Sample 11

CONFIDENTIAL
Main & Main Core Asset Opportunity Fund, Ltd.
Limited Partnership Interests
Confidential Private Placement Memorandum
HIGHLY CONFIDENTIAL
No. _______
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
Main and Main Core asset o p p o rt u n i t y F u n d , L t d .

(a Texas limited partnership)
MiniMuM:
$50,000,000 usd
MaXiMuM: $250,000,000 usd
UNITS OF LIMITED PARTNERSHIP INTERESTS $1,000,000 USD MINIMUM INVESTMENT
September 2008 THE UNITS OF LIMITED PARTNERSHIP INTERESTS OFFERED HEREBY (THE UNITS) INVOLVE A HIGH DEGREE OF RISK AND CONFLICTS OF INTEREST. SEE RISK FACTORS AND CONFLICTS OF INTEREST CONTAINED HEREIN. ACCORDINGLY, THE UNITS ARE ONLY BEING OFFERED TO THOSE PERSONS AND ENTITIES WHO ARE ABLE TO BEAR THE ECONOMIC RISK OF LOSS OF THEIR ENTIRE INVESTMENT AND WHO ARE ACCREDITED INVESTORS AS SUCH TERM IS DEFINED IN REGULATION D (HEREIN SO CALLED) OF THE SECURITIES ACT (DEFINED BELOW). THIS MEMORANDUM SHOULD BE TREATED AS CONFIDENTIAL, ANY REPRODUCTION OR DISTRIBUTION OF THIS MEMORANDUM IN WHOLE OR IN PART, OR THE DISSEMINATION OF ANY OF ITS CONTENTS WITHOUT THE PRIOR WRITTEN CONSENT OF THE GENERAL PARTNER, EXCEPT TO A PROSPECTIVE INVESTORS LEGAL COUNSEL OR FINANCIAL OR TAX ADVISOR, IS STRICTLY PROHIBITED. EACH PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREES THAT IN CASE SUCH PROSPECTIVE INVESTOR ELECTS NOT TO SUBSCRIBE FOR THE UNITS DESCRIBED HEREIN OR THE OFFERING IS TERMINATED, FOR ANY REASON WHATSOEVER, SUCH PROSPECTIVE INVESTOR WILL PROMPTLY RETURN THIS MEMORANDUM AND ALL RELATED DOCUMENTS TO THE GENERAL PARTNER.
Main and Main Core Asset Opportunity Fund, Ltd.

The rights and obligations of the parties to the transactions contemplated herein are set forth in and will be governed by certain documents described herein. This Confidential Private Placement Memorandum (this Memorandum) contains summaries of certain of these documents; however, reference is hereby made to the actual documents for a complete description of the rights and obligations of the parties hereto. All such summaries are qualified in their entirety by this reference. This Memorandum relates to the offer and sale (the Offering) by Main and Main Core Asset Opportunity Fund, Ltd. (the Partnership) to prospective investors of and in the Units of limited partnership interests in the Partnership (Units). The Partnership will make available to each prospective investor, prior to the consummation of the Offering, the opportunity to ask questions of, and receive answers from, the Partnership concerning the terms and conditions of the Offering, and to obtain any additional information, to the extent the Partnership possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information set forth herein. No other persons or entities are authorized to give any information or to make any representations in connection with the Offering. The Units are being offered when, as, and if issued, subject to prior sale or withdrawal, cancellation or modification of the offer without notice and subject to the approval of certain legal matters by counsel and certain other conditions. No Units may be sold without delivery of this Memorandum. NEITHER THE PARTNERSHIP NOR ANY OF THE UNITS THEREIN HAVE BEEN OR WILL BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, OR THE SECURITIES LAWS OF ANY OF THE STATES OF THE UNITED STATES. THE OFFER AND SALE OF SUCH UNITS IS BEING MADE IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND UNDER STATE SECURITIES LAWS FOR OFFERS AND SALES OF SECURITIES WHICH DO NOT INVOLVE ANY PUBLIC OFFERING. AS A RESULT, THE UNITS MAY NOT BE RESOLD OR TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT AND SUCH LAWS OR SUCH RESALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE AND OTHER SECURITIES LAWS. THE UNITS ARE ALSO SUBJECT TO FURTHER RESTRICTIONS ON TRANSFER DESCRIBED HEREIN. BECAUSE OF SUCH RESTRICTIONS, IT IS UNLIKELY THAT A SECONDARY TRADING MARKET FOR THE UNITS WILL DEVELOP, AND PURCHASERS MUST BEAR THE RISK OF THEIR INVESTMENTS FOR AN INDEFINITE PERIOD OF TIME. PROSPECTIVE INVESTORS SHOULD ALSO NOTE THE LIMITED WITHDRAWAL RIGHTS OF LIMITED PARTNERS DESCRIBED HEREIN. As a condition to purchasing the Units, each prospective investor will be required to represent to the Partnership that it is an accredited investor as such term is defined in Rule 501(a) of Regulation D. PROSPECTIVE INVESTORS IN THE UNITS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE PARTNERSHIP, ITS GENERAL PARTNER OR ANY OF THEIR OFFICERS, EMPLOYEES OR AGENTS, AS LEGAL, ACCOUNTING, REGULATORY OR TAX ADVICE. PRIOR TO INVESTING IN THE UNITS, A PROSPECTIVE INVESTOR SHOULD CONSULT WITH ITS ATTORNEY AND ITS INVESTMENT, ACCOUNTING, REGULATORY AND TAX ADVISORS TO DETERMINE THE CONSEQUENCES OF AN INVESTMENT IN THE UNITS AND ARRIVE AT AN INDEPENDENT EVALUATION OF SUCH INVESTMENT, INCLUDING THE APPLICABILITY OF ANY LEGAL INVESTMENT RESTRICTIONS.
This Memorandum does not include information relating to events occurring subsequent to its date, except as specifically indicated. The delivery of this Memorandum at any time does not imply that information herein is correct as of any time subsequent to its date. This Memorandum has been furnished on a confidential basis; the information contained herein may not be reproduced or used for any other purpose. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS MEMORANDUM AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT AND MUST NOT BE RELIED UPON. THE DELIVERY OF THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE UNITS. THE DELIVERY OF THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY OFFER, SOLICITATION OR SALE OF UNITS IN THE PARTNERSHIP IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE IS NOT AUTHORIZED OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE. INVESTMENT IN THE PARTNERSHIP WILL INVOLVE A HIGH DEGREE OF RISK AND CONFLICTS OF INTERESTS WHICH PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER BEFORE PURCHASING UNITS. (SEE RISK FACTORS AND CONFLICTS OF INTEREST.) IN MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PARTNERSHIP AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISK INVOLVED. THE MERITS OF THIS OFFERING HAVE NOT BEEN PASSED UPON BY, AND THE UNITS HAVE NOT BEEN REGISTERED WITH, THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, THE TEXAS SECURITIES COMMISSION, OR ANY OTHER FEDERAL OR STATE AGENCY, AND NO SUCH AGENCY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM OR HAS APPROVED THE SUITABILITY OF THE UNITS FOR INVESTMENT PURPOSES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. WITH RESPECT TO ANY U.S. FEDERAL INCOME TAX DISCUSSION (THE TAX DISCUSSION) SET FORTH IN THIS MEMORANDUM, INCLUDING BUT NOT LIMITED TO THE TAX DISCUSSION SET FORTH IN THE CERTAIN TAX CONSIDERATIONS SECTION, EACH PROSPECTIVE LIMITED PARTNER SHOULD NOTE THAT THE TAX DISCUSSION IS NOT INTENDED OR WRITTEN TO BE USED AND SUCH TAX DISCUSSION CANNOT BE USED BY ANY PERSON FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, (B) THE TAX DISCUSSION WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING (WITHIN THE MEANING OF U.S. TREASURY DEPARTMENT CIRCULAR 230) OF UNITS IN THE PARTNERSHIP, AND (C) ANY PERSON REVIEWING THE TAX DISCUSSION SHOULD SEEK ADVICE BASED ON SUCH PERSONS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. WHENEVER THE MASCULINE OR FEMININE GENDER IS USED IN THIS MEMORANDUM, IT SHALL EQUALLY, WHERE THE CONTEXT PERMITS, INCLUDE THE OTHER, AS WELL AS ENTITIES.
ii
All inquiries should be directed to the attention of the individual at the General Partner listed below: Main and Main CAOF GP, LLC Attn: Garrett Reed, Fund Manager Telephone: (817) 421-3312 fundmanager@mandmcap.com Through August 31, 2008 direct mailed inquiries to: 1010 Mustang Drive, Suite 102 Grapevine, TX 76051 Beginning September 1, 2008 direct mailed inquiries to: 1212 Corporate Drive, Suite 500 Irving, TX 75038-2517
iii
Contents
Section I Executive Summary 1
II
Summary of Offering
III
Management Team
13
IV
Investment Philosophy & Process
17
Investment Track Record
25
VI
Details of Offering
37
FORWARD LOOKING STATEMENTS........................................................................... 38 INTRODUCTION............................................................................................................ 38 INVESTMENT PROGRAM............................................................................................. 38 TERMS OF OFFERING................................................................................................. 40 MANAGEMENT.............................................................................................................. 42 FEES; EXPENSES......................................................................................................... 42 DESCRIPTION OF THE PARTNERSHIP AGREEMENT............................................... 43 RISK FACTORS............................................................................................................. 50 CONFLICTS OF INTEREST.......................................................................................... 58 CERTAIN TAX CONSIDERATIONS............................................................................... 59 SUITABILITY STANDARDS FOR PROSPECTIVE LIMITED PARTNERS.................... 66 HOW TO SUBSCRIBE................................................................................................... 68 ADDITIONAL INFORMATION........................................................................................ 68
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Executive Summary
Section I
Section I
Executive Summary
Section I
Executive Summary
Section I
EXECUTIVE SUMMARY
The principals of Main and Main Capital Group, LLC (Main & Main) have established the Main and Main Core Asset Opportunity Fund, Ltd. (the Partnership) for the purpose of delivering quarterly cash returns as well as superior risk-adjusted total returns to the Partnerships investors by acquiring, redeveloping, and converting underutilized income producing real estate assets, improving the cash flow, and disposing of the assets. The Partnership will have a particular investment emphasis on existing and in progress Office, Retail, Industrial and Multifamily properties. The Partnership is a continuation of the highly successful investment strategy of Main & Main. The Partnership is seeking capital commitments of up to $250 million. The Partnership will be managed by the General Partner through a team of professionals who collectively have over 100 years of real estate, finance and investing experience. As stated, the principals of the General Partner run the highly successful company, Main & Main, that invests in major real estate markets and types. At Main & Main the principals of the General Partner conceived and developed a real estate equity investing platform that consistently generates high investment returns throughout the real estate market cycle in various product types. The knowledge and experience of the principals of the General Partner was developed during varying economic cycles in different product types. This knowledge and experience has allowed the principals of the General Partner to take advantage of opportunities generated as the various product types responded to changing economic and market conditions. The principals of the General Partner have invested approximately $730 million in total project value. Approximately $516 million, or 70%, of these investments have been realized at a weighted average pro forma internal rate of return (IRR) of 27%. Also notable, the principals of the General Partner have never lost a dollar of invested capital on a market rate investment.
Investment Strategy The objective of the General Partners investment selection is to generate consistent and predictable performance, while increasing the opportunity for capital appreciation. Over the years, the General Partner has developed and implemented a disciplined account management system to achieve this goal. The success of this system is driven by both its investment governance structure and investment disciplines including, but not limited to:

