become personally liable to Lender for the repayment of all of the
Indebtedness upon the occurrence of any of the following Events of Default:

(1) Borrower’s acquisition of any property or operation of any business not permitted
by Section 33 of the Security Instrument; or

(2) a Transfer that is an Event of Default under Section 21 of the Security Instrument.

(d) To the extent that Borrower has personal liability under this Paragraph 9, Lender may
exercise its rights against Borrower personally without regard to whether Lender has exercised any
rights against the Mortgaged Property or any other security, or pursued any rights against any
guarantor, or pursued any other rights available to Lender under this Note, the Security
Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term
“Mortgaged Property” shall not include any funds that (1) have been applied by Borrower as required
or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2)
Borrower was unable to apply as required or permitted by the Security Instrument because of a
bankruptcy, receivership, or similar judicial proceeding.

10. Voluntary and Involuntary Prepayments.

(a) A prepayment premium shall be payable in connection with any prepayment made under this
Note as provided below:

(1) Borrower may voluntarily prepay all (but not less than all) of the unpaid principal
balance of this Note only on the last calendar day of a calendar month (the “Last Day of the
Month”) and only if Borrower has complied with all of the following:

	 	(i)	 	Borrower must give Lender at least 30 days (if
given via U.S. Postal Service) or 20 days (if given via facsimile,
email or overnight courier), but not more than 60 days, prior written
notice of Borrower’s intention to make a prepayment (the “Prepayment
Notice”). The Prepayment Notice shall be given in writing (via
facsimile, email, U.S. Postal Service or overnight courier) and
addressed to Lender. The Prepayment Notice shall include, at a
minimum, the Business Day upon which Borrower intends to make the
prepayment (the “Intended Prepayment Date”).

	 	(ii)	 	Borrower acknowledges that the Lender is not
required to accept any voluntary prepayment of this Note on any day
other than the Last Day of the Month even (A) if Borrower has given a
Prepayment Notice with an Intended Prepayment Date other than the Last
Day of the Month or (B) if the Last Day of the Month is not a Business
Day. Therefore, even if Lender accepts a voluntary prepayment on any
day other than the Last Day of the Month, for all purposes (including
the accrual of interest and the calculation of the prepayment premium),
any prepayment received by Lender on any day other than the Last Day of
the Month shall be deemed to have been received by Lender on the Last
Day of the Month and any prepayment calculation will include interest
to and including the Last Day of the Month in which such prepayment
occurs. If the Last Day of the Month is not a Business Day, then the
Borrower must make the payment on the Business Day immediately
preceding the Last Day of the Month.

	 	(iii)	 	Any prepayment shall be made by paying (A) the
amount of principal being prepaid, (B) all accrued interest (calculated
to the Last Day of the Month), (C) all other sums due Lender at the
time of such prepayment, and (D) the prepayment premium calculated
pursuant to Schedule A.

	 	(iv)	 	If, for any reason, Borrower fails to prepay
this Note (A) within five (5) Business Days after the Intended
Prepayment Date or (B) if the prepayment occurs in a month other than
the month stated in the original Prepayment Notice, then Lender shall
have the right, but not the obligation, to recalculate the prepayment
premium based upon the date that Borrower actually prepays this Note
and to make such calculation as described in Schedule A attached
hereto. For purposes of such recalculation, such new prepayment date
shall be deemed the “Intended Prepayment Date.”

(2) Upon Lender’s exercise of any right of acceleration under this Note, Borrower shall
pay to Lender, in addition to the entire unpaid principal balance of this Note outstanding
at the time of the acceleration, (i) all accrued interest and all other sums due Lender
under this Note and the other Loan Documents, and (ii) the prepayment premium calculated
pursuant to Schedule A.

(3) Any application by Lender of any collateral or other security to the repayment of
any portion of the unpaid principal balance of this Note prior to the Maturity Date and in
the absence of acceleration shall be deemed to be a partial prepayment by Borrower,
requiring the payment to Lender by Borrower of a prepayment premium.

(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium shall be payable
(1) with respect to any prepayment occurring as a result of the application of any insurance
proceeds or condemnation award under the Security Instrument, or (2) as provided in subparagraph
(b) of Schedule A.

(c) Schedule A is hereby incorporated by reference into this Note.

(d) Any required prepayment of less than the entire unpaid principal balance of this Note
shall not extend or postpone the due date of any subsequent monthly installments or change the
amount of such installments, unless Lender agrees otherwise in writing.

(e) Borrower recognizes that any prepayment of the unpaid principal balance of this Note,
whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender’s
incurring loss, including reinvestment loss, additional expense and frustration or impairment of
Lender’s ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon
demand damages for the detriment caused by any prepayment, and agrees that it is extremely
difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges
and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents
a reasonable estimate of the damages Lender will incur because of a prepayment.

(f) Borrower further acknowledges that the prepayment premium provisions of this Note are a
material part of the consideration for the loan evidenced by this Note, and acknowledges that the
terms of this Note are in other respects more favorable to Borrower as a result of the Borrower’s
voluntary agreement to the prepayment premium provisions.

11. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including fees
and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred
by Lender as a result of any default under this Note or in connection with efforts to collect any
amount due under this Note, or to enforce the provisions of any of the other Loan Documents,
including those incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial
or non-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 by applicable law, shall
not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance
by Lender of any payment after the due date of such payment, or in an amount which is less than the
required payment, shall not be a waiver of Lender’s right to require prompt payment when due of all
other payments or to exercise any right or remedy with respect to any failure to make prompt
payment. Enforcement by Lender of any security for Borrower’s obligations under this Note shall
not constitute an election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.

13. Waivers. Presentment, demand, notice of dishonor, protest, notice of acceleration, notice
of intent to demand or accelerate payment or maturity, presentment for payment, notice of
nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower, Key
Principal, and all endorsers and guarantors of this Note and all other third party obligors.

14. Loan Charges. Borrower and Lender intend at all times to comply with the law of the State
of Texas governing the maximum rate or amount of interest payable on or in connection with this
Note and the Indebtedness (or applicable United States federal law to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater amount of interest than under
Texas law). If the applicable law is ever judicially interpreted so as to render usurious any
amount payable under this Note or under any other Loan Document, or contracted for, charged, taken,
reserved or received with respect to the Indebtedness, or of acceleration of the maturity of this
Note, or if any prepayment by Borrower results in Borrower having paid any interest in excess of
that permitted by any applicable law, then Borrower and Lender expressly intend that all excess
amounts collected by Lender shall be applied to reduce the unpaid principal balance of this Note
(or, if this Note has been or would thereby be paid in full, shall be refunded to Borrower), and
the provisions of this Note, the Security Instrument and any other Loan Documents immediately shall
be deemed reformed and the amounts thereafter collectible under this Note or any other Loan
Document reduced, without the necessity of the execution of any new documents, so at to comply with
any applicable law, but so as to permit the recovery of the fullest amount otherwise payable under
this Note or any other Loan Document. The right to accelerate the maturity of this Note does not
include the right to accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention
of the Indebtedness shall, to the extent permitted by any applicable law, be amortized, prorated,
allocated and spread throughout the full term of the Indebtedness until payment in full so that the
rate or amount of interest on account of the Indebtedness does not exceed the applicable usury
ceiling. Notwithstanding any provision contained in this Note, the Security Instrument or any
other Loan Document that permits the compounding of interest, including any provision by which any
accrued interest is added to the principal amount of this Note, the total amount of interest that
Borrower is obligated to pay and Lender is entitled to receive with respect to the Indebtedness
shall not exceed the amount calculated on a simple (i.e. noncompounded) interest basis at the
maximum rate on principal amounts actually advanced to or for the account of Borrower, including
all current and prior advances and any advances made pursuant to the Security Instrument or other
Loan Documents (such as for the payment of taxes, insurance premiums and similar expenses or
costs).

15. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by
Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for
personal, family or household purposes.

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

17. Governing Law. This Note shall be governed by the law of the jurisdiction in which the
Land is located.

18. Captions. The captions of the paragraphs of this Note are for convenience only and shall
be disregarded in construing this Note.

19. Notices. All notices, demands and other communications required or permitted to be given
by Lender to Borrower pursuant to this Note shall be given in accordance with Section 31 of the
Security Instrument.

20. Consent to Jurisdiction and Venue. Borrower and Key Principal each agrees that any
controversy arising under or in relation to this Note shall be litigated exclusively in the
Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the
Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise
under or in relation to this Note. Borrower and Key Principal each irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and waives any other venue
to which it might be entitled by virtue of domicile, habitual residence or otherwise.

21. WAIVER OF TRIAL BY JURY. BORROWER, KEY PRINCIPAL AND LENDER EACH (A) AGREES NOT TO ELECT
A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE
PARTIES AS LENDER, KEY PRINCIPAL AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY
RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR
IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY
AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED SCHEDULES. The following Schedules are attached to this Note:

	 	 	 	 	 
	[ X ] Schedule A	Prepayment Premium (required)
	
 
	 	Schedule B
	 	Modifications to Multifamily Note

1

IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has caused this Note to be
signed and delivered by its duly authorized representative.

BORROWER

Apartment REIT Park at North Gate, LP,

a Texas limited partnership

	 	 	 	 	 	 	 	 	 
	By:	 	Apartment REIT Park at North Gate GP, LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	Its:	 	General Partner	 	 	 	 
	 	 	By:	 	NNN Apartment REIT Holdings, L.P.,
	 	 	 	 	a Virginia limited partnership	 	 
	
 
	 	Its:
	 	Manager
	 	

	 	

	 	 	 	 	By:	 	NNN Apartment REIT, Inc.,
	 	 	 	 	 	 	a Maryland corporation
	
 
	 	 	 	Its:
	 	General Partner
	 	

	
 
	 	 	 	 	 	By:
	 	/s/ Stanley J. Olander
	
 
	 	 	 	 	 	 	 	 
	
 
	 	 	 	 	 	Name:
	 	S. Jay Olander
	
 
	 	 	 	 	 	 	 	 
	
 
	 	 	 	 	 	Title:
	 	Chief Executive Officer
	
 
	 	 	 	 	 	 	 	 

Borrower’s Social Security/Employer ID Number: 26-0363010

Fannie Mae Commitment Number: 851687

2

PAY TO THE ORDER OF

WITHOUT RECOURSE

LENDER:

PNC ARCS LLC,

a Delaware limited liability company

	 	 	 
	By:

	 	/s/ Larry R. Sneathern
	
 
	 	 
	Its:

	 	Larry R. Sneathern

Senior Vice President

ARCS Loan Number: 310228780

	 	 	Fannie Mae Commitment Number: 851687

3

SCHEDULE A

PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 10 of this Note shall be computed as follows:

	 	(a)	 	If the prepayment is made at any time after the date of this Note and before
the Yield Maintenance Period End Date, the prepayment premium shall be the greater of:

	 	(i)	 	1% of the amount of principal being prepaid; or

	 	(ii)	 	The product obtained by multiplying:

	 	(A)	 	the amount of principal being prepaid,

	 	 	 	by

	 	(B)	 	the difference obtained by subtracting from the
Fixed Rate on this Note the yield rate (the “Yield Rate”) on the 4.500%
U.S. Treasury Security due May, 2017 (the “Specified U.S. Treasury
Security”), on the twenty-fifth Business Day preceding (x) the Intended
Prepayment Date, or (y) the date Lender accelerates the Loan or
otherwise accepts a prepayment pursuant to Paragraph 10(a)(3) of this
Note, as the Yield Rate is reported in The Wall Street Journal,

	 	 	 	by

	 	(C)	 	the present value factor calculated using the
following formula:

1 — (1 + r)-n/12

r

[r = Yield Rate

n = the number of months remaining between (1) either of
the following: (x) in the case of a voluntary prepayment, the
Last Day of the Month during which the prepayment is made, or
(y) in any other case, the date on which Lender accelerates
the unpaid principal balance of this Note and (2) the Yield
Maintenance Period End Date]

In the event that no Yield Rate is published for the Specified U.S.
Treasury Security, then the nearest equivalent non-callable U.S.
Treasury Security having a maturity date closest to the Yield
Maintenance Period End Date of this Note shall be selected at
Lender’s discretion. If the publication of such Yield Rates in The
Wall Street Journal is discontinued, Lender shall determine such
Yield Rates from another source selected by Lender.

	 	(b)	 	Notwithstanding the provisions of Paragraph 10(a) of this Note, no prepayment
premium shall be payable with respect to any prepayment made on or after the Yield
Maintenance Period End Date.

	 
	/s/ SJO
	Borrower Initials

4EX-10.8

Prepared by, and after recording

return to:

Closing Department

PNC ARCS LLC

26901 Agoura Road, Suite 200

Calabasas Hills, California 91301

Attn: Closing Dept.

