DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS

Exhibit 10.8

BE ADVISED THAT THE PROMISSORY NOTE SECURED BY THIS SECURITY INSTRUMENT PROVIDE FOR A VARIABLE RATE OF INTEREST AND A BALLOON PAYMENT AT MATURITY.

DEED TO SECURE DEBT, SECURITY AGREEMENT AND

ASSIGNMENT OF LEASES AND RENTS

Loan No. 62-5204531

THIS DEED TO SECURE DEBT, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS (this " Security Instrument "), is made effective as of September 11, 2008 between FOX STRATEGIC HOUSING INCOME PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP , the address of which is 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, as grantor (" Borrower "); and WASHINGTON MUTUAL BANK , a federal association, at its mailing address at National Commercial Operations Center, Attention: CREL Portfolio Administration, 3929 West John Carpenter Freeway, Irving, Texas 75063, as grantee (" Lender ").  This Security Instrument is made in connection with the loan (the " Loan ") evidenced by the Note (as defined in Section 3 below).

1.

GRANTING CLAUSE .  Borrower, in consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to secure the obligations described in Section 3 below, irrevocably grants, bargains, sells, assigns and conveys to Lender and its successors and assigns, forever, with power of sale, all of Borrower's estate, right, title, interest, claim and demand in and to the property in the county of Cobb, state of Georgia, with a street address of 100 Pinhurst N.W., Atlanta, Georgia (which address is provided for reference only and shall in no way limit the description of the real and personal property otherwise described in this Section 1 ), described as

follows, whether now existing or hereafter acquired  (all of the property described in all parts of this Section 1 and all additional property, if any, described in Section 2 is called the " Property "):

1.1

Land and Appurtenances .  The land described on Exhibit A hereto (the " Land "), and all tenements, hereditaments, rights-of-way, easements, appendages and appurtenances thereto belonging or in any way appertaining, including without limitation (a) all of the right, title and interest of Borrower in and to any avenues, streets, ways, alleys, vaults, strips or gores that adjoin the Land and solely serving the Property, (b) all rights to water, water stock, drains, drainage and air rights to the extent serving the Property, and (c) all claims or demands of Borrower either in law or in equity in possession or expectancy of, in and to the Property; and

1.2

Improvements and Fixtures .  All buildings, structures and other improvements now or hereafter erected on the property described in Section 1.1 above (collectively, the " Improvements "), and all facilities, fixtures, machinery, apparatus, installations, goods, equipment, inventory, furniture, building materials and supplies and other properties of whatsoever nature, now or hereafter located in or on that property, it being the intention of the parties that all property of the character described above that is now owned or hereafter acquired by Borrower and that is affixed or attached to, stored upon or used in connection with the property described in Section 1.1 above shall be, remain or become a portion of that property and shall be covered by and subject to the lien of this Security Instrument, together with all contracts, agreements, permits, plans, specifications, drawings, surveys, engineering reports and other work products relating to the design, construction, supply or installation of the existing or any future improvements or fixtures on the Property, any and all rights of Borrower in, to or under any architect's contracts, engineer's contracts or construction contracts relating to the design or construction of the existing or any future improvements on the Property, and any performance and/or payment bonds issued in connection therewith, together with all trademarks, trade names, copyrights, computer software and other intellectual property used by Borrower in connection with the Property, provided however, that nothing contained in this Section shall be deemed a grant of any intellectual property that applies to any other entity or property, other than Borrower and the Property; and

1.3

Enforcement and Collection .  Any and all rights of Borrower in and to, and to make claim for, collect, receive and receipt for, any and all rents, income, revenues, issues, earnest money, deposits, refunds (including but not limited to refunds from property taxing authorities, utilities and insurers), royalties, and profits, including mineral, oil and gas rights and profits, Insurance Proceeds (hereinafter defined and subject to the provisions set forth herein regarding the Insurance Proceeds) of any kind (whether or not Lender requires such insurance and whether or not Lender is named as an additional insured or loss payee of such insurance), condemnation awards and other moneys, payable or receivable from or on account of any of the Property, including interest thereon, or to enforce all other provisions of any other agreement (including those described in Section 1.2 above) affecting or relating to any of the Property, to bring any suit in equity, action at law or other proceeding for the collection of such moneys or for the specific or other enforcement of any such agreement, award or judgment, in the name of Borrower or otherwise, and to do any and all things that Borrower is or may be or become entitled to do with respect thereto, provided, however, that no obligation of Borrower under the provisions of any such agreements, awards or judgments shall be impaired or diminished by virtue hereof, nor shall any such obligation be imposed upon Lender; and

