TERM LOAN AGREEMENT -

Exhibit 10.39

TERM LOAN AGREEMENT

Dated: As of June 28, 2005

between

HINES REIT PROPERTIES , L.P.

(the “Borrower”)

and

KEYBANK NATIONAL ASSOCIATION

(“Administrative Agent”)

and

and other Lenders, if any, which may become parties

to this Agreement (with KeyBank National Association, the “Lenders”)

$60,000,000.00 TERM LOAN

TABLE OF CONTENTS

TERM LOAN AGREEMENT

     This is a Term Loan Agreement (“Agreement”) made and entered into as of the 28th day of June 2005, by and between HINES REIT PROPERTIES, L.P, a Delaware limited partnership (the “Borrower”), having an address at c/o Hines Interests Limited Partnership, 2800 Post Oak Blvd., Suite 5000, Houston, Texas 77056, and KEYBANK NATIONAL ASSOCIATION, a national banking association having an address at 127 Public Square, Cleveland, Ohio 44114, and the other lending institutions which may become parties to this Agreement pursuant to Section 11.15 hereof (each, a “Lender” and collectively the “Lenders”) and KeyBank National Association, as agent for itself and such other lending institutions (the “Administrative Agent”).

WITNESSETH:

1. BACKGROUND.

     1.1 Defined Terms . Capitalized terms used in this Agreement are defined either in Exhibit A, or in specific sections of this Agreement, or in another Credit Document, as referenced in Exhibit A.

     1.2 Borrower . Borrower is a limited partnership organized under the laws of the State of Delaware, of which the sole general partner is Hines Real Estate Investment Trust, Inc., a Maryland corporation.

     1.3 Use of Loan Proceeds . Borrower has applied to Administrative Agent for a loan of Sixty Million Dollars ($60,000,000) (the “Facility”) the proceeds of which are to be used solely for the purposes of acquiring the California Property.

     1.4 Accounting Terms . Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements and reports delivered pursuant to Section 7.2 (or, prior to the delivery of the first financial statements pursuant to Section 7.2, consistent with the financial statements dated March 31, 2005).

2. LOAN PROVISIONS.

     2.1 Amount of Facility .

     (a)  Commitment . Subject to all of the terms, conditions and provisions of this Agreement, each Lender agrees severally to make loans (each a “Loan” and, collectively, the “Loans”) to the Borrower for the purposes herein set forth in an aggregate amount up to such Lender’s Commitment Percentage of the Facility; provided, however: (i) with regard to each Lender individually, such Lender’s outstanding Loans shall not exceed such Lender’s

Commitment Percentage of the Committed Amount and (ii) with regard to the Lenders collectively, the aggregate principal amount of outstanding Loans shall not exceed the Committed Amount.

     (b)  Notes . The Loans shall be evidenced by duly executed promissory note(s) of the Borrower to each Lender in the original principal amount of each Lender’s Commitment Percentage of the Committed Amount; such notes shall be substantially in the form of Exhibit F .

     (c)  Loans . In order to request that Lenders make a Loan hereunder, Borrower must submit a Notice of Borrowing in the form attached hereto as Exhibit I to Administrative Agent at least three (3) Business Days prior to the date on which the Loan is requested to be made (which shall be a Business Day) and shall also submit to Administrative Agent a Notice of Rate Selection in accordance with Section 2.3.5. Provided that all conditions precedent thereto are satisfied, Lenders will use commercially reasonable efforts to fund the requested Loan on such date.

     2.2 Term of Facility . The Facility shall be for a term (“Term”) commencing on the date hereof and ending ninety (90) days from the date hereof on September ___, 2005 (“Maturity Date”).

     2.3 Interest Rate and Payment Terms . Amounts outstanding under the Facility shall be payable as to interest and principal in accordance with the provisions of this Agreement. This Agreement also provides for interest at a Default Rate, Late Charges and prepayment rights and fees. Any and all interest rate selection and conversion provisions in this Agreement are to be administered by the Administrative Agent and are to be allocated on a pro rata basis to the Note(s) held by each Lender based upon such Lender’s Commitment Percentage.

2.3.1 Borrower’s Options . Principal amounts outstanding under the Facility shall bear interest at the following rates, at Borrower’s selection, subject to the conditions and limitations provided for in this Agreement: (i) Variable Rate or (ii) Adjusted LIBOR Rate.

2.3.2 Selection To Be Made . Borrower shall select, and thereafter may change the selection of, the applicable interest rate, from the alternatives otherwise provided for in this Agreement, by giving Administrative Agent a Notice of Rate Selection as provided in Section 2.3.5 hereof: (i) at least three (3) Business Days prior to a Loan, (ii) on any Business Day on which Borrower desires to convert an outstanding LIBOR Rate Loan to a Variable Rate Loan, or (iii) at least three (3) Business Days before the date on which Borrower desires to convert an outstanding Variable Rate Loan to a LIBOR Rate Loan or make any change with respect to an outstanding LIBOR Rate Loan.

2.3.3 Increased Costs . If due to any one or more of: (i) the introduction of any applicable law or regulation or any change (other than any change by way of imposition or increase of reserve requirements or imposition of a Reserve Percentage already referred to in the definition of LIBOR Rate) in the interpretation or application by any authority charged with the interpretation or

application of any law or regulation; or (ii) the compliance with any guideline or request from any governmental central bank or other governmental authority, there shall be an increase in the cost to Administrative Agent or any Lender of agreeing to make or making, funding or maintaining LIBOR Loans, including without limitation changes which affect or would affect the amount of capital or reserves required or expected to be maintained by Administrative Agent or any Lender, with respect to all or any portion of the Facility, or any corporation controlling (directly or indirectly) Administrative Agent or any Lender, on account thereof, then, provided that such increases in costs are not due to the fraud or gross negligence of Administrative Agent or such Lender, Borrower from time to time shall, upon demand by Administrative Agent, pay additional amounts sufficient to indemnify Administrative Agent or such Lender against the increased cost; provided, however, that such amounts shall be no greater than that which such Administrative Agent or Lender is generally charging other borrowers similarly situated to the Borrower. If at any time a Lender or Lenders other than the Administrative Agent shall make a determination of increased cost, the Borrower may at any time during the period that such increased cost is being charged to Borrower instruct such Lender or Lenders to sell its or their commitments (with all Loans outstanding thereunder) to a bank to be designated by the Borrower and approved by the Administrative Agent (such approval not to be unreasonably withheld) at a price equal to all outstanding principal and accrued and unpaid interest and fees thereunder and any other outstanding obligations due to such Lender hereunder, provided, however, that such purchasing bank shall comply with the provisions of Section 11 hereof. A certificate as to the amount of the increased cost and the reason therefor submitted to Borrower by Administrative Agent, in the absence of manifest error, shall be conclusive and binding for all purposes.

2.3.4 Illegality . Notwithstanding any other provision of this Agreement, if the introduction of, or a change in the interpretation of, any law, treaty, statute, regulation or interpretation thereof shall make it unlawful, or any central bank or government authority shall assert by directive, guideline or otherwise, that it is unlawful for Administrative Agent or any Lender to make or maintain LIBOR Loans or to continue to fund or maintain LIBOR Loans then, on written notice thereof and demand by Administrative Agent to Borrower, (a) the obligation of Administrative Agent and Lenders to make LIBOR Loans and to convert or continue any Loan as a LIBOR Loan shall terminate and (b) Borrower shall convert all Loans outstanding under the Facility into Variable Rate Loans until such time as such Lender may again make, maintain, and fund LIBOR Loans.

          2.3.4.1 Treatment of Affected Loans . If the obligation of any Lender to make LIBOR Loans shall be suspended pursuant to Section 2.3.4 hereof, such Lender’s LIBOR Loans shall be automatically converted into Variable Rate Loans on the last day(s) of the then current Interest Period(s) for such LIBOR Loans or prior thereto if and to the extent LIBOR Loans may not be maintained as a result of any condition or event specified in Section 2.3.4 hereof and, unless and until

such Lender gives notice as provided below that the circumstances specified in Section 2.3.4 hereof that gave rise to such conversion no longer exist:

     (a) to the extent that such Lender’s LIBOR Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lender’s LIBOR Loans shall be applied instead to its Variable Rate Loans; and

     (b) all Loans that would otherwise be made or continued by such Lender as LIBOR Loans shall be made or continued instead as Variable Rate Loans, and all Variable Rate Loans of such Lender that would otherwise be converted into LIBOR Loans shall remain as Variable Rate Loans.

     If such Lender gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Section 2.3.4 hereof that gave rise to the conversion of such Lender’s LIBOR Loans to Variable Rate Loans pursuant to this Section 2.3.4.1 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when LIBOR Loans made by other Lenders are outstanding, such Lender’s Variable Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding LIBOR Loans to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding LIBOR Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with such Lenders’ respective Commitment Percentages.

2.3.4.2 Taxes .

     (a) Any and all payments by the Borrower to or for the account of any Lender or the Administrative Agent hereunder or under any other Credit Document shall be made free and clear of and without deduction for any and all taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or the Administrative Agent (as the case may be) is organized or by the jurisdiction where such Lender (or its applicable Lending Office) or the Administrative Agent has a permanent establishment or office, or is engaged in a trade or business, or any political subdivision of such jurisdiction (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Credit Document to any Lender or the Administrative Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.3.4.2) such Lender or the Administrative Agent receives an amount equal to the sum it would have received had no such deductions been

made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 12.1, the original or a certified copy of a receipt evidencing payment thereof.

