DOCUMENT PRODUCTION(NON-PRTVTLEGED)

Part 1

PRODUCED 9/30 I2O1O

Document6

From: Sharon Simonson [ssimonson@bizjournals'com]Sent: Monday, Decernber 31,2007 1 1:20 AM

To: Plasencia, JavierSubject: Re: Public Records Act - Page Mill Properties

you can send it to 96 N. Third St. Suite 100, San Jose, 95112. Please direct it to my

attention.

On t2l3¡l17 Ll:17 AM, "Plasencia, Javier" <Javier-Plasencia@CaIPERS.CA.GOV> wrote:

Dear Ms. Simonson:

This responds to your Public Records Act request dated December 20,20A7- ln your e-

mailyou requested information pertaining to the following:

,,a copy of any documents presented to CaIPERS staff or board members by Page Mill

eropårties an-d ¡ts founder and chief executive David Taran explaining the investment

strategy for the company's page Mill Properties ll LP lnvestment fund."

The appropriate real estate program staff is currently reviewing your request-to determine

which'docurnents are subject to disclosure under the Public Records Act. We estimate

that this reviewwill be completed in approximately two to three weeks. Once this review is

òompleted and we have deiermined to what extent the documents will be made available,

we will provide you with,copies and an accounting of the copying charges'

We don't have a street address for you and would appreciate an address where we can

send qur next resPonse.

please feel free to contact me via email or at (916) 795-3673 if you have any questions or

concerns regarding this matter. Although I will be on vacation most of this week, I will be

back the following week.

Regards,

F. JAVIER PLASENCIASenior Staff Counsel

PM-1833

Plasencia, Javier

From: Taran, David [DTaran@PageMill.com]Sent: FridaY, August 25,200610:25 AMTo: Plasencia, JavierCc: rnlewis@emmetmarvin.com;Pottle, RandySubject: RE: CaIPERS legalOPinion

lmportance: High

Attachments: imageOO'liPg

Javier,

Thank you so much for all your help in getting CaIPERS opinion signed and to us before noon today. Mr. Lewis'email, fax,and phone number are (1) mlewis@emmetmarvin.com , (2) 212-238-3100, and (31 212-238'31521 212'653'1771respectively.

Thanks,

David

David A. Taran

cEo

Page Mill Properties, LLC

1900 University Avenue, Suite 201

East Palo Alto, CA 94303

650/833-3888 - direct

650/833-3988 - direct fax

dtaran@pagemíll.com

www.paqemill.com

PM-1834

image001.jps (4 KB)

From: Plasencia, Javier Imaifto:Javier-Plasencia@CaIPERS.CA.GOVISent: Friday, August 25,2006 10:244MTo: Taran, DavidCc: mlewis@emmetmaruin.com; Pottle, RandySubjech CaIPERS legal Opinion

David, as per our conversation, I will try to have the signed CaIPERS opinion before noon. You provided me with Mr.

Lewis; email, however, I don't have his fax nurnber which is what I will need to fax the opinion (if signed before noon). lfyou have any other questions, I may be reached at (916) 795-3673.

(l am also using this to confirm that I have the correct email addresses.)

Javier Piasencia

Senior Staff Counsel

Plasencia Javier

M200years.gif

(s KB)

You have my correct e-mail address. My other contact information is set forth below.

Marc C. LewisEmmet, Marvin & Martin, LLP120 Broadway 32nd FloorNewYork, NY 10271Tel:212-238-3152

212-65T1771Fax:212-238-3100Em ai I : m lewis@em m etm arvinTtre inforrnation in this email and in attachments ís confidential and intended solely for the attention and use of the namedaddressee(s). This information may be subject to legal professional or other privilege or may otherwise be protected bywork producl immunity or other legal rules. lt must not be disclosed to any person without our authoriÇ. lf you are. not the

intended recípient, or a person responsible for delivering it to the intended recipient, you are not authorized to and must not

disclose, copy, distribute, or retain this message or any part of it.

From:Sent:To:Gc:Subject:

Attachments:

LEWIS, Marc [mlewis@EMMETMARVIN,COM]Friday, August 25, 2006 1 0:25 AMPlasencia, JavierPottle, Randy; Dtaran@pagemill.comRE: CaIPERS legal Opinion

200years.gif

PM-1835

Circular 230 Disclosure Notice. To insure compliance with requirements imposed by the lnternal Revenue Service, we

inform you that any tax advice that may be contained in this communication (including any attachments) is-not intended or

written io be used, and cannot be used, for the purpose of avoiding penalties under the lnternal Revenue Code or any

state or local tax law to which a governmental requirement similar to Circular 230 applies.

From: Plasencia, Javier lmailto:Javier-Plasencia@CaIPERS.CA.GOV]Sent: Friday, August 25,2006 l=24 PM

To: Dta ran@pagemill.comCc: LEMS, Marc; Pottle, RandY

Subjech CaIPERS legal Opinion

David, as per our conversation, I will try to have the signed CaIPERS opinion before noon.- You provided me with Mr.

Lew¡s; emäil, however, I don't have his-fax number whlch is what I will need to fax the opinion (if signed before noon)' lfyou have any other questions, I may be reached at (916) 795-3673.

(l am also using this to confirm that I have the correct email addresses')

Javier PlasenciaSenior Staff Counsel

PM-1836

[-Í""p*tyTyp;;II

Page Mill Properties - Investment Criteda Sheet

The Fund may also acquire unimproved land for the

purposes of developing the foregoing types of properties,

subject to the limitations described below in

Nothern Califomia Bay Area

IJp to 20o/o of the fund's Commitnents (í.e., portfolioequity of $255 mitüon) may be invested jn othertechnology-led markets including:

o Boston/Route 128

r Seattleo Los Angeles

i of the date such ro1þ-t-e!¡egs-ll-:ggggf4),..---._---. i

i . Dulles Corridor/\X/ashington, T)'C' i

ia'__l---i TË F "d-i*#G; ."*p-""td;ã-'"""ãt nn ""*"ä;ãã"ÏI capitalinexcess of.2\o/o- i

¡t_-l T'lr-. iåø .q*ty itt;;t*er'¡ to ^oy

one asset ot company i-ti (."ch. a:r Investment) may not exceed 20o/o of ii \"---t -- -/ ---J -- - i

i Commitments.

i

i No mot. r}ran2}o/o of Committnents may be in-vest¡{in i

! ptoperties located outside of the Nothern CalifomiaBay i

iÀt"". ii!l!t-I No t rot. than2}o/o of Commitments mây be used to

i

i ,.qoir. ot develop land that is less than i5o/o pre-Ieased I

i ot Pre-sold it^i

--Jir lr-ttrd." -i rrt" r"".irþtãtto it-"ãtã *.*a eo;l'

"i-th. r^o

-l!

I market value of the Fund's Investrnents (determined as i:

I

I¡____-_

PM-1837

EXECUTIVE SUMMARY OF KEY TERMS

The followin¿ inþrmation it' prennted aÍ a sammaîJ of ærtain princþal tem¡ and is qaalfæd þ referenæ to the more d¿tailed

"Sømmary of Pnncipal Tenn¡" in the Priaate Plaæment Memorandaø, the Partnrshiþ .Agreennt atd aryt olher rubsctiptiott

doømefirforPøge Mitl PrEertiet II, LP. (cEitali7.ed tems ara defned in lhe morà deraiÌed "Sammatl of PrintþalTernt").

The Fund

Initial Offering Size

General PattnetCommitmentTerm

Fund Strategy

Divetsification

Distributions

Clawback

Management Fee

Key Man

Page Mill Ptoperties II, L.P., a Delav¡ate limited pârhershiP.

$300 million, subject to increase in the sole arrã absolute discretion of the General

Partner.

3o/o of the aggregate Commitrnents of the limited partrrers (not to exceed $10 million).

Eþht yeats, with up to two consecutive one yeaf extensíons by the General Pattner,

with the approval of the LP Âdvisory Committee.

To make long-term investr¡rents ("qoitf and possibly debt) in value-enhanced cote,

challenged core and development assets located in the United States targeted toachieve (a) a leveraged 60/o to 87o current ferum at stabilization and þ) a leveraged

t3o/o ro 14% IRR (compounded annually) ovet the life of the investment. Thete can

be no assurafice that such tatgeted retums will be achieved.

No more than 20ok of aggregate maximum Comrnitments may be invested in any one

Fund investment.

All distributable proceeds attributabie to an Investment will be initially apportionedamong the Partners (including the General Partner) pro rate- in accotdance with theitrespective Petcentage Intetests (as defined herein). The amount appottioned to the

General Pz.rtnef will be distributed to the General Pa¡tner. The amount apportioned

to each Limited Partner generally will be distributed as follows:

(a) First, 100%o to such Lirnited Partner, until.such Limited Pa¡tr¡er has ¡eceived a 80/o

annually compounded cumulative annual retum on its Capital Contributions telatingto such Investrnent;

þ) Second, 100% to such Limited Partner until such Limited Partner has teceived a

return of ali of its Capital Contributions relating to such Investment;

(c) Third, 100%o to such Limited Partner undL such Limited Partner has teceived any

unpaid âmounts described in clauses (a) and þ) relatiag to Closed Investments (as

defi.ned herein) (in the priority described in (a) and þ));(Q Fouith, (1) 48% ro such Limited Partner and (ü) 52o/o to the Genetal Partner untltlle General Pattner has received 20o/o of all amounts apportioned to such LimitedPartner (othet than amounts representing â return of capital distributed Pursuant toclause þ) or þ)) telating to such Investment or any Closed Investments; and

(e) Fifth, (Ð 80% to such Limited Partner and (if 20o/o to the General Pattner-

Yes, with 50%o of the carried interest defer:red.

l.5o/o of unfunded Commitrnents during the Investment Pedod (subject to reduction

to 1.25o/o for Limited Parthers ma-king Commitments in excess of $75 million) or 1.5o/o

of capial called.

During the Investment Period, David Taran shall devote a substanrial and apptopriate

portion of his business time and atteotion to the Pattnetship and existing Investrnents

(including Page Mill), provided in all cases David devotes the necessary time to the

Pattnership as is tequired to satisfy its stated objectives'

LO5A2]¿93402.2

PM-1838

VII. SUMMARY OF PRINCIPAL TERMS

The following is not a complete sumrnary of the tetms of the Fund. To understand the Fund more fully,

prospective investors should read this Private Placement Memorandum in its entirety, as well as the

Partnership Agteement and subscription documents.

The Fund

The Genetal Partnet

The Investment Advisor

Fund Strategy

Fund Investrnents

Investment Limitations

Initial Capitalization ofthe Fund

Minimum Commitment

Page Mll Properties II, L.P., a Delawate limited parmetship (togethet withany AJ.tetnative Investment Vehicles and Parallel Investment Vehides, the

"Fund).

Page Mill Properties II GP, LLC, a Delawate limited liability comPany, serves

as the General Partnet of the Fund (the "Genetal Partnet'). David A. Tamn(the "Principali) controls the General Parto.et.

Page Mill Advisors, I r .C, aDelaware limited.liability company and an affiIiateof the General Partner (the "Investment Advisot'), will serve as the Fund'sinvestment advisor Pursuant to an investment advisory agreement (the

"Advisory .Agreement') with the Fund.

The Fund's strategy is to make long-term investrnents in value-enhanced

core, challenged core, and development âssets located in the United States

targeted to achieve (a) a leverageð' 6o/o to 8olo curtent return ât 5gþilizationand þ) a levetaged l3o/o to 14% IRR (compounded annually) ovet the life ofthe investment (each, a "Core-Plus Investrnent').

The Fund intends to invest in and to acquire direct ot inditect interests in arange of ptopefty types, induding residential industrial, retail, hospitality,office and othet properúes. The Fund is permitted to invest in properties at

various stages of development and lease-up, ìncluding improved propenies

@oth leased alnd vacant propeties), development and redeveloPment

ptopetties, and unimptoved land for the Pu{poses of development. The Fund

may acquire such ptoperties ditectly or indirectly tfuough ioint ventures' TheFund may also make loans to entities that either dLectly ot indkectly'ownsuch properties. In addition, the Fund may co-invest with othet funds and

acquire equity, debt, or other interests in, secuted by ot related to real est¿tg

including interests in companies that invest in, manage ot develop, or make

Ioans in respect of real estate. Each Fund investrneng tegardless of howstnrctured, is refered to herein as an "Ifrvestment."

The Fund will not invest mote rhan 20o/o of its Comrnitrnents in any one

Investment unless otherwise approved i¡ the discretion of the LP A.dvisory

Committee (each individual asset in a portfolio acquisition u'ill constitute a

sepa.rate Investment fot all pu¡poses).

The General Partner, on behalf of the Fund, is currently seeking

commitments (the "Commitments") to the Fund aggegating $300 million,subject to inctease in the sole and absolute disctedon of the General Partner.

The rninimum Comrnitrnent from an investor (once admitted, a "LimitedPartner" and coilectively with the General Partner and the othet LimitedPattners, the '?artnets') is $10 million; Prel4dcd, b¡ævel, that the General

PM-1839

General Partnet Co-Investment

Initial Closing

Capital Contributions

Subsequent Closings

P¿rtners ParticiPating inSubsequent Closings

Partner reserves the dght to accept Commitments of lesset amounts'

The General Partner's Commitrnent is the lesser of (ø,)3"/o of the aggtegate

Commitments of the Limited Pattners (thtough and jnduding the Final

Closing) or @) $10 million'

The initial closing of the Fund (the "Initial Closing ) u¡ill occut as of a date

determined by rhe Genetal Patnet.

From and after the Initial closing, the Fund u,ill make capital calls on

Pattners (including the General Pârtnef oî a pra raTø basis) as arld _v¡hen

needed to acquire Investments, satisfi other obligations of the Fund, and

establish resefr¡es. Commitrnents vtill be drawn downpro røta on an as-needed

basis i¡ an amount not to exceed each Parmer's unfunded Commitment, with

2 mifrilIlum of 10 busi¡ess days prior nodce to each Partner (the "DueDate,). Contributions of capital ('Capital Conttibutions') will be made in

cash in US dollars. For pwposes of determining a Limited Partner's retufn on

czpiøl: (a) Capital Contdbutions with resPect to Investments or telated

,"i.*., *iU Uã deemed made upon the l¿ter of (i) the Fund's receipt of the

Capiral Contdbutions or (ü) the Fund's date o[ closing of the acquisition ofthË subject Investment, and þ) Capitat ContributionS with respect to Fund

expenses or related feserves wilt be deemed made on the later of (i) the

Fund,s receipt of the Capital Contributions ot (ü) the Due Date fot such

Capitai Contributions.

Subsequent closings (eactr, if any, a "subsequent Closing" and collectively

u¡ith the Initial Closing, the '"Closings" or individually, a "Closing') may

occur, in the sole and absolute discretion of the Genetal Pattner; P@de-{however, that the frnal ctosing will occut no latet than t year aftet the Initial

Ctosing (the "Final Closing'), q¡hich date r.nay be extended by 6 months

súth the approval of the LP Âdvrsory Committee.

If Limited Partnets are admitted to the Fund in a Subsequent Closing, each

such Limited Partner *tll (") contribute to the Fund ân amount equal to its

prt rata share of all Capital Contributions previously made by the Pattnets

lexcluding rhose used t; ñrnd fees payable ro the Investrnent Advisor) from

the date ðf tn. Ittitl¿ Closing to the date such Limited Partnets ate admitted

to the Fund, Iess any distributions previously made to ttre Patmers, and

(b) p^y to the Fund, as agent for the previously admitted Partnets,. interest

theteón ^t

a rate equal to 8%o per annum, comPounded annually. Such

amounrs contributeð or paid to the Fund will be paid to the previously

admitted Limlted Parurrets, pro rala, in proportion to theif capital

Contributions, and the previously adrnrtted Limited Pattners' unfunded

Commitments will be increased to teflect the amount of such Payfnents(excluding the interest portion paid to them). The interest poniol paid to the

Èurrd, "r

ãg*t for the previously admitted Limited Parrners, will be deemed

paid to such Lrmited Partners by the new Limited Pattnets outside the Fund

andwill not constitute aCapitaL Contribution by the newLimited Pattners (or

reduce their Comrnitments). In addition, each Limited Pattnet admitted in a

Subsequent Closing will be required to Pay to the Fund (y) its shate of fees,

or incr-ease in fees, that would have been payable to the Investment Advisor

ftom the Initial Closing, as if such l-¡srited Partner had been admitted at such

Initial Closing and (z) jnterest thereon ^t ^ y^te equal to 8o/o pet aûnum,

PM-1840

Investment Pedod

Term

compounded annually, from the date of the Iniúal Closing. Such amounts willbe paid to the Fund (as açnt and for Pâyment to the pteviously admitted

Limited Partners and the Investment Advisor in such amourits as they each

would have teceived had the new Limited Pattnet been admitted at the IninalClosing). The interest portion of such pâyments ryill not constitutè a Capital

Contribution by the nev¡ Limited Partnets (or reduce their Commitments)'The foregoing conuibutions, distributions and pâyments will be üeated fortåx pu{poses as a sale of zþro rata portior' of each such previously admitted

Pattner's intetest to the newly admitted Limited Partners so that all Pattners

u¡ill be treated as if they v/efe admitted at the Initial Closing. If a pteviously

ad.mitted Llrnited Parlnef increases its Commitment in a Subsequent Closing,

analogous provisions shatt apply with tespect the increase in such LimitedPartnet's Commitment-

The Fund will generaliy identifr and fund any investments duting the period

comrnencing on the date of rhe Initiat Closing and ending on a date that is 3

yexs after the Final Closing (the "Investment Pedod'). Following the

Investment Period, all Partners will be released from any further obligation

with respect to their unfunded Cornmitrnents, excePt to the extent necessafy

to (a) covet Fund expenses, þ) repay any amouûts owing undet any Credit

Facility (as hereinaftet defined), (c) enable the Fund to make "Follow-onInvestments" (def,rred below) (which arnounts' in the case of this clause (c),

will be @ timited to 75o/o of Commrtments and (if called within 6 rnohths

after the end of the Investrnent Period, unless such follow-on Investrnent

was previously disclosed to the Paftners in a detailed wtitten notice, in which

case such follow-on Investment will be completed.ûithin 7 year af,ter the date

of such written notice), (d) complete any Investment that is the subject of adefrnitive agreement, option, or letter of intent priot to the end of the

Investrnent Pedod þrovided that the acquisition of. any such Investrnent is

completed within 6 months aftet the end of the Investment Petiod) and

(e) piovide fot teasonalrle obligations, commitrnents or contingencies relating

to the Fund and Investments. Notu¡ithstanding the foregoing, the General

Partner will have the nght to extend the time for calling contributions ftomCommitments after the Investment Petiod to call for additional contdbutionsin ordet to fund construction andf or development proiects with tespect to

which the General Partner has obtained plans and specifications and

established a budget as of the end of the Investment Period (ot the 6-monthextension thereo$ by giving notice thereof to the Limited Patmers at the end

of fhe Investment Pedod.

"Follow-on Investment'' means any additional investrnent by the Fund in(a) any Investment and þ) any ProPerty adjacent to ot associated with any

properry that ditectly or inditectly constitutes an InvestmentNotrvithstanding t}le foregoing, a Partner will be required to recontribute any

distribution made to such Pattnet in erot at any dme, arrd to the extent

necessafy to pay Fund expenses until the expfuation of the l-yeat period aftet

liqurdation of the Fund.

The Fund will dissolve on the eighth annivercary of the date of the Final

Closìne; orovided, however, that the General Pattner may extend the term ofthe Fund for up to 2 additional l-year periods, with the approval of the LPAdvisory Committee. The General Parmer .¡¡ill have the tight to elect to

PM-1841

Disttibutions

dissolve the Fund at any brne prior to the termination date'

EXcept as provided in'"Tax Distributions" and "Permitted ReinvestmenÇ"

distritutable proceeds generated by the Fund generally will be distributed

not less frequentþ than quarterþ; plevidçd, however, that the Fund may

retain any reserves that the General Partner deems prudent to defray future

.*p"nr"r or liabilities of the Fund. All distributable proceeds attributable

to an Investment will be initially apportioned among the Parbners

(including the General Partner) pro rata in accordance with their

respective Percentage Interests (us defured below). The amount

apiortioned to the General Partner will be distributed to the General

Pãrfner. The amount âpportioned to each Limited Parther will be

dístributed as follows;

(a) First, 100% to such Limited Partner, until such Limited Fartner

has received an 8%o annually compounded cumulative annual return on its

Capital Contributions relating to suoh Investment;

(b) second, 100% to such Limited Partner until such Limited Partner

has received a return of all of its capital contributions relating to such

lnvestment;

(c) Third, 100% to such Limited Partner until such Limited Parbrer

has received any unpaid amounts described in clauses (a) and (b) relating

to Closed Investments (as defined below) (in the priority described in (a)

and (b));

(d) Fourth, (i) 48% to such Limited Parbrer and (ii) 52Yo to the

General Parhrer until the General Parbrer has received 20/o of a71 amounts

apportioned'to such Limited Partnçf (other than amounts representing a

tåtu* of capiøl distributed pursuant to clause (b) or (c)) relating to such

Investment or any Closed Investments; and

(e) Fifth, (Ð 80% to such Limited Partrer and (ir) 20%o to the General

Parhrer.

If, at the tirne of any dislribution to such Limited Partner of distributable

proceeds from operations attributable to an Investment with respect to

which such Limiied Parbner has not received a retum of all of its Capital

Conkibutions, such Limited Partner (i) has received ãggregate

disü.ibutions from all IirvesÍnents equal to an ïYo annually compounded

cumulative annual retum cornputed on an overall portfolio basis and

(ii) such aggregate disûrbutions and the distribution that such Limited

Èarürer would receive on such date assuming that each of the Fund's

Investments were sold in connection with a liquidation of the Fund at the

most recent value (as defined below) of such Investment would be equal

to or greatef than such Limited Partner's Aggregate Preferred Retum" (as

defrned below), then such Limited Partner's share of distributable proceeds

from operations attributable to such Investment will be distributed in the

priority described in clause (a) above followed by clause (d) above

followed by clause (e) above.

Pf\A-1842

If at the time of any distribution to such Limited Partner of distributableproceeds, such Limited Partner has not received aggregate dishibutionsequal to its total Capital Contributions plus an 8% annually compounded

cumulative annual return computed on an overall portfolio basis

("Aggregate Preferred Return"), 50Yo of the General Partner's share ofany distributions apportioned to zuch Limited Parhrer from such

Investment will instead be distributed to such Limited Parher. In addition,

if at the time of such distribution such Limited Partner's Aggregate

Prefered Return exceeds the sum of (i) the aggregate distributionspreviously received by such Limited Partner and (ii) the distribution thatsuch Limited Parbrer would receive on such date assuming that each of the

Fund's Investments were sold in connection with a liquidation of the Fund

at the most recent Value (as defined below) of such Investr'nent, the

remaining 50o/o of the General Partner's share of distributions from such

Limited Partner will instead be dishibuted (to the extent of such shortfall)to such Limited Partner. To the extent the General Parfner's share ofdistributions apportioned to any Limited Parhrer are instead distributed tosuch Limited Parbrer, such amount will be credited to a notionalmemorandum account ("Deferred Distribution Account") which willaccrue interest at a rate of 8o/o, compounded annually, from the date ofsuch credit. At such time as a Limited Parbrer has received its AggregatePreferred Distribution, such Limited Parfner's share of any distributionswill instead be distibuted to the General Parbrer until the General Parfnerhas received an amount equal to the balance in such Deferred DistributionAocount (including accrued interest thereon).

Distributable proceeds that are not allocable to a specific Investment will,for purposes of the distribution provisions, be allocated among allInvestments outstanding at the time such distribut¿ble proceeds are

distributed pro rata based upon the most recentþ determined respectiveValues (as defined below) of such Investments at such iime. Thedetermination of the amounts distributable at any time pursuant to clause

(c) above in respect of any "Closed Investuent" (i.e., any Investment or aportion of an Investment that has been the subject of a disposition) will be

made by calculating the amoun! if any, of the accrued and unpaid 8%

annually compounded cumulative annual return and the amount of the

Capital Contributions that would then exist with respect to the portion(s) ofsuch Investment, and such determination will take into account the CapitalContributions and cash distributions allocable thereto.

"Value" means the gross fair market value (unreduced by leverage) of an

asset, as determined in good faith by the General Partner or an independentappraiser of recognized standing (if an appraisal was in fact made by or forthe Fund)- See "Valuation" below.

"Carried Interest" means the distributions made to the General Parhrer

pursuant to clauses (dXii) and (e)(ii) above

"Percentage fnterest" means, with respect to any Partner, a percentage

determined by dividing such Partner's Commitments by the aggregate

Cornmitments of all Parfirers (as such percentage may be from time to time

PM-1843

Tax Distributions

Time and Attention

adjusted, with respect to any Investment for Limited Part¡rers that are

excluded or excused from an Invesünent or are in default with respect to

any required Capital Conkibutions). Fo¡ the avoidance of doubt, any

Limited Partner that has been excused or excluded from an Investment willhave a Percentage Interest equal to 0% with respect to such Investment and

will not be entitled to receive any distributions of distributable proceeds inrespect of such Investment.

To the extent that the distribution priorities described above do not providecumulative distributions of Carried lnterest to the General Partner as of the

end of any calendar quarter equal to the federal and state taxes that would(based on the assumptions below) be deemed to be payable by the General

Parhrer on the cumulative taxable income of the Fund allocated to the

General Parher with respect to its Carried Interest as of the end of such

quarter (determined by assuming the General Partner is an individualsubject to the highest rate of federal and state taxation applicable to

individuals residing in California and taking into account the character ofincome allocated to the General Parûrer and the deductibility of state taxes

for federal tax purposes) (the "Carried Interest Tax Liability"), then the

General Partner has the right to elect to cause a distribution to be made to

the General Partner for such quarter equal to the Carried Interest TaxLiability (the "Carried fnterest Tax Distribution")' Carried Interest TaxDistributions will be treated as advance payments of the Carried úrterest

and reduce future payments thereof (but will not be repayable by the

General Partner).

The General Partner will devote so much of its time to the conduct of the

affaks of the Fund as is appropriate to manage effectively the affairs of the

Fund. Further, the Principal, so long as he remains affiliated with the General

Partner, u¡ill devote a substandal and apptopriate portion of his business time

and attention to (a) the affatrs of tle Fund (and any of its co-investrnent

opporrunides), þ) existing Investments, (c) the zffatts of Page MillProperties, L.P., (d) prior real estate investments in which the Pdncþal has an

interest, (e) co-investment opportunities v.ith Page Mill Properties, L-P.,

(f) fundraising and matketing acúvities with respect to, and the affairs of, any

other real estate fund that is not a "Core-Plus Fund' (and any of its co-

investment oppottunities), and (g) ftom a¡d after the termination of the

Investrnent Period, the affairs of any othet Core-Plus Fund, provided in all

cases that the Princþal devotes the necessary time to the Fund as is tequiredto satisSr its stated objecflves

"Cote-Plus Fund" means any irivestment fund with the primary pu¡pose ofacquiring Core-Plus f nvestments.

"substantially Invested Date" means the eatlier to occur of (a) the date oftermination of the Investment Period or þ) the date ât least 75Vo of the

agteg te Commitrnents have been (i) invested in Investments, (ü) resewed

fox (x) zny Investment that is the subject of a definitive agreement' option otletter of rntent or (y)

""y ptopetty-development activities in respect of any

Investment made pwsuant to a business plan or budget in place at the tjme

rnoneys are reserved, or (Ð set aside in good faith by the General Partner to

provide for reseles and to enable the Fund to make Follow-on Investrnents.

Pl\A-1844

Leverage

until the Substantially Invested Date, the General Partrrer will not bepermitted to sponsor or form any additional Core-Plus Fund, except asotherr¡¿ise approved in the sole discretion of the Lp Advisory committee.Notwithstanding the foregoing, the General Pattner r¡¡ill have the authoritywithout the approval of the LP ,A.dvisory Committee ro sponsor funds otherthan Core-Plus Funds at any d.me.

The Genetal Partner u¡ill be under no obligation to provide co-investmentoppottunities (or provide any concessions granted to

^rLy other Limited

Partner upon admission) to any Limited Partnet by reason of the fact thatsuch opportuniry was made available to any other Limited partner otinvestor.

The Genetal Partner iotends to cause the Fund to obtain financing secu¡edby its Investrnents, with such financing to be on such terms ând .o.rditiot. u,the General Partner deems apptopriate in its sole and absolute disc¡etion.The General Partner may refinance any asset of the Fund at a',y time in itssole and absolute discretion.

The Fund may moreage its properties, acqufue properties subject to debt orotherwise incut secued or unsecured indebtedness (including short-temctedit f¿cilities and construction financing, as necessary)

^t "ty-ti-e a¡d onsuch terrns as are deternined by the General Partner, including indebtednesssecured by the Limited Partners' commitments (see "credit Facility" below).The Fund rlrill employ leverage ftom debt sources to reduce its equityinvestmentjn properties and seek to maximize its long-term ren'.n on eq"ity.The use of leverage wrll permit the acquisition of mo¡e properdes than ifleverage is not used, thereby increasing the diversification of the Fund'spottfolio.

Unless otherwise approved by the LP ,\dvisory Committee, the Fund mayonly incur debt or otherrvise leverage its "stabilízed Âssets,' (or acquirestabilized Âssets with existing debt in place) it as a resulr thereof, theaggfegâre amount of all of its asset-secuted motgage financing does notexceed 50o/o of the aggregate fai¡ ma¡ket vaiue of all of its stabitjzed -A.ssets(detetrnined at the time of each assumption of debt, financing or refinancingas applicable, based on the most recent quartedy asset valuations).

"stabilized Asset''means an Investment that the Genetal partner expects togenerate a current dividend or yield of at least 8o/o at stabiszation, withoutsigrr.ihcant appreciation thereafter being projected dur-ìng the Fund's intendedfun:te hold period of such asset. unless an Investment later becomes astabilized rA.sset, "stabilized Âsset" does not include an Investment thateither (a) has been acquited for, or whose business plans initially include or

^re l^ter changed to include, 'þound up" development or substantial

development, tedevelopmen! renovaúon, or repositioning (inclurling leaserestruc-tudngs), (b) is less than 75o/o leaseð, and tequfues significant capitøJexpenditures (defined as at least 70o/o of the gross contrâct purchase pdce ofsuch Investment unless otherwise apptoved by the LP Âdvisory committee)to (i) bring it up to operating stândards and achieve stabilization (defined as atleast 95%o occupancy) or f.i) otherrvise resrrucrure leases, reposition otreriovate the Investment as part of its initial or later modified business plan,

PM-1845

Credit Facility

Investment Structure

or (c) although acquired when it \ras at least 750Å leased, (r) is no longer at

least759/o leased or (ù) is subject to a business plan at acquisition or thereafter

to festfuctufe its then existing leases or other\¡/ise reposition, renovate, oftedevelop the Investment to bring the Investment uP to new operating

standatdi and achieve stabilization (e¿', lease terms, tental mtes, tenant mix,

rollover mix, e/e).

The Fund'øill not be tequired to limit its mdebtedness levels for assets othet

than Stabilized Assets; ptovided that Fund will not incur debt or otherwise

leverage and asset (or acquite an asset with existing debt in place) iÇ as a

result thereo f, the aggregate amount of all of its asset-secuted urortgage

financing exceeds 75o/o of the aggregate fai¡ matket value of all of its assets

(detetmined at the time of each assumption of debt, financing ot rehnancing

as apPlicâble, based on the most recent quârtedy asset valuations)' Inaddition, the Fund will not be required to teduce outstanding irrdebtedness

levels because of reductions in tlle market value of one of mote of its assets.

The Fund may incur asset sesuted mortgage Enancing regarding any asset inexcess. of such limit for limited periods of time if the General Pãrtnet

determines that such action is apptopdate for strategic or othet appropriate

business teasons.

The Fund of one of more of its subsidiaries may enter into credit facilities

(each, a "Credit Facility') from time to time in order to enable the Fund to

iay.op"tating "*p".r.* or to provide for interim acquisition financing inñoth"rro.. of the Fund's business. In connecúon v¡ith any Credit Facility,

the General Partner will be authorjzed to pledge, mortgage, assigtt, transfer

and gmnt securiry inrerests in the right to issue funding notices and collect

Capital Contributions from the Limited Pattnets. The Credit Facility may be

secured by assignment of the obligations of the Limited Partners to make

Capital Contributions to the Fund. The Limited Partnets v¡ill be tequired to

cofrsefìt to the security intetest gtanted to the lender and to ptovide

information as requested by the lender. Interim acquisition financing under

the Credit FaciJity must be repaid wrthin L2 months of such financing.

The Fund may acquite and hold Investments ditectly ot indirectly through

subsidiaries, tmsts, partnerships, lirnited liability companies, ioint ventues,joint investrnent entities ot othet entities.

The General Partner may (but is not requùed to) conduct certain of its"REIT qualifying investrnents" through a subsidiary (the "SubsidiaryR-EIT') of the Fund that r¡¡ill elect to be taxed

^s a teal estate investment

trust (a "REIT') fo¡ federal income tax Pu{Poses andtnay take such acdons

as are fiecessary to avoid the Subsidiary REIT being treated as a pension-held

REIT (and thereby potentially causing tax allocations to tax-exemPt investors

attributable to invèstments owned directly or indirectly by the Subsidiary

R-EIT to be umelated business taxable income (tIBTI') under the IntemalRevenue Code of 1986, as amended (the "Code')). The Subsidiary REIT willbe wholly-owned by the Fund except for preferred shares ftaving a $1,000

liquidation preference, and bearing a cumulative preferred returr\ payable and

compounded annually, at a 12.5o/o annual fate subiect to il¡ctease if the rate

charged therefore by REIT Funding, LLC (or its successor) is increased) held

by investots to meet the 100 shateholdet tequirement to qualiff as a REITunder the Code. -Any investments (such as investments in dealet ProPerty)

PM-1846

Alternative Investm e ntVehicles; ParallelInvestment Vehicles

Excuse and Exclusion

that would cause the Subsidiary REIT to jeopardize its REIT stetus ot be

subject to fedetal income tax. m^y be owned (a) by the Subsidiary REITthtough a taxable REIT subsidi^ty, ot (b) by the Fund directly or inditectlythtough one or mote subsidiary T 'T f,5, rathet than through the Subsidiary

REIT (even though such ownetship outside of the Subsidiary REIT would

Iikely cause tax-exempt i¡vestots' share of any such investments to be UBTIfor fedetal tax purposes (see "Untelated Business Taxable Income" below))'

The General Partner may also cause the Subsidiary REIT to fotm an

operating ({IPREIÐ pattnetship controlled by itmd/or form one or more

subsidiades (which may include othet REITs, taxable subsidiaries, non-

taxable subsidiaries, trusts, limited liabiìity cornpanies and othet entities) if the

General Partner determines the same to be beneficial to the Fund ot orÌe otmore of its Partners.

Subject to certarn excepdons, the Subsidiary REIT (and any REIT subsidiary

theteof) genetally will not be subject to federal income tax on its taxable

income if it distributes on an annual basis an amount equal to or gteater than

its taxable income fo¡ such yeat. Thê Fund q¡ill be classified as a partnetshipfor federel income tax purposes, and therefore, generally u¡ill not be subject

to federal income tax at t}le Fund level. Taxable income and loss of the Fund(including dividends from the Subsidiary REIÐ *dl genetally be passed-

through and allocated to the Partners in accordance v¡ith their inte¡ests in the

Fund. In some cfucumstances, the Fund and the Subsidiary REIT (and any

REIT subsidiary thereof), and other entities in "vhich

the Fund or the

Subsidiary REIT invest, may be subject to certain federal income ot excise

taxes and cettain stâte and local incorne and.propety taxes.

The General Partner rnay organize additional investrnent vehicles to Facilitate,

ftom a legal, tax or regulatory standpoint, (a) Investr.nents by the Fund('Alternative Investment Vehicles') or þ) investrnent in the Fund by

certain classes of investots (?atallel Investment Vehicles').

A I¡mited Partner may be excused or excluded ftom participaring in an

Investment if the Genetal Pattner makes a good farth determination that:

(a) such Limited Partner's particþation in such Investment is teasonably

likely to result in a matetial adverse effect on the Fund or. arry of its affiliates,

any portfolio company or properry in which the Fund has ot may have an

Investrnent, due to any law or goveflrmental regulation to which the Fund is

subject; "r þ) based upon advice of counsel, such Limited Pattner's

participation in such Investrnent may be teasonably likely to cause â

substantial risk of noncompliance r¡¡ith xty law or govefnmental regulation to

which such Lirnited Partner is subject or otherutise is not a permittedinvestment for such Lrmited Pattnet because of a conflict of interest otcontractual obligations to which such Limited Paftnef is subject. If LirnitedPartnets tepresenting 25ok of the Commitrnents are to be excused orexduded" the Gene¡al Partner wjll not proceed v¡ith the Investment v¡ithout

the approval of the LP Advisory Cornmittee.

Âny determination to excuse or exclude a Limited Pattner ftom participating

in an Investrnent u'ill be communicated to all Limited Partners at or prior tothe making of the Investrnent and fuodi"g notices will inform such members

of the contributions they are required to make to the Fund. No LimitedPartnet will be tequited to contribute an amount in excess of its unfunded

PM-1847

Co-Investment;Allocation of InvestmentOpportunities

Pennitted Reinvestment

Transactions withAffiliates

Commitment plus, in certain circumstances, distrìbutions received by it (see

"Investrnent Þenod' above). The unfunded Commitmcnt of a Limited

Partnet excused ot excluded from participaung in an Investment will not be

reduced as a resulg anà any Capital Contdbution made by such Limited

Partner with respect such InvesLment will be refunded to such Limited

Partnet. ,{ppropriate âdjustments wrll be made to distributions (and to t]reFund structure, if n.cessary) in the event that all Limited Partnets do not

participate in all Investments.

During the Investment Pedod, the General Partner will offer to the Fund all

investments that consútute Cote-Plus Investrnents; p¡gvtdcd' however, that

tlre General Partnff mzy, lor stmtegic or other apptopriate business ¡easons

çurcluding, v¡ithout limitation, the suitabrlity of the investment for the Fund,

ttunsactiðn size, d.iversifrcation, Ieverage, geographic locaúon, income mix,

product mix, tenant roll-over, capital expenditure requirements, opetatìng

ir.o-. to capital income mix, fevenue timing and othet dsk or stfategic

business feasons), offer Lirnited Partne¡s o¡ other strategic investors

opportufiities to co-invest with the Fund in Core-Plus Investments, including,

wiihout limitation, othet funds controlled by third patties or the Principal-

Neither the Fund tllof atry Limited Partnet will be entided to teceive any fees

or Payments based on amounts teceived by the Genetal ?atmer, the

Invãstment Advisor or any of their afFrliates in connecdon with the Fund, any

co-investment by any third-party with the Fund ot any non-Fund investrnenq

transaction, serr¡ice or actrvity (all of 'vhich may be retained by such perties

v¡ithout reduction of any amounts payable to such parties by the Fund).

Subject to the foregoing, the Partnets (including the General Partner) and

thei¡ afEliates may engage in or possess an interest in other business ventures

of every ûature and dãs-ription for their own account, independently ot withothers, including reâl estate business ventures, whether or not such other

enterprises witl be in competition with any activities of the Fund; and neithef

the Find nor rhe other Limited Pattnets v¡ill have any tight by virtue of this

Agreement in and to such independent ventures or to the income or Pfofi.tsderived theteftom.

The General Partner may þut is not required to). cause the Fund to engage in

code section. 1031 like-kind exchanges whereby the Fund teinvests

disposition proceeds in new Inveslments (instead of distributing the

proceeds). The Geneml Partnet aiso has the right to feirvest the Portion ofthe proceeds of any sale made during the Investment Period that fepfesent

the ieturn of capital in transactions that ate not like-kind exchanges (ot todistdbute such þtoceeds and add the amount that reptesents a teturn ofcapital therefrom to each Pattner's unfunded Comrnitments)-

The Fund, and the Genetal Partner on behalf of the Fund, may from time to

time engage other sersice providers, rncluding a custodian, a úaûSfef agent'

indepenãent real estate appraisets, pfoPefty managefs, constnrcúon and

deválopment managefs, leasing fnanagefs, contfâctofs, legal and accounting

fi.rms, -tax

advisOts and envirOnmental consuitants and other consultants'

Each of these service providers will be comPensated by the Fund on such

terms and at such rarei as managemenr of the Fund deems appropriate in

light of the services provided. If any of the Management Companies ptovides

PM-1848

Removal of GenetalPartner

any such service in place of a third party, such Management Compan; rvill be

entitled to additional compensation for providing such services. The

additional coûlpensadofr pryable to such Management Company will be on

terms at least as favotable to the Fund as the terms tlren reasonably expected

by the General Pa¡tnet to be available in an atm's length üansaction with an

independent third party providing the same first-class services in the same

location, The fees uflder such agfeement will be subject to tevie's¡ and

reduction by the LP Advisory Committee at the next meeting thereof if and

to the extent that the LP Advisory Committee deter¡nines that the amount

charged for such sewices exceeded such market rates therefore.