1.4

Accounts and Income .  Any and all rights of Borrower in any and all accounts, rights to payment, contract rights, chattel paper, documents, instruments, licenses, contracts, agreements and general intangibles relating to any of the Property, including, without limitation, income and profits derived from the operation of any business on the Property or attributable to services that occur or are provided on the Property or generated from the use and operation of the Property and any reserve accounts for the purpose of funding tenant improvements, leasing commissions and/or interest reserves; and

1.5

Leases .  All of Borrower's rights as landlord in and to all existing and future leases and tenancies, whether written or oral and whether for a definite term or month to month or otherwise, now or hereafter demising all or any portion of the property described in Sections 1.1 and 1.2 above, including all renewals and extensions thereof and all rents, deposits and other amounts received or receivable thereunder, and including all guaranties, supporting obligations, letters of credit (whether tangible or electronic) and letter of credit rights guaranteeing or supporting any such lease or tenancy (in accepting this Security Instrument Lender assumes no liability for the performance of any such lease); and

1.6

Books and Records .  All books and records of Borrower relating to the foregoing in any form.

2.

SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS .

2.1

Security Agreement .  To the extent any of the property described in Section 1 is personal property, Borrower, as debtor, grants to Lender, as secured party, a security interest therein together with a security interest in Borrower's interest in all other personal property of whatsoever nature that is located on or used or to be used in connection with any of the property described in Section 1 , and any products or proceeds of any thereof, pursuant to the Uniform Commercial Code of the state of Georgia (the " UCC "), on the terms and conditions contained herein.  Borrower hereby authorizes Lender to file any financing statement, fixture filing or similar filing to perfect the security interests granted in this Security Instrument without Borrower's signature.  Borrower shall: (a) execute and deliver such documents as Lender reasonably deems necessary to create, perfect and continue the security interests contemplated by this Security Instrument; (b) not change its name, or, as applicable, its chief executive office, its principal residence (or, if Borrower is a trust or one or more trustees acting with respect to property held in trust, the identity or principal residence of any trustee), the jurisdiction in which it is organized, or otherwise change its location (as that term is used in Article 9 of the UCC), without giving Lender at least thirty (30) days' prior written notice thereof; and (c) reasonably cooperate with Lender in perfecting all security interests granted in this Security Instrument and in obtaining such agreements from third parties as Lender reasonably deems necessary, proper or desirable in connection with the preservation, perfection or enforcement of any of Lender's rights under this Security Instrument.

2.2

Assignment of Leases and Rents .

(a)

Absolute Assignment .  Borrower hereby absolutely and unconditionally grants, transfers, conveys, sells, sets over and assigns to Lender all of Borrower's right, title and interest now existing and hereafter arising in and to the leases, subleases, concessions, licenses, franchises, occupancy agreements, tenancies, subtenancies and other agreements, either oral or written, now existing and hereafter arising which affect the Property, Borrower's interest therein or any improvements located thereon, together with any and all security deposits, guaranties of the lessees' or tenants' obligations (including any and all security therefor), and other security under any such leases, subleases, concessions, licenses, franchises, occupancy agreements, tenancies, subtenancies and other agreements, and all supporting obligations, letters of credit (whether tangible or electronic) and letter of credit rights guaranteeing or supporting any of the foregoing (all of the foregoing, and any and all extensions, modifications and renewals thereof, shall be referred to, collectively, as the " Leases "), and hereby gives to and confers upon Lender, following an Event of Default, the right to collect all the income, rents, issues, profits, royalties and proceeds from the Leases and any business conducted on the Property and any and all prepaid rent and security deposits thereunder (collectively, the " Rents ").  The term "Rents" includes, but is not limited to all minimum rents, additional rents, percentage rents, deficiency rents, common area maintenance charges, lease termination payments, purchase option payments, refunds of any type, prepayment of rents, settlements of litigation, settlements of past due rents, and liquidated damages following default, and all proceeds payable under any policy of insurance covering loss of rents, together with any and all rights and claims of any kind that Borrower may have against any tenant under the Leases or any other occupant of the Property.  This Security Instrument is intended by Lender and Borrower to create and shall be construed to create an absolute assignment to Lender of all of Borrower's right, title and interest in and to the Leases and the Rents and shall not be deemed merely to create a security interest therein for the payment of any indebtedness or the performance of any obligations under the Loan Documents (as defined below), subject to the licenses in favor of Borrower as set forth herein.  Borrower irrevocably appoints Lender its true and lawful attorney at the option of Lender at any time following an Event of Default to demand, receive and enforce payment, to give receipts, releases and satisfactions and to sue, either in the name of Borrower or in the name of Lender, for all such Rents and apply the same to the Secured Obligations.

