In the past, the Managing Member has purchased interests in the Fund in a minimum amount of 1% of the total capitalization in the Fund, such investments have been structured either by the Managing Member investing in the Fund as a Nonmanaging Member (defined below) or by the principals of the Managing Member investing in the Fund as individual Nonmanaging Members.
 

The goals of past Funds have been to return all capital plus an internal rate of return ("IRR") of 15% on that capital by the time the Fund is liquidated. As an added feature, the members of past funds, other than the Managing Member, (the "Nonmanaging Members") have been entitled to a preferred return on capital contributions made to the Fund of 8% compounded annually for the amount of time such capital contributions are outstanding (the "Preferred Return"). This amount has been earned by all Nonmanaging Members on each investment of the Fund before any distribution to the Managing Member with respect to that investment. In addition, upon liquidation of the Funds, there has been a "look back" calculation of the Preferred Return on all contributed capital for the amount of time such capital contributions are outstanding.
 

Mr. DeNardo and Mr. Yerrall are quite familiar with the markets of the Investment Territory. The Operating Principals have acquired, managed, underwritten, developed or provided capital with respect to over 20 million square feet of real estate in the Investment Territory.
 

Private investors, due to factors such as a scarcity of time, personal capital, experience or expertise, seldom find opportunities to invest in sizeable real estate transactions alongside professional real estate investment managers who have personal capital at risk. Unlike large institutional funds that require investment minimums of approximately $10 million, the Funds have provided access to a professionally managed real estate investment vehicle for individuals and institutions with all parties' interests being aligned.
 

The Funds have focused on real estate investments that maximize capital appreciation. These investments are unlike Real Estate Investment Trusts ("REITs"), which emphasize an income approach to a capital-intensive business. REITs (i) are subject to risks of the securities markets adding an element beyond the fundamentals of basic real estate risk and (ii) bear the burden of securities registration, public reporting and the costs associated with being a publicly traded company.

The Funds have also differed from an opportunity fund. Besides the lack of access for most investors, opportunity funds can be high-risk ventures, in which tremendous stress is placed on transactions in the pursuit of extremely high rates of return. Time is an important factor in the calculation of the applicable IRR for these ventures. While the Fund's have respected the importance of the overall return to its Nonmanaging Members, they have remained focused on managing real estate fundamentals using a balanced approach to risk and return.
 

Other than the compensation and benefits by the Managing Member to the Operating Principals and other employees of the Managing Member derived from asset management fees and the incentive promote payable to the Managing Member as set forth in the LLC Agreement, no other management fees, organization fees, acquisition fees, disposition fees, or any other fees will be charged to the investors by the Managing Member or its affiliates. The total remuneration for the Operating Principals and such other employees will be derived from such compensation and benefits (which are subject to Advisory Board review), and from their share (through ownership interests in the Managing Member) of the aforementioned incentive promote. Any fees earned from the operation of the business will be included in the revenue of the Fund. The Fund, however, will be responsible for payment of its own organization, tax and auditing expenses and will reimburse the Managing Member for any expenses advanced on its behalf.
 

Notwithstanding anything to the contrary, the Fund has paid fees to third parties for the referral of investors who became Nonmanaging Members.
 

Nonmanaging Members are investing with managers whose interests are aligned with theirs:

The Managing Member has (through an investment as a Nonmanaging Member) made substantial investments of its own capital into prior Funds, such capital has been returned on a pari-passu basis with the other Nonmanaging Members.

There have been no separate fee revenue of any kind to the Managing Member.

The Managing Member's incentives have been dependent upon the return of capital plus the Preferred Return with respect to each investment to the Nonmanaging Members before any distribution has been made to the Managing Member on an incentive basis.

The Managing Member has not been entitled to any "catch-up" provisions that are common to many other real estate funds.