To facilitate acquisiúons by the Fund, the General Pattner (or an affiliate)

may putchase investrnents for the Fund and üansfet such investments to the

Fund at the General Partner's (or such affiliate's) Adjusted Cost' "AdjustedCost" fot any investrnent means the sum of the original cost to acquire and

then to own such investment, including (without limitation) external

borrowings and botrowing costs (deemed to be 8%o Per annum, comPounded

annuall¡ ãr ".y portion of such otiginal cost that dre General .Partnef does

not boffow from tkri¡d parties), other zllocable expenses and capitalized

acquisition costs.

If the Genetal Partnef determines that a short-term loan wouid be in the best

interests of the Fund (in advance of.acapital call of so as to avoid Ptemahilredisposition of Fund assets to meet t¡e Fund's oblþtions), then the General

Part¡rer may make (or cause its affiLiates to make) such a loan to the Fund,

which loan v¡ill bear intetest ^t

a nate equal to the General Pattner's most

fecefrt unsecured borrowing tate, ot if none, 8% per annum' compounded

annually (and irrclude othet market terms).

The Genetal Partner may be removed as generâI partner of the Fund, by a

75o/ovote of the Limited Partners, at any dme aftet the Pdncþal has engdged

i¡ conduct constituting gtoss negligence, uncured v¡illful and material breach

of the Fund,s Païtnefship Agreement, u¡illful misconduct or fraud, felony

cofi¡icdon involving veracity of permanent injuncúon that advetseþ affects

the Fund, or if dre Pdncipal is either dead or adjudicated incompetent, orpeffnânently incapacitated. Upon any such temoval, (a) the General Partner's

Lterest in the Fund will be cònverted to a Limited Pattr¡er's interest and the

General Partnelwill conti¡ue to be entided to receive distributions with

fespect to the Fund and þ) any contfacts r¡¡ith the Genetal Pattner or any ofits ãffiliates will be tetmiûated u¡ithout penalty ot arLy other payment other

than for arsounts eamed prior to the date of termination and reasonable out-

of-pocket costs and "*penses

related thefeto. IÉ General Partner is removed

"od th" Limited Partners elect a successot general partner to tbe Fund and

elect to condflue the Fund's business, then General Partner wül receive 7570

of any future Carned Intetest.

Wirlrin 90 days after the date the General Pætner receives vøj.tten notice ofits remova! a75o/o vote of Limited Partnets may (a) elect and admit, effective

es of the date of such temoval, a successof general Partfìef (the "SucCessor

General Pattnet') and elect to continue the Fund's business ot þ) elect a

liquidatot to liquidate the assets of the Fund. Any Successor General Pa¡tner

will have an of tne management powers and obligations of the former

PM-1849

Asset Management Fee

Ttansaction, Advisory orOther Fees

Broken Deal Expenses

Otgatúzationa,lExpenses

Fund Expenses

General Partner as the general paftnef of the Fund under this ,\greement.

,ts consideration for the investment advisory services to be provided

pufsuanr to the ,\dvisory ,tgreement, , the Limited Partners shall pay to the

investment ,\dvisor, quarterþ in advance in each Fiscal Yeat, an asset

manâgement fee equi to (a) 7.5Y0 pet annurn of theit unfunded

ComÃit*ents, except that any Limited Pattner cornmitting at least $75

million d poy 1.25o/o pet rorr*o, during the Commitment Period or þ)7.5ok per ânnum of thei¡ Funded Commitments-

..Funded commitment" means, with respect to a L.imited Partnet, the

amount of Capitat Contribuúons made by such Limited Partner, whether or

not returned to such Limited Pattnet'

Eighty percefrt of all advisory difectors" transaction, toppinS break-up, or

rñil; i.es earned in respect of the Investments will be applied to-teduce

subsequent installments oi the asset mânâgement fee payable by the Fund to

the Investment Âdvisot.

The Fund will bear all third-parry expenses incured in connection v¡ith a

proposed Investment that is nót ultimateljr consum¡nated by the Fund

The Fund v¡ill bcat the expenses, costs and liabilities incwred i¡ connection

wirh (a) the offenng and iale of the fnterests, þ) the orqanization of the

Frrnd,'the General Þartner and the Investment Advisor and their respective

affiliaies, and (c) the negotiation, execution and delivery of the Fund

Àgreemárrt (deirn.d belãw), the Âdvisory Á.greement, .the -govemingdäuments for the Genetal Partner, and any telated or similat documents;

p!r:4dçd, however, that the total reimbursable expenses under c]1uses (r), (b),

ila-q.¡ ,tãr. u¡ill not enceed g1 million. The Fund d pul all amounts in

excess- of such amounts as well as plâcement fees; P¡ovided, however, that

(i) the asset management fee payable to the Investment Âdvisor will be

.á¿rr..a on a dollar-fot-dollat bãsis in ¿n amount equal to such excess as well

^s any placement fees paid by the Fund and (ü)to the,extent that, upon

liquid.uon of the Fund, such ieductions do not equal such excess as well as

urry pl"""m.nt fees paid by the Fund, the General Partner will pay to the

Fund an amount equal to such deficit'

Except as ptovided herein, the Fund v¡ill bear all costs and expenses incurred

ln m"i"t¡"i"g the operations of the Fund, induding the cost of organLing

any parallel ot= Alternadrre Investment Vehicle, legal and accounting- exPenses'

mo¡tl.rg and úavel exPenses, tax advice, tax projections, the cost of prepanng

the Frind,s financial statements, tax fetufns and K-l's, the cost of annual

audits, custodial fees, insurance, litigation and indemnification expenses' taxes

and othet govemmental fees and charges, exPenses incutted_in connecd.on

with any inãebtedness or Credit Facility entefed into by the Fund, exPenses

of the annual informational meeting of Limited Partners, exPenses of the LP

,Adr.isory Committee and othet exPenses associated with identifrTing, IocaUng,

.rrulo"titg pursuing (including v¡ithout limitation all due r{iligence and other

pursuit .ãriq, ,tori,*i"g, negotiating, acqrriring and closing âny potentiâl

investment (whether or ìot consummated) and the acquisition, financing,

ownership, holding, sale, ptoposed sale, management, leasing, construction'

other disiosition Jt vahaúon-of any Investment Except as provided herein,

PM-1850

Distributions in Kind

Risk Factors andConflicts of Interest

Annual Meetings

LP Advisory Committee

the General Pattner n'ill be responsible for the exPenses of its own

operadons, including rent, salaties, fumitue, fixtures, ofEce equipment and

oYethead.

The General Partner intends to make dist¡ibuüons in cash to the extent

reasonably possible ,¡¡ithout ieopardizing the potential fetufn to the Limited

Panners it*o ,try asset owned by the Fund. ¿tt no time vill direct interests in

real properry b. dist ibnt d to a Limited Pattner n¡ithout such Limited

P^.t r.r', consent. Further, securities that ate not publicly traded rvi-ll not be

distributed to a Limited Pa¡tnet without such Limited Partner's consent,

unless such distdbution is made in connection s¡ith the liquidation of the

Fund, the General Partner has used its reasonable commercial efforts to

liquidate such securities and the General Pattner has developed a.reasonable

pün of liquidation of such securities. The fair market value of such securities

-ill ¡. determined by the General Partner, subject to the approva-l by a

majoriry of the LP Ádvisory Committee. Distributions of publicly traded

r"á¡ai.. may be rnade to thé Partners ât any time if the Gene¡al Partner has

determined that an in-kind distibution is likely to result in a grc tet tetufn to

the Limited Pattrrers than selling the Fund's assets for cash'

,\ny in-kind disttibuúons would be made in proportions computed by

assuming that the Fund sold the diseibuted assets for cash in an arnount

"qual to theit fair market value as determinecl in the ttansaction pursuant to

which such assets wefe acquited, and then distributed such cash to the

Parmers as described in 'DisfnbuUons" above. If the General Partner in

good faith determi¡es that, because of spe.ial cifcumstarÌces, the established

îalrrution methods do not fafuly detetmine the value of a securify or othet

asset of the Fund, the General Paftnef may make such adjusûnents of use

such alternative valu¿tion method as it reasonably deems aPPropriate. The

General Parmer rvill notify the Limited Partners ol any such in-kind

disribution, and each Limited Paftnef will haveT calendar days from the date

the General Pattnet sends such notification to elect to have the Fund be its

sales agent for the assets that otherurise would have been distributed to such

f,imited Partner in the in-kind distribution (in lieu of receiving such assets in

the in-kind distribution). Any assets that ate selected by the General Partner

to be distributed in-kind ,will, fot pufposes of the drstdbution provisions

above, be deerned to have been distributed to all Patmers on the date that is 7

çfs¡rlat days from the d¿te the General Partner sends the notificadon to the

Limited Partnets (the "Record Date'). If the Fund acts as sales ^gerrt

fot ^îy

Lirnited Partner, any expenses of such sale and any increase or decrease in

value of the assets after the Record Date will be paid or teceived by such

Limited Paftnef (and any taxable incorne of loss attributable to such expenses

or change in value will be deemed to be tecognized by such Limited Pattner

dnectly, and not through the Fund)-

This offering involves various risk factors and potential conflicts of interest

arnong the Genetal Partnet, the Investrnent Adr¡isor and the Fund'

The Fund v¡ill hold annual meetings whete Partners will have the oppornrnity

to review and discuss the business and affairs of the Fund'

On or before the Final Closing the Genetal Patmet q¡ill establish an advisory

committee for tåe Fund composed of fePtesentatives of certain of the

PM-1851

Fiduciary Duty

Liability Standatd;Exculpation andIndemnification

Limited Pattners (the "LP Advisory Comrrrittee'), which Lirnited Pa¡tners

taken together u,ill o'ü/n ât least half of ail Interests owned by Limited

Partnets.-Each Limited Partner having a Commitment oF at least $50 million

v¡ill be offered representation on the LP Advisory Comrnittee. The Genetal

Partner may also offer representation to one of more Limited Pattners having

Cornmitments of less than $50 million in the Genet¿l Partner's sole and

absolute discreúon. The General Partnet will meet with the LP .Advisory

Committee not iess often than semi-¿nnually to obtain its approval on dle

mafters conceming the Fund tequiring its approval as set forth in this

Summary, hcluding, u¡ithout limitation, the valuation of Investments, âny

changes to leverage-limitations on the Fund, distdbutions in kind, apptoval ofconúcts between the Fund and affiliates of the General Pattnet other tJran

as provided above, and âny other matters as the Geneml Parmer may

determine from time to tirne. Unless otheru¡ise indicated, âny mattefs

requrdng approval of the LP .A.dvisory cornmittee vill ue considered

approveã onty if a maionty of the representatives þ numbet) vote torþþroo. such matter (in their reasonable discredon unless otherwise expressly

indicated hetein).

The General Partner will at all times act in good faith and in the best interests

of the Partners and the Fund. In rnanaging the affairs of the Fund and in itsdealings with the Limited Partners, the General Partner utill o'u¡e a hduciary

duty io the Paftners as set forth for a "general partner" of a li¡nited

partriership undet Delawa¡e law, inciuding: (a) a duty of loyaþ, which

iequire, the General Partnet to ceurrt¡ out its responsibilities wn¡! loyalty,

honesty, good faith and faimess toward the Fund and the Limited Partners,

and þ) " aoty of cate, which requires the General Partner to discharge its

duties u'ith the diligence, care and skill, including, but not limited to, the

safekeeping ofand use ofall funds, assets and records ofthe Fund'

The General Pattner, the Investment -Advisor, the Principal, theit affiliates

and their tespective officets, shareholdets, directors, managers, members,

partr¡€rs, and employees, including, rvithout limitadon, any Person or entity

that is an offi.cet, shareholder, director, member, managing membet' managet'

parrnef of employee in any such pafiy, of afly Pefson or entity that directly or

indtectly, thtough one or mofe limíted liability companies, paftnefships ofother entities, is an officet, shateholdet, director, member' managing member'

marrageÍ, partner ot employee in any such patty, and as determined by the

Geneial Partner, consultants of agents (the "Indernnified Patties') will not

be Liable to the Fund of to the Lrmited Partners, or. any of. their afFrliates, and

the Fund will indemni$', defend and hold hatmless all Indemnified Parties

frorn and agâinst ^fly

arrd all claims, liabilities, costs ând exPenses, i?cluding

legal fees, except with respect to (i) any act or omission which was not taken

Uy tfre Inaernnined Party in the good faith belief that such act ot omission (r\)

was consistent v¡ith its fiduciary doty, (B,) was within the scope of authoriry

granted to the Indemnitred Patty by the Fund Âgteemenl and (C)-was in or

iot opposed to the Funds bist interest, (Ð ^"y

material bteach of the Fund

,tgteement by the Indemnified Party or (rri) fraud, u¡illfirl misconduct, bad

fairh, breach of any fiduciary duty owed by the Indemnified Patty to the Fund

or the Limited Pattnets, gross negligence or reckless disregard of duty on the

part of the Indemnified Parfy in connecdon u¡ith the business of the Fund.

Ñotv¡ithstanding the foregoing, no Indemnif,ied Party who is an individual

PM-1852

Transfers andWithdraurals

Default Provision

Amendments

u,ill have any personal liabiliry to the Fund, to any entity in which the Fund

holds dfuect or indit..t investments (induding any Subsidiary REIT and any

other subsidiaty of the Fund), or to tlre investors ot any of theìr affiliates

except to t̡e extent the loss ot damage is attdbutable to such individual's

actual and intentional ft¿ud.

A Limited Partner may not sell, assign, ttansfer, pledge or hypothecate any

portion of its Interesi *ithout the prior .¡¡ritten consent of th9 Genetal

Þ^tt t.r (which consent, in the case of a transferee that is an affiliate of the

transferor oi , Partn.r, may not be unreasonably withheld (e.3, it would not

be unreasonable to withhold consent to a üansfer if the ttansferee (a) has a

reputation for litig,iousness or discord, þ) has used any business stfâtegy that

iniohed extortioã, a[eged exrortion or disruptive activity within a fund

designed to obtâin ..ooã*i" benefits at the expense of the other participants

it .,i.tt fund, (c) lacked cteditworthiness, (d) has violated ot allegedly violated

the USA Patrioi ,A.cg (e) has a reputauon that could have a material adverse

impact on t}le Fund or any o[ its Partfiers, (f) is another real estate fund or a

hedge fund (debt ot equity), (g) is a pefson or an entiry that sponsors, acts as

advi"sot to, ii an emplóyee of, or is part of the conttol group of anothet real

estate fund ot a hedge fund (debt or eqruty), þ) has a business that competes

with the Fund, (i) ii a lendet (or any affúate of a lender) to the Fund,

f) might, in the good faith belief of the General Pattnet, use its Interest or

uny ittfotto^tion with fespect to the Fund, any Investment, of such lnterest to

t atrn tfre Fund, the othãr Parrners or thei¡ respective reputadons, G) *tghC

in the good faith belief of the General Partner, attemPt to obtain an

economi-c benefit at the expense of the other Pattners, inCluding the use ofstrategies of attemptìng ã hostile takeover, apptopdating any business

oppoirunities of thi nund, causing liquidation of the Fund (ot any of its

"rr.ts) ot forcing so-called "greenmail payments" or the like from the Fund,

or Q would holã its Interest (ot any portion thereoÇ, directly or, indirectly,

for'the benefit of any pefson ot entity described in clauses (a) through (Ï)

above)). No such transferee v¡il become a substituted Limited Partner

without the consent of the General Pattnet, which consent may be given or

withheld in the General Partner's sole and absolute discret-ion. No Partner

may withdtaw from the Fund, except that Limited Partners that ø-r.e

goo.ro*"rrt plans, ernployee benefit plans or regulated barking entities may

irrithdt"* from the puna if their participation becomes illegal undet certain

circumstances.

Á. Limited Pa¡tner that has not been excused or excluded from all ot patt of

any requfued contribution of capital and defaults wittr tespect to such

contribution obligation may be subiect to certaifl adverse consequences,

including a reducdon of all ot a pottion of its Interest as Liquidated damages.

The limited pârtnership âgreement (or other goveming documenQ (each, an

"Entity Agåement"f for e".h entity included in the Fund (each, a "lFund

Entiq/) m"y be amended ¡16¡¡ time to ti¡ire (or any ptovisigl thetein may

be warvld) by the General Partner upon the following applicabie af6rmative

vote of the investors: (a) if the amendment (or waiver) affects more than one

Fund Entity, the affirmative vote of investors in all affected Fund Entities

collectively holding a majority of the aggtegate intetests held by all of the

investors in all of such affected Fund Entities (with voting to occut as if all of

PM-1853

Reports

such ìnvestors were parmets in a single partnership), or (t) if the amendrnent

(or vraiver) affects ánly one Fund Enrity, the affrrnative vote of investots

.ollectirr.þ holding a majonty of the aggegate interests held by ¿ll of the

investofs irr ,,r.h Fund Entity. Notwithstanding the foregoing, the Genetal

Partner, without the consent of any investor in any Fund Entity, v¡ill have the

unilatetal authodty to arnend any Entity ,\greemenÇ upon noticé to the

investors therein, so as (a) to corfect effofs, cufe ambiguities, fesPond to

changes in the la.v and make changes for the benefit of the investors and

þ) tã imptove, upon advice of counsel, the Fund's position in (i) preserving

Èfuf ,tutur, (ri) satisfying Investrnent Company Act . exemptions,

(Ð q"^äfy"g foi ERIS¡ pLn "rs.t exemptions, (iv) sustaining

-the tax

p"riti""r-ofluch Fund Entity, any Subsidiary or aÃy investor of Partnef,

iv) avoiding publicly traded partnerstrip status or (vi) pteventng th: investors'

nrrd ""pltl âcco'nts ftom deviating from the intended priod.ty cash

drstributions des cribed above-

Each Limited.Parmer v¡ill receive audited annua-l ltnancral st¿tements and

annual tax informatiofi necessafy for the completion of income tâx feturns.

Mofeovef, within 90 days (or as soon as practicable thereafter) following the

end of each fiscal year,'the General Partner v¿ill use commercially reasonable

efforts to furnistr of cause to be furnished to each Limited Partnet a

statement of changes rn the net asset value of the Fund and a confumation

from the Fund's uoditoÏs of caiculations of distributions (if any) made during

such fiscal yeü to the Investor by the Fund and changes in such Lirnited

Partnet's capital accourìt during such fiscal year.

At the end of each quartet of each fiscal year, the Genetal Partner wjll also

use colaunercially reaionable efforts to ptovide to each Limited Partnef (a) a

balance sheet oi the Fund as of the end of such quaftet and statements ofoperations and cash flows of the Fund for such quattet; (b) a_statement as to

,t. ,lro., recently determined (i) cost of each InvestmenÇ (ü) net operating

income óf "u"h Investment during such quartet, Gä) Value of each

Investrnent as of the end of such quaftef, and (iv) amount of all secured debt

and other liabilities accrued with tespect to each Investment or otherrvise

payable by the Fund; (c) a statement showing the computation of fees and

ArrrlUnti""r to the Gènetal Partner and its affiliates, which statement wi]|

separately reflect each type of tansaction v¡ith of service provided by the

Gäns"l þartnet and its ^fftli"t.t,

the amount paid with fespect theteto and

tle method ot formula used f,or calculating such paymeng other than

transacrions contemplated by the Fund ,tgreement; (d) a statement of the

Limited Partner's capital account balance and a valuation of the Limited

Partner's investment in the Fund using the most recently determined Value ofthe Fund's assets; (e) a Limited Pa¡tner's capital âccount transacdons report

that shows the details of all Fund üansacdons affecting the Limited Pattner's

capital accounr that occurred since the end of the preceding quarter and

p'ecedittgfiscalyeat,includrngallCapit'lContributionsanddistdbutions'and theÈ effects at the time on the Limited Partner's annually compounded

rate of retum; (f) a statement of performance meâsufement tetufns, prepated

in a manner that is in compliance with the Associates for Investrnent

Management and Resea¡ch (AIÀiR) Performance Presentation Standards; and

G) ""i such other informarion as rhe Limited Partnets may reasonably

ì".þrt. The Genetal Pattner will use reasonable efforts to ptovide such

PM-1854

Valuation

Secutities Law Matters

ERISA

quattedy inforrnation .¡/ithin 45 days following the end of each quarter ofeach fiscal year.

The General Parmer wdl also furnish of cause to be furnished to the Limited

Partners the following inforrnation w'ith respect to each month of each fiscal

year: (x) a balance sheet of the Fund as of the end of such month;

þ ,,^tl*"ots of operarions and cash flow of the Fund for such month; and

þ srr.h other infórmadon as the Limited Parmers.will reasonably reguest

r.i"ti"g to the immediately pteceding month's activity. The General Partner

-ill ,rsã commercially reasonable efforts to provide such monthly information

on or before the last day of the succeeding montÏ.

In addition to the foregoing, the General Pa¡tner u¡ill promptly ptovide to the

Lirnited Partners copies of any appmisal made v¡ith fespect to an Investment

and a notice of change in Value of such Investment.

\fithin 30 days aftet the end of each quattet of each f,tscal yeat, the General

Partner v¡ill use reasonable commercial effotts to determine the Vaiue of each

Investrnent as of the end of such quartet. In the case of âû Investment

acquired within the 1.Z-month pedod pteceding any quâftedy valuation, its

Viue will be its acquisition cost (adiudted to take into account any additional

amounts invested thetein aftet acquisition), unless the General Pafinef

determines in its disctetion to obtain an independent thfud-Parly appraisal for

such rnvestment during such 12-month period. witJr tespect to any

Investment that has been sold, its Value will be its net sales price, The Value

of money market instruments, securities and other interirn investrnents q¡ill be

thei¡ then cufrent market pdces, unless there exists no active mafket fot such

investmenrs, in which .^rã th"y will be valued in good faith by the General

Pattnet using such information as lhe General Paftnef deems relevant.

Interests in the Fund v¡ill not be registered undef the 1933 Act and must be

acquired solely fot investment PurPoses and without any view to the

dlr-t ib.rtion thereof in violation of the 1933 'tct. Offers of Interests in the

Fund will be made solely to accredited investots within the rrreaning of the

rules promulgated under the 1933 Act, except as othefwise expressly agreed

by the Genetal Pattner.

The General Paftner anticipates tlat the Fund will be exempt from the

registration requirements of the Investrnent Company A.l o-f l94O' as

arãended lthe .;1940 Act'), by reason of the exemption specified in Section

3(c)(1) (for issuers whose securities are not beneficially owned by more than

tòó p"rsonr) andf or Section 3(c)(7) (for issuers whose securities are owned

exclusively by ,,quallFred purchasers" wrthin the meaning of secúon 2(a)(5t)

of the 1940 Act).

The Fund's counsel urill issue an opinion to the Fund at the time the Fund

acquires its initiat investrnent that the assets of the Fund will not be deemed

plan assets undet the Employee Retirement Income Security Ãct of 1974

i,enfso-1, either because rhe ownership interest in each class of equity

àterest in the Fund hetd by all private and public empþee benefit plans is

less than 25"/o of the value of such class of equity interests i¡ the Fund or

because the. Fund qualifi.es as a"rezl estate operating company'' or a "ventufe

capiøl operating .ò*pr.ty" ot satisfies anorher exemplion from plan asset

PM-1855

Tax Allocations

Unrelated BusinessTæ<able Income

Tax Considerations

Counsel

IndependentAccountants

treatrnent for its assets.

No Partner subject to ERISA (as hereinafter defined) rvill be required to

make an initial Capital Contdbution in tespect of the F'und's fust Invest¡rent

unless the Fund has delivered an opinion of counsel to the effect that the

Fund will qualry for an exemption from ERISA plan assets.treatment for its

assets undå theUS Department of Labot plan assets tegulations immediateþ

after the Fund makes such Investment. An opinion of counsel regatdìng

applicability of an ERISÄ exemption v¡ill also be issued as of the Final

Closing.

Profits and losses of the Fund generally will be allocated to each Partner so as

to cause the Partners' capital accounts to be consistent with the foregoing_

distribution provisions "r,à

th. requirements of dre Intemal Revenue Code of198ó, as amended (the "Code").

Tax-exempt investors in the Fund generally s¡ìIl not be subiect to UBTI on

RBIT tttut may be formed, unless the Fund has bortowed money to putchase

the shares of the Subsidi"fy REff' or the investor has borrowed the money

used to invest in the Fund, ãr the investor is (a) a pension plan owning over a

107o interest i¡ the Fund and þ) the Subsidiary REIT is a pension-held REIT

(i.e., hf. any single pension plan owns in excess oÍ 25o/o of the interests in the

È'rrnd, or-a[ p.orlort plani owning in excess of 70"/o of the intetests inr the

Fund collectiiely own in excess of 50ok of the interests i¡ the Fund). The

General Pafrner has the right to limit thc extent of the particþæion by

pension plans and to limit uansfers as necessafy to avoid pension-held status.

Tax-exempt iovestofs may have UBTI (subiect to tax at cofPofate rates) ftom

Investments thât are acquired outside any Subsidiary R-EIT. The Genetal

Pa.rtner has the right to stfuctufe t}re Fund's acquisition and oPeration ofìnvestments ,. it ãeems apptopriate and, because of the complexity of a

REIT structu¡e, may decide (in its sole and absolute discretion) not to form a

Subsidiary REIT in its sole and absolute discredon. The General Pattnet \r¡ill

not be liable for the recognition of any UBTI by an investor with respect to

an investment in the Funá, and potential investots can exPect some or all ofthelr profits ftorn the Fund to be UBTI.

Each ptospective Limited Partne¡ should consult with its own tax advisot

,.g^.dirrg the federal, state, local and foreign tax consequences applicable to

an iflvestment in the Fund putsuant to this offering'

Pircher, Nichols & Meeks and DI-A Piper Rudnick Gtay Cary US LLP

PricewaterhouseCoopets T J.C, or such othet accounting frtm selected by the

General Partner, -lU ¡. the independent accountants fot the Fund' The

Fund's âttoffieys and accountants may also provide similar ot other services

to the Geneml Prtttt"t zndf or its affiliates q¡ithout b'eing disqualiFred from

serving jn *y role for the Fund.or the General Partnet (or affiliates ofeither).

PM-1856

E)GCUTI\IE ST,IMMARY OF KEY TERMS

ru fúouirg iîforrmtion is prøøtd. as a swwral! f @Ìuin prrruipal tmrc ard it qodúd b r{eøæ n th nme fuãild"SØ"ffiury f fual Temt" in tlß l+irÃIe Plaryløx Mqnrarú,rn tln Pø;ruenhþ Agwvt ørd ørry úu suhuiptian

dm,nøti ¡- Smwpase-Mi| Ptrytilà L.P. (Øpitalizd tm76 ûe Mrd in tlte nnre fuaild "Søtnwy { I+i,tipllT*^.).The Fund

Initial Offering Size

Genenl PartnerC-ommitnentTerrn

Fund Støægy

Diversification

:_: .' .: ,l:,.'-' .

.

,. , tt. . -... ,,

EeÞJÞg#i€dIåseæs+DjsfdbÉisns

fbt Secon¿. tOO"¿ to suc=b

æceive¿ a retum of an of lts Ofct fnir¿. tOO"¿ to sucfr I-m

Strstarlagc-Iúi! PropertiesJl, L.P., a Delaware limited partnenhip.

$3OO millior\ subject to increæe in the sole a¡rd absolute discretion of the General

Partner.

3o/o oÍ the e1gregete Commiuments of the limited panne$ (not to exceed $10 million).

frnEjeht years, wiuh up ro rwo consecrnive one )æar extersions by the General

Partner, with the approval of the LP AdvisoryComminee.

To make long-term investments (equity and possibly debÛ in value-enhanced core,

challenged cori and deveþment assèts located in the United Staæs targeted to achieve

(a) a leverage d 60/o to 8olo õr¡rrent return et stabilization and (b) a leveraged 12þo/o to14olo IRR (compounded antruellt over the life of the investment. There can be no

assur?nce that such targeted returns will be achieved

No more *pn2ú/o of aggregaæ meximum Commitmens maybe invested in anyoneFund investmen¿

Contributions rcletins to suc

LOSA21s9J44?+2$4422

PM-1857

Clawback

ManagementFee

Investrnents: and

f e) Fifth. f il 80% to su

Yes"-with 50% of the cartiSd inrcrc

l-Oo/s ef *re Vdue ef *æ FrxCt æsets prusl.Solo of caoital.called. and

ln¡ stqentlcÊod. 7-5o/o of unfunded C-ommitments (i@reõæõn to t¿sp¿ tpr runtte¿ pannen mat¿ng Comillion).

LOSi¿le,E4æ+2åi4022

PM-1858

'[ r'

lnvestment Opportunity Summary

Sunstar Properties, L.P.

Preliminary Analysis - June 2006

TermsS u n sta r eroþ-e rti e s, L. R.

$300 Million.

$100 Million.

$100 Million.

Generat Partner co-investment of lesser of 3% oflimlted partner commitmentsor $10 Million.

3 Years after FinalClosing ofthe lnitlalOffering.

. 10 years, with up to2consecutive 1-yearextensions by the GeneralPartner, with the approvalofthe LP Advisory Committee(subject to extensionindefinitely if a Public VehicleExit occurs).

Closed end fund with PublicVehicle Exit objective.

Sunstar Properties GP, LLCis the general partner, and .

SunstarAdvisors, LLC is theinvestment advisor. Bothentities are controlled byDavid A. Taran.

United States.

All Core Plus tnvestmentsoffered to the Fund untilsubstantially invested.

ItemFund Name:

Fund Size:

Requestr

Glosing Tranch:

Go-lnvestmentGommitment:

Gommitment Period:

'E¡rn¡l Tarrrr.I Y¡¡g ¡ V¡¡¡¡¡

lnvestor Exit Rights:

Sponsor/Managen

GeographicDiversification:

Exclusivity:

Source

U

\J

PM-1859

Dedicated Team:

,.-J

J Fund Objective:

Fund Strategy:

Deal Pipeline:

Asset Diversification :

Time CommÍtment:A substantial portion ofteamb business time andattention as is reasonablyrequired fsr the propermanagement of the Fund.

Çò-invest¡r/tgntCommitment:Management team mayinvest as part of GeneralPartners's co-lnvestment.

ProfÍt sharins:A promote sharing regime infavor of management will beimplemented consistent withthe regime in place for PageMill Fund l.

Track Record:Please see "Sponsor's/Manageds Track Record"below.

Make long-term investmentsin Core-Plus assets targetedto achieve (a) a leveraged6o/olo 8olo curent return atstabilization and (b) aleveraged 12o/oto 147o IRR(compounded annually) overthe life of the investment.

lnvest in interests in value-enhanceable core,challenged core anddevelopment opportu n ityproperties.

Several transactions invarious stages of negotiationand cclntingency.

No more lhan2Oo/o of theCommitments may beinvested in any onelnvestment unless approvedby the LP Advisory

PM-1860

\J

.l ,i

:... r

Fund Structure:

Gurrency:

Hedging:

...

Proposed Otherlnvestors:

Go-investment Rights:

Proposed Glosing/s:

Leverage:

Reinvestment:

lnvestmentManagement Fee-

OrganizationalExþenses

Trustee's Fees

Third Party Gosts

Committee

Limited PartnershiP

United States dollars.

Potentially interest ratehedging on bonowings onlY.

ln discussion with otherpension funds and qualifiedinvestors.

None.

lnitial closing June 30, 2006;lnitialOffering period of 12months with possible 6 monthextension. SecondaryOfferings in discretion ofGeneralPartnqr.

Unless otherwise aPProvedby the LP AdvisoryG-ommittee, no mõre than50% leverage gn stabilizedassets,

ln orderto prePare, maintainor size the Fund for thePublic Vehicle Exit, the Fundmay engage in 1031exchanges and maY reinvestsale proceeds.

1.0o/o of the Value of Fundassets plus 1.5% of unfundedCommitments (includingreserves).

The Fund will bear the cost oforganizational exPenseswhich, with resPect to thelnitial Offering, will notexceed $1 million.

No trustee;s fees;

See "OrganizationalExpenses" above.

,:: ,

PM-1861

Placement Agent Fees No ptacement agent fee loadon CaIPERS investment.

ç Initial operating Gapital or line of creditDeficit Funding: secured by capital

commitments.

\./

Underlying Fund or JV Levered 14-16% IRRlnvestment (compounded annually) overTarget Terms: the life of each investment.

Profit.Sharing: General Partne¡'s canied

8f#:l;ii,Ëlä,i3"ïGeneral Partner to caniedinterest oÍ 20o/o at targetedretums. Maximum GPcarried interest is VÙolo.

Fund Governance: The General Partner (and thelnvestment Advisor to theextent delegated bythe GP)

ËliL3ïiålJåT.i::Hi,:iinvestment strategy anddecisions,

¿:i*ifi 3,i,'J',ff,:'ñ""CaIPERS is a member, hasaPProval rights on certainmaterial matters of the Fund.

Sponsor's/Managefs Since 1993, David Taran,Track Record. Page Milland its

afül iates/predecessors haveacquired aPProximatelY 1 3.8million square feet ofcommercial property, 700acres of developable landand 449 hotelrooms; withaggregate value of

:üJ,iffi i:'ål3J,iJ'tän",of approximately $665million; and generatingrealized and unrealized valueof aPProximatelY_$] .4 tillionand yielding an IRR of

PM-1862

':..'1..'

''1. : Reserve Account:

Glawback:

Return ExPectations:

approximatelY 35.0% orapproximatelY 2.0x investedequity through 12131 lO5-

Predecessor and non'fundco-investments haveachieved apProximatelY $1 .1

billion in realized andunrealized value Yielding 91IRR of approximatelY 34-6%or approximatelY 2.1xinvested equrty and (ii) PageMill Fund I's investmentshave achieved aPProximatelY$303 million in realized andunrealized value Yielding anIRR of approximatelY 45.3o/o

or approximatelY 1.9xinvested equity through1A3¡l05.

None, as distributions arePartnershiP based.

Yes.

Leveraged:Prooertv Level:14-16%.Fund Level:Before fees and Profits.1Ùo/o.

After fees and Profits.14%.lnvestor Level:Before fees and Profits.8o/o.

Afterfees and Profits.12o/o.

Unleverased:Propertv Level:12-14o/oFund Level:Before fees and Profits.8o/o

Afterfees and Profits.12o/o.

Follow on fund; established

J

Pros:

PM-1863

Gons: .

PreliminaryRecommendation:

fund manager with successfultrack record with CalPers.

Goals / strategY similartoprior successful funds /investment activitY.

$100 Million.

U

\.1

PM-1864

TriumnhPronerfvServices

ÊW. Sèþ' lftçsl . ù8rjgb--å,l€el ltlrr GaflËl

August 12,2008

Athr: Stephen FordRent Stabilization Program2277 Urtlersity AvenueE. Palo Alto,CA94303Vi a email: sford@cit-vofepa.org CC : wli@cityofepa. org

RE: Supptemental Form Providing Rents for June 30, 2007 anð June 30, 2008The Redwoods - 220 E. O'Keefe Street

Dear Stephen:

As requested in your form letter of July 25, 2008 we are enclosing the supplementalinformatíon requested under protest.

We received the changes to the rent control ordinance ma¡ked "7-9-08 Final Adoption" onJuly 29,2008 and reviewed them. You may recall that I requested this information in an

email to you on July 8, 2008. We are a bit confused as to how the changes to theordinance could be implemented as of July 1, 2008 yet r¡/ere not adopted until July 9,2008.We also do not understand how the change in calculation of maximum lègal rent can be

retroactive to July 1, 200'l . It seems to us that orce a rent ceiling is detennined, it shouldbe effective until a new rent ceiling is established, most often via the Costa-l.Iawkins Act.

Please have someone contact me to explain the rational and legality behind the retroactivecomputations as well as address the other items of concem in this letter.

Your generic letter of July 3, 2008 included in your form letter dated July 25, 2008referred to a revised Vacancy Registration Form. We have not received this form andrequest that you immediately forward five (5) copies to us.

I am also unsuïe why neither I nor the building owner received written notification thatchanges to the ordinance \pere being considered. As stakeholders in East Palo Alto, whosecontact information is in your files, we expect that we would have received some sort ofnotification. Please ensure we are notified of futu¡e changes that are being reviewed orconsidered, regularly scheduled meetings of the Rent Stabilization Board and any specialmeetings of the Rent Søbilization Board.

Please also forward a copy of this letter to a higher up and have them contact me. Couldthis person be Wayland Li who is mentioned in your fom letter dated July 25,2008?We're not sure who he or she is.Lastly, please check your records to confirm you have the correct address for notices forthis property. The receipt for payment of the registration fees was sent to Ely Place in Palo

3101 Middlefield Road, Unit 3, Palo Alto, CA 94306650-813-1413 voice r 650-813-9413 facsimile

PM-1865

ïrlumohPronértvService's

tuyr Se!. l¡rr.çl ¡f.fonpge.-S'lea¡

Alto, when it should have been sent to the Triumph Property Services office per ourconstant reminders of the notification aiddress for matters pertaining to this property. Also,some of our correspondence from you has the mistaken address of #33 as the unit number.

Please make sure ALL correspondence for the propedy is sent as follows:

The Fisher LLCC/O Triumph Properry Services3101 Middlefreld Road Unit 3Palo Alto, CA94306The contact phone number should be 650-813-1413.

Stephen, I have to go on the record here and express my disappointment in the way the

changes to the o¡dinance were handled. The long-term effect of these changes will be that

we, as somewhat philanthropic propefiy owners and managers, will no longer be able to

make special accommodations to rents for those of our residents who fall upon hard times

or whose income is insufficient to pay our typical below market rents. We will be forcedto increase rents each year to the maximum legal rent ceiling just to pay increases to the

registration fees and maintain the buildings. It appears that gone are the days where we

could reward good long-term residents with rninimal or no annual increases or temporarily

reduce a rent due to resident hardshþs.

Additionally, the changes to the ordinance have resulted in a decrease in value of the

property. The net effect of the change in the ordin¿nce is a reduction of 542,286 (forry-t rothousand two hundred eighty-six dollars) in the gross potential rent. This equates to areduction in total value of the buildings of between $5 I I ,000 and $ 1,066,500 using GRMs(gross rent multipliers) ranging from 18 to 25. The drop in gross potential rent equates to a

loss of value of over $357,000 if we use a capitalization rate of l2%" and over $857,000 ifwe use a capitalization rate of 5%to determine building value.

AII in all, we do not see how the changes to the ordinance benefit either properly owners or

renters in the long run. I am looking forward to discussing our position with someone

from your office or a member of the rent stabilization board; please make sure they receive

a copy of this letter.

Sincerely,

Katrina EdwardsTriumph Properfy Services as

Agent for The Fisher LLC

Enclosures

310f M¡ddlefield Road, Unit 3, Palo Alto, CA 94306650-813-1413 voice r 650-813-9413 facsímile

PM-1866

The News srlrcoil uA[rEY t sAl{ rosE

[ea] EstateChanges occur atWindermere and AlainPìnel Realtors.

Pags 3

ffiffiffiffiffiffi

!Is

I

CalPEnS hacks Page Mill planSkeptics watch East Palo Alto initiative

!I

Iæo,!

sltÂR0il slM0llsot{ssìinonson@bi¡journals.com

The C¡ lifornia P..ublic Employees' Retire'ment System, kiiqwn for investing thatchampions finânëÌat and social returns, isa m4õr backer of,ä controversial businessplan being pu{suéd by a Silicon VaLleyieal-estatc vèntrUe to acquire and possi-bly redevelop huùdreds oi East palo ¿ltoapartments. .-:

Palo Alto-based"Page MilI Propertles hascome under harsh criticism from somequarters of this.:tiny and relatively im'poverished Silicon Valley community for

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DECEMBER 28,2007

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attempting to raise rents for househplds inthe dozens of complexes that it has boughtover the past 15 months or so. The com-Blexes are part of a rent control districtmanagdil by an East Palo Alto city board,and, according to two boarcl members, arethe community's largest source of afford-able housing.

CaIFERS has committed $100 mÍllion inequityìto the effort, which some fear wÍlluttimately replace standing apar'tmentstock with new ancl much'pricier units,thus driving the existing, largely poor resi'

$ee PÀEE MlLL, Page 24

TffiËNFItsEShutterflycrealing aculture by

CEO believes ingreat companycommunicating.

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Page Mill Properliæ LP hae rcquiled dozens ol rpartment

buildings in lhe E¡st P¡lo Ällo are¡ south ol ll.S. 101 and

adj¡cenl to Palo Allo ¡nd Me¡lo Fark,

r Newsãus-tNess lounn^. .*i-"

hI{SION:

ilssance aho offers

ancing resource

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ed a budger of S350,000 andpeilstart a¡out 250 buslnesesPa¡o Alto. Some of those h.

a nail slon, a chlld ¡ealncing flrE a luury ca¡ wash,cde ccnter, a mqid senice

ers.e exclted about this m€rger! our combtneal strengtbs willn mole succ$sful new busl-' says Greg Salds, a Startounds and ve¡tqe capltal-r Sutter Hlll Ventu¡æ, in aleâsé. "Combining Stårt Up'sbs in suÞpo¡tlDg SpânlEtFte entreI¡reneurs ânal Rehais-scæssful progmús ùelplngi sEall bNl¡esæs acceleratewll¡ nake both oflheæ capa-rvailable tluou8hout the Saræ Penirsule."silce üalÞs about 1,200Ér yeã ln classes that regetr-week introductory øumes€ù buslnss ÞlaÐlng crus.