(b)

Revocable License to Collect .  Notwithstanding the foregoing assignment of Rents, so long as no Event of Default (as defined below) remains uncured, Borrower shall have a revocable license, to collect all Rents, and to retain any portion thereof not required to pay the expenses of the Property or the obligations secured thereby and to otherwise act as the landlord or lessee under the Leases, subject to the terms hereof.  Upon any Event of Default, Borrower's license to collect and retain Rents shall terminate automatically and without the necessity for any notice except for any notice expressly required by the terms hereof.

(c)

Collection and Application of Rents by Lender .  While any Event of Default remains uncured:  (i) Lender may at any time, without notice except for any notice expressly required by the terms hereof, in person, by agent or by court-appointed receiver, and without regard to the adequacy of any security for the Secured Obligations, enter upon any portion of the Property and/or, with or without taking possession thereof, in its own name sue for or otherwise collect Rents (including past due amounts); and (ii) following demand by Lender, Borrower shall promptly deliver to Lender all prepaid rents, deposits relating to Leases or Rents, and all other Rents then held by Borrower or collected by Borrower during the continuance of any Event of Default.  Any Rents collected by or delivered to Lender may be applied by Lender against the Secured Obligations, less all expenses, including reasonable attorneys' fees and disbursements, in such order as Lender shall determine in its sole and absolute discretion.  No application of Rents against any Secured Obligation or other action taken by Lender under this Section 2.2 shall be deemed or construed to cure or waive any Event of Default, or to invalidate any other action taken in response to such Event of Default, or to make Lender a mortgagee-in-possession of the Property.

(d)

Direction to Tenants .  Borrower hereby irrevocably authorizes and directs the tenants under all Leases to pay all amounts owing to Borrower thereunder to Lender following receipt of any written notice from Lender that states that an Event of Default remains uncured and that all such amounts are to be paid to Lender. Borrower further authorizes and directs all such tenants to pay all such amounts to Lender without any right or obligation to inquire as to the validity of Lender's notice and regardless of the fact that Borrower has notified any such tenants that Lender's notice is invalid or has directed any such tenants not to pay such amounts to Lender.

Notwithstanding any provision in Section 1 or Section 2 herein to the contrary, the term " Property " shall not include any interest in, and no fee or other interest is conveyed or assigned in, any adjoining property now owned or hereafter acquired by Borrower or any improvements thereon or personal property thereon or used with respect thereto or other collateral described above to the extent not relating to the Land and shall not include any rights in any other Lease or payments or rights thereunder with respect to any property other than the Land and the improvements thereon.

3.

OBLIGATIONS SECURED .   This Security Instrument is given for the purpose of securing the following (the " Secured Obligations "):

3.1

Performance and Payment .  The performance of the obligations contained herein and in the Loan Documents, and the payment of $13,800,000.00 with interest thereon and all other amounts payable according to the terms of the promissory note having a maturity date of September 11, 2013 (the " Note ") of even date herewith in such amount made by Borrower, payable to Lender or order, and any and all extensions, renewals, modifications or replacements of either thereof, whether the same be in greater or lesser amounts.  The Note provides for a variable rate of interest and a balloon payment at maturity.

3.2

Future Advances .  The repayment of any and all sums advanced or expenditures made by Lender subsequent to the execution of this Security Instrument for the construction of improvements on the Property, or the maintenance or preservation of the Property or advanced or expended by Lender for any other purpose pursuant to any provision of this Security Instrument or the other Loan Documents on or after the date hereof, together with interest thereon. Borrower intends that all such advances, whenever made and whether or not Lender is obligated to make the same, shall be secured by this Security Instrument and shall be a lien on the Property having priority as of the date this Security Instrument is recorded.

3.3

Other Amounts .  All other obligations and amounts now or hereafter owing by Borrower to Lender under this Security Instrument, the Note or any other document, instrument or agreement evidencing, securing or otherwise relating to the Loan and any and all extensions, renewals, modifications or replacements of any thereof (collectively, the " Loan Documents "); provided, however, that this Security Instrument does not and shall not in any event be deemed to, secure the obligations owing to Lender under: (a) any certificate and indemnity agreement regarding hazardous substances (the " Indemnity Agreement ") executed in connection with the Loan (or any obligations that are the substantial equivalent thereof); or (b) any guaranty of the Loan.

4.

WARRANTIES AND COVENANTS OF BORROWER .   Borrower warrants, covenants, and agrees:

4.1

Warranties .