Strategic Planning that outlines annual goals, targets viable markets, and focuses on asset management, debt strategy and dispositions. An Investment Committee which is comprised of successful and qualified senior investment professionals. Allocation of investment dollars among the various asset categories based on various risk and return criteria. Annual reporting to provide accountability to investors.
3
Executive Summary
Section I
The cornerstone of our investment process involves, top-down research coupled with a bottom up selection process. Markets are selected, top down, by first analyzing the economic outlook, then looking at the relative property sector, then qualifying markets to find the preeminent target markets. Once a target market is determined, the bottom-up acquisition/disposition process begins. Through established relationships in target markets we are able to uncover investment opportunities and collect information valuable to the due diligence process which aids in superior asset management. The General Partner creates value for its investors by identifying products in the office, retail, multifamily and industrial disciplines with value-add opportunity. By leveraging years of experience, relationships and market expertise, the General Partner is able to successfully acquire, manage and dispose of real estate assets while creating quarterly cash returns and superior risk-adjusted total returns to the Partnership.
Summary of Offering
Section II
Section II
Summary of Offering
Summary of Offering
Section II
Summary of Offering
The following is a summary only and is qualified in its entirety by the more detailed information in this Confidential Private Placement Memorandum (this Memorandum) and in the Limited Partnership Agreement of Main and Main Core Asset Opportunity Fund, Ltd. (the Partnership Agreement). Unless otherwise indicated herein, the Partnership shall mean Main and Main Core Asset Opportunity Fund Ltd., a Texas Limited Partnership, and the General Partner shall mean Main and Main CAOF GP, LLC, a Texas limited liability company. This offer and sale (the Offering) involves a high degree of risk, conflicts of interest and the payment of substantial fees and other compensation to the General Partner, its affiliates, and affiliates of its principals, and is only intended for investors who are able to bear the economic risk of loss of their entire investment and who are accredited investors as such term is defined in Regulation D.
Securities Offered
A minimum of $50 million in units of limited partnership interests (the Units) in Main and Main Core Asset Opportunity Fund, Ltd., a Texas limited partnership (the Partnership). If demand for the Offering is sufficiently great, the General Partner may sell up to a maximum of $250 million in Units. All references to dollars, $, or USD shall refer to the lawful currency of The United States of America. $250,000 per Unit; four (4) Unit Minimum. If the minimum of $50 million in Units are subscribed for, each Unit will represent an approximate 0.5% limited partner interest in the Partnership. If the minimum of $50 million in Units are subscribed for, each minimum block of Units (i.e., four (4) Units or $1,000,000) will represent an approximate 2.0% limited partner interest in the Partnership. If the maximum of $250 million in Units is subscribed as assumed, each Unit will represent an approximate 0.1% limited partner interest in the Partnership. If the maximum of $250 million in Units is subscribed, again, as assumed, each minimum block of Units (i.e., four (4) Units or $1,000,000) will represent an approximate 0.40% limited partner interest in the Partnership. Four (4) Units, or $1,000,000, which minimum investment amount may be waived in the sole and absolute discretion of the General Partner. Only accredited investors as such term is defined in Regulation D may subscribe. Prospective Limited Partners who wish to purchase Units must generally complete, execute and deliver to the Partnership a Subscription Agreement, together with their initial capital contribution and any other required documents, prior to the expiration of this offering. Subscriptions are not valid unless and until accepted in writing by a manager of the General Partner. The Partnership is being formed to raise funds for the purpose of investing directly and/or indirectly, into real estate investment opportunities, including, but not limited to, office, industrial, mixeduse, retail, multifamily, and any other real estate investment considered acceptable to the Partnership. As used in this Memorandum, invest, investment, investing and similar terms, when used in reference to the actions of the Partnership, shall include acting in a creditor capacity, an equity holder capacity, or both.
Purchase Price
Minimum Investment
Subscription Procedures
Business
Summary of Offering
Section II
Investment Objective and Strategy
The Partnerships objective is to provide significant returns by investing in: existing core assets or in-progress development of real estate; redevelopment by converting underutilized real estate assets profitable uses; and other forms of real estate transactions reasonably expected to provide significant returns. The Partnership will not invest any more than thirty-five percent (35%) of the Partnerships investment portfolio in any one transaction. The Partnership will not invest any more than seventy-five percent (75%) of the Partnerships investment portfolio in any one real estate product category. The investments made by the Partnership will be made pursuant to a broad range of vehicles, including, without limitation, equity investment, equity structured as debt, and debt with equity participation. The Partnership is seeking to raise between $50 million and $250 million in capital commitments to the Partnership (the Commitments) from the limited partners (each, a Limited Partner, collectively, the Limited Partners and together with the General Partner, the Partners) pursuant to the Offering. The Partnership may incur trade indebtedness to facilitate its normal day-to-day business operations. Neither the General Partner nor the Partnership shall be liable for any recourse debt, but may be a primary obligor or a surety, indemnitor, guarantor, or occupy a similar capacity for environmental indemnities and customary bad boy carve outs relating to financing incurred by subsidiaries, affiliates or Development Partner (defined hereafter) affiliates of the Partnership and/or General Partner. The closing of the Offering will occur on or about April 30, 2009 (the Closing). The Closing will be conditioned upon receipt of subscriptions for at least $50 million pursuant to the Offering. Main and Main CAOF GP, LLC, a Texas limited liability company, will be the sole general partner of the Partnership. The General Partner will make capital contributions to the Partnership equal to 0.1% of the capital contributions of the Limited Partners, up to but no more than $500,000. Pursuant to the terms of the Partnership Agreement, the General Partner will serve as the investment manager of the Partnership. In its role as investment manager, the General Partner will provide investment advice and other management and administrative services, including, without limitation, investigating, structuring and negotiating investments (Investment(s)) and advising the Partnership as to disposition opportunities. The General Partner is also responsible for the management and control of the Partnerships business. The managing members of the General Partner are Messrs. Garrett Reed, Ralph Reed, and Howard Heald. The General Partner is not currently registered as an investment adviser in the State of Texas or under the Investment Advisers Act of 1940, as amended (the Advisers Act), in reliance upon available exemptions from each such registration. The Partnership will register as an investment adviser should circumstances so require. The Partnerships principal office address is 1010 Mustang Drive, Suite 102, Grapevine, Texas 76051 through September 31st, 2008, and beginning October 1, 2008 shall be 1212 Corporate Drive, Suite 500, Irving, TX 75038-2517.
Target Capitalization
Indebtedness
Closing
The General Partner
Summary of Offering
Section II
Commitment Period
Capital calls may be made from time to time until three (3) years following the Closing (the Commitment Period). Upon expiration of the Commitment Period, all Partners will be released from any further obligation with respect to their undrawn Commitments, except to the extent necessary to: (i) pay the Management Fee (defined below); (ii) make follow-on investments in existing Investments (Follow-On Investments); and (iii) complete Investments that were in process or to which the Partnership has committed as of the end of the Commitment Period. The General Partner will bear full economic responsibility for all fees payable to any placement agent working with the General Partner; provided, however, any and all fees paid to representatives or affiliates of a given Limited Partner (i.e., other than placement agents of the General Partner) shall be paid by such Limited Partner. Except for the foregoing, the Limited Partners will not bear any such placement agent fees. The Partnership shall be responsible for the expenses of its organization and offering of Units, including government charges and professional fees and expenses in connection with the preparation of this Memorandum, Partnership Agreement, the Subscription Agreement, other contract documents and a disclosure document to be furnished by the General Partner to prospective investors in the Partnership, legal and accounting fees, printing costs, travel and out-of-pocket expenses (collectively, the Organizational Expenses), which expenses will be amortized over a 60 month period. The Partnership will pay all costs and expenses relating to its operations, including, but not limited to: (i) legal, compliance, auditing, consulting and accounting fees and expenses of the Partnership (including thirdparty accounting services and costs of reports to the Partners, financial statements, tax returns and K-1s); (ii) most extraordinary expenses (such as litigation); (iii) investment expenses such as commissions, research fees and expenses; (iv) interest on and fees and expenses arising out of all Partnership indebtedness; (v) all insurance, indemnification and other expenses associated with the acquisition, holding and disposition of proposed or actual Partnership assets; (vi) all third-party expenses directly or indirectly related to Partnership investments; (vii) all expenses of liquidating the Partnership; and (viii) any taxes, fees or other governmental charges levied against the Partnership and all expenses incurred in connection with any tax audit, investigation, settlement or review of the Partnership (the Operating Expenses). The General Partner will be responsible for its own operations, including office rent; furniture and fixtures; stationery; secretarial/ internal administrative services; salaries; entertainment expenses; employee insurance and payroll taxes. A Limited Partner may not sell, assign, transfer, pledge, lien, encumber or otherwise hypothecate any interest in the Partnership, except with the prior written consent of the General Partner, which consent may be withheld in the sole and absolute discretion of the General Partner. Further, a Limited Partner may not withdraw from the Partnership unless it has a legal obligation, pursuant to applicable law and regulations, to do so.
Organizational and Offering Expenses
Operating Expenses
Other Expenses
Transfer and Withdrawal
Summary of Offering
Section II
Reports to Limited Partners
Each Limited Partner will receive audited annual financial statements and a summary of the Partnerships performance for the applicable fiscal year as well as information necessary to complete its tax return. In addition, the General Partner intends to distribute unaudited quarterly reports summarizing the performance of the Partnership. Such quarterly reports will include statements of each Limited Partners Undistributed Preferred Balance and Unrecovered Capital Balance (as such terms are defined the Partnership Agreement), but such reports need not include financial statements. The expected auditor of the Partnership is KPMG International. INVESTMENT IN THE PARTNERSHIP ENTAILS A HIGH DEGREE OF RISK, AND THE GENERAL PARTNER AND ITS AFFILIATES HAVE CONFLICTS OF INTEREST. SEE RISK FACTORS AND CONFLICTS OF INTEREST. Under applicable law, so long as a Limited Partner does not actively participate in the operation of the Partnership, such Limited Partner will not be liable to the Partnerships creditors for debts of the Partnership. The Partnership Agreement expressly prohibits Limited Partners from taking any active participation in the management of the day-to-day operations of the Partnership. Accordingly, absent any contravention of the Partnership Agreement by a Limited Partner, a Limited Partners total exposure for any debts, liabilities, obligations, damages, or judgments against the Partnership is limited to that Limited Partners investment obligation in the Partnership (including such Limited Partners allocable share of any undistributed income or gain of the Partnership). No Limited Partner will be liable to the Partnership or any Limited Partner or to any third party for the debts and obligations of the Partnership and, subject to the specific requirements of applicable law set forth in the Partnership Agreement, its sole liability will be to pay the agreed amount to be contributed by it pursuant to its Subscription Agreement. The Partnership Agreement permits the Partnership to invest in any instrument secured by any kind of real property including, but not limited to, office, industrial, mixed-use, retail, multifamily, and any other real estate investment considered acceptable to the General Partner, together with any personal property that is incidental or ancillary thereto, and any beneficial interest as an owner of an interest in, or as a creditor of any partnership, trust, limited liability company, corporation or other entity (other than the Partnership) the assets of which are comprised primarily of real estate assets, as long as such investments are consistent with the investment strategy described in this Memorandum. It is anticipated that the average hold period of these investments will be four to seven years. The Partnership Agreement also permits the Partnership to invest in certain temporary investments selected by the General Partner, as long as such investments are consistent with the investment strategy described in this Memorandum.
Risks and Conflicts of Interest
Liability of Limited Partners
Permissible Investments
Summary of Offering
Section II
Co-Investment Opportunities
The General Partner may permit unrelated managers of investment opportunities in real estate or real estate related interests of all kinds, providers of debt financing to real estate or real estate related interests of all kinds, strategic investors or other parties to co-invest with the Partnership, and it may receive compensation, including carried interest, from co-investors. Commitments will be drawn down pro rata on an as-needed basis, with a minimum of five (5) days prior written notice to the Limited Partners. The initial drawdown for each Partner will include its pro-rata share of (i) the Management Fee (defined below) retroactive to the Closing; (ii) Organizational Expenses retroactive to the Closing; (iii) Operating Expenses retroactive to the Closing; and (iv) the original cost of any Investment made prior to such drawdown. Any amount paid as a Management Fee, Organizational Expenses, or Operating Expenses pursuant to this paragraph will be paid to the General Partner. In the event a partner defaults on a capital call, the General Partner, on behalf of the Partnership, may enforce standard dilution provisions as set forth under Description of the Partnership Agreement - Default by a Limited Partner. In such event, the General Partner shall have the right in its sole and absolute discretion to sell all Units of the defaulting Limited Partner and to pursue any other available legal remedies. If the General Partner determines to sell the Units of the defaulting Limited Partner, such defaulting Limited Partner faces severe economic repercussions. Partnership investments will be valued in accordance with the proposed Partnership Agreement. The Partnership will terminate seven years from the Closing, but may be extended at the sole and absolute discretion of the General Partner for one three-year period. Distributions of cash flow and sales proceeds will be made on an Investment by Investment basis. Capital contributed to the Partnership will be allocated among the Investments in a manner determined in the sole and absolute discretion of the General Partner. Cash flow and sales proceeds from the operations or sale of each Investment will be distributed (a) first, 100% to the Partners until the Partnership has distributed amounts sufficient to return their investment costs related to such Investment, (b) second, 100% to the Limited Partners until the Partnership has distributed amounts sufficient to provide a 9% per annum simple, cumulative preferred return on the investment costs related to such Investment, (c) third, 80% to the Limited Partners and 20% to the General Partner until the Partnership has distributed amounts sufficient to provide a 13% per annum simple, cumulative preferred return on the investment costs related to such Investment, (d) fourth, 65% to the Limited Partners and 35% to the General Partner until the Partnership has distributed amounts sufficient to provide a 17% per annum simple, cumulative preferred return on the investment costs related to such Investment, and (e) thereafter, 50% to the Limited Partners and 50% to the General Partner.
Drawdowns
Default by a Limited Partner
Valuation
Partnership Term
Distributions
10
Summary of Offering
Section II
Upon liquidation of the Partnership, and after all payments and reserves provided for in the Partnership Agreement, distributions of cash flow and sales proceeds will be distributed in the same manner as above (Investment by Investment); provided, however, that any remaining liquidating distributions shall be made (a) first, 100% to the Partners until the Partnership has distributed amounts sufficient to return their unrecovered capital balance, (b) second ,100% to the Limited Partners until the Partnership has distributed amounts sufficient to provide a 9% per annum simple, cumulative preferred return on the aggregate investment costs related to all Investments, (c) third, 80% to the Limited Partners and 20% to the General Partner until the Partnership has distributed amounts sufficient to provide a 13% per annum simple, cumulative preferred return on the aggregate investment costs related to all Investments, (d) fourth, 65% to the Limited Partners and 35% to the General Partner until the Partnership has distributed amounts sufficient to provide a 17% per annum simple, cumulative preferred return on the aggregate investment costs related to all Investments, and (e) thereafter 50% to the Limited Partners and 50% to the General Partner. Clawback Upon termination of the Partnership, the General Partner will be required to restore funds to the Partnership to the extent it has received cumulative distributions in excess of amounts otherwise distributable to the General Partner pursuant to the formula set forth in the second paragraph under Distributions above (the liquidation formula), applied on an aggregate basis covering all transactions of the Partnership; provided, however, that the General Partners obligation shall be capped at the lesser of: (i) fifty percent (50%) of the business income recognized by the members of the General Partner; and (ii) an amount required to provide the Limited Partners their unrecovered capital balance plus an amount necessary to provide them with a 9% per annum simple, cumulative preferred return on the drawn Commitments over the life of the Partnership covering all Investments calculated as a cash-on-cash return. Net profits and losses of the Partnership generally will be allocated among the Partners in a manner that attempts to mirror the regular ongoing distributions made by the Partnership, which the General Partner believes to be reflective of the economic interests of the Partners and to be consistent with the requirements of the Internal Revenue Code of 1986, as amended (the Code). Due to the fact that the Partnership intends to make distributions when gains occur, the General Partner does not expect a Limited Partner to receive a very large allocation of income and gain from the Partnership without receiving a corresponding distribution of cash. However, income other than gains realized could itself constitute a significant amount of income to be reported by Limited Partners, Moreover, under the method by which income and gain are allocated among the partners, a Limited Partner may be forced to pay taxes on income and gain for which it has not yet received a distribution.
Allocations
Income Without Cash and Character of Income
11
Summary of Offering
Section II
Since the General Partner is given the discretion to invest in many different types of real estate interests, it is impossible to predict what character of income the Partnership will generate, if any. In fact, substantial returns may be generated by the Partnership that may not be characterized as long-term capital gain (e.g., the Partnership may have short-term items or significant interest-type income). Although the General Partner does not believe that this is the case; the Internal Revenue Service (IRS) could recharacterize the Partnerships investment activities, as those of a dealer, which would generally have the effect of generating only ordinary income for the Partners. Management Fee The Partnership will pay a management fee (the Management Fee) to the General Partner or an affiliate thereof based on Commitments and/or Commitments actually funded to the Partnership and not then repaid to Limited Partners, as the case may be, payable quarterly as follows: (i) in advance equal to 1.2% per annum of the Commitments during the Commitment Period; and (ii) in arrears equal to 1.2% of the Commitments actually funded to the Partnership and not then repaid to Limited Partners as of the first day of the month from and after the Commitment Period until termination of the Partnership. A third party or affiliate of the principals of the General Partner may receive an origination fee of up to 1.0% of the cost or development of a given real estate Investment (the Origination Fee). All Origination Fees shall be a cost of and paid by the acquiring/ developing entity. The General Partner may, from time to time in its sole and absolute discretion, appoint a Board of Advisors consisting of one or more individuals selected by the General Partner, who may or may not be affiliates or employees of the General Partner. If established, any such Boards function would be to consult with the General Partner on investment opportunities and other Partnership related matters. The Partnership will indemnify members of any such Board of Advisors to the maximum extent permitted by law and will have the authority to reimburse the members thereof for any out-of-pocket expenses arising out of their service on such Board. Further, individuals serving on any such Board may be reasonably compensated in cash by, or in equity interests in, the General Partner or an affiliate thereof at the sole and absolute discretion of the General Partner.
Origination Fee
Board of Advisors
12
Management Team
Section III
Section III
Management Team
13
Management Team
Section III
Management Team
The following chart details the orgranizaiton of Main & Main Capital Group, LLC.
Advisory Board
Management Committee
Garrett Reed
Michael Mann
Heather Sheehan
Senior Admin Assistant
Admin Support Team
Howard Heald
Development Management
Eric Reed
Richard Noon
Vice President of Investor Relations
Ralph Reed
Director of Asset Management
Ian Elieson
Leasing Team
Underwriting Analyst
Richard Broadhead
Senior Financial Analyst
Richard Adams
Junior Accountant
Robert Vann
Onsite Property Managers
Vice President of Development
Rhonda Martin
Retail Leasing
Onsite Engineers
Shila Hallmark
Director of Development
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Management Team
Section III
Management Biographies
Garrett M. Reed Founder / CEO
Garret M. Reed is the fund manager and a principal of the General Partner. Mr. Reed will have primary responsibility for management of Partnership operations. Garrett M. Reed is also a principal of Main and Main Capital Group, LLC (Main & Main). Mr. Reed manages the investment strategies in and has overseen the development and management of over thirty-five hundred retail and office developments with a collective development value in excess of $500 million. Mr. Reed has provided site selection, directed tenant negotiations, managed leasing personnel and coordinated interim and permanent financing, while simultaneously being involved in the disposition of the development project. Before joining Main & Main, Mr. Reed was a member of N3 Capital. Mr. Reed worked in real estate development for three Fortune 500 companies, Radio Shack, Zales Corporation and Starbucks Corporation, for a total of five years where he was active in development, portfolio acquisition, value enhancement and management. Mr. Reed graduated from the University of North Texas with a Bachelors of Business Administration in Finance. Mr. Reed is a member of the International Council of Shopping Centers.
Ralph D. Reed Founder / CFO
Ralph D. Reed is a principal of the General Partner and of Main & Main. Mr. Reed analyzes the investment opportunities and oversees all accounting and financial functions of Main & Main. Mr. Reed has originated, negotiated, analyzed, and/or obtained in excess of Two Billion in real estate related financings. Before joining Main & Main, Mr. Reed was a founding member of N3 Capital and Bedrock Development, LLC, developing retail projects throughout the United States. Before founding Bedrock Development, LLC Mr. Reed worked as a consultant evaluating and negotiating real estate and banking investments. Prior to consulting, Mr. Reed worked as Vice Chairman of the Board of Directors for First Savings Association and President and Board Member of BrazosBanc Savings for over twelve years where he was active in analyzing and originating real estate and related loans. Before working in the savings and loan industry, Mr. Reed was an audit and consulting manager for KPMG Peat Marwick. Mr. Reed graduated from Texas A&M University with a BBA in Accounting and a MBA in Finance & Computer Science. Mr. Reed served as Director of the Texas Savings & Loan League from 1985 to 1988, was a member of the Urban Affairs Committee, Texas A&M University from 1984 to 1988, and was Chairman of the College Station Library Planning Committee from 1989 to 1990. Mr. Reed is a member of the International Council of Shopping Centers. Since 1970, Mr. Reed has been a licensed Certified Public Accountant and was appointed by Governor Mark White to serve as a member of the Finance Commission of Texas from 1983 to 1988 during which time he served as Chairman of the Commission and Chairman of the Savings and Loan Section of the Commission.
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Management Team
Section III
Howard L. Heald S.V.P. of Office
Howard L. Heald is a principal of the General Partner and has worked with Main & Main since its formation. Mr. Heald is the Executive Vice President of office acquisition, development, and management, and has vast experience in asset management, property management, marketing, leasing and a strong track record in value creation and profit enhancement in class A and B office buildings. Prior to joining Main & Main, Mr. Heald worked with Coventry Investment Group as President of its Realty Advisory Group where he was responsible for asset management, acquisitions, dispositions, and investor relations. Mr. Heald is a licensed real estate broker with the State of Texas and has over twenty-seven years of experience in commercial real estate. Prior to joining Coventry, Mr. Heald was with Kinney & Associates and the Henry S. Miller Company. Prior to this, Mr. Heald was a registered representative in institutional fixed income sales in Dallas. Prior to this, Mr. Heald was employed by Allied Bank of Texas in Houston as an Investment Officer. Mr. Heald serves as a Presidential Advisor to the TEXPERS Board of Directors and was a Charter Board Member of the National Society of Pension Professionals Foundation serving Public Employees Pension Systems across the country from 1997 to 2006. Mr. Heald served from 1995 to 1998 as Chairman of the Office Building Committee for the Houston Downtown Management Taxing District and served on the Economic Development and Capital Project committees for the District. Mr. Heald has held memberships in the Urban Land Institute and National Association of Industrial and Office Parks. Mr. Heald holds a BBA Degree from the University of Houston.
Eric Reed S.V.P. of Retail
Eric H. Reed is a principal of the General Partner and Main & Main. Mr. Reed will have primary responsibility for site selection and financial analysis and validation. Mr. Reed will handle tenant relationships and oversee relationships with development partners. On the acquisitions side, Mr. Reed will be involved in asset pipeline management and negotiation. On the dispositions side, Mr. Reed will be involved in market knowledge and analysis. Mr. Reed leads site selection and business development efforts for Main & Main. Mr. Reed has built an extensive network with some of the most successful brokerage firms and retail tenants while closing a significant number of transactions throughout the country. Mr. Reed is responsible for sourcing deals for various high growth national tenants in existing markets and identifying new market opportunities. Mr. Reed has sourced and closed a significant number of transactions throughout the country. Prior to joining Main & Main, Mr. Reed was responsible for managing roll-out efforts for Chilis while at Brinker International. Mr. Reed led a team of site selectors, construction and project managers, and attorneys whose primary focus was new store roll out in Northern Texas, Oklahoma, Kansas, Nebraska and Arkansas. Prior to Brinker International, Mr. Reed was responsible for new store site selection, leasing and property management oversight at Payless Shoe Source. Prior to Payless Shoe Source, Mr. Reed was responsible for site selection at Sally Beauty Company. Mr. Reed holds a Bachelor of Business Administration in Finance from Texas A&M University, and is a member of the International Council of Shopping Centers.
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Investment & Philosophy Process
Section IV
Section IV
Investment Philosophy & Process
17
Section IV
Process
The objective of the General Partners, all of whom are principles of Main & Main Capital Group, LLC (Main & Main), investment selection is to generate consistent and predictable performance and avoid capital loss, while increasing the opportunity for capital appreciation. Over the years, the principals of the General Partner have developed a disciplined account management system to pursue this goal. The success of this system is driven by both its investment governance structure and investment disciplines as described below. Investment Governance: The General Partner intends to implement the following key operational practices already used by Main & Main to foster transparency and communication. Strategic Plan: The Annual Strategic Plan outlines the goals, objectives and guidelines during the next 12-month period and includes investment strategy, target markets, debt strategies, asset management focus and dispositions necessary to achieve the goals in a prudent manner. Investment Committee: The Investment Committee (herein so called) is comprised of senior investment professionals from each investment disciplinePortfolio Management, Research, Acquisitions, Underwriting, Closing Services, Asset Management and Client Services. Each investment opportunity is subjected to an exhaustive review and approval by the Committee. Unanimous consent is required for approval of each prospective investment. Investment Allocation: Following Investment Committee approval, the Portfolio Management group screens assets for investment strategy and criteria fit within a given asset category. Report Card: The General Partner will use an annual Report Card to provide accountability to our investors. The Report Card serves as an objective measurement of performance against the Strategic Plan. Investment Disciplines: The cornerstones of our investment process is top-down research coupled with bottom-up asset selection process. As shown below, these processes are combined to identify those sectors of the real estate market that offer the best relative investment value. The General Partner will apply these disciplines of Main & Main to both the acquisition and disposition decision. Brief descriptions of our investment disciplines are provided in the following graph.
Top-Down
Market Selection
Best Relative Value Bottom-Up
Property Selection/ Disposition
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Section IV
Top-Down Research Process: The General Partners investment research will be an applied discipline. The Research concentrates on top-down issues primarily affecting property allocation and market selection. The economic outlook is one of the key drivers of these recommendations. The General Partner believes the key drivers for real estate at both the national and local level are business and consumer confidence, demographic shifts, employment growth and interest rate levels. Combined, these factors affect the relative value for each property sector. Our research professionals are charged with regularly gathering, keeping, and assessing these trends and combining them with local intelligence to formulate well-founded opinions on the underlying investment potential on a marketby-market basis for each property type. Equally important, the Research Department is responsible for integrating its top-down market evaluations with the bottom-up expertise of acquisition, asset management and disposition professionals. Asset Management, Dispositions, Acquisitions, Underwriting and Research are separate areas of expertise; however, professionals in these disciplines contribute to the research process in an effort to develop an in-depth understanding of local markets. Our market selection process involves two steps: 1) identifying Qualified Markets that historically have proven to generate predictable, sustained demand for certain property types and 2) selecting Target Markets. Target Markets are screened from those Qualified Markets that are either under priced relative to their long-term value or in the trough of their cycle. This Qualified Market selection process is guided by four fundamental beliefs.
Market Selection
Economic Outlook Property Sector Relative Value Qualified Markets Target Markets
Many metropolitan areas possess embedded characteristics that support predictable, sustained demand for certain property types. Embedded characteristics include a citys location, transportation infrastructure, employment base and quality of life. All real estate markets experience cyclical supply-and-demand fluctuations that cause values to vary. Investor emotion and overreaction to market cycles contribute to and exaggerate price fluctuations. Values within markets possessing embedded characteristics correct themselves more efficiently.
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Section IV
In light of these beliefs, we orient our research towards consideration of value over the investment horizon identified in the strategic plan. The firms understanding of the unique embedded characteristics of individual markets and property types supports the objective of generating consistent and predictable performance. Bottom-up Acquisition/Disposition Process: Our bottom-up property selection/disposition process complements its top-down market selection process. Once a Target Market list has been developed, we draw upon our established relationships to uncover investment opportunities and provide information useful to the due diligence process. We have been an active investor in institutional-quality real estate with more than 700 Million dollars. we posses the in-depth knowledge of the markets, properties and people necessary to source high-quality investment opportunities.
Property Selection / Disposition Process