     (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Credit Document (hereinafter referred to as “Other Taxes”).

     (c) The Borrower agrees to indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 2.3.4.2) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto; provided, however, that such amounts shall be no greater than the amounts which such Administrative Agent or Lender is generally charging other borrowers similarly situated to the Borrower.

     (d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Administrative Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Administrative Agent with (i) Internal Revenue Service Forms W-8ECI, W-8BEN, W-8IMY and W-9 (or their equivalent), as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying if appropriate that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, and (ii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Agreement or any of the other Credit Documents. If the form provided by a Lender at the time such Lender first becomes a party to this Agreement indicates a United States withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from the definition of Taxes set forth in Section 2.3.4.2(a).

     (e) For any period with respect to which a Lender has failed to provide the Borrower and the Administrative Agent with the appropriate form pursuant to Section 2.3.4.2(d) (unless such failure is due to a change in treaty, law, or

regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 2.3.4.2(a) or 2.3.4.2(b) with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of Taxes, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall, at such Lender’s sole cost and expense, take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

     (f) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 2.3.4.2, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender.

     (g) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.3.4.2 shall survive the repayment of the Loans and the other obligations under the Credit Documents and the termination of the Commitments hereunder.

                         2.3.4.3 Capital Adequacy . If any future law, governmental rule, regulation, policy, guideline or directive or the interpretation thereof by a court or governmental authority with appropriate jurisdiction affects the amount of capital required or expected to be maintained by banks or bank holding companies and any Lender or the Administrative Agent determines that the amount of capital required to be maintained by it is increased by or based upon the existence of Loans made or deemed to be made pursuant hereto, then such Lender or the Administrative Agent may notify the Borrower of such fact, and the Borrower shall pay to such Lender or the Administrative Agent from time to time, upon demand made by the Administrative Agent or such Lender, as an additional fee payable hereunder, such amount as such Lender or the Administrative Agent shall determine reasonably and in good faith and certify in a notice to the Borrower to be an amount that will adequately compensate such Lender or Administrative Agent in light of these circumstances for its increased costs of maintaining such capital. Each Lender and the Administrative Agent shall allocate such cost increases among its customers in good faith and on an equitable basis, and will not charge the Borrower unless it is generally imposing a similar charge on its other similarly situated borrowers.

                    2.3.5 Notice . A “Notice of Rate Selection” shall be a written notice, given by cable, tested telex, facsimile transmission (with authorized signature), or by telephone if immediately confirmed by such a written notice, from an Authorized Representative of Borrower which: (i) is irrevocable; (ii) is received by Administrative Agent not later than 1:00 o’clock P.M. Eastern Time: (a) at least three (3) Business Days prior to a Loan; or (b) if a Libor Rate is selected, at least three (3) Business Days prior to the end of the current Interest Period to which such selection is to apply; (c) if a Variable Rate is selected, on the first day of the Interest Period to which it applies; and (iii) as to each selected interest rate option, sets forth the aggregate

principal amount(s) to which such interest rate option(s) shall apply and the Interest Period(s) applicable to each LIBOR Loan.

                    2.3.6 If No Notice . If Borrower fails to timely select an interest rate option in accordance with the foregoing prior to a new Loan or as to an expiring Interest Period of an outstanding LIBOR Loan, then such new Loan and/or such outstanding LIBOR Loan shall be deemed converted to a LIBOR Loan with an Interest Period of one (1) month; provided, however, if a LIBOR Loan is not then available, any such new Loan shall be deemed to be a Variable Rate Loan, and on the last day of the applicable Interest Period of any such outstanding LIBOR Loan all outstanding principal amounts thereon shall be deemed converted to a Variable Rate Loan.

                    2.3.7 Telephonic Notice . Without in any way limiting Borrower’s obligation to confirm in writing any telephonic notice, Administrative Agent may act without liability upon the basis of telephonic notice, concerning interest rate selection only, believed by Administrative Agent in good faith to be from Borrower prior to receipt of written confirmation. In each case Borrower hereby waives the right to dispute Administrative Agent’s record of the terms of such telephonic Notice of Rate Selection in the absence of manifest error.

                    2.3.8 Limits On Options . Each LIBOR Loan or Variable Rate Loan shall be in a minimum amount of $100,000. At no time shall there be outstanding a total of more than six (6) LIBOR Loans at any time. If Borrower shall make more than one (1) interest rate selection in any thirty (30) day period, excluding conversions of outstanding Loans made at the end of an applicable Interest Period of any previously outstanding LIBOR Loan, Administrative Agent may impose and Borrower shall pay a reasonable processing fee for each such additional selection.

                    2.3.9 Payment and Calculation of Interest . Subject to the provisions of Section 2.3.14, all interest shall be: (a) payable in arrears commencing on July 31, 2005 with payments to be made on each Interest Payment Date thereafter; and (b) calculated on the basis of a 360 day year and the actual number of days elapsed.

     (i) Variable Rate Loans. During such periods as the Loans shall be comprised in whole or in part of Variable Rate Loans, such Variable Rate Loans shall bear interest at a per annum rate equal to the Variable Rate. Each change in the Prime Rate or Adjusted Federal Funds Rate shall, as applicable, simultaneously change the Variable Rate payable under this Agreement; and

     (ii) LIBOR Loans. During such periods as the Loans shall be comprised in whole or in part of LIBOR Loans, such LIBOR Loans shall bear interest at a per annum rate equal to the Adjusted LIBOR Rate. Interest at the LIBOR Rate shall be computed from and including the first day of the applicable Interest Period to, but excluding, the last day thereof.

                    2.3.10 Voluntary and Mandatory Principal Payments .

     (a)  Voluntary Prepayments . The Borrower shall have the right to prepay Loans in whole or in part at any time upon three (3) Business Days prior notice to Administrative Agent

without premium or penalty with respect to Variable Rate Loans and, with respect to LIBOR Loans, subject to a Make-Whole Provision.

     (b)  Mandatory Prepayments .

     (i) If at any time the aggregate principal amount of outstanding Loans shall exceed the Committed Amount, the Borrower shall immediately prepay the outstanding principal balance on the Loans in an amount sufficient to eliminate such excess (such prepayments and any other payments designated as such herein, “Mandatory Prepayments”).

     (ii) All amounts required to be paid pursuant to Section 2.3.10(b)(i) shall be applied to the Loans. Within the parameters of the applications set forth above, Mandatory Prepayments shall be applied first to Variable Rate Loans and then to LIBOR Loans in direct order of Interest Period maturities. All prepayments under this Section 2.3.10(b)(ii) applied to LIBOR Loans in accordance with the foregoing shall be subject to a Make-Whole Provision.

                    2.3.11 Maturity . At Maturity all accrued interest, principal and other charges due with respect to the Facility shall be due and payable in full and the principal balance and such other charges, but not unpaid interest, shall continue to bear interest at the Default Rate until so paid.

                    2.3.12 Method of Payment; Date of Credit . All payments of interest, principal and fees shall be made in lawful money of the United States in immediately available funds: (a) by direct charge to an account of Borrower maintained with Administrative Agent (or the then holder of the Facility), or (b) by wire transfer to Administrative Agent, or (c) to such other bank or address as the holder of the Facility may designate in a notice to Borrower. Payments shall be credited on the Business Day on which immediately available funds are received prior to one o’clock P.M. Eastern Time; payments received after one o’clock P.M. Eastern Time shall be credited on the next Business Day, payments which are not in the form of immediately available funds shall not be credited until such funds become immediately available to Administrative Agent.

                    2.3.13 Billings . Administrative Agent may submit monthly billings reflecting payments due; however, any changes in the interest rate which occur between the date of billing and the due date may be reflected in the billing for a subsequent month. Neither the failure of Administrative Agent to submit a billing nor any error in any such billing shall excuse Borrower from the obligation to make full payment of all Borrower’s payment obligations when due; provided, however, that Borrower shall not be considered in breach of this Agreement to the extent that it makes payments in accordance with such billings unless and until three (3) Business Days after Borrower’s receipt of written notice from Administrative Agent of such error in billing.

                    2.3.14 Default Rate . Administrative Agent shall have the option of imposing, and Borrower shall pay upon billing therefor, a default interest rate which is four percent (4%) per annum above the Variable Rate (the “Default Rate”): (a) while any monetary Default exists

and is continuing, during that period between the due date and the date of payment; (b) while any Event of Default exists, unless and until the Event of Default is waived by Administrative Agent; and (c) after Maturity. Borrower’s right to select pricing options shall cease upon the occurrence and during the continuance of a monetary Default or any Event of Default.

                    2.3.15 Late Charges . Except with respect to payments due at Maturity (as to which the Late Charge shall not be applicable), Borrower shall pay, upon billing therefor, a “Late Charge” equal to five percent (5%) of the amount of any payment of principal, interest, or both, which is not paid within ten (10) days of the due date thereof. Late Charges are: (a) payable in addition to, and not in limitation of, the Default Rate, (b) intended to compensate Administrative Agent for administrative and processing costs incident to late payments, (c) are not interest, and (d) shall not be subject to refund or rebate or credited against any other amount due.

