Document:

ex10_6.htm

    Exhibit
10.6

    

    ECONOMIC
INTEREST PARTICIPATION AGREEMENT AND PURCHASE OPTION

    

    This Economic Interest Participation
Agreement and Purchase Option (this “Agreement”)
is entered into effective as of the 19th day of
September, 2008 (the “Effective
Date”) by and between UNITED MORTGAGE TRUST, a real
estate trust organized under the laws of the State of Maryland with an address
of 1702 N. Collins
Blvd., Suite 100, Richardson, TX 75080, as lender, agent and assignor (“Assignor”),
and UNITED DEVELOPMENT FUNDING
III, L.P., a Delaware limited partnership with an address of 1812 Cindy
Lane, Suite 200, Bedford, Texas 76021, as assignee (“Assignee”).

    

    R
E C I T A L S:

    

    A.           United
Development Funding, L.P., a Delaware limited partnership (“Borrower”)
has executed and delivered that certain First Amended and Restated Secured Line
of Credit Promissory Note, dated as of September 30, 2004, executed by Borrower
and payable to the order of Assignor in the original principal amount of
$30,000,000, as amended and restated in its entirety by that certain Second
Amended and Restated Secured Line of Credit Promissory Note dated as of June 20,
2006 in the increased principal amount of $45,000,000, as modified by that
certain First Modification of Second Amended and Restated Secured Line of Credit
Promissory Note dated as of September 1, 2006 (as so amended, and as it may be
further amended, modified, renewed, extended, superseded or replaced from time
to time, the “Note”).

    

    B.           The
payment and performance of Borrower’s obligations under the Note is secured by
that certain First Amended and Restated Security Agreement dated as of September
30, 2004, executed by Borrower in favor of Assignor (as it may be amended,
modified, renewed, extended, superseded or replaced from time to
time,   the “Security
Agreement”).

    

    C.           The
Note, the Security Agreement, and all other instruments, agreements, mortgages,
guarantees, certificates executed or entered into in connection with the Note
are referred to herein collectively as the “Loan
Documents”.

    

    D.           Assignee
desires to purchase (i) an economic interest in the payments of principal and
interest made by Borrower under the Note relating to amounts funded by Assignee
towards Assignor’s funding obligations under the Note (the “Economic
Interest”) and (ii) an option to purchase a Participation Interest (as
defined in Section
1 below) in the Note and the other Loan Documents (the “Option”),
and Assignor has agreed to sell, assign, transfer and convey the Economic
Interest and the Option to Assignee.

    

    A
G R E E M E N T:

    

    NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor and Assignee agree as follows:

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    1.           Assignment.  In
consideration for the payment of the Purchase Price (as defined in Section 3 below),
Assignor hereby agrees to sell, transfer, assign and convey, and does hereby
sell, transfer, assign and convey to Assignee, and Assignee hereby agrees to
purchase, accept and receive, and does hereby purchase, accept and receive from
Assignor, the Economic Interest and the Option.  The Economic Interest
is the right of Assignee to receive payment of principal and accrued interest
thereon under the Note relating to amounts funded by Assignee towards Assignor’s
funding obligations under the Note.  The Option is the right of
Assignee to purchase a participation interest in ownership of the Note and the
Loan Documents relating to the Economic Interest purchased by Assignee hereunder
including, without limitation, a participation in all rights incidental to
ownership of the Note and the Loan Documents (a “Participation
Interest”).

    

    2.           Economic
Interest.  Commencing on the Effective Date, each time that
Borrower requests an advance of principal under the Note (a “Borrower
Advance”), Assignor shall notify Assignee in writing of the principal
amount requested by Borrower and the wire transfer and funding
instructions.  Thereafter, Assignee shall fund an amount to Assignor
equal to the amount of the Borrower Advance and upon such funding, Assignee
shall own the Economic Interest related to the Borrower Advance so funded by
Assignee.  Assignor shall clearly notate the Economic Interest of
Assignee in its books and records by marking each Borrower Advance funded by
Assignee and notating that the Economic Interest for such Borrower Advance is
owned by Assignee.  Each time Assignee funds a Borrower Advance,
Assignee’s Economic Interest shall be increased accordingly.

