MASTER CREDIT FACILITY AGREEMENT

Exhibit 10.35

EXECUTION VERSION

MASTER CREDIT FACILITY AGREEMENT

BY AND AMONG

THE PARTIES LISTED ON SCHEDULE I ATTACHED HERETO

AND

RED MORTGAGE CAPITAL, INC.

DATED AS OF

DECEMBER 31, 2008

TABLE OF CONTENTS

EXHIBITS

MASTER CREDIT FACILITY AGREEMENT

THIS MASTER CREDIT FACILITY AGREEMENT is made as of the 31st day of December, 2008, by and among (i) the parties listed on Schedule I attached hereto, each as a Borrower hereunder; (ii) RED MORTGAGE CAPITAL, INC., an Ohio corporation; and (iii) EDUCATION REALTY TRUST, INC., a Maryland corporation, and EDUCATION REALTY OPERATING PARTNERSHIP, LP, a Delaware limited partnership, as guarantor.

RECITALS

A. Borrower owns one (1) or more Rental Properties (unless otherwise defined or the context clearly indicates otherwise, capitalized terms shall have the meanings ascribed to such terms in Appendix I of this Agreement) as more particularly described in Exhibit A to this Agreement.

B. Borrower has requested that Lender establish a $222,411,000 Credit Facility in favor of Borrower, comprised initially of (a) a $74,550,000 Variable Facility, of which $49,874,000 will be advanced initially, all or part of which can be converted to a Fixed Facility in accordance with, and subject to, the terms and conditions of this Agreement and (b) a $147,861,000 Fixed Facility.

C. To secure the obligations of Borrower under this Agreement and the other Loan Documents issued in connection with the Credit Facility, Borrower shall create a Collateral Pool in favor of Lender. The Collateral Pool shall be comprised of (i) the Rental Properties listed on Exhibit A and (ii) any other collateral pledged to Lender from time to time by Borrower pursuant to this Agreement or any other Loan Documents.

D. Each Note and Security Document related to the Mortgaged Properties comprising the Collateral Pool shall be cross-defaulted ( i.e. , a default under any Note, Security Document relating to the Collateral Pool and under this Agreement, shall constitute a default under each Note, Security Document and this Agreement related to the Mortgaged Properties comprising the Collateral Pool) and cross-collateralized ( i.e. , each Security Instrument related to the Mortgaged Properties within the Collateral Pool shall secure all of Borrower’s obligations under this Agreement and the other Loan Documents) and it is the intent of the parties to this Agreement that, after an Event of Default, Lender may accelerate any Note without needing to accelerate any other Note and that in the exercise of its rights and remedies under the Loan Documents, Lender may, except as provided in this Agreement, exercise and perfect any and all of its rights in and under the Loan Documents with regard to any Mortgaged Property without needing to exercise and perfect its rights and remedies with respect to any other Mortgaged Property and that any such exercise shall be without regard to the Allocable Facility Amount assigned to such Mortgaged Property and that Lender may recover an amount equal to the full amount outstanding in respect of any of the Notes in connection with such exercise and any such amount shall be applied as determined by Lender pursuant to the terms of this Agreement, the Notes and the other Loan Documents.

E. Subject to the terms, conditions and limitations of this Agreement, Lender has agreed to establish the Credit Facility.

NOW, THEREFORE, Borrower, Lender, and Guarantor in consideration of the mutual promises and agreements contained in this Agreement, hereby agree as follows:

ARTICLE 1
THE COMMITMENT

Section 1.01. The Commitment.

Subject to the terms, conditions and limitations of this Agreement:

(a)  Variable Facility Commitment .

(i) Subject to the provisions of subsection (a)(ii) below, Lender agrees to make Variable DMBS Advances and Variable Structured ARM Advances to Borrower from time to time during the Variable Facility Availability Period in accordance with the terms and provisions of this Agreement. The aggregate principal balance of the Variable Advances Outstanding at any time shall not exceed the Variable Facility Commitment. No Variable DMBS Advances shall be made, or be permitted to remain Outstanding unless the aggregate of Variable DMBS Advances Outstanding is at least $25,000,000. The borrowing of a Variable Advance shall permanently reduce the Variable Facility Commitment by the original principal amount of such Variable Advance. Borrower may not re-borrow any part of a Variable Advance which it has previously borrowed and repaid. Except as set forth in Section 2.06 of this Agreement, no Variable Advances shall be made as a result of increases in the Valuation of any Mortgaged Property. Any portion of the Variable Facility Commitment that is not advanced on the Initial Closing Date and which Lender determines may be advanced to Borrower, is available to be advanced to Borrower within ninety (90) days of the Initial Closing Date.

(ii) Limitation on Variable DMBS Advances. Fannie Mae, in its sole discretion, shall determine whether a Variable DMBS Advance execution is available to Borrower in connection with each proposed Variable DMBS Advance. The limitations set forth in this Section 1.01(a)(ii) do not apply to Rollover Variable Advances.

(b)  Fixed Facility Commitment . Lender agrees to make Fixed Advances to Borrower from time to time during the Fixed Facility Availability Period. The aggregate original principal of the Fixed Advances shall not exceed the Fixed Facility Commitment. The borrowing of a Fixed Advance shall permanently reduce the Fixed Facility Commitment by the original principal amount of such Fixed Advance. Borrower may not re-borrow any part of a Fixed Advance which it has previously borrowed and repaid. Except as set forth in Section 2.06 , no Fixed Advances shall be made as a result of increases in the Valuation of any Mortgaged Property. Any portion of the Fixed Facility Commitment that is not advanced on the Initial Closing Date and which Lender determines may be advanced to Borrower, is available to be advanced to Borrower within ninety (90) days of the Initial Closing Date.

Section 1.02. Requests for Advances .

Borrower shall request an Advance by giving Lender an Advance Request in accordance with Section 2.04 . The Advance Request shall indicate whether the Request is for a Fixed Advance, a Variable DMBS Advance, a Variable Structured ARM Advance or more than one type of Advance.

Section 1.03. Maturity Date of Advances; Amortization .

(a)  Variable Advances; Amortization . The maturity date of each Variable Advance shall be the earlier of (i) the Variable Facility Termination Date, (ii) the maturity date of the applicable outstanding DMBS (with respect to a Variable DMBS Advance), or (iii) such other maturity date referenced in any Variable Facility Note. Subject to the terms of the preceding sentence, the maturity date of any Variable Advance shall be specified by Borrower for such Variable Advance, provided that such maturity date shall be no earlier than the date five (5) years after the Closing Date of such Variable Advance and no later than the date ten (10) years after the Closing Date of such Variable Advance, provided that no maturity date shall exceed the Variable Facility Termination Date. Not less than thirty (30) Business Days prior to the maturity date of the applicable outstanding DMBS, the relevant Borrower may request that the Variable DMBS Advance backing the outstanding DMBS be (1) refinanced with a Rollover Variable Advance through the sale of a new DMBS using the DMBS Refinance Request Form (in the form attached to the applicable Variable Facility Note) which, shall take effect on the maturity date of the outstanding DMBS and shall be funded by the sale of a single DMBS, in an amount sufficient to fund the aggregate outstanding principal balance of such Variable DMBS Advance or (2) converted to a Fixed Advance which, shall take effect on the maturity date of the outstanding DMBS. No Borrower may refinance any Variable DMBS Advance on or after the Variable Facility Termination Date. The DMBS Issue Date shall be the first day of the month in which the DMBS is issued, and the maturity date of the DMBS funding each Variable DMBS Advance shall be specified by Borrower in its Advance Request, which date shall be three, six or nine full months after the DMBS Issue Date; provided, however, in connection with a release, an addition or a substitution of a Mortgaged Property and subject to Borrower’s payment to Lender of an administrative fee of $2,500, the maturity date of the DMBS funding a Variable DMBS Advance may be one or two full months after the DMBS Issue Date.

For these purposes, a year shall be deemed to consist of twelve (12) 30-day months. For example, the date which completes three full months after September 1 shall be December 1; and the date which completes three full months after January 1 shall be April 1. The initial Variable Advance will require amortization calculated over the Amortization Period. Any Future Advances that are Variable Advances may be payable interest only, in Lender’s sole and absolute discretion.

(b)  Fixed Advances; Amortization . The maturity date of any Fixed Advance shall be specified by Borrower for such Fixed Advance, provided that such maturity date shall be no earlier than the date five (5) years after the Closing Date of such Fixed Advance and no later than the date ten (10) years after the Closing Date of such Fixed Advance, provided that no maturity date shall exceed the Fifteenth Anniversary. The initial Fixed Advance will require amortization calculated over the Amortization Period. Any Future Advances that are Fixed Advances may be payable interest only, in Lender’s sole and absolute discretion.

(c) Prepayment .

(i) Fixed Advances are not prepayable at any time, provided that, notwithstanding the foregoing, Borrower may prepay all or a portion of any Fixed Advance pursuant to the yield maintenance provisions of the Fixed Facility Note.

(ii) Subject to the terms and conditions of the Variable Facility Notes, the Indebtedness extended to Borrowers hereunder through Variable Advances is prepayable in whole or in part at any time pursuant to the fee maintenance provisions of the Variable Facility Notes.

Section 1.04. Interest on Advances .

(a)  Partial Month Interest . Notwithstanding anything to the contrary in this Section 1.04 , if an Advance is not made on the first day of a calendar month, and, with respect to a Variable DMBS Advance, the DMBS Issue Date is the first day of the month following the month in which the Advance is made, Borrower shall pay interest on the original stated principal amount of the Advance for the partial month period commencing on the Closing Date for the Advance and ending on the last day of the calendar month in which the Closing Date occurs. Borrower shall pay interest for such partial month on any (i) Variable DMBS Advance at a rate per annum equal to the greater of (1) the Coupon Rate as determined in accordance with Section 1.05 and (2) a rate determined by Lender, based on Lender’s cost of funds and approved at least three (3) Business Days prior to such Advance, in writing, by Borrower, (ii) Variable Structured ARM Advance at a rate per annum equal to a rate determined by Lender based on Lender’s cost of funds and approved at least three (3) Business Days prior to such Advance in writing by Borrower; and (iii) Fixed Advance at a rate, per annum equal to the greater of (1) the interest rate described in subsection (d)(i) of this Section 1.04 and (2) a rate determined by Lender, based on Lender’s cost of funds, and approved at least three (3) Business Days prior to such Advance, in writing, by Borrower.

(b) Variable DMBS Advances .

(i)  Discount . Each Variable DMBS Advance shall be a discount loan. The original stated principal amount of a Variable DMBS Advance shall be the sum of the Price and the Discount. The Price and Discount of each Variable DMBS Advance shall be determined in accordance with the procedures set forth in Section 2.01 . The proceeds of the Variable DMBS Advance made available by Lender to Borrower will equal the Price. Borrower shall pay to Lender, in advance of Lender making the initial Variable DMBS Advance requested by Borrower, the entire Discount for the Variable DMBS Advance. With respect to any subsequent Variable DMBS Advances, Borrower shall pay to Lender the Discount for the Variable DMBS Advance in monthly installments. Each monthly installment shall be equal to the product of (1) a fraction with one as the numerator and the number of months in the term of the applicable DMBS as the denominator, multiplied by (2) the Discount calculated on the applicable then Outstanding DMBS (for example, if the DMBS term is three (3) months and the entire Discount is $100,000, such monthly installments shall equal one third (1/3) of the entire Discount ( i.e. $33,333). The first installment shall be payable on or prior to the Closing Date of such Variable DMBS Advance. Subsequent installments shall be payable on the first day of each calendar month, commencing on the first day of the second full calendar month following the DMBS Issue Date, to the first day of the month prior to the maturity date of such DMBS.

