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RealQuant Capital Advisors

Confidential Loan Management Report


SAMPLE
Mezzanine Loan for SF, units.) –

Risk Rating/FDIC Classification: _____ .

Risk Rating Rationale: The credit is rated a __________ because:

 Operating results (lease rates and absorption), are lower than original assumptions used during underwriting.
Occupancy is increasing with leasing absorption of roughly ___ units per month, but this only brings occupancy
up to ___% (based on an leasing status report through ______), and rents net of recurring concessions are $-
.___/SF versus $-.___/SF at underwriting. Rents net of recurring and nonrecurring concessions average $-
.___/SF. The Project recently lowered effective rents net of recurring and non recurring concessions to $-.--/SF
for new leases, and absorption has increased to __ units in December and __ units in January, notwithstanding
the recent increases in submarket supply.

 Restructure negotiations are active and continuing but are being pursued on several different fronts.

 At a January --, ---- meeting held at ________’s office between ________, ________, ________, ________,
and ________Senior, the ________ half of the partnership used the meeting to announce it would not put
additional funds towards a restructure, but would consider making discounted offer to purchase the
mezzanine and senior loan.
 Since then, ________ made proposals for a discounted purchase of the _____-Sr and ________/_____ loans,
but apparently at a level (--% of par) that did not interest _____-Sr and its participant.
 Concurrently, ________/_____ and ________ discussed the possibility and appropriate terms for an
________-only restructure.
 Subsequently, on February --th, ----, ________ changed its position, and indicated interest in a senior loan
and mezzanine loan restructure. ________ is apparently continuing to negotiate senior loan restructure terms
now including right of first offer to purchase the senior note. The mezz restructure negotiations are now
active and ongoing with potential to reach agreement. These negotiations with the debt holders appear to
have superseded the ________-only restructure scenario.

 While the above restructure conversations continue, ________Senior filed for foreclosure on February -rd, ----.
The notice of Trustee Sale was filed and Lender received it on February --th, ---- and it appears that the sale date
is set for May -, ----. However, _____-Sr has indicated that it continues to be interested in pursuing a restructure,
if not a discounted not sale, and consummation of a restructure sale date of May -th is still feasible. The date can
be postponed by _____-Sr as well.

 The senior loan’s interest reserve has been depleted and the loan is out of balance. As part of the loan
modification executed -Q---, Sponsor funded $---,--- to a reserve, and also agreed to fund out of pocket debt
service until stabilization (and has funded $-.-- MM out of pocket through the Oct --th ---- interest payment).
However, the Borrower did not make the interest payment due Nov --th for $---M, the Dec --th interest payment
of $---M, the Jan --th payment of approximately $---M, or the Feb --th payment of $--- M, totaling $---,---. The
borrower apparently elected to cease further out-of-pocket interest payments so as to put pressure on _____-
Senior towards a restructure resolution. However, _____-Senior has responded by withholding the final $---,---
retention payment until past due interest is brought current. ________ ________ and _____-_____ are still in
dialogue on this matter.

 Security is a subordinate mezzanine position. No lien on property. Collateral is a pledge of all of the
membership interests in the Borrower, _____/________ _____, LLC, via pledges made by _____ Associates,
LLC (________) and ________ _________ Partners III, LLLP (________).

 The MAI appraisal dated -------- indicates an as-is value is $--.--MM and a stabilized value is $--.-MM (a/o May-
----). Both values are in excess of the $--.-MM ________senior loan plus $-.-MM original mezz principal
amount.

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 Notwithstanding the current MAI value (see below) of $--.--MM, there is material risk that at a foreclosure sale
in the current illiquid market, there may not be bids above the _____-Senior loan balance. In the event that a
foreclosure is achieved by _____-_____ (or by ________ in the unlikely event of a discounted purchase of the
_____-Senior loan without a concurrent purchase of the ________/________ mezz loan), there would be a risk
of loss to ________’s position. As of this date, however, restructure dialogue is continuing on several fronts, as
described above.