ARCS #: 310228780

FNMA #: 851687

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS 

AND SECURITY AGREEMENT AND FIXTURE FILING

(TEXAS)

1

Notice of Confidentiality Rights: If you are a natural person, you may remove or strike any of the

following information from this instrument before it is filed for record in the Public Records:

Your social security number or your driver’s license number.TABLE OF CONTENTS

PAGE

	 	 	 	 	 	 	 	 	 
	1.
	 	DEFINITIONS	 	 	1	 
	2.
	 	UNIFORM COMMERCIAL CODE SECURITY AGREEMENT	 	 	6	 

3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER;

LENDER IN POSSESSION 7

4. ASSIGNMENT OF LEASES; LEASES AFFECTING

THE MORTGAGED PROPERTY 9

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN

	 	 	 	 	 	 	 	 	 
	 
	 	DOCUMENTS; PREPAYMENT PREMIUM	 	 	11	 
	6.
	 	EXCULPATION	 	 	11	 
	7.
	 	DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES	 	 	12	 
	8.
	 	COLLATERAL AGREEMENTS	 	 	13	 
	9.
	 	APPLICATION OF PAYMENTS	 	 	13	 
	10.
	 	COMPLIANCE WITH LAWS	 	 	13	 
	11.
	 	USE OF PROPERTY	 	 	13	 
	12.
	 	PROTECTION OF LENDER'S SECURITY	 	 	14	 
	13.
	 	INSPECTION	 	 	14	 
	14.
	 	BOOKS AND RECORDS; FINANCIAL REPORTING	 	 	16	 
	15.
	 	TAXES; OPERATING EXPENSES	 	 	17	 
	16.
	 	LIENS; ENCUMBRANCES	 	 	17	 

17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF

	 	 	 	 	 	 	 	 	 
	 
	 	MORTGAGED PROPERTY	 	 	18	 
	18.
	 	ENVIRONMENTAL HAZARDS	 	 	24	 
	19.
	 	PROPERTY AND LIABILITY INSURANCE	 	 	25	 
	20.
	 	CONDEMNATION	 	 	26	 

21. TRANSFERS OF THE MORTGAGED PROPERTY OR

	 	 	 	 	 	 	 	 	 
	 
	 	INTERESTS IN BORROWER	 	 	29	 
	22.
	 	EVENTS OF DEFAULT	 	 	30	 
	23.
	 	REMEDIES CUMULATIVE	 	 	31	 
	24.
	 	FORBEARANCE	 	 	31	 
	25.
	 	INTENTIONALLY DELETED	 	 	31	 
	26.
	 	WAIVER OF STATUTE OF LIMITATIONS	 	 	31	 
	27.
	 	WAIVER OF MARSHALLING	 	 	32	 
	28.
	 	FURTHER ASSURANCES	 	 	32	 
	29.
	 	ESTOPPEL CERTIFICATE	 	 	32	 
	30.
	 	GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE	 	 	32	 
	31.
	 	NOTICE	 	 	33	 
	32.
	 	SALE OF NOTE; CHANGE IN SERVICER	 	 	33	 
	33.
	 	SINGLE ASSET BORROWER	 	 	33	 
	34.
	 	SUCCESSORS AND ASSIGNS BOUND	 	 	33	 
	35.
	 	JOINT AND SEVERAL LIABILITY	 	 	33	 
	36.
	 	RELATIONSHIPOF PARTIES; NO THIRD PARTY BENEFICIARY	 	 	33	 
	37.
	 	SEVERABILITY; AMENDMENTS	 	 	34	 
	38.
	 	CONSTRUCTION	 	 	34	 
	39.
	 	LOAN SERVICING	 	 	34	 
	40.
	 	DISCLOSURE OF INFORMATION	 	 	34	 
	41.
	 	NO CHANGE IN FACTS OR CIRCUMSTANCES	 	 	34	 
	42.
	 	SUBROGATION	 	 	35	 
	43.
	 	ACCELERATION; REMEDIES.	 	 	35	 
	44.
	 	RELEASE.	 	 	38	 
	45.
	 	TRUSTEE	 	 	38	 
	46.
	 	VENDOR’S LIEN; RENEWAL AND EXTENSION	 	 	39	 
	47.
	 	NO FIDUCIARY DUTY	 	 	39	 
	48.
	 	FIXTURE FILING	 	 	39	 
	49.
	 	ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS	 	 	39	 
	50.
	 	LOAN CHARGES	 	 	40	 

51. PROPERTY AND LIABILITY INSURANCE — DELIVERY OF

	 	 	 	 	 	 	 	 	 
	 
	 	POLICY TO LENDER	 	 	40	 
	52.
	 	ENTIRE AGREEMENT	 	 	40	 
	53.
	 	WAIVER OF TRIAL BY JURY	 	 	41	 

2

MULTIFAMILY DEED OF TRUST,

ASSIGNMENT OF RENTS AND

SECURITY AGREEMENT AND FIXTURE FILING

THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT AND FIXTURE FILING
(the “Instrument”) is dated as of the 1st day of August, 2007, by Apartment REIT Park at North
Gate, LP, a Texas limited partnership organized and existing under the laws of the State of Texas ,
whose address is 1551 N. Tustin Avenue, Santa Ana, California 92705, as trustor (“Borrower”), to
Lawyers Title Insurance Company, as trustee (“Trustee”), for the benefit of PNC ARCS LLC, a
Delaware limited liability company organized and existing under the laws of the State of Delaware,
whose address is 26901 Agoura Road, Suite 200, Calabasas Hills, California 91301, as beneficiary
(“Lender”).

Borrower, in consideration of the Indebtedness and the trust created by this Instrument,
irrevocably grants, conveys and assigns to Trustee, in trust, with power of sale, the Mortgaged
Property, including the Land located in Harris County, State of Texas and described in Exhibit A
attached to this Instrument. To have and to hold the Mortgaged Property unto Trustee, Trustee’s
successor in trust and Trustee’s assigns forever.

TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower’s Multifamily Note
payable to Lender, dated as of the date of this Instrument, and maturing on August 1, 2017, in the
principal amount of $10,295,000.00, and all renewals, extensions and modifications of the
Indebtedness, and the performance of the covenants and agreements of Borrower contained in the Loan
Documents.

Borrower warrants and represents that Borrower is lawfully seized of the Mortgaged Property
and has the right, power and authority to grant, convey and assign the Mortgaged Property, and that
the Mortgaged Property is unencumbered. Borrower covenants that Borrower will warrant and defend
generally the title to the Mortgaged Property against all claims and demands, subject to any
easements and restrictions listed in a schedule of exceptions to coverage in any title insurance
policy issued to Lender contemporaneously with the execution and recordation of this Instrument and
insuring Lender’s interest in the Mortgaged Property.

Covenants. Borrower and Lender covenant and agree as follows:

1. DEFINITIONS. The following terms, when used in this Instrument (including when used in the
above recitals), shall have the following meanings:

(a) "Borrower” means all persons or entities identified as “Borrower” in the first paragraph
of this Instrument, together with their successors and assigns.

(b) "Collateral Agreement” means any separate agreement between Borrower and Lender for the
purpose of establishing replacement reserves for the Mortgaged Property, establishing a fund to
assure completion of repairs or improvements specified in that agreement, or assuring reduction of
the outstanding principal balance of the Indebtedness if the occupancy of or income from the
Mortgaged Property does not increase to a level specified in that agreement, or any other agreement
or agreements between Borrower and Lender which provide for the establishment of any other fund,
reserve or account.

(c) "Environmental Permit” means any permit, license, or other authorization issued under any
Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to
the Mortgaged Property.

(d) "Event of Default” means the occurrence of any event listed in Section 22.

(e) "Fixtures” means all property which is so attached to the Land or the Improvements as to
constitute a fixture under applicable law, including: machinery, equipment, engines, boilers,
incinerators, installed building materials; systems and equipment for the purpose of supplying or
distributing heating, cooling, electricity, gas, water, air, or light; antennas, cable, wiring and
conduits used in connection with radio, television, security, fire prevention, or fire detection or
otherwise used to carry electronic signals; telephone systems and equipment; elevators and related
machinery and equipment; fire detection, prevention and extinguishing systems and apparatus;
security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves,
microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other
appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds,
shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings;
fences, trees and plants; swimming pools; and exercise equipment.

(f) "Governmental Authority” means any board, commission, department or body of any municipal,
county, state or federal governmental unit, or any subdivision of any of them, that has or acquires
jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.

(g) "Hazardous Materials” means petroleum and petroleum products and compounds containing
them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive
materials; polychlorinated biphenyls (“PCBs”) and compounds containing them; lead and lead-based
paint; asbestos or asbestos-containing materials in any form that is or could become friable;
underground or above-ground storage tanks, whether empty or containing any substance; any substance
the presence of which on the Mortgaged Property is prohibited by any federal, state or local
authority; any substance that requires special handling; and any other material or substance now or
in the future defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic
substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the meaning of any Hazardous
Materials Law.

(h) "Hazardous Materials Laws” means all federal, state, and local laws, ordinances and
regulations and standards, rules, policies and other governmental requirements, administrative
rulings and court judgments and decrees in effect now or in the future and including all
amendments, that relate to Hazardous Materials and apply to Borrower or to the Mortgaged Property.
Hazardous Materials Laws include, but are not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C.
Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous
Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

(i) "Impositions” and “Imposition Deposits” are defined in Section 7(a).

(j) "Improvements” means the buildings, structures, improvements, and alterations now
constructed or at any time in the future constructed or placed upon the Land, including any future
replacements and additions.

(k) "Indebtedness” means the principal of, interest on, and all other amounts due at any time
under, the Note, this Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances as provided in Section 12 to protect the security of this
Instrument.

(l) [Intentionally omitted]

(m) "Key Principal” means the natural person(s) or entity identified as such at the foot of
this Instrument, and any person or entity who becomes a Key Principal after the date of this
Instrument and is identified as such in an amendment or supplement to this Instrument.

(n) "Land” means the land described in Exhibit A.

(o) "Leases” means all present and future leases, subleases, licenses, concessions or grants
or other possessory interests now or hereafter in force, whether oral or written, covering or
affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is a cooperative housing corporation), and all
modifications, extensions or renewals.

(p) "Lender” means the entity identified as “Lender” in the first paragraph of this Instrument
and its successors and assigns, or any subsequent holder of the Note.

(q) "Loan Documents” means the Note, this Instrument, all guaranties, all indemnity
agreements, all Collateral Agreements, O&M Programs, and any other documents now or in the future
executed by Borrower, Key Principal, any guarantor or any other person in connection with the loan
evidenced by the Note, as such documents may be amended from time to time.

(r) "Loan Servicer” means the entity that from time to time is designated by Lender to collect
payments and deposits and receive notices under the Note, this Instrument and any other Loan
Document, and otherwise to service the loan evidenced by the Note for the benefit of Lender.
Unless Borrower receives notice to the contrary, the Loan Servicer is the entity identified as
“Lender” in the first paragraph of this Instrument.

(s) "Mortgaged Property” means all of Borrower’s present and future right, title and interest
in and to all of the following:

	 	(1)	 	the Land;

	 	(2)	 	the Improvements;

	 	(3)	 	the Fixtures;

	 	(4)	 	the Personalty;

	 	(5)	 	all current and future rights, including air rights,
development rights, zoning rights and other similar rights or interests,
easements, tenements, rights-of-way, strips and gores of land, streets, alleys,
roads, sewer rights, waters, watercourses, and appurtenances related to or
benefitting the Land or the Improvements, or both, and all rights-of-way,
streets, alleys and roads which may have been or may in the future be vacated;

	 	(6)	 	all proceeds paid or to be paid by any insurer of the Land, the
Improvements, the Fixtures, the Personalty or any other part of the Mortgaged
Property, whether or not Borrower obtained the insurance pursuant to Lender’s
requirement;

	 	(7)	 	all awards, payments and other compensation made or to be made
by any municipal, state or federal authority with respect to the Land, the
Improvements, the Fixtures, the Personalty or any other part of the Mortgaged
Property, including any awards or settlements resulting from condemnation
proceedings or the total or partial taking of the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property under the
power of eminent domain or otherwise and including any conveyance in lieu
thereof;

	 	(8)	 	all contracts, options and other agreements for the sale of the
Land, the Improvements, the Fixtures, the Personalty or any other part of the
Mortgaged Property entered into by Borrower now or in the future, including
cash or securities deposited to secure performance by parties of their
obligations;

	 	(9)	 	all proceeds from the conversion, voluntary or involuntary, of
any of the above into cash or liquidated claims, and the right to collect such
proceeds;

	 	(10)	 	all Rents and Leases;

	 	(11)	 	all earnings, royalties, accounts receivable, issues and
profits from the Land, the Improvements or any other part of the Mortgaged
Property, and all undisbursed proceeds of the loan secured by this Instrument
and, if Borrower is a cooperative housing corporation, maintenance charges or
assessments payable by shareholders or residents;

	 	(12)	 	all Imposition Deposits;

	 	(13)	 	all refunds or rebates of Impositions by any municipal, state
or federal authority or insurance company (other than refunds applicable to
periods before the real property tax year in which this Instrument is dated);

	 	(14)	 	all tenant security deposits which have not been forfeited by
any tenant under any Lease; and

	 	(15)	 	all names under or by which any of the above Mortgaged Property
may be operated or known, and all trademarks, trade names, and goodwill
relating to any of the Mortgaged Property.

(t) "Note” means the Multifamily Note described on page 1 of this Instrument, including the
Acknowledgment and Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse
Liability (if any), and all schedules, riders, allonges and addenda, as such Multifamily Note may
be amended from time to time.

(u) "O&M Program” is defined in Section 18(a).

(v) "Personalty” means all equipment, inventory, general intangibles which are used now or in
the future in connection with the ownership, management or operation of the Land or the
Improvements or are located on the Land or in the Improvements, including furniture, furnishings,
machinery, building materials, appliances, goods, supplies, tools, books, records (whether in
written or electronic form), computer equipment (hardware and software) and other tangible personal
property (other than Fixtures) which are used now or in the future in connection with the
ownership, management or operation of the Land or the Improvements or are located on the Land or in
the Improvements, and any operating agreements relating to the Land or the Improvements, and any
surveys, plans and specifications and contracts for architectural, engineering and construction
services relating to the Land or the Improvements and all other intangible property and rights
relating to the operation of, or used in connection with, the Land or the Improvements, including
all governmental permits relating to any activities on the Land.