                    2.3.16 Make Whole Provision . Borrower shall pay to Administrative Agent, immediately upon request and notwithstanding any contrary provisions contained in any of the Credit Documents, such amounts as shall be necessary to compensate each Lender for the loss, cost or expense which it actually reasonably incurs as a result of (i) any payment or prepayment, under any circumstances whatsoever, whether voluntary or involuntary, of all or any portion of a LIBOR Loan on a date other than the last day of the applicable Interest Period of such LIBOR Loan, (ii) the conversion, for any reason whatsoever, whether voluntary or involuntary, of any LIBOR Loan on a date other than the last day of the applicable Interest Period, (iii) the failure of all or a portion of a Loan which was to have borne interest at the Adjusted LIBOR Rate pursuant to the request of Borrower to be made under this Agreement (except as a result of a failure by Administrative Agent or any Lender to fulfill Administrative Agent’s or such Lender’s obligations to fund), or (iv) the failure of Borrower to borrow in accordance with any request submitted by it for a LIBOR Loan (except as a result of a failure by Administrative Agent or any Lender to fulfill such Administrative Agent’s or Lender’s obligations to fund). Such amounts payable by Borrower shall be equal to any administrative costs actually incurred plus any amounts required to compensate for any loss, cost or expense reasonably incurred by reason of the liquidation or re-employment of deposits or other funds acquired by any Lender to fund or maintain a LIBOR Loan, including, without limitation, the costs associated with the cancellation of any interest rate hedge agreement.

     2.4 Fees . The Borrower agrees to pay to the Administrative Agent for the benefit of the Lenders in immediately available funds on or before the Closing Date a commitment fee (the “Commitment Fee”) in the amount agreed to by Borrower and the Administrative Agent in the Fee Letter.

3. SECURITY FOR THE LOAN; LOAN AND SECURITY DOCUMENTS.

     3.1 Credit Documents and Security Documents . The Facility shall be made, evidenced, administered, secured and governed by all of the terms, conditions and provisions of the “Credit Documents”, each as the same may be hereafter modified or amended, consisting of: (i) this Agreement; (ii) separate Notes in the form of Exhibit F annexed hereto, with one Note being payable to each Lender in the original principal amount equal to such Lender’s Commitment, such promissory notes to be in the aggregate original principal amount of Sixty Million Dollars ($60,000,000.00); (iii) the Direction Letters, if any; (iv) the Fee Letter; (v) the Environmental

Indemnity; (vi) the Security Documents; (vii) the Guaranty; and (viii) any and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto executed to further evidence or secure the Facility.

     3.2 Collateral . (a) Administrative Agent and Lenders shall have a first priority, perfected security interest in the Collateral at Closing and at all times prior to Maturity, except as otherwise provided in this Agreement or the Pledge Agreement. With respect to each of the Portfolio Investments in a Portfolio Investment Entity listed on Exhibit K , Borrower will pledge to Administrative Agent and Lenders certain of Borrower’s right, title and interest in and to each of the Portfolio Investments, as the same may be modified from time to time in accordance with this Section 3.2. With respect to such pledges, Borrower will execute and deliver on the Closing Date (i) the Pledge Agreement, (ii) UCC-1 financing statements with respect to such pledges, and (iii) any additional documents or instruments reasonably requested by Administrative Agent on behalf of Lenders in order to evidence or perfect such pledges, with all such documents to be in form and substance acceptable to Administrative Agent on behalf of Lenders.

     (b) Borrower hereby authorizes Administrative Agent at any time and from time to time to file UCC financing statements, continuation statements, and amendments thereto describing the Collateral without the signature of Borrower. Administrative Agent shall give Borrower prompt written notice of any such filing.

     (c) As provided in Section 7.2.8, Borrower shall give written notice to Administrative Agent prior to the making of any Portfolio Disposition by Borrower or any of its Subsidiaries, which notice shall be accompanied by a written certification by Borrower in the form of Exhibit L attached hereto stating that Borrower will be in full compliance with all covenants contained herein or in the other Credit Documents, including without limitation the covenants set forth in Section 7.3, after giving effect to the proposed Portfolio Disposition, and which notice shall be accompanied by evidence of such compliance satisfactory to Administrative Agent on behalf of Lenders. Borrower shall give written notice to Administrative Agent upon its acquisition of any new Portfolio Investment.

     (d) Administrative Agent shall be authorized and obligated to release, within three (3) Business Days after receipt of a written request from Borrower, any of the Portfolio Investments from any security interests, liens or other encumbrances under the Pledge Agreement or any other Security Document that is the subject of a proposed Portfolio Disposition in compliance with the conditions set forth in this Section 3.2 (each, a “Permitted Portfolio Disposition”). Within three (3) Business Days after receipt of a written request from Borrower, Administrative Agent on behalf of Lenders will execute and deliver such instruments as are reasonably required to confirm the release of the security interest, lien and/or other encumbrance of Administrative Agent and Lenders with respect to such Portfolio Investment (which release may be concurrent with and conditioned on the consummation of such Permitted Portfolio Disposition) (i) that is the subject of a Permitted Portfolio Disposition or (ii) with respect to which Administrative Agent on behalf of Lenders has otherwise released its security interest, including UCC-3 partial releases.

     (e) Each new Portfolio Investment made by Borrower after the date hereof shall automatically become a part of the Collateral, and, upon any such addition to the Collateral,

Borrower shall execute and deliver such Security Documents as Administrative Agent may reasonably require to with respect to the new Collateral; provided, however , that, if the terms of any third party financing proposed to be obtained in connection with the acquisition of a Portfolio Asset relating to a Portfolio Investment would prohibit the Borrower from pledging in favor of Administrative Agent and the Lenders 100% of a Portfolio Investment, then Borrower shall be required to pledge only that portion of such Portfolio Investment permitted to be pledged under such financing (and, in each case, to the greatest extent so permitted); provided further however , that in no event shall Borrower pledge less than 49% of any such Portfolio Investment without the consent of Administrative Agent, such consent not to be unreasonably withheld or delayed.

     (f) Subject to Section 3.2(g) below, and provided that Borrower is in compliance with the financial covenants contained in Section 7.3 of this Agreement and an Event of Default does not exist, and provided that Borrower complies with the provisions of Section 7.2.6 of this Agreement with respect to any proposed Portfolio Disposition, Borrower may make and may cause its Subsidiaries to make Portfolio Dispositions.

     (g) If Borrower’s Consolidated Leverage Ratio exceeds seventy percent (70%) after giving effect to such Portfolio Disposition, the outstanding aggregate principal amount of the Loans shall be reduced by the amount necessary to maintain compliance with Borrower’s covenants contained herein or in the other Credit Documents, including without limitation the covenants set forth in Section 7.3. The foregoing reductions in the outstanding aggregate principal amount of the Loans are collectively referred to herein as a “ Required Reduction .” Any Required Reduction shall not reduce the Maximum Loan Amount. Any Required Reduction shall be calculated based on the Pro Forma Reduction Calculation attached hereto as Exhibit L . The Total Asset Value of any Portfolio Investment used for the purpose of making the calculation of the Required Reduction under this Section 3.2(g) shall be based on the most recent Appraised Asset Values of the Portfolio Assets associated with such Portfolio Investment.

     (h) Notwithstanding the foregoing or anything contained herein to the contrary, (A) after an Event of Default and while such Event of Default is continuing, (B) if an Event of Default is created as a result of a Portfolio Disposition, or (C) if a Portfolio Disposition results in Borrower not being in compliance with any of Borrower’s covenants set forth in Section 7.3 (other than the Consolidated Leverage Ratio requirement set forth in Section 7.3(a)), then one hundred percent (100%) of Net Sales Proceeds (or so much of such Net Sales Proceeds as is required to cure such Event of Default or to bring Borrower into compliance with Borrower’s covenants set forth in Section 7.3, as applicable) shall be applied to reduce the outstanding aggregate principal amount of the Loans and there shall be a corresponding Required Reduction; provided, however, if the Consolidated Leverage Ratio is greater than seventy percent (70%) and there is no Event of Default (including as a result of a Portfolio Disposition) and Borrower is otherwise in compliance with Borrower’s covenants set forth in Section 7.3, the provisions of Section 3.2(g) shall apply to Portfolio Dispositions and Borrower shall not be required to apply Net Sales Proceeds to reduce the outstanding aggregate principal amount of the Loans as provided in this Section 3.2(h).

     (i) All Required Reductions made by Borrower pursuant to Sections 3.2(g) and 3.2(h) shall constitute “Mandatory Prepayments” subject to the provisions of Section 2.3.10(b).

     3.3 Borrower Escrow Account (i) Borrower Escrow Account . Borrower shall place funds in a Borrower Escrow Account as required by this Section 3.3. The Borrower Escrow Account shall serve as additional collateral for the Facility and the Borrower Obligations.

     (ii) If an Event of Default occurs and is continuing, then, except as provided in Section 7.9, Borrower shall deposit into the Borrower Escrow Account all Net Cash Flow for the immediately preceding fiscal quarter that is Available for Distribution to Borrower derived from any Portfolio Investment until such time that Borrower is in compliance with all covenants of Borrower hereunder, including without limitation, the covenants under Section 7.3. Deposits into the Borrower Escrow Account shall be made within fifteen (15) days after the end of the fiscal quarter for which such deposit is due and, to the extent sufficient information is not available to Borrower to make a final determination of the amounts due on or before such fifteenth (15 ^th ) day, a final payment (if necessary) shall be made on or before the forty-fifth (45 ^th ) day following the end of such quarter.