're excitedÌs merger because our

:d slrengths will result in

lccessful new businesses.'

Grcg sandrSla¡t Up co-loundet

o Ðnual budBet of aboutlfob. The Eroqp lncubatedRun, â weU-kmwn women's)parel retailer, and ttainedlmlaga, whowôn t}leSmall. ádEilistratioD Buslnæs¡f lhe Year awüd l¡ Sano tbis year ln palt for thebuslness ùe incubated withDce, It âls offors aa¡vancedElDg lÀcludi¡g pær gloup,ne.on-one conguldng, busi-ubator technology clæ6esla-month ¡etvorklng andtung sessloN.ræ alco offæ a finùclhgætrter, does los ÞackaFingartups Bet banE loans ed,te resources a¡d nonprofitls æal tlut futrds startuÞte nonp¡oñt is fu¡ded w¡thì!t conbacts aDd thtfrghrd donadons froh fouala.!þÞtions and hdlvidqals€ Eerger, the orgâr¡lzationtûcreæ lts budg€t to 92.?{iller says.

lllll cøør lluræ, ùllnrs renløtsbt ¡nd qorlr trtnr|lnril fd tlËJ. SleËn h rorhld ¡t lÍl&299-lUt.

will beû, but Ìfürlsn ud Websterclalb tbat ludlo¡ds have not heendlligeDt aùout ftltng th€ prcper Þa.perwork whe¡ e n€w tenant oæuÞl€sa Mit and a lew bæE r€nt on whichsubsequent rmt t¡seæes wou¡d bofrgured ls establlsherl

Page Miü sys that its proDosed l¡-æass cmpv with the clB orùinilæmal æ beld not only ihe lesat Ublbfor tlæ ænt-øntroll€d Impcrti6 butelso mùket len¿s. Ths €mpâny alsdalEs that ft bâd origbaüy i¡ierded toæk "g¡ailual a¡.nu¿.Ì nrt tEreises'to help ofset, ln !ilt, lls tll Eilltonir proÞerty iñIWmÐG, but that areænt clty prct$al for Dew mt re.stteuo¡s forced tts h&¿ City ctriclals@uld not h€ sdred bdæ ¡ros timto BDonù The ænDany says that itwiu tnåke ml allorums ffr ruldentsúith "6!ecial nerds," itrcludllc thosllv|Ig on governneDt-sponsored fuedincomes.

!¡rgest lwnolThe Page Ml¡l fu nd oMs about 1,300

of the mol€ than 2,500 eprtmentsin the Rent Stabllizatton prosrÐ,ed tìe cornpüy is eæi¡y the l$g-est 4Þrhsnl owner ln the progrm,Ìf/ehstet says,

CaIPERS spokesDm CIrk MCKIì.ley, queried about thet agency's reac-tlon to the comhunity unrest, says,'CaIPERS has spoken with our pairt.!e¡, ùd we ûe saüsfreil tl¡at ourpartr€ris complyl¡B with the law ÐdfoUowlDg soud buEins practiæs.',

CalPÞRS genereìIy has a l0.ywinvæboent horlzon, he sys-

Acærdi¡g to CaIPERS dæutD&ts,the Paæ MiU fr¡¡d's 'gwl is to tar8€t(rea¡ estate) i¡mb¡Ðts lo mte yaluethrowh fæE @ reposltioni¡g, ÞdÈvelopmeþt or cobreBion alurg wlth ac.tual déveloÞMt of náIestate wLs."

Mcl{i¡ley would not embelllsh ont¡e d€grc to whid¡ CaIPERS tnvdlveslbelt in tb lÞtbss' bEins stat8gies ùd implementatio[ At ¡east onedeveloper iñilirF wlth tle businæsrelåtiobsblps, how€E, says that eù.i¡elllvAtîmt frEds sucb æ Pace Mi¡l,sere oflên ønsideì€d "dlætioury,'iræly!¡g that the mrey ma¡acÈ hðbmad hdependmtabl¡lty tow0k æ heo¡ slrc ffi f il, i¡ fact C¿ÌPERS míssæmlderable ovmÍght.

"Yes, tt is 'dlscretiona¡y,, but youare oIÞrâUng wlthiu a lltde bo¿ ud

CalPlRS trrould ærteinly be awæ"of Page Mill's acttvlles end plans, hesays.

He also notes ibat whtle Tfet€florts ha?e been met wtth skepticlsm, a valid arguænt €n bemade that they wul bsDefit thccomunlty end ebeady have.It is also wort¡ notlng that spårtEent rents across Silicon Va:lley, âf-tù years offauint ad tÀen stagnating, hæo 6tarted to rise across theb@rd, driv€n by job lacasee; thecflsls in housing finaÞ, whlch ispushhg so¡oe folks into læta¡s whomiBht otherwlse buy; end the reglon'schronlc fallure to build enough hox.irg to meet demmil.

The Page Mill sFategy ap¡eæ to reJyon what mighl be callcd BægrsÞhic ü-bltr¿ee. A]l of th€ apùtñent6 in quee-tþn slt ln Eæt Palo Alto ln a r€lativelywow fbbon of lend fÐDting U.S.10f. But the¡r lffit¡ons ate a stone'sthrow froE the büile¡s of Palo Altou¿l MeIùo Pa¡*. East Palo A¡to realestate velue8 have hiÊtorlcally beqdepressd by the tom's ¡eþutation asb€lng crlne.rHden ed imÞovellshed.But if the brand, at Ieæt lr thls smaug€o8raphy, 6uld be shifled to be moreclosly aligÌeil vith that sf PaIo AltoÐd Menlo Pùk, both of whjcÌ¡ enfoystat$ as wælthy enclaves, the ÞætPalo Alto r€el estate valuæ could bedramatlcally lnl)rcved.

Eeyonil percepllon æ othel fec.tors. East Palò AIto ls ôtralegtcállylocated wjthin the gouth Bsy. paloAlto i6 home to tho Sta¡füd ResøchPùk and is a EeEeEdous jobÉ cente¡,me¡lng rÐby houslng, particulsrlythe ¡ss ãpeßlve housfbg tùat is l!East PaIo Alto, atkactlee to worksrs,lte towD, whlch meæùes on¡y 2.5sqlæ mlles, also sits about esuidis-tant froE Sù Jose to the æuth ædSan F¡ancisæ to the north, Ðd @Fnæts dllectly to the Eest BAy via theneilby DuDbartoD Brldge.

The tDm hö udùgone soÞe slg.nlfiøt but at times conùovelslelgentlifi@tim al¡€ady, with the ønst¡uctioh of a new fetâìl Þower center,lnduding a huge IKEA, and r FouSeæons hotel ând Datchirg Clse Aomce torers ln the Þast five yqrs.Both developments also frcnt U.S. tolmd sit in c.lose proximlty lo pageMllJ.'s acquisitlons.

The wident fcù is that the tom'shistorically minorlty population -åìmost 25 peÌæDl Afllcü.Arer¡canud about 60 percÐt Hlspan¡c, ac.cording to the U.S. CeEus Bureeu -Elll be deprived of tìe econonlc beD-efits suc.b new genlrlficalion csutd beexlÆted to briug.

The rent board i¡tends to æk t}le cþcoucll for East PaIo Alto to atlot $?,S(bfor ¡egåI æmel to sduis It ø hw bpreed. WeNer and Ha¡rrffi say. Un.til the isuæ ru be nsolved, WebstqslE hc wÐts to ask the ffiùto a¡¡Dre a reDt û%. Hmisn disoutsthat posslbiJity, howvÈ.

"We E¡mply don't heve enoußh i!-formatlon about the þgãlity cf dotngthat," he says, 'ÌYe cån't unlleteHllybtrilse we have æncerned clttzeDstake sLl$ anil penauze Page Mill."

Page Mlll says it is "coE¡nitted toseel¡g the project through not onlyfor t¡e berefit of Nr ræidents btÈ forall of Eþst Pâlo Alto."

3fi1ñ!I Slf,0ÍS0l 3m¡nd sue fütlESqtEs.humd. Rtsó ñÈ d ({08) 23f1853.

PAGE Ml[[: Company says it has invested ffin¡ ¡n East palo Alto holdings

c0llllluE ¡noil PtÊE I

dents ffom tbel¡ homs. Such equityf[YatE€nts æ tyÞlcslly leverågedwith substuual debt givixg muaB.ers buy¡rg powe¡ seveÞl fl¡es thèequity.

CaIPERS is rhe lalgst U.S. pt¡ùltcpe!6im tund Elth hore thÐ $260 bil-llon l¡ assets. It loilag$ ÞeDsl on anrlhes¡th beneÃts îd about 1,5 miuionexlsttn8 ud reti¡ed employm of theståte, schæls ùil otb€r pùticipatingpubllc agencis, Its ¡eâl€tate inv€t-ment rêturns æ otten double-diBil

David Taran, a teletively weU.known Eoley manager lI the va.l-ley ilho sFæializes ln æmrerctallcal 6tatc, founded Page Mill sever¿lyeam ago The comlÐy issued a two-paEgÞph statffieDt dcfendlng ¡tsâctions in East Palo Alto, syluc ¡tsinvestments "have alrady b€gun totrilsforn alons.reslectederea i¡to ewfe¡ more livable coÞmunlty.,'

So fål Ps€e MiU say6 it hæ i¡vesterlSu EillloE ùo improve itr Eæt Palo Attoholdin€s, mâÌ¡Dg not on¡y "6Eeticdlang6" but âlso "ulEmdBE to sêcurity,ælÐic ænæms, Itghting, dral¡agqpavl¡c ud mfins."

Tbe coÌ¡pa¡y sys it hæ m the ?0em¡¡loyeæ who Gide ir Eæt Pa¡o .Atb.

SkeptlclvnWlllleln Webster, e memb€r of thg

ciblb nqt Stabtllzåtlon Bodd since!99?, says he ls hopetul tìat pageMil¡'s intentions üe gooal, but he ¡e.maiE msæ. "ÎÌe pmp*ties aeolal, ad if Mr. TaÌÐ anil Mr. (JuesE.) ThonÞsoÞ meân to do what theysat - tû acquln ild r€hab üieh" - itls Dot a Dl0blem, he sys. "(Pâge Mil¡deYelopment dlrector) Mn ThoEDsnis very ¡nsislent tbat they me¡n loprovlde a setrice to t¡e coEEuity.gut I ab skepticâl beøuse that's notbeen the lntent of mst develolrerswho come to East Pålo Alto."

r,Yebster, RÐt Stebilizâtion B@dCbaima¡ Lee Her¡sotr æd Stil¡eyY-lð, a thùd boüil member, alt sat¡they r€Ealn opÐ.ml¡ded about paaeMills actir¿ittes. AII say theJr æ try.lng to gein a b€tt€r uilerstaDdi¡g ofthe lnvslorrs plers md Etionâle forbellevlng lt has the legal light to rzisersts æ nuch as pFposed. The b@tdis seeklb8 ¡ega¡ counsl. they noteRent lrææes sought by Page MilIrÐge &oB aboul 20 percent to almost50 ¡Ercent, Hæ¡ison seyE.

The Rüt Stabilizatlo¡ BHal's rol€ls not æ ar adv@te for the tenmts,Hmisol Ëy6, but æ e a¡btte¡ to q.sure that both tenæls üd lafiUordsact spproprlately ùd ate træted eq-uitably. But, he says, "theE is a lotof concm tlat leplE who bave been(llvlrg h theæ apath€nts) for gen-eratlons will be pushed out tf t¡eseki¡il of rqt i¡seæes are a.llowed tostmd."

Eg b€lieres thât Ðme renteF havealæady left the propertfes,

Under the Rent Stablltzation pro-grm, a landlord cil reset ù aÞüt-mentk rent at lhe nûket's going ratewhen oDe temt leaves ùd aothercomes in, he æd Webster sy, As loDgas â tenant æEains in a unit how-eeeB trn¡ual tent increasæ æc bæedo¡ the qtry-level ænt plu6 the rate of

'lflellon as set by tìe federal govem-

mÐt ild ¡etlJled by the Rent Stabi¡i-atlon Boatd, New deyêloÞn6t is notsuùject to reut controls. Harrlson and

Webster ey.the crux of tàe current disagree.

ment appeæ to be so-calleil "c*.tlfi@οs of wimu legel rcnt" thatset the Ht ælltng æuålly for EætPalo Alto ¡mallo¡ds h the tent stabl.¡lation progËE, Also at lssue ls txe"bãking" - ol saving - of "@ualgsnera¡ adjEtmfits" or alloHblerent inclæ€8, Ttebster says.

H,stori@Iy, {he nax,EuE a¡low-able rent as reflected in tle certtfi.cat€s hæ exæeded wbat tbe Mket

rBut I am skept¡calbecause that has not been the

intent of most developers who

tome t0 East Palo Alto.'

Wllllarn WobsterRenl SlabilÞation Board

__J

PM-1868

Page MillProperties News Clips, Jan.3-9,2007

January 9,2007

East Palo Alto freezes rentsSilicon Valley / San Jose Business Journal,

The East Palo Alto City Council passed an urgency ordinance Tuesday evening

imposíng a six-month rent freeze.

The unanimous vote was in the wake of a meeting late last week in which theemergency measure failed because only four of the council's five members attended

the session and only three of those were in support of the measure.

About 1,300 rents were hiked by landlord Page Mill Properties on Dec. '1, ranging

between $36 and $150.

Chris Griffith of the firm Ellman, Burke, Hoffman & Johnson, represented Page Mill

Properties and said the decision puts the council in legaljeopardy. The company'sCEO, David Taran, said a lawsuit is next.

Page Mill Properties, which has acquired 1,620 apartments in the community overthe last 15 months or so, came under fire from some members of the communityafter it proposed to raise rents on about 1,000 units. About 1,300 of Page Mill's units

are governed by the community's Rent Stabilization ordinance, which covers about2,500 apartments in all.

ln general, the law allows landlords whose properties are covered by it to raise rents

annually by the rate of inflation as set by the federal government. ln question iswhether those annual inereases can be "banked" or saved from year to year when

they are not applied, and then imposed later when the market will bear.

Also in question is the setting of the base rents on which the annual increases are tobe applied.

PM-1869

January 9,2007

City freezes rent hikesMove could land East Palo Alto in court with developer

By Banks Albach / Daily News Staff Writer

ln a bold move sure to prompt a legal challenge from the city's largest landlord,

the East Palo Alto City Council on Tuesday passed an urgency ordinance

freezing rent hikes for the next six months.

The unanimous decision, which takes effect immediately, was prompted by

roughly 1,300 rent hikes brought on by Page Mill Properties on Dec' 1 and due

on Feb. 1. Most of the increases ranged between $36 and $150. But some rents

peaked much higher: One tenant received a 47 percent increase for a two-

bedroom townhouse that was severely undervalued, the company's development

director Jim Thompson said.

The council called a special meeting last Thursday to explore passing the

ordinance, but the absence of Council Member David Woods made it impossible'

Under state law, urgency ordinances need a four-fifths vote, so it was put on hold

after Council Member Peter Evans abstained last week, citing numerous

irregularities and fear of litigation.

lnstead, the council passed a normal ordinance that would have taken effect a

week after the rent increases are due.

Woods made it clear early on which way he was swayin$.

"To not pass it as an emergency ordinance would be detrimental to the tenants,"

he said before voting. "l think it's very important we treat this as an emergency."

The city is contending that the increases are illegal under East Palo Alto's long-

standing rent stabilization program, which caps rent increases at around 3-2

percent per year, a cost of living adjustment. But the city's rent control, which

regulates about 2,500 units, 1 ,600 of which are owned by Page Mill, also runs on

a system using certificates of maximum rent, which the city issues annually.

Over the last several years, the actual rent for hundreds of units has dropped,

while the city continued to adjust the certificates at a higher rate. Page Mill based

the rent increases on the higher of the two numbers, a discrepancy that has left

hundreds of tenants in a tight squeeze between an outdated city ordinance and

Page Mill.

PM-1870

"This is mOre than a legal issue, this iS a moral issue," Loma Eaves, a Page Mill

tenant, told the council. "l ask you to support this moratorium tonight."

Page Mill's attorney, Chris Griffith, of the firm Ellman, Burke, Hoffman & Johnson,

told the council it is in violation of numerous laws, and after the decision, Page

Mill's CEO David Taran said he plans to sue.

"We have no choice," Taran said. 'When we bought those properties, the city told

us the certificateS were the law," Taran Said. "lf anyone'S been tricked, ifs uS."

Griffith is claiming that the city may have acted illegally in how it passed theordinance, that it violated state election law by passing the moratorium, whichaffects an ordinance passed by popular vote and can only be altered the same

way, and that Council Member Ruben Abrica may have a conflict of interest

because his name is on a 1O-year-old Page Mill lease.

Abrica's possible conflict of interest was one reason why Evans abstained from

last Thursday's vote.

Abrica defended his position, however, claiming he oniy moved into the unit six

months ago and pays his brother 30 percent of the rent. City Attorney Michael

Lawson told the council that Abrica's share of the 7 percent increase set to take

effect on Feb. 1 is not enough money to mark a conflict of interest.

The big question - which could be answered in court - is how much Page Mill is

allowed to raise rents. lf the certificates reflect numerous years that had no

increases, can Page Mill bank those amounts and combine them in a single

increase?

Outgoing City Attomey Michael Lawson and outside counsel Rick Jarvis are

confident the answer is no; Griffith is banking on Page Mill's right to iaise rents tothe limit on the city-issued certificates.

Uploaded: Wednesday. January 9, 2008,2:47 PM

Apartment company plans to sue East Palo Altoby Don KazakPalo Alto Onl¡ne Staff

Page Mill Properties, which owns more lhan 1,600 apartments in East share: Il :Ãi # @ ç,"ã Hilpalo Rlto, will sue the city for passing an urgency ord¡nance Tuesday níght I

that prohibits rent increases greater than 3.2 percent for the neK six

PM-1871

months, according to a company spokesman.

The moratorium on rent increases is illegal, according to Chris Giffith, an attorney for Page Mill Properties.

The city considered the rent moratorium because hundreds of East Palo Afto tenants rece¡ved rentincreases that exceed the cunently allowed 3.2 percent, with many increases 15 percent or greater.

A company spokesman, Lance lgnon, also noted, however, that several hundred Page Mill Propertiestenants did not receive any rent increase.

"By refusing Page Mill Properties' repeated offers to pursue negotiations and reach common ground, PageMill Properties has no alternative but to seek legal action," lgnon said.

Both the company and city fully expected to end in court. Each had its own court reporter at the last twoCity Council meetings, recording every word spoken about the proposed rent rnorator¡um.

The council fa¡led to muster the necessary four votes to enact the moratorium last week as urgency.item,with Councilman David Woods absent and Councilman Peter Evans abstaining.

But Woods voted for the moratorium Tuesday night and Evans, surprisingly, also supported it aftercriticizing it last week.

The way the city enforces its rent stabilization ordinance does not conform to state law, Griffith contends,an allegation that lawyers for the city strongly dispute.

Page Mill may also challenge Tuesday nighfs vote on the grounds that itwas not properly noticed uncjerthe state open-meeting law, which requires 72-hour advance notice of agenda items. The City Councilagenda had the rent moratorium on its agenda Tuesday night, but as a regular ordinance to go into effect30 days later, not as an urgency ordinance.

ïhe City Council enacted the rent moratorium as an urgency ordinance so it can go into effectimmediately, before the scheduled Feb. 1 rent increases for Page Mill tenants go into effect.

Tuesday, January 8,2007

EPA counc¡l reverses itself on rent moratoriumCouncilmen Peter Evans and David Woods supply votes that were missing 4ast week

å"i""',î'?JËi"?Ël,f'xÏì: îiåiff:l,liåfi:3äi:J#åi"'1i,i3,i,, snare, f *r {} Ð çå rstonight (Tuesday) by the East Palo Alto City Council -- reversing a failureto enact such a moratorium lasl week.

The action was passed 5-0 as an urgency ordinance that takes effect immediately.

The legality of the action, however, was questioned by Page Mill Properties, the company that tiggered itsconsideration by notifying hundreds of tenants in its 1,600 apartments of rent increases would take effectFeb. 1 that exceed 3.2 percent -- the current increase allowed by the city's Rent Stabilization Board. Manyof the increases were to be 15 percent or higher.

Pl//l-1872

"There is a question of sufficient notice for an urgency ordinance," Chris Griffith, attorney for Èage Mill

Properties, said.

State law requires 72-hour not¡ce of agenda items, and the rent morator¡um was listed on tonight's agenda

as a normal ordinance, to take effect in 30 days, not an urgency ordinance. The council failed to pass an

urgency rent moratorium Jan. 3 on a 3-0-1 vote, with Councilman David Woods absent and Councilman

Peter Evans abstaining. Fourvotes are required for such an ordinance.

Evans, who said he wouldnt vote for an urgency ordinance last week because it would trigger a lawsuit

from Page Mill Properties, voted for it ton¡ght, as did Woods.

The rent moratorium is almost certain to end up in court, City Attorney Michael Lawson said' "ln all

likelihood, Page Mill Properties will sue the ciÇ and we ll see them in court," he said.

Griffiths claimed last week that the proposed rent moratorium would be illegal because of the way the city

is enforcíng its rent-stabilizatìon ordinance in calculating the maximum allowed rent increases each year.

Now, the company may also challenge whether the action tonight was properly noticed under slate law.

Woods, who was absent last week, said it was critical that the ci$ take emergency action before the Page

Mill Properties Feb. I rent increases go into effect.

He said he hoped the ciÇ and Page Mill Properties will "now sit down and work it out," regarding the

different interpretations of the city's rent regulations.

Friday, January 4,2408

Push for East Palo Alto counc¡l rentfreeze failsSilicon Valfey I San Jose Business Journal

The five-member c¡ty council for the c¡ty of East Palo Alto voted down an emergency

measure Thursday night to freeze rents in a special rent-control district.

But a lawyer working on behalf of affected tenants says a like measure can still be

approved.

'We were disappointed, but we haven't given up hope," said Daniel Harris, whO is

representing a group of affected tenants.

Only four of the council's five members attended the session, he says, and of those

in attendance, only three supported the measure, not enough to pass-

Palo Alto's Page Mill Properties, which has acquire d 1,620 apartments in the

community over the last 15 months or so, has borne the brunt of sharp critlcism from

some members of the community after it proposed to raise rents on about 1,000

PM-1873

units. The company, led by Silicon Valley real-estate developer David Taran, has

excited deep interest and Some suspicion for what some view as an attempt to

monopol¡ze the community's rental market. About 1,300 of Page Mill's units are

govemed by the community's Rent Stabilization ordinance, which covers about

2,500 apartments in all.

"l think it is in everyone's best interests to try to avoid litigation and to seek

compromise," said Lance lgnon, a spokesman for Page Mill-

ln general, the law allows landlords whose properties are covered by it to raise rents

annually by the rate of inflation as set by the federal government. ln question is

whether those annual increases can be "banked" or saved from year-to-year when

they are not applied and then imposed later, when the market will bear- Also in

question is the setting of the base rents on which the annual increases are to be

applied.

Gouncit falls 1 vote short of passing rent'freeze lawPalo Alto Daily News (paloaltodailynews.com)By Banks AlbachJan 5, 2008

Despite pleas from dozens of tenants facing $150-$200 per month rent

increases, the East Palo Alto City Council came up one vote short of enacting an

emergency ordinance to freeze rents.

With David Woods absent and Peter Evans abstaining, the council Thursdaynight couldn't muster the four votes needed to pass the ordinance.

page Mill Properties triggered consideration of the ordinance when ii recentlyraised rents at 1,300 of almost 1,600 apartment units it owns in the city from a

minimum of 7 percent to as much as 47 percent in one case.

Evans said he is concerned that a rent freeze could embroil the city in a lawsuit

and prefers that staff try to sway Page Millto voluntarily'lreeze the rent

increases, which are set to take effect on Feb. 1.

"We need a chance for these people to make uS an offer," Evans said before

abstaining.

The three other councÍl members, however, felt comfortable with staffsrecemmendation for an emergency ordinance. City Attomey Michael Lawson and

outside attorney Rick Jarvis said they are confident the rent increases are illegal

under the city's rent stabilization program because they exceed 3.2 percent, the

normal rate of inflation allowed under the ordinance, Page Mill's attorney, Chris

Griffith, contends the hikes are well within the law'

Pf\A-1874

Jim Thompson, Page Mill's development director, told the council his companyhas waived or reduced the increases for tenants who are disabled, elderly, on afixed income or facing other challenges. He also repeatedly said his door is openfor any tenant who wants to voice concerns about the rent hikes.

lf a lawsuit eventually is filed, its focus likely will be the city's long-standing rentstabilization program, which sets maximum rent increases based in part on acost-of-living formula that is supposed to be updated annually and reflected oncertificates.

But after the dot-com bust, rents dropped and the certificates stopped reflectingactual amount paid, even though city stafl continued to sign off on them. PageMill used the figures on those certificates as a base for the new rent increases,not what tenants actually were paying.

Evans blamed the predicament on the outdated program.

"These (tenants) wouldn't be burdened if the city was being run properly," hesaid.

Page Mill also has fumbled along the way. The company first lobbed tenants witha 30-day notice, though state law requires a 60-day notice for increases thatexceed 10 percent. The company also raised rents for numerous tenants withactive leases- Page Mill has since rectified both mistakes.

But a third oversight surfaced Thursday, when tenant Jamie Schiessler told thecouncil her maximum certificate shows $635 in rent and her Feb. 1 rent increasewould take it to $745, or $138 above the legal limit.

"We're not perfect," Page Mill CEO David Taran said. "lf that's a mistake, we'll fix¡t."

Some of almost 100 tenants who filled the council chambers yelled when Evansexplained why he would abstain.

"l think it's a joke," said Brian Pass, whose rent is supposed to jump from $940 to

$1,375. "l think (Evans) is scared of using our tax dollars to fight this."

Numerous tenants pleaded with the council to enact a moratorium, citing not onlythe steepness of the rent hikes but also noting that many units are dilapidated,moldy and full of cockroaches.

"This is an opportunity for you to represent the people - rne and them," saidEdward Burns, an East Palo Alto resident.

PM-1875

Lawson said the council might be able to get a fourth vote for an emergencyordinance next Tuesday if Woods shows up.

"That is definitely a possibility," he said.

Thursday. January 3, 2008

Emergency meeting to consider EastPalo Alto rent freezeSilScon Valley I San Jose Business Journal - by Sharon Simonson

The city of F¿s1 Palo Alto has called an emergency meeting of its five-membercouncil to consider a six-month treeze on proposed rent increases for tenants innearly 1,000 apartments in a special rent-control district in the community.

The proposal is being viewed with deep concern by a Palo Alto-based developer thathas acquired in excess of 1,600 apartments in this tiny Silicon Valley town over thelast 18 months and is seeking the greater rent payments to compensate it in part forwhat it says is an $11 million capital improvement plan for the properties. That's ontop of more than $100 million that Page Mill Properties has spent to acquire theEast Palo Alto apartments, according to public record.

Page Mill's activities in East Palo Alto are being backed by the California PublicEmployees'Retirement System, which has given the company $100 million toinvest on its behalf. Page Mill is not limited to investing in East Palo Alto under itsagreement with CaIPERS. Any proposal that suppresses rents in the community orchanges the regulatory framework could adversely affect Page Mill's financialreturns.

Jim Thompson, chief development officer for Page Mill, says the landlord willvigorously contest the council's proposed measure, starting with a questioning ofwhether a legitimate emergency exists. Three-hundred forty Page Mill tenants havereceived no rent increase, he says, and the average rent increase for the remainingunits ís less than $90 a month or about 8.5 percent, based on Page Mill's internalrecords.

"As of today, we have gotten 13 (letters) from tenants giving us 30 days' notice thatthey intend to move out (because of the proposed rent increases), and the city hasreceived 18 petitions from tenants seeking relief from" the proposed rental-rate rise,Thompson says. That's a tiny fraction of the 1,620 units that Page Mill owns, hesays, and "shows that we don't have an emergency."

PM-1876

Twelve tenants have contacted the company to seek relief because they are

disabled or reliant on public assistance for their incomes. Page Mill has reviewed six

of those cases so far and has agreed to grant increase waivers, he says.

Page Mill has embarked on an ambitious acquisition campaign in the community,

buying up apartment homes on either side of the University Circle development over

the last 18 months. That A-grade office and hotel complex is a centerpiece of East

Palo AIto renewal efforts.

Thompson declined to say if Page Mill continues to acquire properties in the area nor

would he give statements to describe Page Mill's long-term plans for the community.

He denies that Page Mill has any sinister aims to force tenants from the complexes

to make it easier to redevelop, as some have alleged.

But an attorney representing the East Palo Alto tenants says he is deeply skeptical

of Page Mill's intentions. Daniel Harris says the city council needs to act immediately

"to avoid displacement."

"These are people who will be homeless and living on the streets," he says.

"Honestly, I think if they (Page Mill) had semi-altruistic motives, we would haveL^^-l ^L.¡. '* i* rr ha ^^.,- tr-f ha.a io ataarhr a nlan in nlano anrl fha fqnf fhal f harr

will not go public with their p¡ans is very suspicious. To me, it's clear they want tobulldoze and rebuild. Why else try to monopolize housing in East Palo Alto?"

Pl{l-1877

Page 1 of I

Page Mill Properties Sues East Palo Alto Over Rent Control OrdinanceSan Jose Business JournalByThursday, t:!r.O- 77t 2OO8

Page Mill Properties said late Wednesday it filed a lawsuit in San Mateo County Superior Court to

forðe the city of East Palo Alto to rescind an urgency ordinance that retroactively freezes rents on

all rent-controlled apârtments.

The suit alleges that the City Council's action was "arbitrary and capricious, lacking in rationalbasis, and contrary to law."

The lawsuit further contends that the ordinance should be rescinded because Councilman Ruben

Abrica signed a lease for one of the affected apartments and therefore "has a personal financialinterest in the decision to freeze rents," Page Mill said.

A hearing is scheduled for Feb- 21 on the issue.

Last week the City Council passed an urgency ordinance imposing a six-month rent freeze.

The unanimous vote was in the wake of a meeting a week earlier in which the emergency measure

failed because only four of the council's five members attended the session and only three of thosewere in support of the measure.

About 1,000 rents were hiked by landlord Page Mill Properties on Dec. 1. About two-thirds of the

units saw rent increases ranging between $36 and $150; the remaining units saw rent increaseshigher than that.

Palo Alto-based Page Mill Properties, which has acquired 1,620 apartments in the community overthe last 15 months òr so, came under fire from some members of the community after it proposed

to raise rents on about 1,000 units. About 1,300 of Page Mill's units are governed by the

community's Rent Stabilization ordinance, which covers about 2,500 apartments in all.

ln general, the law allows landlords whose properties are covered by it to raise rents annually by

the rate of inflation as set by the federal government. ln question is whether lhose annual increases

can be "banked" or saved fiom year to year when they are not applied, and then imposed laterwhen the market will bear.

Also in question is the setting of the base rents on which the annual increases are to be applied.

"The court agreed that we stated a legitimaie cause of action and ordered an expedited process forreaching a cóndusion on the merits of our case, so we are very pleased with this outcome," said

Chris Griffith, a Page Mill attorney with Ellman Burke Hoffman & Johnson-

file://C:\Documents and Settings\lweir\Local Settings\Temporary Internet Files\OLKl22\a... l124/2008

PM-1878

CAA News Page 1 ofl

CAA ewsI .ft.. 1.Êat CAA Legal Fund Takes on East Palo Alto

l*_I.*t= Rent Gontrol Ordinance

CAA's Legal Fund Trustees and Board of Directors have voted to legally challenge East Palo Alto's rent controlordinance, which they argue violates both local and state law.

At the heart of the matter are amendments to the local law that interfere with a rental property owner's ability toincrease the rent when there has been a change in.tenancy. This is a clear violation of the State's Costa-Hawkins Rental Housing Act, a law sponsored by CAA in 1996, which protects property owners from rent capslike those proposed in East Palo Alto.

East Palo Alto's Rent Stabilízation Board (RSB) proposed changes to the locaf rent control law followingconcerns from renters about recent rent increases by property owners in the City. ln response, the RSB hasproposed to roll back all rents in the City.

Additionally, attorneys for CAA argue the RSB does not have the authority to amend or revise the City'sordinance without first placing the matter before the voters. Since the East Palo Alto Rent StabilizationOrdinance was passed by the voters, the Elections Code provides that laws enacted by the voters can only beamended by the voters

http://caanet.informz.neUadmin3l/contenlternplate.asp?sid:10213&brandid:3136&uid=7... 8/18/2008

PM-1879

PAGEMILTPROPERTIES

RncBNtNEwS

Corpotate Os¡nets

. SanJose BusinessJoumal, "ÉfP seeking $80M fot Peninsula sitert'February 27,2003

. San Jose Business Journal, "How low can it go?" January 10,2003

- Inktomi sells its headquartets for $160 per foot, having bought it for $437 perfoot in,{.ugust to unrvind a synthed.c lease

- Qwest sells a Sunnyvale offrce/R&D building forff62 per foot, having purchasedit ftom Divco fot more than $320 pet foot

Distressed Financial Owners

'Wall StreetJoumal. "Tishrnan Tov¡er Sale: Tech Fallout?" February 70,2003

Credit Suisse Fi¡st Boston CMBS Market \üatch \feekly, "Delinquencies in CMBS:How High?" January 24, 2003

Fitch Ratings Commercial Motgage Special RePort, "Ups and Downs of CMBSRating Actionsr" Decembet'16, 2002

- 2002 downgrades exceeded 2001 downgrades by a factor of more than 4 to l,exceeding the pace of every otlet year since 1994

- Fitch expects dehnquencies to double un2003

lS0rUmeden Blvd., Suite 700SanJose, CÁ 95113kt 408.291.9600Fex: 408.293.9690www.pagemill.com

PM-1880

FitchRatings Strucfured Finance

Commercial MortgageSpecial Report

Ups and Downs of GMBS RatingActions

AnalystsKaren Nelson T¡ebacht 212908-0215karen. trebach@f itchratings. com

Mary MacNeill1 212908-0785mary.macneill@fif clratings.com

Fitch Ratings would like to acknowledgeTerrence Ellison for his connibulion to lhisrePort.

I SummaryThrough 11 months ended Nov. 30, 2002, Fitch Ratings upgraded

352 tranches in lll deals, downgraded 126 tranches in 51 deals,

placed 115 tranches in 40 deals on Rating Watch Negative (RWN),

and affirmed the remaining tranches, which exceeded 3,400 tranches.

These actions follow 511 reviews of Fitch-rated commercial mortgage-backed securities (CMBS) transactions totaling $16l billion. As wouldbe expected in a weakened economic environment, the pace ofupgrades in 2002 (21.7% of all deal reviews) fell short of 2001

(31.3yù, and the 2002 downgrades (10.0%) far exceeded the 2001

downgrades (2.3Vù.In fact, the pace of downgrades exceeded the pace

of every other year since 1994. The pace prior to 2002 averaged 4.3o/o

per year. The 2002 downgrades a¡e ín line with Fitch's predictions

earlier this year.

As in .previous yer¡rs, upgrades were mainly due to paydowns ofmultiborrower transactions, specifically older deals with expirediockouts anci fioating-rate deais with short'term maturities.

Downgrades, however, were mainly due to íncreased realized losses ærd

expected losses on defaulted loans and loans in special servicing. Types

of loans that were problematic include hotel, health care, and retail'

Although weakened economic conditions and real estate markets across

the U.S. affect CMBS fansactionsn the level of defaults is not as great as

may have been expected or a¡i compared to the real estate recession ofthe early 1990s due to more stingent underwriting guidelines' Each

tansactior¡ however, must be analyzed on its own merits.

To help facilitate market liquidity, Fitch monitors every rated

transaction to ensure that current ratings accurately reflect currentcredit risk. Several market situations in 2002 necessitated an increased

number of deal reviews. In fact, the number of deal reviews increased

48%o from 2001. Fitch reviewed 3l large loan transactions foradequacy of tenorism insurance and four credit tenant lease (CTL)transactions and 104 multiborrower transactions due to the bankruptcyfrling of a rnajor retailer, Kmart.

I Outlook íor 2OO3Fitch continues to expect upgrades for seasoned multiborrowertransactions that experience sizable paydowns and for deals withfloating-rate loans that repay quickly. In addition, there are several

single-borrower transactions that have exhibited strong petformance

over the past few years and, due to long-term leases or strong

amortization schedules, are likely to be upgraded in 2003' Fitchexpects specially serviced loan resolutions to cause downgrades ofthelower rated tranches of multiborrower transactions.

December 161 2OOZ

www.fitcfìratings. com

PM-1881

FitchRatings Structured Finance

Multiborrower transactions generally are subject to

the barbell effect - the top ofthe structure becomes

better and the bottom becomes worse. As loans pay

ofl the credit enhancement levels increase on the top,

and upgrades are warranted. Often adverse selectioncreates problems in the transaction, causing interest

shortfalls and realized losses to the bottom classes,

and downgrades are waranted. A sfiking example is

the Nomura Asset Securitization Corp. (NIASC)

1994-MDI transaction, which has two loans

remaining, one now real estate owned (REO) and one

a performing hotel pool loan. The bottom classes @-34, B-38, and B-3P) are currently rated 'Þn due tolosses realized on the disposition of a retail asset. The

B-1 class and the B-2 class are rated 'CCC' and 'C',respectively. The rcmainÍng classes, A'3 and itscorresponding interest-only class, are rated 'AAA"Although these classes are currently on RWN due tointerest shortfalls, full recovery is expected.

According to Fitch's 2002 CMBS loss study, Iôss

severities increased to 33.8Yo in 2001 from 18.5% in2000. Fitch expects the loss severity to increase in2002 and 2003 to approximately 50cá, as most

estimates of market r€covery are not until late 2003'Fitch expects delinquencies to double in 2003, as theU,S. economy remains in a recession and commercialreal estate problems typically lag the economy (formore information, see Fitch Research on "2002

CMBS Loss Srudy," dated Nov. 4, 2002, available on

Fitch's web sile at www.Jìtchratings.com).

For the four main properly types, Fitch is expectingperformance to deteriorate. Although hotels are

starting to show some stabilization, revenue per

available room is at a level far below what was

underwritten. Office properties with leases rolling in

the next couple of years will be faced with increased

concessions and lower rents, as almost all officemarkets are -very soft. Fitch still expects more

bankruptcies and liquidations of national retailers, as

consumer spending is expected to decline in 2003'posing additional stress on retail loans. Multifamilydelinquencies are on the rise due to increased

competition and the fact that many potential tenants

have purchased homes due to the current low interest

rate environment. Homeownership is at record levels

in the U.S. Property performance expectations wouldbe considerably worse with any future terrorism

attack, war with lraq, or double-dip recession.

Despite the gloomy outlook, Fitch expects upgrades

to continue to outpace downgrades, especially due toinvestment-grade classes of seasoned deals-

However, Fitch projects that in 2003, the ratio ofupgrades to downgrades will be similar to that of2002, which reflects a higher number ofdowngradescompared to historical trends, Fitch's enhanced

surveillance system, Fitch S.T-R.S., has an assigned

perspective for each deal's future rating. Based on the

perspectives assigned, Fitch predicts that for every

2.5 deals that are upgraded, Fitch will downgrade one

deal in 2003. This pace is compared to 2.2 to I forthe first I I months of 2002. The average pace for the

four years prior to 2002 was considerably highe¡

with nine deals upgraded for every one downgraded.

(Fitch S.T.R.S. surveillance information is available

on Fitch's subscriber veb site. For more ìnformalion,

see Fitch's w eb site at www.fit chratings. com.)

I 2O02 UpgradesMost upgrades thLrough ll months ended Nov' 30,2002a¡e due to paydowns of muìtibonower deals ininvestnent-grade tranches, often in seasoned deals- Arecent increase in upgrades for less seasoned deals is

due to the floating-rate nature of the loans with shorter

loan terms, Seven ta¡rches from two 2001 vintage deals

were upgrarÍed, one of which was the GP Capiial

Frurding Corp.2001-A deal, which had one class placed

on Rating Watch Positive in December 2001, only

l0 months after the closing of the tansaction, and four

classes upgraded in August of this year after a Iarge

number of p,repayments and loan payoffs at maturity' Atotzl of 42 upgraded tranches ûom 2000 vintage deals

surpasses the number ûom 1999 and 1998 vintages due

2002" Upgrades by Rating Category andOrigination Years

El 1992-1994 r 1995

I 1998 B 1999

(Number of Tranches)

n1996 B1997N2000 812001

30

25

20

15

10

5

0

'AA-'to 'A-'þ'A+ 'BBB-'to 'BB-'to 'CCC'b

'¡A+ 'BBB+ 'BB+ 'BC

Pre-2002 Rating

'Actions through Nov. 30, 2002.

Ups and Downs of CMBS Rating Actlons

PM-1882

FitchRatings Structured Finance

2002" Upgrades vs. Downgrades byOrlginatlon Years

@ Upgrades lDowngrades

'1992- 1995 1996 1997 1998 1399 2000

1994Yearc of Originafion

*Actions through Nov. .3o,2002.