(w) "Property Jurisdiction” is defined in Section 30(a).

(x) "Rents” means all rents (whether from residential or non-residential space), revenues and
other income of the Land or the Improvements, including subsidy payments received from any sources
(including, but not limited to payments under any Housing Assistance Payments Contract), parking
fees, laundry and vending machine income and fees and charges for food, health care and other
services provided at the Mortgaged Property, whether now due, past due, or to become due, and
deposits forfeited by tenants.

(y) "Taxes” means all taxes, assessments, vault rentals and other charges, if any, general,
special or otherwise, including all assessments for schools, public betterments and general or
local improvements, which are levied, assessed or imposed by any public authority or quasi-public
authority, and which, if not paid, will become a lien, on the Land or the Improvements.

(z) "Transfer” means (A) a sale, assignment, transfer or other disposition (whether voluntary,
involuntary or by operation of law); (B) the granting, creating or attachment of a lien,
encumbrance or security interest (whether voluntary, involuntary or by operation of law); (C) the
issuance or other creation of an ownership interest in a legal entity, including a partnership
interest, interest in a limited liability company or corporate stock; (D) the withdrawal,
retirement, removal or involuntary resignation of a partner in a partnership or a member or manager
in a limited liability company; or (E) the merger, dissolution, liquidation, or consolidation of a
legal entity. “Transfer” does not include (i) a conveyance of the Mortgaged Property at a judicial
or non-judicial foreclosure sale under this Instrument or (ii) the Mortgaged Property becoming part
of a bankruptcy estate by operation of law under the United States Bankruptcy Code. For purposes
of defining the term “Transfer,” the term “partnership” shall mean a general partnership, a limited
partnership, a joint venture and a limited liability partnership, and the term “partner” shall mean
a general partner, a limited partner and a joint venturer.

2. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is also a security agreement
under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law,
may be subject to a security interest under the Uniform Commercial Code, whether acquired now or in
the future, and all products and cash and non-cash proceeds thereof (collectively, “UCC
Collateral”), and Borrower hereby grants to Lender a security interest in the UCC Collateral.
Borrower hereby authorizes Lender to file financing statements, continuation statements and
financing statement amendments in such form as Lender may require to perfect or continue the
perfection of this security interest and Borrower agrees, if Lender so requests, to execute and
deliver to Lender such financing statements, continuation statements and amendments. Borrower
shall pay all filing costs and all costs and expenses of any record searches for financing
statements that Lender may require. Without the prior written consent of Lender, Borrower shall
not create or permit to exist any other lien or security interest in any of the UCC Collateral. If
an Event of Default has occurred and is continuing, Lender shall have the remedies of a secured
party under the Uniform Commercial Code, in addition to all remedies provided by this Instrument or
existing under applicable law. In exercising any remedies, Lender may exercise its remedies
against the UCC Collateral separately or together, and in any order, without in any way affecting
the availability of Lender’s other remedies. This Instrument constitutes a financing statement
with respect to any part of the Mortgaged Property which is or may become a Fixture.

3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally
assigns and transfers to Lender all Rents. It is the intention of Borrower to establish a present,
absolute and irrevocable transfer and assignment to Lender of all Rents and to authorize and
empower Lender to collect and receive all Rents without the necessity of further action on the part
of Borrower. Promptly upon request by Lender, Borrower agrees to execute and deliver such further
assignments as Lender may from time to time require. Borrower and Lender intend this assignment of
Rents to be immediately effective and to constitute an absolute present assignment and not an
assignment for additional security only. For purposes of giving effect to this absolute assignment
of Rents, and for no other purpose, Rents shall not be deemed to be a part of the “Mortgaged
Property,” as that term is defined in Section 1(s). However, if this present, absolute and
unconditional assignment of Rents is not enforceable by its terms under the laws of the Property
Jurisdiction, then the Rents shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and perfect a lien on
Rents in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) After the occurrence of an Event of Default, Borrower authorizes Lender to collect, sue
for and compromise Rents and directs each tenant of the Mortgaged Property to pay all Rents to, or
as directed by, Lender, and Borrower shall, upon Borrower’s receipt of any Rents from any sources
(including, but not limited to subsidy payments under any Housing Assistance Payments Contract),
pay the total amount of such receipts to the Lender. However, until the occurrence of an Event of
Default, Lender hereby grants to Borrower a revocable license to collect and receive all Rents, to
hold all Rents in trust for the benefit of Lender and to apply all Rents to pay the installments of
interest and principal then due and payable under the Note and the other amounts then due and
payable under the other Loan Documents, including Imposition Deposits, and to pay the current costs
and expenses of managing, operating and maintaining the Mortgaged Property, including utilities,
Taxes and insurance premiums (to the extent not included in Imposition Deposits), tenant
improvements and other capital expenditures. So long as no Event of Default has occurred and is
continuing, the Rents remaining after application pursuant to the preceding sentence may be
retained by Borrower free and clear of, and released from, Lender’s rights with respect to Rents
under this Instrument. From and after the occurrence of an Event of Default, and without the
necessity of Lender entering upon and taking and maintaining control of the Mortgaged Property
directly, or by a receiver, Borrower’s license to collect Rents shall automatically terminate and
Lender shall without notice be entitled to all Rents as they become due and payable, including
Rents then due and unpaid. Borrower shall pay to Lender upon demand all Rents to which Lender is
entitled. At any time after the occurrence of an Event of Default, Lender may give, and Borrower
hereby irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged Property
instructing them to pay all Rents to Lender; provided, however, that the giving of any such notice
by Lender shall not affect, in any way, Lender’s entitlement to the Rents as of the date on which
the Event of Default occurs. No tenant shall be obligated to inquire further as to the occurrence
or continuance of an Event of Default, and no tenant shall be obligated to pay to Borrower any
amounts which are actually paid to Lender in response to such a notice. Any such notice by Lender
shall be delivered to each tenant personally, by mail or by delivering such demand to each rental
unit. Borrower shall not interfere with and shall cooperate with Lender’s collection of such
Rents.

(c) Borrower represents and warrants to Lender that Borrower has not executed any prior
assignment of Rents (other than an assignment of Rents securing indebtedness that will be paid off
and discharged with the proceeds of the loan evidenced by the Note), that Borrower has not
performed, and Borrower covenants and agrees that it will not perform, any acts and has not
executed, and shall not execute, any instrument which would prevent Lender from exercising its
rights under this Section 3, and that at the time of execution of this Instrument there has been no
anticipation or prepayment of any Rents for more than two months prior to the due dates of such
Rents. Borrower shall not collect or accept payment of any Rents more than two months prior to the
due dates of such Rents.

(d) If an Event of Default has occurred and is continuing, Lender may, regardless of the
adequacy of Lender’s security or the solvency of Borrower and even in the absence of waste, enter
upon and take and maintain full control of the Mortgaged Property in order to perform all acts that
Lender in its discretion determines to be necessary or desirable for the operation and maintenance
of the Mortgaged Property, including the execution, cancellation or modification of Leases, the
collection of all Rents, the making of repairs to the Mortgaged Property and the execution or
termination of contracts providing for the management, operation or maintenance of the Mortgaged
Property, for the purposes of enforcing the assignment of Rents pursuant to Section 3(a),
protecting the Mortgaged Property or the security of this Instrument, or for such other purposes as
Lender in its discretion may deem necessary or desirable. Alternatively, if an Event of Default
has occurred and is continuing, regardless of the adequacy of Lender’s security, without regard to
Borrower’s solvency and without the necessity of giving prior notice (oral or written) to Borrower,
Lender may apply to any court having jurisdiction for the appointment of a receiver for the
Mortgaged Property to take any or all of the actions set forth in the preceding sentence. If
Lender elects to seek the appointment of a receiver for the Mortgaged Property at any time after an
Event of Default has occurred and is continuing, Borrower, by its execution of this Instrument,
expressly consents to the appointment of such receiver, including the appointment of a receiver ex
parte if permitted by applicable law. Lender or the receiver, as the case may be, shall be
entitled to receive a reasonable fee for managing the Mortgaged Property. Immediately upon
appointment of a receiver or immediately upon the Lender’s entering upon and taking possession and
control of the Mortgaged Property, Borrower shall surrender possession of the Mortgaged Property to
Lender or the receiver, as the case may be, and shall deliver to Lender or the receiver, as the
case may be, all documents, records (including records on electronic or magnetic media), accounts,
surveys, plans, and specifications relating to the Mortgaged Property and all security deposits and
prepaid Rents. In the event Lender takes possession and control of the Mortgaged Property, Lender
may exclude Borrower and its representatives from the Mortgaged Property. Borrower acknowledges
and agrees that the exercise by Lender of any of the rights conferred under this Section 3 shall
not be construed to make Lender a mortgagee-in-possession of the Mortgaged Property so long as
Lender has not itself entered into actual possession of the Land and Improvements.

(e) If Lender enters the Mortgaged Property, Lender shall be liable to account only to
Borrower and only for those Rents actually received. Lender shall not be liable to Borrower,
anyone claiming under or through Borrower or anyone having an interest in the Mortgaged Property,
by reason of any act or omission of Lender under this Section 3, and Borrower hereby releases and
discharges Lender from any such liability to the fullest extent permitted by law.

(f) If the Rents are not sufficient to meet the costs of taking control of and managing the
Mortgaged Property and collecting the Rents, any funds expended by Lender for such purposes shall
become an additional part of the Indebtedness as provided in Section 12.

(g) Any entering upon and taking of control of the Mortgaged Property by Lender or the
receiver, as the case may be, and any application of Rents as provided in this Instrument shall not
cure or waive any Event of Default or invalidate any other right or remedy of Lender under
applicable law or provided for in this Instrument.

4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

(a) As part of the consideration for the Indebtedness, Borrower absolutely and unconditionally
assigns and transfers to Lender all of Borrower’s right, title and interest in, to and under the
Leases, including Borrower’s right, power and authority to modify the terms of any such Lease, or
extend or terminate any such Lease. It is the intention of Borrower to establish a present,
absolute and irrevocable transfer and assignment to Lender of all of Borrower’s right, title and
interest in, to and under the Leases. Borrower and Lender intend this assignment of the Leases to
be immediately effective and to constitute an absolute present assignment and not an assignment for
additional security only. For purposes of giving effect to this absolute assignment of the Leases,
and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged Property,”
as that term is defined in Section 1(s). However, if this present, absolute and unconditional
assignment of the Leases is not enforceable by its terms under the laws of the Property
Jurisdiction, then the Leases shall be included as a part of the Mortgaged Property and it is the
intention of the Borrower that in this circumstance this Instrument create and perfect a lien on
the Leases in favor of Lender, which lien shall be effective as of the date of this Instrument.

(b) Until the occurrence of an Event of Default, Borrower shall have all rights, power and
authority granted to Borrower under any Lease (except as otherwise limited by this Section or any
other provision of this Instrument), including the right, power and authority to modify the terms
of any Lease or extend or terminate any Lease. Upon the occurrence of an Event of Default, the
permission given to Borrower pursuant to the preceding sentence to exercise all rights, power and
authority under Leases shall automatically terminate. Borrower shall comply with and observe
Borrower’s obligations under all Leases, including Borrower’s obligations pertaining to the
maintenance and disposition of tenant security deposits.

(c) Borrower acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be construed to make Lender
a mortgagee-in-possession of the Mortgaged Property so long as Lender has not itself entered into
actual possession of the Land and the Improvements. The acceptance by Lender of the assignment of
the Leases pursuant to Section 4(a) shall not at any time or in any event obligate Lender to take
any action under this Instrument or to expend any money or to incur any expenses. Lender shall not
be liable in any way for any injury or damage to person or property sustained by any person or
persons, firm or corporation in or about the Mortgaged Property. Prior to Lender’s actual entry
into and taking possession of the Mortgaged Property, Lender shall not (i) be obligated to perform
any of the terms, covenants and conditions contained in any Lease (or otherwise have any obligation
with respect to any Lease); (ii) be obligated to appear in or defend any action or proceeding
relating to the Lease or the Mortgaged Property; or (iii) be responsible for the operation,
control, care, management or repair of the Mortgaged Property or any portion of the Mortgaged
Property. The execution of this Instrument by Borrower shall constitute conclusive evidence that
all responsibility for the operation, control, care, management and repair of the Mortgaged
Property is and shall be that of Borrower, prior to such actual entry and taking of possession.

(d) From and after the occurrence of an Event of Default, and without the necessity of Lender
entering upon and taking and maintaining control of the Mortgaged Property directly, by a receiver,
or by any other manner or proceeding permitted by the laws of the Property Jurisdiction, Lender
immediately shall have all rights, powers and authority granted to Borrower under any Lease,
including the right, power and authority to modify the terms of any such Lease, or extend or
terminate any such Lease.

(e) Borrower shall, promptly upon Lender’s request, deliver to Lender an executed copy of each
residential Lease then in effect. All Leases for residential dwelling units shall be on forms
approved by Lender, shall be for initial terms of at least six months and not more than two years,
and shall not include options to purchase. If customary in the applicable market, residential
Leases with terms of less than six months may be permitted with Lender’s prior written consent.