    

    

    3.           Purchase
Price.  The purchase price for the Economic Interest and the
Option shall be (i) Assignee’s funding of each Borrower Advance  made
under the Note after the Effective Date and (ii) Assignee’s funding of its
pro-rata share of any costs of collection, including attorney fees
(collectively, the “Purchase
Price”).

    

    4.           Payment of Economic
Interest.  Assignor shall pay the Economic Interest to Assignee
as follows:

    

    (a)           Interest.  For
each payment of interest made by Borrower on the Note, Assignor shall pay
Assignee its pro rata share of accrued interest paid on the Note based on
Assignee’s Economic Interest.  For example and not necessarily
representative of real transactions hereunder, if $20,000,0000 in principal is
outstanding under the Note, Assignor has funded $16,000,000 of such outstanding
principal amount and Assignee has funded $4,000,0000 of such outstanding
principal amount, and Borrower makes a payment equal to all accrued interest
then due and payable under the Note, then Assignee’s pro rata share of
Borrower’s interest payment shall be 20% ($4,000,000 /
$20,000,000).

    

    (b)           Principal. For each
repayment of principal made by Borrower under the Note, Assignor shall pay
Assignee its pro rata share of the principal repaid based on Assignee’s Economic
Interest.  For example and not necessarily representative of real
transactions hereunder, if $32,000,0000 in principal is outstanding under the
Note, Assignor has funded $16,000,000 of such outstanding principal amount and
Assignee has funded $16,000,0000 of such outstanding principal amount, and
Borrower makes a principal payment equal to $1,000,000, then Assignee’s pro rata
share of Borrower’s principal payment shall be $500,000.

    

    
      
        
        

      

      
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    (c)           Payments. Assignor
shall make all payments of the Economic Interest to Assignee by wire transfer
promptly upon receipt of payments from Borrower under the Note.

    

    5.           Abatement. Assignee
may temporarily abate its obligation to purchase the Economic Interest by
funding Borrower Advances under Section 2 by giving
Assignor written notice of the abatement which includes the number of months
during which Assignee’s obligations shall be abated, not to exceed (12)
months.

    

    6.           Appointment of Agent.
 While Assignee
owns the Economic Interest:

    

    (a)           Assignee
hereby appoints Assignor as its agent with respect to the Economic Interest, and
hereby authorizes Assignor on its behalf, and as deemed advisable by Assignor in
its reasonable discretion, to do any and all acts and to make any and all
decisions required, contemplated or advisable in connection with the Note and
the other Loan Documents that may effect the Economic Interest, including,
without limitation, modification or amendment of the Note and the Loan
Documents, and enforcement of the rights and remedies available to Assignor
under the Note and the Loan Documents.  Assignor’s powers to act with
respect to the Note and the other Loan Documents shall not be limited or impeded
in any manner by this Agreement despite any impact such exercise or non-exercise
of powers by Assignor may have on the Economic Interest.

    

    (b)           Assignor
has complete authority to manage and control the Note and the Loan
Documents.  Assignee shall rely solely upon Assignor with respect to
its Economic Interest in the Note and the enforcement of Assignor’s rights under
the Note and the Loan Documents.  Assignee shall not have any rights
separate from Assignor to take any action, make any decision, or enforce any
right under the Note and the Loan Documents.

    

    7.           Exercise of
Option.  Assignee shall give Assignor written notice of its
intent to exercise the Option and acquire a Participation Interest in the Note
and other Loan Documents. Upon exercise of the Option and payment of One Hundred
and NO/100 Dollars (the “Exercise
Price”), the Economic Interest purchased by Assignee hereunder shall be
converted to a Participation Interest.  The exercise of the Option and
the conversion of the Economic Interest into a Participation Interest shall be
effective on the date of Assignee’s notice to Assignor.  The terms and
conditions of the Participation Interest in the Note and Loan Documents shall be
set forth in a Participation Agreement which shall be executed by Assignor and
Assignee upon exercise of the Option, in substantially the form attached hereto
as Exhibit
“A”.  Once Assignee and Assignor have executed the
Participation Agreement, its terms and conditions shall govern and control the
Participation Interest despite any terms and conditions in this Agreement to the
contrary that governed the Economic Interest prior to its conversion into a
Participation Interest.