(ii)  Variable Facility Fee . In addition to paying the Discount and the partial month interest, if any, Borrower shall pay monthly installments of the Variable Facility Fee to Lender for each Variable DMBS Advance Outstanding from the applicable DMBS Issue Date to its maturity date. The Variable Facility Fee shall be payable in advance, in accordance with the terms of the Variable Facility Note. The first installment shall be payable on or prior to the Closing Date for the Variable DMBS Advance and shall apply to the first full calendar month of the DMBS issued in connection with such Variable DMBS Advance. Subsequent installments shall be payable on the first day of each calendar month, commencing on the first day of the second full calendar month of such DMBS, to its maturity date. Each installment of the Variable Facility Fee shall be in an amount equal to the product of (1) the Variable Facility Fee, (2) the Variable DMBS Advance Outstanding, and (3) 1/12.

(c) Variable Structured ARM Advances .

(i)  Adjustable Rate . Each Variable Structured ARM Advance shall bear interest at an Adjustable Rate which Adjustable Rate shall include the Margin. The Adjustable Rate with respect to each Variable Structured ARM Advance shall change on each Rate Change Date until such Variable Structured ARM Advance is repaid in accordance with the applicable Variable Facility Note.

(d) Fixed Advances .

(i)  Annual Interest Rate . Each Fixed Advance shall bear interest at a rate, per annum, equal to the Cash Interest Rate for such Fixed Advance.

(ii)  Monthly Payment . In addition to paying the partial month interest, if any, Borrower shall pay monthly installments of the Cash Interest Rate to Lender for each Fixed Advance from the first day of the month following the Closing Date for such Advance, to its maturity date. The Cash Interest Rate shall be payable in arrears, in accordance with the terms of the Fixed Facility Note. Installments shall be payable on the first day of each calendar month, commencing on the first day of the second full calendar month of such Advance, to its maturity date.

Section 1.05. Coupon Rates for Variable DMBS Advances .

The Coupon Rate applicable to a Variable DMBS Advance shall mean the sum of (1) an imputed interest rate as determined by Lender pursuant to Section 2.01 of this Agreement (rounded to three places) payable for the DMBS pursuant to the DMBS Commitment (“ DMBS Imputed Interest Rate ”) and (2) the Variable Facility Fee.

Section 1.06. Notes .

(a)  Variable Advances . The obligation of Borrower to repay the Variable Advances shall be evidenced by the Variable Facility Notes. The Variable Facility Notes shall be payable to the order of Lender and shall be made in the original principal amount of each Variable Advance.

(b)  Fixed Advances . The obligation of Borrower to repay the Fixed Advances shall be evidenced by the Fixed Facility Notes. The Fixed Facility Notes shall be payable to the order of Lender and shall be made in the original principal amount of each Fixed Advance.

Section 1.07. Reserved .

Section 1.08. Conversion from Variable Facility Commitment to Fixed Facility Commitment .

Except as provided in Section 1.09 , Borrower shall have the right, from time to time prior to the Variable Facility Termination Date, to convert all or any portion of the Variable Facility Commitment to the Fixed Facility Commitment, provided that the maturity date for any such Fixed Advance shall be as required generally for Fixed Advances pursuant to Section 1.03(b) . If any Variable Advances Outstanding under a Variable Facility Note are converted to a Fixed Advance, the Fixed Facility Note executed in connection with such Fixed Advance shall not have a maturity date beyond the maturity date set forth in the original Variable Facility Note. The Variable Facility Commitment shall be reduced by, and the Fixed Facility Commitment shall be increased by, the amount of each conversion.

(a)  Request . To convert all or a portion of the Variable Facility Commitment to the Fixed Facility Commitment, Borrower shall deliver a Conversion Request to Lender. Each Conversion Request shall designate (i) the amount of the Variable Facility Commitment to be converted, and (ii) any Variable Advances Outstanding that will be prepaid on or before the Closing Date for the conversion as required by Section 1.09(c) .

(b)  Closing . Subject to Section 1.09 and provided that all conditions contained in Section 1.10 are satisfied, Lender shall permit the requested conversion to close at offices designated by Lender on a Closing Date selected by Lender, and, with respect to a Variable DMBS Advance, occurring on the maturity date of the applicable outstanding DMBS, within thirty (30) Business Days after Lender’s receipt of the Conversion Request (or on such other date as Borrower and Lender may agree). At the closing, Lender and Borrower shall execute and deliver, at the sole cost and expense of Borrower, in form and substance satisfactory to Lender, the Conversion Documents. Borrower shall be obligated to pay an interest rate and fees in connection with a conversion as determined in accordance with the applicable requirements of the Fannie Mae product line then in effect.

(c)  Minimum Remaining Amount of Variable DMBS Advances . After the closing of any conversion, if any Variable DMBS Advances remain Outstanding, the minimum aggregate principal amount Outstanding of such remaining Variable DMBS Advances shall be not less than $25,000,000. If the aggregate principal amount Outstanding of Variable DMBS Advances is less than $25,000,000, such Variable DMBS Advances must be repaid or converted to Fixed Advances pursuant to the terms of this Section and Sections 1.09 and 1.10.

Section 1.09. Limitations on Right to Convert .

Borrower’s right to convert all or any portion of the Variable Facility Commitment to the Fixed Facility Commitment is subject to the following limitations:

(a) Reserved .

(b)  Minimum Request . Each Conversion Request shall be in the minimum amount of $3,000,000.

(c)  Obligation to Prepay Variable Advances . Borrower shall prepay any difference by which, after the conversion, the aggregate unpaid principal balance of all Variable Advances Outstanding will exceed the Variable Facility Commitment.

(d)  Failure to Convert . In the event all or a portion of the amount of the Variable Facility Commitment set forth in the Conversion Request cannot be converted because the increased Fixed Facility Commitment does not satisfy the Underwriting Requirements, Borrower shall prepay the amount of the Variable Facility Commitment that cannot be converted to a Fixed Facility Commitment and shall pay all prepayment premiums and other fees associated with such prepayment.

Section 1.10. Conditions to Conversion .

The conversion of all or any portion of the Variable Facility Commitment to the Fixed Facility Commitment is subject to the satisfaction, on or before the Closing Date, of (a) the conditions precedent contained in Section 6.08 and Section 6.11 and (b) all applicable General Conditions contained in Section 6.01 .

Section 1.11. Yield Maintenance .

At such time as Borrower requests the first Fixed Advance, or, if prior in time, elects to convert all or a portion of the Variable Facility Commitment to a Fixed Facility Commitment, Borrower shall select yield maintenance with respect to Fixed Advances. Borrower shall notify Lender of such selection on the Advance Request for the first Fixed Advance or on the first Conversion Request, as applicable. The terms and conditions of yield maintenance are contained in the Fixed Facility Notes. The selection of Borrower as to yield maintenance made at the time of the first Advance Request for a Fixed Advance or the first Conversion Request shall apply to all Fixed Advances made pursuant to this Agreement.

Section 1.12. Interest Rate Cap.

To protect against fluctuations in interest rates during the term, pursuant to the terms of the Pledge, Interest Rate Cap Agreement, Borrower shall make arrangements for a LIBOR-based interest rate cap in form and substance satisfactory to Lender with a counterparty satisfactory to Lender (“ Interest Rate Cap ”) to be in place and maintained at all times with respect to the portion of the Variable Facility Commitment which has been funded and remains Outstanding. As set forth in the Pledge, Interest Rate Cap Agreement, Borrower agrees to pledge its right, title and interest in the Interest Rate Cap to Lender as additional collateral for the Indebtedness.

ARTICLE 2
THE ADVANCES

Section 2.01. Rate Setting for an Advance .

Rates for an Advance shall be set in accordance with the following procedures:

(a)  Preliminary, Nonbinding Quote . At Borrower’s request, Lender shall quote an estimate of the Cash Interest Rate (for a proposed Fixed Advance), or the Adjustable Rate (for a proposed Variable Structured ARM Advance) or the DMBS Imputed Interest Rate (for a proposed Variable DMBS Advance). Lender’s quote shall be based on (i) in the case of a proposed Variable DMBS Advance, a solicitation of bids from institutional investors selected by Lender in the case of a DMBS execution or, in the case of a Fixed Advance or a Variable Structured ARM Advance, the rate quoted by Fannie Mae for a cash execution and (ii) the proposed terms and amount of the Advance selected by Borrower. The quote shall not be binding upon Lender.

(b)  Rate Setting . Borrower may submit to Lender, by facsimile transmission before 1:00 p.m. Washington, D.C. time on any Business Day (“ Rate Setting Date ”), a completed and executed Rate Form. The Rate Form shall specify the amount, term, DMBS Issue Date, Variable Facility Fee, any breakage fee deposit amount, the proposed maximum Coupon Rate (“ Maximum Annual Coupon Rate ”), the proposed Maximum Adjustable Rate or Cash Interest Rate, as applicable, and Closing Date for the Advance.

(c)  Rate Confirmation . In the case of a DMBS execution, within one (1) Business Day after receipt of the Rate Form and upon satisfaction of all of the conditions to Lender’s obligation to make the Advance, Lender shall solicit bids from institutional investors selected by Lender based on the information in the Rate Form and, provided the actual Coupon Rate would be at or below the Maximum Annual Coupon Rate, shall obtain a commitment (“ DMBS Commitment ”) for the purchase of a DMBS having the bid terms described in the related Rate Form. In the case of a cash execution, within one (1) Business Day after receipt of the Rate Form, Lender shall obtain a commitment from Fannie Mae (“ Fannie Mae Commitment ”) for the purchase of the proposed Advance having the terms described in the related Rate Form. Lender shall then complete and countersign the Rate Form thereby confirming the amount, term, and Closing Date for the Advance, in the case of a Variable DMBS Advance, the DMBS Issue Date, DMBS Delivery Date, DMBS Imputed Interest Rate, Variable Facility Fee, Coupon Rate, Discount and Price, in the case of the Variable Structured ARM Advance, the Adjustable Rate, and in the case of a Fixed Advance, the Cash Interest Rate and shall immediately deliver by facsimile transmission the Rate Form to Borrower.

Section 2.02. DMBS Refinance Confirmation Form for Rollover Variable Advances .

Not later than four (4) Business Days before the Closing Date for a Rollover Variable Advance, Borrower shall execute and deliver to Lender a fully executed DMBS Refinance Confirmation Form (in the form attached to the applicable Variable Facility Note).

Section 2.03. Breakage and other Costs .

If Lender obtains, and then fails to fulfill, the DMBS Commitment or Fannie Mae Commitment because the Advance is not made (for a reason other than Lender’s default), Borrower shall pay all reasonable out-of-pocket costs payable to the potential investor and other reasonable costs, fees and damages incurred by Lender in connection with its failure to fulfill the DMBS Commitment or Fannie Mae Commitment. Lender reserves the right to require Borrower to post a deposit at the time the DMBS Commitment or Fannie Mae Commitment is obtained. Such deposit shall be refundable to Borrower upon the delivery of the related DMBS or the purchase of the Advance for cash by Fannie Mae.