(f) Borrower shall not lease any portion of the Mortgaged Property for non-residential use
except with the prior written consent of Lender and Lender’s prior written approval of the Lease
agreement. Borrower shall not modify the terms of, or extend or terminate, any Lease for
non-residential use (including any Lease in existence on the date of this Instrument) without the
prior written consent of Lender. Borrower shall, without request by Lender, deliver an executed
copy of each non-residential Lease to Lender promptly after such Lease is signed. All
non-residential Leases, including renewals or extensions of existing Leases, shall specifically
provide that (1) such Leases are subordinate to the lien of this Instrument (unless waived in
writing by Lender); (2) the tenant shall attorn to Lender and any purchaser at a foreclosure sale,
such attornment to be self-executing and effective upon acquisition of title to the Mortgaged
Property by any purchaser at a foreclosure sale or by Lender in any manner; (3) the tenant agrees
to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale
may from time to time request; (4) the Lease shall not be terminated by foreclosure or any other
transfer of the Mortgaged Property; (5) after a foreclosure sale of the Mortgaged Property, Lender
or any other purchaser at such foreclosure sale may, at Lender’s or such purchaser’s option, accept
or terminate such Lease; and (6) the tenant shall, upon receipt after the occurrence of an Event of
Default of a written request from Lender, pay all Rents payable under the Lease to Lender.

(g) Borrower shall not receive or accept Rent under any Lease (whether residential or
non-residential) for more than two months in advance.

5. PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM. Borrower
shall pay the Indebtedness when due in accordance with the terms of the Note and the other Loan
Documents and shall perform, observe and comply with all other provisions of the Note and the other
Loan Documents. Borrower shall pay a prepayment premium in connection with certain prepayments of
the Indebtedness, including a payment made after Lender’s exercise of any right of acceleration of
the Indebtedness, as provided in the Note.

6. EXCULPATION. Borrower’s personal liability for payment of the Indebtedness and for
performance of the other obligations to be performed by it under this Instrument is limited in the
manner, and to the extent, provided in the Note.

7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

(a) Borrower shall deposit with Lender on the day monthly installments of principal or
interest, or both, are due under the Note (or on another day designated in writing by Lender),
until the Indebtedness is paid in full, an additional amount sufficient to accumulate with Lender
the entire sum required to pay, when due (1) any water and sewer charges which, if not paid, may
result in a lien on all or any part of the Mortgaged Property, (2) the premiums for fire and other
hazard insurance, rent loss insurance and such other insurance as Lender may require under
Section 19, (3) Taxes, and (4) amounts for other charges and expenses which Lender at any time
reasonably deems necessary to protect the Mortgaged Property, to prevent the imposition of liens on
the Mortgaged Property, or otherwise to protect Lender’s interests, all as reasonably estimated
from time to time by Lender. The amounts deposited under the preceding sentence are collectively
referred to in this Instrument as the “Imposition Deposits”. The obligations of Borrower for which
the Imposition Deposits are required are collectively referred to in this Instrument as
“Impositions". The amount of the Imposition Deposits shall be sufficient to enable Lender to pay
each Imposition before the last date upon which such payment may be made without any penalty or
interest charge being added. Lender shall maintain records indicating how much of the monthly
Imposition Deposits and how much of the aggregate Imposition Deposits held by Lender are held for
the purpose of paying Taxes, insurance premiums and each other obligation of Borrower for which
Imposition Deposits are required. Any waiver by Lender of the requirement that Borrower remit
Imposition Deposits to Lender may be revoked by Lender, in Lender’s discretion, at any time upon
notice to Borrower.

(b) Imposition Deposits shall be held in an institution (which may be Lender, if Lender is
such an institution) whose deposits or accounts are insured or guaranteed by a federal agency.
Lender shall not be obligated to open additional accounts or deposit Imposition Deposits in
additional institutions when the amount of the Imposition Deposits exceeds the maximum amount of
the federal deposit insurance or guaranty. Lender shall apply the Imposition Deposits to pay
Impositions so long as no Event of Default has occurred and is continuing. Unless applicable law
requires, Lender shall not be required to pay Borrower any interest, earnings or profits on the
Imposition Deposits. Borrower hereby pledges and grants to Lender a security interest in the
Imposition Deposits as additional security for all of Borrower’s obligations under this Instrument
and the other Loan Documents. Any amounts deposited with Lender under this Section 7 shall not be
trust funds, nor shall they operate to reduce the Indebtedness, unless applied by Lender for that
purpose under Section 7(e).

(c) If Lender receives a bill or invoice for an Imposition, Lender shall pay the Imposition
from the Imposition Deposits held by Lender. Lender shall have no obligation to pay any Imposition
to the extent it exceeds Imposition Deposits then held by Lender. Lender may pay an Imposition
according to any bill, statement or estimate from the appropriate public office or insurance
company without inquiring into the accuracy of the bill, statement or estimate or into the validity
of the Imposition.

(d) If at any time the amount of the Imposition Deposits held by Lender for payment of a
specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess shall be
credited against future installments of Imposition Deposits. If at any time the amount of the
Imposition Deposits held by Lender for payment of a specific Imposition is less than the amount
reasonably estimated by Lender to be necessary, Borrower shall pay to Lender the amount of the
deficiency within 15 days after notice from Lender.

(e) If an Event of Default has occurred and is continuing, Lender may apply any Imposition
Deposits, in any amounts and in any order as Lender determines, in Lender’s discretion, to pay any
Impositions or as a credit against the Indebtedness. Upon payment in full of the Indebtedness,
Lender shall refund to Borrower any Imposition Deposits held by Lender.

8. COLLATERAL AGREEMENTS. Borrower shall deposit with Lender such amounts as may be required
by any Collateral Agreement and shall perform all other obligations of Borrower under each
Collateral Agreement.

9. APPLICATION OF PAYMENTS. If at any time Lender receives, from Borrower or otherwise, any
amount applicable to the Indebtedness which is less than all amounts due and payable at such time,
then Lender may apply that payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender’s discretion. Neither Lender’s acceptance of an amount which is
less than all amounts then due and payable nor Lender’s application of such payment in the manner
authorized shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an
accord and satisfaction. Notwithstanding the application of any such amount to the Indebtedness,
Borrower’s obligations under this Instrument and the Note shall remain unchanged.

10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws, ordinances, regulations and
requirements of any Governmental Authority and all recorded lawful covenants and agreements
relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations,
requirements and covenants pertaining to health and safety, construction of improvements on the
Mortgaged Property, fair housing, zoning and land use, and Leases. Borrower also shall comply with
all applicable laws that pertain to the maintenance and disposition of tenant security deposits.
Borrower shall at all times maintain records sufficient to demonstrate compliance with the
provisions of this Section 10. Borrower shall take appropriate measures to prevent, and shall not
engage in or knowingly permit, any illegal activities at the Mortgaged Property that could endanger
tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the
Mortgaged Property, or otherwise materially impair the lien created by this Instrument or Lender’s
interest in the Mortgaged Property. Borrower represents and warrants to Lender that no portion of
the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

11. USE OF PROPERTY. Unless required by applicable law, Borrower shall not (a) except for any
change in use approved by Lender, allow changes in the use for which all or any part of the
Mortgaged Property is being used at the time this Instrument was executed, (b) convert any
individual dwelling units or common areas to commercial use, (c) initiate or acquiesce in a change
in the zoning classification of the Mortgaged Property, or (d) establish any condominium or
cooperative regime with respect to the Mortgaged Property.

12. PROTECTION OF LENDER’S SECURITY.

(a) If Borrower fails to perform any of its obligations under this Instrument or any other
Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged
Property, Lender’s security or Lender’s rights under this Instrument, including eminent domain,
insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials
Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent,
then Lender at Lender’s option may make such appearances, disburse such sums and take such actions
as Lender reasonably deems necessary to perform such obligations of Borrower and to protect
Lender’s interest, including (1) payment of fees and out-of-pocket expenses of attorneys,
accountants, inspectors and consultants, (2) entry upon the Mortgaged Property to make repairs or
secure the Mortgaged Property, (3) procurement of the insurance required by Section 19, and (4)
payment of amounts which Borrower has failed to pay under Sections 15 and 17.

(b) Any amounts disbursed by Lender under this Section 12, or under any other provision of
this Instrument that treats such disbursement as being made under this Section 12, shall be added
to, and become part of, the principal component of the Indebtedness, shall be immediately due and
payable and shall bear interest from the date of disbursement until paid at the “Default Rate”, as
defined in the Note.

(c) Nothing in this Section 12 shall require Lender to incur any expense or take any action.

13. INSPECTION. Lender, its agents, representatives, and designees may make or cause to be
made entries upon and inspections of the Mortgaged Property (including environmental inspections
and tests) during normal business hours, or at any other reasonable time.

14. BOOKS AND RECORDS; FINANCIAL REPORTING.

(a) Borrower shall keep and maintain at all times at the Mortgaged Property or the management
agent’s offices, and upon Lender’s request shall make available at the Mortgaged Property, complete
and accurate books of account and records (including copies of supporting bills and invoices)
adequate to reflect correctly the operation of the Mortgaged Property, and copies of all written
contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records,
contracts, Leases and other instruments shall be subject to examination and inspection at any
reasonable time by Lender.

(b) Borrower shall furnish to Lender all of the following:

	 	(1)	 	within 120 days after the end of each fiscal year of Borrower,
a statement of income and expenses for Borrower’s operation of the Mortgaged
Property for that fiscal year, a statement of changes in financial position of
Borrower relating to the Mortgaged Property for that fiscal year and, when
requested by Lender, a balance sheet showing all assets and liabilities of
Borrower relating to the Mortgaged Property as of the end of that fiscal year;

	 	(2)	 	within 120 days after the end of each fiscal year of Borrower,
and at any other time upon Lender’s request, a rent schedule for the Mortgaged
Property showing the name of each tenant, and for each tenant, the space
occupied, the lease expiration date, the rent payable for the current month,
the date through which rent has been paid, and any related information
requested by Lender;

	 	(3)	 	within 120 days after the end of each fiscal year of Borrower,
and at any other time upon Lender’s request, an accounting of all security
deposits held pursuant to all Leases, including the name of the institution (if
any) and the names and identification numbers of the accounts (if any) in which
such security deposits are held and the name of the person to contact at such
financial institution, along with any authority or release necessary for Lender
to access information regarding such accounts;

	 	(4)	 	within 120 days after the end of each fiscal year of Borrower,
and at any other time upon Lender’s request, a statement that identifies all
owners of any interest in Borrower and the interest held by each, if Borrower
is a corporation, all officers and directors of Borrower, and if Borrower is a
limited liability company, all managers who are not members;

	 	(5)	 	upon Lender’s request, a monthly property management report for
the Mortgaged Property, showing the number of inquiries made and rental
applications received from tenants or prospective tenants and deposits received
from tenants and any other information requested by Lender;

	 	(6)	 	upon Lender’s request, a balance sheet, a statement of income
and expenses for Borrower and a statement of changes in financial position of
Borrower for Borrower’s most recent fiscal year; and

	 	(7)	 	if required by Lender, a statement of income and expense for
the Mortgaged Property for the prior month or quarter.

(c) Each of the statements, schedules and reports required by Section 14(b) shall be certified
to be complete and accurate by an individual having authority to bind Borrower, and shall be in
such form and contain such detail as Lender may reasonably require. Lender also may require that
any statements, schedules or reports be audited at Borrower’s expense by independent certified
public accountants acceptable to Lender.

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports
required by Section 14(b), Lender shall have the right to have Borrower’s books and records
audited, at Borrower’s expense, by independent certified public accountants selected by Lender in
order to obtain such statements, schedules and reports, and all related costs and expenses of
Lender shall become immediately due and payable and shall become an additional part of the
Indebtedness as provided in Section 12.

(e) If an Event of Default has occurred and is continuing, Borrower shall deliver to Lender
upon written demand all books and records relating to the Mortgaged Property or its operation.

(f) Borrower authorizes Lender to obtain a credit report on Borrower at any time.

(g) If an Event of Default has occurred and Lender has not previously required Borrower to
furnish a quarterly statement of income and expense for the Mortgaged Property, Lender may require
Borrower to furnish such a statement within 45 days after the end of each fiscal quarter of
Borrower following such Event of Default.

15. TAXES; OPERATING EXPENSES.

(a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower shall pay, or cause
to be paid, all Taxes when due and before the addition of any interest, fine, penalty or cost for
nonpayment.

(b) Subject to the provisions of Section 15(c), Borrower shall pay the expenses of operating,
managing, maintaining and repairing the Mortgaged Property (including insurance premiums,
utilities, repairs and replacements) before the last date upon which each such payment may be made
without any penalty or interest charge being added.

(c) As long as no Event of Default exists and Borrower has timely delivered to Lender any
bills or premium notices that it has received, Borrower shall not be obligated to pay Taxes,
insurance premiums or any other individual Imposition to the extent that sufficient Imposition
Deposits are held by Lender for the purpose of paying that specific Imposition. If an Event of
Default exists, Lender may exercise any rights Lender may have with respect to Imposition Deposits
without regard to whether Impositions are then due and payable. Lender shall have no liability to
Borrower for failing to pay any Impositions to the extent that any Event of Default has occurred
and is continuing, insufficient Imposition Deposits are held by Lender at the time an Imposition
becomes due and payable or Borrower has failed to provide Lender with bills and premium notices as
provided above.

(d) Borrower, at its own expense, may contest by appropriate legal proceedings, conducted
diligently and in good faith, the amount or validity of any Imposition other than insurance
premiums, if (1) Borrower notifies Lender of the commencement or expected commencement of such
proceedings, (2) the Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower
deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender,
and (4) Borrower furnishes whatever additional security is required in the proceedings or is
reasonably requested by Lender, which may include the delivery to Lender of the reserves
established by Borrower to pay the contested Imposition.