     (iii) If Borrower is required to deposit funds into the Borrower Escrow Account and thereafter Borrower is able to provide written evidence reasonably satisfactory to Administrative Agent on behalf of Lenders that no Event of Default currently exists, then (a) so long as no Default or Event of Default shall have occurred and be continuing, the balance remaining in the Borrower Escrow Account (including any income earned on amounts deposited in the Borrower Escrow Account), if any, shall be disbursed to Borrower or as Borrower shall otherwise direct Administrative Agent in writing. The written evidence of such compliance referred to in the preceding sentence will be deemed satisfactory and approved by the Administrative Agent on behalf of Lenders unless written notice outlining the reason for disapproval is received by Borrower from the Administrative Agent within ten (10) Business Days of receipt by the Administrative Agent of first notice of such compliance.

     (iv) Administrative Agent may, during the existence and continuation of an Event of Default and on the Maturity Date, and, at the request of Borrower on any Interest Payment Date, Administrative Agent will apply all amounts existing in the Borrower Escrow Account (including any income earned on amounts deposited in the Borrower Escrow Account) as follows: (i) first, to accrued but unpaid interest of the Loans outstanding, and (ii) second, to a reduction of the principal amount on the Loans outstanding and all other amounts due and owing under this Agreement; provided that, with respect to any amounts remaining in the Borrower Escrow Account subsequent to any Interest Payment Date, such amounts may be applied by Administrative Agent only to the principal balance of the Loans, and not to any future interest payments (until the next subsequent Interest Payment Date). After the principal amount of the Loans, all accrued and unpaid interest and all other amounts owing under the Credit Documents have been paid in full and all commitments under the Credit Documents have been terminated, the Borrower Escrow Account shall be closed and the balance remaining (including any income earned thereon), if any, shall be returned to Borrower.

     If Borrower is required to deposit funds into the Borrower Escrow Account for two consecutive fiscal quarters, then Administrative Agent shall have the right on and after the date that the second quarterly deposit is due to deliver the Direction Letters to the addressees named thereon. Administrative Agent shall not deliver the Direction Letters prior to such date.

4. CONTINUING AUTHORITY OF AUTHORIZED REPRESENTATIVES. The Borrower has the power and authority to enter into this Agreement and the other Credit Documents and to perform its obligations under and consummate the transactions contemplated by such Credit Documents and has by proper action duly authorized the execution and delivery of the Credit Documents. Administrative Agent and each of the Lenders is authorized to rely upon the continuing authority of the persons, officers, signatories or agents hereafter designated (“Authorized Representatives”) to bind Borrower with respect to all matters pertaining to the Facility and the Credit Documents including, but not limited to, the selection of interest rates. Such authorization may be changed only upon notice to Administrative Agent accompanied by evidence, reasonably satisfactory to Administrative Agent, of the authority of the person giving such notice and such notice shall be effective not sooner than five (5) Business Days following receipt thereof by Administrative Agent. The present Authorized Representatives are listed on Exhibit C.

5. CONDITIONS PRECEDENT. The obligation of Administrative Agent and Lenders to enter into this Agreement and to make the Loan on the Closing Date shall be subject to satisfaction of the following conditions (in form and substance acceptable to the Lenders):

     5.1 Satisfactory Credit Documents . Each of the Credit Documents shall be satisfactory in form, content and manner of execution and delivery to Administrative Agent and Administrative Agent’s counsel.

     5.2 No Material Change . No change shall have occurred in the condition (financial or otherwise), business, affairs, operations or control of Borrower or any other member of the Combined Group, the General Partner, or any Portfolio Investment Entity, which would have a Material Adverse Effect since the date of Borrower’s financial statements most recently delivered to Administrative Agent.

     5.3 Warranties and Representations Accurate . All warranties and representations made by or on behalf of Borrower and the General Partner to Administrative Agent or any Lender shall be true, accurate and complete in all material respects.

     5.4 Financials and Appraisals . Administrative Agent on behalf of the Lenders shall have received and approved: (i) consolidated financial statements of General Partner complying with the standards set forth in Section 7.2, and (ii) a statement of Appraised Asset Value dated as of a recent date for the Portfolio Assets, which indicates Borrower’s Pro Rata Share of each Portfolio Asset.

     5.5 Environmental Compliance and Indemnification Agreements . The Borrower will execute and deliver a compliance and indemnification agreement with respect to environmental matters in favor of Administrative Agent and Lenders with respect to any assets owned directly or indirectly by the Borrower (“Environmental Indemnity”).

     5.6 Validity and Sufficiency of Security Documents . Each of the Security Documents and related UCC filings shall have been duly recorded and filed to the satisfaction of Administrative Agent, and Administrative Agent’s counsel, and the Security Documents, upon

the filing and recordation of the UCC filing statements, shall create a perfected lien on the Collateral.

     5.7 No Other Liens; Taxes and Municipal Charges Current . The Collateral shall not be subject to any liens or encumbrances other than real estate taxes and personal property taxes not yet due and payable and other Permitted Liens, unless such liens or encumbrances have been approved by Administrative Agent and Lenders. All real estate taxes, personal property taxes and other municipal charges relating to any of the Collateral shall be current.

     5.8 Organizational Documents and Entity Agreements . Administrative Agent shall have received and approved the Partnership Agreement or other organizational documents of Borrower and of the other members of the Combined Group and the General Partner, and certificates of good standing and/or legal existence for such Persons issued as of a recent date by such entity’s state of organization and each other state where such entity, by the nature of its business, is required to qualify or register

     5.9 Votes, Consents and Authorizations . Administrative Agent shall have received and approved certified copies of all partnership, entity and corporate votes, consents and authorizations as may be reasonably required to evidence authority for: (i) closing the Facility and the transactions contemplated hereby; (ii) providing continuing authorization to designated persons to deal in all respects on behalf of Borrower; and (iii) the execution of all Credit Documents.

     5.10 Legal and Other Opinions . Administrative Agent shall have received and approved legal opinion letters from counsel representing Borrower and the General Partner which meet Administrative Agent’s legal opinion requirements.

     5.11 Due Diligence . Completion and approval of all due diligence deemed necessary by the Administrative Agent.

     5.12 Fees and Expenses . Payment of all fees and expenses owing to the Lenders and the Administrative Agent in accordance with the Fee Letter.

     5.13 Guaranty . The Guarantor will execute and deliver to Administrative Agent, for the benefit of the Lenders, the Guaranty.

     5.14 No Default . There shall not be any Default or Event of Default under any of the Credit Documents.

     5.15 No Litigation . There shall not be any action, suit, investigation or proceeding, pending or threatened, in any court or before any arbitrator or governmental authority, that has a reasonable probability of materially adversely effecting the ability of the Borrower to perform its obligations under this Agreement or the other Credit Documents.

     5.16 Compliance with Covenants . The Borrower shall be in compliance with all covenants contained herein and in the other Credit Documents.

6. WARRANTIES AND REPRESENTATIONSBorrower warrants and represents to Administrative Agent and each of the Lenders for the express purpose of inducing the Lenders to enter into this Agreement, to make the Facility available to the Borrower, to make the Loan, and to otherwise complete all of the transactions contemplated hereby, that as of the date of this Agreement, upon the date any Loan is funded and at all times thereafter until such Loan has been repaid and all obligations to each of the Lenders have been satisfied as follows:

     6.1 Financial Information. Borrower has heretofore delivered to Administrative Agent on behalf of the Lenders audited financial statements for General Partner for the period ended December 31, 2004 and unaudited financial statements for General Partner for the three months ending March 31, 2005. Such financial statements were true, accurate and complete in all material respects, and fairly presented, in all material respects, the financial condition of General Partner and the Borrower, as of the dates thereof and for the periods covered thereby, and the same were prepared in accordance with GAAP. Since the date of the most recent financial statements so delivered, there have occurred no changes or circumstances which have had or will have a Material Adverse Effect. All financial statements of General Partner hereafter delivered to Administrative Agent on behalf of the Lenders shall be true, accurate and complete in all material respects, and such financial statements shall fairly present in all material respects the financial condition of General Partner and the Borrower as of the dates thereof and for the periods covered thereby.

     Borrower has heretofore delivered an operating report to Administrative Agent on behalf of the Lenders for each Portfolio Asset. Each such operating report presents, in all material respects, a true, accurate, and complete report of all material operating expenses and operating revenues of the Portfolio Asset to which it relates for the period covered by such report. Each such operating report hereafter delivered to the Administrative Agent on behalf of the Lenders in respect of any Portfolio Asset shall present, in all material respects, a true, accurate, and complete report of all material operating expenses and operating revenues of such Portfolio Asset for the period covered by such report.

     6.2 No Violations . Neither the execution and delivery of the Credit Documents by the Borrower, nor the consummation by the Borrower of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof by the Borrower will (i) violate or conflict with any provision of the organizational documents or other governance documents of the Borrower or any other member of the Combined Group, (ii) violate any law, regulation (including without limitation Regulation U, Regulation X or Regulation T), order, writ, judgment, injunction, decree or permit applicable to the Borrower (iii) violate or materially conflict with contractual provisions of, or cause an event of default under, any indenture, mortgage, deed of trust, contract or other agreement or instrument to which any member of the Combined Group is a party or by which any such Person may be bound, or (iv) except for Liens created by, under or in connection with this Agreement or the other Credit Documents, result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to the Portfolio Investments of the Borrower or any interest in a Portfolio Asset held by a member of the Combined Group.