100

90

80

70

60

50

40

30

20

l00

in part to one deal, SASCO 2Q00-Q, which wasupgraded tv'¡ice and had upgrades on all tranches.

Of the 352 tranches upgraded, 95 tranches werepreviously below investrnent gtade, mainly fromseasoned deals. Of these 95 tranches, 41 wereupgraded to investment grade due to a largepercentage of the deal paying off rather quickly, as inthe case of KS Mortgage Capital 1995-1,

The 1996 vinfage deals had the most upgrades ofanyother vintage. In addition, the 1996 vintage had the

fewest downgrades, yielding the best upgrade-downgrade ratio - for every 15.5 upgrades, onedowngrade (see chart above).

I 2OO2 DowngradesFor the first 11 months of 2002, Fitch downgraded126 tranches in 34 unique trarisactions in the course

of 5l deal reviews, including t8 CTL reviews,20 multiborrower transaction reviews, six single-borrower reviews, and seven large loan transactionreviews. Again this year, the main drivers for thedowngrades were realized losses and expected lossesor poor performance of the more volatile propertytypes: health care; hotel; and CTL transactions withweakened credits. A newer trend for this year's

downgrades was losses expected on or the poorperformance of retail properties, especially anchored

strips or regional malls that have lost anchors, oftenintertiary locations.

Nine tranches were downgraded from investnent grade

to below invesfrnent grade mostly due to the poor

performance or expected losses on one or twosignificant loans in the pool. The transactions include

fhree ìarge loan tansactions Q\,IASC 1994-MDI,

COMM 2000-FL2, and COIvOvf 2001-Il), a single-

borrower tansaction (Opryland), and a multiborrowerhansaction with a myriad of issues ranging ûom Kmartexposure to hospital and medical offrce loan exposure

(Asset Securitization Corp. [ASC] 1997-D5). A total of28 other inveshnent-grade banches were downgraded

mostly due to ttre downgrade of a dependent rating(Kmart CTLs) or poorly performing hotel loans inmultiborrower and single-borrower tansactions.

The large amount of downgrades ofthe 1994 vintage(36 tranches) is driven mainly by Kmart CTLtransactions (CNC 1994-1 and Kmart Funding) and

NASC 1994-MDl. These deals were reviewed several

times in the year. Similarly, the 1995 vintagedowngrades (18 tranches) were due to a Kmart CTL(Kmârt Corp. 1995) reviewed several tirnes and hoteland health care loans causing problems inmuitiborrower tarrsactions. The 1997 vin'øgedowngrades (22 tanches) were mostly inmuttiborrower transactions with poorly performing

retail and hotel loans. One 1997 transaction, RMF1997-1, was downgraded due to its exposure to poorlyperforming skilled nursing loans (see chart below)'

In addition to the Kmart CTLs, two transactions weredowngraded due to Fitoh lowering its corporate rating

2002* Downgrades by Ratlng Category andOrigination Years

ä 1S93 ¡ 1994

E 1998 Ñ 1ee9

, o (Number ofTranche-s)

ú1s95 81996 I1997ø2000 82001

1ô

14

12

l0

o

4

2

0

'MA' 'AA'lo 'A- to 'BBB-'þ 'BB-'to 'C'to,AA+ 'A+ ,BBB{ 'BB+ 'B+'

Pre-2002 Ratlng

'Actìons through Nov. 30, 2002.

Ups and Downs of CMBS Rat¡ng Actions

PM-1883

FitchRatings Structured Finance

on Heilig Meyers Company and BellSouthTelecommunications, Inc.

To date, only one multiborrower transaction wasdowngraded as a direct result of Kmart exposure(GMAC 2000-C2} Several other transactions weredowngraded due to Kmart exposure in conjunctionwith other hotel or retail loans with expected orrealized losses (15 tranches). Oftrer multiborrowerdowngrades were caused by the deterioration ofretail(five tanches), health care (10 tranches), and hotelIoans (four tanches). Many of the lower rated classes

also experienced interest sho¡tfalls,

A total of 22 tranches in seven reviews of large loantransactions were downgraded. These transactionswere limited to two issuers - llle¡¡¡¡¿ mid-1990sdeals (ASC 1995-MDIV, ASC 1997-MDVII, and

NASC 1994-MDI) and COMM early-2000s deals(COMM 2000-FL2 and COMM 2001-J1). Three ofthe transactions v/ere downgraded due to thedeterioration of the performance in hotel pool loans.The sharp drop in perforrnance of a multifamily loancaused tùe downgrade of the ciasses directiy tied tothe Whitehall loan in COMM 2000-FL2. NASC199+MDI was reviewed three times due to theexpected loss and ultimately massive realized loss ona regional mall loan in Ohio. The proceeds realizedon the disposjtion of the asset were insufficient tocover seryicer advances.

Three single-borrower transactions were downgradeddue to lack of adequate terrorism insurance after beingon RWN for four months. The 'AAA' classes weredowngraded to 'AA' (280 Park Avenue, HoustonGalleri4 and German American 1996-3). Other single-bonower transaction downgrades were due to the poorperformance of hotel loans (Opryland and EQI Series

1997-l) or multifamily loans (City of Indianapolis).

I 2OO2 Rating llYatchFitch uses the Rating Watch Positive or RWNdesignation to indicate that Fitch is awaiting receiptof information that would either positively ornegatively influence the ratings in the short term.

Through 1l months ended Nov. 30, 2002, Fitchplaced ll5 fanches in 40 transactions on RWN due

to exposure to bankrupt tenants, inadequate terrorisminsurance coverage, operating performance

deterioration, specially serviced loan losses, orinterest shorffalls. Of the ll5 tranches placed onRWN tkough Nov. 30, 2002, 38 were downgraded,

34 were affirmed and removed from RWN, one paid

off, and 42 remain on RWN. Tenant exposures tobankrupt Kmart and inadequate terrorism insurancecoverage for single-asset deals drove the increase infrequency of RWN designations in 2002 over 2001,during which only four deals had been placed onRWN. No deals have been placed on Rating WatchPositive during 2002.

In early June 2002, Fitch placed 38 tranches from13 single-asset transactions on RWN while reviewingthe adequacy oftheir terorism insurance coverage.

Kmart's bankruptcy in first-quarter 2002 and

subsequent lease rejectionVstore closures spurred theplacement of 29 tranches on RWN in 17 deals. Ofihese deaìs, Kmart exposure combined with otherloans of concem caused downgrades on 20 tranchesand affirmations on seven tranches.

The remaining RWN designations assigned in 2002were largely due to collateral performancedeterioration and specially serviced loan losses.

Examples include the ASC 1995-MDIV, OprylandHotel Trust 2001-OPRY, and MS 1995-GALItransactions, the last of which was put on RWN forinterest shortfalls being caused by an REO loan.

In all cases, Fitch requested additional information on

issues and loans of concem to better estimate theamount oflosses or interest shorfalls expected. Uponreceipt of such information, deals with tranches stillon RWN will again be reviewed accordingly.

Up-to-date information on specific deals is availableon Fitch's web site at www.fitchratings.com.

Ups and Downs of CMBS Rat¡ng Actlons

PM-1884

Fitchltatings Structured Finance

Downgrades/Upgrades by Deal - 2OO2*

Rating BeforeReview

Rating as ofService Date

ClassServiceDate

3t8t023t81023t8to2318lo23t8t023t8lo2318l02318l023t8t02

TrancheBreakdown

Assel Securitizalion 1 997-05Asset Securitization 1 997-D5Asset Securit¡zat¡on 1 997-D5Asset Securitization 1997-D5Assel Securitization 1997-D5Asset Securitization 1 997-D5Asset Secur¡tizat¡on 1997-DsAsset Securitization 1 997-D5Asset Securitization 1 997-05

Class

A-1A-2A-2Fx-1B-1

B-2B-2HA-CS3A-4B-3B-5B-6A-5A-6A-7B-1B-3B-2B-4A-5

1'AB

cDA-1A-2A-3B

DcA-1A-2A-3cDA-1A-2A-3BG-WHJ-\ /l-lH.WHH

GJM

Amount

Downgrades9l30lo2 280 ParkAvenue Trust, 2001-XL2809l30l12 280 ParkAvenue Trust, 2001-XL2809/30/02 2€0 ParkAvenue Trust, 2001-X12809130102 280 ParkAvenue Trust, 2001-XL28011121102 AssetSecuritizat¡on1ggSMD|V11121102 AssetSecurilizationl99SMD|V11121102 AssetSecuritizationl99SMD|V'l'1121102 AssetSecuritization 199SMDIV7118102 AssetSecur¡tization199AD210118102 AssetSecuritizationl99ô.D3

7t23t021tst021t9102'19t021t9to2'U9t021t9t021t17t021t17lO21t17tO21t17t021t17toz1t17lO21l23l021t231021naoz1t23t021t23l021t23lo24t12lO24t121024t1AO211t20102't1t20t0211t20t0211t20to24l9lo2419102

4t9to23t15l023t15t027t'17t028t27t02

,AAA'IAAA'

'AAA'.AAA',BB'

'B'.B'

'B'.BBB'

'B-''ccc''ccc''BBB+',BBB-',BBB-'.BB+',BB-',BB'

'B-','B+','B-'.AA_,

.BB'

.BBB'

.BB'

'BB', 'AA'

'AA'.AA'.BB'

'B-''B''A''A'

'ccc''ccc'.BBB-'.BBB-'.BBB-'

'B-'.BBB+'.BBB-',BBB',BBB-'

'BBB',BBB-'

'AA+,'ccc'r

,B'

'B-''B''ccc'.BBB'

,AA'.AA'

'AA'.AA'

'B''ccc''ccc''ccc',BBB-'

'ccc'

.BBB'

'BB+'.BB

'B+''cc',B'

'c''ccc''ccc'A+'

18¡.BB'

'B''B-',

'A'Þ-'ccc''ccc',BBB_',BBB_'.BBB_'

'cc''cc'.BB+'.BB+,,BB+'

'ccc'.BB+,,BB-,

'BB'.BB'.BBB-',BB',AA'

'c''ccc''B-''ccc''ccc''cc'.BBB-'

31,712,33956,344,00073,000,000

067,703,00638,686,432

1,0000

35,178,0857,825,869

13,',t55,11721,925,19539,,165,35143,850,39021,925,19539,465,3518,770,074

39,465,35113,155,11727,476,2489,991,363

43,841,980

3,555,0009,802,9ô77,842,3747,842,374

38,587,92536,539,69833,867,6709,802,9677,U2,3747,U2,î74

38,587,92536,539,69833,867,6707,842,3747,U2,374

38,587,92536,539,698 .

33,867,6709,802,9671,000,0001,500,0001,400,000

13,604,00013,604,000't1,664,592

9,681,35213,563,00016,952,00027,125,00014,660,00029,320,000

7,100,00026,S00,000

6114102 AsselSecur¡tization1997-MDVll6114102 AsselSecuritlzatlonl99T-MDVll10129102 BellSouth Telecommun¡cations lnc. Sale and

Leaseback Senior NolesCity of lnd¡anapolis, lNCNC Pass-Through Gert¡fi cates 1 994-1CNC Pass-Through Certificates 1994-lCNC Pass-Through Certilicates I 99+1cNc Pass-Through Cert¡f¡cates I 994-1CNC Pass-Through Certilicates 1994-lCNC Pass-Through Certificates'1994-1GNC Pass-Through Certif¡cates 1994-1CNC Pass-Through Certlficates 1994-1

CNC Pass-Through Certificates I 994-1

CNC Pass-Through Certilicates I 994-1CNC Pass-Through certificates I 994-1CNC Pass-Through Certificates 1994-1CNC Pass-Through Certifi cates I 994-1

CNC Pass-Through Certilicates 1994-1cNc Pass-Through Certifi cates 1 994-1CNC Pass-Through Certlflcates 1 994-1

CNC Pass-Through Cert¡l¡cates 1994-1

CNC Pass-Through Certificates I 994-1coMM 2000-FL2COMM zOOGFL2COMM 2OOGFL2coMM 2001-J1coMM 2001-J1coMM 2001-J1coMM 2001-J1csFB 1997-C1csFB r997-C1csFB 1997-C1csFB 1997-C2csFE 1997-C2csFB 1999-C1DLJ 1997-CF1

*Actions thfough N ov.30,2OO2- Does not includê private ratings. Some deals wefe reviewed more than once and wíll have mult¡Ple seruÌcé dates.

JI

HI

HNB-1

Ups and Downs of CMBS Rating Actions

PM-1885

FitchRatings Strucfured Finance

Downgrades/Upgrades by Deal - 2OO2* (continued)

Service TrancheDatê Breal(down

Rating Before Rating as of ClassReview Service Dato Amount ($)

Downgrades (continued)11l5lÙ2 DMARC, Series 199&C111l5lÙ2 DMARC, Series 1998-Cl11l7lo2 EQI Series 1997-19ß0102 Gennan Amerlcan Capltal 1996-39f301O2 German American Capital 199ô39130102 German Amer¡can Capital 1996-310t25t02 GMAC 2000-C210t25to2 GMAC 200GC210116102 GS Mortgage Sec. Corp. ll 1998-C19130102 Houston Galleria9l3ol02 Houslon Galleria9124102 J.P. Morgan 1999-C89l24lo2 J.P. Morgan 1999-C89124102 J.P. Morgan 1999-C8ffi102 Kmart Corporation Pass-Through Trusts 19951mO2 Kmart Corporation Pass-Through Trusts 19951116102 Kmart Corporation Pass-Through Trusts 19951116102 KmarlCorporationPass-ThroughTrustsl99S1123102 Kmart Corporation Pass-Through Trusts 19951l73l12 Kmart Corporatlon Pass-Through Trusts 19959116102 Kmart Corporation Pass-Through Trusls 19959116102 KmartCorporal¡onPass-ThroughTrustsl99S117102 Kmart Fund¡ng Corporation1l7lo2 Kmart Fundlng Corporaton1116102 Kmart Funding Corporalion1116102 Kmart Funding Corporat¡on11.23102 KmartFundingCorporation1l23lÙ2 Kmart Funding Corporalion9116102 Kmart Funding Corporation9116102 Kmart Funding Corporaliongtgtlz Merill Lynch 1995-C28l'16102 . Merrill Lynch 1996-Cl2t11l12 Merill Lynch 1998-CÍ-CTL2111102 MenillLynch'1998-CI-CTL8115102 Merrill Lynch 1998-C1-CTL8l15lÙ2 Merrill Lynch 199&C1-CTL4l11lÙ2 Merrill Lyrnh 1999C14111102 Merríll Lynch 199SCl4111102 MeÍill Lynch 1999-Cl'l0l1lOZ Morgan Stanley 1999FNV1916102 Mortgage Capital Funding 1997-MC12128102 Nomura Asset Sec. Corp. 1994-MD I

2l28lÙ2 Nomura Asset Sec. Corp. 1994-MD I

2l28lù2 Nomura Asset Sec. Corp. 1994-MD I

2l28lù2 Nomura Asset Sec. Corp. 1994-MD I

gø02 Nomura Asset Sec. Corp. 1994-MD I

8l21OZ Nomura Asset Sec. Corp. 1994-MD I

10116102 NomuraAssetsec.corp.1994-MDI10116102 Nomura Asset Sec. Corp. 1994-MD I

10116102 NomuraAssetSec.Corp.1994-MDI11DAO2 OPRYLAND11122]02 OPRYLAND7l9l02 PrudentialSecuritiesl99S-C1719102 PrudentialSecuriliesl99S-MCF-2719102 PrudentialSecuritiesl99S-MCF-2

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22,706,00040,872,0001 0,000,0004,480,068

47,609,1110

4,836,0004,836,000

23,269,000't41,'t54,811

020,1 16,00023,774,OOO

7,31 5,00065,275,70981,959,00065,275,7058l,959,00065,275,70981,959,00081,932,67466,843,07296,649,92620,926,00020,926,00096,649,92696,649,92620,926,00020,926,00090,439,49413,992,50132,36't,0004,846,0001,615,0004,846,0001,615,0002,963,000

23,698,00020,735,0009,481,0009,878,1 25

24,839,0001,503

8,000,00024,629,00026,681,00024,629,OOO

718,56443

231,43139,300,00010,000,0004,226,000

12,226,00011,114,000

N

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AXH

J

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'Actions through Nov. 30, 2002. Does rct include pdvate retings. Some deâls were rev¡ewd mote than oncè and w¡ll have mult¡ple seMce dates.

Ups and Downs of CMBS Rating Actions

PM-1886

FitchHatings Structured Finance

Downgrades/Upgrades by Deal - 2OO2" (continued)

Rating BeforeRevlew

Rating as ofService Date

ClassServiceDate

TrancheBreakdown Class Amount

Downgrades (continued)9t3t02 RMF 1995-1

9t3t02 RMF 1995-18t15t02 RMF 1997-18115t02 RMF 1997-1

Upgrades'lÙtltlz 277 Park Avenue Finance Corp', Series 1æ7-C11ol1t12 277 Park Avenue Finance Corp., Series 1997-C1

9n3ß2 Aetna Commercial Mtge. Trust 1995-C58n2ß2 Aelna Commercial Mtge. Trust 1997-ALIG8t22lg2 Aetna Commercial Mtge. Trust 1997-ALIC

8t22l12 Aetna Commercial Mtge. Trust 1997-ALIC8n2ß2 Aetna Commercial Mtge- Trust 1997-ALIC819102 Allied Capital 1998-l2t,l02 American Southwest 1995€1A5102 American Southwest 1995-C1

2l5lo2 American Southwest 1995-C1

215102 American Southwest 1995-Ci9117102 American Southwest 1995419l17lo2 Amer¡canSouthwestl995-C19117lO2 AmericanSouthwestl99S-C19l12l\2 AssetSecuritizationl99S-D'l9t12102 AssetSecurilizationl99S-Dl9112J02 AssetSecurilizationls95-D1318102 AssetSecuritizationl99T-D56123102 Banc One/FCCC 2000-C1

5l23loz Banc One/FcCC 2000-Cl5l23l12 Banc One/FCCC 2000-C1

5l23l\2 Banc One/FCCC 2000-Cl5123102 Banc One/FCCC 2000-Ci9130102 BCF Ser¡es 1997-C19lnl02 BCF serles 1997-C1

9130102 BGF Series 1997-Cl7123102 BTC, BTR-2 Trust 1999-51

7l23l\2 BTC, BTR-2 Trust 19S9-S1

8l29t12 BTC, BTR-2 Trust 1999-51

8l29l\2 BTC, BTR-2 Trust 1999'518129102 BTC, BTR-2 Trust 1999'512t1UO2 CDC Depositor Trust ST I, 1998-ST I

2l13to2 cDc Depositor Trust sT l, 1998-ST I

2l13t\2 CDC Depositor Trust ST l, 1998-ST I

2l13t1z CDC Depositor Trust ST l' 1998-ST I

2!1UO2 CDC Depositor Trust ST l, 1998-ST I

2l13lÙ2 CDC Depositor Trust ST l, 1998-ST I

9l3t\2 CDC Secr-¡rilization Corp. 1S99-FL1

9t3t\2 CDC Sedr¡lizat¡on Corp. 1999-FLl913102 cDC Securilization corp' 1999-FLl9l3lo2 CDC Securit¡zation corp. 1999-FL1

919102 Chase CMSC 199&1919102 Chase CMSC 199Èl919102 Chase CMSC 1996-11OH02 Chase CMSC 1996-21012102 Chase CMSC 199&21O12|OZ Chase CMSC 199È29|18t02 Chase CMSC 1997-1

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10,227,OO07,305.0003,970,0003,970,000

161,161,52285,000,00035,463,55544,148,000

8,027,00014,047,00026,088,00021,723,537

014,600,00014,600,00014,600,0007,527,208

014,600,00012.652,544i f ,598,1656,326,272

17,670,2718,570,0008,571,000

14,998,00034,282,00042,852,0005,364,7963,210,000

040,234,06337,998,83737,998,83710,058,5'1622,352,25712,628,99418,352,46438,397,954

163,238,992163,238,992195,886,79136,533,31743,703,00021,851,00046,S80,00022,157.96915,510,578't 1,078,98417,027,02115,717,25013,097,70810,675,500

A-1N2FFGH

Jcs-2B-2B-3&,1B-1s-2g-2

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,Actions through Nov. 30, 2002. Does not ¡nclude private retíngs. Some deals wera reviewed more than once and w¡ll have multiple seN¡ce detes

Ups and Downs of CMBS Rating Actions

PM-1887

FitchRatings Structured Finance

Downgrades/Upgrades by Deal - 2OO2* (continued)

ServiceDate

Tranche Rating BeforeReview

Ratlng as ofService DateClass Amount

Upgrades (continued)9l18l\2 ChaseCMSC1997-19118102 Chase CMSC 1997-19118102 ChaseCMSC1997-1sl30l02 Chase CMSC 1997-2

9130102 Chase CMSC 1997-2

1125102 Comm. Mtge. Accept. Corp., 1996-C21125102 Comm. lVltge. Accept. Gorp., 1996'C21t25t02 Comm. Mtge. Accept. Corp., 1996-C21125102 Comm. Mlge. Accept. Corp., 1996-C21125102 Comm. Mlge. Accept. Corp., 1996-C24116102 GreekwoodCapitalCorporationCollateralizedNotes1Ol23lOZ CRllMl MAE Trust, Series 1996-C1

1Ol23lO2 CRllMl MAE Trust, Serles 1996-C1

1Ol28lO2 CS First Boston/Dlt 1995-T'l10128102 CS First Boston/DU 1995-T1

8t8to2 csFB 1995-AËl /1

8l8to2 csFB 1995-AÉ1 /1

6t5t02 csFB 1995-WFl6t5lo2 csFB1995-WFl6t5102 csFB 1995-WF16t5to2 csFB 1995-WF1

7r11tÙ2 CSFB 1997-SPICE7t't1102 csFB 1997-SPICE7n1ta2 csFB',1997-SPICE8t16lÙ2 CSFB1997-SPICE8t16t02 csFB 1997-SPICE8116t02 csFB 1997-SPICE8t16tï2 csFB',l997-SPICE10t17t02 csFB 1998-FL2

10t17102 csFB 1998-FL28128102 CSFB/First Union 1995-MF1

8l28l12 CSFB/Flrst Union 1995-MF1

1t22t02 DLJ 1993-MF17

1122102 DLJ 1993-MF171t22tg2 DLJ 1993-MFl71t22t12 DLJ 1993-MF17lnaoz DLJ 1993-MF178t8t02 DLJ 1994-MF11818102 DLJ 199+MF118t8t02 DLJ 1994-MF119t16t,2 DLJ 199ÈCF29t16t02 DLJ 199GCF29t23t02 DLJ 199&CG19t23lg2 DLJ 199&CG16118102 Fa¡lax Fund¡ng Trust 1998-1

8l21lo2 FD¡C REMIC Trust 1996-C1

8t21t\2 FDIC REMIC Trust 1996-C1

8l21l!2 ' FDIC REMIC Trust'1996.C18l21lÙ2 FDIC REMIC Trust'1996-C18121102 FDIC REMIC Trusl 1996-Cl10l8l02 First Boslon 1993-M11oßl02 First Boston 1993-M11111102 FirstChicago/Lennar,1997-CHL110115102 GMAC 1998-C2

10t15102 GMAC 1998-C2

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26,688,74926,688,74929,357,62432,559,69548,839,5425,754,0005,754,000

14,797,OOO

15,255,68916,441,000

110,890,55417,375,51570,000,0005,839,000

11,087,000631,349

5,178,00014,633,00019,510,0009,756,000

19,510,0008,809,000

1ð,ru.t,éèo24,663,0008,809,000

18,203,38310,570,00013,309,92234,564,489

112,100,0005,523,489

10,042,7040

4,600,0005,600,000

10,345,48113,100,0007,302,893

15,000,0008,560,000

30,600,00025,500,00039,106,00078,213,00019,000,00031,734,34514,529,88426,445,7691 1 ,301 ,15642,313,128

1,S66,0842,176,236

83,575,982126,518,000I 13,866,000

'Actions through Nov. 30, 2002. Does not include priwte ratings. Some deals were reviewed nore lhan once and will have multiP¡o serv¡c€ dates'

Ups and Downs of CMBS Rating Actions

PM-1888

FitchRatrngs Structured Finance

Downgrades/Upgrades by Deal - 2OO2* (continued)

ServlceDale

TrancheBreakdown Class

Ratlng Beforê Ratlng as of classReview Service Dale Amount (9)

2t6to2 GMAC 2000-FL-A B

9t3to2 GMAC 2000-FL-A B

10t17102 GMAC 2000-FL-B B

1ot17to2 GMAC 2000-FL-B c1ol17to2 GMAC 2000-FL-B D

10t't7to2 GMAC 2000-FL-B E

10t17t02 GMAC 2000-FL-B F

9t1oto2 GMAC 2000-FL-F B

9t1oto2 GMAC 2000-FL-F c8116102 GP Capital Funding Corp. 2001-A B

Upgrades (continued)10t151o2 GMAC 1998-C2

811õ102 GP Capital Funding Corp. 2001-A8l16to? GP Capital Funding Corp. 2001-A8116102 GP Capital Funding Corp. 2001-A

1Ol25lO2 GS Mortgage Sec Corp ll 1996-PL1Ol25lO2 GS Morlgage Sec Corp ll 1996-PL10125102 GS Mortgage Sec Corp ll 1996-PL10125102 GS Mortgage Sec Gorp ll 1996-PL1Ol25lO2 GS Mortgage Sec Corp ll 1996-PL11114102 GS Mortgage Sec Corp ll 1997-GL I

11114102 GS Mortgage Sec Corp ll 1997-GL I

11l14loz GS Mortgage Sec Corp ll 1997-GL I

11114102 GS Mortgage Sec Corp ll 1997-GL I

111'14102 GS Mortgage Sec Corp ll 1997-GL I

11114102 GS Mortgage Sec Corp ll 1997-GL I

11114102 GS Mortgage Sec Corp ll 1997-GL I

9l24l,2 Howard County, MD Houslng Revenue9124102 Howard County, MD Housing Revenue

4121024t21024t2l024t26t024t26t024t26t0210t29toz10t291o23t15t023t151023t151023t15t0210n4t0210t2410211t5tO211t5t0211t5t02u28ß28t28t028t28t128n81028t28t02

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164474,Oæ18,649,02618,649,0266,434,857

11,735,0163,451,4758,628,6889,318,983

13,077,60613,600,7106,700,0007,800,000

10,000,0005,500,000

43,015,00032,260,00035,846,00019,223,22717,550,93317,610,09216,386,51619,567,08378,160,00014,660,00053,750,00014,650,00048,960,00058,620,00034,208,9994,430,0007,565,000

1 1,631 ,000

06,886,000

12,051,00014,032,00024,056,00026,060,00051,687,00056,856,0006,092,000

't 0,153,00010,153,00012,184,OOO

39,820,00047,784,000

9,535,00010,595,00010,595,0008,451,294

10,563,60825,353,88327,ffi,19728,523,033

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finn2 Greenwich Capital Commercial Funding Corp.200l-FLl B

finrcz Greenwich Capital Commercial Funding Corp.2001'FL1 Cfnl,z Greenwich Cap¡tal Commercial Funding Colp.2001-FL1 D

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10t28102 lmperial Credil Comm. Mtge. lnvestment Corp., B

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'Actions through Nov. 30, 2002. Doæ not ìnclude private rat¡ngs. Some deals were reviewed more lhan mce and will have multiPle serv¡ce dâtes'

Serles 1999-1J.P. Morgan 1995-C1J.P. Møgan 1995-C1J.P. Morgan 1995-c1J.P. l¡organ 1996-C3J.P. Morgan 1996-C3J.P. Møgan 1996-C3J.P. Morgan 1997-C5J.P. [¡organ 1997-C5J.P. N¡organ 1997-SPTL-C1J.P. Morgan 1 997-SPTL-C1J.P. Morgan 1997-SPTL-C1J.P. Morgan 1997-SPTL-C1J.P. Nlorgan 199&C6J.P. Morgan 1998-C6J.P. Morgan 1999-PLS1J.P. Morgan 1999PLS1J.P. Morgan 1999-PLSIJ.P. Morgan 200GFL1J.P. Morgan 200G.F11J.P. Morgan 200SFL1J.P. Morgan 2000-FL1J.P. Morgan 2000-FL1

Ups and Downs of CMBS Rating Act¡ons

PM-1889

FitchRatings Structured Finance

Downgrades/Upgrades by Deal - 2OO2* (continued)

SErviceDate

TfancheBreakdown Class

Rating Beforê Rating as of Class

Review Service Date Amount ($)

Upgrades (continued)1Of25102 Kidder Peabody 1994-C310125102 Krauss/SchwarlzPropertiesLtd.8127102 KS Mortgage Capital, Series 1995-'l8127102 KS Mortgage Capital, Series 1995-1

11126102 LBCommercíalConduit',l995-C211126102 LBCommercialConduit.l99S-C21'i,126102 LB Commercial Condu¡t 1995-C29l13lOZ Lehman P-T Sec., 199+A4t3oloz Lehman Structured Secur¡ties Corp., Series 1996'111115102 LTC Commercial 1993-1

11115102 LTC Commercial 1993-111115102 LTC Commercial 1994-12l27lÙ2 Merr¡ll Lynch 1994-C11116102 Menill Lynch 1995-Ci1116102 Merrill Lynch 199S.C'l9123102 Merrill Lynch 199SC39l23lOZ Merrlll Lynch 199+C38116102 Merr¡ll Lynch 199eC18116102 Merrill Lynch 199ÈC19l4lÙ2 Merrill Lynch 1996-C29l4lí2 Merrill Lynch 1996-C29l4lÙ2 Menill Lynch 1996-C29141A2 Menill Lynch 1996-C211l22loz Merr¡ll Lynch 1997-C'l11122102 Merrill Lynch 1997-C19123102 Midland RAC 19s6-c19t23lo2 MidlandRAC.l9S6-Cl9l23lÙ2 Midland RAC 1996-C19l23lo2 Midland RAC 1996-Cl8121t02 Midland RAC 1996-C28121102 Midland RAC 1996-C28l21lOZ Midland RAC 1996-C28121lo2 Midland RAC 1996-C2812'1102 Midland RAC 1996428l21lo2 Mid¡and RAC 1996-C28l21lÙ2 Midland RAC 1996-C29123tO2 Morgan Stanley 1996-C1

9123102 Morgan Stanley 1996-C19123102 Morgan Slanley 1996-C1

9l23l12 Morgan Stanley 1996-C19123102 Morgan Stanley 1996-C1

8128102 Morgan Stanley 1996-WF1

8128102 Morgan Stanley 1996-WFl8l28l12 Morgan Stanley 1996-WF18128102 Morgan Stanley 1996-WF1

8128102 Morgan Stanley 199&WF18128102 Morgan Stanley I99GWF1919102 Morgan Stanley 19S7-C1

919102 Morgan Stanley 1997-C1

9l9l12 Morgan Stanley |997-C1919102 Morgan Stanley 1997-C19l9lo2 Morgan Stanley 1997-Cl11120102 Morgan Stanley 1997-HF111120102 Morgan Stanley 1997-HF1

11120102 Morgan Slanley 1997-HF1

11120102 Morgan Stanley 1997-HF1

cBEFcDE1

E-2cDEFDEcDBcBcDEBcEDcF

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cDF

B

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28,896,9517,474,892

13,655,6978,273,4M

16,891,62412,993,55724,687,7593,247,664

28,974,776373,549

5,735,00016,941,59610,236,000r7,066,00019,199,00032,180,00038,616,00038,833,00038,833,00068,299,00062,607,00056,915,00028,458,00û46,243,00046,244,OOO

5,568,00014,848,00025,985,0007,424,0007,682,000

12,803,00015,364,00023,045,00028,166,00030,727,0005,122,000

18,728,68417,026,0765,107,822

18,728,68413,620,86130,268,42036,322,105

9,080,52621 ,187,89521,187,89533,295,26351,252,OOO

38,439,00035,236,00019,220,00011,211 ,00055,656,00034,012,00027,828,000

9,276,000

'Actions through Nov. 30, 2002. Does not ¡nclude prívate ratings- Some deats were reviewed more lhan once and will have mult¡ple seruiæ dâtes

Ups and Downs of CMBS Rating Actlons

PM-1890

FitchRatings Structured Finance

Downgrades/Upgrades by Deal - 2OO2* (continued)

Service Tmnche Rating Before Rating as of

Dale Breakdo\ivn Class Review Servicê DatE Amount ($)

Upgrades (continued)11l2OlO2 Morgan Stanley 1997-HF1

10115102 Morgan Stanley 1997-LB110i,15102 MorganSlanley'1997-LBl1Ol15lO2 Morgan Stanley 1997-LBi10115102 Morgan Stanley 1997-LBl10115102 Morgan Slanley 1997-LBi10110102 Morgan Stanley 1997-WF110l1OlO2 Morgan Stanley 1997-WF110l1OlO2 Morgan Stãnley 1997-WF110117102 Morgan Stanley 1997-XLl10117102 Morgan Stanley 1997-XL1gl23lg2 Morgan Stanley 1998-HF19l23lÙ2 Morgan Stanley 1998-HFl3l27lÙ2 Morgan Stanley 1998-WF23l27lÙ2 Morgan Stanley 1998-WF23l27lo2 Morgan Stanley 1998-WF23l27lOZ Morgan Stanley 1998-WF23127102 Morgan Stanley 1998-WF23127|02 Morgan Stanley 1998-WF23127102 Morgan Stanley 1998-WF23127102 Morgan Stanley 1998-WF23l27lo2 MorganStanley1998-WF2gl24l02 Morgan Stanley 1999-CAM19l24ll2 Morgan Stanley 1999-CAM11ol17lO2 Mortgage Capital Funding 1995-MC110117tO2 Mortgage Capital Funding 1995-MCl8122102 Mortgage cap¡tal Funding 1996-MC'l8l22l12 Mortgage Capital Fundlng 199ô-MC1

8122102 Mortgage Capital Funding 1S96-il/|C1

8l22l02 Mortgage Capital Funding 1996-MC19l1AO2 Mortgage Cap¡tal Fund¡ng 1996-MC29l12lo2 Mortgage CapitaÍ Fundlng 1996-Mc29l12l12 Mortgage Capital Funding 1996-MC28126102 NationsBanc 199$M29l4l12 Nat¡onslink Funding Corp. 1996-1

9l4l12 NatlonsLlnk Fundlng Corp. 1996-1

9l4l\2 Nationslink Funding Corp. 199&19l4lOZ NationsL¡nk Fund¡ng Corp. 1996-1

9l4l,2 Nat¡onsL¡nk Funding Corp. 1996-1

9l4l,2 Nationslink Funding Corp. 1996-1

916102 Nationslink Funding Coç. 1998-1

916102 NationsL¡nk Funding Corp. 1998'1916102 NationsLink Funding Corp- 1998-1

10l4lÙ2 NB Commerclal Mtg. P-T, Serles FSI

9l17lÙ2 Nomura AssetSec. Corp. 1994-C311l12lOZ Nomura Asset Sec. Corp. 199SMDlll11112/t02 Nomura AssetSec. Corp. 1995-MDlll9l25l12 Penn Mulual 1996-PML9l25l12 Penn Mutual 1996-PML9l25lÙ2 Penn Mutual 1996-PML9125102 Penn Mutual 1996-PML9l25lo2 Penn Mutual 1996-PML9l25l12 Penn Mutual 1996-PML9/251A2 Penn Mutual 1996-PMLgn1l12 Penn Mutual 1996-PML9l25l12 Penn Mutual 1996-PML

FcDEF

GBcDcD

cBJKHEF

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Class B

Class CN4r-4 (ro)cDEFBcDUC

DE

F.

H

B

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MACS3A-4EF

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41,742,0007,304,000I,130,0003,ô52,0006,391,0006,848,000

30,754,00033,549,00027,958,00022,636,00045,271,O0064,185,00067,395,0007,965,0007,965,000

10,620,00021,240,OOO

21,240,00023,896,00047,790;00053,100,00053, r 00,00026,209,00026,210,0009,151,000

031,353,00019,294,00016,882,0007,235,000

27,483,33222,902,77718,322,2213,305,919

19,358,37817,745,17914,518,783f 0,485,7885,646,1939,ô79,189

53,58r,52956,1s3,03048,478,5261,472,7976,516,379

042,n9,92511,723,OOO

23.M6,0001,738,966

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.Actions through Nov- 30, 2002, Does not ¡nclude prlvate ratings- Some deals were re\¡¡ewed more lhan once and will have multiPle service dates.

Ups and Downs of CMBS Rating Actions

PM-1891

FitchRatings Structured Finance

Down g rades/Upgrades by Deal - 2AO2* (contin ued)

Rating Before Ratlng as ofReview Service Date

ClassServiceDate

TranchoBreakdown Class Amount

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Upgrades (continued)4t30to2 RTc 1994-C14t30t02 RTC 199+C110l4lo2 Salomon Brothers, Series 1997-TZH1ol4lo2 Salomon Brothers, Series 1997-TZH1014102 Salomon Brolhers, Ser¡es 1997-TZH1014102 Salomon Brothers, Series 1997-TZH1014102 Salomon Brothers, Series 1997-TZH11l4lo2 Salomon Brothers, Ser¡es 1997-TzH9l11lÙ2 SASCO, Series 1992-M1gißtoz sAsco, series 1994-cl4l1lÙ2 SASCO, Ser¡es 1995-Cí4l1lOZ SASCO, Series 1995-C111118102 SASCO, Series 1995-C4713102 SASCO, Series 1996-C39120102 SASCO, Series 1996-CFL9l2oloz SASCO, Ser¡es 1996-CFL9l2OlOZ SASCO, Series 1996-CFL2127102 SASCO, Series 1997-LLl218102 SASCO, Series 1998-C32tÙIoz SASCO, Ser¡es 1998-C3218102 SASCO, Series 1998-C3218102 SASCO, Series 1998-C3218102 SASCO, Ser¡es 1998-C32l8lo2 SASCO, Series 1998-C36121lOZ SASCO, Series 1999-C36121102 SASCO, Sedes 1999-C36121102 SASCO, Series 1999-C36121102 SASCO, Series 1999-c36121102 SASCO, Series 1999-C36121102 SASCO, Series 1999-C36121lo2 SASco, Series 1999-C36121102 SASCo, Series 1999-C36121102 SASCO, Series 1999-C36121102 SASCO, Series 1999-C36121102 SASCO, Series 1999-C36121102 SAsco, Serles 1999-C36121102 SASCO, Series 1999-C3713102 SASCO, Series 2000-C27l3lo2 SASCO, Series 2000-C27l3l12 SASCO, Serles 2000-C27l3l12 SASCO, Series 2000427l3l12 SASCO, Series 2000-C27l3l12 SASCO, Ser¡es 2000-C27t3lo2 SASCO, Series 2000427l3lo2 SASCO, Series 200042713102 SASCO, Series 2000-C27l3loz SASCO, Series 2000-C27l3lo2 SASCO, Series 2000-C27l3lÙ2 SASCO, Series 2000-C27l3l1z SASCO, Seiles 2000-C2f n1l02 SASCO, Series 2000-C211n1n2 SASCO, Series 2000-C211n1ß2 SASCO, Series 2000-C2fin1102 SASCO, Series 200GC2rn1l02 SASCo, Seríes 200GC211f21102 SASCO, Series 2000-C2

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20,090,297.18,655,77633,476,72412,305,60814,1 13,591

Ups and Downs of CMBS Rating Aclions

PM-1892

FitchRatings Structured Finance

Downgrades/Upgrades by Deal - 2OO2* (continued)

Servlce TrancheDate Breakdown Class

Rating Beforo Rating as of ClassReview Service Date Amount ($)

Upgrades (continued)fin1102 SASCO, Series 2000-c2fin1lÙ2 SASCO,Series.2000-C2'11f21102 SASCO, Series 2000-C2fin1102 SASCO, Series 2000-C211125t02 SL, SeI¡es 1997-C1'l'1125102 SL, Series 1997-C111125102 SL, Series 1997-Cl11125102 SL, Series 1997-Ci1l22lï2 Southern Pac¡f¡c Thrift & Loan Association, Series

1996-C11122102 Southem Pacific Thtift & Loan Association, Series

1996-C11l2uo2 Southern Pac¡fic Thr¡ft & Loan Association, Series

1996-Cl1l22lo2 Southem Pacif¡c Thrifr & Loan Association, Series

rsg&cl11115102 Structured Mtg. Sec. Corp., 1995-M111115102 Structured Mlg. Sec. Corp., 1995-Ml'l1l13l12 Wsconsin Avenue Securities 1995-M41'll13l12 Wsconsin Avenue Securities 1995-M4

1116t02 Wsconsin Avenue Securities 1996-M111113102 Wisconsin Avenue S€curit¡es 199ÈM311113102 Wsconsin Avenue Securlties 1996-M311113102 Wsconsin Avenue Secur¡ties 1996-M311t6l12 Vvisconsin Avenue Securities 1996-M51116102 W¡sconsin Avenue Securities 1996-M5

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Copyright O 2OO2 by Fitch, Inc. ùd Fiæh Rãlings. Ltd. ed i6 $bsid¡ti6 One Sbt¿ SFeel Plâz¿, l{Y, l{Y I0004feiólã¡c: t-aoo-233¡ez+, lztz¡ loa+:oo. iu: el2) 4tù4a35. Reproducrio¡ or rerræm¡ssion in wtrolc or in pM is ptohib¡led except by pemiss¡or. A.ll righß reseMd. Al of úeinfo;âtion ænþined hqein ii bæd on ¡nfomarion obrÀinêd fþm ¡$um, oùq obligoE, udeMiteF. dd orhe! sourc$ Fitch believer ro be rcliable Fitch does not aud¡r ot veriÛ the mh or

accuncy of ay sucl infomation, As a rsqlt, û¡e infomarion in this ¡.pon is p¡ovided "æ ¡s" wiùou üy tepøøtatioo or wùùty of æy lind' A f¡lch nl¡trg ¡s d opinion õ lo ùc

ey seilrÍty. ¡{ repon proviáinga Fitchãtìng is neirher a prospew norasbsdrur for the infomaúon æemblC verili€4 úd ptedtcd lo invætors by lhc isruar ad ib agcns in ønncction

*iíh to r¡i. oftú" .ouriricr ñatings may bi chuged, supcndcd, or withdram at my rimc for uy ræn at thc rclc disrcrion of filcb. Fitd¡ dG nol prov¡dê i¡vclmcnt adviø olùy soÊ

Rutin6, * nor n r"*mcndaion rõ buy, scll, o. tña *y r*u;ty. nutngs do not commenr ø thc adcqucy of muka priæ, thc süitabilìty of Ðy seorily.for l-pmiculr invesor, or the tu-uøir naw or tuability of payners madi in ræp"ctL *y écurity. Étch rccci"c fce from issucr, iruurers, guuotor, oùøobligors' ød udcmitcre for ralin¿ secuitiæ. Such fcæ

gøcåly "ary

fion US$l,Ooo io fXSZSqooo lotthc applicablá cuncncy equiwlmt) per isue ln co¡tain cæe, Fitch will róle ôil or o nùmbet of¡so* isued by o puiculu især, or ireurod or

ä*ó¿ Uí o port¡.ul. i**", * gur-r*, for r singlc m"ul fe. Such fæs *" "'p"acd

ro wy fioñ USSlo,o0o b UStl,50o,o0o (or ttrc applicablc curocy equivdenù Tte si8nm4t,

fitti."rion, á. a'l"r"rioation of a rari-ng by Fiich shall iot ørrirure a øn*nt by Fitcir to ue iE n-do s d expen in ømectio wirh my regishatiol staement f¡êd üdd thc Unitêd Sht6

Fitch r*wch may beavailabls to eleeronic sìJbscribøs up to thrædays carlicr rhæ ro print subscriber.

l3

Ups and Downs of CMBS Rating Actlons

PM-1893

F¡XED INCOME RESEARCH > STRUCTURED PRODUCTS > AMERICAS

CREDIT FIRSTBOSTON

24 January 2003

SUISSE

Contributors

Gail LeE+1 212 325 1214gail.lÉe@csb.com

Patricla Growell+1 212 325 4881paty.crowel@cslb,com

Paul FiEsimmons+1 2125398567paul.fi Þsimmons@csfb.com

Serif Ustun+1 2125384582señf uslun@æb.com

CMBS Spreads

CMBS Market Watch Weekly

Chart of the Week: Tightening lOyr Triple A Spreads Kick-Off2003EÊ

Sou@: Credil Sr¡iss Fißt Bo$on-

Delinquencies in CMBS: "How High?"HighiighisResearch Commentary:

We tackle the "how high will delinquencies rise in 2003?'question by examiningloans on servicer watch lists. Our findings suggest that a 3.0olo "worst case'boundary is perhaps reasonable.