(e) Borrower shall promptly deliver to Lender a copy of all notices of, and invoices for,
Impositions, and if Borrower pays any Imposition directly, Borrower shall promptly furnish to
Lender receipts evidencing such payments.

16. LIENS; ENCUMBRANCES. Borrower acknowledges that, to the extent provided in Section 21,
the grant, creation or existence of any mortgage, deed of trust, deed to secure debt, security
interest or other lien or encumbrance (a “Lien”) on the Mortgaged Property (other than the lien of
this Instrument) or on certain ownership interests in Borrower, whether voluntary, involuntary or
by operation of law, and whether or not such Lien has priority over the lien of this Instrument, is
a “Transfer” which constitutes an Event of Default.

17. PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

(a) Borrower (1) shall not commit waste or permit impairment or deterioration of the Mortgaged
Property, (2) shall not abandon the Mortgaged Property, (3) shall restore or repair promptly, in a
good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its
original condition, or such other condition as Lender may approve in writing, whether or not
insurance proceeds or condemnation awards are available to cover any costs of such restoration or
repair, (4) shall keep the Mortgaged Property in good repair, including the replacement of
Personalty and Fixtures with items of equal or better function and quality, (5) shall provide for
professional management of the Mortgaged Property by a residential rental property manager
satisfactory to Lender under a contract approved by Lender in writing, and (6) shall give notice to
Lender of and, unless otherwise directed in writing by Lender, shall appear in and defend any
action or proceeding purporting to affect the Mortgaged Property, Lender’s security or Lender’s
rights under this Instrument. Borrower shall not (and shall not permit any tenant or other person
to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property except
in connection with the replacement of tangible Personalty.

(b) If, in connection with the making of the loan evidenced by the Note or at any later date,
Lender waives in writing the requirement of Section 17(a)(5) above that Borrower enter into a
written contract for management of the Mortgaged Property and if, after the date of this
Instrument, Borrower intends to change the management of the Mortgaged Property, Lender shall have
the right to approve such new property manager and the written contract for the management of the
Mortgaged Property and require that Borrower and such new property manager enter into an Assignment
of Management Agreement on a form approved by Lender. If required by Lender (whether before or
after an Event of Default), Borrower will cause any Affiliate of Borrower to whom fees are payable
for the management of the Mortgaged Property to enter into an agreement with Lender, in a form
approved by Lender, providing for subordination of those fees and such other provisions as Lender
may require. “Affiliate of Borrower” means any corporation, partnership, joint venture, limited
liability company, limited liability partnership, trust or individual controlled by, under common
control with, or which controls Borrower (the term “control” for these purposes shall mean the
ability, whether by the ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation, to make management decisions on behalf of, or
independently to select the managing partner of, a partnership, or otherwise to have the power
independently to remove and then select a majority of those individuals exercising managerial
authority over an entity, and control shall be conclusively presumed in the case of the ownership
of 50% or more of the equity interests).

18. ENVIRONMENTAL HAZARDS.

(a) Except for matters covered by a written program of operations and maintenance approved in
writing by Lender (an “O&M Program”) or matters described in Section 18(b), Borrower shall not
cause or permit any of the following:

	 	(1)	 	the presence, use, generation, release, treatment, processing,
storage (including storage in above ground and underground storage tanks),
handling, or disposal of any Hazardous Materials on or under the Mortgaged
Property or any other property of Borrower that is adjacent to the Mortgaged
Property;

	 	(2)	 	the transportation of any Hazardous Materials to, from, or
across the Mortgaged Property;

	 	(3)	 	any occurrence or condition on the Mortgaged Property or any
other property of Borrower that is adjacent to the Mortgaged Property, which
occurrence or condition is or may be in violation of Hazardous Materials Laws;
or

	 	(4)	 	any violation of or noncompliance with the terms of any
Environmental Permit with respect to the Mortgaged Property or any property of
Borrower that is adjacent to the Mortgaged Property.

The matters described in clauses (1) through (4) above are referred to collectively in this
Section 18 as “Prohibited Activities or Conditions”.

(b) Prohibited Activities and Conditions shall not include the safe and lawful use and storage
of quantities of (1) pre-packaged supplies, cleaning materials and petroleum products customarily
used in the operation and maintenance of comparable multifamily properties, (2) cleaning materials,
personal grooming items and other items sold in pre-packaged containers for consumer use and used
by tenants and occupants of residential dwelling units in the Mortgaged Property; and (3) petroleum
products used in the operation and maintenance of motor vehicles from time to time located on the
Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled,
transported and disposed of in compliance with Hazardous Materials Laws.

(c) Borrower shall take all commercially reasonable actions (including the inclusion of
appropriate provisions in any Leases executed after the date of this Instrument) to prevent its
employees, agents, and contractors, and all tenants and other occupants from causing or permitting
any Prohibited Activities or Conditions. Borrower shall not lease or allow the sublease or use of
all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by
any user that, in the ordinary course of its business, would cause or permit any Prohibited
Activity or Condition.

(d) If an O&M Program has been established with respect to Hazardous Materials, Borrower shall
comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and
any other persons present on the Mortgaged Property to comply with the O&M Program. All costs of
performance of Borrower’s obligations under any O&M Program shall be paid by Borrower, and Lender’s
out-of-pocket costs incurred in connection with the monitoring and review of the O&M Program and
Borrower’s performance shall be paid by Borrower upon demand by Lender. Any such out-of-pocket
costs of Lender which Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12.

(e) Borrower represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing:

	 	(1)	 	Borrower has not at any time engaged in, caused or permitted
any Prohibited Activities or Conditions;

	 	(2)	 	to the best of Borrower’s knowledge after reasonable and
diligent inquiry, no Prohibited Activities or Conditions exist or have existed;

	 	(3)	 	except to the extent previously disclosed by Borrower to Lender
in writing, the Mortgaged Property does not now contain any underground storage
tanks, and, to the best of Borrower’s knowledge after reasonable and diligent
inquiry, the Mortgaged Property has not contained any underground storage tanks
in the past. If there is an underground storage tank located on the Property
which has been previously disclosed by Borrower to Lender in writing, that tank
complies with all requirements of Hazardous Materials Laws;

	 	(4)	 	Borrower has complied with all Hazardous Materials Laws,
including all requirements for notification regarding releases of Hazardous
Materials. Without limiting the generality of the foregoing, Borrower has
obtained all Environmental Permits required for the operation of the Mortgaged
Property in accordance with Hazardous Materials Laws now in effect and all such
Environmental Permits are in full force and effect;

	 	(5)	 	no event has occurred with respect to the Mortgaged Property
that constitutes, or with the passing of time or the giving of notice would
constitute, noncompliance with the terms of any Environmental Permit;

	 	(6)	 	there are no actions, suits, claims or proceedings pending or,
to the best of Borrower’s knowledge after reasonable and diligent inquiry,
threatened that involve the Mortgaged Property and allege, arise out of, or
relate to any Prohibited Activity or Condition; and

	 	(7)	 	Borrower has not received any complaint, order, notice of
violation or other communication from any Governmental Authority with regard to
air emissions, water discharges, noise emissions or Hazardous Materials, or any
other environmental, health or safety matters affecting the Mortgaged Property
or any other property of Borrower that is adjacent to the Mortgaged Property.

The representations and warranties in this Section 18 shall be continuing representations and
warranties that shall be deemed to be made by Borrower throughout the term of the loan evidenced by
the Note, until the Indebtedness has been paid in full.

(f) Borrower shall promptly notify Lender in writing upon the occurrence of any of the
following events:

	 	(1)	 	Borrower’s discovery of any Prohibited Activity or Condition;

	 	(2)	 	Borrower’s receipt of or knowledge of any complaint, order,
notice of violation or other communication from any Governmental Authority or
other person with regard to present or future alleged Prohibited Activities or
Conditions or any other environmental, health or safety matters affecting the
Mortgaged Property or any other property of Borrower that is adjacent to the
Mortgaged Property; and

	 	(3)	 	any representation or warranty in this Section 18 becomes
untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve Borrower of, or result in a waiver of, any
obligation under this Instrument, the Note, or any other Loan Document.

(g) Borrower shall pay promptly the costs of any environmental inspections, tests or audits
(“Environmental Inspections”) required by Lender in connection with any foreclosure or deed in lieu
of foreclosure, or as a condition of Lender’s consent to any Transfer under Section 21, or required
by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions
may exist. Any such costs incurred by Lender (including the fees and out-of-pocket costs of
attorneys and technical consultants whether incurred in connection with any judicial or
administrative process or otherwise) which Borrower fails to pay promptly shall become an
additional part of the Indebtedness as provided in Section 12. The results of all Environmental
Inspections made by Lender shall at all times remain the property of Lender and Lender shall have
no obligation to disclose or otherwise make available to Borrower or any other party such results
or any other information obtained by Lender in connection with its Environmental Inspections.
Lender hereby reserves the right, and Borrower hereby expressly authorizes Lender, to make
available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged
Property, the results of any Environmental Inspections made by Lender with respect to the Mortgaged
Property. Borrower consents to Lender notifying any party (either as part of a notice of sale or
otherwise) of the results of any of Lender’s Environmental Inspections. Borrower acknowledges that
Lender cannot control or otherwise assure the truthfulness or accuracy of the results of any of its
Environmental Inspections and that the release of such results to prospective bidders at a
foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount
which a party may bid at such sale. Borrower agrees that Lender shall have no liability whatsoever
as a result of delivering the results of any of its Environmental Inspections to any third party,
and Borrower hereby releases and forever discharges Lender from any and all claims, damages, or
causes of action, arising out of, connected with or incidental to the results of, the delivery of
any of Lender’s Environmental Inspections.

(h) If any investigation, site monitoring, containment, clean-up, restoration or other
remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order of
any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the
use, operation or improvement of the Mortgaged Property under any Hazardous Materials Law, Borrower
shall, by the earlier of (1) the applicable deadline required by Hazardous Materials Law or (2) 30
days after notice from Lender demanding such action, begin performing the Remedial Work, and
thereafter diligently prosecute it to completion, and shall in any event complete the work by the
time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis
or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial
Work to be completed, in which case Borrower shall reimburse Lender on demand for the cost of doing
so. Any reimbursement due from Borrower to Lender shall become part of the Indebtedness as
provided in Section 12.

(i) Borrower shall cooperate with any inquiry by any Governmental Authority and shall comply
with any governmental or judicial order which arises from any alleged Prohibited Activity or
Condition.

(j) Borrower shall indemnify, hold harmless and defend (i) Lender, (ii) any prior owner or
holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan Servicer, (v) the officers,
directors, shareholders, partners, employees and trustees of any of the foregoing, and (vi) the
heirs, legal representatives, successors and assigns of each of the foregoing (collectively, the
"Indemnitees”) from and against all proceedings, claims, damages, penalties and costs (whether
initiated or sought by Governmental Authorities or private parties), including fees and
out-of-pocket expenses of attorneys and expert witnesses, investigatory fees, and remediation
costs, whether incurred in connection with any judicial or administrative process or otherwise,
arising directly or indirectly from any of the following:

	 	(1)	 	any breach of any representation or warranty of Borrower in
this Section 18;

	 	(2)	 	any failure by Borrower to perform any of its obligations under
this Section 18;

	 	(3)	 	the existence or alleged existence of any Prohibited Activity
or Condition;

	 	(4)	 	the presence or alleged presence of Hazardous Materials on or
under the Mortgaged Property or any property of Borrower that is adjacent to
the Mortgaged Property; and

	 	(5)	 	the actual or alleged violation of any Hazardous Materials Law.

(k) Counsel selected by Borrower to defend Indemnitees shall be subject to the approval of
those Indemnitees. However, any Indemnitee may elect to defend any claim or legal or
administrative proceeding at the Borrower’s expense.

(l) Borrower shall not, without the prior written consent of those Indemnitees who are named
as parties to a claim or legal or administrative proceeding (a “Claim”), settle or compromise the
Claim if the settlement (1) results in the entry of any judgment that does not include as an
unconditional term the delivery by the claimant or plaintiff to Lender of a written release of
those Indemnitees, satisfactory in form and substance to Lender; or (2) may materially and
adversely affect Lender, as determined by Lender in its discretion.

(m) Lender agrees that the indemnity under this Section 18 shall be limited to the assets of
Borrower and Lender shall not seek to recover any deficiency from any natural persons who are
general partners of Borrower.

(n) Borrower shall, at its own cost and expense, do all of the following:

	 	(1)	 	pay or satisfy any judgment or decree that may be entered
against any Indemnitee or Indemnitees in any legal or administrative proceeding
incident to any matters against which Indemnitees are entitled to be
indemnified under this Section 18;

	 	(2)	 	reimburse Indemnitees for any expenses paid or incurred in
connection with any matters against which Indemnitees are entitled to be
indemnified under this Section 18; and

	 	(3)	 	reimburse Indemnitees for any and all expenses, including fees
and out-of-pocket expenses of attorneys and expert witnesses, paid or incurred
in connection with the enforcement by Indemnitees of their rights under this
Section 18, or in monitoring and participating in any legal or administrative
proceeding.

(o) In any circumstances in which the indemnity under this Section 18 applies, Lender may
employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal
or administrative proceeding and Lender, with the prior written consent of Borrower (which shall
not be unreasonably withheld, delayed or conditioned), may settle or compromise any action or legal
or administrative proceeding. Borrower shall reimburse Lender upon demand for all costs and
expenses incurred by Lender, including all costs of settlements entered into in good faith, and the
fees and out-of-pocket expenses of such attorneys and consultants.