     6.3 No Litigation . There is no litigation, action, proceeding, investigation or suit now pending, or to the best of Borrower’s knowledge threatened, against Borrower, a Portfolio

Investment Entity, or any other member of the Combined Group which, if adversely decided, would have a Material Adverse Effect.

     6.4 Compliance With Legal Requirements . The Borrower, any Additional Pledgor and each other member of the Combined Group is in compliance in all material respects with all laws, rules, regulations, orders and decrees (including without limitation Environmental Laws) applicable to it, or to its properties, unless such failure to comply would not have or would not be reasonably expected to have a Material Adverse Effect.

     6.5 Use of Proceeds . The proceeds of any Loan shall be used solely for the purposes described in Section 1.3 above.

     6.6 Entity Matters .

6.6.1 Borrower . Borrower: (a) is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) has all necessary power pursuant to proper authorization to enable it to enter into the Credit Documents to which it is a party, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where the failure to do so could have a Material Adverse Effect and (d) has the limited partnership power and authority, and the legal right to conduct the business in which it is currently engaged.

6.6.2 General Partner . The General Partner (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, (b) has all necessary power pursuant to proper authorization to enable it to act as the general partner of Borrower and to execute and deliver the Credit Documents to which Borrower is a party on Borrower’s behalf, (c) is duly qualified to do business in and is in good standing under the laws of each jurisdiction where the failure to do so could have a Material Adverse Effect, and (d) has the corporate power and authority, and the legal right, to conduct the business in which it is currently engaged.

6.6.3 Identity of General Partner . As of the date of this Agreement, the sole General Partner of Borrower is Hines Real Estate Investment Trust, Inc., a Maryland corporation.

     6.7 Valid and Binding . Each of the Credit Documents to which it is a party constitutes the legal, valid and binding obligations of Borrower; and the Partnership Agreement constitutes the legal, valid and binding obligations of the parties thereto, in each case enforceable against the relevant Person in accordance with the respective terms thereof, subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, with respect to the availability of the remedies of specific enforcement, subject to the discretion of the court before which any proceeding therefor may be brought. All required entity actions and proceedings have been duly taken with respect to Borrower and the General Partner and each Portfolio Investment Entity, so as to authorize the execution, delivery and performance by Borrower of the Credit Documents to which it is a party. All consents and approvals that are

required in connection with the execution and delivery of this Agreement and the other Credit Documents have been obtained, including, without limitation, consents and approvals required under existing mortgage and loan agreements, organizational agreements, and from governmental authorities.

     6.8 Deferred Compensation and ERISA . Borrower has not established and does not plan to establish any pension, insurance or other arrangement or plan for employees covered by Title IV of the Employee Retirement Income Security Act of 1974, as now or hereafter amended (“ERISA”), and no “Reportable Event” as defined in ERISA has occurred and is now continuing with respect to any Plan. The granting of the Facility, the performance by Borrower of its obligations under the Credit Documents to which it is a party and Borrower’s conducting of its operations do not and will not violate any provisions of ERISA.

     6.9 No Material Change; No Default . Neither Borrower, the General Partner, any other member of the Combined Group, nor, to the best knowledge of Borrower, any Portfolio Investment Entity, is in default in any respect under any contract, lease, agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party which default would have or would be reasonably expected to have a Material Adverse Effect. No Default or Event of Default presently exists hereunder or under any other Credit Document to which Borrower is a party. Borrower, the General Partner, each other member of the Combined Group and, to the best knowledge of Borrower, each Portfolio Investment Entity has filed all required federal, state and local tax returns and has paid all taxes due pursuant to such returns or any assessments against any of them. As of the Closing Date, no change has occurred with respect to Borrower, the General Partner, or to the best knowledge of Borrower, any Portfolio Investment Entity, any Portfolio Asset or any Portfolio Investment, that would reasonably be expected to have a Material Adverse Effect since March 31, 2005. The Partnership Agreement, a true and correct copy of which has been provided to the Administrative Agent, is in full force and effect.

     6.10 No Broker or Finder . Neither Borrower nor anyone on behalf thereof, has dealt with any broker, finder or other person or entity who or which may be entitled to a broker’s or finder’s fee, or other compensation, payable by Administrative Agent or any Lender in connection with the Facility; it being understood however, that a broker has been engaged by Borrower in connection with the Facility and other financings which will not result in a fee or compensation payable by the Administrative Agent or any Lender.

     6.11 Background Information and Certificates . Borrower has delivered to Administrative Agent accurate and complete copies of all the organizational documents of the Borrower, the General Partner, any other member of the Combined Group and each Portfolio Investment Entity. To the best knowledge of the Borrower, all of the factual information contained or referred to in this Agreement and in the Exhibits and/or Schedules to this Agreement or the other Credit Documents, and in the certificates and opinions furnished to Administrative Agent or any Lender by or on behalf of Borrower in connection with the Facility, is true and correct in all material respects.

     6.12 Consents . Except to the extent previously obtained, no consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental

authority or other Person is required in connection with the execution, delivery or performance of this Agreement or any of the other Credit Documents to which Borrower is a party, including without limitation, consents and approvals required under existing mortgage and loan agreements, organizational agreements, and from governmental authorities.

     6.13 Indebtedness . Except as permitted under Section 7.4, the Borrower does not have any Indebtedness. All Funded Debt outstanding as of the Closing Date is accurately reflected on Exhibit B.

     6.14 Government Regulation . The Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935 or the Federal Power Act, each as amended. In addition, the Borrower is not (i) an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such a company, or (ii) a “holding company,” or a “Subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or of a “Subsidiary” or a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

     6.15 Environmental Matters .

     (a) Except as would not result or be reasonably expected to result in a Material Adverse Effect:

     (i) Except as disclosed on Exhibit J attached hereto and made a part hereof, neither the Borrower, the General Partner, any other member of the Combined Group nor, to the knowledge of the Borrower any Portfolio Investment Entity, has received any written notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding Hazardous Materials or compliance with Environmental Laws with regard to any of the Portfolio Assets nor does the Borrower have knowledge that any such notice is being threatened.

     (ii) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower, the General Partner, any other member of the Combined Group, or, to the knowledge of the Borrower, any Portfolio Investment Entity is or will be named as a responsible party, nor are there any consent or other decrees, remediation orders, administrative or other orders, or other similar administrative or judicial requirements outstanding under any Environmental Law with respect to the Borrower, the General Partner, any other member of the Combined Group, or, to the knowledge of the Borrower, any Portfolio Investment Entity or any of the Portfolio Assets.

     (iii) Neither the Borrower, the General Partner, any other member of the Combined Group, nor, to the knowledge of the Borrower, any Portfolio Investment Entity, has assumed any liability of any Person under any Environmental Law.

     6.16 Portfolio Assets . Set forth on Exhibit B is a complete and accurate list of all Portfolio Assets existing as of the Closing Date, together with the ownership interest (both direct and indirect) of the Borrower therein, and together with a list of the existing documents evidencing Funded Debt currently encumbering the same (which sets forth the names of the parties, the dates of such documents, and the amount of Funded Debt relating to each such

document) (collectively, the “Funded Debt Documents”). Except for mandatory prepayments of Funded Debt upon the sale of Portfolio Assets, upon the maturity (whether at the stated maturity date or upon acceleration) of any Funded Debt or in connection with a default continuing beyond any applicable notice and/or cure period under the Funded Debt Documents, there are no restrictions or limitations (whether by contract or otherwise) on payments of dividends, returns of capital or any other forms of distributions from any Portfolio Investment Entity or any member of the Combined Group to the Borrower or any other member of the Combined Group.

     6.17 Full Disclosure . All information heretofore furnished by or on behalf of the Borrower to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by or on behalf of the Borrower to the Administrative Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is stated (except to the extent any such information is subsequently supplemented or corrected by information provided by or on behalf of Borrower); provided, however, that where such information is the work product of a third party that is unrelated to Borrower, such information is and will be, to the best of Borrower’s knowledge, true and accurate in all material respects on the date as of which information is stated. To the best of its knowledge, the Borrower has disclosed to the Lenders in writing any and all facts which have had or might have in the future a Material Adverse Effect.

     6.18 Subsidiaries . Borrower has no Subsidiaries other than those listed on Exhibit B and no Lien other than Permitted Liens exists on Borrower’s interests in its Subsidiaries.

     6.19 No Material Adverse Contracts, Etc . Neither the Borrower, the General Partner, any other member of the Combined Group nor, to the knowledge of the Borrower, any Portfolio Investment Entity, is subject to any charter, corporate, partnership or other legal restriction, or any judgment, decree, order, rule or regulation, or party to any contract or agreement that has had or could reasonably be expected in the future to have a Material Adverse Effect.

     6.20 Compliance With Other Instruments, Laws, Etc. . Neither the Borrower, the General Partner, any other member of the Combined Group nor, to the knowledge of the Borrower, any Portfolio Investment Entity, is in violation of any provision of its partnership agreement, charter or other organizational document, as the case may be, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect.

     6.21 Solvency . Each member of the Combined Group, the General Partner, and to the knowledge of the Borrower, each Portfolio Investment Entity, is Solvent.