Commentary / Updates

CURRENT RESTRUCTURE PROGRESS

________: At a January --, ---- meeting held at ________’s office between ________, ________, ________, ________,
and ________Senior, the ________ half of the partnership used the meeting to announce it would not put additional funds
towards a restructure, but would consider making discounted offer to purchase the mezzanine and senior loan. Since
then, ________ made proposals for a discounted purchase of the _____-Sr and ________/_____ loans, but apparently at a
level (--% of par) that did not interest _____-Sr and its participant, which as reported by ________ would have required a
DPO in the --% - --% range.
Subsequently, on February --th, ----, ________ changed its position, and indicated interest in a senior loan and mezzanine
loan restructure, (at least one that would provide ________ an option to purchase the senior note later). ________ is
apparently continuing to negotiate senior loan restructure terms now including right of first offer to purchase the senior
note. The mezz restructure negotiations are now active and ongoing with potential to reach agreement. These
negotiations with the debt holders appear to have superseded the ________-only restructure scenario.
.
________: On a recent call with ________ and ________ ________, it was communicated that dialogue between
________ and _____-_____ ("__________" for _____-Sr) is still open enough (notwithstanding the Feb - foreclosure
filing by _____-_____) to allow for negotiations on a restructure of the Sr loan that excludes ________. ________
apparently met with _____ _____ on -/--/--. ________/________ continue to provide ideas for ________ to use in a
counterproposal to _____-_____ and thus to encourage him to actively pursue a counterproposal to _____-_____.
________ was very interested in hearing suggestions for a counter to _____-_____, and he appears to be inclined to make
a counter offer. The ___________ deal is close to a restructure deal on the senior side, but ________ does not have the
support of its mezz participant. And presumably, any final deal (if achieved) would likely still be tied to _____ by Mr.
________.

_____-_____: ________Senior filed for foreclosure on February -rd, ----. The notice of Trustee Sale was filed and Lender
received it on February --th, ----. It appears the sale date is set for May -, ----. _____-_____ has indicated that their -----
--- restructure proposal is still on the table, and ____ has indicated that they would at least cooperate with an
________/________restructure that excludes ___. To the extent that ________ cannot pretty quickly get ________ to
describe a restructure that he could live with (perhaps something close to the -------- _____-_____ proposal, but smaller
upfront reserves and some type of recourse release in exchange for $-MM-$-MM of ____ cash equity over time),
________ will go back to _____ and _____-_____ and try and broker a DPO perhaps in the --% range for the senior, TBD
pricing and structure on the mezz. However, these alternatives may have been superseded by the _____-proposed
restructure dialogue.

OPERATING P_____ORMANCE

Per the December operating statements we received on January --th, ---- total occupied units increased -- units from --- in
November to --- in December, and total occupied sq ft increased from ---,---sf in November to ---,---sf in December.
Total rented units increased from --- to ---. NOI increased $--,--- from ($--,---) in November to ($--,---) in December.
Total revenue increased $--,--- due to the increase in occupied units and net rents, and expenses decreased $--,---, due
primarily to: general maintenance decreasing $-,---, advertising decreasing $-,---, and property insurance decreasing by $-
,---. Of the fourteen new leases that started in December, the avg rent per sq ft prior to netting out concessions was $-.--
per sq ft. Three of these leases offered recurring concessions averaging -.- months of free rent, and two of leases were for
less than - months, with one of the leases being a corporate two month rental. Year-to-date the property reported total
income of $---,---, operating expenses totaling $-,---,--- and a net operating loss of ($---,---). Total Income was $---,--- less
than budgeted due primarily to vacancy loss. Operating expenses were $---,--- less than budgeted due primarily to positive
variances in payroll expenses, general maintenance expenses, general and administrative expenses, and real estate tax
expense. Those positive variances were partially offset by a negative variance in insurance expense ($--,---).

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INVESTMENT SUMMARY

_____ Group (“Sponsor”) received construction financing, as supplemented by the subject mezzanine loan, to develop a --
--unit, -- building, three story multifamily project (“Project”) totaling ---,--- SF in _____, _____ (-- miles north of
downtown _____). ________ purchased a $-.- million participation in the $- million mezzanine loan for which
_____Bank (________) is the agent. Pricing on the Loan is at --.-% (compounded monthly) with no look back. The Loan
has a term of -- months plus a six month extension at a fee of -% (paid on the original principal, $-MM, and not accrued
interest. $--,---). The senior loan in the amount of $--.-MM was provided by _____Bank and is coterminous with the
mezzanine loan. Pricing on the senior loan is at LIBOR + --- bps.

GUARANTEES

________ and ________ joint and severally guaranty completion plus guaranty for standard “non recourse carve-out”
events. ________ ________ has a reported net worth of $--.-MM with liquidity of $-.--- MM per (-/--/----) financials. $-
.- MM of ________ liquidity is cash.

FINANCIAL ANALYSIS

Based on ________ financial analysis we have a base line calculation which projects the stabilization date at Dec----- and
stabilized NOI at $-.--MM. We also project the total shortfall to be $-.-- MM until break even. This does not factor past
due interest nor does it apply the $---,--- currently in reserve as a partial source of funds). See table below. This estimate
is an indication of what we think the total shortfall could be, and is subject to change. Salient assumptions in our analysis
include $-.--/SF rent (net of recurring concessions), --- units occupied as of --------, -- unit per month absorption, expenses
based on the trailing - month average adjusting for lower property taxes, and -.-% Libor on the full $--.-MM existing
senior loan amount.