(p) The provisions of this Section 18 shall be in addition to any and all other obligations
and liabilities that Borrower may have under applicable law or under other Loan Documents, and
each Indemnitee shall be entitled to indemnification under this Section 18 without regard to
whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any
other security, pursued any rights against any guarantor, or pursued any other rights available
under the Loan Documents or applicable law. If Borrower consists of more than one person or entity,
the obligation of those persons or entities to indemnify the Indemnitees under this Section 18
shall be joint and several. The obligation of Borrower to indemnify the Indemnitees under this
Section 18 shall survive any repayment or discharge of the Indebtedness, any foreclosure
proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release
of record of the lien of this Instrument.

19. PROPERTY AND LIABILITY INSURANCE.

(a) Borrower shall keep the Improvements insured at all times against such hazards as Lender
may from time to time require, which insurance shall include but not be limited to coverage against
loss by fire and allied perils, general boiler and machinery coverage, and business income
coverage. Lender’s insurance requirements may change from time to time throughout the term of the
Indebtedness. If Lender so requires, such insurance shall also include sinkhole insurance, mine
subsidence insurance, earthquake insurance, and, if the Mortgaged Property does not conform to
applicable zoning or land use laws, building ordinance or law coverage. If any of the Improvements
is located in an area identified by the Federal Emergency Management Agency (or any successor to
that agency) as an area having special flood hazards, and if flood insurance is available in that
area, Borrower shall insure such Improvements against loss by flood.

(b) All premiums on insurance policies required under Section 19(a) shall be paid in the
manner provided in Section 7, unless Lender has designated in writing another method of payment.
All such policies shall also be in a form approved by Lender. All policies of property damage
insurance shall include a non-contributing, non-reporting mortgage clause in favor of, and in a
form approved by, Lender. Lender shall have the right to hold the original policies or duplicate
original policies of all insurance required by Section 19(a). Borrower shall promptly deliver to
Lender a copy of all renewal and other notices received by Borrower with respect to the policies
and all receipts for paid premiums. At least 30 days prior to the expiration date of a policy,
Borrower shall deliver to Lender the original (or a duplicate original) of a renewal policy in
form satisfactory to Lender.

(c) Borrower shall maintain at all times commercial general liability insurance, workers’
compensation insurance and such other liability, errors and omissions and fidelity insurance
coverages as Lender may from time to time require.

(d) All insurance policies and renewals of insurance policies required by this Section 19
shall be in such amounts and for such periods as Lender may from time to time require, and shall be
issued by insurance companies satisfactory to Lender.

(e) Borrower shall comply with all insurance requirements and shall not permit any condition
to exist on the Mortgaged Property that would invalidate any part of any insurance coverage that
this Instrument requires Borrower to maintain.

(f) In the event of loss, Borrower shall give immediate written notice to the insurance
carrier and to Lender. Borrower hereby authorizes and appoints Lender as attorney-in-fact for
Borrower to make proof of loss, to adjust and compromise any claims under policies of property
damage insurance, to appear in and prosecute any action arising from such property damage insurance
policies, to collect and receive the proceeds of property damage insurance, and to deduct from such
proceeds Lender’s expenses incurred in the collection of such proceeds. This power of attorney is
coupled with an interest and therefore is irrevocable. However, nothing contained in this
Section 19 shall require Lender to incur any expense or take any action. Lender may, at Lender’s
option, (1) hold the balance of such proceeds to be used to reimburse Borrower for the cost of
restoring and repairing the Mortgaged Property to the equivalent of its original condition or to a
condition approved by Lender (the “Restoration”), or (2) apply the balance of such proceeds to the
payment of the Indebtedness, whether or not then due. To the extent Lender determines to apply
insurance proceeds to Restoration, Lender shall do so in accordance with Lender’s then-current
policies relating to the restoration of casualty damage on similar multifamily properties.

(g) Lender shall not exercise its option to apply insurance proceeds to the payment of the
Indebtedness if all of the following conditions are met: (1) no Event of Default (or any event
which, with the giving of notice or the passage of time, or both, would constitute an Event of
Default) has occurred and is continuing; (2) Lender determines, in its discretion, that there will
be sufficient funds to complete the Restoration; (3) Lender determines, in its discretion, that the
rental income from the Mortgaged Property after completion of the Restoration will be sufficient to
meet all operating costs and other expenses, Imposition Deposits, deposits to reserves and loan
repayment obligations relating to the Mortgaged Property; (4) Lender determines, in its discretion,
that the Restoration will be completed before the earlier of (A) one year before the maturity date
of the Note or (B) one year after the date of the loss or casualty; and (5) upon Lender’s request,
Borrower provides Lender evidence of the availability during and after the Restoration of the
insurance required to be maintained by Borrower pursuant to this Section 19.

(h) If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the
Mortgaged Property, Lender shall automatically succeed to all rights of Borrower in and to any
insurance policies and unearned insurance premiums and in and to the proceeds resulting from any
damage to the Mortgaged Property prior to such sale or acquisition.

20. CONDEMNATION.

(a) Borrower shall promptly notify Lender of any action or proceeding relating to any
condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged
Property, whether direct or indirect (a “Condemnation”). Borrower shall appear in and prosecute or
defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in
writing. Borrower authorizes and appoints Lender as attorney-in-fact for Borrower to commence,
appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any
Condemnation and to settle or compromise any claim in connection with any Condemnation. This power
of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained
in this Section 20 shall require Lender to incur any expense or take any action. Borrower hereby
transfers and assigns to Lender all right, title and interest of Borrower in and to any award or
payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii)
any damage to the Mortgaged Property caused by governmental action that does not result in a
Condemnation.

(b) Lender may apply such awards or proceeds, after the deduction of Lender’s expenses
incurred in the collection of such amounts, at Lender’s option, to the restoration or repair of the
Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower.
Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the
Indebtedness shall not extend or postpone the due date of any monthly installments referred to in
the Note, Section 7 of this Instrument or any Collateral Agreement, or change the amount of such
installments. Borrower agrees to execute such further evidence of assignment of any awards or
proceeds as Lender may require.

21. TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

(a) The occurrence of any of the following events shall constitute an Event of Default under
this Instrument:

	 	(1)	 	a Transfer of all or any part of the Mortgaged Property or any
interest in the Mortgaged Property;

	 	(2)	 	a Transfer of a Controlling Interest in Borrower;

	 	(3)	 	a Transfer of a Controlling Interest in any entity which owns,
directly or indirectly through one or more intermediate entities, a Controlling
Interest in Borrower;

	 	(4)	 	a Transfer of all or any part of Key Principal’s ownership
interests (other than limited partnership interests) in Borrower, or in any
other entity which owns, directly or indirectly through one or more
intermediate entities, an ownership interest in Borrower;

	 	(5)	 	if Key Principal is an entity, (A) a Transfer of a Controlling
Interest in Key Principal, or (B) a Transfer of a Controlling Interest in any
entity which owns, directly or indirectly through one or more intermediate
entities, a Controlling Interest in Key Principal;

	 	(6)	 	if Borrower or Key Principal is a trust, the termination or
revocation of such trust; and

	 	(7)	 	a conversion of Borrower from one type of legal entity into
another type of legal entity, whether or not there is a Transfer.

Lender shall not be required to demonstrate any actual impairment of its security or any
increased risk of default in order to exercise any of its remedies with respect to an Event of
Default under this Section 21.

(b) The occurrence of any of the following events shall not constitute an Event of Default
under this Instrument, notwithstanding any provision of Section 21(a) to the contrary:

	 	(1)	 	a Transfer to which Lender has consented;

	 	(2)	 	a Transfer that occurs by devise, descent, or by operation of
law upon the death of a natural person;

	 	(3)	 	the grant of a leasehold interest in an individual dwelling
unit for a term of two years or less not containing an option to purchase;

	 	(4)	 	a Transfer of obsolete or worn out Personalty or Fixtures that
are contemporaneously replaced by items of equal or better function and
quality, which are free of liens, encumbrances and security interests other
than those created by the Loan Documents or consented to by Lender;

	 	(5)	 	the grant of an easement, if before the grant Lender determines
that the easement will not materially affect the operation or value of the
Mortgaged Property or Lender’s interest in the Mortgaged Property, and Borrower
pays to Lender, upon demand, all costs and expenses incurred by Lender in
connection with reviewing Borrower’s request; and

	 	(6)	 	the creation of a tax lien or a mechanic’s, materialman’s or
judgment lien against the Mortgaged Property which is bonded off, released of
record or otherwise remedied to Lender’s satisfaction within 30 days of the
date of creation.

(c) Lender shall consent, without any adjustment to the rate at which the Indebtedness secured
by this Instrument bears interest or to any other economic terms of the Indebtedness, to a Transfer
that would otherwise violate this Section 21 if, prior to the Transfer, Borrower has satisfied each
of the following requirements:

	 	(1)	 	the submission to Lender of all information required by Lender
to make the determination required by this Section 21(c);

	 	(2)	 	the absence of any Event of Default;

	 	(3)	 	the transferee meets all of the eligibility, credit, management
and other standards (including any standards with respect to previous
relationships between Lender and the transferee and the organization of the
transferee) customarily applied by Lender at the time of the proposed Transfer
to the approval of borrowers in connection with the origination or purchase of
similar mortgages, deeds of trust or deeds to secure debt on multifamily
properties;

	 	(4)	 	the Mortgaged Property, at the time of the proposed Transfer,
meets all standards as to its physical condition that are customarily applied
by Lender at the time of the proposed Transfer to the approval of properties in
connection with the origination or purchase of similar mortgages on multifamily
properties;

	 	(5)	 	in the case of a Transfer of all or any part of the Mortgaged
Property, direct or indirect ownership interests in Borrower or Key Principal
(if an entity), if transferor or any other person has obligations under any
Loan Document, the execution by the transferee or one or more individuals or
entities acceptable to Lender of an assumption agreement (including, if
applicable, an Acknowledgement and Agreement of Key Principal to Personal
Liability for Exceptions to Non-Recourse Liability) that is acceptable to
Lender and that, among other things, requires the transferee to perform all
obligations of transferor or such person set forth in such Loan Document, and
may require that the transferee comply with any provisions of this Instrument
or any other Loan Document which previously may have been waived by Lender;

	 	(6)	 	if a guaranty has been executed and delivered in connection
with the Note, this Instrument or any of the other Loan Documents, the Borrower
causes one or more individuals or entities acceptable to Lender to execute and
deliver to Lender a guaranty in a form acceptable to Lender; and

	 	(7)	 	Lender’s receipt of all of the following:

	 	(A)	 	a non-refundable review fee in the amount of
$3,000 and a transfer fee equal to 1 percent of the outstanding
Indebtedness immediately prior to the Transfer.

	 	(B)	 	In addition, Borrower shall be required to
reimburse Lender for all of Lender’s out-of-pocket costs (including
reasonable attorneys’ fees) incurred in reviewing the Transfer request,
to the extent such expenses exceed $3,000.

(d) For purposes of this Section, the following terms shall have the meanings set forth below:

	 	(1)	 	“Initial Owners” means, with respect to Borrower or any other
entity, the persons or entities who on the date of the Note own in the
aggregate 100% of the ownership interests in Borrower or that entity.

	 	(2)	 	A Transfer of a “Controlling Interest” shall mean, with respect
to any entity, the following:

	 	(i)	 	if such entity is a general partnership or a
joint venture, a Transfer of any general partnership interest or joint
venture interest which would cause the Initial Owners to own less than
51% of all general partnership or joint venture interests in such
entity;

	 	(ii)	 	if such entity is a limited partnership, a
Transfer of any general partnership interest;

	 	(iii)	 	if such entity is a limited liability company
or a limited liability partnership, a Transfer of any membership or
other ownership interest which would cause the Initial Owners to own
less than 51% of all membership or other ownership interests in such
entity;

	 	(iv)	 	if such entity is a corporation (other than a
Publicly-Held Corporation) with only one class of voting stock, a
Transfer of any voting stock which would cause the Initial Owners to
own less than 51% of voting stock in such corporation;

	 	(v)	 	if such entity is a corporation (other than a
Publicly-Held Corporation) with more than one class of voting stock, a
Transfer of any voting stock which would cause the Initial Owners to
own less than a sufficient number of shares of voting stock having the
power to elect the majority of directors of such corporation; and

	 	(vi)	 	if such entity is a trust, the removal,
appointment or substitution of a trustee of such trust other than (A)
in the case of a land trust, or (B) if the trustee of such trust after
such removal, appointment or substitution is a trustee identified in
the trust agreement approved by Lender.

	 	(3)	 	“Publicly-Held Corporation” shall mean a corporation the
outstanding voting stock of which is registered under Section 12(b) or 12(g) of
the Securities and Exchange Act of 1934, as amended.