Section 2.04. Advances .

Borrower may deliver an Advance Request to Lender:

(a) If the Advance Request is to obtain the Initial Advance and all conditions precedent contained in Section 6.02 and Section 6.11 and the General Conditions contained in Section 6.01 are satisfied on or before the Closing Date for the Initial Advance, Lender shall make the Initial Advance on the Initial Closing Date or on such other date as Borrower and Lender may agree.

(b) If the Advance Request is to obtain a Future Advance, such Advance Request shall be in the minimum amount of $3,000,000, except that any Request for a Variable DMBS Advance shall be in the minimum amount of $25,000,000. If all conditions precedent contained in Section 6.03 and Section 6.11 and the General Conditions contained in Section 6.01 are satisfied, Lender shall make the requested Future Advance, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, which date shall be not more than three (3) Business Days after Borrower’s receipt from Lender of the confirmed Rate Form (or on such other date as Borrower and Lender may agree).

Section 2.05. Determination of Allocable Facility Amount and Valuations .

(a)  Initial Determinations . On the Initial Closing Date, Lender shall determine (i) the Allocable Facility Amount and Valuation for each Initial Mortgaged Property, (ii) the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio, (iii) the Advance Amount, and (iv) the Commitment amount. The determinations made as of the Initial Closing Date shall remain unchanged until the First Anniversary. Changes in Allocable Facility Amount, Valuations, the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio shall be made pursuant to Section 2.05(b) .

(b)  Monitoring Determinations . Once each Calendar Quarter within twenty (20) Business Days after Borrower has delivered to Lender the reports required in Section 8.03 , Lender shall determine the Aggregate Debt Service Coverage Ratio, the Aggregate Loan to Value Ratio, the Valuations and the Allocable Facility Amounts and whether Borrower is in compliance with the other covenants set forth in the Loan Documents. With respect to the third Calendar Quarter during any Loan Year, monitoring determinations shall be calculated based on the prior twelve (12) month period. After the First Anniversary, on an annual basis, and if Lender decides that changed market or property conditions warrant, Lender shall redetermine Allocable Facility Amounts and Valuations. Lender shall also redetermine Allocable Facility Amounts to take account of any addition or release of Collateral or other event that invalidates the outstanding determinations. In determining Valuations, Lender shall use Cap Rates based on its internal survey and analysis of cap rates for comparable sales in the vicinity of the Mortgaged Property, with such adjustments as Lender deems appropriate and without any obligation to use any information provided by Borrower. If Lender is unable to determine a Cap Rate for a Mortgaged Property, Lender shall have the right, not more than once annually, to obtain, at Borrower’s expense, a market study in order to establish a Cap Rate. Lender shall promptly disclose its determinations to Borrower. Until redetermined, the outstanding Allocable Facility Amounts and Valuations shall remain in effect. Notwithstanding anything in this Agreement to the contrary, no change in Allocable Facility Amounts, Valuations, the Aggregate Loan to Value Ratio or the Aggregate Debt Service Coverage Ratio shall, unless resulting from the removal of Collateral from the Collateral Pool, (i) result in a Potential Event of Default or Event of Default, (ii) require the prepayment of any Advances, (iii) require the addition of Collateral to the Collateral Pool, or (iv) preclude the making of a Rollover Variable Advance.

Section 2.06. Future Advances Made on Increased Values.

Borrower may request, and Lender, in its sole discretion, may advance Future Advances based on decreases in the Aggregate Loan to Value Ratio and increases in the Aggregate Debt Service Coverage Ratio as determined by Lender in accordance with this Agreement and based on Lender’s determination that such Future Advance may be made pursuant to Lender’s Underwriting Requirements for the Fannie Mae “Supplemental Loan” product line then in effect, and pursuant to the terms and conditions of the Loan Documents, but only to the extent that such Future Advance and subsequent reallocation of the Allocable Facility Amounts do not cause the Geographical Diversification Requirements to be violated. Borrower shall pay all reasonable costs related to such Future Advance requested under this Section 2.06 (whether or not such Future Advance is actually made), including but not limited to Appraisal costs, environmental site assessment costs, physical needs assessment costs, Lender’s nonrefundable due diligence fee of $4,000 for each Mortgaged Property in the Collateral Pool at the time plus out-of-pocket expenses payable at the time a Request for a Future Advance is made, a reunderwriting fee in the amount equal to the greater of $50,000 or one percent (1%) of such proposed Future Advance, all legal fees incurred by Lender and Fannie Mae in connection with such proposed Future Advance and any other actual out of pocket third party costs incurred in connection with such proposed Future Advance. In relation to any Future Advance made pursuant to this Section 2.06, Borrower shall be obligated to pay an interest rate and fees, determined in accordance with the applicable requirements of the Fannie Mae “Supplemental Loan” product line then in effect. Borrower shall request such Future Advance by giving Lender an Advance Request in accordance with Section 2.04 and an Expansion Request, requesting an Expansion in the amount of such Future Advance in accordance with Section 4.01.

ARTICLE 3
COLLATERAL CHANGES

Section 3.01. Right to Add Collateral .

Subject to the terms and conditions of this Article, Borrower shall have the right, from time to time during the Fixed Facility Availability Period and the Variable Facility Availability Period, as applicable, to add Rental Properties to the Collateral Pool.

Section 3.02. Procedure for Adding Collateral .

The procedure for adding Collateral contained in this Section 3.02 shall apply to all additions of Collateral.

(a)  Request . Subject to the limitations set forth in Section 15.17 , Borrower may deliver to Lender an Addition Request to add one (1) or more Rental Properties to the Collateral Pool. Each Addition Request shall be accompanied by the following: (i) the quality and type of property-related information required by Lender in connection with the Initial Advances made hereunder and any additional information Lender may reasonably request; and (ii) the payment of all Additional Collateral Due Diligence Fees and the Additional Collateral Due Diligence Deposit.

(b)  Underwriting . Borrower may add any Additional Mortgaged Property provided that, after such addition, the proposed Additional Mortgaged Property itself has a Debt Service Coverage Ratio of not less than 1.30:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to such Additional Mortgaged Property drawn from the Fixed Facility Commitment and 1.05:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to such Additional Mortgaged Property drawn from the Variable Facility Commitment, and its Loan to Value Ratio must not exceed seventy-five percent (75%), and, after such addition, the Collateral Pool must satisfy the Coverage and LTV Tests, provided, that if either of the tests described above are not met, Lender may permit the Additional Mortgaged Property to be added to the Collateral Pool. Lender shall evaluate the proposed Additional Mortgaged Property in accordance with the Underwriting Requirements and shall make underwriting determinations as to the Debt Service Coverage

Ratio and the Loan to Value Ratio of the proposed Additional Mortgaged Property and the Aggregate Debt Service Coverage Ratio and the Aggregate Loan to Value Ratio applicable to the Collateral Pool on the basis of the lesser of (i) the acquisition price of the proposed Additional Mortgaged Property if purchased by Borrower within twelve (12) months of the related Addition Request, and (ii) a Valuation made with respect to the proposed Additional Mortgaged Property. In addition, Lender shall determine whether an exit strategy acceptable to Lender is available with respect to such Additional Mortgaged Property. Within thirty (30) Business Days after receipt of (1) the Addition Request and (2) all reports, certificates and documents required by the Underwriting Requirements, including a zoning analysis required by Lender in connection with similar loans anticipated to be sold to Fannie Mae, Lender shall notify Borrower whether it has determined whether the proposed Additional Mortgaged Property meets the Underwriting Requirements and the other conditions for addition set forth in this Agreement. If Lender determines that the proposed Additional Mortgaged Property meets the Underwriting Requirements and the other conditions set forth in this Agreement, it shall set forth the Aggregate Debt Service Coverage Ratio, the Aggregate Loan to Value Ratio, and the Advance Amount that Lender estimates shall result from the addition of the proposed Additional Mortgaged Property. Within five (5) Business Days after receipt of Lender’s written consent to the Addition Request, Borrower shall notify Lender in writing whether it elects to add the proposed Additional Mortgaged Property to the Collateral Pool. If Borrower fails to respond within the period of five (5) Business Days, it shall be conclusively deemed to have elected not to add the proposed Additional Mortgaged Property to the Collateral Pool.

(c)  Closing . If Lender determines that the proposed Additional Mortgaged Property meets the conditions set forth in this Agreement, Borrower timely elects to add the proposed Additional Mortgaged Property to a Collateral Pool and all conditions precedent contained in Section 6.04 , Section 6.11 and Section 6.12 and all General Conditions contained in Section 6.01 are satisfied, the proposed Additional Mortgaged Property shall be added to the Collateral Pool, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, occurring within thirty (30) Business Days after Lender’s receipt of Borrower’s election (or on such other date as Borrower and Lender may agree).

Section 3.03. Right to Obtain Releases of Collateral .

Subject to the terms and conditions of this Article 3 and the limitations set forth in Section 15.17 , Borrower shall have the right from time to time to obtain a release of Collateral from the Collateral Pool.

Section 3.04. Procedure for Obtaining Releases of Collateral .

(a)  Request . To obtain a release of Collateral from the Collateral Pool, Borrower shall deliver a Release Request to Lender. The Release Request shall result in a termination of all or any part of the Credit Facility and Borrower shall lose the borrowing capacity associated with such release and all or a part of the Variable Facility Commitment and/or Fixed Facility Commitment comprising such borrowing capacity shall be terminated.

(b)  Closing . If all conditions precedent contained in Section 6.05 and all General Conditions contained in Section 6.01 are satisfied, Lender shall cause the Release Mortgaged Property to be released, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, and occurring within thirty (30) days after Lender’s receipt of the Release Request (or on such other date as Borrower and Lender may agree), by executing and delivering, and causing all applicable parties to execute and deliver, all at the sole cost and expense of Borrower, the Release Documents. Borrower shall prepare the Release Documents and submit them to Lender for its review.

(c)  Release Price . The “ Release Price ” for each Release Mortgaged Property means the greater of (i) one hundred percent (100%) of the Allocable Facility Amount for the Release Mortgaged Property and (ii) one hundred percent (100%) of the amount, if any, of Advances Outstanding that are required to be repaid by Borrower to Lender in connection with the proposed release of the Release Mortgaged Property from the Collateral Pool so that, immediately after the release, the Coverage and LTV Tests will be satisfied. In addition to the Release Price, Borrower shall pay to Lender all associated prepayment premiums and other amounts due under the Notes being repaid. In connection with a non-simultaneous substitution of Collateral pursuant to Section 3.06(c)(ii) of this Agreement, Borrower shall be permitted, in lieu of paying the Release Price, to post a Letter of Credit issued by a financial institution acceptable to Lender and having terms and conditions acceptable to Lender, having a face amount equal to one hundred fifteen percent (115%) of the Allocable Facility Amount for the Release Mortgaged Property.