Per a call to the leasing office on ------- and per a recent market survey, the Project has lowered effective rents to $-.-- per
sq ft per month. Based on a proposed A Note $--.- MM pursuant to the restructure terms being discussed, a -% index
plus spread, -- unit absorption and $-.-- per sq ft effective rents, the total shortfall would be $-.--- MM, and based on an --
unit/month absorption rate the total shortfall would be $-.--- MM. Please see Exhibit - for the base line cash flow.

Total Operating Shortfall $ 50,874

Total Debt Service


Shortfall $ 2,087,520

Total $ 2,138,394

From the table below, Project p_____ormance varies from original underwriting due to a slower lease up, a seven-month
construction delay, and effective rents that are --.-% below initial underwriting. The Project is complete and is leasing --
units per month at $-.-- per sq ft (net of recurring concessions) per the December operating statements.

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CURRENT APPRAISAL CONCLUSIONS

On ___ --st, we received an MAI appraisal. _____ and _____ have reviewed the appraisal and believe it to be a well
supported analysis. The appraisal has not been reviewed by _____'s technical services group, but has been reviewed by
___ on our behalf, which review supports ____’ conclusions and considers the analysis and values to be well supported.
The as-is value is $--.--MM and the stabilized value is $--.-MM (a/o May-----). Both values are in excess of the $--.-MM
________senior loan plus $-.-MM original mezz principal amount.

MARKET INFO (______ Group Appraisal --/--/--/ ________ ________ provided Market Survey -/-/--)

COMPETITION

The most recent additions to the subject’s submarket include, and, with ___ nearing completion and opening. Although
_____ was leasing units at higher rents $-.-- per sq ft, $-.-- net of recurring concessions, and $-.-- net of both recurring and
non recurring concessions, it recently lowered rents to approximately $-.-- per sq ft (increasing concessions to -.- months)
to be more competitive, as verified by a call to the leasing office, and the per the data provided below. As demonstrated
below, _____ has l_____er units than the competition, as the Project was built to a condo spec. While the weighted
average rent per unit is higher than the competition, the average rent per sq ft is lower which should enable the Project to
increase absorption from recent levels. The leasing office reports that -- leases have been signed during the month of
February and there are a total of --- units leased a/o -/-/--, hence it appears the increased concessions is generating some
leasing momentum. We will continue to monitor leasing at these competitive projects. There are approximately ---- units
available in the competitive market set mentioned below.

is a gated, --- unit project approximately ten miles south of the subject at ----- N. --rd Avenue, in _____. This two and
three story project offers a range of one through four bedroom units that on average are --- square feet in size. Its density
is at --.- units per acre. The project began lease-up in September ---- and is at --.-% occupancy averaging approximately -
- unit absorption per month. The average effective rent rate is $--- per month or $-.-- per square foot.

is a --- unit project approximately five miles south of the subject at ----- N. --th Drive in _____ that opened during
February of ----. This gated community offers one, two and three bedroom units that average --- square feet with an
overall density of --.- units per acre. The average effective monthly rental rate is $--- or $.-- per square foot and

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occupancy is at --%. Current concessions offer two months free on a --- month lease. Demand has been strong with
absorption averaging --.- units per month.

is directly south of the Las Colinas Black Canyon Apartments (approximately five miles south of the subject) at ----- N. --
th Drive in _____. Construction began in April of ---- and its completion is anticipated during the second quarter of ----.
Alliance Residential is the developer of this --- unit community.

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Exhibit -– Site Visit Pictures as of --/--/--
___

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Exhibit -– Extension Conditions and Definitions

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Exhibit -– Triggers for Downgrades and Upgrades

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Exhibit -– Guarantor Financials

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Exhibit -– Borrower Financials

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Exhibit - – Borrower Org Chart

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Exhibit -– Interest and Operating Reserve Analysis

Rental Analysis - Roll-Out December-08 January-09 February-09 March-09 April-09 May-09 June-09 July-09 August-09 September-09 October-09 November-09

Month 1 2 3 4 5 6 7 8 9 10 11 12
Residential - Apartments Units Rental Revenue 115,880 125,289 135,220 145,150 155,081 165,011 174,942 184,872 194,803 204,734 214,664 224,595
Residential - Units Rental Revenue - - - - - - - - - - - -
Parking Revenue - - - - - - - - - - - -
Miscellaneous Income 13,210 12,796 13,725 14,653 15,582 16,510 17,438 18,367 19,295 20,223 21,152 22,080
One time Concessions (12,161) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381)
Total Revenue 116,929 129,705 140,564 151,423 162,282 173,141 184,000 194,859 205,717 216,576 227,435 238,294