22. EVENTS OF DEFAULT. The occurrence of any one or more of the following shall constitute an
Event of Default under this Instrument:

(a) any failure by Borrower to pay or deposit when due any amount required by the Note, this
Instrument or any other Loan Document;

(b) any failure by Borrower to maintain the insurance coverage required by Section 19;

(c) any failure by Borrower to comply with the provisions of Section 33;

(d) fraud or material misrepresentation or material omission by Borrower, or any of its
officers, directors, trustees, general partners or managers, Key Principal or any guarantor in
connection with (A) the application for or creation of the Indebtedness, (B) any financial
statement, rent roll, or other report or information provided to Lender during the term of the
Indebtedness, or (C) any request for Lender’s consent to any proposed action, including a request
for disbursement of funds under any Collateral Agreement;

(e) any Event of Default under Section 21;

(f) the commencement of a forfeiture action or proceeding, whether civil or criminal, which,
in Lender’s reasonable judgment, could result in a forfeiture of the Mortgaged Property or
otherwise materially impair the lien created by this Instrument or Lender’s interest in the
Mortgaged Property;

(g) any failure by Borrower to perform any of its obligations under this Instrument (other
than those specified in Sections 22(a) through (f)), as and when required, which continues for a
period of 30 days after notice of such failure by Lender to Borrower, but no such notice or grace
period shall apply in the case of any such failure which could, in Lender’s judgment, absent
immediate exercise by Lender of a right or remedy under this Instrument, result in harm to Lender,
impairment of the Note or this Instrument or any other security given under any other Loan
Document;

(h) any failure by Borrower to perform any of its obligations as and when required under any
Loan Document other than this Instrument which continues beyond the applicable cure period, if any,
specified in that Loan Document; and

(i) any exercise by the holder of any other debt instrument secured by a mortgage, deed of
trust or deed to secure debt on the Mortgaged Property of a right to declare all amounts due under
that debt instrument immediately due and payable.

23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument is distinct from
all other rights or remedies under this Instrument or any other Loan Document or afforded by
applicable law, and each shall be cumulative and may be exercised concurrently, independently, or
successively, in any order.

24. FORBEARANCE.

(a) Lender may (but shall not be obligated to) agree with Borrower, from time to time, and
without giving notice to, or obtaining the consent of, or having any effect upon the obligations
of, any guarantor or other third party obligor, to take any of the following actions: extend the
time for payment of all or any part of the Indebtedness; reduce the payments due under this
Instrument, the Note, or any other Loan Document; release anyone liable for the payment of any
amounts under this Instrument, the Note, or any other Loan Document; accept a renewal of the Note;
modify the terms and time of payment of the Indebtedness; join in any extension or subordination
agreement; release any Mortgaged Property; take or release other or additional security; modify the
rate of interest or period of amortization of the Note or change the amount of the monthly
installments payable under the Note; and otherwise modify this Instrument, the Note, or any other
Loan Document.

(b) Any forbearance by Lender in exercising any right or remedy under the Note, this
Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of any other right or remedy. The acceptance by Lender of
payment of all or any part of the Indebtedness after the due date of such payment, or in an amount
which is less than the required payment, shall not be a waiver of Lender’s right to require prompt
payment when due of all other payments on account of the Indebtedness or to exercise any remedies
for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness
shall not constitute an election by Lender of remedies so as to preclude the exercise of any other
right available to Lender. Lender’s receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

25. [INTENTIONALLY DELETED]. See Section 50.

26. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to assert any statute
of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought
to enforce any Loan Document.

27. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in
the Mortgaged Property held by Lender or by any other party, Lender shall have the right to
determine the order in which any or all of the Mortgaged Property shall be subjected to the
remedies provided in this Instrument, the Note, any other Loan Document or applicable law. Lender
shall have the right to determine the order in which any or all portions of the Indebtedness are
satisfied from the proceeds realized upon the exercise of such remedies. Borrower and any party
who now or in the future acquires a security interest in the Mortgaged Property and who has actual
or constructive notice of this Instrument waives any and all right to require the marshalling of
assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation
or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the
exercise of any of the remedies permitted by applicable law or provided in this Instrument.

28. FURTHER ASSURANCES. Borrower shall execute, acknowledge, and deliver, at its sole cost
and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing
statements, transfers and assurances as Lender may require from time to time in order to better
assure, grant, and convey to Lender the rights intended to be granted, now or in the future, to
Lender under this Instrument and the Loan Documents.

29. ESTOPPEL CERTIFICATE. Within 10 days after a request from Lender, Borrower shall deliver
to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any
person designated by Lender, as of the date of such statement, (i) that the Loan Documents are
unmodified and in full force and effect (or, if there have been modifications, that the Loan
Documents are in full force and effect as modified and setting forth such modifications); (ii) the
unpaid principal balance of the Note; (iii) the date to which interest under the Note has been
paid; (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing
any of the covenants or agreements contained in this Instrument or any of the other Loan Documents
(or, if the Borrower is in default, describing such default in reasonable detail); (v) whether or
not there are then existing any setoffs or defenses known to Borrower against the enforcement of
any right or remedy of Lender under the Loan Documents; and (vi) any additional facts requested by
Lender.

30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

(a) This Instrument, and any Loan Document which does not itself expressly identify the law
that is to apply to it, shall be governed by the laws of the jurisdiction in which the Land is
located (the “Property Jurisdiction”).

(b) Borrower agrees that any controversy arising under or in relation to the Note, this
Instrument, or any other Loan Document shall be litigated exclusively in the Property Jurisdiction.
The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall
have exclusive jurisdiction over all controversies which shall arise under or in relation to the
Note, any security for the Indebtedness, or any other Loan Document. Borrower irrevocably consents
to service, jurisdiction, and venue of such courts for any such litigation and waives any other
venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

31. NOTICE.

(a) All notices, demands and other communications (“notice”) under or concerning this
Instrument shall be in writing. Each notice shall be addressed to the intended recipient at its
address set forth in this Instrument, and shall be deemed given on the earliest to occur of (1) the
date when the notice is received by the addressee; (2) the first Business Day after the notice is
delivered to a recognized overnight courier service, with arrangements made for payment of charges
for next Business Day delivery; or (3) the third Business Day after the notice is deposited in the
United States mail with postage prepaid, certified mail, return receipt requested. As used in this
Section 31, the term “Business Day” means any day other than a Saturday, a Sunday or any other day
on which Lender is not open for business.

(b) Any party to this Instrument may change the address to which notices intended for it are
to be directed by means of notice given to the other party in accordance with this Section 31.
Each party agrees that it will not refuse or reject delivery of any notice given in accordance with
this Section 31, that it will acknowledge, in writing, the receipt of any notice upon request by
the other party and that any notice rejected or refused by it shall be deemed for purposes of this
Section 31 to have been received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service or the courier service.

(c) Any notice under the Note and any other Loan Document which does not specify how notices
are to be given shall be given in accordance with this Section 31.

32. SALE OF NOTE; CHANGE IN SERVICER. The Note or a partial interest in the Note (together
with this Instrument and the other Loan Documents) may be sold one or more times without prior
notice to Borrower. A sale may result in a change of the Loan Servicer. There also may be one or
more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the
Loan Servicer, Borrower will be given notice of the change.

33. SINGLE ASSET BORROWER. Until the Indebtedness is paid in full, Borrower (a) shall not
acquire any real or personal property other than the Mortgaged Property and personal property
related to the operation and maintenance of the Mortgaged Property; (b) shall not operate any
business other than the management and operation of the Mortgaged Property; and (c) shall not
maintain its assets in a way difficult to segregate and identify.

34. SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and the rights granted by this
Instrument shall inure to, the respective successors and assigns of Lender and Borrower. However,
a Transfer not permitted by Section 21 shall be an Event of Default.

35. JOINT AND SEVERAL LIABILITY. If more than one person or entity signs this Instrument as
Borrower, the obligations of such persons and entities shall be joint and several.

36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

(a) The relationship between Lender and Borrower shall be solely that of creditor and debtor,
respectively, and nothing contained in this Instrument shall create any other relationship between
Lender and Borrower.

(b) No creditor of any party to this Instrument and no other person shall be a third party
beneficiary of this Instrument or any other Loan Document. Without limiting the generality of the
preceding sentence, (1) any arrangement (a “Servicing Arrangement”) between the Lender and any Loan
Servicer for loss sharing or interim advancement of funds shall constitute a contractual obligation
of such Loan Servicer that is independent of the obligation of Borrower for the payment of the
Indebtedness, (2) Borrower shall not be a third party beneficiary of any Servicing Arrangement, and
(3) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the
Indebtedness.

37. SEVERABILITY; AMENDMENTS. The invalidity or unenforceability of any provision of this
Instrument shall not affect the validity or enforceability of any other provision, and all other
provisions shall remain in full force and effect. This Instrument contains the entire agreement
among the parties as to the rights granted and the obligations assumed in this Instrument. This
Instrument may not be amended or modified except by a writing signed by the party against whom
enforcement is sought.

38. CONSTRUCTION. The captions and headings of the sections of this Instrument are for
convenience only and shall be disregarded in construing this Instrument. Any reference in this
Instrument to an “Exhibit” or a “Section” shall, unless otherwise explicitly provided, be construed
as referring, respectively, to an Exhibit attached to this Instrument or to a Section of this
Instrument. All Exhibits attached to or referred to in this Instrument are incorporated by
reference into this Instrument. Any reference in this Instrument to a statute or regulation shall
be construed as referring to that statute or regulation as amended from time to time. Use of the
singular in this Agreement includes the plural and use of the plural includes the singular. As
used in this Instrument, the term “including” means “including, but not limited to.”

39. LOAN SERVICING. All actions regarding the servicing of the loan evidenced by the Note,
including the collection of payments, the giving and receipt of notice, inspections of the
Property, inspections of books and records, and the granting of consents and approvals, may be
taken by the Loan Servicer unless Borrower receives notice to the contrary. If Borrower receives
conflicting notices regarding the identity of the Loan Servicer or any other subject, any such
notice from Lender shall govern.

40. DISCLOSURE OF INFORMATION. Lender may furnish information regarding Borrower or the
Mortgaged Property to third parties with an existing or prospective interest in the servicing,
enforcement, evaluation, performance, purchase or securitization of the Indebtedness, including
trustees, master servicers, special servicers, rating agencies, and organizations maintaining
databases on the underwriting and performance of multifamily mortgage loans. Borrower irrevocably
waives any and all rights it may have under applicable law to prohibit such disclosure, including
any right of privacy.

41. NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the application for the loan
submitted to Lender (the “Loan Application”) and in all financial statements, rent rolls, reports,
certificates and other documents submitted in connection with the Loan Application are complete and
accurate in all material respects. There has been no material adverse change in any fact or
circumstance that would make any such information incomplete or inaccurate.

42. SUBROGATION. If, and to the extent that, the proceeds of the loan evidenced by the Note
are used to pay, satisfy or discharge any obligation of Borrower for the payment of money that is
secured by a pre-existing mortgage, deed of trust or other lien encumbering the Mortgaged Property
(a “Prior Lien”), such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s
request, and Lender shall automatically, and without further action on its part, be subrogated to
the rights, including lien priority, of the owner or holder of the obligation secured by the Prior
Lien, whether or not the Prior Lien is released.

43. ACCELERATION; REMEDIES. At any time during the existence of an Event of Default, Lender,
at Lender’s option, may declare the Indebtedness to be immediately due and payable without further
demand, and may invoke the power of sale and any other remedies permitted by Texas law or provided
in this Instrument or in any other Loan Document. Borrower acknowledges that the power of sale
granted in this Instrument may be exercised by Lender without prior judicial hearing. Lender shall
be entitled to collect all costs and expenses incurred in pursuing such remedies, including
attorneys’ fees, costs of documentary evidence, abstracts and title reports.

If Lender invokes the power of sale, Lender may, by and through the Trustee, or otherwise,
sell or offer for sale the Mortgaged Property in such portions, order and parcels as Lender may
determine, with or without having first taken possession of the Mortgaged Property, to the highest
bidder for cash at public auction. Such sale shall be made at the courthouse door of the county in
which all or any part of the Land to be sold is situated (whether the parts or parcel, if any,
situated in different counties are contiguous or not, and without the necessity of having any
Personalty present at such sale) on the first Tuesday of any month between the hours of 10:00 a.m.
and 4:00 p.m., after advertising the time, place and terms of sale and that portion of the
Mortgaged Property to be sold by posting or causing to be posted written or printed notice of sale
at least twenty-one (21) days before the date of the sale at the courthouse door of the county in
which the sale is to be made and at the courthouse door of any other county in which a portion of
the Land may be situated, and by filing such notice with the County Clerk(s) of the county(s) in
which all or a portion of the Land may be situated, which notice may be posted and filed by the
Trustee acting, or by any person acting for the Trustee, and Lender has, at least twenty-one (21)
days before the date of the sale, served written or printed notice of the proposed sale by
certified mail on each debtor obligated to pay the Indebtedness according to Lender’s records by
the deposit of such notice, enclosed in a postpaid wrapper, properly addressed to such debtor at
debtor’s most recent address as shown by Lender’s records, in a post office or official depository
under the care and custody of the United States Postal Service. The affidavit of any person having
knowledge of the facts to the effect that such service was completed shall be prima facie evidence
of the fact of service.

Trustee shall deliver to the purchaser at the sale, within a reasonable time after the sale, a
deed conveying the Mortgaged Property so sold in fee simple with covenants of general warranty.
Borrower covenants and agrees to defend generally the purchaser’s title to the Mortgaged Property
against all claims and demands. The recitals in Trustee’s deed shall be prima facie evidence of
the truth of the statements contained in those recitals. Trustee shall apply the proceeds of the
sale in the following order: (a) to all reasonable costs and expenses of the sale, including
reasonable Trustee’s fees and attorneys’ fees and costs of title evidence; (b) to the Indebtedness
in such order as Lender, in Lender’s discretion, directs; and (c) the excess, if any, to the person
or persons legally entitled to the excess.