(d)  Application of Release Price . The Release Price for the Release Mortgaged Property will be applied first against the Variable Advances Outstanding until there are no further Variable Advances Outstanding, then against the prepayment of Fixed Advances Outstanding, so long as the prepayment is permitted under the applicable Fixed Facility Note. The remainder of the Release Price, if any, shall be held by Lender (or its appointed collateral agent) as Additional Collateral, in accordance with a security agreement and other documents in form and substance acceptable to Lender. Any such Additional Collateral remaining will be returned to Borrower on the Termination Date. If, on the date Borrower pays the Release Price, Variable Advances are Outstanding but not then due and payable, Lender shall hold the Release Price as Additional Collateral, until the next date on which Variable Advances are due and payable, at which time Lender shall apply the appropriate portion of the Release Price to such Variable Advances.

(e)  Release of Borrower and Guarantor . Upon the release of a Mortgaged Property, the Borrower that is the owner of such Release Mortgaged Property and the Guarantor shall be released of all obligations related to the Release Mortgaged Property under this Agreement and the other Loan Documents except for any provisions of this Agreement and the other Loan Documents that are expressly stated to survive any release or termination.

Section 3.05. Right to Substitutions.

Subject to the terms and conditions of this Article 3 and the limitations sets forth in Section 15.17 , Borrower shall have the right to obtain the release of the Mortgaged Property securing the Advances made to such Borrower by replacing such Mortgaged Property with one or more Rental Properties that meet the requirements of this Agreement (the “ Substitute Mortgaged Property ”) thereby effecting a " Substitution ” of Collateral.

Section 3.06. Procedure for Substitutions.

(a)  Request . Borrower shall deliver to Lender a completed and executed Substitution Request. Each Substitution Request shall be accompanied by the following: (i) the information required by the Underwriting Requirements with respect to the proposed Substitute Mortgaged Property and any additional information Lender reasonably requests; and (ii) the payment of all Additional Collateral Due Diligence Fees and the Additional Collateral Due Diligence Deposit.

(b)  Underwriting .

(i) Lender shall evaluate the proposed Substitute Mortgaged Property in accordance with the Underwriting Requirements.

(ii) A Substitution may be effected if (A) (1) the Substitute Mortgaged Property has a Valuation equal to or greater than the Valuation of the Release Mortgaged Property, and (2) the Substitute Mortgaged Property has Net Operating Income (as determined by Lender in its discretion) equal to or greater than the Net Operating Income (as determined by Lender in its discretion) of the Release Mortgaged Property and (3) Lender determines that the Substitute Mortgaged Property is of similar or better quality and located in a similar or better market as the Release Mortgaged Property and (B) after the Substitution, the Collateral Pool meets the Coverage and LTV Tests and the Substitute Mortgaged Property itself has a Debt Service Coverage Ratio of not less than 1.30:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to such Substitute Mortgaged Property drawn from the Fixed Facility Commitment and 1.05:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to such Substitute Mortgaged Property drawn from the Variable Facility Commitment and a Loan to Value Ratio of not more than seventy-five percent (75%). If any of the tests described in (A) and (B) are not met, Lender may, in its discretion, permit the substitution to be effected.

(iii) Within thirty (30) Business Days after receipt of (A) the Substitution Request and (B) all reports, certificates and documents required by the Underwriting Requirements and this Agreement, including a zoning analysis required by Lender in connection with similar loans anticipated to be sold to Fannie Mae, Lender shall notify the applicable Borrower whether the Substitute Mortgaged Property meets the requirements of this Section 3.06(b) and the Underwriting Requirements and the other requirements for the Substitution of a Mortgaged Property as set forth in this Agreement. Within five (5) Business Days after receipt of Lender’s written notice in response to the Substitution Request, Borrower shall notify Lender whether it elects to proceed with the Substitution. If Borrower fails to respond within the period of five (5) Business Days, it shall be conclusively deemed to have elected not to proceed with the Substitution.

(c)  Closing . If Lender determines that the Substitution Request satisfies the conditions set forth herein, Borrower timely elects to proceed with the substitution, and all conditions precedent contained in Section 3.05 , Section 3.06 , Section 6.04 , Section 6.05 , Section 6.06 , Section 6.11 , Section 6.12 and all General Conditions contained in Section 6.01 are satisfied, the proposed Substitute Mortgaged Property shall be added in replacement of the Mortgaged Property being released, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender and occurring —

(i) if the substitution of the proposed Substitute Mortgaged Property is to occur simultaneously with the release of the Release Mortgaged Property, within sixty (60) days after Lender’s receipt of the applicable Borrower’s election (or on such other date to which Borrower and Lender may agree); or

(ii) if the substitution of the proposed Substitute Mortgaged Property is to occur subsequent to the release of the Release Mortgaged Property, within ninety (90) days after the release of such Release Mortgaged Property (provided such date may be extended an additional ninety (90) days if Borrower provides evidence satisfactory to Lender of Borrower’s diligent efforts in finding a suitable proposed Substitute Mortgaged Property) (the “ Property Delivery Deadline ”) in accordance with the terms of this Section 3.06(c) .

Section 3.07. Substitution Deposit .

(a)  The Deposit . If a Substitution of the proposed Substitute Mortgaged Property is to occur subsequent to the release of the Release Mortgaged Property pursuant to Section 3.06(c)(ii), at the Closing Date of the release of the Release Mortgaged Property, Borrower shall deposit with Lender the “ Substitution Deposit ” described in Section 3.07(b) in the form of cash or, in lieu of depositing cash for the Substitution Deposit, Borrower may post a Letter of Credit issued by a financial institution acceptable to Lender and having terms and conditions acceptable to Lender, having a face amount equal to the Substitution Deposit.

(b)  Substitution Deposit Amount . The “ Substitution Deposit ” for each proposed substitution shall be an amount equal to the sum of (i) the Release Price, plus (ii) any and all of the fee maintenance for the DMBS, or the prepayment premium for a Note funded through a cash execution, calculated as of the end of the month in which the Property Delivery Deadline occurs, as if the Note (and applicable DMBS, if applicable) were to be prepaid in such month, plus (iii) interest on the Note (or Discount, if applicable, and if necessary as estimated by Lender) through the end of the month in which the Property Delivery Deadline occurs, if necessary as reasonably estimated by Lender, plus (iv) costs, expenses and fees of Lender pertaining to the substitution (the “ Substitution Cost Deposit ”). If a Substitution of the last remaining asset is taking place, the cash collateral or Letter of Credit must include, (A) any yield maintenance that would be due to the extent that the Fixed Advance must be prepaid to effect a Release at that time, (B) any Discount that would be due for any Variable DMBS Advance, as applicable, if necessary as reasonably estimated by Lender and (C) any fee maintenance that would be due to the extent that the Variable Structured ARM Advance must be prepaid to effect a Release at that time. The Substitution Cost Deposit shall be used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in connection with such substitution whether such substitution actually closes. In the event that the Borrower elects to post a Letter of Credit in lieu of cash for the Substitution Deposit, Borrower shall also be obligated to make any regularly scheduled payments of principal and interest due under the applicable Note during any period between the closing of the Release Mortgaged Property and the earlier of the closing of the Substitute Mortgaged Property and the date of prepayment of the Note, or the applicable DMBS.

(c)  Failure to Close Substitution . If the substitution of the proposed Substitute Mortgaged Property does not occur by the Property Delivery Deadline in accordance with Section 3.06(c)(ii) , then such Borrower shall have irrevocably waived its right to substitute such Release Mortgaged Property with the proposed Substitute Mortgaged Property, and the release of the Release Mortgaged Property shall be deemed a prepayment of the Note and the DMBS, if applicable. The Property Delivery Deadline shall be no later than the date ninety (90) days (or one hundred eighty (180) days, if applicable) after the date the Lender’s lien on such Release Mortgaged Property is released. Any DMBS being prepaid shall be deemed to be prepaid as of the end of the month in which the Property Delivery Deadline falls, and the Lender, shall follow standard Fannie Mae procedures for the prepayment of the Note, or any applicable DMBS, including delivery of the Substitution Deposit (less the Substitution Cost Deposit) to Fannie Mae in accordance with such procedures. Any portion of the Substitution Deposit not needed to prepay the Note, or any applicable DMBS, all interest, and any prepayment fees (including any portion of the Substitution Cost Deposit not used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in connection with such Substitution) shall be promptly refunded to the applicable Borrower after the Property Delivery Deadline.

(d)  Substitution Deposit Disbursement . At closing of the Substitution, the Lender shall disburse the Substitution Deposit (less any portion of the Substitution Cost Deposit used by Lender to cover all reasonable out-of-pocket costs and expenses incurred by Lender and Fannie Mae, including any out-of-pocket legal fees and expenses incurred by Fannie Mae and Lender in connection with such substitution) directly to the Borrower at such time as the conditions set forth in Sections 3.05 , 3.06 , 6.06 , 6.11 , 6.12 and all General Conditions contained in Section 6.01 have been satisfied, which must occur no later than the Property Delivery Deadline.

ARTICLE 4
INCREASE OF CREDIT FACILITY

Section 4.01. Request to Increase Commitment .

Subject to the terms, conditions and limitations of this Article and this Agreement, Borrower may request, during the Fixed Facility Availability Period, to increase the Fixed Facility Commitment, during the Variable Facility Availability Period, to increase the Variable Facility Commitment, or both (the “ Expansion ”). Lender has the right to agree to Borrower’s request in its sole discretion. Any Expansion is subject to the following limitations:

(a)  Maximum Amount of Increase in Commitment . The maximum amount of the Expansion is $77,589,000 (for a maximum total Commitment of $300,000,000).

(b)  Minimum Request . Each Request for an Expansion shall be in the minimum amount of $3,000,000, except that an Expansion that will result in a Variable DMBS Advance shall be in a minimum amount of $25,000,000.

(c)  Terms and Conditions . The terms and conditions (including pricing) applicable to any Expansion shall be mutually agreed upon by Lender and Borrower at the time of the Expansion.

Section 4.02. Procedure for Obtaining Increases in Commitment.

To obtain an Expansion, Borrower shall deliver an Expansion Request to Lender. Each Expansion Request shall be accompanied by a nonrefundable deposit of $25,000 and shall include the following:

(a) the total amount of the proposed increase;

(b) a designation of the increase as being part of the Fixed Facility Commitment and/or the Variable Facility Commitment;

(c) a request that Lender inform Borrower of an indication of the interest rate and fees that will apply to Advances drawn from such Expansion; and

(d) a request that Lender inform Borrower of Net Worth and Liquidity requirements that will apply upon the Expansion.

Section 4.03. Closing .

If Lender in its sole discretion agrees to the Expansion Request and if all conditions precedent contained in Section 6.07 and Section 6.11 and all applicable General Conditions contained in Section 6.01 are satisfied, Lender shall permit the Expansion to occur, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, and occurring within fifteen (15) Business Days after Lender’s receipt of the Expansion Request (or on such other date as Borrower and Lender may agree).

ARTICLE 5
TERMINATION OF FACILITIES

Section 5.01. Right to Complete or Partial Termination of Facilities .

Subject to the terms and conditions of this Article, Borrower shall have the right from time to time to permanently reduce the Variable Facility Commitment and/or the Fixed Facility Commitment.

Section 5.02. Procedure for Complete or Partial Termination of Facilities .