Dispositions Asset Management Investment Sourcing
Target Markets
Two factors distinguish our bottom-up property selection/disposition process. Acquisition Team Approach Leads to Increased Investment Opportunities: Through our team approach, experts from each of the firms disciplines focus on the various acquisition and closing tasks and evaluate the risks associated with an investment. As a result, our acquisition professionals are focused solely on sourcing quality investment opportunities. This process allows acquisition professionals to cover markets most effectively and build strong relationships, thus increasing access to investment opportunities. Credibility Supports Deal Flow: In todays market, owners and brokers have many options for selling properties. Because of its screening process, depth of market knowledge and transaction history, we have a reputation in the investment market as a strong performer and a sophisticated investor in value-added properties. Underwriting/Contract Negotiation/Due Diligence: Before executing a contract, we establish a Transaction Team comprised of professionals from Acquisitions, Underwriting, Asset Management, Research and Closing Services. During the formal underwriting phase our Underwriting and Asset Management professionals subject the asset to a comprehensive physical, financial and market analysis. This analysis includes the propertys historical performance, lease terms and rollover/tenant credit, and the investments anticipated future returns. Before making the acquisition decision, the transaction team prepares a detailed investment proposal that defines the major investment issues. Simultaneously, the Asset Manager develops a Value Optimization Plan (property-level
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Section IV
business plan) with the assistance of established contacts at local management and leasing firms to assess market and operational issues. This business plan identifies key strategies necessary to create value. An important aspect of this plan is the disposition strategy, which identifies the market and property characteristics, expected to generate the optimum sales price. Based on findings during the due diligence period, the transaction team incorporates any necessary adjustments into the original underwriting before final approval is sought. This proposal is presented to our Investment Committee for approval. Unanimous approval is required to acquire the asset. Closing Services: Our standard purchase and sale agreement provides ample time for property inspection. During this period, Closing Services professionals conduct an evaluation of engineering, legal, environmental liability and risk management issues utilizing independent consultants. They are responsible for anticipating and mitigating potential problems and keeping third-party costs at a minimum. If the Investment Committee approves the asset for purchase, Closing Services professionals finalize the transaction according to the terms and conditions of the contract, making any price adjustments required as a result of the due diligence. Asset Management: Upon closing, the transaction team transitions the asset to the internal Asset Management group, which is responsible for executing the Value Optimization Plan established during due diligence. Our asset management process is characterized by three major competitive advantages. Integrated Investment Process: As part of our team approach, Asset Management professionals become closely involved with an investment beginning with the initial due diligence period. The Asset Manager provides continuity by remaining actively involved through the disposition phase of the asset transaction. Use of Independent Third-Party Property Managers: We use third-party property managers to provide highly qualified local leasing and management expertise. The firm hires property management firms it considers to be the most qualified in a given market and emphasizes accountability through a 30-day cancelable contract. We actively seek the most attractive fee structure for property management services by competitively bidding the assignments. Use of third-party property managers also helps reduce potential economic conflicts of interest that may arise in executing an exit strategy and helps align the disposition decision with the Partnerships investment objectives. Integrated Financial Systems: All of our professionals have access to detailed information on each property investment, thereby enhancing performance and responsiveness to clients. Dispositions: Developing an effective disposition strategy for each property type begins with prudent market and property selection. By limiting investments to high-quality properties in qualified markets, we are better positioned to implement a proactive disposition strategy. Before acquisition, the firm formulates a preliminary disposition strategy and a target disposition date based upon expected market and property performance. Quarterly, and as special conditions warrant, a disciplined hold/sell analysis is performed for each asset. In determining the timing of property dispositions, we evaluate: Market cycles (e.g., macroeconomic conditions and anticipated supply/demand); Property considerations (e.g., competitive position, leasing status, tenant rollover, physical condition and capital improvement costs); Capital market conditions (e.g., capitalization and discount rates, debt markets and investor demand); and The Partnerships return objectives (e.g., diversification, risk profile and the Partnerships overall objectives ).
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Section IV
Products
We have extensive experience investing in a variety of real estate products. We use a number of investment strategies, including core investing, value-added investing and investing in other developers projects. For the Partnership, the General Partner will focus on value-added products primarily within four specific property types: office, retail, multifamily, and industrial. A summary of the value-added opportunities for each product type follows. OFFICE: Main & Main will focus its office efforts on suburban buildings. These properties typically meet more of the physical and locational needs of todays tenants. Special purpose features or operations shall be considered. From a geographic perspective, we will focus on those investments located in geographical demonstrating sustained growth. Desired Attributes Suburban Low- and mid-rise office buildings. Minimum size of 50,000 sq. ft. with adequate parking availability and acceptable parking ratios for the given market. Aesthetically appealing interior and exterior decor. Adequate mechanical systems, security systems, telecommunications. capabilities/flexibility and energy efficiency to meet or adapt to current and anticipated future tenant demands. Buildings capable of accommodating multiple user types (flexible floor plates and bay depths). Located in large employment nodes in major metropolitan areas with easy access to major roadways and/or mass transit.
Value-Added Opportunity in the Office Sector Acquisition of office buildings that have significant lease rollover exposure, are vacant, soon-to-be vacant and/or at a discount to reproduction cost. Acquisition of office properties mis-priced due to todays capital markets. These properties will have very high current income returns. Development of value office product.
RETAIL: The retail acquisition efforts will focus on regional shopping centers. The firm believes shopping centers that meet the need for basic goods and services will perform more predictably throughout all phases of the economic cycle, without the credit and concept risk associated with small neighborhood centers. Emphasis shall Value-Added Opportunity be placed on institutional-quality assets in prominent Class in the Retail Sector A locations. Anchor space must be competitive by todays standards, and anchor tenants shall have a dominant market Renovation of existing properties. presence. The focus will be on investments located in, or in proximity to, existing retail nodes with strong performance Re-tenanting/repositioning of existing histories. Anchors generally must have above average sales properties. history. Development of new retail products.
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Section IV
Desired Attribute Neighborhood/Community Minimum size of 50,000 sq. ft. Grocery-anchored centers Minimum one anchor, but typically two. Appropriate tenant mix for the surrounding neighborhood. Good visibility and multiple curb cuts for access. Good traffic counts on adjacent arteries. Suitable local/shop bay depths. Marketable parking availability. MULTIFAMILY: The General Partner will emphasize acquisitions of well-located, garden-style, in-fill, or mid-rise apartment communities. Properties will provide an opportunity to add value through renovation of both interior features (appliances, bathrooms, kitchens, floor coverings, washer/dryer additions, crown molding, ceiling fans, etc.) and exterior features (security gates, landscaping, pool and water features clubhouse upgrades fitness room etc.). New sources of revenue will also be explored (new garages and carports, billing back utilities to new tenants, etc.). By providing a more affordable living option in desirable areas, We believes that the investment will provide a more secure income stream with the potential for long-term growth.
Value-Added Opportunity in the Multifamily Sector Renovate existing properties in urban in-fill locations. Development of new multifamily product.
Desired Attributes Garden and Mid-Rise Garden-style (2-3 stories) or mid-rise (4-6 stories). Minimum of 150 units per project. Located within relatively unaffordable single-family neighborhoods and in proximity to major employment nodes, retail centers and neighborhood amenities. Preferred unit amenities washer/dryer connections, walk-in closets and patios/balconies. Preferred common-area amenities clubhouse, pool and fitness center.
INDUSTRIAL: The General Partner will focus its investment efforts on warehouse and distribution properties near major transportation infrastructure. Given the evolution of inventory control for manufacturers and distribution channels for retailers, well-located warehouse/ distribution properties should maintain a competitive position in the market. Buildings shall be of high quality Value-Added Opportunity construction, with a physical layout that accommodates in the Industrial Sector multiple tenants and facilitates traffic flow, the General Partner will focus on investments located in primary industrial Acquisition of vacant or soon-tocorridors, within markets that exhibit a strong relationship to be vacant industrial buildings at a regional or national distribution trends. discount to reproduction price. Development of new industrial product.
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Section IV
Desired Attributes - Warehouse/Distribution Minimum building size - 75,000 sq. ft. Minimum of one truck door per 8,000 sq. ft. Minimum 100-foot truck court, concrete aprons preferred. Fire sprinkler system, power supply and warehouse lighting that meet or exceed competitive market standards. Prefer buildings with multi-tenant flexibility. Office finish of 0% to 40%.
Performance
Main & Main has been active as a value-added investment manager for several years. By identifying and implementing value-added strategies, the firm has generated superior performance for its clients. While the past performance of the principles of Main & Main real estate investments cannot be taken as indicative of future performance of the Partnership, we believe our collective track record (see Section V.) is indicative of our investment acumen through various stages of the real estate cycle.
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Section V
Section V
25
Section V
One Riverway
Location: Houston, Texas
Property Type Class A office
Square Feet 481,000
Total Value $62,130,000
Realized IRR 38%
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Section V
Texaco Heritage Plaza