If all or any part of the Mortgaged Property is sold pursuant to this Section 43, Borrower
will be divested of any and all interest and claim to the Mortgaged Property, including any
interest or claim to all insurance policies, utility deposits, bonds, loan commitments and other
intangible property included as a part of the Mortgaged Property. Additionally, after a sale of
all or any part of the Land, Improvements, Fixtures and Personalty, Borrower will be considered a
tenant at sufferance of the purchaser of the same, and the purchaser shall be entitled to immediate
possession of such property. If Borrower shall fail to vacate the Mortgaged Property immediately,
the purchaser may and shall have the right, without further notice to Borrower, to go into any
justice court in any precinct or county in which the Mortgaged Property is located and file an
action in forcible entry and detainer, which action shall lie against Borrower or its assigns or
legal representatives, as a tenant at sufferance. This remedy is cumulative of any and all
remedies the purchaser may have under this Instrument or otherwise.

In any action for a deficiency after a foreclosure under this Instrument, if any person
against whom recovery is sought requests the court in which the action is pending to determine the
fair market value of the Mortgaged Property, as of the date of the foreclosure sale, the following
shall be the basis of the court’s determination of fair market value:

	 	(a)	 	the Mortgaged Property shall be valued “as is” and in its condition as of the
date of foreclosure, and no assumption of increased value because of post-foreclosure
repairs, refurbishment, restorations or improvements shall be made;

	 	(b)	 	any adverse effect on the marketability of title because of the foreclosure or
because of any other title condition not existing as of the date of this Instrument
shall be considered;

	 	(c)	 	the valuation of the Mortgaged Property shall be based upon an assumption that
the foreclosure purchaser desires a prompt resale of the Mortgaged Property for cash
within a six month-period after foreclosure;

	 	(d)	 	although the Mortgaged Property may be disposed of more quickly by the
foreclosure purchaser, the gross valuation of the Mortgaged Property as of the date of
foreclosure shall be discounted for a hypothetical reasonable holding period (not to
exceed 6 months) at a monthly rate equal to the average monthly interest rate on the
Note for the twelve months before the date of foreclosure;

	 	(e)	 	the gross valuation of the Mortgaged Property as of the date of foreclosure
shall be further discounted and reduced by reasonable estimated costs of disposition,
including brokerage commissions, title policy premiums, environmental assessment and
clean-up costs, tax and assessment, prorations, costs to comply with legal requirements
and attorneys’ fees;

	 	(f)	 	expert opinion testimony shall be considered only from a licensed appraiser
certified by the State of Texas and, to the extent permitted under Texas law, a member
of the Appraisal Institute, having at least five years’ experience in appraising
property similar to the Mortgaged Property in the county where the Mortgaged Property
is located, and who has conducted and prepared a complete written appraisal of the
Mortgaged Property taking into considerations the factors set forth in this Instrument;
no expert opinion testimony shall be considered without such written appraisal;

	 	(g)	 	evidence of comparable sales shall be considered only if also included in the
expert opinion testimony and written appraisal referred to in the preceding paragraph;
and

	 	(h)	 	an affidavit executed by Lender to the effect that the foreclosure bid accepted
by Trustee was equal to or greater than the value of the Mortgaged Property determined
by Lender based upon the factors and methods set forth in subparagraphs (a) through (g)
above before the foreclosure shall constitute prima facie evidence that the foreclosure
bid was equal to or greater than the fair market value of the Mortgaged Property on the
foreclosure date.

Lender may, at Lender’s option, comply with these provisions in the manner permitted or
required by Title 5, Section 51.002 of the Texas Property Code (relating to the sale of real
estate) or by Chapter 9 of the Texas Business and Commerce Code (relating to the sale of collateral
after default by a debtor), as those titles and chapters now exist or may be amended or succeeded
in the future, or by any other present or future articles or enactments relating to same subject.
Unless expressly excluded, the Mortgaged Property shall include Rents collected before a
foreclosure sale, but attributable to the period following the foreclosure sale, and Borrower shall
pay such Rents to the purchaser at such sale. At any such sale:

	 	(a)	 	whether made under the power contained in this Instrument, Section 51.002, the
Texas Business and Commerce Code, any other legal requirement or by virtue of any
judicial proceedings or any other legal right, remedy or recourse, it shall not be
necessary for Trustee to have physically present, or to have constructive possession
of, the Mortgaged Property (Borrower shall deliver to Trustee any portion of the
Mortgaged Property not actually or constructively possessed by Trustee immediately upon
demand by Trustee) and the title to and right of possession of any such property shall
pass to the purchaser as completely as if the property had been actually present and
delivered to the purchaser at the sale;

	 	(b)	 	each instrument of conveyance executed by Trustee shall contain a general
warranty of title, binding upon Borrower;

	 	(c)	 	the recitals contained in any instrument of conveyance made by Trustee shall
conclusively establish the truth and accuracy of the matters recited in the Instrument,
including nonpayment of the Indebtedness and the advertisement and conduct of the sale
in the manner provided in this Instrument and otherwise by law and the appointment of
any successor Trustee;

	 	(d)	 	all prerequisites to the validity of the sale shall be conclusively presumed to
have been satisfied;

	 	(e)	 	the receipt of Trustee or of such other party or officer making the sale shall
be sufficient to discharge to the purchaser or purchasers for such purchaser(s)’
purchase money, and no such purchaser or purchasers, or such purchaser(s)’ assigns or
personal representatives, shall thereafter be obligated to see to the application of
such purchase money or be in any way answerable for any loss, misapplication or
nonapplication of such purchase money;

	 	(f)	 	to the fullest extent permitted by law, Borrower shall be completely and
irrevocably divested of all of Borrower’s right, title, interest, claim and demand
whatsoever, either at law or in equity, in and to the property sold, and such sale
shall be a perpetual bar to any claim to all or any part of the property sold, both at
law and in equity, against Borrower and against any person claiming by, through or
under Borrower; and

	 	(g)	 	to the extent and under such circumstances as are permitted by law, Lender may
be a purchaser at any such sale.

44. RELEASE. Upon payment of the Indebtedness, Lender shall release this Instrument.
Borrower shall pay Lender’s reasonable costs incurred in releasing this Instrument.

45. TRUSTEE.

	 	(a)	 	Trustee may resign by giving of notice of such resignation in writing to
Lender. If Trustee shall die, resign or become disqualified from acting under this
Instrument or shall fail or refuse to act in accordance with this Instrument when
requested by Lender or if for any reason and without cause Lender shall prefer to
appoint a substitute trustee to act instead of the original Trustee named in this
Instrument or any prior successor or substitute trustee, Lender shall have full power
to appoint a substitute trustee and, if preferred, several substitute trustees in
succession who shall succeed to all the estate, rights, powers and duties of the
original Trustee named in this Instrument. Such appointment may be executed by an
authorized officer, agent or attorney-in-fact of Lender (whether acting pursuant to a
power of attorney or otherwise), and such appointment shall be conclusively presumed to
be executed with authority and shall be valid and sufficient without proof of any
action by Lender.

	 	(b)	 	Any successor Trustee appointed pursuant to this Section shall, without any
further act, deed or conveyance, become vested with all the estates, properties,
rights, powers and trusts of the predecessor Trustee with like effect as if originally
named as Trustee in this Instrument; but, nevertheless, upon the written request of
Lender or such successor Trustee, the Trustee ceasing to act shall execute and deliver
an instrument transferring to such successor Trustee, all the estates, properties,
rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver any of the property and monies held by the Trustee ceasing to act
to the successor Trustee.

	 	(c)	 	Trustee may authorize one or more parties to act on Trustee’s behalf to perform
the ministerial functions required of Trustee under this Instrument, including the
transmittal and posting of any notices.

46. [INTENTIONALLY DELETED].

47. NO FIDUCIARY DUTY. Lender owes no fiduciary or other special duty to Borrower.

48. FIXTURE FILING. This Instrument is also a fixture filing under the Uniform Commercial
Code of Texas.

49. ADDITIONAL PROVISIONS REGARDING ASSIGNMENT OF RENTS. In no event shall the assignment of
Rents or Leases in Section 3 and Section 4 cause the Indebtedness to be reduced by an amount
greater than the Rents actually received by Lender and applied by Lender to the Indebtedness,
whether before, during or after (i) an Event of Default, or (ii) a suspension or revocation of the
license granted to Borrower in Section 3(c) with regard to the Rents. Borrower and Lender
specifically intend that the assignment of Rents and Leases in Section 3 and Section 4 is not
intended to result in a pro tanto reduction of the Indebtedness. The assignment of Rents and
Leases in Section 3 and Section 4 is not intended to constitute a payment of, or with respect to,
the Indebtedness and, therefore, Borrower and Lender specifically intend that the Indebtedness
shall not be reduced by the value of the Rents and Leases assigned. Such reduction shall occur
only if, and to the extent that, Lender actually receives Rents pursuant to Section 3 and applies
such Rents to the Indebtedness. Borrower agrees that the value of the license granted with regard
to the Rents equals the value of the absolute assignment of Rents to Lender. The assignment of
Rents contained in Section 3 shall terminate upon the release of this Instrument.

50. LOAN CHARGES. Borrower and Lender intend at all times to comply with the laws of the
State of Texas governing the maximum rate or amount of interest payable on or in connection with
the Indebtedness (or applicable United States federal law to the extent that it permits Lender to
contract for, charge, take, reserve or receive a greater amount of interest than under Texas law).
If the applicable law is ever judicially interpreted so as to render usurious any amount payable
under the Note, this Instrument or any other Loan Document, or contracted for, charged, taken,
reserved or received with respect to the Indebtedness, or if acceleration of the maturity of the
Indebtedness, or if any prepayment by Borrower results in Borrower having paid any interest in
excess of that permitted by any applicable law, then Borrower and Lender expressly intend that all
excess amounts collected by Lender shall be applied to reduce the unpaid principal balance of the
Indebtedness (or, if the Indebtedness has been or would thereby be paid in full, shall be refunded
to Borrower), and the provisions of the Note, this Instrument and the other Loan Documents
immediately shall be deemed reformed and the amounts thereafter collectible under the Loan
Documents reduced, without the necessity of the execution of any new documents, so as to comply
with any applicable law, but so as to permit the recovery of the fullest amount otherwise payable
under the Loan Documents. The right to accelerate the maturity of the Indebtedness does not
include the right to accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention
of the Indebtedness shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of the Indebtedness until payment in full so that the
rate or amount of interest on account of the Indebtedness does not exceed the applicable usury
ceiling. Notwithstanding any provision contained in the Note, this Instrument or any other Loan
Document that permits the compounding of interest, including any provision by which any accrued
interest is added to the principal amount of the Indebtedness, the total amount of interest that
Borrower is obligated to pay and Lender is entitled to receive with respect to the Indebtedness
shall not exceed the amount calculated on a simple (i.e., noncompounded) interest
basis at the maximum rate on principal amounts actually advanced to or for the account of Borrower,
including all current and prior advances and any advances made pursuant to the Instrument or any
other Loan Document (such as for the payment of Impositions and similar expenses or costs).

51. PROPERTY AND LIABILITY INSURANCE — DELIVERY OF POLICY TO LENDER. Notwithstanding the
provisions of Section 19(b), Borrower shall not be required to deliver the original (or a duplicate
original) of any renewal policy of insurance to Lender more than 15 days prior to the expiration
date of the policy then held by Lender.

52. ENTIRE AGREEMENT. THIS INSTRUMENT, THE NOTE 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.

53. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE RELATIONSHIP BETWEEN
THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO
TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE
FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

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

	 	 	 	 	 	 	 
	 

	 	

	 

	 	

	 

	 	

3

IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or has caused this
Instrument to be signed and delivered by its duly authorized representative.

BORROWER:

Apartment REIT Park at North Gate, LP,

a Texas limited partnership

	 	 	 	 	 	 	 	 	 
	By:	 	Apartment REIT Park at North Gate GP, LLC,	 	 
	 	 	a Delaware limited liability company	 	 
	Its:	 	General Partner	 	 	 	 
	 	 	By:	 	NNN Apartment REIT Holdings, L.P.,
	 	 	 	 	a Virginia limited partnership	 	 
	
 
	 	Its:
	 	Manager
	 	

	 	

	 	 	 	 	By:	 	NNN Apartment REIT, Inc.,
	 	 	 	 	 	 	a Maryland corporation
	
 
	 	 	 	Its:
	 	General Partner
	 	

	
 
	 	 	 	 	 	By:
	 	/s/ Stanley J. Olander
	
 
	 	 	 	 	 	 	 	 
	
 
	 	 	 	 	 	Name:
	 	Stanley J. Olander
	
 
	 	 	 	 	 	 	 	 
	
 
	 	 	 	 	 	Title:
	 	CEO
	
 
	 	 	 	 	 	 	 	 

THE COMMONWEALTH OF VIRGINIA

CITY/COUNTY OF Henrico, to-wit:

I, Julia S. Bard, a notary public of the City/County of Henrico, Commonwealth
of Virginia, do hereby certify that Stanley J, Olander, whose name is signed to the writing
above bearing date on the 30 day of July 2007, 2007, has acknowledged the same
before me in my State aforesaid in his capacity as the/a CEO of NNN Apartment REIT, Inc., a
Maryland corporation, in its capacity as the general Partner of NNN Apartment REIT Holdings, L.P.,
a Virginia limited partnership, in its capacity as the Manager of Apartment REIT Park of North Gate
GP, LLC, a Delaware limited liability company, in its capacity as the General Partner of Apartment
REIT Park at North Gate, LP, a Texas limited partnership, on behalf of said limited partnership.

Given under my hand this 30 day of July, 2007.

 /s/ Julia S. Bard

Notary Public

My Commission expires: 6/30/10 Registration Number: 220269

KEY PRINCIPALS

	 	 	 	 	 
	Key Principal:

	NNN Apartment REIT, Inc.

	1551 N. Tustin Avenue

	Suite 300

	Santa Ana, CA 92705

4

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