(a)  Request . To permanently reduce the Variable Facility Commitment or the Fixed Facility Commitment, Borrower shall deliver a Facility Termination Request to Lender. A permanent reduction of the Variable Facility Commitment to $0 shall be referred to as a “ Complete Variable Facility Termination .” A permanent reduction of the Fixed Facility Commitment to $0 shall be referred to as a “ Complete Fixed Facility Termination .” The Facility Termination Request shall include the following:

(i) The proposed amount of the reduction in the Variable Facility Commitment and/or Fixed Facility Commitment; and

(ii) Unless there is a Complete Variable Facility Termination or a Complete Fixed Facility Termination, a designation by Borrower of any Variable Advances that will be prepaid and/or any Fixed Advances that will be prepaid.

Any release of Collateral, whether or not made in connection with a Facility Termination Request, must comply with all conditions to a release that are contained in Section 6.05 .

(b)  Closing . If all conditions precedent contained in Section 6.09 and all General Conditions contained in Section 6.01 are satisfied, Lender shall reduce the Variable Facility Commitment or Fixed Facility Commitment, as the case may be, to the amount designated by Borrower, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, within thirty (30) Business Days after Lender’s receipt of the Facility Termination Request (or on such other date as Borrower and Lender may agree), by executing and delivering the Facility Termination Document evidencing the reduction in the Facility Commitment.

Section 5.03. Right to Terminate Credit Facility .

Subject to the terms and conditions of this Article, Borrower shall have the right to terminate this Agreement and the Credit Facility and receive a release of all of the Collateral.

Section 5.04. Procedure for Terminating Credit Facility .

(a)  Request . To terminate this Agreement and the Credit Facility, Borrower shall deliver a Credit Facility Termination Request to Lender.

(b)  Closing . If all conditions precedent contained in Section 6.10 are satisfied, this Agreement shall terminate, and Lender shall cause all of the Collateral to be released, at a closing to be held at offices designated by Lender on a Closing Date selected by Lender, within thirty (30) Business Days after Lender’s receipt of the Credit Facility Termination Request (or on such other date as Borrower and Lender may agree), by executing and delivering, and causing all applicable parties to execute and deliver, all at the sole cost and expense of Borrower, the Credit Facility Termination Documents.

ARTICLE 6
CONDITIONS PRECEDENT TO ALL REQUESTS

Section 6.01. Conditions Applicable to All Requests .

Borrower’s right to close the transaction requested in a Request shall be subject to Lender’s determination that all of the following general conditions precedent (“ General Conditions ”) have been satisfied, in addition to any other conditions precedent contained in this Agreement:

(a)  Geographical Diversification . For each Request on or after the First Anniversary, the Geographical Diversification Requirements shall be satisfied. In the event Borrower decides to wind down the Credit Facility over a period no longer than six (6) months by releasing all of the Mortgaged Properties then currently remaining in the Collateral Pool, Borrower shall send a notice in writing to Lender, which notice shall include a statement that Borrower intends to wind down the Credit Facility and a timeline for each of the releases (the “ Wind Down Notice ”). After receipt of the Wind Down Notice, the Geographical Diversification Requirements for any Release may be waived in Lender’s discretion, provided that Borrower satisfies each of the following at the time of the Release: (x) all other conditions of a Release shall be met and (y) each Mortgaged Property then currently remaining in the Collateral Pool has a Debt Service Coverage Ratio of not less than 1.30:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to each such Mortgaged Property and drawn from the Fixed Facility Commitment and 1.05:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to each such Mortgaged Property and drawn from the Variable Facility Commitment and a Loan to Value Ratio of not more than seventy-five percent (75%). At Borrower’s request, Lender may in its discretion permit that the Geographical Diversification Requirements be waived in connection with any Request.

(b)  Payment of Expenses . The payment by Borrower of Lender’s and Fannie Mae’s reasonable third party out-of-pocket fees and expenses payable in accordance with this Agreement, including, but not limited to, the legal fees and expenses described in Section 10.05 .

(c)  No Material Adverse Change . Except in connection with a Credit Facility Termination Request, there has been no material adverse change in the financial condition, business or prospects of Borrower or Guarantor or in the physical condition, operating performance or value of any of the Mortgaged Properties since the date of the most recent Compliance Certificate (or, with respect to the conditions precedent to the Initial Advance, from the condition, business or prospects reflected in the financial statements, reports and other information obtained by Lender during its review of Borrower and Guarantor and the Initial Mortgaged Properties).

(d)  No Default . Except in connection with a Credit Facility Termination Request, there shall exist no Event of Default or Potential Event of Default on the Closing Date for the Request and, after giving effect to the transaction requested in the Request, no Event of Default or Potential Event of Default shall have occurred.

(e)  No Insolvency . Except in connection with a Credit Facility Termination Request, receipt by Lender on the Closing Date for the Request of evidence satisfactory to Lender that neither Borrower nor Guarantor is insolvent (within the meaning of any applicable federal or state laws relating to bankruptcy or fraudulent transfers) or will be rendered insolvent by the transactions contemplated by the Loan Documents, including the making of a Future Advance, or, after giving effect to such transactions, will be left with an unreasonably small capital with which to engage in its business or undertakings, or will have intended to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature or will have intended to hinder, delay or defraud any existing or future creditor.

(f)  No Untrue Statements . The Loan Documents shall not contain any untrue or misleading statement of a material fact and shall not fail to state a material fact necessary to make the information contained therein not misleading.

(g)  Representations and Warranties . Except in connection with a Credit Facility Termination Request, all representations and warranties made by Borrower and Guarantor in the Loan Documents shall be true and correct in all material respects on the Closing Date for the Request with the same force and effect as if such representations and warranties had been made on and as of the Closing Date for the Request.

(h)  No Condemnation or Casualty . Except in connection with a Credit Facility Termination Request or a Release Request or a Substitution Request, there shall not be pending or threatened any condemnation or other taking, whether direct or indirect, against the Mortgaged Property and there shall not have occurred any casualty to any improvements located on the Mortgaged Property, which casualty would have a Material Adverse Effect.

(i)  Delivery of Closing Documents . The receipt by Lender of the following, each dated as of the Closing Date for the Request, in form and substance satisfactory to Lender in all respects:

(i) The Loan Documents relating to such Request;

(ii) A Compliance Certificate;

(iii) An Organizational Certificate; and

(iv) Such other documents, instruments, approvals (and, if requested by Lender, certified duplicates of executed copies thereof) and opinions as Lender may reasonably request.

(j)  Covenants . Except in connection with a Credit Facility Termination Request, Borrower is in full compliance with each of the covenants contained in Article 8 and Article 9 of this Agreement, without giving effect to any notice and cure rights of Borrower.

(k)  Execution . For any Advance, conversion of an Advance or any refinance of an Advance, Lender must confirm with Fannie Mae that Fannie Mae is purchasing Advances of the type requested by Borrower in the marketplace at the time of the Request and on the Closing Date for the requested Advance, conversion or refinance. Borrower acknowledges that if Lender does not confirm that Fannie Mae is purchasing Advances of the type requested by Borrower in the marketplace, Borrower will not be entitled to any Advance, conversion or refinance under this Agreement.

Section 6.02. Conditions Precedent to Initial Advance .

The obligation of Lender to make the Initial Advance is subject to the following conditions precedent:

(a) Receipt by Lender of the fully executed Advance Request;

(b) If the Initial Advance is a Variable Advance, receipt by Lender at least five (5) days prior to the Initial Closing Date, of the confirmation of an Interest Rate Cap commitment, in accordance with the Pledge, Interest Rate Cap Agreement, effective as of the Initial Closing Date;

(c) If the Initial Advance is a Variable Advance, receipt by Lender of Interest Rate Cap Documents in accordance with the Pledge, Interest Rate Cap Agreement, effective as of the Initial Closing Date;

(d) Delivery to the Title Company, for filing and/or recording in all applicable jurisdictions, of all applicable Loan Documents required by Lender, including duly executed and delivered original copies of the Variable Facility Note or Fixed Facility Note, as applicable, the Guaranty, the Initial Security Instruments covering the Initial Mortgaged Properties and UCC-1 Financing Statements covering the portion of the Collateral comprised of personal property, and other appropriate instruments, in form and substance satisfactory to Lender and in form proper for recordation, as may be necessary in the opinion of Lender to perfect the Liens created by the applicable Security Instruments and any other Loan Documents creating a Lien in favor of Lender, and the payment of all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing;

(e) If the Initial Advance is a Variable DMBS Advance, receipt by Lender of the first installment of Variable Facility Fee and the entire Discount payable by Borrower pursuant to Section 1.04 ; and

(f) Receipt by Lender of the Initial Origination Fee pursuant to Section 10.03(a) , the Initial Due Diligence Deposit pursuant to Section 10.03(a) and the Initial Due Diligence Fee pursuant to Section 10.04(a) .

Section 6.03. Conditions Precedent to Future Advances .

A Future Advance is subject to the satisfaction of the following conditions precedent:

(a) Except in connection with a Rollover Variable Advance, receipt by Lender of the fully executed Advance Request;

(b) Except in connection with a Rollover Variable Advance, delivery by Lender to Borrower of the Rate Form for the Future Advance;

(c) Except in connection with a Rollover Variable Advance, after giving effect to the requested Future Advance, the Coverage and LTV Tests will be satisfied;

(d) If the Advance is a Fixed Advance, delivery of a Fixed Facility Note, duly executed by Borrower, in the amount and reflecting all of the terms of the Fixed Advance;

(e) If the Advance is a Variable DMBS Advance, delivery of the DMBS Refinance Confirmation Form, duly executed by Borrower and/or (in the case of a Variable Advance that is not a Rollover Variable Advance) a new Variable Facility Note, as applicable;

(f) For any Title Insurance Policy not containing a revolving credit or future advance endorsement, the receipt by Lender of an endorsement to the Title Insurance Policy, amending the effective date of the Title Insurance Policy to the applicable Closing Date and showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing Date and other exceptions approved by Lender;

(g) If the Advance is a Variable DMBS Advance, the receipt by Lender of the first installment of Variable Facility Fee for the Variable DMBS Advance and the entire Discount for the Variable DMBS Advance payable by Borrower pursuant to Section 1.04 ;

(h) If the Advance is a Variable Advance (and not a Rollover Variable Advance), receipt by Lender at least five (5) days prior to the applicable Closing Date, of the confirmation of an Interest Rate Cap commitment, in accordance with the Pledge, Interest Rate Cap Agreement, effective as of the Closing Date;

(i) If the Advance is a Variable Advance (and not a Rollover Variable Advance), receipt by Lender of Interest Rate Cap Documents, in accordance with the Pledge, Interest Rate Cap Agreement, effective as of the Closing Date;

(j) Except in connection with a Rollover Variable Advance, receipt by Lender of a Confirmation of Guaranty; and

(k) Receipt by Lender of one or more endorsements as specified by Lender increasing the amount of any or all Title Insurance Policies in the aggregate equal to the amount of Future Advances made pursuant to Section 2.06.

Section 6.04. Conditions Precedent to Addition of an Additional Mortgaged Property to the Collateral Pool .