Square Feet 1,149,140
Realized IRR 29%
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Section V
2603 Augusta
Square Feet 242,000
Realized IRR 23%
28
University Centre I
Location: Fort Worth, Texas
Property Type
Square Feet 100,000
Projected IRR 20%
Class A office
Section V
29
Section V
4900 Woodway
Property Type Class B Office
Square Feet 120,000
Realized IRR 16 %
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Section V
1212 Corporate Dr..

Location: Irving, Texas
Property Type Class B office
Square Feet 127,000
Projected IRR 35%
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Section V
Two Riverway
Square Feet 371,000
Projected IRR 22%
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Section V
Additional Offices (not pictured)

Property Name
York Centre Sugarland Plaza B B
Class
Square Feet
113,000 61,000
Total Value
$12,500,000 $4,000,000
Realized IRR
26% 19%
NOTE: The figures represented are actual IRRs received by investors net of all fees and expenses.
Retail Project Returns

Capital Invested
100 80 60 40 20 10 $ in Millions 2004
$15,570,458
2005
$60,042,481
2006
$83,883,770
2007
$94,393,715
Average Return on Investment

35% 30% 25% 20% 15% 10% 2004
25.8%
2005
33.97%
2006
22.86%
2007
32.31%
NOTE: The figures represented are actual IRRs received by investors net of all fees and expenses.
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Section V
Retail Projects in Progress

Bee Caves
Location Square Feet Total Cost Projected IRR Austin, Texas 116,700 $30,127,432 34%
TENANTS Kohls Bed Bath & Beyond Dicks Sporting Goods
Buckner Crossing
Location Square Feet Total Cost Projected IRR Dallas, TX 90,000 $11,900,000 27%
TENANTS Ross Dunkin Donuts Payless Shoes Famous Footwear
Quail Creek
g, Texas
Location Square Feet Total Cost Projected IRR TENANTS Bed Bath & Beyond GameStop Petsmart Academy Sports Witchita Falls, Texas 241,000 $28,100,000 25%
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Section V
Highland Market Place

Location Square Feet Total Cost Projected IRR TENANTS Smiths Fine Foods Walgreens Highland, UT 168,000 $32,200,000 33%
The Shops at Gray Hawk

Location Square Feet Total Cost Projected IRR Frisco, TX 32,000 $8,500,000 25%
TENANTS Walmart Wachovia Wendys Wells Fargo
Metro West
Location Square Feet Total Cost Projected IRR
Texas
Orlando, FL 48,300 11,200,000 22%
TENANTS Super Walmart
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Details of Offering
Section VI
Section VI
Details of Offering
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Details of Offering
Section VI
FORWARD LOOKING STATEMENTS

All statements other than statements of historical fact contained in this Memorandum are forward-looking statements. When used herein, the words anticipates, expects, believes, seeks, goals, intends or projects and similar expressions are intended to identify forward-looking statements. It is important to note that the Partnerships actual results could differ materially from those projected by such forward-looking statements. Although the Partnership believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the Partnerships results to differ materially from the results discussed in such forward-looking statements include, but are not limited to, the risks described under Risk Factors. All forward-looking statements in this Memorandum are expressly qualified in their entirety by the cautionary statements in this paragraph.
INTRODUCTION
Main and Main Core Asset Opportunity Fund, Ltd. is a Texas limited partnership formed for the purpose of investing its assets in accordance with the investment objective set forth in this Memorandum and the terms of the Partnership Agreement. Main and Main CAOF GP, LLC, a Texas limited liability company, is the General Partner and, as the investment manager, is responsible for providing investment advice and other management and administrative services, including, without limitation, investigating, structuring, and negotiating investments (Investment(s)) and advising the Partnership as to disposition opportunities. The General Partner is also responsible for the management and control of the Partnerships business. The managing members of the General Partner are Garrett Reed, Ralph Reed, and Howard Heald. The General Partner is not currently registered as an investment adviser in the State of Texas or under the Investment Advisers Act of 1940, as amended (the Advisers Act), in reliance upon available exemptions from each such registration. The Partnership will register as an investment adviser should circumstances so require. The Partnerships principal office address is 1010 Mustang Drive, Suite 102, Grapevine, Texas 76051, through August 31, 2008, and beginning September 1, 2008 shall be 1212 Corporate Drive, Suite 500, Irving, TX 75038-2517, and its telephone number is (817) 421-3312. This Memorandum sets forth the investment objective and method of operation of the Partnership, the principal terms of the Partnership Agreement and certain other pertinent information. However, the Memorandum does not set forth all the provisions and distinctions of the Partnership Agreement that may be significant to a particular prospective Limited Partner. Each prospective Limited Partner should examine this Memorandum, the Partnership Agreement and the Subscription Agreement in order to assure itself that the terms of the Partnership Agreement and the Partnerships investment program are satisfactory to it. Prospective Limited Partners are invited to review any materials available to the General Partner relating to the Partnership and any other matters regarding this Memorandum. All such materials are available at the office of the Partnership, at any reasonable hour, after reasonable prior notice. The General Partner will afford prospective Limited Partners the opportunity to ask questions of and receive answers from its representatives concerning the terms and conditions of the Offering and to obtain any additional information to the extent that the General Partner or the Partnership possesses such information or can acquire it without unreasonable effort or expense.
INVESTMENT PROGRAM
Business The Partnership is being formed to raise funds for the purpose of investing in core asset opportunities, including but not limited to, office, industrial, mixed-use, retail, multifamily, and any other real estate investment considered acceptable to the General Partner. Such investments will be as an equity holder in the entity developing, redeveloping or holding the real estate project, in the capacity of a creditor, or both. The Partnership may also invest in other transitional projects which are not typically pursued by mainstream buyers and sellers due to their financing structure, leverage and risk profile.
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Details of Offering
Section VI
Investment Objective and Strategy The Partnerships objective is to provide significant returns by acquiring core real estate assets and converting those assets to more profitable uses through leasing, development and redevelopment. The primary focus of the Partnership is to make equity and debt investments in office, industrial, mixed-use, retail, multifamily, and any other real estate investment considered acceptable to the Partnership. Such Investments are expected to comprise the majority of the Partnerships investment portfolio. These office, industrial, mixed-use, retail, multifamily, and other real estate investment considered acceptable to the Partnership include, but are not limited to, managing, leasing, development and redevelopment of office, industrial, mixed-use, retail, multifamily, and other real estate investment generally ranging in size from a fifty thousand to more than one million square feet. The secondary focus of the Partnership is to make debt and equity investments in office, retail, and industrial projects of other proven real estate developers (the Development Partners) whose focus is similar to that of the Partnership. Such Investments are expected to comprise less than 50% of the Partnerships investment portfolio. In addition, the Partnership will pursue other value-add real estate investment opportunities, including but, not limited to, new and existing office, industrial, retail, multifamily, and mixed-use projects. The primary exit strategy for the Partnership is to sell or refinance assets in the Partnerships investment portfolio. In addition to the objective and strategy set forth above, the General Partner has sole and absolute discretion to take all such other action as the General Partner may deem necessary and desirable to achieve the investment objectives of the Partnership. Individual Investments in which the Partnership invests will generally range from $3 million USD to $35 million USD; however, the General Partner may, in its sole and absolute discretion and in the course of pursuing the investment objectives of the Partnership, make individual investments outside that range. While it is anticipated that the Partnership will invest primarily in the types of Investments described above, the Partnership has broad and flexible investment authority. Accordingly, the General Partner may invest Partnership capital in such Investments as the General Partner determines, in its sole and absolute discretion, further the Partnerships objectives. The General Partner may permit unrelated managers of investment opportunities in real estate or real estate related interests of all kinds, providers of debt financing to real estate or real estate related interests of all kinds, strategic investors or other parties to co-invest with the Partnership, and it may receive compensation, including carried interest, from co-investors. In Investment opportunities, even with Development Partners, the Partnership will be an active investor having control and decision making authority with regards to such Investment opportunities. The General Partner will seek Development Partners who are established local, regional and national real estate professionals and can provide access to specific development and acquisition opportunities. The General Partner will place significant emphasis on selecting experienced, qualified developers to be the Development Partners. The General Partner will seek Development Partners who are successful in their respective markets and product types and who have proven track records and strong local market knowledge and the relevant development, redevelopment or repositioning expertise to serve as effective Development Partners. In co-investment opportunities with Development Partners, the Partnership and the Development Partner will likely form a new single purpose entity for each individual Investment. The Development Partner (or an affiliate of the Development Partner acceptable to the General Partner) will be the general partner or manager of the single purpose entity and will be responsible for the day-to-day operations of the special purpose entity, subject to control by the General Partner with regards to material issues. The Partnership will be the limited partner or member of the special purpose entity, with voting rights, the creditor to the single purpose entity, or both, as it is anticipated that on some projects the Partnerships interest in a particular transaction may be secured by a recorded mortgage or deed of trust. The Partnership will require the Development Partner to create a development plan for the single purpose entity. If the Development Partner deviates from the plan in any material way, the General Partner will have the ability to take over the management of the special purpose entity and, in certain circumstances, buy out the Development Partner
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Details of Offering
Section VI
altogether. The General Partner is in a unique position in that it will have the experience and wherewithal to manage the single purpose entity at a high level. Interim Investments Pending investment of the type described above, payment of expenses or distributions to Partners, any available assets of the Partnership may be invested in temporary investments selected by the General Partner which may include, but are not limited to, customary, interest-bearing brokerage accounts maintained with a bank or other brokerage accounts eligible in whole or in part for insurance provided by the Securities Investor Protection Corporation; shortterm debt securities issued or guaranteed by the United States government, its agencies and instrumentalities; money market funds investing primarily in securities issued or guaranteed by the United States government, its agencies and instrumentalities; negotiable or non-negotiable certificates of deposit or short-term deposits with banks eligible in whole or in part for insurance provided by the Federal Deposit Insurance Corporation or a comparable insurer (such as Securities Investor Protection Corporation); or commercial paper or other obligations maturing within seven days issued by financial institutions or any other issuer which, at the time of purchase, have been assigned one of the two highest investment grade ratings by a nationally recognized statistical rating organization. AN INVESTMENT IN THE PARTNERSHIP MAY BE DEEMED TO BE HIGHLY SPECULATIVE AND IS NOT INTENDED AS A COMPLETE INVESTMENT PROGRAM. IT IS DESIGNED ONLY FOR SOPHISTICATED PERSONS WHO CAN BEAR THE ECONOMIC RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT IN THE PARTNERSHIP AND WHO HAVE A LIMITED NEED FOR LIQUIDITY IN THEIR INVESTMENT. THERE CAN BE NO ASSURANCE THAT THE PARTNERSHIP WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
TERMS OF OFFERING
General The Partnership is making a private offering of Units of limited partnership interests only to accredited investors. The Partnership is offering up to 1000 Units, or $250 million USD, pursuant to the Offering. The General Partner reserves the right in its sole and absolute discretion to revise or withdraw the Offering. The minimum Commitment is $1,000,000 USD being ten (4) Units, which minimum Commitment may be waived in the General Partners sole and absolute discretion. The General Partner arbitrarily determined the offering price for the Units. The offering price bears no relationship to the Partnerships assets, earnings, book value or any other generally accepted criteria of value. The General Partner may use its sole and absolute discretion in deciding whether to accept or reject any subscriptions for Units. Closing and Termination of Offering The closing of the Offering will occur on or about April 30, 2009 (the Closing). The Closing will be conditioned upon receipt of subscriptions for at least $50 million USD pursuant to the Offering. The General Partner may terminate the Offering at any time prior to the Closing if it determines, in its sole and absolute discretion, that the Offering will not be consummated for any reason. In this event, subscription funds previously received from subscribers and deposited in the Partnership account will be returned (with interest on such funds, if any, in excess of any bank service charges), and the subscribers will have no further rights or remedies with respect to the General Partner or its affiliates, and the General Partner will have no further obligations, with respect to the Partnership, prospective Limited Partners, subscribers or this Offering. SUBSCRIBERS SHOULD BE AWARE OF THE RISK THAT THE OFFERING MAY NOT CLOSE AND THAT IF IT DOES NOT, SUBSCRIBERS WILL NOT RECEIVE A RETURN ON THEIR INVESTMENT OR ANY OF THE ALLOCATIONS AND DISTRIBUTIONS DESCRIBED IN THIS MEMORANDUM. Upon the Closing, the accepted subscribers will be admitted to the Partnership as Limited Partners.
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Commitment Period Capital calls may be made from time to time until three (3) years following the Closing (the Commitment Period). Upon expiration of the Commitment Period, all Partners will be released from any further obligation with respect to their undrawn Commitments, except to the extent necessary to: (i) pay the Management Fee (defined below); (ii) make follow-on investments in existing Investments (Follow-On Investments); and (iii) complete Investments that were in process or to which the Partnership has committed as of the end of the Commitment Period. Partnership Term The Partnership will terminate seven years from the Closing, but may be extended at the sole and absolute discretion of the General Partner for one three-year period. Drawdowns Commitments will be drawn down pro rata on an as-needed basis, with a minimum of five (5) days prior written notice to the Limited Partners. The initial drawdown for each Partner will include its pro-rata share of: (i) the Management Fee (defined below) retroactive to the Closing; (ii) Organizational Expenses retroactive to the Closing; (iii) Operating Expenses retroactive to the Closing; and (iv) the original cost of any Investment made prior to such drawdown. Any amount paid as a Management Fee, Organizational Expenses or Operating Expenses pursuant to this paragraph will be paid to General Partner. Subscription Agreement Each prospective Limited Partner will be required to enter into a subscription agreement (the Subscription Agreement) covering its investment in the Partnership to be prepared and approved by General Partner. The Offering is being made solely to accredited investors as such term is defined in Regulation D. In the Subscription Agreement, the prospective Limited Partner will make a representation that it is an accredited investor and make other customary representations and warranties in connection with the private offering of Units in the Partnership. By subscribing for Units in the Partnership, each Limited Partner will appoint the General Partner his attorneyin-fact for purposes of filing required certificates and documents relating to the formation and maintenance of the Partnership as a limited partnership under applicable law and signing all instruments effecting authorized changes in the Partnership or the Partnership Agreement and conveyances and other instruments deemed necessary to effect the dissolution or termination of the Partnership. The power-of-attorney granted as part of each Limited Partners Subscription Agreement is a special power-of-attorney and is coupled with an interest in favor of the General Partner and as such shall be irrevocable and will continue in full force and effect notwithstanding the subsequent death or incapacity of any Limited Partner granting such power-ofattorney, regardless of whether the Partnership or the General Partner shall have had notice thereof, and shall survive the delivery of a transfer by a Limited Partner of the whole or any portion of such Limited Partners interest. Plan of Distribution The Partnership is offering a minimum of $50 million USD in Units of limited partnership interests at a price of $250,000 USD per Unit. If demand for the Offering is sufficiently great, the General Partner may sell up to a maximum of $250 million in Units. The minimum investment allowed will be four (4) Units, or $1,000,000 USD, which minimum amount may be waived in the sole and absolute discretion of the General Partner. The Partnership does not anticipate using a broker or dealer to sell the Units; and, therefore, does not expect to pay any commissions in connection with the placement of Units; provided, however, the General Partner may, at its option, pay commissions from its funds to persons locating investors and any and all fees paid to representatives or affiliates of a given Limited Partner (i.e., other than finders of the General Partner) shall be paid by such Limited Partner. The Partnership will pay all of its costs and expenses in connection with this Offering, including, but not limited to,
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all expenses related to the costs incurred by the Partnership to prepare, reproduce or print this Memorandum, legal expenses and other expenses incurred in qualifying this Offering for sale under the Blue Sky laws of such jurisdictions as may be necessary.
MANAGEMENT
The General Partner The General Partner is Main and Main CAOF GP, LLC, a Texas limited liability company. The General Partner was formed on March 14, 2008 to serve as the general partner of the Partnership. The General Partner is owned by Garrett Reed (25%), Eric Reed (25%), Ralph Reed (24%), Howard Heald (25%), and Shila Hallmark (1%). Garrett Reed, Eric Reed and Ralph Reed are the principal owners of Main & Main; however, beyond the in common control by Garrett Reed, Eric Reed and Ralph Reed, Main & Main does not own, is not owned by, and is not otherwise affiliated with the General Partner or the Partnership. Minority ownership interests in the General Partner may be issued to and subsequently held by other persons at the discretion of the General Partner. See Conflicts of Interest. The General Partner has no assets other than a nominal amount of initial capitalization. The General Partner is required to devote such time as may reasonably be required to further the affairs and activities of the Partnership. The General Partner, or its affiliates, in its ordinary course of business may act as adviser to other accounts, and may act as sponsor or general partner for other customers, accounts, partnerships, and investment vehicles. See Risk Factors and Conflicts of Interest. The Board of Advisors The General Partner may, from time to time in its sole and absolute discretion, appoint a Board of Advisors consisting of one or more individuals selected by the General Partner, who may or may not be affiliates or employees of the General Partner. If established, any such Boards function would be to consult with the General Partner on investment opportunities and other Partnership related matters. The Partnership will indemnify members of any such Board of Advisors to the maximum extent permitted by law and will have the authority to reimburse the members thereof for any out-of-pocket expenses arising out of their service on such Board. Further, individuals serving on any such Board may be reasonably compensated in cash by, or in equity interests in, the General Partner or an affiliate thereof in the sole and absolute discretion of the General Partner.
FEES; EXPENSES
Management Fee The Partnership will pay a management fee (the Management Fee) to the General Partner or an affiliate thereof based on Commitments and/or Commitments actually funded to the Partnership and not then repaid to Limited Partners, as the case may be, payable quarterly as follows: (i) in advance equal to 1.2% per annum of the Commitments during the Commitment Period, and (ii) in arrears equal to 1.2% of the Commitments actually funded to the Partnership and not then repaid to Limited Partners as of the first day of the month from and after the Commitment Period until termination of the Partnership. Origination Fee A third party or affiliate of the principals of the General Partner may receive an origination fee of up to 1.0% of the cost or development of a given real estate Investment (the Origination Fee). All Origination Fees shall be a cost of and paid by the acquiring/ developing entity.
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Organizational and Offering Expenses The General Partner will bear full economic responsibility for all fees payable to any placement agent working with the General Partner; provided, however, any and all fees paid to representatives or affiliates of a given Limited Partner (i.e., other than placement agents of the General Partner) shall be paid by such Limited Partner. Except for the foregoing, the Limited Partners will not bear any such fees. The Partnership shall be responsible for the expenses of its organization and offering of Units, including government charges and professional fees and expenses in connection with the preparation of this Memorandum, the Partnership Agreement, and Subscription Agreement, other contract documents and a disclosure document to be furnished by the General Partner to prospective investors in the Partnership, legal and accounting fees, printing costs, travel and out-of-pocket expenses (collectively, the Organizational Expenses), which expenses will be amortized over a 60 month period. Operating Expenses The Partnership will pay all costs and expenses relating to its operations, including, but not limited to (i) legal, compliance, auditing, consulting and accounting fees and expenses of the Partnership (including third party accounting services and costs of reports to the Partners, financial statements, tax returns and K-1s); (ii) most extraordinary expenses (such as litigation); (iii) investment expenses such as commissions, research fees and expenses; (iv) interest on and fees and expenses arising out of all Partnership indebtedness; (v) all insurance, indemnification and other expenses associated with the acquisition, holding and disposition of proposed or actual Partnership assets; (vi) all third-party expenses directly or indirectly related to Investments; (vii) all expenses of liquidating the Partnership; and (viii) any and all taxes, fees or other governmental charges levied against the Partnership and all expenses incurred in connection with any tax audit, investigation, settlement or review of the Partnership (the Operating Expenses). Other Expenses The General Partner will be responsible for its own operations, including office rent; furniture and fixtures; stationery; secretarial/internal administrative services; salaries; entertainment expenses; employee insurance and payroll taxes.
DESCRIPTION OF THE PARTNERSHIP AGREEMENT