Trading Commentary:The rush of new supply begins, spreads tìghten and the market lone is

overwhelmingly positive-

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PM-1894

cREDrr lnnsrsulssE lBosroN

CMBS Market Walch WecklyResearch Mew Gommentary

Whoa,5.6%l!!

...But Don't RunYet!

How About 3.0%?

Research View: Commentary

Delinquencies in CMBS: "Hovv High?"

This week, we thought we would tackJe a very popular question, "how high will delinquencies rise

in 2003"? |laving heard a broad range of estimales, we took on the challenge of trying to quantiff

the magnìtude of an expected incæase. While many (including ourselves) have construcled fancy

commercial rnortgage delinquency models, each wilh its black box features based on past crycles'

we thought we'd take.a much more practical approach this time: somelhing more real We

examined servjcer watch lists to assess the "pipeline" of delinquent loans. A loan on watch today

is likeþ to be tomorrov/s delinquenry- We think our findings are not only interesting, butwill help

set some boundaries on the expected delinquency rates cunently being bantered about'

As a start¡ng point to detennine the potential candidates for tomorrovy's delinquencies, we used

ourdatabasetoidentifyloanswithDsCRsequal loandlessthan l-00. lf weassurneall loans

were to becorne delinquent, this could serve as our Vorst" case GMBS boundary' With üris

criteríon as our screen, we identified 1,704 loans representing $8.1 billion in the fixed rate conduit

universe-1 Togetherwith the cunent 30 day + conduit delinquency rale of 1.620/o, the 1'704 ($8.1

bilfion) loans, w" "oiu.

at a 5.6%'worsf case level. While a very high number indeed, it is still

less lhan the oeak 7.53% observed in 1992.2

Ok, now before uv€ all "head for the h¡lls', we emphasize a few things aboul the 5-6% rate- First'

as most investors ere eïvare, the reported DSCR numbers are often ouldated and inaccurate.3

Approximately one.third of the reported DSCRs with less than 1.0x were reported with "as of

dates in 2001 or even earlier. And, many of these numbers are sometimes inconectly reported or

recorded. Second, as loans become delinquent they are often resolved and becoming cunent (or

REO and soþ) - and so, loans roll in and out of their delinquency status. Third, many bonowers

continue lo keep their loans ctnent despite operating shortfalls. Fourth, there are chronic late

payers who always appear on üre 30-day list. ln short, this number includes a lot of "noise" we ve

wreslfed with ,in the sector regarding information and data.

That said, we set cr¡t lo refine thìs uníverse of 1,704 a litle further by examining loans found on

the service¡'s watch tisls as thes,e serve to identify potential toubled loans and provide

data/color.a For purposes of or.lr analysis, we were constrained by using servicer watch list data

that were availabþ in eleclronic format. And so, with tris criterion, of the 1,704 loans we identified

in our initial data cut, 61 I -loans appeared on servicer electronic watch lists.s We used lhls subset

to anafyze and discuss tlre potenlial delinquency "pipeline" in the remainder of this commenlary'

The 6l1loans rniverse represenis g2.9 billion. or 1.41Yo ($2.9 billion/$2O3 billion) potential

pipeEne of incrernental definquencies. This pipeline of 1-41o/o combined with fhe cunent

ffier36,l67toarrstotaling$203.2biIlion.The1,7o4loans¡defltifiedwith DSCR s1.0 was as of Jam¡ary 2003.2 observation is based tn {he-ACLI data seL3 The DSCR fg¿nes r¡r¡ere from Trepp and are based on NOI and nol t'tcF', S"t;á rãná¿ä warcr¡ $sts are avåiøble in etectonic format ftom Trepp. The electronic lt/ãtch lid we

received '¿ms forthe montl¡ of Decembe¡, covering approximately 64% by balance and 58% by deal count of

the conduit universe.i õt t¡.-rãrã"øg 1,093 ûoans u/ith ÐSCR <1.0 these loars either 1) did not appear on an eþcironic wat*l list

(565 loars) or 2)-servúcer does not provÍde watdl lÍsts ín an decbonic fomat (528 loans)-

24 January 2OO3

PM-1895

cREDrr I nnsrsurssE I BosToN

CMBS Market Watch WeeklYResearch View: Commentary

delinquency rate of 1.62% suggesls a projected delinquency of 3.03ô/o. We present stralificalions

on this 611-loan universe to provide some insþht on vintages, property tyPes and ma¡kets.

We begin wilh vintages. Tabte I shows the cuffent 30 day + del¡nquencies and potential pipeline

of delinquencies by vintage. The range of pþeline delinquencies is .01% (2Û02) to 3.03% (1995).

Table 1 Current and "Pipeline" Delinquencies by Mntage(B)

(A) Potential Potenlìd (A + B)

30 Ðay+ 30 Day+ Delinq. Ddir¡q' ProjectedDelinq. Ðelinq. Rate "Pipeline" "Pipdine- Deling. Rat€

\ir¡nrâoe Total ($mm) {$mrñ¡ $l $¡q¡¡I---Eegl@ (U2s.s 0S 3.52 352

1995 r,1405 É3.9 9.99 3'1"5 3'03 13'02

1996 6,441á 3628 5,63 27.7 0.43 6.06

1997 17

lsss ¡15.982.8 96:1.7 2.09 894.2

2O0O 26,97î.r {7?-2 - !?7 365'8 r.36 3.12

tnñr 1¡ qq7 Í 7)82 0.5¡t 258.7 0.71

203.193.1 sfrLs 1.62 ¿857'3 l'4,l 3.03

SourêÉ: cÉdil Sui$sê FiÉt Bctoñ. TGpp.

Table 2 shows the similar data by property type. The top three property t¡pes with the highest

balance in the delinquency pipeline are multifamily with $810.4 million (198 loans), followed by

retait with $603.5 million (90 loans). ard lodging with $569.9 million (99 loans). Healthcare loans

conünue to have lhe hþhest projected.delinquency rate, fotlo!ì/ed very closely by CTL and

lodg¡ng.

24 January 20Q3

PM-1896

CREDIT I

su¡ssE I

FIRSTBOSTON

CMBS Market Watch WeektYResearch Vìew: Gommentary

Table 2 Current and Potent¡al Delinquencies by Property Type

30 Day+Del¡nq.

(A)30 DaY+

Delinq. Rate

(B)Potential (A + B)Delinq. Proieded

"Pipeline" Delinq.Rate

Potent¡dDelinq.

"Pipeline"Rate

3,{23.6 283.3 9.07 1x5.8 4'35 t3.12

LO 14,437.0 981.8 6¡2 569.9 3'95 l0J7

MF 54,ES1.0 536.6 0.98 810'{ l'18 2'15

RT 60,4325 797.7 l'32 603.5 J'o(l äa

lr¡U ¡,otl¡ ¿¡'o t.zt ll,Z -0'4l t'n

ss 33635 305 0.91 7'5 0'22 1'13

Total ã13.193.1 32CZS 1.ü¿ ¿857'3 l'41 3'03

Soure: Cred¡l Suíse Fßl 8o6lm. TEP9'

Table 3 provides market and property type deta¡ls for the current and proiected pipei¡ne

del¡nguency for the 25 fargest MSAs in the conduit universe. The projected delinquencies for lhe

property sector are specîFtc to the respective MSA. For example, the proiected retail delinquency

rate for New York retail is 3.6%. We have a complete breakdown for all MSAs in conduit CMBS

available upon requ€sl,

PfOS and COnS Whìle there are several c¿¡veats to our exercise, including: lhat our sample set was limited to

watchlists available eþcü.onicalV. the lack of statlst¡cal probabilities and liming for when loans

with DSCRs <1.0x become del¡nquent (or for any loans with DSCRs>1 .0) and, lest but not least,

the accuraç¡r of the data. Whle we are conssrvat¡ve in our preference for longer (and detailed)

watchlists, recognÉing the weaÍnesses, we think this analysis hetps set some boundaries on lhe

recent dellnquenc,y "gusssürnetes'. We hope this provides a better relative direction of wàere the

increases may occur by vintage, property type and market

Our tables are the fust steps towa¡d answer¡ng the "how high" question' ln closing, we don't

believe delinquencies will splke to 5.6%, but we do think the 3.0% level is perhaps a starting point

for considering wfrat might be ã worst-case scenario boundary. Remember, conduit

delinquencies are stiÍ relatirrely hw al onÍy 1.620/o (¡n Part thanks to an expanding denominator)'

Whether it is 2.5% or 3.0ûlo, r¡ihat þ most ¡mportent ¡s ident¡fying which loans are potentially

tomorrow's delinquencbs in your porfoEo. Relative value in CMBS lies in the ability to dig deeper

¡nto ¡ocal markets/copateral as efficiently as possible to determine the potential impact on a

security. \Âlhile stucü.ne proviCes an additional cushion of safety, having access to aclual

collateral performance and an&,ipaled performance should aid investors in their ¡nvestÎent

decisions.

24 January 2003

PM-1897

Table 3 Projected Property and Top 25 MSA Delinquency Rates

(B)

(A) Folgntial Potenthl

l'¡SA 30hy+ 30Day+ i/SA lìiSA (A+B)\^/dch Llst Total I¡SA [ilSA Delhq. tÞlinq. Èoþoted Rposuro

Loân Iì/SA ekq. Dslft1q. "Plpelhe' "Hpelino" lúSA Cþli,¡q. ¡n CIVES

MsA Tlec,if-HncyRate(%lbvi",i*.y*,H€.lt+"Hp€lro") count (Srm) (Srrrn) Rete(%) ($rm) Rare(o/o) Râl€(%) Rank

New York, NY PMSA 3.ô 2.1 0,8 6,1 1ìl 1,8 0.0 3.4 1,6 0.0

Lß Àr¡€les{ong Bèâêh. CA PMsÀ 0.8 0.5 0,9 l4.l 2.8 ll.8 0.0 4-Z 0.0 0:0

Weshlngton, Oô+lÞVA.t¡ìò/ PMSA 1.0 1.0 0,8 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Chlcago, [- PMSA 2.5 0.1 1.5 8.3 10.2 0.0 0.0 4.S 30.8 0.0

Dâll8s, TXPMSA 0,9 3,5 4.0 x1.2 2.8 0.0 0,0 0,0 2't.5 7.6

AüËnb, GA MSA 2,8 4.2 1.0 6,8 0.5 0.0 5,2 S,9 0,0 12.3

PhllådolÞhlå, PA-NJ PMSA 'l,g 0,3 0.9 2,9 6,7 23.3 0,0 11.8 0,0 39.5

l-buslon, ÎX PMSÀ 4,1 2.0 1,0 0,0 0,6 0.0 4.6 0,0 0.0 n:tPhoanlx.lrieea, Æ MSA 1.1 3.3 1,1 42.4 1'5 0.0 4.9 39.6 0.0 0.0

sm d€go, CA MSA 1.0 t.8 . 0.3 s,2 0.3 0,0 0.0 0.0 0.0 100.0

DÊþoll MIPMSA 1.2 l.l 1.8 49.2 6.6 0.0 0'0 33.4 100.0 3'4

8ßton, MA.NH.PI,SA 0,3 0'0 0,0 n'l 0.0 2'7 0'0 0,0 0.0 17.3

Lae Vogæ, NV.AZ MSA 2,1 0,? 1,0 0,0 0.0 0.0 0.0 ' 0,0 0.0

Oranoe CounV, CA PMSÀ 0,1 0,0 03 12,0 9.1 0.0 13,8 0.0 0.0 2,6

Sgn Jæe, öÀ ÞMSA 0,0 0,0 1,7 l,t 1,S 0,0 0'0 0.0 ' 0'0

Sån Frsncl6c0, CA PMSA 0.5 0.9 t.9 9,0 6.0 0'0 0,0 0,0 0.0 0.0

Btìlmoro, MD PMSA 1.9 0.6 Zg 4.4 3.5 0'0 0.0 ' 0.0 ¡18.5

RlveruHe'San Bemerdlnð, CA PMSA '1,6 0.0 0,0 0.0 0,0 .0'0 û0 0.0 0.0 0.0

SÈått6BèllevuÈEv6nh, WA PMSA 1,8 2,2 2,0 2,3 0'0 9,7 O0 9.4 0.0 0,0

Öatlard, 6A ÞMSA 0.0 'l.8 0.0 0.4 2'8 0,0 0,6 0.0 11.5 0.0

Fofl tåud$dälå, Ët PMSA ô.6 2'2 2.1 0.0 3,8 0,0 0,0 32.f 0.0 0.0

Mlânl, FL PMSA 1.5 2,4 6'8 1'4 9.1 0.0 0.0 0.0 6.3

Odando, FL MSA 4.6 1.ô 1.8 49'9 5.3 ' O0 ô.4 0.0 34.3

O€nvðr, CO FMSÀ 1,2 3,0 0.3 17.0 12'3 t0 0.0 2l'7 0.0 32.7

NasBåu€utulk, NY PMSA 19,6 3'8 0'g 0,0 0'0 0.Û 0'0 24.6 0.0 0.0

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4,895.2 104.5 214

4,887.3 148.4 304

1,717.ø 60,9 r.29

4,403.1 67,6 1,53

4,031.8 21,4 0.s3

3,903.9 72.2 1.85

3,885.5 13,9 0.36

3,766.5 69,0 ,l.83

3,668.6 16,7 0,45

3,647.8 40,4 t,tl3,384.9 28.0 0.83

3,082,5 26.9 0.07

3,048.S 36.9 1.21

a879.8 23.2 0.81

2187.3 19.2 0.77

2,4i4,? 323 r.34

2,344,9 0.0 0.00

2,158.0 51.3 2,6Ë

¿103,9 26,8 1,23

2,089.5 n3.2 10.66

l,93l.s 30,9 1.5å

1,800.8 53.3 2,90

173.4 1,42 1.90 1

fl1.6 1.02 1.28 2

31.9 0.s8 0.73 3

71.t 1.46 3,60 4

44,4 0,91 3,94 6

103.6 2,20 3,49 6

32.1 0,73 2.26 I90.ô 2.25 2.78 I110.5 2.83 4.68 I47.9 1.23 1.59 10

63,5 1.69 3.52 11

30,6 0,83 r.æ 12

54.2 1,49 2,59 1g

51,0 l.5l 2.33 14

10,9 0.35 1.23 f5

33,0 1,08 2.2! 16

42.6 1.48 2.8 17

1.0 0,04 0.81 18

27,5 1.14 2.49 19

30.5 1.30 1,30 20

l8,s 0.88 3.63 21

43,0 ZU 1,27 22

16.1 0.77 il.45 23

33.6 1.71 3.29 24

140.6 7.8t 10,7t 2Ë

lnf)cÐBgm{E-ofrØ.Ø-t-loz

H2ôtI]g(,4<¿9oô1Ë3-ä3¿åE

CREDITsulssE

I rrnsrI BOSTON

CMBS Market Watch WeeklYDesk View: Trading Commentary

Gontributors

Michael Maniott+1 212 325 4240mlchael.marriolt@cslb.c€m

Lou¡se Fogarty+1 212 325 4240Iouis€.f ogarty.z@ßf b¡om

Kin Lee+1 212 325 4240kln.lee@csfb,com

John McGrath+1 212325 4?40

iohn.mcgralh@cslb.con

Albert Sohn+1 212325 4240dbeúsoir@cslb.com

Desk View: Trading CommentaryThe tone in CMBS this past week remained overwhelmingly positive as the sector put away ¡ts

f¡rst new issue fixed-rate deal of the year. With the TOP pricing coming in at the tight end of the

underwriters' initial guidance, the deal capped a week of tighter spreads and a fattening credit

curve. Secondary flows were relatively light. The few bid lists that came out traded as if dealers

were desperate to add to their inventory, no matter what level it took to take down the bonds-

Reta¡l ¡nterest in adding paper has been fairly broad, indicating that this buy inquiry may not be

fleeting. There's been no sþn of investors rotating out of CMBS into corporates or asset-backeds.

All in all, CMBS has had a pretty good run so far in 2003.

Looking forward to the upcoming supply, certainly the next couple of deals should have no

problem being absorbed at good levels. The tesl for spreads will come further into lhe calendar.

Table 4 Benchmark Trades

BoVSotd Security Rating Size (mm$) Avg' Life (y0 Day

Sold DUCÎú 98.CF2 AtA AAArtua 5mn 3¡6 Ttur

Sold GlJlÃTgg.Cl A4 AÁAfAaa lllmm 9'82 Wed

Sold IIASC 98Ð6A18 MÂlAMlAaa 20mm 2'4¡l Tues

53¡¡

Souræ: Creü Suis FLsl Soslm.

24 January2003

PM-1899

cREDrr I nnsrsurssE lBosroN

CMBS Market Watcfi WeeklYTechn'ral USate

Technical Update

Conduit/Fusion

CMBS Domestic Pipeline Outlook (in millions)

Floating

Rate

s435

Single

Other Sonower

$8S5

s240

ll. Upcoming Domestic Deals

Deâls ¡n Januery

Wells, Bear, llorgan Stanley, Princ¡pã|, John Hancock

Waehovla, Art€sia, Nomura SecurÍtlesãÉ.- -¡- u-ta rÊ-.-t ^^*^l;^lÐuéwg¡L nuE ltryE lry.ustv,

Cred¡t Su¡s-çe Fturst Boston 2002'FL2

Deal Type

Conduit

Gondult

Singl¿ Bor¡ours¡

Floaflng Ratc

S¡ze (mm)

sr,0?8

$937

$570

$135

Boro$Er

lll. Deals in lhe Market

Bear Steams is markelíng a$æ4.6mil1iqn cross+ollateralized and cross-defaulted floaling+ate loan, BSCM 2tþ3-

WEST, secured by a frst mortgage lien on 11 fr¡llservice hotels. The bonower is Westbrook Hotel Partners lV LLC'

Bear Steams Corrune1:id MoJgJge originated 100% of üre pool. The top frve geogrraphical concentrat'tons are in

Virginia (15.8%|,GaÍfom¡a 1tS.õZ"l NewYork (16.1%), Miciúgan (15.60/ol and Pennsyl'ania (10'9%)' Standard 6'

poo/s anaþb determíned lhat the loan has a DSCR of t.S+i ¡ase¿ on a 1Q-5% refir¡ance constant, with a beginning

LTV of 65.50lo and an end.ng LT\/of 60.7% þased on the inútial $year loan lerm)- This deal has been rated by

Standard & Poot's, Moodfs. and Fitch.

Wacfiovia, Nomura, and Banc of AÍierba are marketing a $937.3 rnilion deal, WBGMT ãÐ3C3' collateralized by 130

frxed-rateloans on 130 multifanily and commercial properr*¡s. The loan orþinabrs a¡e Wacfiovia Bank (55-e%)'

ñomura credit & capital (?0.a%), and Artesh Mortgage Cerñilal (13:7%)- The tbp five pfoperty type composition are

retail(l4.Bo/ol,multifamfy(30-a.lj, office(13.9%), hsþl (6.370), and mixed-use(1-OVo)' Thetopfive geographical .-

concentrations are h Cagfàmi¡ di.eolol,Florida (12.6%), eeorgia (g.5qo)'Maryland Ø-onZo)'an! W¡¡!1ston (6-1010)'

Standard & poor,s analysb determined that, on a lveþhted arrerage basis, lhe pool has a DSCR of l '43r with a

¡"g¡nn¡ng L|\tr oÍ 94.|oioand ar¡ ending LTV of 80.0Yo. This deal has been rated by Standerd & Poofs and Fitcå'

Sdê: Cæ4 Süis F¡¡st 8GEÐ. CoñrÞEjel Mortgágê Alert

24 January?Ñ3

PM-1900

cREDrr I rtnsrsurssE I BOSTON

CMBS Market Watch WeeklYTechnical Update

lV. Recent Pricing

MSDWC 2003-TOP9 - $',|,077.8mm

Trarrche Size (mm)

Priced: January 24,2003

Size (mm) Subordination (%) Average Life Pricing Spead

5.7 +39A-1

A-2

IEF-

G 5.4

t,077.8

ss3.2

'Þeal rated by Slandard & Poo/s €nd Fitch.

Silfcæ: Credil Sul8s Fißt Bosld, MCM Slrudured Rnetræ, 1repp.

24 January 20t3

PM-1901

cREDrr I nnsrsu¡ssE I BosroN

CMBS Market Watch WeeklYTechnical UPdate

V.

2003

Supply

Conduit /Fusion

Float¡ng

Rate

CMBS lssuance in Millions - Year to Date

Single

Other Bonower

2003

Domestic

Total

2002 Change

Domestic from

Total 2002'

Domest¡c

Tolal

2003

2003 Global

Non-US Tolal

'Tolal 'Chsege for200U qly ¡ndud6 issuanE data alÞr a mnlh has etrde{Souræs: Credit Su'Ese Flrgl BGlon, Comrercial Morlgage Ale't MCI'I SLuctutedFlnan€ Watch-

Vl. HistoricalCMBS lssuance in Millions

Conduit / Floating

Fusion RateSupply

Single

Borower

2002

2000

1998 105

026

19/,

6 Our tolal domestii volume is $60.3 billbn versus a total of g66-4 bitlion as indicated by CMA. The difference

of $6.1 billion represer¡t:s ofher transactions such as private resecurilizat¡ons'

24 January 20O3

PM-1902

cREDrr lrtnsrsu¡ssE lBosToN

CMBS Market Walch WeeklYTechnical UPdate

Vll. CMBS lssuance in Millions

Condút / Float¡ng

2002 Supply Fusion Rate

Grand

Souræ: Cr€dlt Suþs Frsl Bßlon-

Vlll. CMBS lssuance in Millions

Corduit / Floating

2001 Supply Fusion Râte

20v2 2001

Dornes{lc Domestic

Tolal Total

2002

2002 Global

Non-uS Tota¡

Chang€

from

2001

2001

Global

Total

2000 Change

Dornes{b fiom

Total 200Û

æ01

Domestþfotal

Sir¡gle

Oú¡er Borower

2001

Non{JS

SoqÊo: Credit Su'!g* Frsr Boekn

24 JanuarY 2Ù0310

PM-1903

CREDITSUISSE

FIRSTBOSTON

AMSTERDAM ....,,..................31 20 5754 890

AT|-ANTA.,-............................1 404 656 9s00

BALTIMORE .-........................1 410 223 3000

8EtJtNG..............-.-....--........ 86 l0 6410 6611

BOSTON.-.....-........................1 617 556 5500

8UDAPEST............................. 36 I 2022180

BUENOS 41R8S.................. 54 ll 4131 27N

cAtRo..........-......................,...202s67 7600

cHlcAGo....-.........................1 312750 :XlO0

FRANKFURT -.......................... /tg 69 7538 0

GENEVA...-...... .....................11 22394 70 00

HOUSTON..........-..................1 7t3 220 6700

HONG KONG....... --.......... --...- 852 2101 6000

tSTANBUL....... ....................8¡ 212278 2û0

JOHANNESBURG .........-......27 l'l 343 22 00

LONDON .-. 44 20 7888 8888

MADRID ......34 91 42316 00

MELBOURNE ........................ ô1 3 9280 1666

MEXCO C|TY......................... 52 5 2&? 89 00

M1L4N.............. 3902nU27

MOSCOW.............................. 7 5t¡l 951? &200

MUMBAI ......91 22230 fi13:l

NEW YORK ........................... I 212 325 æsD

PALO ALTO......................,.... 1 650 61/t ã|00

PARlS....-............,................. 33 I /t{¡ 76 8888

PASADENA ........................... 1 626 395 51 00

PH|LAÐELPHIA .......... -.......... 1 215 851 1000

sAN FRANCISCO .................1 415 836 7600

sÃo PAULO...........-............-55 ll 3841 6000

sEou1........--.-...................... 82 2 3107 3700

SHANGHA|...........................86 2t 6881 8118

s1NGAPORE........................-.--65 6212 2000

SYDNEY.............................'.' 61 2 8205 4400

TAtpEt..........................-.......886 2 2715 6388

TFüA||-AND...............,.........-.'...66 2 61¿¡ 6000

TOtCfo.................................. 8l 3 5104 9000

TORONTO.....-....................... 1 416 352 451¡0

vtEN]\tA...............................-..-4iì t 512 3023

WARSAW.-............... -........-. -,... 0111 134343

WASH|I{GTON DC................ I æ2351 2600

zuc...................................... 41 41 7n g7 @

zuRtcH.................................. 4l I 333 55 55

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PM-1904

stlCBXNI4VPB rrrrrt* I¡**CAR-RT L0T*rC055

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tlE GôGI¡inn QAnRrlr¡t ùuE¡\rlts çuutul

' BY sHARo[ stMotlsolt ,

si¡nonmn@bizjoumajiicon., ; :_.,,: i, Hþs¿"6-P"oO*U,Co. is,sæking,.'$80'million for' à, 27-acr:e'êiiC'it "

on¡ns on the border of MoiihtainView and PaloAlto, butpotentialbqyers say they doubt tåe infor-mation-technology company willcollect arry.where near that sum

. i . ...: :

'-.assumihg.no dark-horse bid.¡ ,, ,

deremerges... ..; i

' Palo Attebased IIP is selling'. .':thgr Þroperty .which inclufle-õi .'r'488,900:'squdre fêêt bf offices;as' ::partof anefforttocut.itsadmin- |

istrative facilities by 19 percentworldwide. A spokeswoman de

,. -.:

... ¡:.. ..S¿om0PEEfT,ÞgeÍ !

PM-1905

Pmfi3PEffiTY: I'lP's complex on Palo Alto-t\llountain l/iew border once housed 1,600 workers

TRllM PAGEl

cb¡ed to say how many square feet tfiatwould.be.

The company is pushing to sell ütesite quickly.

"'Neþhbors in the area say they are well

aware the property is on the block. Sever-al are concerned. that any new use notoverwhelm what is already a tightlypacked subùivision of some 1,000 largelysingle-family homes on the MourtainView side. TWenty-two acres of the 27 to-talare in MountainView

"It's a pretty significant site," says El-lis Berns, economic development man-ager for that cit¡¿ "You don't often find22 acres together."

There are many possible permutatiorsof what could be developetl on the proper'ty if anew ownen seelrs to change its zon-ing, Mr. Berns says, from housing toneighborhoocl antl regional retaü. Butneighborhoocl input, and the needs of thecity to rarse revenue, will be guidingforces in whatever happens, he adds

The complex housed some 1,600 HPworkers as recently as 2000 but is nearlyempty now It should be entirely vacant byApriÏs end- It sits nestled by lush land'scaping in the older neighborhood ofwhat were once mostly working-classhomes thatnow sellforhundreds of tlrou'sands of dollars, The site itself is the for-mer Mayf,eld Mall, hrilt jn 1967, a usethat a handfr:l of local residents say theywouldn't mind seeing again.

Bids for the proBerts which HP con-verted to a business complex when itboueht the site in 1984, were due Feb. 1B'

The company dedinetl to say how many'bids it received,

IIP marketed the properby nationally as

a potential headquarters with room toadd 160,000 square feet of ofüces and anexisting "advanced communications net'work." It also swgested it could be con-vented into a mdtitenant office park orcompletely redeveloped for uses includ-i:og houslng retall or a hotel.

Bidalers say the company hopes to closethe kansaction rvithin the next 120 days.

That spe€d is one reason the see¡ningly

*ã ewlett-Packard selling

The Palo Alto company says the property could be a new

corpomle headquarters, a multi tenant offlce property 0r

redeveloped as a mix of residenùal, ¡stail and hospitâl¡ty,

dent for Pulte Homes Inc. Pulte is thelargest U.S. home builder, recently re-Borting annual profit of $454 million, amore than 50 percent increase from ttreyear before.

"You car buy lotlrer pieces of land]baserl on receiving firll entitlements rel,a-tively risk-free with an optior¡' he says.Entitlements are the rights to clevelop apiece of property in a particular way

Idealty a housing developen prefers tobuy the rþhts to purchase a properlywhile pu¡suing developrnent planstl¡rough a cit5i If the developen is unableto get a property zoneil for the kind ofhousing clesired" he isn't oblþated to buythe land. antl onlyloses his option.

Having such an alternative elsewheremeans Pulte wonlt make a run for the HPoffering, even though the company is ag-gressively looking for new sites in tlrearea, i\fr lþlmbach says.

Pulte competitor I{B Home did bid, saysRobert F?eed, president of I(B's SouthBay company But }i1r. lTeeds ol¡serua-tions matdted his peer's at Ptlte .

"FubJicþ traded builders won't buyproperW ouhight'as is,' " he says. "The'value is intlre entitLements."

I(B reBorted net income of $314 millionfor fi scal 2002, also nearly a 50 percent riseover its previous fiscal year: I¡Ir Fleed de'cïned to disclose Ns company's bidamount.

Roger Menard, president and chief en-

ecutive ofücer of PaloAlto based Sum-mer.ÉIi[ Elomes, says his company alsomade a run for the sitg though the offerwas complicated when Ellis Partners'LLC, a San Flancisco real estate develop-er and investo4 decided against a bid.Sur¡rmerHill hail been working with E.ll i s.

Mr. Menard did not disclose a proposedpurchasepiice.

Alt least two commencial property ovfiI'ers also said they wor:ld bid for tlre sÍtgthough neithen world be identified.

husuingthe sitetomaintain itas an oÊ

fice holding is even more risþ than buy'ing it with the intent of changing its zon-ing for hornes, meaning their bicls arelikely evm lowen than the ones from tfie

(former Mayfield Ma[ on Palo Allo-¡lount¿in Vier¡v

* tuo M.ylirld Àu.., Mountain View ìk

!I

I(ooO)

Site size: 27 acres

0ffice space:487,538 square frel in lhree buildinqs

Asking price: $80 million

Soürce: Ex0cutlll6 summary 0f b¡d solhlhtlon f][m Prud€¡l¡âl

Real Eslots Advhors ¡cilng 0n llewlett-P¡Blord's belulf

stongest class of potential bidders -housing developers - isn't expected topay top clollar for the site, despite the ex-ceptional location.

To build housing - indeetl to changethe properh/s use to anything away ftomits current ofüce use - requires a shjft inzoning. That change couldtake ayearandperhaps much longeE in part because theland lies in two cities. Ovwrlng land whilethat process u¡folcls costs money andnotlmowing what the cities will eventuallyallow creates risk. Both factors unden-mine the pr-operty's current value for ahousing developer even ttrough housingis one of only two types of real estate development Urat is prospering in todafsBayArea economy Retailis the other

'Tfb pretty crazy right now to be takingdown somethìng like that" says SteveKalmbaclr, Northern CalSfornia presi

homebuilders. A gfut of existing and oÊten vacant otrce buildings tlroughoutthe Bay Arm has deeply discounted. off ce

rents, meaning cashflow would be low, es-pecially at first. A dearth of prosBectivetenants seeking more than 25,000 squarefeet also means a landlord could strugglefor a year or longer to get the propertyfllled at all.

Whoever winds up v¡ith the propertywill have to deal with what appea.rs to bea very active homeo'çryners association onthe site's fla¡k. Residents in the MontaLoma neighborhood Ín Mountain Vieware frrliy aware of events and. new tlevel-opments that could atrect their properWvalues and qualiff of life. A visit to theneighborhood. producecl calls and emailswithinhours aften one resident broadsastthat a story was beingpreparetL

Several residents linked changes at theIIP property to their disappoinûnent withdevelopmerrts at a nearby neighborhoodretail sbip centeq, which an Albertsort'sgrocery store had vacatetl more than ayear ago. The store site rernains emptJ¿

For residerrts, the two areas represent ob'vious extensions of their neighborhood,and likely sites for commencial or retailservices to support it or new housing toextend it.

Several residents noted the speed withwhich rumors spread in the area, andsaid keeBÍng everyone Ínformed withfacts would go a long way toward dissi-patingfear

"If the use i:s to change, it is very im-portant that the developer bring theneighborhood along during the planningprocess," wrote Thaddeus Drive residentJim Cochran. 'We found dwing the timewhenthe citywas consideringpart of thesite for housing that runors were quickto alarm many of us. ... We neeid to see

that the neighborhood wor¡it stffer."Anofher rumor - that Stanford Uni-

versit5¡ which already owns L3 squaremiles of land in the area, is also a bidderforttre site- couldnotbe conirmeù

SHAA0il SlM0tlS0ll covers real estate for üe Eusiiess

- Jounal

. JANIJARYlO,2OT3

voL 20, N0:35;' '

$1.50

ffiffiffiffiffiffi ilî*jî.STAY GAUGHT UP: Sign up for free e-mail news updates at sanJose,biziournais

Rocli-bottomprice paid forInktomi HQ

. BY SHARON STMONSON'. : slmonsoh@bhþumals.com .

,. -- -.r,.,tA Chjcæo-based real estate in-

vestrnent firm has purchased the.

Foster City headquarters of trou'¡led mliomi Cory for a fractionof what the lrternet search com'pany pai4 léss than six monthsago.

Walton Street CaPital LLC,which invests in real estate onbehalf of persion funds, insurancecompanies and.other Private eq-uiû paitt $41.6 million, or just

. un¿er $160 a square foot, for theproperty accortlìng. to Public'' recorcls.

Inktomi bought the . same260,00Èsquare.foot develoPmentfor $43? a square foot, or $114 mil'lion, Ín August.

A fund fun by Walton also isthe primary equitY investor inthe new downtown San Jose Mar'rioft cgnvention center hotel.

For Urq Inlctomi ProPertg Wa1'ton outbid - thciugh not bY much

- three òther companies, j¡clud'

$æ lNKT0M!,'Pase 34

PM-1907

lNKT[Ml: Foster City headquarters complex sells for less than half,what oornpany paid in August

TBOI¡ PIEE 1

ing San Josebased Divcowest hopel-tiæ ðd Sm trtanciscGbased SPI Holil'l¡æ LLg ädötüná tò sources, l¡clud-llg the chtêf êxæutivs for þne losi¡gæmlEny. . An secutlve.for livalton dedlned t0spec,f,¡ how.mricb dèbt Walton Used to.ærotrete the dæl or ib expected Ftun PeriT Pinùo, who hætlles rul'es..tate æqllisitlm.fq lválton SE€et lnNoilhm:Câliforoia, did ænaæde; how'eveB that the pu.rchæe''ts rtsky". "We do tbirk it ls a.vefy atfacdve.deal- Thafs why we @de the invest-ment," he aalded.

Ttle trmctlon ß the latèst evldencoof tle @ltj¡qing dedire ir tbe value ofBay Area æmmercia¡ prcperdes wltìwobbly tffits - or nP tenæts at all -..,¡ a marùet.whse few companies æseekingslne . .

The sale disdosed D€s 30 i¡ Inlrtomlfili¡Ês with tÏe us. Seiuities æal Ëx-chmge Comht¡]slon, follows â handJi¡Iof Siliæn VaUey t"ruactiore since Au'

' gust in w}jdrbuy$s wluing úo stomdrexæptionäl rìst ¡flo pld{ed up Þrcper-ties for. well below previous. valuæ.Oplllons allfer on whether the InktordpÞperty is of the sâmê ilk æ sme ofthe other s€.les, inclu¿li¡g Nortels ele ofits Santa Clåm mpus md a Mowtain.View cmpus pür:Xas€d by the Comput-er Hlstory MEemJlôs;ere4, jn geher¿lthe tmisctions ile boud by the d€.presetl natræ of the priæs, often-trou-bled omùs ail the buyer's obvioE *:IEtation .that they æe..puÌcbaslng i¡the,.@nomic tou¡ù ánd should prcñthmdsomely when theria*èt reboud$'The lDktomt buüdilgs æ tuIy

leased,. one: factor lhat some aigueu1åkes t¡e M-le difieHt froin some pre-viou cleals. SdlL wheE the s€le wþ fi-¡åùilzeil, I¡rtctomi was.'irot .viewe:d æ asùellar teâirt, havhg i;r¡ilered eteep joblosæ md some diæy f¡rociål tims..there hail nof yet been a pub[c m.nouæment of t¡e þtoÞosed merger tetwæn aÌkioml ánd Ya¡oolnc of Suuy- .

yale, a ¡Âuçh shongs compey . ,.

For fscaj. yeæ 90Ûi æde¿ ¡n Septón-beE l¡lctomi lost more thm $500 mllllon.

This could rurn into a

real succes ifYahoo occupies

.the $pAce,or it could turn lntq .

anothBl one ofthe vacant ,

buildings ln the areal

Stlert¡'. Sh¡ff

Iis shæ have tzdedþelów $2 in recentmonths. The compæy has appmKimâtFly 2m employees toda$ doM Aom a

. high of 1300:Walto¡isMrPintosqysblddersbadno 1

iìùIing that the Ya¡æ msger wæ lnthê offing, though it wâ3 colillonlythoucht that lìldoml æuldJoin with Ð.óther ftm Walton entet'tâtned the pos'

sibülty that lDktomi ¡nlght mt survirewhen ii made its bid, he sYs.

Under the terms of.the tleal, xnktomiwill continue to Ht 130,000 gqlæ.fæt.hl the.co¡npld under a frvsyeù læsewith Walþn, a@rd.ing !o the SEC fl'

.. ¡ngs, thorl ChmudloJ thespaçe jsmpty.

Real estate re¿l-ity

ftr lnkt0¡rl headquârtorsl0iú a ¡towlDg lld 0f disl¡êssed c0mnDrchl lrogerü¡s In tùeEglof, selllng ât ddep dlsmrrb fmm lt8lr previm vatuc.

8qß$ cûСú: ryF! Ii Êe dqd

InktoBi m renew for up to three àueesire fiveye¿t t€ms. .