The addition of an Additional Mortgaged Property to the Collateral Pool on the applicable Closing Date is subject to the satisfaction of the following conditions precedent:

(a) The proposed Additional Mortgaged Property itself has a Debt Service Coverage Ratio of not less than 1.30:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to such Additional Mortgaged Property drawn from the Fixed Facility Commitment and 1.05:1.0 with respect to the amount of the Advance which equals the Allocated Facility Amount which is allocated to such Additional Mortgaged Property drawn from the Variable Facility Commitment and a Loan to Value Ratio of not more than seventy-five percent (75%) and immediately after giving effect to the requested addition, the Coverage and LTV Tests will be satisfied, provided that if either of the tests described above are not met, Lender may permit the Additional Mortgaged Property to be added to the Collateral Pool;

(b) Receipt by Lender of the Additional Collateral Due Diligence Deposit, the Addition Fee, (provided that no such fee shall be due with respect to an Additional Mortgaged Property that is added in connection with an Expansion and the payment of an Expansion Origination Fee) and the Additional Collateral Due Diligence Fees, or if the Additional Mortgaged Property is being added in connection with a substitution made pursuant to Section 3.05 of this Agreement, receipt by Lender of the Substitution Fee and the Additional Collateral Due Diligence Deposit and the Additional Collateral Due Diligence Fees;

(c) Delivery to the Title Company, with fully executed instructions directing the Title Company to file and/or record in all applicable jurisdictions, all applicable Addition Loan Documents required by Lender, including duly executed and delivered original copies of any Security Instruments and UCC-1 Financing Statements covering the portion of the Additional Mortgaged Property comprised of personal property, and other appropriate documents, in form and substance satisfactory to Lender and in form proper for recordation, as may be necessary in the opinion of Lender to perfect the Lien created by the applicable additional Security Instrument, and any other Addition Loan Document creating a Lien in favor of Lender, and the payment of all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing;

(d) If required by Lender, amendments to the Notes and the Security Instruments, reflecting the addition of the Additional Mortgaged Property to the Collateral Pool and, as to any Note or Security Instrument so amended or if Lender determines that such endorsement is necessary to maintain the priority of the Lien created in favor of Lender with respect to the Outstanding Indebtedness or to maintain the validity of any Title Insurance Policy, the receipt by Lender of an endorsement to each Title Insurance Policy insuring the Security Instruments, amending the effective date of each Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing Date, Permitted Liens and other exceptions approved by Lender;

(e) If the Title Insurance Policy for the Additional Mortgaged Property contains a tie-in endorsement, an endorsement to each other Title Insurance Policy containing a tie-in endorsement, adding a reference to the Additional Mortgaged Property;

(f) Any proposed Additional Borrower meets and satisfies all of the requirements and conditions of Section 14.02 ;

(g) Receipt by Lender on the Closing Date of a Confirmation of Obligations; and

(h) For any Addition on or after the First Anniversary, the Mortgaged Properties in the Collateral Pool after the Addition shall satisfy the Geographical Diversification Requirements.

Section 6.05. Conditions Precedent to Release of Property from the Collateral Pool .

The release of a Mortgaged Property from the Collateral Pool is subject to the satisfaction of the following conditions precedent on or before the Closing Date:

(a) Receipt by Lender of the fully executed Release Request;

(b) Immediately after giving effect to the requested release the Coverage and LTV Tests will be satisfied;

(c) Receipt by Lender of the Release Price;

(d) Receipt by Lender of the Release Fee and all other amounts owing under Section 3.04(c);

(e) Receipt by Lender on the Closing Date of one (1) or more counterparts of each Release Document, dated as of the Closing Date, signed by each of the parties (other than Lender) who is a party to such Release Document;

(f) If required by Lender, amendments to the Notes and the Security Instruments, reflecting the release of the Release Mortgaged Property from the Collateral Pool and, as to any Security Instrument or Note so amended or if Lender determines that such endorsement is necessary to maintain the priority of the Lien created in favor of Lender with respect to the Outstanding Indebtedness or to maintain the validity of any Title Insurance Policy, the receipt by Lender of an endorsement to each Title Insurance Policy insuring the Security Instruments, amending the effective date of each Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing Date, Permitted Liens and other exceptions approved by Lender;

(g) If Lender determines the Release Mortgaged Property to be one (1) phase of a project, and one (1) or more other phases of the project are Mortgaged Properties which will remain in the Collateral Pool (“ Remaining Mortgaged Properties ”), Lender must determine that the Remaining Mortgaged Properties can be operated separately from the Release Mortgaged Property and any other phases of the project which are not Mortgaged Properties and whether any cross use agreements or easements are necessary. In making this determination, Lender shall evaluate access, utilities, marketability, community services, ownership and operation of the Release Properties and any other issues identified by Lender in connection with similar loans anticipated to be sold to Fannie Mae;

(h) Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance Policies, if deemed necessary by Lender, to reflect the release;

(i) Receipt by Lender on the Closing Date of a Confirmation of Obligations; and

(j) For any Release on or after the First Anniversary, the remaining Mortgaged Properties in the Collateral Pool shall satisfy the Geographical Diversification Requirements.

Section 6.06. Conditions Precedent to Substitutions .

The obligation of Lender to make a requested Substitution is subject to Lender’s determination that each of the following conditions precedent has been met:

(a) Receipt by Lender of the fully executed Substitution Request;

(b) Receipt by Lender of the Substitution Deposit to the extent necessary under Section 3.07;

(c) Receipt by Lender of the Additional Collateral Due Diligence Fees, Additional Collateral Due Diligence Deposit and Substitution Fee;

(d) Such Substitute Mortgaged Property securing such Advance shall comply with the provisions of Section 3.06(b) of this Agreement;

(e) Delivery to the Title Company, with fully executed instructions directing the Title Company to file and/or record in all applicable jurisdictions, all applicable Loan Documents reasonably required by Lender to be filed or recorded, including duly executed and delivered original copies of any Security Instrument and UCC-1 Financing Statements covering the portion of the Substitute Mortgaged Property comprised of personal property, and other appropriate documents, in form and substance reasonably satisfactory to Lender and in form proper for recordation, as may be necessary in the reasonable opinion of Lender to perfect the Lien created by the applicable additional Security Instrument, and any other relevant Loan Document creating a Lien in favor of Lender, and the payment of all taxes, fees and other charges payable in connection with such execution, delivery, recording and filing;

(f) Receipt by Lender of endorsements to the tie-in endorsements of the Title Insurance Policies, if deemed necessary by Lender, to reflect the substitution;

(g) Receipt of all documents required for the addition of the Substitute Mortgaged Property pursuant to the Underwriting Requirements;

(h) Any proposed Additional Borrower meets and satisfies all of the requirements and conditions of Section 14.02;

(i) Receipt by Lender on the Closing Date of a Confirmation of Obligations;

(j) If required by Lender, amendments to the Notes and the Security Instruments, reflecting the Substitution and, as to any Security Instrument or Note so amended or if Lender determines that such endorsement is necessary to maintain the priority of the Lien created in favor of Lender with respect to the Outstanding Indebtedness or to maintain the validity of any Title Insurance Policy, the receipt by Lender of an endorsement to each Title Insurance Policy insuring the Security Instruments, amending the effective date of each Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing Date, Permitted Liens and other exceptions approved by Lender;

(k) For any Substitution on or after the First Anniversary, the Mortgaged Properties in the Collateral Pool after the Substitution shall satisfy the Geographical Diversification Requirements.

Section 6.07. Conditions Precedent to Increase in Commitment.

Any Expansion is subject to Lender’s consent in its sole discretion and to the satisfaction of the following conditions precedent on or before the Closing Date:

(a) Receipt by Lender of the fully executed Expansion Request;

(b) Receipt by Lender of the Expansion Origination Fee;

(c) Receipt by Lender of an endorsement to each Title Insurance Policy, amending the effective date of the Title Insurance Policy to the Closing Date, increasing the limits of liability to the Commitment, as increased under this Article, showing no additional exceptions to coverage other than the exceptions shown on the applicable Title Insurance Policy and other exceptions approved by Lender, together with any reinsurance agreements required by Lender; and

(d) Receipt by Lender of fully executed original copies of all Expansion Loan Documents, each of which shall be in full force and effect, and in form and substance satisfactory to Lender in all respects.

Section 6.08. Conditions Precedent to Conversion .

The conversion of all or a portion of the Variable Facility Commitment to the Fixed Facility Commitment is subject to the satisfaction of the following conditions precedent on or before the Closing Date:

(a) Receipt by Lender of the fully executed Conversion Request;

(b) After giving effect to the requested conversion, the Coverage and LTV Tests will be satisfied;

(c) Prepayment by Borrower in full of any Variable Advances Outstanding that Borrower has designated for payment solely with respect to the conversion; provided, however, no associated prepayment premiums and other amounts due with respect to the prepayment of such Variable Advances shall be payable by Borrower;

(d) If required by Lender, receipt by Lender of an endorsement to each Title Insurance Policy, amending the effective date of the Title Insurance Policy to the Closing Date and showing no additional exceptions to coverage other than the exceptions shown on the Initial Closing Date and other exceptions approved by Lender; and

(e) Receipt by Lender of one (1) or more counterparts of each Conversion Document, dated as of the Closing Date, signed by each of the parties (other than Lender) to such Conversion Document.

Section 6.09. Conditions Precedent to Complete or Partial Termination of Facilities .

The right of Borrower to reduce the Commitment and the obligation of Lender to execute the Facility Termination Document, are subject to the satisfaction of the following conditions precedent on or before the Closing Date:

(a) Receipt by Lender of the fully executed Facility Termination Request;

(b) Payment by Borrower in full of all of the Variable Advances Outstanding and Fixed Advances Outstanding, as the case may be, required to reduce the aggregate unpaid principal balance of all Variable Advances Outstanding and Fixed Advances Outstanding, as the case may be, to not greater than the Variable Facility Commitment and Fixed Facility Commitment, as the case may be, including any associated prepayment premiums or other amounts due under the Notes (but if Borrower is not required to prepay all of the Variable Advances Outstanding or Fixed Advances Outstanding, as the case may be, Borrower shall have the right to select which of the Variable Advances or Fixed Advances, as the case may be, shall be repaid); and

(c) Receipt by Lender on the Closing Date of one (1) or more counterparts of the Facility Termination Document, dated as of the Closing Date, signed by each of the parties (other than Lender) who is a party to such Facility Termination Document.

Section 6.10. Conditions Precedent to Termination of Credit Facility .

The right of Borrower to terminate this Agreement and the Credit Facility and to receive a release of all of the Collateral from the Collateral Pool and Lender’s obligation to execute and deliver the Credit Facility Termination Documents on the Closing Date are subject to the following conditions precedent:

(a) Receipt by Lender of the fully executed Credit Facility Termination Request; and

(b) Payment by Borrower in full of all of the Notes Outstanding on the Closing Date, including any associated prepayment premiums or other amounts due under the Notes and all other amounts owing by Borrower to Lender under this Agreement.

Section 6.11. Delivery of Opinion Relating to Advance Request, Addition Request, Substitution Request, Conversion Request or Expansion Request .

With respect to the closing of an Advance Request, an Addition Request, a Substitution Request, a Conversion Request or an Expansion Request, it shall be a condition precedent that Lender receives favorable opinions of counsel (including local counsel, as applicable) to Borrower, as to the due organization and qualification of Borrower, the due authorization, execution, delivery and enforceability of each Loan Document executed in connection with the Request and such other matters as Lender may reasonably require, each dated as of the Closing Date for the Request, in form and substance satisfactory to Lender in all respects.