     6.22 REIT Status . The General Partner was organized and has operated in conformity with the requirements for qualification and taxation as a REIT for each of its taxable years beginning with the year ended December 31, 2004, and its current or anticipated organization and method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT.

     6.23 Patriot Act . Neither Borrower, the General Partner, any other member of the Combined Group nor, to the knowledge of the Borrower, any Portfolio Investment Entity, is or shall become a person with whom Lender is restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury of the United States of America (including, without limitation, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under Executive Order 13324 — Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, or any similar Executive Order or other similar Legal Requirement, and neither Borrower, the General Partner, any other member of the Combined Group nor, to the knowledge of the Borrower, any Portfolio Investment Entity is knowingly engaged or shall knowingly engage in any dealings or transactions or otherwise be associated with such persons.

7. COVENANTS.

     Borrower covenants and agrees that from the date hereof and so long as any indebtedness remains unpaid hereunder, or any of the Loans or other obligations remain outstanding, as follows:

     7.1 Notices . Borrower shall, with reasonable promptness, but in all events within ten (10) days after it has actual knowledge thereof, notify Administrative Agent in writing of the occurrence of any act, event or condition which Borrower, in its good faith determination, believes constitutes a Default or Event of Default under any of the Credit Documents, specifying the nature and existence thereof. Such notification shall include a written statement of any remedial or curative actions which Borrower proposes to undertake to cure or remedy such Default or Event of Default.

     7.2 Financial Statements and Reports . Borrower shall furnish or cause to be furnished to Administrative Agent from time to time, the following financial statements and reports and other information, all in form, manner of presentation and substance reasonably acceptable to Administrative Agent:

7.2.1 Annual Statements . Within ninety (90) days following the end of each fiscal year, a consolidated balance sheet, an income statement, a statement of changes in shareholders’ equity and a statement of cash flows of General Partner as of the end of such fiscal year, setting forth in comparative form consolidated figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by one of the following accounting firms: Deloitte & Touche LLP, Ernst & Young LLP, KPMG or PricewaterhouseCoopers (or by another independent certified public accounting firm of recognized national standing reasonably acceptable to the Administrative Agent), and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP and shall not be limited as to the scope of the audit or qualified as to the status of General Partner or the Borrower as a going concern or otherwise;

7.2.2 Periodic Statements . Within forty-five (45) days following the end of each fiscal quarter of the Borrower (other than the fourth fiscal quarter, in which

case ninety (90) days after the end thereof) an unaudited consolidated balance sheet, income statement and statement of changes in shareholders’ equity of the General Partner as of the end of such fiscal quarter, in each case setting forth in comparative form consolidated figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Administrative Agent (provided, however, Administrative Agent hereby confirms that the form and detail of such financial information, as well as any financial information submitted by Borrower pursuant to Section 7.2.1 above, shall be deemed to be acceptable if it is in substantially the same form and detail as the financial information submitted by Borrower to Administrative Agent prior to the date hereof), and accompanied by a certificate of an authorized officer of Borrower to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the General Partner and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end adjustments.

7.2.3 Data Requested . Within a reasonable period of time after a request from Administrative Agent, such other financial data or information as Administrative Agent may reasonably request with respect to any of the Portfolio Assets or members of the Combined Group including, without limitation, operating statements, budgets, mortgage information, rent rolls, and lease status/expiration reports.

7.2.4 Tax Returns . Within a reasonable period of time after a request from Administrative Agent, complete copies of all federal and state tax returns and supporting schedules of Borrower, and, to the extent applicable each other member of the Combined Group.

7.2.5 Pro Forma . Calculation of Certain Financial Covenants. Within forty-five (45) days after the end of each fiscal quarter Borrower shall deliver a pro forma calculation of the financial covenants contained in Section 7.3.

7.2.6 Officer’s Certificate . (A) At the time of delivery of the financial statements provided for in Sections 7.2.1 and 7.2.2 above, (B) at least fourteen (14) days prior to any sale, disposition or other transfer of a Portfolio Asset (or any material part thereof, other than the leasing of space in Portfolio Assets to tenants in the ordinary course of business), and (C) at the time Borrower requests a new Loan hereunder or repays any principal amount outstanding under the Facility, Borrower shall deliver a certificate of an authorized officer of Borrower substantially in the form of Exhibit G , (i) demonstrating compliance with the financial covenants contained in Section 7.3 by calculation thereof as of the end of each such fiscal period or after giving effect to such transfer, borrowing or repayment (together with such supporting documentation as Administrative Agent may reasonably require), (ii) calculating the Applicable Margin as of the end of each such fiscal period or after giving effect to such transfer, borrowing or repayment, and (iii) stating that no Default or Event of Default exists or will exist

as a result of such transfer, borrowing or repayment, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Borrower proposes to take with respect thereto. In the event that any such certificate indicates a violation of any of the financial covenants in Section 7.3, then Borrower shall, as applicable, contemporaneously with the delivery of any such certificate make a principal payment by an amount necessary to achieve compliance with such financial covenants or if caused by a transfer of a Portfolio Asset make such a principal payment contemporaneously with the closing of such transfer.

7.2.7 Information to Owners . To the extent not otherwise provided hereunder, promptly upon the mailing thereof to the owners in Borrower generally, copies of all financial statements and reports so mailed.

7.2.8 Portfolio Investments . As soon as available, and in any event within sixty (60) days after the close of each fiscal quarter of Borrower, a report in a form reasonably satisfactory to Administrative Agent describing (i) each Portfolio Investment made during such fiscal quarter and (ii) any transfer of any Portfolio Investment during such fiscal quarter to another legal entity in which Borrower has acquired a direct or indirect interest. Such report shall be accompanied by a Direction Letter for each such Portfolio Investment made in a Portfolio Investment Entity that is not controlled by Borrower or affiliates of Borrower and shall include a description of any such Portfolio Investment, and such other information as reasonably requested by Administrative Agent. Except as provided in Section 3.2(e), each such Portfolio Investment shall, subject to any Permitted Liens, automatically become a part of the Collateral hereunder and shall be subject to the terms and provisions of this Agreement and any other applicable Credit Document, including without limitation Section 3.2 of this Agreement.

7.2.9 Auditor’s Reports . Promptly upon receipt thereof, a copy of any other report or “management letter” submitted by independent accountants to the Borrower in connection with any annual, interim or special audit of the books of the Borrower.

7.2.10 Environmental Reports . Promptly upon transmission thereof by Borrower or any other member of the Combined Group, copies of any filings and registrations with, and reports to, the United States Environmental Protection Agency, or any state or local agency responsible for environmental matters, the United States Occupational Health and Safety Administration, or any state or local agency responsible for health and safety matters, or any successor agencies or authorities concerning environmental, health or safety matters pertaining to any of the Assets.

7.2.11 Notice of Default or Litigation . Upon the Borrower obtaining knowledge thereof, it will give notice to the Administrative Agent promptly, but in any event within five (5) Business Days of obtaining such knowledge, of the occurrence of any of the following with respect to the Borrower, the General Partner, any

Portfolio Investment Entity or any other member of the Combined Group: (i) any development in the business or affairs of any such Person that has resulted in, or that Borrower reasonably believes may result in, a Material Adverse Effect, (ii) the pendency or commencement of any litigation, arbitration or governmental proceeding against any such Person in which damages are sought or environmental remediation demanded which could reasonably be expected to be adversely determined and which, if adversely determined, could be expected to have a Material Adverse Effect, (iii) any levy of an attachment, execution or other process against its assets which could reasonably be expected to have a Material Adverse Effect, (iv) the receipt of any notice alleging the occurrence of an event or condition which shall constitute a default or event of default under any other agreement for borrowed money, or (v) the institution of any proceedings against, or the receipt of written notice of potential liability or responsibility for any violation, or alleged violation which could reasonably be expected to be adversely determined, of any federal, state or local law, rule or regulation, including but not limited to, Environmental Laws, the violation of which could reasonably be expected to have a Material Adverse Effect.

7.2.12 Reserved. 7.2.13 Debt . (i) At least ten (10) Business Days prior to the incurrence thereof, or (ii) in the case of any Portfolio Asset held by a Person other than a member of the Combined Group, within five (5) Business Days after obtaining knowledge of the incurrence thereof if not within the knowledge of the Borrower prior to such incurrence, notice to Administrative Agent specifying the amount and nature of any additional (i.e., other than the Funded Debt and the Funded Debt Documents existing as of the date hereof and reflected on Exhibit B hereto) Indebtedness, encumbrances, mortgages or other security interests (other than Permitted Liens) affecting any of the Portfolio Assets or any material property or Investment of Borrower or any other member of the Combined Group.

7.2.14 Other Information . With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of the Borrower or any other member of the Combined Group as the Administrative Agent may reasonably request.

     7.3 Financial Covenants .

     (a)  Consolidated Leverage Ratio . The Borrower will not permit Funded Debt (including, without limitation, the outstanding balance under the subject Facility) to exceed seventy percent (70%) of the Total Asset Value. This covenant shall be tested quarterly at the end of each calendar quarter, at the time each new Loan is made, and in connection with the delivery of an officer’s certificate pursuant to Section 7.2.6.