Howerel; l¡ what ould bæome a si€i.n¡Ilmt caveat, InKmi alsq trEy termi-natê the leåi afrs oDly.tvio yeæs, for áfæ that is not discl$ed.in thefiliñ g: I¡k.tomt's chief fEmcisl'oftlce¡ì RædyGottftied; did not retùn a €Il for æm-ment,. Stuüt Z Shifi, Þchief eiecutlve ofE-ær fòr Divibw€t, s$r,that áll of'tbeblddeni wéæ bothered by lhe hieh va-cancy ratês in-¡bster.Clt]l incìuding thèempty ntrly 400,00ûsquiueJ@t Pækside 'ibwers, omed by Equity OtræProiært1æ TlEt, üteru¡¡y adoss the'sbeet hom'the Inlrto¡iri campw .

' lThiÈ lthè ll1ktoml.{oEplex-l @uldtum into a rea¡ sudÆ lf Yahoo æc11..pi¿b the spacê, or it æulil im into æ-other one df the uøt buildings in t¡eÐu," he sayg..

. Ðtvæ has râlsed$'i?o EllllloD, much ofit ftom the Califomia PublicEmployæs'Retiment'S¡steñ æil thè CaliforntáState Teächsrc' Retiremenf Systerl toinvest in reâl estâte in the next æreralyel$ primtriþ in the valeY. .The lriktomirYahæ msger; whe¡èbyIlktmi wtuhcom awhoÌy offii€dYâ-hæ robsldÞ+i shoutit be iþm]matedsoÍietÍne tbls quårter When - and lf'- the maEer ls done, Inhtoml wlll beù-aßformeil fþm a teffit with a qu*ùonàì]e tuhue to one with fa greatere:ræctatioro fof srvÛal. Asimlng Inl(toni stays. for the tull

fivé iæ, it will forwdd $9.8 mil]ion inaggregâte læse pâyments, includingcosts, to Walton.. The othei two teiHts in fte buildi¡gs

ae Iêgacy Comercial, whicb also wili@ge the i¡mperüæ for Walton butdß not have any ommhlp, ild AÈpl-ied Biosy.stems Inc Both hæe five'yÉais re¡¡aining,on thÞil leær; Mnräto sdis.

The saùi priæ for the frktomi l¡ead-qwtere ls fæ less.thil what lt wìtdcost a.develop€r to build the same sEuc.tm todali says Bilry DiRaimondo,'piæidmt of LegæJt Pãbîere Colimer-rbial, the trbéter City ileEtopû whó builtt¡e Inl(tomi buildtngs in the late 1990s .

Legâc1' sold the buildings to.Inktomi formioie tha 6¿oo a sqlæ foot, accordingtolvû:.DlRâimònalo. : -..''iBut in Jme 2004Ihktonl eDtü'ed.ihtoa sFthetic leæ .- a fom bf oË-b41.æce:sheet ûna¡cl¡g - with DeirtscheBek ed afinlaþs, aæbrding to I¡ktGmi's SEC fli¡gs. I¡ktmi w forc€al tobuy the buildi¡æ from Deubcbe Ba¡Iid.A[gustvhen.It fajleit,to mæLa mtrilmm ¡eùi of prefttabt[tyå cdnditionoftElæ. : Ii,h ÐtRaimonclti. est¡mates that itrculil c¡sl a dweloler b€tween $u5 âsqwe fæt md $230 a s$ws foot to rsptace the l¡ktomiibuildings todÃ$' in-

' cludlnc laid acquisÍtion, govùmentblesing, coßFuction æd leaStng æts

He.ahd óthers agree fi€ lrldomi deBlls ñEthel Þroûf that alistre*d vâlIeyassets aæ t¡ading for fil less thân thei¡reÞlâæmÐtæsL r - ...

. "I thlnl litl ls endemic to what's haÞpen!¡g ln this part of the cycle," he says.

. Walton Steet's Iì,{r Pinto dimisssthat maiysis, sying the pruIEcts fornew consFdctien 1lr the valtey today des sllm æ to ñuke ily discßidn o! re

plaærient cæt iffe1wml Dæb have tobe evaluated bâs€d on rent llow in.st@d. Howeve! ME PiDto doæ conq:ile:"Tbls deål should læk attmctlve when+Ì¡ey gét.bæk to bujlding.ill'the Bay'Aræ.'l .

I¡vestr¡ênt sals ü1 the ralley hæebs few in tlle last 12 months, exæuìtives sal Among the most notable hâvebæn South Bay Developmmt co.'s pur'chasi? of t¡e fomer Santa ClÈa head-quafienÊ of No'rlel Netmrtc Ltd., in:.iluaurg 16 ac'res of lmd, forthe value ofimprcveneots máde io the building intle late I990s

Bffry Swnsn Builders of. sm JGemd a group 8f ärvestorubought.d old'eç pæËally.'vãcant 205,Q00'sguæfætindusHal buildi¡g i¡ north Sil Jose iorwhat mmy eid wæ s sng; The build-ing, which hadrgoæ back to the lender,l¡cluded a ltÞyeff lææ to FþdB ædætitlements lo devdlop Ð addtional60;000 squàre fæL .. .

'Gl Pa{beF ot Me¡ùo.Pdlc a Fal6-tate opÞrtimity ffDd, bor8ht a 130,00Gsquæfmt data ænterfor less thm $200a qqua¡e foot jn Sah J6e l! De{mbswith a redjt temt ahd :sme l'5(þ asquæ fmt in temt imProremmts'ttle building had b@ omed by Cuptr-tino's SobHto Development Cos., rYhichdonated it to Cotmuity FoudatiooSiüæn Valley â yÐ ago. .

Johr Mlcbael Sobmto,.whGe æmlu-ny handled the ele, ack¡owledged in æi¡tèwièw that tbe sales.priæ "rcIlætedtodaYs sofr markel"

sHAß0il sl¡1toflSoil ffi @l 6l¡b lor$0 80úmJfl@t. . r;

PM-1908

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VÀLI- ST'R,EET JOURNAL'

Ey Sueul Muro

SAN FRANCISCO-Tlshnan SPeYer

ProBerties, which owus and operates sev-

elaf landmark properties, is puttilg a

two-tower office properfy here on theblock after defar:ItÍng 0n its 10ân'

The move mal'ks the first distressed.

to mainlain ownership of the propertyuntil it is soltl, but declined to comrnentfurther.

\ Iith the exception of propertiesput on

the blockbv troubled companies indudingEnron Corf. and WorldCom Inc., MarketCenter is the first major dishessed prop-

ertv being olfered for sale by ahigh-profilelandlordiince the econonric downturn.

For niore than ayear, flrlhtre investorshave been circling in anticipatioil of a host

of distressed offieè landlords looking to seltheirnroperties as leasingcondüionsdeteri'orateã añd tetters of crealit and other secu-

riW denosits lorleited by tenants begân t0

mñ oui. Stitl, office ploBerties have been

tratlins at prices that defy the falling occu-

oancvãndientalrãtesaarlthe grimoutlookior the sector. While most don't expect a re'neai of the rèat-estate debacle o{ the late

iggos aud eaxly 1990s, when-a significantoortion ofthe nation's office stock changed

Îrands at distressed Pric,es, ufttne inves-priqes, vtftue inves-morè places to land.tors may be fincüng morè places to land'

"We'11 see owners Urat have b€en try'

a record for German banlcuptcies, after37.700 businesses went bust last year'

Déutsche Bank said it isn't as exposed to .

the domestic economy as other Germanbanks, v¡ith only 60% of revenue stem-

ming trom its home market. But Deut- '

schJBank's €2.1 bitlion in provisions lastvear were higher than those at the euro

äone's targest bank, BNP Paribas SA'

which chãiked up €1.5 billion for the

same period. l

Alsb, analysts said, anY Prolitsrowth at the bank likelY will come

írom cost cutting rather than increas-ins revenue, capping Deutsche Banlr'sabìlity to sustain earnÍngs BrowÈh. -To-tal revenue dectined last year to €26'5

biltion from €29.5 billion, led by a one-

third recluction in income frorn markettrading, clown to C4 billion' The Ger-man dÁx 30 reached a five-Year lowduring the Period'

Coiporate and investment bank reYe-

nue fell 187o as the sagging global econ'omy cut clemaud for corporate-financeservices, such as adYice on mergersand acquisitions and initial publiq offer-ines. Diutsche Banlt remains Europe'sniãsest investment banlc by deal value'Aähe private-clients and asset-manage-ment rinit, reYenue dropped L4To to ë9

bitlion. The division is being restruc-turecl t0 combine retail and privatebanldng.

Deutsche Bank has cut costs fasterthan its German competilors, slicingexpenses by €3.8 billion last year' Bytlrô end of 2003, the bank exPects to

ine to hold on saying, 'Let's cut our losses

airämove on,' " particulaÌly glvtn the cost

of leasing a buitrling, said Dilk Àula'baush. the San Francisco-based directorãf rãal-estate services for guron Consult-iÌc Grouo LLC. Caught in a position ofcoinoetinã for tenants, Iandlords a¡e offer-l¡e

-hie¡eir commissions to brokers and

mõre-ãenerous tenant improvements-al-lowanões given to tenants tobuild out theirspace-wñich are as much as $50 Persàuare foot, accorcling to Mr, Aulabaugh'' A person familiar with the situation'said'iishman Speyer' executives didn'tthink thev could turn around the MarketCenter pi'operty given the d'ifficult mar-

ket conilitiõns in San Francisco, where

the vacancy rate is about 237o and averase askins rents have plunged to about

$3"0 per sciuare Íoot from $85 in 2000.

SEtIs Reuiewirug

HiglterÀrYsE Fees

Or¿ßrarLCÍL OfficesBy Cnenru \flnqor<un Mr-irlr

. Dow Jones Ne¡ls¿ui¡s

NEW YORK-Îhe Seculities and Ex'chanee Commission is reviewing an at-

ternoi bv the Nerv York Stock Exchangeto åise the annual fees it charges forbranch-of lice i:e gistration.. Last month, the NÍSE raised its lees to

as muchas $350 abranch from $250, buttheSEC can abrogate the ittcrease within 60

davs. a neriodthat ends Ín mid-March."giokèrage firm Eilward Jones, which

is pushing tb.,.llg. _T_ :tliry. g?lP, Jl:

Tishrnnïì Tower Sale: Tech FalÏout?

sâle of a major property in this city hard At the besinning of February, fish-hit by the high-tech meltdovn.and coìld man Spever áefaulied on a $160 millionsigual the sta"rt of a much'alltlcipa¡ed Ia[- morteâeé loan from Morgan Stanleyout from the severe downnün In üle oI- rvfreriiiiaite. to make a balloon pay-u'ü,""5:ldef

auu""qgi,iÏ,"åliå1n:;;,1't,'¡;.y!iilö$'"HJr$!!:;.åthe propertY-lmown as M¿

ffi däii*""-,i.r#;'*T:1""'i"'lr,l:iï'üîîitr¡üi.üi:iJöiii+iË'iirear-estate market. rir. är,r'tüii"ìtäi! ttie largest iemaining in a commercial-

company, which has tz *iliiõti-îq*iä mortgage-backed sðcurity issued in

Ëåïãñi;dñäro-wiae i"äiu,ii"g äì-cL- 209t.1 spor{esman for lishman spever

efeller center in New vr¡t,-¡ôïËñi uià saiat rhe Ìirm is nearing an agleement

piäîäiti - fsgg ior anoui'girís äiiión with the loan servicer that wilt allow it

:

a-\ . t Tì 1 t- \T^r T\^--LI^IUeutscne öanK s r\eL IJULI-rrrçLr

In 2002 but Missed ForecastsBy Þr,rzl¡Br¡r SouoPR

Dow Jones N¿usuires

FRANKruRT-Deutsche Bark AGr

savins the worst is behind it' announcedt¡ät u:rofit more than doubled for 2002. Butthe iesult fell far short of forecasts be-

cause of huge provisions against bad

debt, and analysts contimle to doubtwhether Germany's largest fhancial insti-tution willbe able to increæe revenue this.vear as the courrtry fights a siaking econ-

ómy and record corporate bankuptcies'The bank said 2002 net profit rose to

€397 nrilliou ($430.2 million) from €167

miilion in200L, shy of analysts' expecta-

tions of €600 million. Still, the resultsare a better pedormance than at rivalssuch as Cornmerzbank AG, which\üeclnesday reported its first-ever an-

nual loss.Deutsche Bank officials heralded a

positive outlook, expressing confide-nce-that

provisiÖns lor bad loans, which dou-

bled to €2.1 billion last Year' have

TJeaked. They also cifed' alT%o reductionin operating costs, achieved mostlythrorigli air unprecedented program oflayoffs.-

"O'¡r outlook for the bank is positive,"Chief Executive Josef Ackermann said."Our view is that Deutsche Bank'hastru'ned the corner ou loan provisioning-...Even a further cleterioration in the Ger-man economy would have a limited effecton 2003 credÍt-risk pl'ovisioning"' Ana-lysts were unconvincecl. "No one can pre-

dlct that ill this ma¡Icet environment,"cairt llpnrc T(anders. analvst with

from Chewon CorP- the Peholeum gi-

ant, which is now ChewonTexacoCorp., leased a sizeable chunk 0f spâce

at fhe proþerLy until the end of lastyear'- That departure, along with space

, ãumpecl by a number ol dot-coms, has

left the ??0,044 square-foot center more

Ihan 82Vo vacant'

PM-1909

^ñîþ,CaIPERS

LegalOfficeP.O. Box 942707Sacramento, CA 94229-27 07Telecommunications Device for the Deaf - (916) 79ç3240(916) 7e5-3673 FAX (e16) 795-3659

August 4,2008

VIA FACSIMILE AND MAIL

Andy BlueTenants Together995 Market Street, Suite 1202San Francisco, CA 94103

Subject Public Records Act - Page Mill Properties

Dear Mr. Blue:

This responds to your Public Records Act request dated December 20,2007. ln your

letter v-ou recuested information pertaining to the following:,v.lYl ,

. All investments or business proposals submitted to CaIPERS, or any agents ofCaIPERS, from PAGE MILL PROPERTIES ("PAGE MILL PROPERTIES" in thisrequest refers to Page Mill Properties; Page Mill Properties, L.P.; Page Mill

Properties ll, L.P.; Page Mill Properties LLC; David Taran; Divco West Properties;

and any affiliated persons or entities) from 1/01/02 to the present.

. All real estate investment proposals for CaIPERS submitted by PAGE MILL

PROPERTIES to any CaIPERS external real estate managers

.. All annual reports submitted to CaIPERS and/or the CaIPERS Board of Directors

by PAGE MILL PROPERTIES from 1lO1lO2 to the present.

. All annual reports submitted to CaIPERS and/or the CaIPERS Board of Directors

by any CaIPERS external real estate manager concerning PAGE MILL

PROPERTIES from 1lO1l02 to the present'

. Alf reports, other than annual reports, submitted to CaIPERS and/or the CaIPERS

Board of Directors by PAGE MILL PROPERTIES from 1101102 to the present.

. All repofts, other than annual reports, submítted to CaIPERS andior the CaIPERS

Board of Directors by any CaIPERS external real estate manager concerningPAGE MILL PROPERTIES from 1lO1l02 to the present-

Galifornia Public Employees' Retirement Systemwww.calpers.ca.gov

PM-1910

Andy Blue August 4,2008

o All documents concerning or constituting communications between PAGE MILL

PROPERTIES and CaIPERS from 1i01l02 to the present'

. Any documents describing a CaIPERS real estate partnership with PAGE MILL

PROPERTIES datíng from 1/01/02 to the present.

o Alldocuments concerning investments, or anticipated investments, by PAGE

MILL PROPERT¡ES in realestate in East Palo Alto, CA'

o All reports, summaries, or other documents prepared by CaIPERS' 9r-?ny agents

ot CaIPERS concerning CaIPERS' partnership with PAGE MILL PROPERTIES.

The appropriate real estate program staff is currently reviewing your request to

determine which documents are subject to disclosure under the Public Records Act. We

estimate that this review will be completed in approximately two weeks' Once this

review is completed and we have determined to what extent the documents will be made

available, we will provide you with copies and an accounting of the copying charges.

please feel free to contact me via email or at (916) 795-3673 if you have any questíons

or concerns regarding this matter.

cc: Laurie Weir, Real Estate Unit t/

FlJAVIER PLASENCIA

PM-191 1

08-08-2008

@l6 r58 Fron-CÁLPERS LEûAL OFFICE -63 S

l^,1

ILU

P.00?/003 F-i55

995 M¡rker sv¿er, Sufte lz0z5¡n Francisco. CA 9¿103

Phone: (415) 495-8100Fax; (aI5) 495-8105

Email; info@tenanmogclher-org

Websìte: www tenanrto gether-org

TENANTS California's

Statewide 0rganizati

for Renters'RightsTOGETHER

July 24, 2008

CaIPERS Legal OfficeAttn: Javier PlasenciaP.O. Box 942707Sacrunenlo, C^ 9 4229 -27 07

RE: Public Records Act Requcst

Dear Mr, Plæcncia:

Pursuant Io our ríghts under the California Public Records Act (Governruent Codè Seuion 6250 erscq.), lenanrs 'l'ogerhel requests copìes of the rbliowing:

' All investnent or business proposâls submitred ro CaIPERS. or trny agents of CaIPERS, lïsmPAGE MlJ.t PROPERTIES ("PAGE MILL PROPERTIES'in this requesl refers to Page

Mill Properties; Page Mill Properrics, L.P-; Page Mill Properries II" L.P.; Page MillPropcrrics LLC: David Taran; Divco West Properries; and any affrliarecl persons or enriries)tiom i/0t/02 to the present.

' A!! rea! es¡ate lnvestnnent proposals for Ca!FERS submirt:er! by PAGE MII-[- PROPERTIESto any CaIPERS exrernal roal esute manageÊ.

' All annual reports submirred to CalPÉRS und/or the Caf PERS Board of Directors by PAGEMILI- PROPERTIES from 1/01 /02 to the present.

' All annual reporrs submitretl to CaIPERS and/or lhe CaIPERS Board of Directors by anyCaIPERS external real estale rnanager concerning PACE MILL PROPERTIES trom 1l0l/02to the presellr,

' Âllreports. olher than annualrcporLS, submitrcd ro CaIPERS and/or rhe CaIPERS Boar<l olDirectors by PAGE MILL PROPERTIES lror¡ l/01102 ro rhe presenr,

' All rèports, other than annnal reports, sub¡nitred ro CalPElìS and/or rhe CaIPERS Board ofDirectors by any Ca¡PERS external real estate manager concerrring PAGE MILLPROPERTIES from l/01/02 to rhe presenl

' All documents concerning or constituting communications between PI\GE MILLPROPERTIES ald CaIPERS from l/01/02 to the presenr.

' Any documents describing a CaIPERS real estale pannership wirh PAGE MILLPROPERTfES daring from l/01/02 io ihe prcscnr.

' AII documenls concerning investments, or anricipated inves¡ments, by PAûE MILLPROPERTIES in real esrate in Easr Palo AIro, CA.

PM-1912

08-08-2008 16:58 Frorn-CALPERS LECAL OFFICE sl 67S53659 T-63S P.003/003 F-755

. All reporrs, smmaries, or other d.ocuments prepard by CaIPERS' or any agenr¡J of CaìPERS

concerning calPERS' pannership with PAGE MILL PROPERTIES.

We ask for a determinarion on this requesl within 10 dayS of yOur receipr of it, and an evgn

prompter reply if you can make thar determination w¡Ihout having to review the rccord[s] in

question.

lf you determine rhat any or all or the information qualifies for an cxemprion from disclosurg, wc

u.ú you to nolè whefher, as is normally thc case underrhe Act, the exemption is dìscrerionary' and ifso wherher ir is necessary in this cÐse to exercise your discretion to withhold the informarion'

please provide a signed norificarion ciring rhe legal authorities on which you rely if you determine

tharany or all of rhe infonnation is exempr and will not be tiisclosed-

If you determine rhar some bnt nor all of the information ìs exernpr from disclosure and thar you

iniend to wi¡hhold ir, we nsk that you redact it for the rime being and rnake the rest available as

requesred.

If I can provide any clarification th¿twill help expedire your atrenrion to my request, pleæc conlacl

r,e at 415-495-8100- Please nori$ me ofany duptication costs exceeding $50 before you duplicate

rhe records so that we may decidc which records we want copiecl'

Thank you for your attention to this marter.

SincerelY,

AndY'Blue-'Tenants Together995 Market Street

S\¡ire 1202

San Francisco, CA 94103and y@tenantstogeth er. org(415) 4es-8100

PM-1913

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FEBRUARY 19,2008 Print I E-mailReprint rights

Reining ln Rent Control

BY COLLEEN FLANNERYCREJ Staff WriterPending litigation challenging a rent-hike freeze could

affect the investment potential for rent-controlled property.Palo-Alto based Page Mill Properties filed a suit Jan. 16

in San Mateo County Superior Court against the city of East Palo Alto, afterit passed a Jan. I urgency ordinance freezing rent on rent-controlledapartments.

Page Mill should be able to raise rents within the limitspreviously agreed to by the city, since knowledge of a property's value inrent plays a big part in an investor's decision to invest in the property,

according to Chris Griffrth, a director with Ellman Burke Hoffman & JohnsonPC.

"ln purchasing a property, the biggest issue is knowingwhat it's worth." Griffith said. "A ruling against Page Mill could be a real

blow in terms of valuing a property based on what the local governmentsays."

Page Mill acquired the 1,620-unit East Palo Alto portfoliolast year, according to company spokesman Lance lgnon. Subsequently, theinvestment and management firm has put about $1 1 million in tenantimprovements into the property.

Proposed rent increases, averaging about 9 percent perunit, represented a way of offsetting the cost of these new investments,lgnon said.

But City Council members and others insist the increase is

too much, too soon - and argue Page Mill instead should implement onlyincremental rent increases.

At issue is the interpretation of each unit's "certificateof máximum rent," which Page Mill says represents a promised allowablemonthly rent. City officials and rent-raise opponents say Page Mill isallowed to boost rent by an annual general allocation, and can't bank all ofthese increases at once to raise the rent to its full ceiling.

Raising the rents that high would hurt Palo Alto's poor -

and it's illegal, said Daniel Harris, a volunteer lawyer with CommunityLegal Services in East Palo Alto.

"lf you don't increase your rent year after year afteryear, you don't get the right to do that all in one fell swoop," he saidduring a Jan. 3 meeting regarding the urgency ordinance.

Page Mitl had tried to implement gradual rent increases,

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but was stymied by East Palo Alto's Rent Stabilization Board, said JamesEdward Thompson, Page Mill's director of development, during the Jan, 3 CityCouncil meeting.

"lnitially this was not our plan," he said. "Our plan wasto do incremental increases on a nominal basis over the years; we got caughtup in a race with the rent board."

Despite testimony by Thompson and others with Page Míll,Cily Council members sided with Harris and with East Palo Alto city staff,and approved the ordinance, whÍch suspends for 60 days all rent hikes withinthe city. Discussion at the meeting and Page Mill's subsequent suitindicated the decision focused on the property owner.

The vote came amid tensions between city officials andPage Mill attorneys regarding whether one of the Council members who paysrent at a Page Mill apartment could vote on the ordinance.

Planning for the PropositionsNot only will the lawsuit test the city's rent control

ordinance, its probing of rent control makes the outcome of particularinterest to attorneys who represent property owners, since a rentcontrol-overturning ballot measure is expected to face voter scrutiny in

June, according to Bryan W. Wenter, a real estate attorney wíth MorganMiller Blair. Wenter said real estate attorneys would watch the interplay ofrent control litigation and the new law, if it were successful.

"lf it passes, what happens next?" Wenter asked. "l'm notsure what effect this will'have on the initiative and on the rent controlprocess."

lf it prevails during the June 23 primary vote, therent-control overturn measure, Proposition 98, would allow currentrent-control units to remain rent controlled only as long as they housetheir current tenants. lts main purpose is to end eminent domain seizures ofprivate homes, businesses and farms for use by private developers, althoughbackers of the measure say rent and lease controls represent a type ofprivate-property seizure.

"Government should not be able to profit by seizingprivate property from unwilling sellers," said Doug Ose, a formerCongressman who is serving as campaign finance chair for the anti-eminentdomain, anti-rent control initiative.

A competing measure, Proposition 99, would disallowseizures of private, owner-occupied dwellings, but does not abolish rentcontrol. ln fact, Prop. 98 opponents use its anti-rent-control stance in

their efforts to oppose the measure."More than 90 percent of the funding to qualify this

measure comes from apartment and mobile home park landlords who hope tofoolvoters," said Nan Brasmer, president of the California Alliance for RetiredAmericans, and a supporter of rent control for seniors. "They won't be

PM-1916

successful."Despite its current popularity, rent control isn't the

only issue expected to come up during courtroom discussions of the case.Councilman Ruben Abrica's participation ín the vote is named among thecauses of action in the suit because he was a tenant at a Page Mill

apartment. The court's eventual decision regarding his vote could haveimportant implications for other property owners' relationship with localgovernment, Griffith said.

Abrica defended his action during the Council's Jan. Imeeting, sayíng he pays part of his brother's rent and signs the lease, butthe increase doesn't really affect him to the extent that he should haveexcused himself from voting.

"l pay him 30 percent of the rent and for the last 10years príor to six months ago, I have not lived in that apartment," he said.

Rents throughout the entire San Jose market area haverisen and are expected to rise another 5 percent in 2008, according to aMarcus & Millichap Real Estate lnvestment Services forecast report. SiliconValley-area investors are focusing on Class B and Class C properties becausethey are affordable properties in a market where affordable housing demandfar exceeds supply.

As rents continue to rise in neighboring communitiès, PageMill's rent hike rekindled constant community worries about gentrification

and affordability - not surprising in a relatively low-income communitycheek-by-jowl with some of Silicon Valley's wealthiest. More than half ofall East Palo Alto wage-earners make less than $50,000, while medianhousehold income in neighboring Palo Alto, just three miles away, is morethan $100,000 annually.

Possibly because of the economics behind the vote, therent ordinance drew tremendous turnout from East Palo Alto residents. LomaEaves, a Page Mill tenant, urged Council members to pass the ordinance tokeep the city's lowincome residents from being priced out of their homes.

"Raising the rents this much is a moral issue," she said'lf Page Mill does prevail, it plans to pursue the rent

money sought in the rent hike retroactively, lgnon said. Notices have beensent out to tenants telling them to put aside the money so they'll have itto pay Page Mill when the litigation is resolved.

City officials could not be reached for comrnent on thesuit, but testimony from city attorney Michael Lawson during the Jan. 8

meeting indicated the city is ready and willing to respond to thelitigation.

"ln all likelihood Page Millwill sue the city," Lawson."So we'll see them in court."

PM-1917

- E-mail Colleen_Flannery@DailyJournal.com

Message

Weir, Laurie

Page I of2

From: Richard Hollowell lrhollowell@Squarmilner.com]

Sent: Friday, April 1 1, 2008 5:31 PM

To: Weir, Laurie

Subject: RE: Squar Milner Contact

Thank you very much, I enjoyed making your acquaintance by phone.

Best regards

Richard trC HollowellSquar, N{ilner, Petersono ìl{iranda & \&'illiasnson, LLPPartner-In-Charge, Real Estate Services4100 Newport Place Drive, Third FloorNewport Beach, CA 92660949-648-0502 Cell949-222-2999 Main949-809-5578 Faxr4{w_wjs.q_ua rm i I n e r, c q¡n

From : Weir, La urie [mailto : Lau rie_Weir@Ca IPERS. ca,gov]SenE Friday, April 11, 2008 4:40 PM

To: Kang, Navdip; Richard Hollowell; Geoff Le PlastrierSubject: RE: Squar Milner Contact

HiAII,

I have attached my v-card and included Geoff LePlastrier on this email.

Thanks verymuch. L

--Ðriginal Message----From: Kang, NavdipSent: Friday, April 11, 2008 4:18 PM

To: Weir, LaurieSubject: Squar Milner Contact

Lauríe,

Per our discussion,

Squar MilnerPartner: Richard Hollowell4100 Newport Place Drive 3rd FloorNewport Beach, CA 92660(949)222-2999

lf its okay, I'll let you shoot Richard an e-mail with your information.

9t212008

PM-1918

Message

Again, Thanks for making time today, I know that your extremely busy.

Page2 ofZ

Navdip S. Kang, Internal Audits

ffice of Audit ServicesCaIPERS(9r6) 79s-oss0

Squar Milner has the distinction of being one of the nation's top 100 accounting and advisory firms as

*èil as one of the largest independent firms in Calífornia. With offices in Newport Beach, San Diego,

and Los Angeles, there are over 200 people to serve you. For more information on our services, please

visit our website at http ://www. squarmilner.com

IRS CIRCULAR 230 NOIICE¡ Please be advised that, based olr current IRSrules and stand.ards, the advice above was not intended or'wrítten tobe used., and ít cannot be used by tshe taxpayer, f,or the purpose ofavoiding penal.ties Èhat may be imposed on the Èær¡layer. If thismessagie íS provlded in any mEÌnlrer to another taxpayer, he or strecannot use the advice anci shouio seeic advíce based on his or her owrrparticul-ar circumstances from an independenb tax ad'vísor.

CONFIDENTIALITY NOTICE: This email message is for the sole use of the intended recipient(s) and

may contain confidential and privileged information. Any unauthorized review, use, disclosure ordisiribution is prohibited. If you are not the intended recipient, please contact the sender by reply email

and destroy all copies of the original message.

9t2/2008

PM-1919

Message Page2 of3

call.

Aloha,Barbara

----Original Message-----From : Ken neth Casarez [ma ilto : kacasarez@sbcA loba l. net]Sent: Monday, January 28, 2008 1:37 PM

To: Stocking, BarbaraCc: erin hutson; Amber Novey; Stausboll, AnneSubject: Hawaii Project

Hello Barbara: Long time, hope you have been well.I received this information this morning on this project in Hawaii whichI believe'should be RCP applicable. If so, would you please contactCilyview and let them know that we would like to work rvith them and

their parbrers on this project and that they can contact me as a place tostart. In the past, we haven't had much luck with City View regardingfulfillíng aspects of the RCP, especially re: notification ofprojects,hopeñllly, this project will be different. HolveveL, we did get thisnotification fi'om the local newspaper article.With any questions, please give me a call (916) 849 9969 cell, or emailall the best,thanks for your time,

Friday, January 25, 2008

Big Island will get 'work-force'homesNational investment firm CityVierv plans 276 units on Kohala CoastPacific Business News ( Honolulu ) - by Janis L. Magin Pacifìc Business News

A national housing invesfinent firm co-founded by fonner U.S. Housingand Urban Development Secretary Henry Cisneros is financing a276-unit work-force housing development on the Big Island .

CityView, u'hich is funded by the nation's largest public pension fund,the California Public Employees' Retirement System, has invested some

5700 rnillionin4T projects in 15 states to date.

The company joins with developers and home buildeß as an equitypartner on residential work-force projects aimed at f,rrst-tinie homebuyers, said Richie L. Butler, CityView's Dallas parhler and senior vicepresident.

"CityVieu' is truly excited about the prospect of funding this project,"said Cisneros" CityView's executive chairman, who also is the formermayor of San Antonio , Texas . "It is directly aligned with ouroverarching vision to help pravide rvork-force housing solutions in an

areathat desperately needs them."

9/2/2008

PM-1920

Message Page 3 of3

The Big Island project will make Hawaii CityView's 16th state, and

Butler said the compauy is looking for more projects to ñurd in the

islands.

"We have evaluated several projects but this is the fÌrst we've pulled the

trigger on," he said.Keolalani is planned for 120 acres at the end of Paniolo Avenue in

Waikoloa Village , said developer Kevin Webb of Webb Properties

Inc., who has worked previously with CiffView on several projects inCaLifomiaWebb and his pattners, 'Waikoloa Heights Land Investors LP, bought

866 acres adjacent to the village in March 2005 for $25 million,according to county tax records.

The CityView project, which is targeting Kohala Coast hotel

employees, construction workers, teachers and other local workers as

buyers, is the first phase of what could be more housing on the land,

which is entitled for up to 3,000 homes, Webb saicl.

"We're excited that we can be a part of bringing quality housing to the

Big Island that we anticipate will represent work-force housing at work-force housiltg prices," Butler said.

The lots average 10,000 squale feet and will be surrounded by green

space and walking trails, r.vith a commrurity recreation center, includinga pool and tennis corut, said Webb, who hopes to start work on roads^-- Á !--î.-^^+---^+,.-^ ¡L.l^ -,^^- ^-l ^+^+ L".illi-^ 1^^'--. h., -^-1.' tnflC)¿1ll0 II[¡.¿rUtILlt/tUIç UIIù yçAr illl\r ùL<llL uullultrg rrvr¡Ivù wJ vøLJ Lvv''

Sales are expected to start this fall for the three- and four-bedroomhomes, rvhich will range in size from 1,450 square feet to 2,350 square

feet and be priced from the mid-$400,000s to the mid-$600,000s, Webb

said. Thirty percent of the hotnes, or about 82 houses, r¡'ill be priced as

affordable under counfy requirements, probably urder $300,000, and

will be spread throughout the deveiopment, he said'

"Wherever there's a need for work-force housing and we can be a leader

for it on the financing side, we will f,rght tooth and nail to make it a'realiTy," Butler said.

.j ma gin @bizj ournals. com | 9 5 5 - I 0 4 I

Áll cc¡nfents o/'tltis site A Anteric:an Ctty Busi.ness Journals htc. All riglús reservecl

Kenneth CasarezLaborers' International Union of North AmericaPacific Southwest Assistant Regional Manager11135 Trade Center Dr. Ste' lOORancho Cordova I CA 9567fJ916 446 3622916 446 6655 fax

91212008

PM-1921

Page 1 of 1

Weir, Laurie

From: Taran, David [DTaran@PageMill.com]

Sent: Thursday, January 17,2008 5:43 PM

To: Weir, Laurie

Gc: Lee, Terry

Subject: Follow Up On Your Voicemail

Laurie,

I received your voicemail. I have put a call into Jonathan Cevita as you requested. He was in a meeting so I left amessage with his assístant Camilla asking him to call me back. lf I don't hear from him, I will follow up with himagain. On your request to call Navdip King, I have asked Terry Lee to contact him and provide Navdip theinformation he needs.

Have a great evening,

David

David A. TaranCEOPage Mill Properties, LLC480 Cowper Street,2od FloorPalo Alto, CA 94301650i833-3888 - direet4081205-5714 - mobile650i833-3988 - direct faxdtzr an(ò.n ase m ill. c o mwww.paggmill.com

wfitp"lyl,r,riL

9/2/2008

Pl\/'-1922

Page 1 of I

Plasencia, Javier

From: Brown, Jeffrey N. flbrown@pircher.com]

Sent; Monday, September 22,2008 5:00 PM

To: Plasencia, Javier

Javier: Pircher Nichols & Meeks engaged Sitrick & Company, lnc. (Lance lgnon works for Sitrick) pursuant to anengagement lefter of December 26,2007. (--

Jeffrey N. BrownPircher, Nichols & Meeks1925 Century Park East, Suite 1700Los Angeles, CA 900673 r0.201.8990310.s64.1790 (faÐjbrown@pircher.com

IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by thelRS, we inform you that any tax advice contained in this communication (including anyattachments) was not intended or written to be used, and cannot be used, for the purpose of (¡)avoiding tax-related penalt¡es underthe lnternal Revenue Code or (ii) promoting, marketing orrecommending to another party any matters addressed herein.

|I¡íPORTANT: This e-mail message is noi iniencjeci io be bincling or relieci uþon anci, wiihoui iimiiaiion on the foregoing, shali rroi eieaie, waiveor modiry any righl, obligation or liability, or be construed to contâin or b€ an electronic signaturs, to constitute a notice, approval, walver 0relection, or to form, modify, amend or terminate any contract. The information contained in this message is confidential and is inlended ontyfor the named addressee(s). This message may be protected by the attorney/clienl privilege, lf the reader of this message is not an ¡ntendedrecipient (or the individual responsible for the delivery of this message to an intended recipient), please be advised lhat any re-use,dissemination, dislribution or copying of lhis message is prohibited. If you have received this message in error, please reply to the sender lhatyou have received the message in error and then delete it.

]!:1!J::================

9/2312008

PM-1923

l)rgc I ol'l

. Weir, Laurie

From: Shore. Jim UShore@PageMill.comfSent: Tuesday, September 09, 2008 10:28 PM

To: We¡r, Laur¡e

Subjec[ Page Mill Update

Attachments: David Taran- EPA Letter Executed.pdf

Laurie

I wanted to update you regarding our recent efforts to engage the community. Attached ¡s a letterDavid Taran sent to the East Palo Alto mayor and city council last week.

Today I had a great meetíng with Larry Moody, a key Trustee of the Ravenswood School Board, tobrainstorm about how to solve problemg lqcing our tenants who have school age children. On MondayI am meeting wlth Councilmember David Woods of the city council. Our rnessãge is simple: Let's try íofind common ground so we can put our combíned resources and expertise to work to adàress theissues of the East Palo Alto community.

We are resolved to eslablísh a dlalogue with our community partners so our investment can beprofitable, bolh socially and fìnancially.

Please call me tomonow so we can catch up on some other items and to schedule my visit to.Sacramento.

Thank you,

Jim Shore, Gencral Cr¡unsclPage Mill P¡opertics, LLC480 Coq'pe¡ Street, 2r¡d Floot, Palo Alto, CA 9430I650.833.3838 dircct . 408209.0702 motiile .650.833.3938 dírect fax

P:\ (i H I,¡or¡e

{,r,r. L

9/t0t2008'

P\/'-1924

WOODI-AND PARKapartments

September 5, 2008

Mayor, Patricia FosterVice Mayoç Donna RuthelordCouncll Member, Ruben AbrlcaCouncíl Member, A. Peter EvaniCouncil Member, David E. WoodsEast Palo Alto City Hall

24¡5 Un¡vers¡ty AvenueEast Palo Alto, CA 94303

Dear Mayor Foster and Members of the C¡ty Counc¡l:

The City of East Palo Alto and Woodland Park Management have spent a substant¡al amount of time and

money thls year defend¡ng our respectlve legal poslt'ons. Although we will continue to vigorously defend ourlegal rights if need be, we befíeve we could accompllsh a great deal more for the commun¡ty and our tenants ifwe were to resolve our dìfferences through a construct¡ve, collaborative and productive dialogue-

As you know, the housing providers lhat own the properties managed by Woodland Park have invested inexcess of S11 million on building repalr3, seísmlc upgrãdes, personal safety measures and other buildingimprovements to prov¡de better and safer housin6 for the tenants, and they lntend to do more. We hope youagree with us that the community at large as well as the tenants will be better served if the City and WoodlandPark can find ways to combine their respective experlise and resources to further lmprove our community.

Please accept this offer as a slncere attempt to find common ground and reasonable compromÍses for thebenefit of everyone concerned, including our tenants,

We stand ready to work diligently with any or all members of the Counc¡l and City Staff to discuss ourdifferences and work towards common sense and reasonable solutions to resolve our disagreernents. Please

contact me at 650-833-3800 if you would like to discuss this or set up a meeting.

Sincerely,

cc: Alvin James, City Manager

5 Newefl Court. East Palo Alto, CA 94303rel: (650) 32¡-6180 ' Fax: (650) 324-7202

Leasing: 1650) 324-5220. Emergenc!¿: (650) 924-0319

PM-1925

WOODT¿,ND PARKapartments

September 5, 2008

Mayor, Patricia Foster

Vice Mayor, Donna Rutherford

Council Member, Ruben Abrica

Council Member, A, Peter Evans

Council Member, David E. Woods

East Palo Alto C¡tY Hall

2415 University Avenue

East Palo Alto, CA 94303

Dear Mayor Foster and Members of the C¡ty Council:

The City of East palo Alto and Woodland Park Management have spent a subslantial amount of time and

money this year defending our respective legal positions. Although we will continue to vigorously defend our

legal rights ii need be, we believe we could accomplish a great deal more for the community and our tenants lf

we were to resolve our differences through a construct¡ve, collaborative and productive dialogue.

As you know, the housing providers that own the propertiesmanaged by Woodland Park have invested in

excess of $11 million on building repairs, seismic upgrades, personal safety measures and other building

¡mprovements to provide befter and safer housing for the tenants, and they intend to do more. We hope you

agiee with us that the community at large as wetl as the tenants will be better served if the City and Woodland

pãrk can find ways to combine their respective expertise and resources to further improve our community'

please accept this offer as a sincere attempt to find common ground and reasonable compromises for the

benefit of everyone concemed, including our tenants.

We stand ready to work diligently with any or all members of the Council and City Staff to discuss our

differences and work towards common sense and reasonable solut¡ons to resolve our disagreements. Please

contact me at 650-833-3800 if you would like to discuss this or set up a meeting.

Sincerelç

cc: Alvin James, CitY Manager

5 Newell Court. East Palo Alto, CA 94303

Tel: (650) 324-6150. Fax: (650) 324-7202

Leasing: (650) 324'5220' Emergency: (650) 924-O3L9

PM-1926

Page 1 of2

Alexander, Judy

From: Lee,Terry[TLee@PageMill.com]

Sent: Monday, May 07, 2007 6:58 PM

To: Alexander, Judy

Subject: RE: Page Mill Properties ll LP - Annual Meeting

Judy

I don't believe we've had a chance to "meet" yet. Please let us know if we should coordinate with you or others aiCalpers and iflwhen it would be appropriate to schedule a (re)introductory meeting.