Section 6.12. Delivery of Property-Related Documents .

With respect to each of the Initial Mortgaged Properties or an Additional Mortgaged Property or a Substitute Mortgaged Property, it shall be a condition precedent that Lender receive from Borrower each of the documents and reports required by Lender pursuant to the Underwriting Requirements in connection with the addition of such Mortgaged Property to the Collateral Pool and, each of the following, each dated as of the applicable Closing Date for the Initial Mortgaged Property or an Additional Mortgaged Property or a Substitute Mortgaged Property, as the case may be, if applicable, in form and substance satisfactory to Lender in all respects:

(a) A commitment for the Title Insurance Policy applicable to the Mortgaged Property and a pro forma Title Insurance Policy based on the Commitment;

(b) the Insurance Policy (or a certified copy of the Insurance Policy) applicable to the Mortgaged Property;

(c) The Survey applicable to the Mortgaged Property;

(d) Evidence satisfactory to Lender of compliance of the Mortgaged Property with Applicable Laws;

(e) A Replacement Reserve Agreement or an amendment thereto, providing for the establishment of a replacement reserve account, to be pledged to Lender, in which the owner shall (unless waived by Lender) periodically deposit amounts for replacements for improvements at the Mortgaged Property and as additional security for Borrower’s obligations under the Loan Documents;

(f) If required by Lender, a Completion/Repair and Security Agreement or an amendment thereto, together with required escrows, on the standard form required by Lender;

(g) An Assignment of Management Agreement or an amendment thereto, on the standard form required by Lender;

(h) An Assignment of Leases and Rents, if Lender determines one to be necessary or desirable, provided that the provisions of any such assignment shall be substantively identical to those in the Security Instrument covering the Collateral, with such modifications as may be necessitated by applicable state or local law;

(i) In relation to each Initial Mortgaged Property, a Security Instrument to effectuate the addition of such Initial Mortgaged Property to the Collateral Pool, in relation to each Additional Mortgaged Property, a Security Instrument to effectuate the addition of such Additional Mortgaged Property to the Collateral Pool, and in relation to each Substitute Mortgaged Property, a Security Instrument to effectuate the addition of such Substitute Mortgaged Property to the Collateral Pool and a Note relating to the Mortgaged Properties. The amount secured by each Security Instrument shall be equal to the Commitment in effect from time to time;

(j) A Certificate of Borrower Parties;

(k) A Confirmation of Guaranty by each party providing a guaranty to Lender; and

(l) A Contribution Agreement or an amendment thereto.

Section 6.13. Additional Collateral.

If Lender determines that, with respect to the addition, release or substitution of Mortgaged Properties, the Coverage and LTV Tests are not met when required to be satisfied by the terms of this Agreement, Borrower shall have the option of either (A) providing to Lender a Letter of Credit which shall either have a term equal to the Term of this Agreement or shall have a term of at least 364 days and provide for a drawing 30 days prior to its date of termination in the event it is not renewed; (B) depositing cash or Cash Equivalents to the Cash Collateral Account; (C) adding an Additional Mortgaged Property to the Collateral Pool in a manner which meets the requirements of Article 3 but which Additional Mortgaged Property is to be encumbered solely by a Security Instrument in favor of Lender securing all of the Obligations (any of the above constituting “ Additional Collateral ”); or (D) to the extent permitted under the Loan Documents, prepaying in part or in whole the outstanding principal amount of Advances designated by Lender, in each case in an amount or, in relation to an Additional Mortgaged Property, with value equal to that amount which Lender determines will cause the Coverage and LTV Tests to be satisfied. For purposes of making such calculation, Lender shall deduct the amount of cash and Cash Equivalents deposited to the Cash Collateral Account or the amount available under the Letter of Credit from the outstanding principal balance of all Advances (the “ Assumed Mortgage Principal Amount ”) and (i) calculate the interest component of debt service based on such Assumed Mortgage Principal Amount and (ii) calculate the principal component of debt service by multiplying the actual amount of principal times a fraction with a numerator equal to the Assumed Mortgage Principal Amount and a denominator equal to the actual outstanding principal amount of all of the Advances. In the event such Borrower exercises either of the options set forth in clauses (A) or (B) of this paragraph, Borrower shall execute and deliver a Cash Collateral Agreement. Lender shall agree at the request of Borrower to exchange one type of Additional Collateral for another type of Additional Collateral provided such other type of Additional Collateral is of equivalent value and which meets the requirements of this Agreement. Notwithstanding any provision hereof to the contrary, except for any Substitution Deposit delivered in accordance with Section 3.07 (the amount and application of which shall be determined in accordance with said Section 3.07), (i) the value of any Additional Collateral delivered pursuant to this Section 6.13 (other than Substitution Deposits) shall not exceed ten percent (10%) of the aggregate Valuation of all Mortgaged Properties in the Collateral Pool, and (ii) in the event the Coverage and LTV Tests (without regard to the Additional Collateral) are not satisfied within one year after delivery of the Additional Collateral, Borrower shall be required to prepay the Advances Outstanding in an amount determined by Lender to cause the Coverage and LTV Tests to be satisfied, and the Lender may draw on such Additional Collateral and use the monies to make such prepayment. Any Advances required to be prepaid pursuant to the preceding sentence shall be selected by the Borrower and, in addition to the prepayment of the related Notes, Borrower shall pay all associated prepayment premiums and other amounts due under the Notes being prepaid.

Section 6.14. Letters of Credit.

(a)  Letter of Credit Requirements . If Borrower provides Lender with a Letter of Credit pursuant to this Agreement, the Letter of Credit shall be in form and substance satisfactory to Lender and Lender shall be entitled to draw under such Letter of Credit solely upon presentation of a sight draft to the LOC Bank. Any Letter of Credit shall be for a term of at least 364 days. Any Letter of Credit shall be issued by a financial institution satisfactory to Lender and shall have its long-term debt obligations and its short-term debt obligations rated in accordance with the requirements of Fannie Mae then in effect.

(b)  Draws Under Letter of Credit . Lender shall have the right to draw monies under the Letter of Credit:

(i) upon the occurrence of (A) an Event of Default; or (B) a Potential Event of Default of which the Borrower has knowledge has occurred and continued for two (2) Business Days;

(ii) if 30 days prior to the expiration of the Letter of Credit, the Letter of Credit has not been extended for a term of at least 364 days or has not been substituted with a replacement Letter of Credit which satisfies the requirements of this Agreement; or

(iii) upon the downgrading of the ratings of the long-term or short term debt obligations of the LOC Bank below the requirements of Fannie Mae then in effect, provided Borrower does not immediately take action to substitute the Letter of Credit with a replacement Letter of Credit which satisfies the requirements of this Agreement and does not deliver such replacement Letter of Credit within thirty (30) days of such downgrading.

(c)  Deposit to Cash Collateral Agreement . If Lender draws under the Letter of Credit pursuant to Section 6.15(b)(ii) or (iii) above, Lender shall deposit such draw monies into the Cash Collateral Account, pursuant to the terms of the Cash Collateral Agreement.

(d)  Default Draws . If Lender draws under the Letter of Credit pursuant to Section 6.15(b)(i) above, Lender shall have the right to use monies drawn under the Letter of Credit for any of the following purposes:

(i) to pay any amounts required to be paid by Borrower under the Loan Documents (including, without limitation, any amounts required to be paid to Lender under this Agreement);

(ii) to (on such Borrower’s behalf, or on its own behalf if Lender becomes the owner of the Mortgaged Property) prepay any Note;

(iii) to make improvements or repairs to any Mortgaged Property which Lender determines are necessary to ensure that the Mortgaged Property meets the requirements set forth in the Loan Documents; or

(iv) to deposit monies into the Cash Collateral Account.

(e)  Legal Opinion . Prior to or simultaneous with the delivery of any new Letter of Credit (but not the extension of any existing Letter of Credit), such Borrower shall cause the LOC Bank’s counsel to deliver a legal opinion substantially in the form of Exhibit W-1 or Exhibit W-2 , as applicable, and in any event satisfactory in form and substance to the Lender in the Lender’s reasonable discretion.

ARTICLE 7
REPRESENTATIONS AND WARRANTIES

Section 7.01. Representations and Warranties of Borrower .

The representations and warranties of Borrower Parties are contained in the Certificate of Borrower Parties.

Section 7.02. Representations and Warranties of Lender .

Lender hereby represents and warrants to Borrower as follows as of the date hereof:

(a)  Due Organization . Lender is a corporation duly organized, validly existing and in good standing under the laws of Ohio.

(b)  Power and Authority . Lender has the requisite power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.

(c)  Due Authorization . The execution and delivery by Lender of this Agreement, and the consummation by it of the transactions contemplated thereby, and the performance by it of its obligations thereunder, have been duly and validly authorized by all necessary action and proceedings by it or on its behalf.

ARTICLE 8
AFFIRMATIVE COVENANTS OF BORROWER AND GUARANTOR

Borrower agrees and covenants with Lender that, at all times during the Term of this Agreement:

Section 8.01. Compliance with Agreements.

(a) Borrower and Guarantor shall comply with all the terms and conditions of each Loan Document to which it is a party or by which it is bound; provided, however, that Borrower’s or Guarantor’s failure to comply with such terms and conditions shall not be an Event of Default until the expiration of the applicable notice and cure periods, if any, specified in the applicable Loan Document.

(b) Borrower shall comply with all the material terms and conditions of any building permits or any conditions, easements, rights-of-way or covenants of record, restrictions of record or any recorded or, to the extent Borrower has knowledge thereof, unrecorded agreement affecting or concerning any Mortgaged Property including planned development permits, condominium declarations, and reciprocal easement and regulatory agreements with any Governmental Authority; provided, however, that Borrower’s failure to comply with such terms and conditions shall not be an Event of Default until the expiration of the applicable notice and cure periods, if any, specified in the applicable document.

Section 8.02. Maintenance of Existence .

(a) Each Borrower Party shall maintain its existence and continue to be organized under the laws of the state of its organization. Borrower shall continue to be duly qualified to do business in each jurisdiction in which such qualification is necessary to the conduct of its business and where the failure to be so qualified would adversely affect the validity of, the enforceability of, or the ability to perform, its obligations under this Agreement or any other Loan Document.

(b) During the Term of this Agreement, REIT Guarantor shall qualify, and be taxed as, a real estate investment trust under Subchapter M of the Internal Revenue Code and will not be engaged in any activities which would reasonably be anticipated to jeopardize such qualification and tax treatment.

Section 8.03. Financial Statements; Accountants’ Reports; Other Information .