(a)

Borrower has full power and authority to grant the Property to Lender and warrants the Property to be free and clear of all liens, charges, and other monetary encumbrances except those appearing in the title insurance policy accepted by Lender in connection with this Security Instrument.

(b)

To the best of Borrower's information, knowledge and belief, the Property is free from damage and no matter has come to Borrower's attention (including, but not limited to, knowledge of any construction defects or nonconforming work) that would materially impair the value of the Property as security.

(c)

The Loan is primarily for commercial, industrial or business purposes and is not primarily for personal, family or household purposes.

4.2

Preservation of Lien .  Borrower will preserve and protect the priority of this Security Instrument as a first (1st) lien on the Property.  If Borrower fails to do so within any notice and cure period for herein, Lender may take any and all actions necessary or appropriate to do so and all sums expended by Lender in so doing shall be treated as part of the Secured Obligations, shall be paid by Borrower within ten (10) days of demand by Lender and shall bear interest at the highest rate borne by any of the Secured Obligations.

4.3

Repair and Maintenance of Property .  Borrower will keep the Property in good condition and repair, which duty shall, other than modifications, include but is not limited to cleaning, painting, landscaping, repairing, and refurbishing of the Property; will complete and not remove or demolish, alter, or make additions to any building or other improvement that is part of the Property (other than the redevelopment work described on Exhibit B attached hereto), or construct any new structure on the Property, without the express written consent of Lender (not to be unreasonably withheld); will underpin and support when necessary any such building or other improvement and protect and preserve the same; will, to the extent any insurance or condemnation proceeds received in connection therewith are made available to Borrower and otherwise in accordance with the provisions of Section 4.4.6, complete or restore promptly and in good and workmanlike manner any such building or other improvement that may be damaged or destroyed and pay when due all claims for labor performed and materials furnished therefor; will not, to the extent in Borrower's reasonable control, commit, suffer, or permit any act upon the Property in violation of law; and will do all other acts that from the character or use of the Property may be reasonably necessary for the continued operation of the Property in a reasonably safe and legal manner, the specific enumerations herein not excluding the general.  If Lender at any time reasonably determines that Borrower is not maintaining and repairing the Property in accordance with the terms of the Security Instrument (including the expiration of any applicable notice or cure rights), Lender may, by written notice to Borrower and without waiving any of its other rights or remedies hereunder or under the other Loan Documents, require that Borrower begin funding a reserve (the " Deferred Maintenance Reserve "), to be held by Lender, with monthly deposits in an amount determined by Lender in its reasonable discretion and payable with each monthly payment on the Note.  If no Event of Default then exists, Lender shall from time to time release the funds in the Deferred Maintenance Reserve, if applicable, to Borrower to reimburse Borrower for the reasonable cost of reasonably required maintenance and repairs to the Property provided Borrower establishes to Lender's satisfaction (including provision of paid receipts for all such work and materials) that such work is carried out in a workmanlike fashion, free of liens, and consistent with such other reasonable requirements as Lender may impose.  Borrower shall execute a deferred maintenance reserve agreement on Lender's then-current form providing for the terms of the Deferred Maintenance Reserve in greater detail.  Borrower hereby grants Lender a lien on and security interest in any Deferred Maintenance Reserve established under this Security Instrument as security for the Note and all other Secured Obligations.

4.4

Insurance .

4.4.1

Property .   Borrower will provide and maintain, as further security for the faithful performance of the Secured Obligations, insurance covering fire and other perils substantially equivalent to those insured under the Causes of Loss—Special Form published by the Insurance Service Office (" ISO "), with boiler and machinery coverage and customary coverage against such other perils as may be specified by Lender (including insurance against earthquake/earth movement and/or against terrorism, if customary and required by Lender on a case-by-case basis) in an amount not less than 100% of the replacement cost of the Property.  Such insurance must include an ordinance or law coverage endorsement if the Property does not conform to applicable zoning or land use laws.  If Lender permits coverage of less than 100% replacement cost in its sole discretion, then such policy must contain an agreed amount endorsement covering at least 80% of such replacement cost.  Such insurance policy or policies shall include rental income and business income interruption coverage as more specifically described in Section 4.4.3 below.  If any of the improvements on the Property are at any time located in a federally-designated special flood hazard area in which flood insurance is available, Borrower must provide Lender with flood insurance in an amount, and with customary deductibles, as specified by Lender.  All policies of insurance on the Property, whether or not required by the terms of this Security Instrument (including but not limited to earthquake/earth movement insurance), shall name Lender as mortgagee and loss payee pursuant to a mortgage endorsement on a form acceptable to Lender, which form must provide that Lender will not have its interest voided by the act or omission of Borrower and that Lender may file a claim directly with the insurer (an " Acceptable Mortgage Endorsement ").  Lender shall have the right to control or direct the proceeds of all such policies of insurance, whether or not required by the terms of this Security Instrument, as provided in Section 4.4.6 below, and all proceeds thereof are hereby assigned to Lender as security for the Secured Obligations.  Each policy of insurance must have a customary deductible of an amount satisfactory to Lender in its sole, but reasonable, discretion.  Borrower shall be responsible for all uninsured losses and deductibles.  