    

    
      
        
        

      

      
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    8.           Term.  This
Agreement shall terminate upon the earlier of (i) payment in full of the
Economic Interest, (ii) exercise of the Option by Assignee and conversion of the
Economic Interest into a Participation Interest (in which case, the
Participation Agreement shall govern the Participation Interest), (iii) mutual
written agreement of Assignor and Assignee, or (iv) thirty (30) days prior
written notice given by one party to the other party.  Upon any
termination of this Agreement without conversion of the Economic Interest into a
Participation Agreement, Sections 4, 6, 11, 13, 18, 19
and 21 shall
survive such termination.  A termination of this Agreement shall not
cause or be implied to have caused a termination of the Participation
Agreement.

    

    9.           Assignee’s Representations
and Warranties.  Assignee hereby represents and warrants to
Assignor that: (i) Assignee is a limited partnership, organized, validly
existing and in good standing under the laws of the State of Delaware, (ii)
Assignee has all requisite limited partnership power and authority to execute
and deliver, and to perform all of its obligations under, this Agreement and
each other agreement executed and delivered by Assignor in connection herewith,
(iii) this Agreement has been duly authorized, executed and delivered by
Assignee and constitutes the legal, valid and binding obligation of Assignee,
enforceable against Assignee in accordance with its terms; and (iv) Assignee has
obtained all necessary consents, releases and agreements required to enter into
this Agreement and to consummate the transactions contemplated
hereby.

    

    10.           Assignor’s Representations
and Warranties.  Assignor hereby represents and warrants to
Assignee, and agrees, that: (i) Assignor is a real estate investment trust
organized, validly existing and in good standing under the laws of the State of
Maryland, (ii) Assignor is the sole owner of the Note and the Loan Documents,
(iii) Assignor has all requisite power and authority to execute and deliver, and
to perform all of its obligations under, this Agreement and each other agreement
executed and delivered by Assignor in connection herewith and (iv) this
Agreement has been duly authorized, executed and delivered by Assignor and
constitutes the legal, valid and binding obligation of Assignor, enforceable
against Assignor in accordance with its terms.

    

    11.           Subordination
Agreement. This Agreement is subject to that certain Subordination and
Intercreditor Agreement executed by Assignor in favor of Textron Financial
Corporation, as agent for certain lenders to Borrower, dated as of June 14, 2006
(as it may be amended, modified, renewed, extended, superseded or replaced from
time to time, the “Subordination
Agreement”).  Nothing herein shall effect or impede the
obligations of Assignor under the Subordination Agreement.  Assignee
hereby accepts, assumes and agrees to be bound by, all of the terms and
provisions of the Subordination Agreement; provided however, that such agreement
shall not be deemed to create privity between Assignee and Textron Financial
Corporation.

    

    
      	
                            
      12.

            	
              Successors and
      Assigns.  This Agreement shall be binding upon and shall
      inure to the benefit of the parties hereto and their respective heirs,
      representatives, administrators, successors and assigns; provided,
      however, that (i) Assignor may assign this Agreement and its rights and
      obligations hereunder to any entity acquiring the Note and Loan Documents
      with the prior written consent of Assignee, and (ii) Assignee may not
      assign or transfer all or any portion of this Agreement and its rights and
      obligations hereunder without the prior written consent of
      Assignor.

            

    

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    13.           Indemnification.  Assignor
shall not be liable or responsible for, Assignee shall protect, indemnify,
defend and hold Assignor harmless from and against, any and all claims and
damages of every kind relating to (i) its performance as agent for Assignee with
respect to the Economic Interest, (ii) the performance or nonperformance of
any act by Assignor under the Note and other Loan Documents,
(iii) Borrower’s failure to pay the Note in full or to comply with any of
its obligations under the Note or any other Loan Document, or any “default” or
“event of default” by Borrower under the Note or any other Loan Document, or any
breach by Borrower of any representation, warranty, covenant or agreement
contained in the Note or any other Loan Document, (iv) Assignor’s enforcement,
or lack of enforcement, of any right it may have arising under the Note and the
other Loan Documents; and (v) Assignee’s loss of its investment in the Economic
Interest, in whole or in part, should such loss occur for any reason; provided,
however, that Assignee shall have no indemnity obligations under this Section 13 to the
extent that any claims or damages arise from the gross negligence or willful
misconduct of Assignor.