The rights and obligations of the General Partner and the Limited Partners will be governed by the Partnership Agreement the form of which shall be prepared by the General Partner. Main and Main Core Asset Opportunity Fund, Ltd., a Texas limited partnership, will be formed pursuant to the terms of the Partnership Agreement. Each prospective Limited Partner will execute the Partnership Agreement at the time he, she, or it executes the Subscription Agreement. The following is a summary of the material terms of which shall be contained in the Partnership Agreement and other aspects of the Partnership although the terms and aspects may ultimately vary from those described herein. A prospective Limited Partner, however, should not purchase Units without a careful study of the final executed Partnership Agreement in its entirety. The General Partner Main and Main CAOF GP, LLC, a Texas limited liability company, was formed on March 14, 2008 for the sole purpose of acting as the General Partner of the Partnership. The General Partner has no operating history and only minimal capitalization. Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark collectively own 100% of the General Partner. After Closing, additional interests in the General Partner may be granted or assigned to certain key employees, affiliates or other persons affiliated with Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Ms. Shila Hallmark. See Conflicts of Interest. Indemnification and Limitation on General Partners Liability The General Partner will make Investments, arrange for the safekeeping or custody of all Partnership funds and assets (including records) and otherwise conduct the business and affairs of the Partnership with a degree of diligence, prudence and care and in a manner in which other general partners familiar with such investments would use in the
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conduct of an enterprise of similar character and with similar aims (determined without regard to the actual standard of care set forth in any partnership agreement governing any such other general partner). The General Partner will not employ (or permit another to employ) Partnership assets in any manner other than for the exclusive benefit of the Partnership. To the fullest extent permitted by law, the General Partner shall not be liable, in damages or otherwise, to the Partnership or to the Limited Partners for any act or omission performed or omitted by the General Partner, or for any losses, costs, damages, liabilities, or expenses arising therefrom, except to the extent that such act or omission (i) constituted gross negligence, (ii) was not for a purpose believed in good faith to be in (or not opposed to) the best interests of the Partnership, (iii) was performed or omitted in bad faith, (iv) constituted fraud or willful misconduct or (v) constituted a breach of the standard of care set forth in the preceding paragraph and resulted in a material adverse impact upon the Partnership and the other Partners. Changes in General Partner The General Partner may withdraw as general partner of the Partnership upon thirty (30) days written notice to all Limited Partners, and upon identification of a successor general partner as approved by a majority of the Limited Partners. The General Partner may be removed at any time, but only with cause, by the unanimous written consent of the Limited Partners that are not affiliates of the General Partner. If the Partnership is to be continued, the General Partner interest of the removed General Partner will be converted to a limited partner interest, but with the same capital account and distribution rights as pertained to the General Partner immediately prior to conversion or removal. If the General Partner is removed, a majority of the Limited Partners shall identify, approve, and admit a substitute general partner. Distributions Distributions of cash flow and sales proceeds will be made on an Investment by Investment basis. Capital contributed to the Partnership will be allocated among the Investments in a manner determined in the sole and absolute discretion of the General Partner. Cash flow and sales proceeds from the operations or sale of each Investment will be distributed (a) first, 100% to the Partners until the Partnership has distributed amounts sufficient to return their investment costs related to such Investment, (b) second, 100% to the Limited Partners until the Partnership has distributed amounts sufficient to provide a 9% per annum simple, cumulative preferred return on the investment costs related to such Investment, (c) third, 80% to the Limited Partners and 20% to the General Partner until the Partnership has distributed amounts sufficient to provide a 13% per annum simple, cumulative preferred return on the investment costs related to such Investment, (d) fourth, 65% to the Limited Partners and 35% to the General Partner until the Partnership has distributed amounts sufficient to provide a 17% per annum simple, cumulative preferred return on the investment costs related to such Investment, and (e) thereafter, 50% to the Limited Partners and 50% to the General Partner. Upon liquidation of the Partnership, and after all payments and reserves provided for in the Partnership Agreement, distributions of cash flow and sales proceeds will be distributed in the same manner as above (Investment by investment); provided, however, that any remaining liquidating distributions shall be made (a) first, 100% to the Partners until the Partnership has distributed amounts sufficient to return their unrecovered capital balance, (b) second, 100% to the Limited Partners until the Partnership has distributed amounts sufficient to provide a 9% per annum simple, cumulative preferred return on the aggregate investment costs related to all Investments, (c) third, 80% to the Limited Partners and 20% to the General Partner until the Partnership has distributed amounts sufficient to provide a 13% per annum simple, cumulative preferred return on the aggregate investment costs related to all Investments, (d) fourth, 65% to the Limited Partners and 35% to the General Partner until the Partnership has distributed amounts sufficient to provide a 17% per annum simple, cumulative preferred return on the aggregate investment costs related to all Investments, and (e) thereafter 50% to the Limited Partners and 50% to the General Partner. Clawback Upon termination of the Partnership, the General Partner will be required to restore funds to the Partnership to the extent it has received cumulative distributions in excess of amounts otherwise distributable to the General Partner
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pursuant to the formula set forth in the second paragraph under Distributions above (the liquidation formula), applied on an aggregate basis covering all transactions of the Partnership; provided, however, that the General Partners obligation shall be capped at the lesser of: (i) fifty percent (50%) of the business income recognized by the members of the General Partner; and (ii) an amount required to provide the Limited Partners their unrecovered capital balance plus an amount necessary to provide them with a 9% per annum simple, cumulative preferred return on the drawn Commitments over the life of the Partnership calculated covering all Investments as a cash-on-cash return. Excuse Procedures The Partnership Agreement gives the General Partner the authority, under certain circumstances, to excuse Limited Partners from all or a portion of any required capital contribution under certain circumstances. Default by a Limited Partner If a Limited Partner fails to make a capital contribution in accordance with its Commitment, such Limited Partner will be in default. Upon the occurrence of an event of default (as defined in the Partnership Agreement), the General Partner shall have the right to sell any or all Units of the defaulting Limited Partner to one or more other Partners at the highest price offered by such other Partners, or to any third party or parties acceptable to the General Partner who shall offer a higher price and who otherwise qualify for admission as a Partner in the Partnership. The General Partner will not be obligated to exercise the remedy for default afforded in the previous sentence, and the General Partner may pursue any other available legal remedies. The proceeds of any such sale will be applied as follows: (i) (ii) (iii) First, to reimburse the Partnership and the General Partner for any costs incurred in connection with such sale; Then, to pay interest to the Partnership at the default rate (as set forth in the Partnership Agreement) on the late payment from the date the payment was due through the date of the sale; Then, to pay to the defaulting Partner two-thirds of the amounts standing to the credit of such Partners capital account as of the date of such sale.
Any remaining proceeds after payment of the amounts referred to above will be retained by the Partnership and treated as income to the Partnership, and the defaulting Limited Partner shall have no further rights thereto. The General Partner shall not be obligated to exercise this remedy for default, and the General Partner may pursue any other available legal remedies. The General Partner shall have the authority to compromise any claim of the Partnership relating to the obligation of any Limited Partner to make a capital contribution, and no consent or approval of any other Partners shall be required for such purpose. Funding the Shortfall Amount If a Limited Partner has been excused or has defaulted pursuant to the terms of the Partnership Agreement, then the General Partner may seek to fund the shortfall amount through the procedure set forth below. (i) In the case of a funding shortfall, the General Partner may determine to increase the amount of the capital contribution required from each Limited Partner with respect to such Investment or expense on a pro-rata basis (up to an amount not exceeding any Limited Partners unfunded Commitment), and The General Partner may also, on any other basis it believes to be equitable and practicable, offer non-excused Limited Partners the opportunity to increase their capital contributions to such Investment. If any such Limited Partner declines to invest in all or any portion of its share of the shortfall amount, such uncommitted amount will be offered to any Limited Partner who has agreed to invest in its share of the shortfall amount and concurrently advised the General Partner of its willingness to increase its capital contribution in excess of such share, and the General Partner shall
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allocate such uncommitted amount among all such other Limited Partners on a basis the General Partner determines in its sole and absolute discretion is, under the circumstances, equitable and practicable. To the extent any shortfall amount has not been fully funded, the General Partner may offer the remaining balance of such shortfall amount to any other person on such terms and conditions as the General Partner may determine in its sole and absolute discretion, except that any such offer to the General Partner or an affiliate of the General Partner shall be on substantially similar terms and conditions as apply to the Limited Partners. To the extent that the shortfall amount is not fully funded as set forth above, the General Partner may fund such amount by calling additional contributions (up to an amount not exceeding any Partners unfunded Commitment). Capital Accounts Under the terms of the Partnership Agreement, a separate capital account will be maintained for each partner on the books and records of the Partnership. A Partners capital account initially will equal the aggregate amount of cash, if any, received by the Partnership in exchange for the Limited Partners Units purchased in the Offering. A Partners capital account will be increased by the dollar amount of any subsequent capital contributions made by the Partner to the Partnership and by the Partners allocable share of Partnership income. A Partners capital account will be decreased by the dollar amount of any distributions made by the Partnership to the Partner and by the Partners allocable share of Partnership losses. Allocations Net profits and losses of the Partnership generally will be allocated among the Partners in a manner that attempts to mirror the regular ongoing distributions made by the Partnership, which the General Partner believes to be reflective of the economic interests of the Partners and to be consistent with the requirements of the Internal Revenue Code of 1986, as amended (the Code). Limited Liability of Limited Partners Under the Partnership Agreement, the Limited Partners will generally have no obligation to make additional capital contributions more than the Commitment or beyond the Commitment Period. The Partnership Agreement generally provides that in no event shall any Limited Partner (or former Limited Partner) be obligated to make any contribution to the Partnership in addition to its agreed Commitment (or other payments provided for in the Partnership Agreement) or have any liability for the repayment or discharge of the debts and obligations of the Partnership except to the extent provided for in the Partnership Agreement or as required by the Texas Business Organizations Code (the TBOC). Under applicable law, so long as a Limited Partner does not actively participate in the operation of the Partnership, he, she, or it will not be liable to the Partnerships creditors for debts of the Partnership. The Partnership Agreement expressly prohibits Limited Partners from taking any active participation in the management of the day-to-day operations of the Partnership. Accordingly, absent any contravention of the Partnership Agreement by a Limited Partner, a Limited Partners total exposure for any debts, liabilities, obligations, damages, or judgments against the Partnership is limited to the Limited Partners investment in the Partnership (including his, her, or its allocable share of any undistributed income or gain of the Partnership). No Limited Partner will be liable to the Partnership or any Limited Partner or to any third party for the debts and obligations of the Partnership and, subject to the specific requirements of the TBOC, its sole liability will be to pay the agreed amount to be contributed by it pursuant to this Memorandum and its Subscription Agreement. Under the TBOC, if a partner receives a return of its contribution, the partner may be liable to the Partnership to the extent of the returned contribution to the extent necessary to discharge liabilities of the Partnership to creditors who extended credit to the Partnership during the period such contribution was held by the Partnership.
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Voting Rights of Limited Partners Pursuant to the Partnership Agreement, the Limited Partners generally do not have the right to participate in the operations or management of the Partnership. However, the Partnership Agreement provides that Limited Partners are entitled to vote on significant matters affecting the Partnership, including, but not limited to, the dissolution of the Partnership under certain circumstances, the removal of the General Partner with cause, certain amendments to the Partnership Agreement, and the General Partners right to transfer any of its interests in the Partnership. Restriction on Transfer A Limited Partner may not sell, assign, transfer, pledge, lien, encumber or otherwise hypothecate any interest in the Partnership, except with the prior written consent of the General Partner, which consent may be withheld in the sole and absolute discretion of the General Partner. The Partnership Agreement sets forth further transfer restrictions on the Units. No Voluntary Withdrawals A Limited Partner shall not have the right to borrow, or to make a withdrawal of, all or any part of its capital account at any time absent a legal obligation to do so. Mandatory Withdrawals The General Partner may, by notice to a Limited Partner, require the Limited Partners interest to be withdrawn in its entirety from the Partnership, effective on any date designated by the General Partner (which shall be not less than ten (10) days after delivery of the notice of mandatory withdrawal), in the event the General Partner determines in good faith or has reason to believe that (a) such Limited Partner has transferred or attempted to transfer any portion of his interest in the Partnership in violation of the Partnership Agreement, (b) ownership of such Limited Partners Interest by such Limited Partner will cause the Partnership to be in violation of the securities laws of the United States or any other relevant jurisdiction or the rules of any self-regulatory organization applicable to the General Partner, (c) continued ownership of such Limited Partners interest by such Limited Partner may be harmful or injurious to the business or reputation of the Partnership or the General Partner or may subject the Partnership or any of the Partners to an undue risk of adverse tax or other fiscal consequences, including without limitation, adverse consequences under ERISA (defined hereinafter), (d) any of the representations and warranties made by such Limited Partner in connection with the acquisition of an interest was not true when made or has ceased to be true, (e) such Limited Partners interest has vested in any other person by reason of the bankruptcy, dissolution, incompetency or death of such Limited Partner, or (f) it would not be in the best interests of the Partnership, as determined by the General Partner in its absolute discretion, for such Limited Partner to continue ownership of such Limited Partners interest. The amount due to any such Partner required to withdraw from the Partnership pursuant to these provisions shall be the fair value of such Limited Partners interest as of the effective date of the withdrawal as determined by the General Partner reasonably. Death, Bankruptcy or Legal Incapacity of a Partner In the event of the death, bankruptcy or legal incapacity of a Partner, the estate or legal representative of such Partner will succeed to the Partners right to share in net profits or net losses of the Partnership and to receive distributions from the Partnership. The estate or representative may, in the sole and absolute discretion of the General Partner, be paid, as of the date of the first Partnership distribution occurring on or after the date on which the Partner died or became bankrupt or legally incapacitated, the value of such Partners capital account as of such time in liquidation of the Partners interest in the Partnership. Alternatively, the General Partner may, in its sole and absolute discretion, admit the estate or representative to the Partnership as a Limited Partner. Amendments to Partnership Agreement The Partnership Agreement may generally be amended, in whole or in part, by the General Partner if it receives the
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consent of a majority-in-interest of the Limited Partners. The General Partner may amend the Partnership Agreement without the consent of the Limited Partners in order to (i) amend the Schedule of Partners to reflect any change required to be made therein pursuant to the terms of the Partnership Agreement, (ii) restate the Partnership Agreement together with any amendments thereto in order to consolidate such documents, and (iii) subject to certain restrictions, amend the Partnership Agreement to effect compliance with any applicable law or regulation or to clarify any ambiguity or to correct or supplement any provision of the Partnership Agreement which is inconsistent with any other provision. The General Partner may not make any amendment to the Partnership Agreement that would (x) increase the obligation of any Partner to make any capital contribution, (y) materially and adversely affect the rights of any Partner with respect to its distributions, or (z) adversely affect the limited liability of any Limited Partner without first obtaining the prior written consent of each Partner adversely affected thereby. If the Partnership accepts subscriptions from certain ERISA-related plan investors, such Limited Partners will have additional consent rights with regard to amendments to provisions of the Partnership Agreement specifically relating to and uniquely affecting those Partners. See Risk Factors - ERISA Considerations. Except with regard to the types of amendments described in clauses (i) and (ii) above, the General Partner has agreed to give written notice of any amendment or proposed amendment to the Partnership Agreement to all of the Limited Partners, which notice must set forth in the text of the proposed amendment or a summary thereof and a statement that the text thereof will be furnished to any Limited Partner upon request. Pursuant to the Partnership Agreement, the General Partner has the sole and absolute discretion to agree with a Limited Partner to waive or modify the application of any provision of the Partnership Agreement with respect to such Limited Partner without obtaining the consent of any other Limited Partner (other than a Limited Partner who is materially and adversely affected by such waiver or modification). The General Partner is not obligated to give notice of any such waiver or modification to the Limited Partners. In signing the Partnership Agreement, each Limited Partner will appoint the General Partner as the attorney-in-fact for such Limited Partner, to execute and file on such Limited Partners behalf: (i) the Partnership Agreement, any separate certificates of formation related thereto, and any amendments to the foregoing; (ii) any other instrument or document required by law to be filed by the Partnership, or which the General Partner deems desirable or appropriate to file; (iii) any financing statement or other filing required or permitted to perfect the security interests contemplated by any provision of the Partnership Agreement; (iv) any documents appropriate to effect the continuation of the Partnership, the admission of any additional or substituted Limited Partner or General Partner, the dissolution and termination of the Partnership (in accordance with the Partnership Agreement), or the transfer of any Limited Partners interest; and (v) such other documents and instruments as may be necessary or appropriate to enable certain other regulatory accommodations. Indemnification The Partnership Agreement provides that the Partnership shall indemnify, defend, and hold harmless the General Partner, its affiliates, and certain other indemnified persons from any loss, cost, liability, damage, or expense to which such persons may become subject in connection with any matter arising out of or in connection with the business or affairs of the Partnership or an investment vehicle, except to the extent that such loss, cost, liability, damage, or expense is the result of an act or omission that (i) constituted gross negligence, (ii) was not for a purpose believed in good faith to be in (or not opposed to) the best interests of the Partnership, (iii) was performed or omitted in bad faith, (iv) constituted fraud or willful misconduct, or (v) as to the General Partner or any fund advisor, constituted a breach of the applicable standard of care for such party and resulted in a material adverse impact upon the Partnership and the other Partners. Co-Investment Opportunities Where the Partnership and any other account over which the General Partner or its affiliates exercise investment discretion from time to time (M&M Accounts) participates in an Investment, the General Partner agrees to allocate the costs and expenses associated with the Investment among the Partnership and the other participating M&M Accounts pro rata based on the invested capital committed to such Investment by the Partnership and each other participating M&M Account or on such other basis as the General Partner deems fair and reasonable.