4.4.2

Liability .  Borrower will maintain commercial general liability insurance on an occurrence form substantially equivalent to ISO form CG 0001 covering the legal liability of Borrower against claims occurring on, in, or about the Property with coverage of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate, naming Lender an additional insured and having a deductible of an amount satisfactory to Lender in its sole discretion.

4.4.3

Income Interruption .  Borrower will maintain income interruption insurance in an amount equal to at least twelve (12) months' gross rental income from the Property as such gross rental income is determined by Lender from time to time, and naming Lender as loss payee on an Acceptable Mortgage Endorsement.  The amount collected under any and all income interruption insurance on the Property, whether or not required by this Security Instrument, shall be applied as provided in Section 4.4.6 .

4.4.4

Changes in Insurance Requirements .  Lender may change its insurance requirements from time to time throughout the term of the Secured Obligations by giving notice of such changes to Borrower.  Without limiting the generality of the foregoing, Borrower shall from time to time obtain such additional coverages or make such increases in the amounts of existing coverage as may be required by written notice from Lender.

4.4.5

General Provisions .  All policies of insurance required to be maintained by Borrower pursuant to this Section 4.4 shall:  (i) be primary and noncontributory with any other insurance Borrower may carry; and (ii) be in form and substance and with companies acceptable to Lender, in its reasonable discretion, which are authorized to conduct business in the state in which the Property is located and which have a current rating from the Best Key Rating Guide that is acceptable to Lender, provided, however, that blanket coverage shall be acceptable if (a) the policy includes limits by property location and (b) the Lender determines in the exercise of its reasonable discretion that the amount of such coverage is sufficient in light of the other risks and properties insured under the blanket policy. For purposes of this Section 4.4.5, an insurance company will be acceptable to Lender if it has a rating in Best Key Rating Guide of at least "A-" and a financial size category of at least "v." Lender reserves the right, in its reasonable discretion, to increase the amount of the required coverages, require insurance against additional risks, or withdraw approval of any insurance company at any time. Borrower shall deliver to Lender evidence (in such form as Lender may require) of all insurance coverage on the Property and, if requested by Lender, a certified copy of all policies of such insurance.  Borrower shall obtain renewals or replacements of any policies that expire and deliver evidence of such renewals to Lender no later than the expiration date of the policy being renewed or replaced.  All policies and renewals thereof shall contain provision for ten (10) days' notice to Lender prior to cancellation for nonpayment of premiums and thirty (30) days' notice to Lender prior to cancellation for any other reason.  If Borrower fails to maintain insurance in accordance with this Security Instrument and the other Loan Documents, Lender may, but need not, obtain insurance to protect Lender's interest in the Property (" Forced Placed Insurance ").  For instance, without limitation, Lender may obtain Forced Placed Insurance if: (a) Borrower fails to deliver to Lender, prior to the expiration of any such required insurance coverage, evidence satisfactory to Lender that Borrower has renewed or replaced such coverage; (b) the amount of insurance is reduced below Lender's requirements; (c) the deductible is increased above Lender's requirements; or (d) the insurer providing the insurance does not meet Lender's insurance company rating requirements.

4.4.6

Damage and Destruction .

(a)