    

    14.           Entire Agreement;
Amendment.  This Agreement together with its exhibits contain
the entire understanding and agreement of Assignor and Assignee regarding the
subject matter hereof and may not in any way be altered, amended or modified
except by an instrument in writing signed by Assignor and Assignee.

    

    15.           Governing
Law.  This Agreement and the rights of Assignor and Assignee
shall be governed by and construed in accordance with the laws of the State of
Texas, without giving effect to its rules regarding conflict of
laws.

    

    16.           Headings.  The
headings of the sections in this Agreement are for convenience of reference only
and shall have no application in the interpretation of this
Agreement.

    

    17.           Exhibits.  The
exhibits hereto are incorporated by reference to the same extent as if fully set
forth herein.

    

    18.           Severability.  If
any provision of this Agreement or application to any party or circumstance
shall be determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances, other than those as to which
it is so determined invalid or unenforceable, shall not be affected thereby, and
each provision hereof shall be valid and shall be enforced to the fullest extent
permitted by law.

     

    19.           Further
Assurances.  The parties agree to execute such other and
further documents as may be reasonably necessary or appropriate to consummate
the transactions contemplated by this Agreement.

     

    20.           Counterparts.  This
Agreement may be executed in multiple counterparts, each of which shall
constitute an original.

    

    
      
        
        

      

      
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    21.           Costs of
Collection.  Assignee shall fund its pro-rata share of any
costs of collection of the Note, including attorney fees, upon Assignor’s
request.

    

    22.           Notices.  All
notices under this Agreement shall be in writing and sent by hand delivery,
overnight courier, or certified or registered mail, return receipt requested, to
the parties at their respective addresses set forth in the introductory
paragraph hereof, or to such other address as a party shall have designated by
notice in the manner described above.  Any notice shall be deemed to
be delivered upon actual receipt by the party to whom it is
addressed.

    

    

    [The
remainder of this page is left blank intentionally.]

    

    

    

    
      
        
        

      

      
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    IN
WITNESS WHEREOF, this Agreement has been executed on this the ______ day of
__________________, 2008, effective for all purposes as of the Effective
Date.

    

    ASSIGNOR:

     

    UNITED
MORTGAGE TRUST

     

    

    

    
      	
               
      

            	
              By:

            	
              /s/ David
      Hanson

            

    

    
      	
               
      

            	
              Name:

            	
              David
      Hanson

            

    

    
      	
               
      

            	
              Title:

            	
              UMTH
      GS L.P.- Advisor

            

    

    

    

    ASSIGNEE:

     

    UNITED
DEVELOPMENT FUNDING III, L.P.

     

    By:           UMTH
Land Development, L.P.

    Its:           General
Partner

    

    By:           UMT
Services, Inc.

    Its:           General
Partner

     

    
      	
               
      

            	
              By:

            	
              /s/ Ben
      Wissink

            

    

    
      	
               
      

            	
              Name:

            	
              Ben
      Wissink

            

    

    
      	
               
      

            	
              Title:

            	
              Chief
      Operating Officer

            

    

    

    

    

    

    
      
        
        

      

      
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    EXHIBIT
A

    

    FORM OF PARTICIPATION
AGREEMENT

    

    (See
Attached)ex10_7.htm

    

    

    

    Exhibit 10.7

    

    

    

    

    

    

    

    

    CONSULTATION
REPORT OF

    

    UDF

    The
Fairness of the Financing Terms

    Between
United Development Funding III, L.P.

    and
United Development Funding, L.P.,

    Dated
August 8, 2008

    

    

    

    Prepared
For:

    

    Mr.
Hollis Greenlaw

    President

    UMTH
Land Development, LP

    1812
Cindy Lane, Suite 200

    Bedford,
Texas  76021

    

    

    

    

    

    

    

    Prepared
By:

    

    JACKSON
CLABORN, INC.

    Real
Estate Consulting and Appraisal Services

    5800
W. Plano Parkway, Suite 220

    Plano,
TX 75093

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              Jackson
      Claborn, Inc.