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The General Partner may permit unrelated managers of investment opportunities in real estate or real estate related interests of all kinds, providers of debt financing to real estate or real estate related interests of all kinds, strategic investors or other parties to co-invest with the Partnership, and it may receive compensation, including carried interest, from co-investors. Confidentiality Agreement The Partnership Agreement contains a confidentiality provision pursuant to which each Limited Partner agrees to keep confidential, and not to make any use of (other than for purposes reasonably related to its interest in the Partnership or for purposes of filing such Limited Partners tax returns) or disclose to any person, any information or matter relating to the Partnership and its affairs and any information or matter related to any real estate Investment (other than disclosure to such Limited Partners directors, employees, agents, advisors, or representatives responsible for matters relating to the Partnership or to any other person approved in writing by the General Partner (each such person being hereinafter referred to as an Authorized Representative )): provided that (i) such Limited Partner and its Authorized Representatives may make such disclosure to the extent that (1) the information to be disclosed is publicly known at the time of proposed disclosure by such Limited Partner or Authorized Representative, (2) the information otherwise is or becomes legally known to such Limited Partner other than through disclosure by the Partnership, the General Partner, or any affiliate of, or other party that is subject to a confidentiality agreement with, any of the foregoing entities, or (3) such Limited Partner reasonably believes disclosure is required by law or in response to any governmental agency request or in connection with an examination by regulatory authority; provided that such agency, regulatory authority or association is aware of the confidential nature of the information disclosed, (ii) such Limited Partner and its Authorized Representatives may make such disclosure to its beneficial owners to the extent required under the terms of its arrangements with such beneficial owners; and (iii) each Limited Partner will be permitted, after written notice to the General Partner, to correct any false or misleading information which becomes public concerning such Limited Partners relationship to the Partnership, the General Partner, any fund advisor or any real estate Investment or proposed real estate Investment. Prior to making any disclosure required by law, regulation or regulatory agency, each Limited Partner shall use its reasonable best efforts to notify the General Partner of such disclosure. Prior to any disclosure to any Authorized Representative or beneficial owner, each Limited Partner shall use its reasonable best efforts to advise such Authorized Representative or beneficial owner of the obligations and limitations set forth in this paragraph. Pursuant to the terms of the confidentiality provision in the Partnership Agreement, the General Partner may, to the maximum extent permitted by applicable law or the Partnership Agreement, keep confidential from any Limited Partner any information the disclosure of which (i) the Partnership, the General Partner or any fund advisor is required by law, agreement, or otherwise to keep confidential, or (ii) the General Partner reasonably believes may have an adverse effect on (1) the ability to entertain, negotiate or consummate any proposed real estate Investment or any transaction directly or indirectly related to, or giving rise to, such proposed real estate Investment, (2) the Partnership, the General Partner, any fund advisor or any of their affiliates, or (3) any person, directly or indirectly, the subject of a real estate Investment. The confidentiality provision in the Partnership Agreement requires the General Partner to use reasonable efforts to keep confidential any information relating to a Limited Partner obtained by the General Partner which the Limited Partner requests be kept confidential (it being understood that the identity of any Limited Partner may be disclosed to any other Limited Partner). Security Interest By joining the Partnership Agreement, each Limited Partner grants to the Partnership and the General Partner a security interest in such Limited Partners Units, as collateral security for the full and timely satisfaction of such Limited Partners obligations under the Partnership Agreement.
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RISK FACTORS
INVESTMENT IN THE PARTNERSHIP ENTAILS A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR SOPHISTICATED INDIVIDUALS AND INSTITUTIONS FOR WHOM AN INVESTMENT IN THE PARTNERSHIP DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM AND WHO FULLY UNDERSTAND AND ARE CAPABLE OF BEARING THE RISKS OF AN INVESTMENT IN THE PARTNERSHIP, PROSPECTIVE LIMITED PARTNERS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS. THERE CAN BE NO ASSURANCE THAT THE PARTNERSHIP WILL BE ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE, AND INVESTMENT RESULTS MAY VARY SUBSTANTIALLY ON AN ANNUAL BASIS. General Risks No assurance can be made that the Partnership will generate any profits. The Partnerships business will be subject to the risks generally inherent in the acquisition, management, development, and sale of core and other real estate, the making of loans to developers and other real estate related risks. Such risks include increases in real estate taxes and other operating expenses, adverse governmental rules and policies, the exercise of condemnation or eminent domain powers by governmental agencies, the availability of mortgage financing, and the general business and financial conditions existing in the principal marketing areas. Growth in Value Appreciation, if any, in the value of the Partnerships Investments will depend on numerous factors, including; (a) the continued growth in the economy of the regions in which the Partnership makes Investments; (b) whether the investments can be identified, purchased relatively quickly, and sold or liquidated within four to seven years as anticipated; (c) whether the management strategies for adding value to the Investments succeed; (d) whether the business plan for each Investment developed and used by the Partnership is accurate; (e) whether the Investments are managed within budget; and (f) whether favorable financing will be available. There is no assurance that any of these factors can be achieved. Blind Pool Purchasers of Units will have the status of Limited Partners in the Partnership and, with limited exceptions, will have no voice in the management or conduct of the affairs of the Partnership. The General Partner will have the sole and absolute right and authority to act for and on behalf of the Partnership in connection with all aspects of the business of the Partnership. The Limited Partners will be bound by all agreements made by the General Partner on behalf of the Partnership. Accordingly, no person should purchase a Unit unless he or she is willing to entrust all aspects of the management of the Partnership to the General Partner and has evaluated the General Partners capabilities to perform such functions. Death or Incapacity of an Organizer The Partnership will rely upon the efforts of Messrs. Garrett Reed, Ralph Reed, and Howard Heald to fulfill the duties and responsibilities of the General Partner. Accordingly, the loss of services of Messrs. Garrett Reed, Ralph Reed, and/or Howard Heald, for any reason, including death or incapacity, will have a material adverse effect upon the business and prospects of the Partnership. Dependence on Limited Markets All of the Investments will be in the continental United States. The Partnerships performance is therefore dependent upon the general economic conditions in the continental United States and specifically in each of the regions thereof. A decline in the economy generally or in any of the regions specifically, may adversely affect the Partnership and its Investments.
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Government Cooperation Critical to the success of any real estate investment is the cooperative assistance that an investor receives from the local government. If the Partnership does not obtain government cooperation, the value of Partnership Investments could be reduced substantially. Zoning Changes Some or all of the Partnership Investments may either not be zoned, or not be zoned in a manner suitable for the Partnerships (or potential buyers or developers) intended use. It may, therefore, be necessary for the Partnership to obtain proper zoning for the Partnership Investments. No assurance can be given that such zoning changes will be achieved. Market Illiquidity Private equity real estate investments are inherently illiquid. Such illiquidity will tend to limit the ability of the Partnership to vary its portfolio promptly in response to changes in economic or other conditions. Failure to Resell Partnership Investments Material appreciation in the value of the Partnership Investments, if at all, largely depends upon the ability of the Partnership to attract qualified buyers to purchase the Partnership Investments in accordance with their individual business plans. If qualified buyers to purchase the Investments are not found within the anticipated time-frame, the Partnership Investments could then be disposed of at prices which may be substantially less than their then fair market value. Competition The real estate market in the continental United States is highly competitive. The Partnership will compete for investments in properties with many other entities engaged in the real estate business, many of which have greater financial resources than the Partnership. The Partnerships Investments are expected to be located in desirable locations. Other investors may invest in adjoining properties and resell such adjoining properties at below market prices, thereby decreasing the resale value of an Investment. In addition, developers may develop lots or parcels adjoining the Partnership Investments, and such developments may have a material adverse effect on the value of the Partnerships Investments. Co-Investment The Partnership may co-invest with third parties (i.e., other than developers) either directly or through joint ventures or other entities. Such investments may involve risks not present in investments where a third party is not involved, including the possibility that a co-venturer or partner of the Partnership may at any time have economic or business interests or goals which are inconsistent with those of the Partnership, or may be in a position to take action contrary to the Partnerships investment objectives. In addition, the Partnership may be liable for actions of its co-venturers or partners. Income Without Cash and Character of Income Due to the fact that the Partnership intends to make distributions when gains occur, the General Partner does not expect a Partner to receive a significant allocation of income and gain from the Partnership without receiving a corresponding distribution of cash. However, income other than gains realized could itself constitute a significant amount of income to be reported by Limited Partners. Moreover, under the method by which income and gain are allocated among the Partners, a Partner may be forced to pay taxes on income and gain for which it has not yet received a distribution. Because the General Partner is given the discretion to invest in many different types of real estate interests, it is
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impossible to predict what character of income the Partnership will generate, if any. In fact, substantial returns may be generated by the Partnership that may not be characterized as long-term capital gain (e.g., the Partnership may have short-term items or significant interest-type income). Although the General Partner does not believe that this is the case, the IRS could re-characterize the Partnerships investment activities as those of a dealer, which would generally have the effect of generating only ordinary income for the Partners. Classification as a Partnership The Partnership will not obtain a ruling from the IRS, or an opinion from legal counsel, that it will constitute a limited partnership for federal income tax purposes. Unless the Partnership qualifies as a partnership (and not a publicly-traded partnership or a corporation) for federal income tax purposes, the Partnerships losses allocable to the Limited Partners would not be deductible by the Limited Partners, the Partnership would itself be taxed on any taxable income, and distributions to the Partners would be treated as dividends to the extent of earnings and profits of the Partnership. Loss of Limited Liability of Limited Partners Limited partners generally are not liable for the debts and obligations of a limited partnership beyond the amount of the capital contributions they have made or are required to make under its partnership agreement. To the extent a limited partner participates in the control of the business of a limited partnership, however, it may become personally liable as a general partner for partnership obligations. Although the Partnership Agreement prohibits Limited Partners from participating in the management or control of the Partnership, if a Limited Partner were to take any action which was deemed participation in such management or control of the Partnership, the Limited Partner could be subjected to general and unlimited liability as a general partner. Assuming compliance with the Partnership Agreement and all applicable laws, the liability of a Limited Partner will be limited to no more than the amount of his, her, or its commitment. Limitations on Liability of General Partner The General Partner will have no liability to the Partnership or Limited Partners for any loss or liability caused by any act or omission of the General Partner, unless such loss or liability arises from an act or omission that (i) constituted gross negligence, (ii) was not for a purpose believed in good faith to be in (or not opposed to) the best interests of the Partnership, (iii) was performed or omitted in bad faith, (iv) constituted fraud or willful misconduct or (v) constituted a breach of the General Partners standard of care and resulted in a material adverse impact upon the Partnership and the other Partners. Indemnification of the General Partner by the Partnership The Partnership (but not the Limited Partners) will indemnify the General Partner for losses which arise out of any act or omission of the General Partner under certain circumstances. Thus, if the General Partner becomes entitled to indemnification, the Partnerships contingent financial obligation thereunder may be significant. Limited Net Worth of the General Partner The General Partner is a newly-formed entity and has a nominal net worth. Default by a Limited Partner If a Limited Partner fails to make a capital contribution in accordance with its Commitment, such Limited Partner will be in default. Upon the occurrence of an event of default (as defined in the proposed Partnership Agreement), the General Partner shall have the right to sell any or all Units of the defaulting Limited Partner to one or more other Partners at the highest price offered by such other Partners, or to any third party or parties acceptable to the General Partner who shall offer a higher price and who otherwise qualify for admission as a Partner in the Partnership. The General Partner will not be obligated to exercise the remedy for default afforded in the previous sentence, and the General Partner may pursue any other available legal remedies. In the event of default by a Limited Partner, such
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Limited Partner could lose its entire investment in the Partnership. Negotiation of Documents The Partnership Agreement and this Memorandum were prepared at the direction of Messrs. Garrett Reed, Ralph Reed, and Howard Heald. The proposed Partnership Agreement has not been negotiated by adverse parties in an arms length transaction. Environmental Hazards Within the past several years, an increasingly complex environmental regulatory system has been put into place. The most significant environmental statute imposing liability on a real properly owner is the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). CERCLA imposes liability on persons potentially responsible for unauthorized releases of hazardous substances. Potentially responsible persons include the current owner or operator of a facility (i.e. real property) and any person who, at the time hazardous substances were disposed of, owned or operated a facility from which such hazardous materials were disposed. Liability of responsible parties is, except in limited circumstances, joint and several and is predicated upon principles of strict liability. Amendments to CERCLA have provided for an innocent landowner defense to liability, but to date, this defense has proven largely illusory. The courts have been willing to hold the shareholders of a corporation liable as well as the corporation itself. Although the TBOC provides specific protection for limited partners from partnership obligations, it is unclear whether or not the Partnership, and potentially a Limited Partner, could be held liable in an action under CERCLA relating to any of the Investments. The General Partner will seek to obtain (or cause its Investment partner or party offering a given Investment to obtain) environmental studies before the Partnership invests in any real estate projects and, to the extent available, obtain from third parties indemnification for liability. Even though the Partnership will only invest in a real estate project if the General Partner determines that any environmental concern associated with such investment is manageable, there can be no assurance that the underlying property is not contaminated or that any such contamination will not materially or completely diminish the value of such property and the Investment. Additionally, certain properties may have a wetlands issue. No assurance can be given that environmental concerns will not create a substantial problem to the Investments of Partnership. Other federal and state environmental statutes may also be applicable to the Investments. ERISA Considerations Purchase of a Unit by an employee benefit plan, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) or a plan described in Section 4975(e)(1) of the Code, hereinafter collectively referred to as Benefit Plan may result in unfavorable consequences for prospective Limited Partners under the provisions of ERISA. Upon the investment by a Benefit Plan in an equity interest of an entity that is neither a publicly-offered security nor a security issued by an investment company registered under the Investment Company Act of 1940, both the equity interest, as well as an undivided interest in each of the underlying assets of the entity, may be considered assets of the investing Benefit Plan. Thus, the acquisition by a Benefit Plan of a Unit may result in the classification of the underlying assets of the Partnership as assets of an investing Benefit Plan. However, the assets of an investing Benefit Plan should not include the underlying assets of the Partnership if equity participation by Benefit Plans in each class of equity interests in the entity is at all times less than 25% of the value of such class. (For purposes of this determination, the value of an equity interest held by any person (or an affiliate of such person), other than a Benefit Plan, who has discretionary authority or control with respect to the assets of the entity or any person who provides investment advice for a fee, direct or indirect, with respect to such assets, will be disregarded.) If the underlying assets of the Partnership are deemed to be assets of an investing Benefit Plan, then any person who exercises authority or control respecting the management or disposition of such underlying assets, and any person who provides investment advice with respect to such assets for a fee, direct or indirect, is deemed to be a fiduciary of the investing Benefit Plan. As a fiduciary of a Benefit Plan, such person is obligated under ERISA to discharge his duties