Borrower's Obligations .  As used in this Security Instrument, the term " Casualty Threshold Amount " means $350,000.00.  In the event of any damage to or loss or destruction of the Property (a " Casualty "): (i) if it could reasonably be expected to cost more than the Casualty Threshold Amount to repair the Casualty, Borrower shall give prompt written notice of the Casualty to Lender and, if making a claim under an insurance policy providing coverage therefore, to Borrower's insurer; (ii) Borrower shall take such actions as are necessary or appropriate to preserve and protect the Property; (iii) if the aggregate proceeds of any and all insurance policies insuring the Property, whether or not required by this Security Instrument, that are payable as a result of the Casualty (collectively, the " Insurance Proceeds ") could reasonably be expected to exceed the Casualty Threshold Amount, or if an Event of Default exists, Borrower shall take such actions as are necessary or appropriate to ensure that all Insurance Proceeds are paid to Lender forthwith to be held by Lender until applied to the Secured Obligations or disbursed in accordance with this Section 4.4.6 ; and (iv) unless otherwise instructed by Lender, regardless of whether the Insurance Proceeds, if any, are sufficient for the purpose, Borrower shall promptly commence and diligently pursue to completion in a good, workmanlike and lien-free manner the restoration, replacement and rebuilding of the Property as nearly as possible to its value, condition and character immediately prior to the Casualty (collectively, the " Restoration ").  If the Restoration will cost more than the Casualty Threshold Amount to repair, Borrower shall submit the proposed plans and specifications for the Restoration, and all construction contracts, architect's contracts, other contracts in connection with the Restoration, and such other documents as Lender may reasonably request to Lender for its review and approval, not to be unreasonably delayed by Lender.  Borrower shall not begin the Restoration unless and until Lender gives its written approval, not unreasonably withheld, of such plans, specifications, contracts and other documents, with such revisions as Lender may reasonably require.  Notwithstanding the foregoing, Lender shall not be responsible for the sufficiency, completeness, quality or legality of any such plans, specifications, contracts or other documents.  Borrower shall pay, within ten (10) days after demand by Lender, all costs reasonably incurred by Lender in connection with the adjustment, collection and disbursement of Insurance Proceeds pursuant to this Security Instrument or otherwise in connection with the Casualty or the Restoration. Notwithstanding the other terms set forth in this Security Instrument, Borrower shall not be obligated to complete Restoration if (i) there is no Event of Default under the Loan Documents, and (ii) Lender intends to apply, or has applied, the Insurance Proceeds to the Secured Obligations.

(b)

Lender's Rights .  Lender shall have the right and power to receive and control all Insurance Proceeds required to be paid to it pursuant to subsection (a)(iii) above.  So long as no Event of Default has occurred and is continuing at the time, (i) Borrower shall have the right to adjust, compromise and settle any claim under any insurance policy on the Property that is less than or equal to the Casualty Threshold Amount without the participation or consent of Lender and (ii) Lender shall have the right to participate in, and Lender's written consent, not to be unreasonably withheld, shall be required for, any adjustment, compromise or settlement of any such claim exceeding the Casualty Threshold Amount.  If an Event of Default has occurred and is continuing at the time, Borrower hereby irrevocably empowers Lender, in the name of Borrower, as Borrower's true and lawful attorney in fact, to commence, appear in, defend, prosecute, adjust, compromise and settle all claims under any insurance policy on the Property; provided, however, Lender shall not be responsible for any failure to undertake any or all of such actions regardless of the cause of the failure.  Borrower will pay Lender's expenses reasonably incurred in the adjustment, collection and disbursement of such Insurance Proceeds or otherwise in connection with the Casualty or the Restoration.  Each insurance company concerned is hereby irrevocably authorized and directed to make payment of all Insurance Proceeds directly to Lender.  Notwithstanding anything to the contrary, Lender shall not be responsible for any such insurance, the collection of any Insurance Proceeds, or the insolvency of any insurer.

(c)

Application of Proceeds .  If, at any time while Lender holds any Insurance Proceeds, an Event of Default exists or Lender determines in its reasonable discretion that the security for the Secured Obligations is impaired, Lender shall have the option, in its sole discretion, to apply the Insurance Proceeds to the Secured Obligations in such order as Lender may determine (or to hold such Insurance Proceeds for future application to the Secured Obligations).  Without limiting the generality of the foregoing, Lender's security will be deemed to be materially impaired only if: (i) an Event of Default exists; (ii) Borrower fails to satisfy any condition precedent to disbursement of Insurance Proceeds to pay the cost of the Restoration within a reasonable time; or (iii) Lender determines in its reasonable discretion that it could reasonably be expected that (A) Borrower will not have sufficient funds to complete the Restoration and timely pay all expenses of the Property and all payments due under the Note and the other Loan Documents through the completion of the Restoration and any leaseup period thereafter, (B) the rental income from the Property will be insufficient to timely pay all expenses of the Property and payments due under the Note and the other Loan Documents on an ongoing basis after completion of the Restoration, or (C) the Restoration cannot be completed at least six (6) months prior to the maturity date of the Note and within one (1) year after the date of the Casualty.