            

    

    · Real Estate Consulting and
Appraisal Services ·

    · Plano, Texas · Southlake, Texas ·

    www.jacksonclaborn.com

    Jimmy H.
Jackson, MAI David Claborn, MAI

    Allen W.
Gardiner, SRA Dod W. Clapp, SRA

    

    August 8,
2008

    

    Mr.
Hollis Greenlaw

    President

    UMTH Land
Development, LP

    1812
Cindy Lane, Suite 200

    Bedford,
TX 76021

    

    
      	
              RE:

            	
              A
      consultation report of the fairness of the proposed financing terms
      between United Development Funding III, L.P., and United Development
      Funding, L.P., our file number
808123

            

    

    

    Ladies
and Gentlemen:

     

    At your
request, we have performed a consulting assignment regarding the
above-referenced agreement as of August 8, 2008, subject to certain assumptions
and limiting conditions that are attached. Our employment was not based upon an
appraisal producing a specific value or a value range and it should also be
noted that this assignment should not be considered to be an appraisal report as
we are not providing our opinion as to the sales price of the subject property,
but only providing our opinion as to the fairness of the financing terms.
Furthermore, we have not inspected the subject property of the above-referenced
agreement.

    

    You have
requested our opinion as an independent advisor (as that term is defined in the
Prospectus of United Development Funding III, L.P. dated May 15, 2006) as to the
fairness of financing terms being contemplated amongst and between United
Development Funding III, L.P., a Delaware limited partnership (“UDF III”) as
Lender and United Development Funding, L.P., a Delaware limited partnership
(“UDF”) as Borrower.  UDF has requested that UDF III as “Lender”,
provide a junior revolving credit facility in the amount of $45,000,000 (the
“UDF Note”). The UDF Note will be fully subordinate to that certain Loan and
Security Agreement in the amount of $30,000,000, dated June 14, 2006 amongst and
between Textron Financial Corporation (“Textron”) and UDF.  Further,
the UDF note will be pari Passau in the right of repayment with that certain
First Modification of Second Amended and Restated Secured Line of Credit
Promissory Note in the amount of $45,000,000, dated September 1, 2006 amongst
and between United Mortgage Trust, a real estate investment trust organized
under the laws of the State of Maryland and UDF.   The initial
Maturity Date of the loan will be December 31, 2009.

    

    

    

    

    
      

    

    Headquarters:
5800 W. Plano Parkway · Suite 220 · Plano, Texas 75093 · (972) 732-0051 · FAX (972)
733-1403

    Branch
Office: 1560 E. Southlake Blvd. · Suite 220 · Southlake, Texas 76092
· (817) 421-3833 · FAX (817)
421-3844

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    UMTH Land
Development, LP

    Page
2

    August 8,
2008

    

    

    

    Interest
will be due and payable monthly at the rate of 14% per annum.  There
will be no points or fees charges for this loan facility.  The credit
facility shall revolve allowing for principal to be advanced and repaid in
accordance with the terms and covenants of the UDF Note.  All advances
requested under this credit facility shall be at the sole discretion of Lender
and shall conform to Lender’s standard underwriting criteria.

    

    The
security for the loan shall be all the assets and receivables held in UDF,
subject to the Textron senior credit facility, including without limitation, the
assignment of any liens and entity equity interests pledged to UDF in the course
of its business.

    

    Based
upon the information provided to us with respect to the Borrower, UDF
originates, purchases and holds for investment loans to real estate developers
and makes equity investments in real estate development entities that use the
proceeds to acquire and develop parcels of real property as single-family
residential lots and who will subsequently market and sell those lots to home
builders. UDF also may enter into separate participation agreements with the
developers to whom they make development loans. These participation agreements
allow UDF to receive a preferred portion of the gain, if any, upon the sale of
each lot to home builders. The loans are generally repaid by the developer from
the proceeds of the sale of the lots to home builders. UDF also provides credit
enhancements with respect to real estate land acquisitions and development loans
for the acquisition and development of parcels of real property as single-family
residential lots.