     (b)  Minimum Interest Coverage Ratio . The ratio of the EBITDA to the Interest Expense shall be greater than 1.65 to 1.00. This covenant shall be tested quarterly at the end of each calendar quarter, at the time of each Loan, and in connection with the delivery of an officer’s certificate pursuant to Section 7.2.6, in each case with respect to the prior two (2) fiscal

quarters most recently ended, annualized; provided that pro forma financial information shall be provided for each fiscal quarter for which actual results are not then available.

     (c)  Minimum Tangible Net Worth . Borrower shall maintain a Tangible Net Worth in excess of Eighty Million Dollars ($80,000,000.00) plus seventy five percent (75%) of the proceeds of any equity offerings, contributions or sales of treasury stock received by the Borrower after the Closing Date. This covenant shall be tested quarterly at the end of each calendar quarter, at the time of each Loan, and in connection with the delivery of an officer’s certificate pursuant to Section 7.2.6.

     (d)  Minimum Fixed Charge Covenant . The ratio of EBITDA to Fixed Charge shall be greater than 1.50 to 1.0. This covenant shall be tested quarterly at the end of each calendar quarter, at the time of each Loan, and in connection with the delivery of an officer’s certificate pursuant to Section 7.2.6, in each case with respect to the prior two (2) fiscal quarters most recently ended, annualized; provided that pro forma financial information shall be provided for each fiscal quarter for which actual results are not then available.

     7.4 Indebtedness and Restrictions on Liens, Transfers and Additional Debt . The Borrower shall not, without the prior written consent of the Administrative Agent and the Required Lenders (which may be withheld in their sole discretion):

     (a) incur any Indebtedness (other than the Indebtedness arising under this Agreement and the other Credit Documents) that is recourse to Borrower (excepting customary environmental and other indemnification obligations in respect of Indebtedness of Persons in which Borrower has an interest which is not otherwise recourse to Borrower);

     (b) provide any completion or other guarantees either directly or indirectly (including, without limitation, through a joint venture) in excess of $5,000,000.00 in the aggregate; and

     (c) [Reserved]

     (d) further encumber the Portfolio Investments; provided that the foregoing shall not limit the right of Borrower to cause the refinancing of any Funded Debt on such terms and conditions as Borrower may direct (including the granting of liens on Portfolio Investments and the granting of direct and indirect interests therein, or Borrower’s becoming subject to an agreement prohibiting or otherwise restricting the creation of liens on Portfolio Investments) so long as such refinancing does not cause the violation of any of the covenants set forth in Section 7.3 of this Agreement. In connection with any such refinancing, Borrower covenants to use commercially reasonable efforts to maintain in full force and effect all existing pledges and assignments of economic interests granted with respect to Borrower’s interests in Portfolio Investments by Borrower pursuant to this Agreement and the other Credit Documents to which it is a party. In the event such refinancing requires the release of Lenders’ security interests in all or part of any Portfolio Investment that is the subject of the refinancing

permitted by this Section 7.4(d), then Administrative Agent is authorized and shall be obligated to release such Portfolio Investment from all pledges thereof and security interests therein created by the Credit Documents; provided however that the Administrative Agent may refuse to release any more than 51% of any such Portfolio Investment from any such pledge or security interest, unless Administrative Agent has given its consent to such refinancing, such consent not to be unreasonably withheld or delayed. If such refinancing will result in Borrower’s noncompliance with the covenants set forth in Section 7.3 of this Agreement, the outstanding aggregate principal amount of the Loans shall be reduced by the amount necessary to maintain compliance with Borrower’s covenants contained in Section 7.3. Within three (3) Business Days after receipt of a written request from Borrower and provided Borrower has satisfied the foregoing reduction requirement, if applicable, Administrative Agent on behalf of Lenders shall execute such releases of Lenders’ security interests in the Portfolio Investments that are the subject of a refinancing permitted by this Section 7.4(d) as Borrower reasonably requests in connection with such refinancing .

       (e) Except as specifically set forth in Section 7.4(d) and Section 7.5 which provide instances in which Administrative Agent’s consent is required, nothing in this Agreement or any other Credit Document shall, and Borrower is hereby specifically permitted to and to permit or cause any Subsidiary or Portfolio Investment Entity to, mortgage, grant securities interests in, and otherwise encumber any Portfolio Asset and the direct and indirect interests of any Portfolio Entity in any Portfolio Asset.

     7.5 Liens/Negative Pledges . Except as permitted in Section 7.4(d) hereof, the Borrower will not either (i) contract, create, incur, assume or permit to exist any additional Lien (other than Permitted Liens) with respect to any of the Portfolio Investments, whether now owned or hereafter acquired, or (ii) enter into, assume or become subject to any agreement (other than this Agreement, the other Credit Documents and the Funded Debt Documents listed and described on Exhibit B ) (A) prohibiting or otherwise restricting the creation or assumption of any Lien upon any of the Portfolio Investments or (B) requiring the Borrower to grant a Lien to a Person in the event Borrower grants a Lien on a Portfolio Investment to another Person.

     7.6 Nature of Business . The Borrower will not alter in a material way the character or conduct of its business from that conducted as of the Closing Date which is and shall be limited to the business permitted by the Partnership Agreement as of the Closing Date; provided, however, this Section 7.6 shall not be construed to prevent the Borrower from making procedural changes in the manner in which Borrower conducts its ordinary business operations.

7.7 Limitations on Certain Transactions

     (a) Borrower shall not dissolve, terminate or liquidate, nor merge or consolidate with any other Person; and

(b) [Reserved]

     (c) Borrower will not become party to, nor will Borrower permit any other member of the Combined Group to become a party to, any document, agreement, or instrument or subject to any other obligation or any charter or corporate or partnership restriction, as the case may be, from and after the date hereof, which individually or in the aggregate, would have a Material Adverse Effect.

     7.8 Investments . Borrower shall not make any Investment which is not a Permitted Investment.

     7.9 Dividends and Distributions . So long as no Event of Default has occurred and is continuing or would be directly or indirectly caused as a result thereof, the Borrower may declare and make any dividends or distributions as permitted under the Partnership Agreement; provided, however, that the Borrower may while an Event of Default is continuing make distributions or dividends but only to the extent (after taking into account all available funds of the Borrower from all other sources) required in order to enable the General Partner to continue to qualify as a REIT.

     7.10 Transactions with Portfolio Investments . Borrower will not, nor will it permit any of its Subsidiaries to, enter into any transaction or series of transactions with any partner or any employee of any member of the Combined Group or any Portfolio Investment Entity other than on terms and conditions substantially as favorable to such Person as would be obtainable by it in a comparable arm’s length transaction with a Person other than any partner, employee or Portfolio Investment Entity, unless such transaction or series of transactions, would not or could not reasonably be expected to have, in the aggregate, a Material Adverse Effect, or otherwise be materially detrimental to the economic interests of the Combined Group taken as a whole.

     7.11 Amendments . To the extent that any amendment, modification, supplement, waiver or termination of any provisions of the Partnership Agreement, or other governing or organizational document of Borrower or any other member of the Combined Group would permit proceeds of the Loans to be used in a manner inconsistent with such governing or organizational document in effect at the Closing Date, the Borrower agrees that it shall not, and shall not permit any other member of the Combined Group to, apply proceeds of the Loans in a manner inconsistent with what was permitted under the governing or organizational documents in effect on the Closing Date.

     7.12 ERISA . The Borrower will not establish any Plan.

     7.13 Place for Records: Inspection . Borrower shall maintain all of its business records at the address specified at the beginning of this Agreement. Upon reasonable prior notice and at reasonable times during normal business hours, Administrative Agent shall have the right (through such agents or consultants as Administrative Agent may designate) to make copies of and abstracts from Borrower’s books of account, correspondence and other records and to discuss its financial and other affairs with any of its investors and any accountants hired by Borrower as well as to visit and inspect the Assets, it being agreed that Administrative Agent and each of the Lenders shall use reasonable efforts to not divulge confidential information obtained from such examination to others except in connection with Legal Requirements and in connection with administering the Facility, enforcing its rights and remedies under the Credit

Documents and in the conduct, operation and regulation of its banking and lending business (which may include, without limitation, the transfer of the Facility or of participation interests therein provided that any such transferee or participant agrees to maintain the confidentiality thereof as required by this Agreement). Any assignee or transferee of the Facility or any holder of a participation interest in the Facility shall be entitled to deal with such information in the same manner and in connection with any subsequent transfer of its interest in the Facility or of further participation interests therein.

     7.14 Costs and Expenses . Borrower shall pay all costs and expenses (excluding salaries or wages of officers, directors and employees of Administrative Agent or any Lender and overhead expenses charged by or allocated to Administrative Agent or any Lender) reasonably incurred by Administrative Agent in connection with the implementation of the Facility and the enforcement of Administrative Agent’s and Lenders’ rights under the Credit Documents, including, without limitation, reasonable third party costs and expenses, including reasonable legal fees and disbursements, appraisal fees (in accordance with, and subject to the terms of, this Agreement), inspection fees, plan review fees, travel costs, fees and out-of-pocket costs of independent engineers and consultants. Borrower’s obligations to pay such costs and expenses shall include, without limitation, all reasonable attorneys’ fees and other costs and expenses reasonably incurred for preparing and conducting litigation or dispute resolution arising from any breach by Borrower of any covenant, warranty, representation or agreement under any Credit Document to which a member of the Combined Group is a party.