(d)

Disbursement of Proceeds .  If Lender is not entitled to apply the Insurance Proceeds to the Secured Obligations, Lender shall disburse the Insurance Proceeds for the Restoration from time to time as the Restoration progresses, but only after satisfaction, at Borrower's expense, of such conditions precedent to such disbursements as Lender may reasonably require including but not limited to the following:  (i) Borrower shall have delivered to Lender evidence reasonably satisfactory to Lender of the estimated cost of the Restoration; (ii) Lender shall have approved the plans, specifications and contracts for the Restoration if and as required by Section 4.4.6(a) ; (iii) Borrower shall have delivered to Lender funds in addition to the Insurance Proceeds in an amount sufficient in Lender's reasonable judgment to complete and fully pay for the Restoration; (iv) Borrower shall have delivered to Lender such building permits, other permits, architect's certificates, waivers of lien, contractor's sworn statements, title insurance endorsements, plats of survey and other evidence of cost, payment and performance as Lender may reasonably require and approve; and (v) if required by Lender, Borrower shall have entered into an agreement providing in greater detail for the Restoration, the disbursement of Insurance Proceeds and related matters.  No payment made prior to the final completion of the Restoration shall exceed ninety percent (90%) of the value of the work performed and materials incorporated into the Property from time to time, as such value is determined by Lender in its reasonable judgment.  Disbursements may, at Lender's election, be made on a percentage of completion basis or on such other basis as is reasonably acceptable to Lender.  Disbursements shall be subject to Borrower's delivery of such lien waivers and paid receipts as Lender may require, and otherwise on terms and subject to conditions acceptable to Lender in its reasonable discretion.  From time to time after commencement of the Restoration, if so requested by Lender, Borrower shall deposit with Lender funds in excess of the Insurance Proceeds which, together with the Insurance Proceeds and all funds previously deposited with Lender in connection with the Restoration, must at all times be at least sufficient in the reasonable judgment of Lender to pay the entire unpaid cost of the Restoration.  Funds so deposited by Borrower may at Lender's option be disbursed prior to the disbursement of Insurance Proceeds.  Lender may retain a construction consultant to inspect the Restoration and related matters on Lender's behalf and to advise Lender with respect thereto and Borrower shall pay the cost thereof; provided that neither Borrower nor any other person or entity other than Lender shall have any right to rely on any inspection or advice of such consultant.  Such consultant shall not be the agent of Lender and shall not have the power to bind Lender in any way.  Any surplus Insurance Proceeds or other funds held by Lender pursuant to this Section 4.4.6 that may remain after payment of all costs of the Restoration shall be paid to Borrower (or to such other person or entity as Lender reasonably determines is entitled thereto) so long as no Default (provided that Lender shall hold the funds to permit Borrower to cure such default within any applicable grace or cure period) or Event of Default then exists.  No interest shall be allowed to Borrower on account of any Insurance Proceeds or other funds held by Lender pursuant to this Section 4.4.6 , but at Borrower's request, Lender will deposit such amounts into a blocked interest-bearing account with Lender over which Lender has sole possession, authority and control, in which Lender has a perfected first-priority security interest to secure the Secured Obligations, and otherwise on terms and conditions satisfactory to Lender in its sole discretion.  Notwithstanding the above, if an Event of Default exists prior to full disbursement of the Insurance Proceeds and any other funds held by Lender pursuant to this Section 4.4.6 , any undisbursed portion thereof may, at Lender's option, be applied against the Secured Obligations, whether or not then due, in such order and manner as Lender shall select.

(e)

Effect on the Indebtedness .  Any reduction in the Secured Obligations resulting from the application of Insurance Proceeds or other funds pursuant to this subsection 4.4.6 shall be deemed to take effect only on the date of such application; provided that, if any Insurance Proceeds are received after the Property is sold in connection with a judicial or nonjudicial foreclosure of this Security Instrument, or is transferred by deed in lieu of such foreclosure, notwithstanding any limitation on Borrower's liability contained herein or in the Note, the purchaser at such sale (or the grantee under such deed) shall have the right to receive and retain all such Insurance Proceeds and all unearned premiums for all insurance on the Property.  No application of Insurance Proceeds or other funds to the Secured Obligations shall result in any adjustment in the amount or due dates of installments due under the Note.  No application of Insurance Proceeds to the Secured Obligations shall, by itself, cure or waive any Default or any notice of default under this Security Instrument or invalidate any act done pursuant to such notice or result in the waiver of any collateral securing the Note.

4.5

Right of Inspection .  Subject to the rights of tenants, Borrower shall permit Lender or its agents or independent contractors (including, but not limited to, appraisers, environmental consultants and construction consultants), at all reasonable times, to enter upon and inspect the Property; provided that Lender shall endeavor to provide notice to Borrower prior to such entry; however, notice shall not be required in the event of an emergency or during the existence of an Event of Default.