    

    UDF is
managed by  UMTH Land Development, L.P., a Delaware limited
partnership (”Land Development”), through an Asset Management agreement. UMT
Holdings, L.P., a Delaware limited partnership holds a 99.9% limited partnership
interest in UMTH Land (“UMT Holdings”), UMT Services, Inc. a Delaware
corporation that is the general partner of UMT Holdings and holds a 0.1% general
partnership interest in UMTH Land (“UMT Services”). UMTH Land was organized in
March 2003 and serves as the asset manager or general partner for other United
Development Funding fund programs, including United Development Funding II,
L.P., a Delaware limited partnership (“UDF II”), and United Development Funding
III, L.P. a Delaware limited partnership (“UDF III”).  UMTH Land and
its affiliates have extensive experience with investing in and financing
single-family residential development assets with those United Development
Funding fund programs, which provide UDF with the unique knowledge, skill–set,
relationships and existing infrastructure and policies and procedures to
identify and structure suitable financing / investment transactions related to
the acquisition and development of affordable single family residential real
estate.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    UMTH Land
Development, LP

    Page
3

    August 8,
2008

    

    

    In just a
short period of operations, UDF has demonstrated a consistent record of
performance.  For the year ending December 31, 2007, UDF reflected in
its audited financial statements $126,983,296 in assets, $82,852,108 in
liabilities and $43,507,638 in equity.  Net Income for this period was
$5,178,226 compared to $8,903,960 for the prior period.

    

    UDF is a
financially sound, well diversified entity of substance that is capitalizing on
a business model of underwriting real estate finance transactions in markets
with strong underlying demographics, appropriate supply/demand ratios and
growing economics. UDF is a well capitalized entity of substance that can
adequately support the repayment of the debt to UDF III.

    

    Since UDF
is an “Affiliated Party”, UDF III is required to obtain this fairness opinion
with respect to the terms of the transaction.

    

    We are a
full service real estate appraisal and consulting firm. As part of our real
estate appraisal and consulting services, we are regularly engaged in the
consultation with regard to real estate value and finance.

    

    We are
acting as an independent advisor to UDF III in connection with the UDF Note and
will receive a fee for our services. The opinion fee is not contingent upon the
conclusions of our opinion. In addition, UMTH Land Development, L.P. has agreed
to indemnify us for certain liabilities arising out of our
engagement.

    

    In the
course of performing our review and analysis for rendering this opinion, we
have: (i) reviewed the details of the transaction with UDF, (ii) reviewed the
terms of the UDF Note, (iii) reviewed materials provided to us by members of the
senior management of UDF III with respect to the described transaction; (iv)
conducted discussions with members of the senior management of UDF III with
respect to the described transaction; and (v) conducted such other financial
studies, analyses and investigations and considered such other information as we
deemed appropriate.

    

    With
respect to the data and discussions relating to the transaction, we have
assumed, at the direction of management of UDF III and without independent
verification, that such data has been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of UDF III. We have further
relied on the assurances of senior management of UDF III that they are unaware
of any facts that would make such information incomplete or
misleading.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    UMTH Land
Development, LP

    Page
4

    August 8,
2008

    

    

    In
rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial, legal, tax, operating and other information
provided to us by UDF III, and have not assumed responsibility for independently
verifying and have not independently verified such information. We have not
assumed any responsibility to perform, and have not performed, an independent
evaluation or appraisal of any of the respective assets or liabilities
(contingent or otherwise) involved in the contemplated transaction. In addition,
we have not assumed any obligation to conduct, and have not conducted, any
physical inspection of the property involved in the contemplated transaction.
Additionally, we have not been asked and did not consider the possible effects
of any litigation or other legal claims.

    

    Our
opinion is subject to the assumptions and conditions set forth herein, speaks
only as of the date hereof, is based on market, economic, financial, legal and
other conditions as they exist and information which we have been supplied as of
the date hereof, and is without regard to any market, economic, financial, legal
or other circumstances or events of any kind or nature which may exist or occur
after such date. We have not undertaken to reaffirm or revise this opinion or
otherwise comment upon any events occurring after the date hereof and do not
have any obligation to update, revise or reaffirm our opinion.

    

    Our
opinion expressed herein is provided for the information and assistance of the
senior management of UDF III in connection with the UDF Note.