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with respect to the Benefit Plan, including the management and disposition of plan assets, for the exclusive purpose of providing benefits to participants and beneficiaries under the Benefit Plan, and defraying reasonable expenses of administering the Benefit Plan. Thus, if the underlying assets of the Partnership are deemed to be assets of an investing Benefit Plan, conflicts may arise concerning the use and disposition of such assets. Failure of a fiduciary to abide by its duties under ERISA may result in personal liability of the fiduciary to a plan for any losses to the plan resulting from the fiduciarys breach of responsibility, and for restoration to the plan of any profits of the fiduciary which have been made through use of the assets of the plan by the fiduciary, as well as various excise taxes which may be imposed upon the fiduciary. Furthermore, ERISA and the Code prohibit Benefit Plans from engaging in certain transactions with specified parties, including fiduciaries of the Benefit Plan. Such transactions include, but are not limited to, a sale or exchange of assets between a Benefit Plan and a fiduciary; the transfer to, or use by, a fiduciary of the income or assets of a Benefit Plan; or an act by a fiduciary whereby he deals with the income or assets of a Benefit Plan in his own interest. Thus, if a Partner is deemed to be a fiduciary of a Benefit Plan, then various transactions between the Partners and the Partnership could constitute prohibited transactions. The Code imposes an excise tax upon certain parties, including fiduciaries, who engage in such prohibited transactions. FOR THE REASONS OUTLINED ABOVE, A BENEFIT PLAN WHICH IS CONSIDERING INVESTMENT IN THE PARTNERSHIP SHOULD CONSULT WITH ITS TAX ADVISOR PRIOR TO SUCH INVESTMENT. Prevention of Money Laundering As part of the General Partners responsibility for the prevention of money laundering under the United States International Money Laundering Abatement and Financial Anti-Terrorist Act of 2001, the Partnership may require a detailed verification of a prospective Limited Partners identity and the source of such prospective Limited Partners Commitments. In the event of delay or failure by a prospective Limited Partner to produce any such information required for verification purposes, the Partnership may refuse to accept the subscription and any monies relating thereto. In addition, each prospective Limited Partner will be required to represent and warrant to the Partnership, among other things, that (i) the proposed investment by such prospective Limited Partner in the Partnership will not directly or indirectly contravene U.S. Federal, state, international or other laws or regulations, including the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 (the Patriot Act), (ii) no capital contribution to the Partnership by such prospective Limited Partner will be derived from any illegal or illegitimate activities, (iii) such prospective Limited Partner is not a country, territory, person or entity named on a list promulgated by the U.S. Treasury Departments Office of Foreign Assets Control ( O FA C ) prohibiting, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals nor is such prospective Limited Partner or any of its affiliates a natural person or entity with whom dealings are prohibited under any OFAC regulations, or (iv) such prospective Limited Partner is not otherwise prohibited from investing in the Partnership pursuant to other applicable U.S. anti-money laundering, anti-terrorist and foreign asset control laws, regulations, rules or orders. Each Limited Partner will be required to promptly notify the General Partner if any of the foregoing ceases to be true with respect to such Limited Partner. Tax Matters A prospective Limited Partner should obtain independent tax advice regarding the tax risks and effects of both federal and state tax laws upon an investment in the Partnership. Restrictions on Transferability of Units There is no market for the Units and no market will develop. As a result, the Units will be restricted securities upon issuance and cannot be resold without an applicable exemption from the registration requirements of federal and state securities laws. Furthermore, the proposed Partnership Agreement sets forth significant restrictions on the transferability of a Unit. The General Partner has not obligated itself to repurchase, redeem or withdraw the Units from the Limited Partners, nor has it established a procedure or plan for such repurchase, redemption or withdrawal. Therefore, Limited Partners will be required to hold the Units indefinitely and must be able to bear the loss of their entire investment therein.
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A Limited Partner will own only an interest in the Partnership and will not directly own any interest in the Investments or any other asset or property of the Partnership. The Partnership May Not Obtain Sufficient Funding For Its Operations After completion of this Offering, the Partnership may need to raise additional equity to meet its working capital requirements. There is no assurance that this Offering will be fully subscribed, or subscribed at or above the minimum level. Also, there can be no assurance that the actual proceeds raised will be sufficient for the Partnerships projected operations, or that the Partnership will successfully complete another round of equity funding should it be required. The Partnership May Not Obtain Financing The Partnership has not yet obtained the anticipated debt financing to complete its business plans. If the Partnership is not able to obtain the required financing, the Partnership may not be able to execute its business plans as currently written. The Partnership Will Likely be Exposed to Leverage The Partnership may incur or guarantee indebtedness, including without limitation, for the purposes of paying Partnership expenses or providing or obtaining interim or permanent financing to the extent necessary to consummate the purchase or refinance of Partnership Investments. The Partnership cannot guarantee that it will be able to obtain any necessary financing from lenders and developers, nor can the Partnership assume that it will be able to obtain such financing on favorable terms. As a result of the Partnerships potential indebtedness, the Partnership may be required to dedicate a portion of cash flow from operations to the payment of principal and interest on its indebtedness, reducing the funds available to fund capital expenditures and other general Partnership purposes. Any significant leverage may also limit the Partnerships flexibility in planning for, or reacting to, changes in its business and industry. Additionally, the Partnership may be at a disadvantage to competitors who are less leveraged. Finally, the terms of any credit arrangements of the Partnership may contain numerous financial and other restrictive covenants, including restrictions on paying cash distributions, incurring additional indebtedness and buying or selling assets. The Partnership Has No Prior History The public formation documents of both the General Partner and Partnership were filed in on March 14, 2008, and the entities have no performance history in real estate investment prior to such date. The Partnerships operations are subject to all of the risks inherent in establishing a new business enterprise with rapid growth. Examples of these risks include, but are not limited to: problems relating to real estate investments; regulatory compliance; operating costs; competitive and regulatory environment; marketing problems and costs; and expenses that may exceed current estimates.
The Partnership may not earn any significant operating income for an extended period of time, if ever. To date, the Partnership has no operations. The Partnership can make no assurance that it will be successful or that it will ever achieve significant revenues or become profitable. Reliance on General Partner The General Partner has full discretionary authority to identify, structure, execute, administer, monitor and liquidate Partnership Investments. Accordingly, no person should invest in the Partnership unless such person is willing to entrust all aspects of the management and investment decisions of the Partnership to the General Partner. If for
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any reason the Partnership were to lose the services of the General Partner or its principals, the Partnership may be adversely affected. See Management - The General Partner. Because of the number and variability of factors that determine the Partnerships use of the net proceeds of the Offering, the Partnership cannot assure Limited Partners that such uses will not vary from the Partnerships current intentions or that Limited Partners will agree with the uses it has chosen. Loss of the General Partner Could be Detrimental to the Partnership Under the Partnership Agreement, the bankruptcy, dissolution, termination of existence, or other event of withdrawal with respect to the General Partner will cause a dissolution of the Partnership, unless at the time of the occurrence of such event, the Partnership cancels such an event otherwise requiring winding up and there is a remaining general partner of the Partnership that is the General Partner or an affiliate of the General Partner, and such general partner continues the business of the Partnership. However, there can be no assurance that any successor general partner would have the experience and capabilities necessary to continue the management and operation of the Partnership. Any sale of the Investments under these circumstances might not produce a satisfactory price, and the Limited Partners could suffer adverse financial and tax consequences as a result of such a sale. Limited Partners May Face Certain Tax Risks Prospective Limited Partners should consult their legal and tax advisors concerning the effect of subscribing to the Offering. No ruling has been requested from the IRS or other tax authority, and no opinion of counsel has been requested, concerning any of the tax consequences of an investment in Units. The tax consequences of an investment in Units may differ depending upon each prospective Limited Partners particular circumstances. Cash distributions from the Partnership for a taxable year, if any, may be less than a Limited Partners income tax liability attributable to its share of Partnership taxable income for such year. An audit by a taxing authority of a tax return of the Partnership may result in an audit of Limited Partners tax returns and adjustments to such returns that may or may not be related to the Partnership. A Limited Partners ability to utilize, currently, its allocable share of any tax losses (or items thereof) of the Partnership may be limited by various provisions of the Code. Additionally, the Partnerships Organizational Expenses and most of its expenditures allocable to a property development that are incurred prior to commencement of operations will be required to be capitalized. The General Partner determined that the Offering does not have a significant intended feature of providing Limited Partners with material federal income tax benefits. If it is determined that the offering of Units falls within the definition of a tax shelter under section 6111 of the Code, an application for a tax shelter registration number must be filed with the IRS; any Limited Partner who subsequently sells or transfers all or part of his Units must furnish the tax shelter registration number of the Partnership to the purchaser or transferee on a written statement; and a Limited Partner must also comply with certain requirements regarding the maintenance of a list of investors in the Partnership. See Tax Shelters A Limited Partner may incur tax liabilities and be required to file income and other tax returns under state or local tax laws. Such laws vary from one locale to another, and are subject to change. See Certain Tax Considerations. Lack of Liquidity for Units This should be viewed as a long-term investment. There will not be an opportunity in the short-term to liquidate your interest even if the Partnership proves successful. The Units will not be registered under the Securities Act or any other securities laws and, therefore, cannot be resold unless they are subsequently registered under such laws or registration thereunder is not required pursuant to an exemption from such registration or otherwise. The Units will also be subject to substantial restriction on transferability under the Partnership Agreement. There is no market for the Units and none is expected to develop.
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General Economic Conditions May Negatively Affect the Partnership General economic and business conditions may affect the Partnerships activities. Interest rates, the prices of real estate and participation by other investors in the real estate markets may affect the value of Investments acquired by the Partnership. The Partnership May be Subject to Litigation and Claims The Partnership and the General Partner, as independent legal entities, may be subject to lawsuits or proceedings by government entities or private parties. Except in certain limited circumstances, expenses or liabilities of the Partnership arising from any suit shall be borne by the Partnership. The Offering Price May Not be Indicative of Value The General Partner arbitrarily determined the offering price of the Units. The offering price of the Units may not be indicative of their value or the value of the Partnership. No assurance is or can be given that the Units could be sold for the offering price or for any amount. Risks Associated with Growth May Affect the Partnership Detrimentally The Partnerships business plans will require the creation and implementation of operational and financial systems and will require management, operational, and financial resources. For example, the Partnership will be required to recruit and train various personnel. The Partnership can make no assurance that it will be able to manage its expanding operations effectively. The failure to implement such systems and add such resources on a cost-effective basis could have a material adverse effect on the Partnerships results of operations and financial condition. The Partnership may be unable to find attractive investment opportunities or successfully execute its investment strategies. The Partnership can make no assurance that it will be able to profitably exit its Investments. Risks Associated with Branding the Main and Main Name The Partnership will be highly dependent upon the goodwill within the marketplace of the Main and Main name. Any negative market or industry perception arising with respect to the Main and Main name may have a material adverse effect on our business. Such negative market or industry perception would not be limited to negative publicity related to the Partnership, but could just as easily arise out of negative publicity related to Main and Main CAOF GP, LLC or any affiliate of the principals of the General Partner branded with the Main and Main name.
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CONFLICTS OF INTEREST
Conflicts with Affiliates The Partnership will be subject to potential conflicts of interest arising out of its relationship with Messrs. Garrett Reed, Eric Reed Ralph Reed, and Howard Heald, and Ms. Shila Hallmark, and each of their affiliates, including, among others, Main & Main Capital Group, LLC, Main & Main Development, LLC, Main & Main Investments, LLC, Main & Main Residential, LLC, RPF Development GP, LLC, RPF Development Management, Ltd., and RPF Development Partners, Ltd. The Partnership, the General Partner, the managing members of the General Partner, Messrs. Garrett Reed, Ralph Reed, and Howard Heald, may be represented in some capacity by the same legal counsel. In addition, Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark and each of their affiliates have previously engaged in, and will continue to engage in other business entities involving real estate investments, acquisitions, development and syndications. The Partnership may enter into shared service arrangements with affiliates of Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark, pursuant to which the Partnership and such affiliates share the cost of certain back office functions including but not limited to research and preparation of reports. Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark or any of their affiliates may presently or in the future have vested economic interests in numerous tracts of real estate which could surround some of the investments of the Partnership. Efforts to maximize the value of such other economic interests could adversely affect the value of the Partnerships investments or conflict with the interests of the Partnership and the Partners. Moreover, the other activities and entities in which Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark and each of their affiliates are involved may require Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark or their affiliates to devote substantial time, attention and financial resources to such other ventures. Because the Partnership was organized by, and will be indirectly controlled by, Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark, any conflicts which arise will not be resolved by arms length negotiation but, rather, through the exercise of judgment by Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark consistent with their fiduciary obligation to the Limited Partners, which, in general, requires Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark to consider the best interests of the Limited Partners in indirectly managing the Partnership. The Partnership Agreement requires that the General Partner act in a manner that it considers fair and reasonable in allocating investment opportunities to the Partnership but does not otherwise impose any specific obligations or requirements concerning the allocation of time, effort or investment opportunities to the Partnership or any restrictions on the nature or timing of investments of the Partnership and for the General Partners own account or for other accounts that the General Partner, its principals or their respective affiliates may manage. The General Partner is not obligated to devote any specific amount of time to the affairs of the Partnership and is not required to accord exclusivity or priority to the Partnership in the event of limited investment opportunities. Fees and Compensation of the General Partner and Its Affiliates The General Partners share of the Partnerships taxable income and losses and cash distributions under the Partnership Agreement were determined solely by the General Partner without independent representation of the interests of the Limited Partners. The principal source of such income, losses and distributions is the Partnerships share of each Partners taxable income and losses and distributable cash from the acquisition, development, operation and/ or disposition of the Investments. The Partnerships shares of those items, as well as the amount of compensation payable to each Partner, was determined by the General Partner without independent representation of the interests of the Limited Partners. While the General Partner believes that the compensation arrangements are reasonable and provide incentives for the profitable development and operation of the business that will benefit all Partners, the interest of the General Partner and its affiliates, on the one hand, and the Limited Partners, on the other, may not always coincide with respect to the amount or terms and conditions of such compensation arrangements. Competition for General Partners Services Prospective Limited Partners should recognize that the General Partner or its affiliates have or may have interests in a
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number of enterprises other than those of the Partnership. Additionally, under the terms of the Partnership Agreement, the officers and members of the General Partner are free to pursue other business opportunities, including ones that may compete with the Partnership. As a result, the General Partner and those individuals who control the General Partner will be required to allocate its time, efforts and loyalties with respect to their various activities and responsibilities and need only devote such time to Partnership affairs as may be reasonable necessary to manage the business of the Partnership. The General Partner may in the future act as a general partner in other limited partnerships, and liabilities incurred by the General Partner in such capacity could adversely affect its ability to manage the Partnership. Moreover, the General Partner may engage in other activities for its own account and for others during the Partnership term. Professional Advisors The same legal counsel represented the Partnership and the General Partner in connection with the formation of the Partnership and the offering of the Units, and may continue to represent these parties in the future. The Limited Partners were not independently represented in the formation of the Partnership or the negotiation of the terms of the Partnership Agreement. Furthermore, the Limited Partners may not find their interests adequately represented in matters which may later arise affecting the business of the Partnership. Should that occur, the Partnership may find it necessary to obtain new counsel to protect its interests. A change of counsel could result in delays and additional expenses for the Partnership. Limited Partner Interest Each of Messrs. Garrett Reed, Eric Reed, Ralph Reed, and Howard Heald, and Ms. Shila Hallmark may make a capital contribution as a Limited Partner of the Partnership. In voting his, her or its Units on those issues for which a vote of Limited Partners is required, Messrs. Garrett Reed, Eric Reed, Ralph Reed and Howard Heald, and Ms. Shila Hallmark would be entitled to exercise the same voting rights as the other Limited Partners, in addition to their ability to control the Partnership through the General Partner.
CERTAIN TAX CONSIDERATIONS

