NOTES PAYABLE

As of June 30, 2011 and December 31, 2010, the Company's notes payable, consisted of the following (dollars in thousands):

Contractual

Principal as of

Interest Rate as of

Payment

Interest Rate at

Maturity

June 30, 2011

December 31, 2010

June 30, 2011 ⁽¹⁾

Type

June 30, 2011⁽¹⁾

Date⁽²⁾

Mortgage Note Payable

Legacy at Valley Ranch Mortgage Loan

22,904

23,122

⁽⁴⁾

Principal & Interest

3.8%

2/1/2017

Premium on notes payable, net⁽³⁾

433

470

Mortgage note payable, net

23,337

23,592

Unsecured Note Payable Due to Affiliate

Advisor Bridge Loan

4,500

⁽⁵⁾

14,000

6.0%

⁽⁶⁾

6.0%

7/25/2011

Total Notes Payable, net

27,837

37,592

_____________________

⁽¹⁾ Contractual interest rate represents the interest rate in effect under the loan as of June 30, 2011. Interest rate is calculated as the actual interest rate in effect at June 30, 2011, using market interest rate indices at June 30, 2011, where applicable.

⁽²⁾ Represents the initial maturity date or the maturity date as extended as of June 30, 2011.

⁽³⁾ Represents unamortized premium on notes payable due to above-market interest rate when the note was assumed. Premium is amortized over the remaining life of the loan.

⁽⁴⁾ The interest rate under this loan is calculated at a variable rate of 362 basis points over one-month Freddie Mac Reference Bills index rate, but at no point shall the interest rate be more than 7.25%.

⁽⁵⁾ On April 21, 2011 and June 21, 2011, the Company repaid $6.0 million and $3.5 million, respectively, of the outstanding principal balance under the Advisor Bridge Loan using proceeds from the Company's offering. On July 25, 2011, the Advisor Bridge Loan was extended to March 25, 2012. In addition, on July 22, 2011, the Company made a $1.5 million principal paydown of this loan.

⁽⁶⁾ Principal and interest are payable at the maturity of this note. As of June 30, 2011, the Company had $0.5 million of accrued interest payable in connection with this note.

During the three and six months ended June 30, 2011, the Company incurred $0.4 million and $0.9 million of interest expense, respectively, which included $36,000 and $0.1 million of amortization of deferred financing costs, respectively. As of June 30, 2011, $0.1 million of interest expense was payable.

The following is a schedule of maturities for the Company's notes payable outstanding as of June 30, 2011 (in thousands):



	Current		Fully Extended
	Maturity		Maturity⁽¹⁾

July 1, 2011 through December 31, 2011	$	4,500	$	4,500
2012 - 2016	—		—
Thereafter	22,904		22,904
	$	27,404	$	27,404

____________________

⁽¹⁾ Represents the maturities of all notes payable outstanding as of June 30, 2011 as there are no extension options available per the terms of the loan agreements.

Certain of the Company's notes payable contain non-financial debt covenants. As of June 30, 2011, the Company was in compliance with all debt covenants.