4.6

Compliance With Laws, Etc.; Preservation of Licenses .  Borrower shall comply in all material respects with (a) all laws, statutes, ordinances, rules, regulations, licenses, permits, approvals, orders, judgments and other requirements of governmental authorities relating to the Property or Borrower's use thereof, and (b) all easements, licenses and agreements relating to the Property or Borrower's use thereof.  Borrower shall observe and comply with all requirements necessary to the continued existence and validity of all rights, licenses, permits, privileges, franchises and concessions relating to any existing or presently contemplated use of the Property, including but not limited to any zoning variances, special exceptions and nonconforming use permits.

4.7

Further Assurances .  Borrower will, from time to time execute and deliver any and all such instruments of further assurance and other instruments and do any and all such acts, or cause the same to be done, as Lender reasonably deems necessary or advisable to grant the Property to Lender or to carry out more effectively the purposes of this Security Instrument, provided that Borrower shall not be required to incur any material expense in connection therewith and provided that Borrower shall not be required to expand or increase its liabilities or obligations under the Loan Documents in connection therewith.

4.8

Legal Actions .  Borrower will appear in and defend any action or proceeding before any court or administrative body purporting to affect the security hereof or the rights or powers of Lender; and will pay all costs and expenses, including cost of evidence of title, title insurance premiums and any fees of attorneys, appraisers, environmental inspectors and others, incurred by Lender, in a reasonable sum, in any such action or proceeding in which Lender may appear, in any suit brought by Lender to foreclose this Security Instrument and in any sale under this Security Instrument.

4.9

Taxes, Assessments and Other Liens .  To the extent that Borrower has not deposited funds for payment thereof with Lender pursuant to Section 4.16 below, Borrower will pay prior to delinquency all taxes, assessments, encumbrances, charges and liens on the Property or any part thereof, including but not limited to any tax on or measured by rents of the Property, the Note, this Security Instrument, or any Secured Obligation or part thereof.  Notwithstanding the foregoing, Borrower may in good faith, by appropriate proceedings and upon notice to Lender, contest the validity, applicability or amount of any asserted tax or assessment so long as (a) such contest is diligently pursued; (b) Lender determines, in its subjective opinion, that such contest suspends the obligation to pay the taxes, assessments, encumbrances, charges or liens and/or that nonpayment of such will not result in the sale, loss, forfeiture or diminution of the Property or any part thereof or any interest of Lender therein; and (c) prior to the earlier of the commencement of such contest or the delinquency date of the asserted tax or assessment, Borrower either bonds over any associated lien or deposits with Lender (or as directed by Lender) an amount reasonably determined by Lender to be adequate to cover the payment of such taxes, assessments, encumbrances, charges or liens and a reasonable additional sum to cover possible interest, costs and penalties; provided , however , that Borrower shall promptly cause to be paid any amount adjudged by a court of competent jurisdiction to be due, with all interest, costs and penalties thereon, promptly after such judgment becomes final; and provided further that in any event each such contest shall be concluded and the taxes, assessments, interest, costs and penalties shall be paid prior to the date any writ or order is issued under which the Property may be sold, lost or forfeited.

4.10

Expenses .  Borrower will pay all costs, fees and expenses reasonably incurred by Lender in connection with this Security Instrument.

4.11

Repayment of Expenditures .  Borrower will pay within ten (10) business days after written demand all amounts expended by Lender and reimbursable to Lender by Borrower pursuant to this Security Instrument or the other Loan Documents, together with interest thereon from the date of expenditure by Lender at the rate of interest borne by the Note, and the repayment thereof shall be secured by this Security Instrument.

4.12

Financial Reporting

(a)

Reports and Other Information .  Borrower shall keep adequate books and records of account in accordance with generally accepted accounting principles or in accordance with other methods of accounting acceptable to Lender in its reasonable discretion, consistently applied (the " Approved Accounting Method ") and shall furnish to Lender the following, which shall be prepared, dated and certified by Borrower as true, correct and complete in the form required by Lender, unless otherwise specified below:

(i)

Operating Statements and Rent Roll .

(A)

Prior to that point in time that the Property shall have a Debt Service Coverage Ratio (as defined in the Note) of 1.20 or higher (for the purposes of this Section 4.12(a)(i) , " Stabilization "), not later than sixty (60) days after and as of the end of each calendar quarter: (A) operating statements relating to the Property and showing all revenues and expenses during each month, quarter and year-to-date (" Operating Statements "); and (