    

    Our
opinion does not address the merits of the underlying decision by UDF III to
undertake the UDF Note, but solely addresses the fairness of the terms
associated therewith.

    

    Based on
and subject to the foregoing, including the various assumptions and limitations
set forth herein, it is our opinion that, as of the date hereof, that the terms
of the UDF Note are fair and at least as favorable to UDF III as such
transaction would be with an unaffiliated third party in similar
conditions.  Furthermore, the proposed loan structure appears to
conform to the basic transactional parameters established under the UDF III
investment guidelines.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    UMTH Land
Development, LP

    Page
5

    August 8,
2008

    

    

    This
consulting assignment conforms to the requirements of the Code of Professional
Ethics and the Uniform Standards of Professional Appraisal Practice (USPAP)
established by the Appraisal Institute and instituted by the State of Texas. If
you have any questions regarding the contents of this report, please contact
either of the undersigned.

     

    

    Respectfully
submitted,

     

    /s/
Jackson Claborn, Inc.

    

    JACKSON
CLABORN, INC.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    CERTIFICATION -
CONSULTATION

    

    

    We
certify to the best of our knowledge and belief, that:

    

    
      	
               
      

            	
              The
      statements of fact contained herein and upon which the opinions herein are
      based, are true and correct, subject to the assumption and limiting
      conditions explained in the report.

            

    

    

    
      	
               
      

            	
              Employment
      in and compensation for providing this consultation are in no way
      contingent upon any value reported and we certify that we have no
      interest, either present or contemplated, in the subject property. We have
      no personal interest or bias with respect to the subject matter of this
      consultation report or the parties
involved.

            

    

    

    
      	
               
      

            	
              This
      consultation report identifies all of the limiting conditions (imposed by
      the terms of my assignment or by the undersigned) affecting the analysis,
      opinions and conclusions contained in this
  report.

            

    

    

    
      	
               
      

            	
              The
      analysis, opinions and/or conclusions, if any, contained in this report
      have been developed in accordance with the Code of Professional Ethics and
      Standards of Professional Practice of the Appraisal
    Institute.

            

    

    

    
      	
               
      

            	
              The
      use of this consultation report is subject to the requirements of the
      Appraisal Institute relating to review by its duly authorized
      representatives.

            

    

    

    
      	
               
      

            	
              No
      one other than the undersigned prepared the analysis, opinions or
      conclusions concerning real estate that are set forth in this consultation
      report.

            

    

    

    
      	
               
      

            	
              No
      one at Jackson Claborn, Inc has personally inspected the property that is
      the subject of this report.

            

    

    

    
      	
               
      

            	
              We
      certify that this consultation assignment was not based on a requested
      minimum valuation, a specific valuation, or the approval of a
      loan.

            

    

    

    /s/
Jackson Claborn, Inc.

    

    JACKSON
CLABORN, INC.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ASSUMPTIONS AND LIMITING
CONDITIONS

    

    This
consultation is expressly subject to the following assumptions and limiting
conditions:

    

    
      	
               
      

            	
              1)

            	 	
              No
      responsibility is assumed for matters of legal nature. It is assumed that
      title to the property is marketable and the legal description furnished us
      is correct.

            

    

    

    
      	
               
      

            	
              2)

            	 	
              The
      property is treated as though under responsible ownership and competent
      management and free and clear of all liens and
    encumbrances.

            

    

    

    
      	
               
      

            	
              3)

            	 	
              The
      described physical condition of any improvements is based on visual
      inspection only. It is assumed that there are no hidden or unapparent
      physical conditions affecting value such as the existence of hazardous
      materials such as asbestos or any other potentially hazardous materials.
      No liability is assumed for the soundness of structural members, equipment
      or soil conditions, since no engineering tests were
  made.

            

    

    

    
      	
               
      

            	
              4)

            	 	
              Improvements
      are considered to be within lot lines and in accordance with local zoning
      and building ordinances, as well as all applicable Federal, state and
      local environmental laws and regulations, except as noted herein. Any
      plats, diagrams or drawings provided are intended solely to facilitate
      understanding and aid to the reader in picturing the property and are not
      meant to be used as references in matters of survey, as no survey was made
      and no liability is assumed regarding questions of
  survey.