(a) Each Borrower Party shall keep and maintain at all times at the address set forth in Section 15.08 of this Agreement, and upon Lender’s request shall make available at the Mortgaged Property, complete and accurate books of accounts and records (including copies of supporting bills and invoices) in sufficient detail to correctly reflect (i) all of Borrower’s and Guarantor’s financial transactions and assets, and (ii) the results of the operation of each Mortgaged Property, and copies of all written contracts, Leases and other instruments which affect each Mortgaged Property (including all bills, invoices and contracts for electrical service, gas service, water and sewer service, waste management service, telephone service and management services, if any). The books, records, contracts, Leases and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

(b) In addition, each Borrower and Guarantor (with respect to clauses (i), (ii), (iii), (ix) and (xi) set forth below) shall furnish, or cause to be furnished, to Lender:

(i)  Annual Financial Statements . As soon as available, and in any event within ninety (90) days after the close of its fiscal year during the Term of this Agreement, the balance sheet showing all assets and liabilities of Borrower and REIT Guarantor as of the end of such fiscal year, the statement of income, expenses, equity and retained earnings of Borrower’s operation and REIT Guarantor’s operation for such fiscal year, and the statement of changes in financial position and cash flows of Borrower and REIT Guarantor for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the prior fiscal year, prepared in accordance with GAAP consistently applied and accompanied by a certificate of REIT Guarantor’s independent certified public accountants to the effect that such financial statements have been reviewed by such accountants, and that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated, with such certification to be free of exceptions and qualifications as to the scope of the audit as to the going concern nature of the business and accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender stating that such financial statements fairly present the results of its operations and financial condition for the periods and dates indicated;

(ii)  Quarterly Financial Statements . As soon as available, and in any event within forty five (45) days after each of the first three fiscal quarters of each fiscal year during the Term of this Agreement, the unaudited balance sheet showing all assets and liabilities of Borrower as of the end of such fiscal quarter, the unaudited statement of income, expenses, equity and retained earnings of Borrower and the unaudited statement of changes in financial position and cash flows of Borrower for the portion of the fiscal year ended with the last day of such quarter, and if required by Lender, a statement of income and expenses of each Mortgaged Property for the prior month, all prepared in accordance with GAAP and in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the previous fiscal year, accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender stating that such financial statements have been prepared in accordance with GAAP, consistently applied, and fairly present the results of its operations and financial condition for the periods and dates indicated, subject to year end adjustments in accordance with GAAP;

(iii)  Quarterly Property Statements . As soon as available, and in any event within forty five (45) days after each Calendar Quarter, a statement of income and expenses of each Mortgaged Property prepared in accordance with GAAP and accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of each such Mortgaged Property for the period indicated;

(iv)  Annual Property Statements . On an annual basis within forty five (45) days after the close of its fiscal year, an annual statement of income and expenses of each Mortgaged Property accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender to the effect that each such statement of income and expenses fairly, accurately and completely presents the operations of each such Mortgaged Property for the period indicated;

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

(vi)  Updated Rent Rolls . Within 120 days after the end of each fiscal year of each Borrower, and at any other time upon Lender’s request, a current Rent Roll for each Mortgaged Property, showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid and any other information requested by Lender and accompanied by a certificate of an authorized representative of Borrower reasonably acceptable to Lender to the effect that each such Rent Roll fairly, accurately and completely presents the information required therein;

(vii)  Security Deposit Information . Within 120 days after the end of each fiscal year of Borrower, and at any other time upon Lender’s request, an accounting of all security deposits held in connection with any Lease of any part of any Mortgaged Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name and telephone number of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts;

(viii)  Accountants’ Reports; Other Reports . Promptly upon receipt thereof: (1) copies of any reports or management letters submitted to Borrower by its independent certified public accountants in connection with the examination of its financial statements made by such accountants (except for reports otherwise provided pursuant to subsection (a) above); provided, however, that Borrower shall only be required to deliver such reports and management letters to the extent that they relate to Borrower or any Mortgaged Property; and (2) all schedules, financial statements or other similar reports delivered by Borrower pursuant to the Loan Documents or requested by Lender with respect to Borrower’s business affairs or condition (financial or otherwise) or any of the Mortgaged Properties;

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

(x)  Annual Budgets . Prior to the start of its fiscal year, an annual budget for each Mortgaged Property for such fiscal year, setting forth an estimate of all of the costs and expenses, including capital expenses, of maintaining and operating each Mortgaged Property; and

(xi)  Federal Tax Returns . Within thirty (30) days of filing, the Federal tax return of Borrower and REIT Guarantor.

(c) Each of the statements, schedules and reports required by Section 8.03 shall be certified to be complete and accurate by an individual having authority to bind Borrower, and shall be in such form and contain such detail as Lender may reasonably require. Lender also may require that any statements, schedules or reports be audited at Borrower’s expense by independent certified public accountants acceptable to Lender.

(d) If Borrower fails to provide in a timely manner the statements, schedules and reports required by Section 8.03 , Lender shall have the right to have Borrower’s books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender shall become immediately due and payable and shall become an additional part of the Indebtedness as provided in Section 12 of each Security Instrument.

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

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

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

Section 8.04. Access to Records; Discussions With Officers and Accountants.

To the extent permitted by law and in addition to the applicable requirements of the Security Instruments, Borrower shall permit Lender to:

(a) inspect, make copies and abstracts of, and have reviewed or audited, such of Borrower’s books and records as may relate to the Obligations or any Mortgaged Property;

(b) at any time discuss Borrower’s affairs, finances and accounts with Borrower’s senior management or property managers and independent public accountants; after an Event of Default, discuss Borrower’s affairs, finances and account with Guarantor’s officers, partners and employees;

(c) discuss the Mortgaged Properties’ conditions, operations or maintenance with the managers of such Mortgaged Properties, the officers and employees of Borrower and/or the Guarantor; and

(d) receive any other information that Lender reasonably deems necessary or relevant in connection with any Advance, any Loan Document or the Obligations from the officers and employees of such Borrower or third parties.

Notwithstanding the foregoing, prior to an Event of Default or Potential Event of Default and in the absence of an emergency, all inspections shall be conducted at reasonable times during normal business hours upon reasonable notice to Borrower.

Section 8.05. Certificate of Compliance.

Borrower shall deliver to Lender concurrently with the delivery of the financial statements and/or reports required by Section 8.03(a) and Section 8.03(b) a certificate signed by an authorized representative of Borrower reasonably acceptable to Lender (i) setting forth in reasonable detail the calculations required to establish whether Borrower and Guarantor were in compliance with the requirements of Article 8 of this Agreement on the date of such financial statements, and (ii) stating that, to the best knowledge of such individual following reasonable inquiry, no Event of Default or Potential Event of Default has occurred, or if an Event of Default or Potential Event of Default has occurred, specifying the nature thereof in reasonable detail and the action Borrower is taking or proposes to take. Any certificate required by this Section shall run directly to and be for the benefit of Lender and Fannie Mae.

Section 8.06. Maintain Licenses.

Borrower shall procure and maintain in full force and effect all licenses, Permits, charters and registrations which are material to the conduct of its business and shall abide by and satisfy all terms and conditions of all such licenses, Permits, charters and registrations.

Section 8.07. Inform Lender of Material Events.

Borrower shall promptly inform Lender in writing of any of the following (and shall deliver to Lender copies of any related written communications, complaints, orders, judgments and other documents relating to the following) of which Borrower has actual knowledge:

(a)  Defaults . The occurrence of any Event of Default or any Potential Event of Default under this Agreement or any other Loan Document;

(b)  Regulatory Proceedings . The commencement of any rulemaking or disciplinary proceeding or the promulgation of any proposed or final rule which would have, or may reasonably be expected to have, a Material Adverse Effect; the receipt of notice from any Governmental Authority having jurisdiction over Borrower that (i) Borrower is being placed under regulatory supervision, (ii) any license, Permit, charter, membership or registration material to the conduct of Borrower’s business or the Mortgaged Properties is to be suspended or revoked or (iii) Borrower is to cease and desist any practice, procedure or policy employed by

Borrower in the conduct of its business, and such cessation would have, or may reasonably be expected to have, a Material Adverse Effect;

(c)  Bankruptcy Proceedings . The commencement of any proceedings by or against Borrower or Guarantor under any applicable bankruptcy, reorganization, liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official is sought to be appointed for it;

(d)  Environmental Claim . The receipt from any Governmental Authority or other Person of any notice of violation, claim, demand, abatement, order or other order or direction (conditional or otherwise) for any damage, including personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, pollution, contamination or other adverse effects on the environment, removal, cleanup or remedial action or for fines, penalties or restrictions, resulting from or based upon (i) the existence or occurrence, or the alleged existence or occurrence, of a Hazardous Substance Activity on any Mortgaged Property in violation of any law or (ii) the violation, or alleged violation, of any Hazardous Materials Laws in connection with any Mortgaged Property or any of the other assets of Borrower;

(e)  Material Adverse Effects . The occurrence of any act, omission, change or event (including the commencement or written threat of any proceedings by or against Borrower in any Federal, state or local court, or before any Governmental Authority, or before any arbitrator), that has, or would have, a Material Adverse Effect, subsequent to the date of the most recent audited financial statements of Borrower delivered to Lender pursuant to Section 8.03 ;

(f)  Accounting Changes . Any material change in Borrower’s accounting policies or financial reporting practices;

(g)  Legal and Regulatory Status . The occurrence of any act, omission, change or event, including any Governmental Approval, the result of which is to change or alter in any way the legal or regulatory status of Borrower; and

(h) Change in Senior Management . Any change in the identity of Senior Management.

Section 8.08. Compliance with Applicable Law.

Borrower shall comply in all material respects with all Applicable Laws now or hereafter affecting any Mortgaged Property or any part of any Mortgaged Property or requiring any alterations, repairs or improvements to any Mortgaged Property. Borrower shall procure and continuously maintain in full force and effect, and shall abide by and satisfy all material terms and conditions of all Permits, and shall comply with all written notices from Governmental Authorities.

Section 8.09. Alterations to the Mortgaged Properties.

Except as otherwise provided in the Loan Documents, Borrower shall have the right to undertake any alteration, improvement, demolition, removal or construction (collectively, “ Alterations ”) to the Mortgaged Property which it owns without the prior consent of Lender; provided, however, that in any case, no such Alteration shall be made to any Mortgaged Property without the prior written consent of Lender if (i) such Alteration could reasonably be expected to adversely affect the value of such Mortgaged Property or its operation as a multifamily housing facility in substantially the same manner in which it is being operated on the date such property became Collateral, (ii) the construction of such Alteration could reasonably be expected to result in interference to the occupancy of tenants of such Mortgaged Property such that tenants in occupancy with respect to five percent (5%) or more of the Leases would be permitted to terminate their Leases or to abate the payment of all or any portion of their rent, or (iii) such Alteration will be completed in more than twelve (12) months from the date of commencement or in the last year of the Term of this Agreement. Notwithstanding the foregoing, Borrower must obtain Lender’s prior written consent to construct Alterations with respect to the Mortgaged Property costing in excess of, with respect to any Mortgaged Property, the number of bedrooms in such Mortgaged Property multiplied by $2,000, but in any event, costs in excess of $250,000 and Borrower must give prior written notice to Lender of its intent to construct Alterations with respect to such Mortgaged Property costing in excess of $100,000; provided, however, that the preceding requirements shall not be applicable to Alterations made, conducted or undertaken by Borrower as part of Borrower’s routine maintenance and repair of the Mortgaged Properties as required by the Loan Documents.

Section 8.10. Loan Document Taxes.

If any tax, assessment or Imposition (other than a franchise tax or excise tax imposed on or measured by, the net income or ca