Real Estate Tax Expense 17,166 26,399 26,465 26,531 26,598 26,664 26,731 26,798 26,865 26,932 26,999 27,067
Operating Expense 96,150 96,390 96,631 96,873 97,115 97,358 97,601 97,845 98,090 98,335 98,581 98,827
Marketing Expense - Advertising - - - - - - - - - - - -
Marketing Expense - Staffing 20,439 20,490 20,542 20,593 20,644 20,696 20,748 20,800 20,852 20,904 20,956 21,008
Rental Condos Administrative Expense - - - - - - - - - - - -
Turnover Costs 1,375 1,375 1,375 1,375 1,375 1,375 1,375 1,375 1,375 1,375 1,375 1,375
Total Expenses 135,130 144,655 145,013 145,372 145,732 146,093 146,455 146,817 147,181 147,545 147,911 148,277

Net Operating Income (18,201) (14,950) (4,449) 6,051 16,550 27,048 37,545 48,041 58,537 69,031 79,524 90,017

Reserves 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425

Net Cash Flow (22,626) (19,375) (8,874) 1,626 12,125 22,623 33,120 43,616 54,112 64,606 75,099 85,592

Beg Loan Balance 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000
Interest Due 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875
Amount Capitalized - - - - - - - - - - - -
End Loan Balance 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000
Monthly Interest Rate 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375%
Annual Interest Rate 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500%

Operating Shortfall thru Stabilization 22,626 19,375 8,874 - - - - - - - - -


Interest Shortfall thru Stabilization 175,875 175,875 175,875 174,249 163,750 153,252 142,755 132,259 121,763 111,269 100,776 90,283
Total Monthly Shortfall 198,501 195,250 184,749 174,249 163,750 153,252 142,755 132,259 121,763 111,269 100,776 90,283

Cumulative Operating Shortfall 22,626 42,000 50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874
Cumulative Interest Shortfall 175,875 351,750 527,625 701,874 865,624 1,018,876 1,161,631 1,293,890 1,415,654 1,526,923 1,627,698 1,717,981
Cumulative Total Shortfall 198,501 393,750 578,499 752,748 916,498 1,069,751 1,212,506 1,344,764 1,466,528 1,577,797 1,678,573 1,768,856

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December-09 January-10 February-10 March-10 April-10 May-10 June-10 July-10 August-10 September-10 October-10 November-10

13 14 15 16 17 18 19 20 21 22 23 24
234,262 243,665 253,069 262,473 271,876 281,280 290,683 300,087 309,491 318,894 328,298 336,734
- - - - - - - - - - - -
- - - - - - - - - - - -
22,923 23,766 24,609 25,452 26,295 27,139 27,982 28,825 29,668 30,511 31,354 32,016
(8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381) (8,381)
248,804 259,051 269,298 279,544 289,791 300,038 310,284 320,531 330,778 341,024 351,271 360,370

27,134 27,202 27,270 27,338 27,407 27,475 27,544 27,613 27,682 27,751 27,820 27,890
99,074 99,322 99,570 99,819 100,069 100,319 100,570 100,821 101,073 101,326 101,579 101,833
- - - - - - - - - - - -
21,061 21,114 21,166 21,219 21,272 21,326 21,379 21,432 21,486 21,540 21,594 21,647
- - - - - - - - - - - -
1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800
149,069 149,438 149,807 150,177 150,548 150,920 151,292 151,666 152,041 152,416 152,793 153,170

99,735 109,613 119,491 129,368 139,243 149,118 158,992 168,865 178,737 188,608 198,478 207,199

4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425 4,425

95,310 105,188 115,066 124,943 134,818 144,693 154,567 164,440 174,312 184,183 194,053 202,774

40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000
175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875 175,875
- - - - - - - - - - - -
40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000 40,200,000
0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375% 0.4375%
5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500% 5.2500%

- - - - - - - - - - - -
80,565 70,687 60,809 50,932 41,057 31,182 21,308 11,435 1,563 - - -
80,565 70,687 60,809 50,932 41,057 31,182 21,308 11,435 1,563 - - -

50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874 50,874
1,798,547 1,869,233 1,930,042 1,980,975 2,022,031 2,053,213 2,074,521 2,085,956 2,087,520 2,087,520 2,087,520 2,087,520
1,849,421 1,920,107 1,980,916 2,031,849 2,072,906 2,104,087 2,125,395 2,136,831 2,138,394 2,138,394 2,138,394 2,138,394

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