     7.15 Compliance with Legal Requirements . Borrower shall comply, and shall cause each other member of the Combined Group to comply, in all material respects with all Legal Requirements. In furtherance of the foregoing and not in limitation thereof, Borrower hereby agrees to provide the Lender with any additional information that the Lender reasonably requests from time to time in order to ensure compliance by Borrower with all applicable Anti-Money Laundering Laws. As used herein, the term “Anti-Money Laundering Laws” shall mean the USA Patriot Act of 2001, the Bank Secrecy Act, and Executive Order 13324 – Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, and any similar Legal Requirements..

     7.16 MAI Appraisals . Promptly upon receipt thereof, Borrower shall deliver to Administrative Agent each appraisal of any of the Portfolio Assets available to Borrower. During the existence and continuation of an Event of Default, if the most recent MAI Appraisal for any Portfolio Asset is older than one (1) year, then Borrower shall upon Administrative Agent’s request therefor promptly use its best efforts to obtain a current MAI Appraisal for such Portfolio Asset at Borrower’s sole cost and expense. Administrative Agent may require Borrower to use its best efforts to obtain updated MAI Appraisals for Portfolio Assets which Borrower has previously delivered MAI Appraisals to Administrative Agent, at Borrower’s sole cost and expense , but if an updated MAI Appraisal is requested for any Portfolio Asset for which an MAI Appraisal is available that is less than one (1) year old, the Administrative Agent and the Lenders shall pay the costs of such requested appraisal.

     7.17 Title to Properties . The Borrower and each other member of the Combined Group has good title to all of its respective properties, assets and rights of every name and nature purported to be owned by it.

     7.18 Insurance . Borrower will, and will cause the other members of the Combined Group to, maintain with respect to their respective properties, with financially sound and reputable insurers, insurance with respect to such properties and its business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent.

     7.19 Taxes . The Borrower will, and will cause each of the other members of the Combined Group to, pay or cause to be paid taxes, assessments and other governmental charges payable by it or as to such Person’s property and file all returns and reports relating thereto before the same become delinquent including, without limitation, upon the income or profits therefrom of any such Person. Promptly upon request by the Administrative Agent, the Borrower will provide evidence of the payment of such taxes, assessments and other governmental charges in the form of receipted tax bills or other form reasonably acceptable to the Administrative Agent, or evidence of the existence of applicable contests as permitted herein.

     7.20 Compliance with Contracts, Licenses, and Permits . The Borrower will comply with, and will cause each other member of the Combined Group to comply with (a) the provisions of its partnership agreement or corporate charter and other organizational documents, as applicable, (b) all material agreements and instruments to which it is a party or by which it or any of its properties may be bound, and (c) all applicable decrees, orders, and judgments, if the failure to comply therewith will, either individually or in the aggregate, result in a Material Adverse Effect.

     7.21 Replacement Documentation . Upon receipt of an affidavit of an officer of Administrative Agent or any Lender as to the loss, theft, destruction or mutilation of a Note or any other Credit Document, Borrower will issue, in lieu thereof, a replacement Note or other Credit Document in the same principal amount thereof and otherwise of like tenor.

     7.22 Perfected LP Interest Covenants . Borrower shall at all times comply with the following covenants with respect to each of the Perfected LP Interests: (i) Borrower shall have full right, title and interest to each Perfected LP Interest, subject to Permitted Liens and such other exceptions set forth herein or in the Pledge Agreement or other Credit Documents; (ii) Borrower shall not encumber any Perfected LP Interest except as permitted hereunder (including as permitted by Section 7.4(d)) or under any Security Document; (iii) Borrower shall comply with all applicable Legal Requirements with respect to each Perfected LP Interest; (iv) Borrower shall promptly deliver to Administrative Agent copies of all notices given or received with respect to each Perfected LP Interest (other than routine correspondence); and (v) Borrower shall comply with all covenants contained in the Security Documents that are in effect with respect to each Perfected LP Interest.

     7.23 Existence of the Borrower; Maintenance of REIT Status . The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its existence as a Delaware limited partnership. Borrower will do all things commercially reasonable and consistent with the Partnership Agreement, to enable the General Partner to at all times maintain the General Partner’s status as a REIT and not take any action which could lead to the General Partner’s disqualification as a REIT.

     7.24 Refinance of California Property . Borrower shall apply the proceeds received by it from any mortgage or other financing of the California Property (other than Loans under the Facility) to the reduction of the outstanding principal balance of the Loans.

8. SPECIAL PROVISIONS.

     8.1 Right to Contest.

8.1.1 Taxes and Claims by Third Parties. Notwithstanding anything in this Agreement to the contrary, it is agreed that any tax, assessment, charge, levy, claim or obligation to a third party (expressly excluding an obligation to make payments to the Lenders created under the Credit Documents) need not be paid while the validity or amount thereof shall be contested currently, diligently and in good faith by appropriate proceedings and if Borrower or the other relevant member of the Combined Group shall have adequate unencumbered (except in favor of Administrative Agent, on behalf of the Lenders or under the Funded Debt Documents, as applicable) cash reserves with respect thereto and provided that Borrower or the other relevant member of the Combined Group shall pay all taxes, assessments, charges, levies or obligations immediately upon the commencement of proceedings to enforce any lien which may have attached as security therefor, unless such proceeding is stayed by proper court order pending the outcome of such contest.

8.1.2 Legal Requirements . Any member of the Combined Group may contest any claim, demand, levy or assessment under any Legal Requirements by any person or entity if: (i) the contest is based upon a material question of law or fact raised by such Person in good faith; (ii) the contest is properly commenced and thereafter diligently pursued; (iii) the contest will not materially impair the ability to ultimately comply with the contested Legal Requirement should the contest not be successful; (iv) Borrower demonstrates to Administrative Agent’s reasonable satisfaction that such Person has the financial capability to undertake and pay for such contest and any corrective or remedial action then or thereafter reasonably likely to be necessary; (v) there is no reason to believe that the contest will not be resolved prior to the Maturity Date; and (vi) no Default or Event of Default exists.

     8.2 Borrower Fully Liable . Borrower shall be fully liable for the Facility, each of the Loans and all other Borrower Obligations.

9. EVENTS OF DEFAULT.

     The following provisions deal with Default, Events of Default, notice, grace and cure periods, and certain rights of Administrative Agent and the Lenders following an Event of Default.

     9.1 Default and Events of Default . The term “Default” as used herein or in any of the other Credit Documents shall mean an Event of Default, or any fact or circumstance which constitutes, or upon the lapse of time, or giving of notice, or both, could constitute, an Event of Default. Each of the following events, unless cured within any applicable grace or notice period

set forth or referred to below in this Section 9.1, or in Section 9.2, shall constitute an “Event of Default”:

9.1.1 Generally . A default by Borrower in the performance of any term, provision or condition of this Agreement to be performed by Borrower, or a breach, or other failure to satisfy, any other term, provision, condition, covenant or warranty under this Agreement and such default remains uncured beyond any applicable specific grace or notice period provided for in this Agreement, or as set forth in Section 9.2. below.

9.1.2 Note and Other Credit Documents . A default by Borrower in the performance of or a breach, or other failure to satisfy, any term, provision, condition, covenant, or warranty under any Note or any other Credit Document, regardless of whether the then undisbursed portion of the Maximum Loan Amount is sufficient to cover any payment of money required thereby, and the specific grace or notice period, if any, allowed for the default in question shall have expired without such default having been cured; or any Credit Document shall fail to be in full force and effect or to give the Administrative Agent and Lenders the rights, powers and privileges purported to be created thereby (except insofar as such rights, powers and privileges are contrary to applicable public policy and except to the extent such failure is due to the gross negligence or willful misconduct of Administrative Agent or a Lender).

9.1.3 Financial Status and Insolvency . (A) Borrower shall: (i) admit in writing its inability to pay its debts generally as they become due; (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act; (iii) make an assignment for the benefit of creditors; (iv) consent to, or acquiesce in, the appointment of a receiver, liquidator or trustee of itself or of the whole or any substantial part of its assets; (v) file a petition or answer seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Federal Bankruptcy laws or any other applicable law; (vi) have a court of competent jurisdiction enter an order, judgment or decree appointing a receiver, liquidator or trustee of Borrower, or of the whole or any substantial part of the assets of Borrower, and such order, judgment or decree shall remain unvacated or not set aside or unstayed for one hundred twenty (120) days; (vii) have a petition filed against it seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Federal Bankruptcy laws or any other applicable law and such petition shall remain undismissed for one hundred twenty (120) days; or (viii) have, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction assume custody or control of Borrower or of the whole or any substantial part of its assets and such custody or control shall remain unterminated or unstayed for one hundred twenty (120) days; or (B) any such event shall occur with respect to the General Partner of Borrower.

9.1.4 Breach of Representation or Warranty . Any representation or warranty made by Borrower herein or in any other certificate, instrument or document

relating to the Facility required to be delivered pursuant to any Credit Document shall at the time made or deemed to have been remade or renewed be false or misleading in any material respect, or any warranty shall be materially breached.

9.1.5 Defaults under Other Agreements . With respect to any Indebtedness (other than Indebtedness outstanding under this Agreement) of the Borrower or any other member of the Combined Group or Portfolio Investment Entity, (A) such Person shall (1) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness and such Indebtedness is accelerated, or (2) the occurrence and continuance of a default in the observance or performance relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required), any such Indebtedness to become due prior to its stated maturity; and (B) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly sche