Many thanks and best regards,

Terry

Terry LeecFoPage Mill Properties, LLC480 Cowper Street, Suite 200Palo Alto, CA 94301tlee@pagemill.com(p) 650 833 3818(f) 650 833 3918

I'l ^ ¡ ñ lf r ' r.t, -d\ LT li lYl I l, l"rno?alftrEs

From: Lee, TerrySenH Monday, April 23,2007 1:39 PM

To:'judy_alexander@calpers.ca.gov'Cc: Taran, DavidSubject: FW: Page Mill Propedies II LP - Annual Meetíng

Judy

We wanted to follow up about scheduling the annual meeting for Page Mill Properties ll LP. While we haven't yetcalled capital, we did initiate significant investment and operaling activities last year to update you on and need toreview certain other items with CaIPERS / the LP Advisory Committee. How can we most easily schedule this inaway, for a time and at a location that is most convenient for you?

Many thanks and best regards,

Terry

On behalf of the Page Mill Properties Team

Terry LeecFoPage Mill Properties, LLC480 Cowper Street, Suite 200Palo Alto, CA 9430'1

llee@pescnü.ça¡n(p) 650 833 3818(f) 650 833 3e18

9/212008

P\11-1927

Page 2 of2

From: Lee, TerrySenh Fríday, April 13, 2007 9:55 AM

To:'judy_alexander@calpers,ca.gov'Subject: FW: Page Mill Propefties Ii LP - 2006Investor Letter and Audit Repoft

Judy

Katherine just confirmed that you have taken over responsibility for all of the Opportunity Funds, including PageMill Properties ll LP, for Calpers. Congratulations! We at Page Mill Properties are looking forward to theopportunity to work with you. Enclosed for your reference is a copy of the year end investor letter and statementsfor Page Mill Properties ll LP.

We also wanted to reach out and schedule a time for a more comprehensive introductory meeting / annualupdate, preferably in person, at your earliest convenience- We would be delighted to vìsit you in Sacramento ifmore convenient for you. Or alternatively, we would welcome the opportunity to host you in Palo Alto at ourheadquarters which would also afford us an opportunity to give you a brief tour of sor'ne of our currentinvestments. I just left a voicemail message regarding scheduling an introductory / annual meeting as well.

Again, we look forward to the opportunity to work with / for you. Many thanks and best regards,

Terry

Terry LeecFoPage Mill Properties, LLC480 Cowper Street, Suite 200Palo Alto, CA 94301tlee@paqemill.com(p) 650 833 381 I(f) 650 833 39'r8

ffif,Åp,lHr,\t

Il¿cEMtrL?h$fr¡T¡fÉ

9/2/2008

PM-1928

Page 1 of2

Alexander, Judy

From: Lee,Terry[TLee@PageMill.com]

Sent: Monday, April23, 2007 1:39 PM

To: Alexander, Judy

Cc: Taran, David

Subject: FW: Page Mill Properties llLP - AnnualMeeting

Judy

We wanied to follow up about scheduling the annual meeting for Page Mill Properties ll LP. While we haven't yetcalled capital, we did initiate significant ínvestment and operating activíties last year to update you on and need toreview certain other items with CaIPERS / the LP Advisory Committee. How can we most easily schedule this ín

a way, for a tirne and at a location that is most convenient for you?

Many thanks and best regards,

Terry

On behalf of the Page Mill Properties Team

Terry LeecFoPage Mill Properties, LLC480 Cowper Street, Suite 200Palo Alto, CA 94301tlee(@pagemill.com(p) 650 833 381 I(f) 650 833 3918

P¡\ ü g M I [ ilPRÐpãrrlãÍ

From: Lee, TerrySent: Friday, AprÍl 13, 2007 9:55 AMTo:'judy_alexander@calpers,ca.gov'Subject: FW: Page Mill Properties II LP - 2006Investor Letter and Audit Report

Judy

Katherine just confirmed that you have taken over responsibílity for all of the Opportunity Funds, including PageMill Properties ll LP, for Calpers. Congratulations! We at Page Mill Properties are looking fon¡vard to theopportunity to work with you. Enclosed for your reference is a copy of the year end investor letter and statementsfor Page Mill Properties ll LP.

We also wanted to reach out and schedule a time for a more comprehensive introductory meeting / annualupdate, preferably in person, at your earliest convenience. We would be delighted to visit you ín Sacramento ifmore convenient for you. Or alternatively, we would welcome the opportunity to host you in Palo Alto at ourheadquarters which would also afford us an opportunity to give you a brief tour of some of our currentinvestments. ljust left a voicemail message regarding scfreduling an introductory / annual meeting as well.

Again, we look forward to the opportunity to work with / for you. Many thanks and best regards,

Terry

912/2008

PM-1929

Page2 ofZ

Terry LeecFoPage Mill Properties, LLC480 Cowper Street, Suite 200Palo Alto, CA 94301flee@pagemill.com(p) 650 833 3818(Ð 650 83s 3918

fä'ilPr\GRh{rLr.IW.J?roF¡nrrts

9t212008

PM-1930

Message Page 1 of2

Alexander, Judy

From: Lee,Terry[TLee@PageMill.com]

Sent: Monday, May 14,2OOl 12:46PM

To: Alexander, Judy

Cc: Taran, David

Subject RE: Page Mill Properties ll LP - Annual Meeting

Judy

Tenific to hear from youl Hope you had a good weekend. And thank you so much for following up with David

_.---/ánd myself. We look fonrard to introductions on the 5th. I understand Lui might be following up with you per your- suggestion for a little time before/after that introductory meeting to cover additional / more specific fund matters /updates.

Separately and at your earliest convenience, we look fonvard to welcoming you to our offices in Palo Alto (andperhaps showing you some representative local investments). Perhaps we can add on to another trip you arealready planning to the Bay Areer/Peninsula...

We appreciate the opportunity to meet / work with you.

Many thanks and best regards,

Terry

Terry LeecFoPage Mill Properties, LLC480 Cowper Street, Suite 200Palo Alto, CA 94301tlee@paqemill.com(p) 650 833 3818(f) 650 833 3918

Pn C E M I I, Lp[Ô?atTliES

From : Alexander, J udy Ima ilto:J udy_Alexander@Ca I PERS.CA, GOV]Sent: Monday, May L4,2007 10:59 AMTo: Lee, TerrySubject: RE: Page Mill Propefties II LP - Annual Meeting

Terry,

Thank you for the invitation. I am sorry it has taken me so long to respond. lt looks like Ted and I will be meetingwith David on June Sth for introductions. lf this is just an introduction meeting with Ted, we can meet after and goover any issues or updates not covered in the meeting with Ted. At some point, I would like to meet at your officefor a tour.

I look fon¡vard to meeting and learning more about your fund.

Best regards,

9/2/2008

PM-1931

Message

Judy M. AlexanderPortfolio ManagerCaIPERSlnvestments - Global Real Estate

400 Q Street Room E4800

Sacramento, CA 95814

Tele: (916)795-228:2

Fax: (916) 795-3965Email: judy_alexander@calpers.ca.gov

Page2 of2

9t212008

PM-1932

Weir. Laurie

From:Sent:To:SubJect:

McKinley, ClarkThursday, December 20,2007 7:34 AM'Sharon SimonsonrRE: Page Mill Properties LP and Page Mill Properties ll,LP

Yes. There ís definitely another side of Ehe story. Our preference is to have you speakwith a Page Mill spokesperson rather than going through CaIPERS. I don't know if you haweÈhe contact informaÈion, buu I'J-I pass on a name and phone number, once I receiveconfirmation from their end.

ft'Ê our pieference in such cases Lo have media LaIk to our partners or theirrepresenLatives rather than to us. If they're unwilfing to tafk about this câse, we wilf.However, they have indicated Eo us their wilJ-ingness to go forward with media on the EastPalo Al-to issue

I¡ile appreciate ygur patience. Thank you.

CIark McKin1eyInformation officerCaIPERS Office of Public Affairs916 /'7 9s-ü-96 ; f.ax: 9t6 /795 -3507

-----original Message- ----From: sharon Simonson [mailtosssimonson@bizjournals.com]sent: V'lednesday, December 19, 2OO7 5:37 PMTo: McKinley, Clark

--J ñ--^ r,i r ì i ^^ TT f nÞuDJ gcL : Ke : Hage rvrarf, FIUtr)cl Lf c5 .tJr diru rdgs Ilrf r rf e}Jçr u¡çÞ ar, !r

Hey C1ark -- did you get anywhere on the Page MiIl matter?

oî 1,2/:-8/07 3.2:2L P14, "McKinley, clark" <c1ark_McKinley@CalPERs.cA.GoV>wrote:

> sharon,> Confirming that I routed t.his request. f'11 let you know lvhat I get> back. Meanwh.ile, here's the l-ink to the Page Mi]I performance report:

> htt.p : / / vrww . calpers . ca. gov / eip -docs / about /board.- ca 1 - agenda/agendas/ inve>st> /2oo7La/supplement -now07 /part-c-2.pdf (scroll- down to partñers)

> Clark McKinley> fnformation Officer> CalPERs Office of Public Affairs> 9L6/795-41-96,. fax: 916/'.l95-3507

> From: Sharon Simonson [mailto:ssimoneon@bizjournals.com]> Sent: Tuesday, December a8, 2OO7 12:01 PM

> To: McKinley, Clark> Subject: Page MiJ-J- Properties LP and Page MilI Properties II,l,P

> Thank you, Clark, for your help.

> These are the two funds I'm interested in, partícularly the second> one. I want to know who the fund. sponsors are for each of these '> Assuming t-hat David Taran and Page MiI1 Properties LLC are the

1

PM-1933

sponsors for the second fund, as f bel-ieve they are, I want to knowwhat CaIPERS'views are on his company's acEivities with regard torenbers in Ehe East Palo Alto area where he is buying. As I said onthe phone, Page Mil-l wants to increase rentè in the arêa bysubstantial margins and the renLers, many of whom are minority andIow-income, are very upset.

Did cafpers know when it inwested in Èhis fund E,hat iLs target wasthese East Palo A1Èo apartments? And was the original expectation thatthere would be redevelopment?

Pasted below is a story I rdrote this summer about a lawsuit thaE Mr.Taran and Page Mill is involved .in. That suit remains unsettled.

My number right Èo my desk is 408-299-1853.

Silicon Va1ley / sar_ Jose Business Journal - LTune 25, 2oO7http: /,/sanj ose. bizj ournals . com/ sanj ose,/ stori es/ zool / oe / 25 / storyt. html

Friday, ,June 22 , 2OO7East Palo AlCo plan hits bumpSilicon Val1ey / san ilose Business Journal - by sharon Simonson

Silicon Val.ley real- estate developer David A. Taran is bettÍng big onthe transformatiwe power of a PaIo Alto address, but his ambitions arebeing sÈyrnied by a bitter dispute with a local real estate broker whoclaims Taran owes him millions of dollars.

According to public record, incJ-uding hundreds of documents on fiie inSan Mateo county court, Taran has spent wefl in excess of $100 millionsince September 2006 to acquire 70 parcels, mostly contiguous, in athin ribbon of land fronting U.S. LOl- and a stone's throl¡/ from what isarguably the most status-laden community in the South Bay. Yet, all ofthe properties Iie Ín East Palo Alto, among the region's most humblecommunities, and they range from modest and aging apartments to somethat can only be described as blighted.

The properties also flank University Circl-e, East Palo Alto'sredevelopment centerpiece completed in the last five years thaÈincludes a four-star hote1, sparkling fountains and three stunningCLass A office tov/ers.

There is every ewidence that Taran intends to continue his buyingbinge. Such large-sca1e, real-estate aggregations often precedeambitious redeveJ-opment p1ans.

At the same time, Taran and his firm, Page Mitl Propertles tLc, havebecome enmeshed ín a rancorous legal fight with Cupertj-no reaf estatebroker Intero ReaI EstaLe Serwices and its agenÈ Efi Luzon. In atleast three lawsuits and one countersuit, the two si-des are battlingower broker commissions related to Page Mil-l's acquisitions andf¡uzon's subsequent purchase.of two sites at the cenÈer of Page Mil]'sassemblage efforts.

fntero is demanding in excess of $a million for Luzon's work in thetransactions,' thus far, Page Mill- has paid only $500,000, courtrecords show. Lawyers for Taran also are seeking to force Luzon togive up his ownership of the tlvo properties he acquired, arguing thaÈhe breached his fiduciary duty in buying them. Luzonrs atÈorneys sayhis oblÍgations to Page Mil-I ended. in August 2006 when the two severedties. Luzon bought the two sites well after that date.

Taran's l-ah'yer, .Teffrey N. Brown of Los Angeles' Pircher, Nichols a

2

PM-1934

> Meeks, did not return a call- for comment. Taran did not return t.hree> caLl.s for comment on his plans for. East Palo Afto.

> But long-time valley real estate attorney Ron Rossi, who represents> InLero, defends Luzon's right to acquire the properties in guestion,> saying he has the same opportunity as any other buyer.

> 'rPage Mill is trying to monopolize the enLire East PaIo ÀIto area and> to claim that their plans are somehow trade secrets and unknown to the> publÍc. ft's absurd because anyone driving l-01 woul-d have to see (East> Palo Alto's) nelrt Ikea and the new hotel and office buildings and know> that there is change going on and opportunity exists," he sayb.

> East Palo AlÈo city officials say they're a\^¡are of some of Page Mill's> activiÈies and are generally pleased with the rehabilitation work that> his firm has undertaken at some of the apartments he has acquired.> That includes evicting several felonious tenants and some major> overhaul work of air conditioning and other primary building systems-> Page MiII is now the largest apartment owner in East Palo Al-to with> far in excess of 1,L00 units- Dominating a markeÈ in that way can give> a landlord leverage to raise rents.

> But the cityts acting planning manaçJer, Brad Tarr, and iLs> redevelopment manager, Carlos Marti-nez, both say they have not been> apprised of any plan by Page Mil] to attempt whoLesale demoliEion of> buildings on the sites thaÈ the company has acquired- Moreover, Tarr> suggesÈs currenb city ordinances might make such a project d.ifficult> to execuÈe.

> Sti1l, in court documents, Taran's atÈorneys regularly refer to Ëhe' > company's "redevelopment p1an" for t.he area.

> Taran's repuLaLion within walley commercial real estate circles is one> of a cantankerous wj.sionary. According bo Page Mill's Vleb site, he> practiced real estate faw in Los Angeles at one tíme and holds> multiple advanced degrees from American and Canadian universities - He> has been admitted to the attorney's bar in California, New York,> Florida and the Canadian province of Quebec. He is also a licensed> Cafifornia real estaÈe broker and a member of the strategic advisory> board of City National Bank.

> But Taran has a history of prickly relationships with business> associates. He and his long-Eime busíness partner Stuart Shiff. parted> ways nearly Èwo years ago after internal disagreements at their> company, Divco West Properties. That split followed the departure of> the firm's long-tíme chief operating officer, who abruptly resigned,> also amidst a compensation dispute.

> Page Mi1l's strategy in East Pal-o Alto exemplifies Taran's abilit.y to> see potential that less analytical or imaginaÈive eyes might miss -

> With its clean lines and creamy Brazilian granite and ltalian> lj-mestone, the University Circle development is an oasis of calm and> order in an often chaotic setting. The courtyard for the property> features v/ater fountains and its offices are populated by presÈigious> tenants inci.uding global law firm DLA Piper.'With 45L,000 square feet,> the offices alone traded for nearly $300 mil]ion in mid-2005.

> And, only yards from University Circle lies Palo Alto, arguably the> most desirable address in the South Bay- Its population is among the> most educated in the nation, its streets are lined with mature trees> and charming housing, and the town is anchored by the world-recognized> Stanford UniversiÈy- It is also home to Stanford Shopping Center, a> perennial- leader in saLes among the nation's mal-ls and home to elite> retailers including Neiman Marcus, jeweler Tiffany & Co., and Brooks> Brothers clothiers.

> Yet, immediately adjacent. to University Circle, which is surrounded by3

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high waIls, is a jumble of largely dilapidated apartment complexes,duplexes and homes. Many of the properties are secured by perimeterfencing and locked gates. Poorly maintained yards, irregular'propertylines, old cars, trash and overgrown shrubbery are the norm, OnIy thebold would.be tempted to buy a home or condo here, much less ?0parcels, plus conceive a plan to acquire that many properties again,as Page Mill seems to have done-

Raja Ahluwalia, an attorney and real esEaÈe investor who owns a condonext to University Circl-e, says he was unaware of Page MiIl'sactivities. Despite EasÈ Palo AIto'E evident troubles, he boughE hisproperty because he saw some of the same potential as Taran, Ahluwaliasays.

nlÈrs an ideal location next to PaLo A1Èo, a very desirable place tolive," he says, It's also next to a major freeway, which providesgreat access, and at the center of Silicon Valley.

Ahluwalia is trying to sell- his condo, but only because he is nolonger interested in main.taining the partnership that owns it

"BuE I know that five years from now, I will l-ook back and wish" thesale hadn't been necessary, he says. uIf th.e redevel-opment occurs, itwould be very good for the area- It will improve the quality of lifefor everyone. tl

SHARON SIMONSON covers real estate for the Business ,Journa]. Reach herat(408) 299-'t-8s3.

Al1 contents of this site (c) American City Business ,Journals Inc. Allrights reserved

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From: Jean TrinhSent: Thursday, January 77,2008 8:33 AMTo: William Ganett; Chris Griffith; David Taran; Jeffrey Brown; Jennifer Moore; Jim Thompson;j ohn I @hanvan. com ; Michael S cheinberg; Rosario P"rry; T erry LeeCc: Lance IgnonSubject: Page Mill News Clips 1.17.08Page Mill Properties sues East Palo Alto over rent control ordinanceSilicon Valley / San Jose Business JournalThursday, January 17,2008 - 6:59 AM PST

Page Mill Properties said late'Wednesday it filed a lawsuit in San Mateo County Superior Court to forcethe city of East Palo Alto to rescind an urgency ordinance that retroactively freezes rents on all rent-cohtrolled aparbnents,

The suit alleges that the City Council's action was "arbitrary and capricious, lacking in rational basis,and conhary to law."

The lawsuit further contends that the ordinance should be rescinded because Councilman Ruben Abricasigned a lease for one of the affected apartrnents and therefore "has a personal financial interest in thedecision to lreeze rents," Page Mill said.

A hearing is scheduled for Feb. 21 on the issue.

Last week the City Council passed an urgency ordinance imposing a six-month rent freeze.

The unanimous vote was in the wake of a meeting a week earlier in which the emergency measure failedbecause only four of the council's five members attended the session and only three of those were insupport ofthe measure.

About 1,000 rents were hiked by landlord Page Mill Properties on Dec. 1. About two-thirds of the unitssaw rent increases ranging between $36 and $150; the remaining units saw rent increases higher thanthat.

Palo Alto-based Page Mill Properties, which has acquire d l,ízlapartments in the community over thelast 15 months or so, came under fiie from some members of the community after it proposed to raiserents on about 1,000 units. About 1,300 of Page Mill's units are governed by the community's RentStabilization ordinance, which covers about 2,500 apartments in all.

In general, the law allows landlords whose properties are covered by it to raise rents annually by the rateof inflation as set by the federal government. In question is whether those annual increases can be"banked" or saved from year to year when they are not applied, and then imposed later when the marketwill bear.

Also in question is the setting of the base rents on which the annual increases are to be applied.

"The court agreed that we stated a legitimate cause of action and ordered an expedited process forreaching a conclusion on the merits of our case, so we are very pleased with this outcome," said ChrisGriffilh, a Page Mill attorney with Ellman Burke Hoffman & Johnson.

Landlord sues city over rent freeze

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Page Mill wants urgency ordÍnance rescindedPalo Alto Daily NewsBy Banks Albach / Daily News Staff WriterJan. 17,2008

After freezing rent hikes last week for six months, the city of East Palo Alto is facing a legal challengefrom the city's largest landlord, Page Mill Properties, which recently gave the majority of its 1,600tenants rent increases that were set to take effect on Feb. 1.

Page Mill filed the suit late Wednesday aftemoon in San Mateo County Superior Court and is hoping foran early judgment against the city at the first hearing, scheduled for Feb. 21. The company is asking a

judge to rescind the urgency ordinance and let the rent hikes take effect. Page Mill's attorney, ChrisGriffith, said she has yet to fiIe for damages, but could eventually do so depending on how much backrent accumulates after Feb. 1.

Normally, a first hearing could happen as far as six months down the line, but a judge allowed a fasterprocess, Griffith said.

"I think today was a good first step," she saíd. "It was a small victory for us to get an expedited hearing,and I'm very confident on the legal issues."

The city's outside attorney, Rick Jarvis, said the city has every right to protect the public good, alsoreferred to as police power. In this instance, with imminent rent increases around the corner, the citycouncil acted legally in passing the urgency ordinance, he said. Most of the hikes range between $50 and

$150, but some are as high as $300 and $400. They aitect about 1,300 tenants, most of whom currentiypay between $600 and $900 per month.

"The reason for the ugency ordinance is obvious," Jarvis said. "The new rents were going to take effectand possibly displace tenants."

Many residents who live in Page Mill holdings and who spoke at public meetings are disabled, on fixedincomes and elderly. Page Mill has rescinded or lowered the hikes for these tenants on a case by case

basis and continues to do so, Grifñth said.

Regardless of how a judge comes down on the fueeze, the lawsuit involves a deeper legal issue with thecity's rent program. East Palo Alto uses certiflcates of maximum rent to mark a rent ceiling for each ofits almost 2,500 stabilized units, so it would seem logical that tenants are paying the certif,red amount.

But in the last few years, many of the previous owners opted to not raise rents. And after the dot-combubble burst, rents plunged, adding to what has become alarge discrepancy between the maximum rents

and actual rents- The city's rent ordinance also pegs arurual increases at around 3.2percent, based on acost of living and inflation index.

Page Mill's increases are based off the certifïcates, not what tenants have been paying, and reflectnumerous annual increases combined, not just one based on last year's rent, Jarvis said. That tactic isalso known as banking, he said.

"I am confident that the moratorium will be upheld, and the city will be allowed to take the steps t<i

clariff this confusion," Jarvis said, describing a move to possibly adjust the certificates during thefueeze.

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Griffith said she is also asking a judge to rule that the certificates are binding on the city under state law,meaning the cify would not be allowed to legally lower the maximum rents.

The lawsuit comes as no surprise to council members. Griffith and Page Mill CEO David Taranthreatened legal action on Jan. I before the ordinance was passed. Council Member Peter Evans biamedttre situation on poor city management, especially regarding the certificates, which are issued by thecity's rent stabilization board and its staff.

Mayor Patricia Foster said that Page Mill was wrong to view the moratorium as an aggressive act.

"I'm disappointed," Foster said. "To have over a thousand residents face rent increases of around 10

percent, we needed more time to work through it. That's what the urgency ordinance is all about."

E-mail B anks A lb ach at b alb ach@dai lynews group. c om.

Page Mill Properties sues EPA in rent disputeBy Don KazakPalo Alto WeeklyJanuary 16, 2008, 5:16 PM

Page Mill Propertìes, a Palo Alto company that owns about 1,600 apartments in East Palo Alto, filed suitagainst that city Wednesday, claiming an urgency ordinance passed unanimously by the City CouncilJan. 8 is illegal.

The urgency measure prohibited rent increases of greater than the 3.2 percent currently allowed by thecity.

According to the lawsuit, Page-Mill Properties "gave notice of intent" to increase rent to 1,300 tenantsaveraging 9 percent. Those increases were due Feb. 1, until the City Council acted last week.

Page Mill Properties is asking San Mateo County Superior Court to order the city to rescind its Jan. 8

urgency measure before Feb. 1.

However, that isn't likely to happen because according to. a press release from the company, the courthas ordered an expedited hearing for Feb. 21.

City Attorney Michael Lawson could not be reached for comment on the lawsuit, but Lawson andanother lawyer representing the city told the City Council that the Jan. 8 wgency measure was legallydefensible.

The lawsuit claims that while the city is limiting current rent increases to 3.2 percent, the companyrelied on "certificates of maximum legal rent" issued for each apartment by the city.

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Those certificates, by Page Mill's calculations, would allow an average rent increase of 37 percent.

But city officials argue that Page Mill is adding past rent increases allowed for each apartment over the

years but which tryeren't always charged.

City ofñcials last week said they fully expected to have Page Mill challenge the Jan. 8 urgency measure-

"We'll see them in court," Lawson said at the time.

page Mill properties claimed in a press release that the city rejected Page Mill's offers to negotiate the

differences between the city and company.

"Ow goal was to form a partnership with the city to improve the living conditions at our properties,"

CEO bavid Taran of Page Mill Próperties said in the release. "Instead, ttre city rejected our repeated

offers to negotiate the isiue of rent increases and left us with no choice but to litigate."

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WOODTAND PARKap¿ìrtrnents

September 5, 20O8

Mayor, Patricia FosterVice Mayor, Donna RutherfordCouncil Member, Ruben Abrica

Council Member, A. Peter Evans

Council Member, David E. Woods

East Palo Alto c¡ty Hall

2415 University AvenueEast Palo Alto, CA 94303

Dear Mayor Foster and Members of the City Council:

The City of East Palo Alto and Woodland Park Management have spent a substantial amount of t¡me and

money this year defending our respective legal positions. Although we will continue to vigorously defend ourlegal rights if need be, we believe we could accomplish a great deal more for the community and our tenants ifwe were to resolve our differences through a constructive, collaborative and productive dialogue.

As you know, the housing providers that own the properties managed by Woodland Park have ¡*erted ¡n

excess of 511 million on building repairs, se¡sm¡c upgrades, personal safety measures and other building

improvements to provide better and safer housing for the tenants, and they intend to do more. We hope you

agree with us that the community at large as well as the tenants will be better served if the City and Woodland

Park can find ways to combine lheir respective expertise and resources to further ¡mprove our commun¡ty.

Please accept this offer as a sincere attempt to find common ground and reasonable compromises for the

benefit of everyone concerned, including our tenants,

We stand ready to work diligently with any or all members of the Council and City Staff to discuss our

differences and work towards common sense and reasonable solutions to resolve our disagreements. Please

contact me at 650-833-3800 if you would like to discuss this or set up a meet¡ng.

Sincerely,

cc: Alvin James, C¡ty Manager

5 Newell Court. East Palo Alto, C-A 94303

Tel: (650) 324-6180. Fax: (650) 32.4-I2Oz

Leasing : 1650l, 324 -5220 . E me rge ncy : (650) 924-03 19

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Weir, Laurie

From:Sent:To:Subject:

Attachments:

Lance lgnon [Lance_lgnon@sitrick.com]Thursday, February 14,2008 3:34 PMWeir, Laurie; MqKinley, ClarkFw: Page Mill Properties clip

Page Mill clips 2.14.08.doc

r4ì_lPage Mill clips

2.14,08.doc (3..FYI

----- original Message -----From: Jean TrinhTo: Chris criffith <cgriffithOellman-burke,com>; William Garrett <garrett@hanvan.com>iTerry Lee <tlee@pagemill.com>; Tammy Taylor,' Rosario Perry <rosario@OCEANLAI'Ù.COM>; MichaelScheinberg <MSCHEINBERG@pirche::.com>i Lance Ignon; johnl@hanvan.com <john1@hanvan.com>,'Jim Thompson <JThompson@pagemiIl-com>; Jenn.ifer Moore <.JMoore@pagemi1l.com>; ,Jeffrey Brown<jbrown@pircher- com>,' David Taran <dtaran@pagemi1l' com>Sent: Thu Feb 14 O9:44:Q2 2QAASubject: Page MilI Propertíes cJ.ip

Eaét Palo AlEo admits error in rent increases

Palo Alto WeeklY

Èr' n^ñ V=c;l¿

!'lednesday, February 13, 2008

East palo Alto, facing a lawsuit from an apartmenE company over rent lncreases,conÈribuEed to the problem, lawyers for the city admit

The East Pafo Alto Rent Stabifization Board contriLruted to the legal standoff between thecity and its largest landlord by issuing "certificates of maximum rentrr for apartmentsthat erroneously allowed renE increases far in excess of what the board was acbuallya1lowing, according to a response by the city's lawyers to a lawsuiÈ that was filedagainst the citY

The response, dated Feb. 8. called the issuance of the rent certificates with higher-than-allowed rent increases "unfortunate. "

The city,s legal filing is in response to a lawsui-t filed last month by Page MiLIproperties, a Palo Alto company that owns and manages about 1,600 apartments in East PafoAlto.

page Milì. sued after the City Councif voted unanimously Jan. I to impose a moratorium onany rent increases greater than 3,2 percent, Èhe current limit al-lowed by the city's rentboard- The rent board calcul-ates al-Iowed rent increages each year on the basis ofincreases in Lhe Bay Area Consumer Príce lndex (CPI) .

P\Ã-1942

Page MilL contends its rent increases for hundreds of apartments, which had been due totake effect Feb- 1. averaged 9 percent, albhough city officials said that many rentincreases were 15 percent or greater.

Page Mi11 officials contend that Lheir announced rent increases were legal because thecompany followed the certificates of maximum rent j-ssued by the city's rent board for each

. apartment.

But city official.s say that the certificates were used by the company incorrectly.

"Basica11y, these cerEificates reflect \"rhat renE woufd be alLowed if the rent for eachunit had been raised by the maximum CPI amount allowed every year since the RentStabitizaEion Program began in 1988," the city's lega1 filing reads.

The Lawsuit response added that the city's renE ordinance rronLy permits annuaf CPI rentincreases based upon what rent was actually lawfulIy charged the prior year, not theamounÈ whích woul.d be theoretically alLowed if the maximum rent increases had been madeeach year. "

The Page Mill- l-awsuit seeks to overturn the ciLy's moratorj.um on rent increases greatertsL-- t â ¡a¡¡aal

- ¿ }Jsreç¡¡e.

The proposed rent increases drew Èundreds of angry and frightened Page Mil-l tenants Èo arent board meeting in December and two Cit.y Councif meeEings in Januafy.

A hearing on the Page MiJ.l l-awsuit against the city is scheduled to be held Feb. 2l- in SanMateo County Superior Court.

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Page I of I

Weir, Laurie

From: Lance lgnon [Lance_lgnon@sitrick.com]Sent: Tuesday, January 29,2OOg 7:53 pM

To: Weir, Laurie; McKinley, Clark

Subject: Op/Ed about page Mi[

Attachments: 01 1 1 98 SJBJ Editoriat.htm

Laurie and Clark,

I thought you'd like to see this.

Lance lgnonMember of the FirmSitrick And Co.cell: 4'l5-793-8851otlice: 415-388-8525

9/2t2íJrJ8

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Page I of I

Weir, Laurie

From: Taran,David[DTaran@PageMillcom]

Sent: Wednesday, January 16, 2008 11:38 AM

To: Weir, Laurie

Subject: San Jose Business Journal Request for Documents

Laurie,

I got your voicemail. Please send us a copy of the public records,request and the documents you are consideringproducing so that we can review them and get back to you regarding what should not be produced and isconfidential.

Thanks,

David

David A. TaranCEOPage Mill PropertÍes, LLC480 Cowper Street, 2nd FloorDnln Älfn lì O/?nl¡ uru nrrva vn /a!rvI

650/833-3888 - direct408/205-5714 - mobile650/833-3988 - direct faxdtaran@,pasemill.comÌvrvvy.pagemill.csm

P,\CEI,III, I.P¡OPIÊIIE'

9/2t2008

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Weir. Laurie

From:Sent:To:Gc:Subject:

Attachments:

Lance Ignon ILance_lgnon@sitrick.com]Wednesday, January 16,2008 4:30 PMWeir, Laurie; McKinley, Clarkdtaran@pagemill.comPage Millupdate

01 1608 press release Final.pdf

011608 press:lease Final.pdf.

Dear Laurie and Clark,

David asked that I send you a copy of a press release that we issued t.his afternoon

Lance Ignon/Member of the Firm/Sitrick And CompanyOffice: 415-388-8525 CeIl: 4]-5-793-8851

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Page 1 ofl

Weir, Laurie

From: Lance lgnon [Lance_lgnon@sitrick.com]Sent: Wednesday, January 09,2008 5:06 pM

To: Weir, Laurie; McKinley, ClarkCc: dtaran@pagemill.com

Subject: news clips for page Mill

Attachments: 0104 thru 0109.doc; page Miil e&A Final.doc

Laurie and Clark,

I have attached a Word document with all of the newspaper coverage of page Mill sinceJanuary 3' You will note that there is a great deal more balance to îne roué"àg". I have alsoattached a revised Q&A that I distributed to reporters and which I hope you-find informative.

Best regards,Lance

Lance lgnonMember of the FirrnSitrick And Co.cell: 415-793-8851office: 415-388-8525

912/2008

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Page Mill Properties Q&AJanuary 8, 2008

This document provides answers to some of the most frequently askedquestions about Page Mill Properties' activíties in East Palo Alto. Pleasecontact Lance lgnon aL415-793-8851 with questions.

Why did Page Mill Properties increase rents on a portion of the rentalunits it manages in East Palo Alto?Page Mill Properties had planned to implement only modest annual rentincreases. The company was forced to abandon this approach and

implement higher increases when East Palo Alto's Rent StabilizationBoard moved to amend the City's Rent Stabilization Ordinance byeliminating the company's right to increase rents according to theOrdinance.

How did the Rent $tabilization Board intend to eliminate Page Mill'srights?The Board wanted to eliminate the company's ability to charge rentsaccording to the level allowed by the City's Certificates of Maximum Rentand as per State law.

What are the Gertificates of Maximum Rent and why are theyimportant?The Certificates establish the maximum rent that any housing provider cancharge for rent-stabilized apartments. This certificate system informs bothtenants and housing providers about the allowable rent. Page Mill reliedon the Certificate amounts in making its investments and was encouragedby City officials to do so when the City issued the annual Certificates.

Did Page Mill raise rents above levels allowed by the Gertificates ofMaximum Rent?No. ln fact, in most cases, Page Mill's increases were well below theamount allowed by the'Certificates of Maximum Rent. Moreover, themajority of the rents even after the increase will still be below market rentsfor the area. There were some instances where clerical errors led to initial

notices that exceeded the Certificate amounts, but all of those have beencorrected and it was never Page Mill's intent to exceed the Certificateamount for any unit.

But the Gity says that Page Mill was allowei to raise rents by only!.zVo,which was the annual increase in the Gonsumer Price lndex.Extensive legal analysis of the Rent Stabilization Ordinance clearly showsthat the City's Certificates of Maximum Rent, not the CPl, establish theannual allowable rent increases. That's why the City issues them eachyear to housing providers. lndeed, the City told Page Mill to rely on theCertificates when the company made its investment in its East Palo Altopropertíes - and the company did so.

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Page Mill Properties Q&AJanuary 8,2008

By how much was Page Mill allowed to raise rents according to theMaximum Rent Gertificates?The Certificates gave Page Mill the right to raise rents by an average ofnearly 37o/o, or $314 per month.

By how much did Page Mill Properties raise rents?o The average rent increase was 9%, or $89 per month.o 21o/o, or 340 of the units, received no increases at all.

o Rents on nearly two thirds of the units were increased between $36and $150 per month.

o 75 units, or 4.60/o of the total, hadand $200.

o 15 units, or O.9Vo of the total, had$200 and $250.

o 10 units, or 0.6% of the total, had monthly increases above $250.o The higheSt increase, 47o/o,was on a two-bedroom townhouse with

a private yard occupied by a single individualthat had been rentingfor $850 per month - well below anything approaching comparablerents for the area.

o Jhe larger increases applied only to those units that were renting¡^- .,,^ll ù.^l^.., n¡a. ¡ailina ralaa in llra aama l.¡r rilrlinnlul wEll LJtiluw Plçvalllllv lcrtçÐ lll llle ùqlr¡ç vurrvrrrti!

The city claims that "hundreds or thousands" of people will beforced to leave their apartments as a result of the rent increases, andthat this is why they need an emergency ordinance to freeze rentincreases for six months.Residents from 13 units have n'otified Page Mill that they plan to leavetheir units as a result of the rent increases.

What will happen to residents who cannot afford the rent increases?Page Mill has already granted rent decreases to residents with specialcircumstances, such as a disability or a fixed income. Other residents withsimilar circumstances are encouraged to contact the company todetermine if they qualify for similar exceptions.

Who are Page Mill's investors?Page Mill's investors represent people from all walks of life, includingretired state workers living on modest fixed incomes. Page Mill has aresponsibility to provide clean and secure housing to its residents, but ithas an equally profound responsibility to provide a reasonable returnthose who entrusted the company with their investment.

monthly increases between $150

monthly increases of between

PM-1949

Page Mill Properties Q&AJanuary 8, 2008

. ls Page Mill increasing rents so it can drive out tenants and thenincrease rents aga¡n?No. lf this had been Page Mill's intention, it would have raised all of itsrents to the maximum allowed by the Certificates of Maximum Rent. ltalso would not have invested so much of its financial resources into

improving the safety, health and living conditions at its properties.

o What kind of improvements is Page Mill making to its properties?Page Mill is investing $11 million in capital improvements to its properties,

many of which had been poorly ma¡ntained or neglected for years. Page

Mill's efforts are mak¡ng not only its properties but the entire neighborhood

cleaner, safer and more livable.

The improvements go well beyond cosmetic improvements and include:

o new roofs on nearly two dozen buildings;o seismic upgrades;o repairing eiisting or installing new fences around swimming pools

to enhance child safetY;o installing new energy-efficient washers and dryers;o improving common areas by replacing worn-out carpets with safer

and more durable tile flooring;^ '^^^irina ¡lnt ¡al rrncafa ]ralnnniae anrl hanrl-rails'(J lEPqll ltlv vly ¡vlr qltÙqrv uqrvv

o an aggressive program to rid the neighborhood of rodents and

other pests;o implementing green programs to eliminate rubbish; ando installing energy-efficient lighting inside common areas'

. ts Page Mill also making improvements to the interiors of the units?yes! Þage Mill has resolved 56 of the 80 repair requests it has received

so far and is cont¡nuing to work on the remainder. Many of the issues

inside the units existed before Page Mill owned the properties, so it takes

time to catch up on repairs. Many of these repairs would not be necessaryhad previous property owners been as diligent as Page Mill has been.

¡ What is Page Mill doing about insect infestations?Terminex, a highly regarded exterminator, is under contract to Page Mill

and is dispatched promptly to deal with insect problems, includingcockroaches. Structuralwork on the buildings and the removal of habitathave displaced insects and rodents, but Page Mill has implementedprograms, such as the one with Terminex, to finally eliminate theseinfestations.

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Page Mill Properties Q&AJanuary 8, 2008

. ls Page Mill improving security?Yes. The company has híred two security companies that provide vehicleand foot patrols at least four times nightly on various properties. Manymembers of the security companies are off-duty police officers and maytherefore have been mistaken for police officers by some residents.

Among other security improvements, Page Mill is:o installing video surveillance systems connected to a dispatch center;o installing security gates and fences with card-key access;o hosting monthly meetings between the police and residents to build

stronger cooperation;o working directly with police to rid the neíghborhood of drug dealers;o providing discounted rents to govemment workers, Such aS police, fire

and teachers, who provide a stabilizing force for the entire commun¡ty;and;

o alerting PG&E to replace street lighting that had been burned out foryears.

. Are these security measures having any effect?Yes. The neighborhood in which Page Mill's properties are located, Beat4,had the lowest crime rate ¡n East Palo Alto in November 2007,-^^^".¡ih^ tn nnlina o*aficfi¡o TJra nnmnanrr'c offnrte fn rarlltne nrimc mavclvuvlt¡lltv t\J Pvltvs ùlqllùllw' I l¡v wr¡rl/qrtJ v

have contributed to the overall decline in serious crimes in East Palo Altolast year.

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^ÑTDCaIPERSlnvestment OfficePost Office Box2749Sacramento, CA 958 1 2 -27 49916 795-3400916 795-3965 (fax)

August 7,2006

Mr. David TaranChief Executíve OfficerPage Mill Properties1900 University Avenue, Suite 201

East Palo Alto CA 94303

Re: PageMill Properties ll, L.P.

Dear Mr. Taran:

Today I was informed that due to Jose McNeill's departure from CaIPERS, that the Page

Mill Properties ll, L.P. Fund was being reassigned to my desk. Although I have not had

an opportunity to fully review this Fund, I have reviewed Page Mills' actual since

inception and pro forma data for the period ending September 2005 and am looking

forward to leaning more about your investment principals and strategies.

On July 27,2006, The Situs Company, due diligence consultant for CaIPERS reported

that su'ccessful due diligence had been achieved and recommended the contemplatedinvestment to the Fund. I don't see a fully executed LP Agreement in the fìle, however, in

speaking to Cox, Castle & Nicholson, LLP this morning, the closing binders are

forthcoming.