            

    

    

    
      	
               
      

            	
              5)

            	 	
              It
      is assumed that all required private, Federal, state or local licenses,
      certificates of occupancy, consents or other legislative or administrative
      permissions required have been or can be readily obtained or renewed for
      any use on which the value estimate in this report is
    based.

            

    

    

    
      	
               
      

            	
              6)

            	 	
              Any
      information received from public or private sources is believed to be
      reliable; however, no warranty is given for its
  accuracy.

            

    

    

    
      	
               
      

            	
              7)

            	 	
              The
      authors shall not be required to give further consultation or testimony or
      appear in court, by reason of this consultation report with reference to
      the property described unless previous arrangements have been made to that
      effect.

            

    

    

    
      	
               
      

            	
              8)

            	 	
              Disclosure
      of the contents of this consultation report is governed by the Bylaws and
      Regulations of the Appraisal Institute. Possession of this consultation
      report or a copy thereof or any part thereof, does not carry with it the
      right of publication, nor may it be used by anyone but the party for whom
      it has been prepared without the previous written consent of the
      appraisers and, in any event, only with proper written qualifications and
      only in its entirety.

            

    

    

    
      	
               
      

            	
              9)

            	 	
              Neither
      all nor any part of the contents of this consultation report (especially
      conclusions as to value, the identity of the appraisers or the firm with
      which the appraiser is connected) shall be disseminated to the public
      through advertising, public relations, news, sales or other media without
      the prior written consent and approval of Jackson Claborn,
      Inc.

            

    

    

    
      	
               
      

            	
              10)

            	 	
              Any
      opinions of value stated herein are based on the purchasing power of the
      dollar as of the date of this report, except as otherwise specified.
      Therefore, the opinion of value is considered reliable only as of the
      stated date of valuation.

            

    

    

    
      	
               
      

            	
              11)

            	 	
              This
      consultation report is intended to be read and used as a whole and not in
      parts. Separation of any section or page from the main body of the
      consultation report is expressly forbidden and will be considered as
      invalidating the consultation.

            

    

    

    
      	
               
      

            	
              12)

            	 	
              Any
      allocation of value of this consultation report between land and
      improvements applies only to this consultation and must not be used as
      part of any other appraisal and is invalid if so used. The value reported
      for any portion appraised, plus the value of all other portions may or may
      not equal the value of the entire parcel or tract considered as an
      entity.

            

    

    

    
      	
               
      

            	
              13)

            	 	
              No
      responsibility is assumed for the accuracy of any descriptions of physical
      materials and conditions pertaining to the property or for any damages
      sustained in connection with actual or potential deficiencies or hazards
      such as, but not limited to, inadequacies or defects in the structure,
      design, mechanical equipment or utility services associated with the
      improvements; air or water pollution; noise; flooding; storms or wind;
      traffic and other neighborhood hazards; radon gas, asbestos, natural or
      artificial radiation or toxic substances of any description, whether on or
      off the premises.

            

    

    

    
      	
                
      14)  

            	
              The
      opinions of value and/or lease rates contained within this consultation
      report are estimates. There is no guarantee, written or implied, that the
      subject will actually sell or lease for the estimated value/lease
      rate.

            

    

    

    
      	
                
      15) 

            	
              The
      Americans with Disabilities Act ("ADA") became effective January 26, 1992.
      We have not made a specific compliance survey and analysis of this
      property to determine whether or not it is in conformity with the various
      detailed requirements of the ADA. Indeed, we have not been supplied with
      nor have we rendered a qualified opinion as to whether or not there are
      any "readily achievable" barrier removal items present. It is possible
      that a survey of the property together with a detailed analysis of the
      requirements of the ADA could reveal that the property is not in
      compliance with one or more of the requirements of the Act.  If
      so, this fact could have a negative affect upon the value of the
      property.  Since we have no direct evidence relating to this
      issue, we did not consider possible non-compliance with the requirements
      of ADA in estimating the value of the property.  Consequently,
      the subject property has been valued assuming compliance to
      ADA.  Should a professional survey
      prove non-compliance, we reserve the right to re-evaluate the
      property.

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