I will be following up with other CaIPERS internat divisions to verify that all required

processes are in place and that all reporting deliverables have been identified. lfpossible, I would like to have an electronic organizational chart of the Page Mill

Þroperties Team, along with their contact information so that I may call upon the

appropriate staff for any additional information that may be needed.

Galifornia Public Employees' Retirement SystemLincoln Plaza East - 400 I Street, Suite E4800 - Sacramento, GA 95814

PM-1952

Mr. David TaranAugust 7 ,2006Page 2

My contact information is as follows:

(91 6) 795-0261 (direct)(e16) 795-3e65 (fax)Katherine fox@calPers.ca.qov.

Please let me know if anything is needed on your end'

SincerelY,

11 fiaKatherine Foxlnvestment Officer - Global Real Estate

ccr Al FemandezRandy PottleSandra PlasenciaMike lnglettPhillip Gee

PM-1953

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RONALD R. ROSSI (SBN 43067)susAN R. REISCHL (SBN 94307',)DEAN C. ROSSI (SBN 188844)RYÀN M. HAGAN (SBN 2008s0)ROSSI, IIAMERSLOUGH, REISCHL & CHUCK1960 The Alameda, Suite 200SanJose, C^ 95t26-L493(408)26t-42s2Fax: (408)261-4292

Attomeys for Defendant EFI LUZON andDefendanVCross-Comp lainantINTERO REAL ESTATE SERVICES, INC.;Defendants EFI LUZON, EPHRAIM K. LOZON TRUST, and1909,1917,1919 CAPITOL AVE. EPA, LLC; ANdDefendants EFi LUZON and 1908 COOLEY AVE, E.P.A., LLC

IN THE SUPERIOR COLIRT OF THE STATE OF CALIFORNIA

iN AND FOR THE COUNTY OF SAN MATEO

CaseNo.: CIY 457866[Consolidated with CaseNo. CIV 461130][Consolidated r¡rith Case No. CI\f 462137]

NOTICE OT'TAKING DEPOSITION OFCALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM (BYSUBPOENA) AND REQUEST FORPRODUCTION OF DOCUMENTS(c.c.P. $s 2025.01 0, 2025.?,30')

NOTICE TIIAT DEPOSITION MÄY BEYIDEOTAPED tc. c.P. $202s.220(aXs)l

Date: March 3, 2008Time: 10:00 a.m.Place: QDS

3750 Auburn Blvd,, Ste. "8"Sacramento, C^95821

Trial Date: July 8, 2008

OF TAKING DEPOSITION OF CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (BYSUBPOENA) AND REQUESTFORPRODUCTION OF DOCLJMENTS (C.C.P. $$ 202s.010,2025.230);NOTICETHAT DEPOSITION MAY BE VIDEOTAPED [C.C.P. $2025220(a)(5)]; Paee MilU. Luzon. et .?1.; Case No. CIV

PAGE MILL PROPERTIES, LLC, a Delawarelimited liability company,

Plaintiff,

vs.

EPHRAIM LUZON, also known as EFI LUZON,also known as EFI LOZON an individual;INTERO REAL ESTATE SERVICES,INC., aCalifornia corporation; and DOESinclusive,

Defendants.

IAND CONSOLIDATED AND RELATED

457866 (Consolidated)

PM-1954

I

2

3

4

PLEASE TAKE NOTICE that on March 3, 2008 at the horu of 10:00 a.m. at the offices of

QDS, 3750 Auburn Blvd., Ste. rB", Sacramento, CA 95821; telephone number (9f q 4æ-7030,

Defendant EEI LUZON and DefendanVCross-Complainant INTERO REAL ESTATE SERVICES,

INC.; Defendants EFI LUZON, EPHRAIM K. LOZON TRUST, and 1909, l9l7,l9l9 CAPITOL

AVE. EPA, LLC; and Defendants EFI LUZON and 1908 COOLEY AVE. E.P.A., LLC , tluough

their attorney of record, in accordance with California Code of Civil Procedure Section 2A25.010, et.

seq.,willtake the deposition of Califomia Public Employees'Retirement System (CaIPERS), by and

through its office¡, director, managing agent, employee, or agent who is most qualified to testiff on

its behalf as to matters described in Item No. 4 ofthe Deposition Subpoena (attached hereto as

Exhibit "A'), upon oral examination, before a notary public, the taking thereof to continue from day to

day thereafter at the same place until completed.

PLEASE TAKE FURTHERNOTICE that pursuant to Code of Civil Procedure

A?mq ??ôla\f {\ fìafcn¿l¡nl EE'I T I I7t.ì'l\I an¡l Tìcfen¡lanf/l-rnss-f-nmnleinnnt TNTF'.RO RF.ÂT.

ESTATE SERVICES,INC.;Defendants EFI LUZON, EPHRAIM K. LOZON TRUST, and 1909,

1917,7979 CAPITOL AVE. EPA, LLC; and Defendants EFI LUZON and lgOg COOLEY AVE.

E.P.A., LLC intend to record the testimony by videotape, in addition to recording the testimony by

stenographic method as required by C.C.P. $2025.330(a)-(d).

PLEASE TAKE FURTHER NOTICE that Defendant EFI LUZON and Defendant/Cross-

ComplainantINTERO REAL ESTATE SERVICES,INC.; Defendants EFI LUZON, EPHRAIM K.

LOZON TRUST, and 1909, 7917,1919 CAPITOL AVE. EPA, LLC; and Defendants EFI LUZON

and 1908 COOLEY AVE. E.P.A., LLc inten.d to reserve the right to use at trial the videotaped

deposition of the above-referenced individual.

t/

t/

//

/t

NOTICE OF TAKTNG DEPOSITION OF CALIFORNIA RETIREI\iÍENT SYSTEM (BYSIJBPOENA) AND REQUEST FOR PRoDUcTIoN oF DOCUMENTS (C.C.P. $$ 2025.010, 2025.230);NoTIcETI{AT DEPOSITION MAY BE VIDEOTAPED [C.C.P. 52025.220(a)(5)]; Paee Mill v. Luzon, et. al.: Case No. CW457866 (Consolidated) 2

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NOTICE IS FURTHER GIVEN that in accordance with the Code of Civil Procedure

g2025.220(a)(4), said deponent is requested to bring with him at the time of the deposition any and all

documents and writings as defined and identified in AfiachmentNo. 3 to Exhibit "A" attached hereto.

&DATED: February Y()

,2008 R.SLOUGH, REISCHL & CHUCK

n------õñvDEAN C. ROSSIAttomevs for Defendant EFI LUZON andDefendánlCro ss-ComPlainantINTERO REAL ESTATE SERVICES, INC.

PM-1956

EXHIBIT *A))

PM-1957

SUBP-O20

nrfOnNev On p¡nfy WÍÍHOUT ATTORNÊY (Núo, Stale 9at number, and addßss):

;io-ñäïD n. iossr (43061);DEAN c- Ros-sr (188844)NOSST, HAMERSLOUGH, RETSCHL E CHUCKrÕoo iHe AIAMEDA, surrg 2oo

sAN JosE, cA 951'26"*''ããi*l*o, -(aoe l- áø-qzsz r¡xMr.lopù'm4: (408) 267-4292

E-¡i.All" ADDRESS loprløsr:¡rnproryFoRr^raind' DEFENDANT INTERO REAI ESTAIE qIByI-qE-S' IN

ffiñroncouRToFcALtFoRNtA,couNTYoF sAN MATEo

sTREETADDREsS: 400 COUNTY CENTER

MAILING ADORESS:

c[YANozlPcoDE; REDIÍOOD CITY, CA 94063gRÁNCH ¡l¡ME SOUTHERN BRANCH

FEnïoTER'PAGE MrLL PRoPERTTES, LLC' a DelawareLimited liabilitY comPany'

RESPONDENT: Ephraim Luzon, aka Efí Luzon

DEPOSITION SUBPOENAAPPEARÑCE ÃHO pnOOUCTION OF DOctJmEIIq AND TH]NG9

THE pEOpLE OF THE STATE OF CALIFORNIA, fo (name, address, and telephone number of deponenl if known)z -

cåItfornlePublicEnployees,Retirementsystem(calPERs),4oo.Q''street'sacramento,callforniag5Sll;(916)795-3oOo,1. you ARE oRDERED To AppEAR tN pERSoN To rEsÍFy As A wlrNEss in lhls aotion at the following date' t¡me'

and place:

As a deponent w¡o l" not a iãturul puoot, you are ordered to deslgnate one or more pelsons to

to the matlers described in ¡tem 4. (Code Civ. Proc., $ 2O25'220(a)(6))'

the of lhe

Date issued: FebruarY , 2OQ8

on your behalf âs

b.T\-.ìYouareorderedtoproducelhedocumentsandthingsdesc¡ibedinitem3.c. I xl This deposition wiii 'oe recorciecì stenographicaliy

'[-] '¡roug!ì the insten! vlsua! dlsplay of testimony'

and bY f-_l audiotaPe [Fl videotaPe

d_ l- )¡l rtr¡s viueotape deposiüon is intended lor posslble use at trial under code of clvll Procedure secton 2025'620(d)'

2. The personal attendance of the custodian or other qualified wilness and the production of the original records are required by this

subpoena. -fhe procedure authorized by Evidence iode sections 1560(b), 1561

' and 1562 will not be deemed sufficientcompliance

4.

with this subPoena.

The documents and things to be produced and any tesling or sampling being sought are described as follows: see

Attachment No. 3.

[X I Continued on Attachment 3.

lf the witness is a represenlative of a business or other entity, lhe matters upon which the witness is to be examined are described

aSfOllOWS:AIl facts and circumstances surrounai.ng any CâIPERS lhvestment' Loan' note' debenture' equity

interest or private Pl.acement with Page uirr ntóputiies, or with Page MifI through iÈs'agents or l-enders

(inctuding vtachovia) concerning rear èstate i" eä"t PaLo Àltor cållfornla from Àpril 2006 thlough present'

|---l Continued on Attachment 4.

r. ñöi;i"tËËfiäÈ*uto wrrH rHts suBPoEIA 49 4 9.99r.o.?låï:f-"311Yy5191ny:;.g1',tÆ:Àt53:,uJot*5oï"r"#ð,i[i'å'oi-å',i*"iåËöäöiíir;ãl-oïrösã.'6 ño lnororu ro'euAsH oRAN oBJEcrroN HAs BEEN

, ^

t^ ^^rlct

rñiÉO f:íÞ EitlDI l'l\!Ë*eü=io'niibü:Àtãiäìi"nbË'iääïöËË'ü¡tllïôÉi¡¡E þÁÀres, wrrNEssEs,ÁNDcoNSUMER oR EMPLoYEE

^ô Érrñf ^vrE

oE^ñÞñQiFËË"'irË'*'uËi âe"oåiÀrùËitãÊrónÈ you ARäRÈouìneo ro pRoDUcE coNSUMER oR EMPLoYEE REGoRDS.

-- ---r^J ^¡^^^-,^^hl¡¡tt¡t atlha ãonacìliu. äiñã"olii"iliä"Ì'vii,ir7ìîäåü¿äå"Ï,'äñ;ääá oìãi'r'"^ "rl "-':y:SlP,:::y:d"::,?i:l:Y:::!::!i:,7!:i:i,''îi,Ï!,^lfiiäi'i*!:;#;i,;;;::i';:";;;;t,;;-y;;,;;v-,;;d"a,;*ti"; ';'o'd,2!.!^i!:i1?,1::,::'iß"::::Y':":,":::!,3:,tarer útey ate ttd"õuttuvu tv' ttvú¿'p'v ' -- ,'i"i" üa ,nrage actually traveled both ways. The,money must be paid, at

sign lhe deposilion. You are entitled to¡eceint *j{!9s1,,.--.-.!¡L -^-.i-ñ ^rrL;- ô,¡ÀMóñ a ar er thø timc af the deoosition.

noüce of the ;ilh;; iilh serv¡ãe or t¡¡¡s õ ubpoena or at the t¡ne of the depos¡tion

PERSON ISSUING SUBPOENA)

ALtornev for Def s.=JL'¡IERO & LUZONornE) _^_

Date: March 3, 2008 Time: 10:00 am Rddìress: QPS, 3750 Auburn Blvd. , Ste. t'8"95821 (916) 483-

olsoiffiENAMAYeepuHlsneo¡scoHreuprBYTH¡ScoURT.YoUWlLLALsoBELlABLEFOR THE SUM OF FIVE HUNDREÐ DOLLARS NÑO ÃLI- ONTVII

I ol2of sen lce on

Føn Adopled lq Msndâtory UsoJud¡cial Corpl ol CEllonla

SUBP42O [ReY. January l' 2007¡

Cod6 ol Clvf Procodrro,

s5 æ20. 5lo, 2025.2ãt, 2Ù25 -62Ù,Government Code, S æ097.1

ffi FoR PERSoNAL-{PPEARAN cE--'ANtiÞRôoÙcrrcÑ ôr oocu¡¡eNTs AND THINGS soffi#,,"

Q.Phß

PM-1958

ATTACInûpNTNO.3

l) AII *WRITINGS" as defined in Califomia Evidence Code Section 250 pertaining to any

ialifornia Public Employees' Retirement System ("CaIPERS') investment, loan, note,

debenture, equity ¡ntereú or private placement with Page Mill Properties, LLC ("Page Mill"), or

with page Mitt ti,rougtt its agãnts or lenders (including Wachovia) conceming real estate in East

Palo Alto, California from April 2006 through present.

Z) All "WRITINGS" as defined in California Evidence Code Section 250 constr'tuting, or

pãrtuiting to, any communications between CaIPERS and Page Mill (including, b-ut not limited

io, David-Taran, James Thompson, Terry Lee, and Jennifer Moore) regarding real estate in East

Palo Alto, Califomia, from Ap:il 2006 tlrougþ present.

3) A¡ *WRITINGS" as defined in CalifomiaEvidence Code Section 250 constituting, or

perøining to, any comrnunications regarding real estate in East Paló Alto, California, from April

äOOO tt¡o:"gtr prér.ot, befween CaIPERS and Page Mill's: a) attorneys (including, but not limited

to, Jeffiey Bto*, Alan Petlak, Linda Donner, Scott Abrahamsoq or any other attomey atpircher. Nichols & Meeks); b) agents; or, c) ienders (including, but not limited to, Wachovia)-

4) All .,WRITINGS" as defined in CatifomiaEvidence Code Section 250 constituting, or

p"rtuioing to, any private placement memoranda sent by Page Mitl to CaIPERS regarding real

ãstrt" in East Palo Alto, California" from April 2006 ttuough present'

5) AII *WRITINGS" as defined in Califomia Evidence Code Section 250 constituting, or

pãttuiniog to, any communications between CaIPERS and Page Mill (including, but not limited

io, David-Taran, Jartres Thorrpson, Terry.Lee, and Jennifer Moore), or Page Mill's attomeys,

regarding INTERO REAL ESTATE SERVICES, INC'

6) All ,.WRITINGS" as defined in California Evidence Code Section 250 constituting, or

p"rtuioi"g to, any communications between CaIPERS and Page Mill (including, but not limited

io, David-Tæan, James Thompson, Terry Lee, and Jennifer Moore), or Page Mill's attorneys,

regarding Ephraim Luzon, aka Efr Luzon akaEfiLozon'

PM-1959

Rúi, Htndow\nÊiEhl ¿ tuù¡9trft&ñú

Slilè 16sin ¡ß cAg't?bllrt

Ph ({6) 261{252Fa(fr¡)¡6¡{¡r¡

PM-1960

Page I of2

Weir, Laurie

From: Lance lgnon [Lance-lgnon@sitrick.com]

Sent: Friday, MaY 30,2008 4:39 PM

To: Weir, Laurie;McKinleY, Clark

Gc: dtaran@pagemill.com

Subject: Latest news re: Page Mill in East Palo Alto

Attachments: image002.emz; image003.gif

FYI

Lance ignon/Member of the Firm/Sitrick And CompanyOffice: 415-388-8525 Cell: 415-793"8851

From the Burlingame DailyNews:

Thursday May 29

Vandals tear up school garden in East Palo AltoBy Banks A|bach I Daily News Staff WrlterPólice aren't seeking suspects, and damage for the most part has already been undone, but the thought of someone vandalizing the garden at

East Palo Alto 49ers Academy Middle School won't go away anytime soon.

,'I u.,as klnd of angry because we worked really hard on it," said l4-year-old student Lashapale Penn. "The strawberries were my favorite.'

Between Friday night and Sunday moming, someone jumped one of two six-foot fencei and knocked over about 1 5 planters and pots,

spilling soil onthe pavement and uprooting several plants, including two young citrus trees and a hearty growth oftomatoes.

After-school program coordinator Aja Desmond said shc came in Sunday aftemoon to do some extra work when she saw the scene.

"It was just a pathetic scene," she said Wednesday. "It's so pointless to destroy something that's so positive. The students'reactions, that's

rvhat I was really wonied about."

The garden, which sprung cabbage, lettuce, mint, tomatoes, lemons, jalapenos, chives and strawberries, is only two months old.

The sixth- through eighth-grade school created the garden as part ofa Thursday nutrition class in its after-school program. About two

dozen students h"elpeã devãlop the garden and I 0 hãve been working daily shifts watering and maintaining it. Luckily, students harvested

thc garden on Friday and made a giant salad for a potluck with parents, siudents and staff.

The school's director, Michele Sharkey, said in an e-mail that the initial investment was about $1,000 for the containers plus plant costs'

"(But) we can't put a price on all the volunteer time," Sharkey said.

The administration has decided not to file a formal complaint with the police department.

Some recent media coverage, however, has led to outside support to rebuild the garden. Page Miil Properties sent ou1 a dozen workers to

fìx the garden right away, Sharkey said.

In addition, Desmond noted, some residcnts have started bringing money, and an Alameda resident offered to donale planting supplies.

"We just have to build it back up," said Guiselle Hemandez, 13.

E-mail Banks Albach at balbach@dailynewsgroup.com-

Comment on this story

Lui GabrielPAGE MILL PROPERTIES, LLC | 480 Cowper Srreer, 2nd Flr, Palo Atto, cA 94301 | 650.833.3800 I

91212008

PM-1961

Page2 of2

650.833.3833 direct | 650.833,3933 direct faxÂ

f;fl Pl."t" .ortsidcr thc cnvironlnent bcfore prinling this enlail'

....4083 liv¿s los¿'.'

912/2008

PM-1962

Page 1 ofl

Weir, Laurie

From: Lance lgnon [Lance_lgnon@sitrick.com]

Sent: Tuesday, February 19, 2008 9:17 AM

To: McKinley, Clark;Weir, Laurie

Subject: Page Mill article

Attachments: 021908 Calif Daily Joumal.doc; 021908 Cailf Daily Journal.pdf

FYI - Same article, different formats.

Lance lgnonMember of the FirmSitrick And Co.cell: 415-793-8851office: 415-388-8525

9t2/2008

PM-1963

Page 1 ofl

Weir, Laurie

From; Lance lgnon [Lance_lgnon@sitrick.com]

Sent: Thursday, January 17,2008 9:58 PM

To: McKinley, Clark;Weir, Laurie

Subject: news clips

Attachinents: Page Mill News Clips 1.17.08.htm

Clark and Laurie,

I have attached the latest news clips, which describe the filing of Page Mill's lawsuit against theCity of East Palo Alto.

Best regards,Lance

Lance lgnonMember of the FirmSitrick And Go.cell: 415-793-8851office: 415-388-8525

9/2/2008

PM-1964

Page 1 ofl

Weir, Laurie

From: Ayala, Sonia [SAyala@PageMill.com]

Sent: Friday, December 28,2007 12:07 PM

To: Weir, Laurie;McKinleY, Clark

Subject: SJ Business Journal Article: "CALPERS backs Page Mill Plan"

Attachments : SJ Business Journal Article (2007 1228)..pdf

Lance lgnon asked that I emailyou a copy of the article'CALPERS backs Page Mill Plan" thatappeared in today's San Jose Business Journal. Please conlact Lance or Jim should you have anyquestions.

Best regards,

Sonia AyalaPage Mill Propertíes, LLC

480 Cowper Street, 2nd FloorPalo Alto, CA 94301Direct: (650) 833-3803Fax: (650) 833-3903

9tzt2008

PM-1965

Weir, Laurie

From:Sent:To:Cc:Subject:

Park, EileenMonday, May 19, 2008 9:26 AMWeir, LaurieArau, JoseFW: Ovier Mariscal - CaIPERS On-Line Web Site - Ask CaIPERS # 293929

Iraurie - PLease see this note forwarded frorn the Talkback system. This issue is related toPage Mi1I. Would you be the one to handle this one? Eileen

- - - --Original Message--- --From: TalkBack, INVO1Sent: Monday, May L9, 2008 8:58 AMTo: Park, EileenSubject: FW; Ovier Mariscal - CaIPERS On-Line Web Site - Açk CaIPERS # 293929

Hi Eileen,Can you take care of Ehis compl-aint?ThanksJose

-- - --original Message- -- - -From : oviermariscal@yahoo . com lmailto : owiermariscal@yahoo - com]Sent: Thursday, May 15,2008 3:2'7 PNI

To: TalkBack, IÌÍVOI-subject: ovier Mariscal - calPERS On-Line Web site - Ask calPERs # 293929

To : inwol_askcalpers@calpers . ca . gov

Ask CaIPERS #: 293929Date Submitted: 2oo8-05-15Time Submitted: a5226236Session Perspective Information:Member Status - UnknownMember CaEegory - UnknownEmployer Agency Type - Unknown

Date Of Birth:

Social Security #:

Status: fnterested Party

IJast Name: MariscalFirst Name: Ovier

Phone #: 650-322-9L65

Respond By: EmailE-Mail Address : oviermariscal@yahoo.comDate Sent: 2008-05-15Time SenE : 1-5:26 236

Subj ect : Investment Policies (.2 0 )

http: //ínsid.er.calpers.ca.gov:82/on|ine,/askcalpers/subject-owners.asp

Street: 2L35 Clarke AvenueCity: East PaIo AItoState: CAZip Code: 94303

1

PM-1966

Organization:

euestion: My name is Ovier Mariscal and i am a community member of East Palo Alto' I'memailing beèause i was inteùestsed in finding out Cal- Pers relationship with eage.l'tillproperties. page Mitl Properties has recentiy made an attempt to displace communitymembers in East palo Afto by raising the rents in high amounts. I wanted to see what typeof guidelines Cal pers has when invésting in companies because Page MilI Properties basedof éalo A1to, CA has acted in an unethicaL manner raising the rents of some people withincreases of up to 4'7? of what they were paying before this years-increase- Please direcÈme with the appropriate person "o

th"t we can set up meeting to discuss the matterfurther, We believe Ca1 Þers has great guidelines in regards to investing in ethicalcompanies, so we want to know if éaf peis had looked into this issue- You can reach me at650-322-9465.

http: //insider.calpers.ca.gov:82/oni-íne/askcalpers/tal-kback-focaLe-asp?TaIkBacklD=293929

vileb Browser: Netscape 5.0 (Macintosh; en-US)

PM-1967

From:Sent:To:Subject:

Park, EileenWednesday, May 21, 2008 11:12 AM'ovierm ariscal @yahoo.com'RE: Ovier Mariscal - CaIPERS On-Line Web Site - Ask CaIPERS # 293929

Dear Mr. Mariscal:

I am transmitting this response to your question for the Reaf EsÈate seníor sÈaff:

Thank you for brínging your concerns to our atténtion. We are ar¡rare of issues you raisedand we are closely-moniloring events related to the Page M111 invesLment- In iluly'06CalpERS invested $fOO *itfion nage Mill Properties II tP fund- Under the fund structurepage Mi11 makes all investment dècisions, Ovier shouLd direct further questions to PageMi11.

- - - --Original Message- --- -From: TalkBack, INVO1Sent: Monday, MaY L9, 20OB 8:58 A]4To: Park, EileenSubject: FW: Ovier Mariscal - CaIPERS On-Line Web Site

Hi Eileen,can you take care of this comPlaint?Thanks,Jose

Ask CaLPERS # 293929

- - - - -originai Message--- - -From : oviermariscal@yahoo. com lmailto : oviermariscal@yahoo' com]Sent: Thursday, MaY 15,20OA 322'1 PM

To: TalkBack, INVO1Subject: Owier Mariscal - CaI-PERS On-Line I^Ieb SiEe - Ask CaIPERS # 293929

To : invol_askcalpers@calpers. ca. gov

Ask CaIPERS #: 293929Date Submitted: 2008-05-l-5Time Submitted: 3.5:26:36Session Perspective Information :

Member status - UnknownMember Category - Unkno\,rnEmployer Agency TyPe - Unknown

Date of Birth;

Social- Security #:

Status: Interested Party

Last Name: MariscalFirst Name: Ovier

Phone #: 650-322-9165

Respond By: EmailE-Mai1 Address : oviermariscal@yahoo.comDate Sent: 2008-05-L5Time Sent: 7.5226:36

Subject: Investment Policies (20)

PM-1968

http: //insíder.calpers.ca.gov:82,/online/askcalpers/subject-owners-asp

Street = 2L35 C1arke AvenueCity: East PaLo AltoState: CAZip Code: 94303

organizaÈion:

euestion: My name is Ovier Mariscal and i am a community member of East Palo AIto' I'mãmailingr beãause i was inÈere.sted in finding out' cal Peis relationship with eage.t"tillproperties. page Mill properties has recently made an attempt to displace communitymembers in East palo Alto by raising the rents in high amounts ' f wanted Eo see what tlpeof guidelines Ca1 pers has wfren invãsting in companies because Page Mil1 Properties based

of pal-o Afto, CA has acted in an uneÈhical manner raising Lhe rents of some people withj.ncreases of up to 4'7"t of what they were paying before this years.j-ncrease. Plea6e directme with the apiropriate person so that r¡/e can set up meeting to discuss the matterfurther. we ¡étieve CaI Þers has great guidelines in regards to inwesting in ethicafcompanies, so we want to know if CaI pers had looked into this issue- You can reach me at650-322-91,65.

htÈp: //insíder.calpers.ca.gov:82/online/askcalpers/talkback-locate.asp?TalkBacklD=293929

Web Bro\¡.tser: NetscaPe 5. o (Macintosh; en-US)

PM-1969

February 1,2008

Sharon Simonson96 N. Third St. Suite 100San Jose, CA 95112

Subject Public Records Act Request

Dear Ms. Sirnonson:

This is the California Public Employees' Retirement System's (CaIPERS)follow-up letter to our December 31,2007 response. This will constitute CaIPERS' finalresponse to your Public Records Act Request dated December 20,2007.

ln your e-mailyou requested information perfaining to the following:

"a copy of any documents presented to CaIPERS staff or board membersby Page Mill Properties and íts founder and chief executive David Taranexplaining the investment strategy for the company's Page Mill Propertiesll LP lnvestment fund."

ln response to your request, Real Estate staff reviewed your request and found aprivate placement memorandum (PPM) addressing Page Mill's investmentstrategy and responsive to your request. However, the documents wereprovided to CaIPERS in confidence (hereinafter referred to as "ConfidentialRecords") and are.exempt from disclosure, as described below.

The Public Records Act

The Act embodíes the California Legislature's fundamental determination that allthe state's business is presumptively subject to public scrutiny, by providing that"every person has a right to inspect any public record." (Sec. 6253(a).)lCaIPERS is fully aware of the purpose of the Act and takes seriously the publicpolicy codified by the Act that access to information concerning the public'sbusiness is a fundamental right of the people of the State of California. However,in enacting the Act, the Legislature also recognized the necessity for keeping

t All statutory references are to the California Government Code, unless othen¡vise specificallynoted.

PM-1970

S. Simonson February 1,2008

certain documents confidential by enacting statutory exemptions to the generalprinciple of disclosure.

The Act exempts records the disclosure of which is exempted or prohibitedpursuant to federal or state law, including, but not limited to, provisions of theEvidence Code relating to privilege. (Sec. 6254(k).) This exemptionencompasses, among other things, Evidence Code section 950, relating toattorney-client communications, Evidence Code section 1060, relatíng to tradesecrets, and Evidence Code section 1040, relating to official information.

Finally, the Act exempts public records from disclosure when the public interesiserved by not disclosing the record clearly outweighs the public interest servedby disclosure of the record. (Sec. 6255.) These statutory exceptions fromdisclosure recognize that there arê circumstances for keeping otherwise public

documents confidential and are applicable to the Confidential RecOrds.

Trade Secret Privilege

The exgmption to the Act set forth in section 6254(k) protects trade secrets,which are privileged under Evidence Code section 1060. This section providesthat'"the owner of a iracje secret has a priviiege to refuse to ciisciose the secret,and to prevent another from disclosing it, if the allowance of the privilege will nottend to concealfraud or otheiwise work injustice." CaIPERS has concluded, inconsultation with its investment staff, consultants, and partners, that financial andproprietary information contained in the Confidential Records constitutes a tradesecret since the information derives economic value, both actual and potential,

from such information not being generally known to the public or to other persons

who can obtain economic value from its disclosure or use. (See definition of"trade secret" in section 3426.1 of the Calífornia Civil Code.) The ConfidentialRecords are therefore exempt from disclosure under the Section 6254(k).

The exception to the Act set forth in section 6254(k) also includes officÍalinformation, which is privileged under Evidence Code section.1040. "Officialinformation" includes "information acquired in confidence by a public employee inthe course of his or her duty and not open, or officially disclosed, to the publicprior to the time the claim of privilege is made." This is a conditional privilege inthat the information must be acquired in confidence and the necessity forpreserving the confídentiality of the information must outweigh the necessity fordisclosure in the interest of justice.

CaIPERS received the Confidential Records in confidence, as part of theinvestment proposal. CaIPERS was advised of the proprietary nature of theinformation and that said records should remain confidential and not be

California Public Employees' Retirement Systemwww.calPers.ca.gov

a

PM-1971

S. Simonson February 1,2008

disclosed. Therefore, the first prong of the "official information" privilege is met

with regard to these documents

The second prong of this privilege, the "weighing" or "balancing" test, is

substantially similar to the weighing of the public.interest test required by section

6255. Here, the necessity for preserving the confidentiality of the Confidential

Records outweighs the.public's interest in disclosure'

Section 6255(a) provides that a state agency:

shalljustify withholding any record by demonstratingthat the record ín question is exempt under expressprovisions of this chapter or that on the facts of theparticular case the public interest served by notdisclosing the record clearly outweighs the public

interest served by disclosure of the record'

CaIPERS understands the public's inteiest in the requested documents, given

the public interest in CaIPERS' investments. Nonetheless, CaIPERS cannotjustify the release of information that could negatively 3ff."t the return on

batpERS' investments. CaIPERS would be jeopardizing its investmeni anci its

relationships with its business partners if it gave competitors valuable proprietary

information. The Confidential Records could also revealto the public marketplace, including CaIPERS' competitors, valuable proprielary information_ and

baus" detrimeñt to the value of CaIPERS' investment. CaIPERS, therefore,

cannot justify the release of the Confidential Records. Therefore, the

Confidéntial Records are exempt under the express provisions of section

6254(k), including the official information privilege, and the balancing test ofsection 6255(a).

Government Code Seclion 6254.26

The Confidential Records are also exempt from disclosure under section

6254.26.2 This code section specifically exempts from disclosure investment

2 Gou"rnr"nt Code section 6254.26 reads, in part, as follows: (a) Notwithstanding any

provision of this chapter or other law, the following records regarding alternative investments in

wnícfr puOtic investment funds invest shall not be subject to disclosure pursuant to this chapter'

unless the information has already been publicly released by the keeper of the information.

(1) Due diligence materials that are proprietary to the public investment fund or the alternative

investment vehicle.:....(6) Altemative investment agreements and all related documents.

iOi t-lo¡"¡tn"tanding subdivision (a) the followíng information.contained in records described in

àíOO¡u¡sion (a) regãrding atternatìve investments in which public investment funds invest shall be

subject to disclosure puisuant to this chapter and shall not be considered a trade secret exempt

from disclosure:

Gatifornia Public Employees' Retirement Systemwww.calPers.ca.gov

-3-

P\ll-1972

S. Simonson February 1,2008

agreements and related documents relating to the venture funds. Theinvestment about which you inquire is a venture investment

Please feel free to contact me at the above telephone number if you have anyquestions or concerns regarding this matter.

Sincerely,

FJP:mio

(1) The name, address and vintage year of each alternative investment vehicle.

(c) For purposes of this section, the following definitions shall apply:

it) 'nlternative investment' means an investment ín a private equity fund, venture fund, hedge

fund, or absolute return fund.(2) 'Alternative investment vehicle' means the limited partnership, limited liability company, or

òim¡tar legal structure through which the public investment fund invests in portfolio companies.

California Public Employees' Retirement Systemwww.calPers.ca.gov

-4-

JAVIER PLASENCIA

PM-1973

From:Sent:lo:GclSubject:

Weir, LaurieTuesday, August 26,2008 9:43 AMCarrillo, Diego; Park, EileenMartin, Omar; Rodriguez, BiancaRE: Public Records Act request re: Page Mill

It looks like we need to move quickly on this as Javier has given us an end of the week deadline to collect all, review it in

house here, ano rorwarJ tã ñi'ì, - ãil'ov the end of the weekl I emailed him noting that this would be challenging. I hope to

hear back fiom him with more time, but I don't think we can count on il.

Thanks for all your good work. L

From:Sent:To:Cc¡Subjectl

Carrillo, Diego

Tuesday, August 26, 2008 9:42 AM

Parlç Eileen; We¡r, LaurieMartin, Omar; Rodriguez, Bianca

RE: Public Records Act request re: Page Mill

Omar has experience with gathering documents for PRA requests. He will start the project and keep us in the loop as he progresses'

thanks

From:Sent:To:ec:Subject:

Par( EileenTuesday, August 26, 2008 9:24 AM

Weir, Laurie; Carrillo, DiegoMartin, omar; Rodr¡guez, ijlancaRE: Public Records Act request re: Page M¡ll

you can also work with omar and Bianca on lhe archived files. They can also do the copying for you. E

From:Sent:To:Cc:Subject:

Weir, LaurieTuesday, August 26, 2008 9:20 AM

Carrillo, D¡egoPark, EileenFW: Public Records Act request re: Page Mill

HiDiego,

please coordinate a search for all records we have relating to Page Mill properties- Determine if we have anything in

stòiage or remote filing oi:ies. once you have it bring it iñto myõrice and'we will review. we are supposed to have this

review complete by the end of this week.

Work with Eileen if you need to delegate some of this work.

Let me know if there are questions. Thanks L

From:Sent:TO:Subject:

Plasencla, JavierMonday, August 25, 2008 6:19 PM

'a ndy@tenantstogether.org'Public Records Act request re: Page Mill

Andy,ii*ji

" pteasure speaking with you. As per our discussion of today, thank you for your 9o1!esy,1n

granting my request to

i"r|""á îo vour pu'btic n"Ëorái Âct requäst untir ihe end of lhis weêx. As I mentioned, calPERS' staff is sathering the

information and it has taken longer thaÅ expected. However, after gathering the information, we also need to review the

docu.ments and determine whelñer the material is proprietary and exempt from disclosure' .

We also discussed the possibilîty of you narrowing'yoür reqúest. For instance, my understanding is that your focus

pi¡,.nãr¡lv óãrtàin" to paér rvlill Êíopefti"" u, L.p. a-ná to the'extent that Paqe Mill Properties LP and Divco west Properties

Prv-1974

are independent and distinct investments from Page Mills Properties ll, LP, you might be willing to exclude these from your

request and narrow your request to the remaining entities and individuals.fnänk you for taking the folläwing request into consideration. Please feel free to call me if you have any questions-

Regards,

F. Javier PlasenciaSenior Staff Counsel(e16) 7e5-3673

PM-1975

Weir, Laurie

From:Sent:To:Gc:Subject:

Weir, LaurieFriday, August 15,2008 5:42 PMEliopoulos, Theodore; Pottle, RandyStausboll, Anne; Park, Eileen; McKinley, Clark; Plasencia, Javier;Weir, LaurieRE: Page Mill Litigation -Attorney Client Privileged Communication--

H¡AII,

I spoke with Terry Lee and Jim Shore, CIO and Chief Counsel of Page Mill.

They were aware of the class action lawsuit, but were only aware that the Stanford Community Law Clinic had gatheredinformation from tenanls on rent increases. They were not aware that an additional legal action was contemplated. Theyare searching their tenant rolls to determine if Chris Lund lives in a Page Mill property.

They view the class action suit as a legal nuisance. They believe that the suit ignores key provisions which define what alandlord is for the purposes of the exclusion to rent control. They have hired San Francisco based outside counsel, Zacks,Ultrecht, Leadbetter to represent them in both the class action and counter suits.. They state that it was the taw firm of Heller Ehrman that advised David Taran (then with Divco, not Page Mill Fund ll)

that he should use separate property ownership vehicles for tax purposes. Page Mill believes that this is a conflict forHeller Ehrman. Heller does not agree. Page Mill intends to file a motion to dismiss on conflict grounds.

. Page Mill also states that the class action suit was filed in Santa Clara County when the properties are located in SanMateo County. They believe that the plaintiffs chose Santa Clara County because Page Mill recently won a rentcontrol suit in San Mateo County. They will request a change of venue to San Mateo County courts.

r Their first formal action has been to request declaratory relief from the court that there is no legitimate claim. Thatrequest is c,urrently pending.

Page Miii states that they believe thai they are on iirm iegai ground. They agreeci io provicie Ca|PERS with a memo on aiilegal issues, anticipated timing, and potential impact on investment strategy. They will try to get this to us in time forJavier and my meeting on Tuesday.

I reminded them that it is always best for CaIPERS to hear about issues such as these from our investment partners andnot from the community or press. They expressed regret that they had not kept us informed of these events andwould keep us up to date as events unfold.

I will keep the group informed as we move forward.

All the best, Lauríe

From:Sent:TolCc:SubJect:

Weir, LaurieFriday, August 15, 2008 1:48 PM

Eliopoulos, Theodore; Potde, RandyStausboll, Anne; Park, E¡leen; McKnley, Clark; Plasencia, JavierPage M¡ll LitigaUon --Attomey client Pr¡v¡leged Communication--

Hi Ted and Randy,

I received a call today from Chris Lund. Chris is a tenant in a 4-plex unit owned by Page Mill properties in East Palo Alto.

Chris stated that he is a party named in a law suit and relayed the following:

ln mid-July a class action law suit was brought against Page Mill properties claiming that Page Mill Ís using LLC ownershipstructures for the purpose of circumventing rent control regulations in East Palo Alto. The pro bono suit, represented byHeller Ehrman LLP, claims that Page Mill registered each small rental property (4 unit or less) in separate LLC structuresin order to meet the "Mom and Pop" exclusion to rent control. They state that Page Mill is a large owner of rental propertyin East Palo Alto and should not be considered a small operator for the purposes of rent control. Page Mill has filed acounter law suit stating that they are entitled to establish LLC ownership of property.

There is a larger case that the Stanford Community Law Clinic (SCLC) plans to file in the near future. SCLC's website

PM-1976

states they are "a direct-services clinic serving low-income people in and around East Palo Alto, an economicallychallenged community four miles from the law school campus." According to Chris, this suit will focus on Page Mill'sholdings of 5 units or more. SCLC willclaim that under the rent control ordinance Page Mill is not allowed to raise rentsmore than 3.2 percent annually. Page Mill has worked on a concept of "banking" prior year unused rent increases to allowthem to raise rents in excess of 3.2 percent annually. Chris noted that SCLC has determined that some tenants in PageMills rental units are CaIPERS system members.

Chris stated that Page Millwas using predatory practices. Page Mill's properties are the only affordable housing forstudents and grad students in the area.

He has reviewed that 2007 lnvestment Report on line that notes that CaIPERS is an investor with Page Mill. They areunable to determíne who are the other investors in the fund.

Chris wants to know:1) what is the size of the current investment GaIPERS has with Page Mill,2) does Page Mill's use of LLC's violate CaIPERS good corporate governance principles, and3) what is the formal process to bring these questions fonvard to CaIPERS?

Chris stated that this is the starting point of their campaign, they intend to send letters to the head of CaIPERSlnvestrnents and the Governors Office on the issue. I thanked Chris for bringing the issues to our attention. I gave him mycontact information and asked that he continue to keep me ínformed as the issues progress. He said that he would dothat, and that he would put his questions in an emailto Clark McKinley and l. I said that it might take us time to respond tohis questions, but lhat we would get back to him with our answers.

Chris is sophisticated and not overly adversarial. He stated that he appreciates CaIPERS progressive position onresponsible investment, that he is an investor and he underslands that often times investors do not know the detail of whatinvestment partners are doing.

I placed a callto David Taran and Terry Lee, principals at Page Mill to discuss the issue. I have not heard back from them.I willwork closely with Javier once the public records act (email) comes in from Chris.

Javier and I are working on another public records act request from Andy Blue of Tenants Together, a tenant rightsorganization in the San Francisco area. We are currently looking into our files to determine what, if anything, is disclosableto Tenants Together in our investment partnership with Page Mill.

Laurie'Weir, Porrfolio Manager

Global Real Estate InvestmentsCalifomia Public Employees Retirement System400 Q Street, Suite E4800Sacramento, CA 95814

Michele Mateo, Assistant

916-795-9428 phone

916-795-3965 fax

^Ñ1h"CaIPEPS

P\1t-1977