the
FoLLowing is a suMMary oF Certain MateriaL investMent in under the
units. the
suMMary does not generaLLy address state, LoCaL, or Foreign taX Considerations,
u.s.
FederaL inCoMe taX Considerations reLevant to an
nor taX Considerations reLevant onLy to partiCuLar Categories oF taXpayers subjeCt to speCiaL treatMent insuranCe CoMpanies and seCurities deaLers.
irs and no opinion oF additionaLLy, the taX Laws and other authorities CurrentLy in eFFeCt and upon whiCh this suMMary is based CouLd Change (possibLy, retroaCtiveLy) aFter the date oF this MeMoranduM.
CounseL has been requested ConCerning any oF the Matters disCussed in this suMMary. ruLing has been requested FroM the
Code,
inCLuding, aMong others, non-u.s. investors, taX-eXeMpt investors, FinanCiaL institutions,
no
WITH RESPECT TO ANY U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH IN THIS MEMORANDUM, INCLUDING BUT NOT LIMITED TO THE TAX DISCUSSION SET FORTH IN THIS CERTAIN TAX CONSIDERATIONS SECTION (THE TAX DISCUSSION), EACH PROSPECTIVE LIMITED PARTNER SHOULD NOTE THAT (A) THE TAX DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND SUCH TAX DISCUSSION CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW; (B) THE TAX DISCUSSION WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING (WITHIN THE MEANING OF U.S. TREASURY DEPARTMENT CIRCULAR 230) OF INTERESTS IN THE PARTNERSHIP; AND (C) ANY PERSON REVIEWING THE TAX DISCUSSION SHOULD SEEK ADVICE BASED ON SUCH PERSONS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. Taxation of Limited Partners The Partnership will elect to be classified as a partnership for federal income tax purposes pursuant to applicable
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Treasury Regulations. Thus, the Partnership will file an annual federal information return of income setting forth the items of taxable income, gain, loss, deduction and credit of the Partnership for each Partnership taxable year, and each Limited Partners distributive share thereof. Each Limited Partner will be required to include in its federal income tax return its distributive share of such items for each taxable year of the Partnership ending with or within the Limited Partners taxable year. Limited Partners must include in their federal income tax returns, and pay tax on their distributive shares of, Partnership taxable income and items thereof without regard to the amount, if any, of cash or other property received from the Partnership during the taxable year. Accordingly, Limited Partners may incur federal income tax liabilities with respect to their investment in the Partnership in excess of amounts, if any, previously distributed to them. Allocations of Partnership Income and Loss Section 704(b) of the Code provides that a partners distributive share of items of partnership income, gain, loss and deduction (as determined for purposes of maintaining the partners book capital accounts) will be determined under the governing partnership agreement if the allocations have substantial economic effect. If an allocation pursuant to a partnership agreement lacks substantial economic effect, the item will be reallocated in accordance with the partners overall interest in the Partnership, determined on a facts and circumstances basis. A treasury regulation under Section 704(b) of the Code (the 704(b) Regulations) provides certain safe-harbors that, if met, generally assure that the substantial economic effect test will be satisfied. The allocation and distribution provisions of the Partnership Agreement may not satisfy the substantial economic effect safe-harbors set forth in the 704(b) Regulations. Nevertheless, the provisions contained in the Partnership Agreement are intended to achieve the same result that would have been achieved by compliance with the safe-harbor rules. The 704(b) Regulations are complex and subject to varying interpretations, however; and the IRS may contend that allocations of income, gain, loss and deduction by the Partnership do not comply with the 704(b) Regulations. Any reallocation of items for these or other reasons could adversely affect the federal income tax and economic consequences of an investment in Units. Additionally, Section 704(c) of the Code requires that items of taxable income or loss must be allocated generally to take into account any difference between the adjusted tax basis and the value at which partnership assets are carried on the books of a partnership. The Partnership Agreement gives the General Partner discretion to select an appropriate method for making allocations under Section 704(c) of the Code. The method chosen for making any allocations under Section 704(c) of the Code may result in allocations to a Limited Partner of items of taxable income or loss that differ from the Limited Partners economic income or loss. Limitations on Deductions and Losses A Limited Partners ability to claim a deduction for his distributive share of any loss (or items thereof) of the Partnership or to use such loss to offset income from other sources will likely be subject to various limitations under the Code. A Limited Partners deduction of losses or items thereof of the Partnership will be limited to (i) the lesser of the Limited Partners adjusted tax basis in his Units as of the end of the taxable year in which the loss is incurred, and (ii) in the case of individuals and certain estates, trusts and closely-held corporations, the amount which the Limited Partner is deemed under Section 465 of the Code to have at-risk with respect to the Partnership. The passive activity loss provisions of Section 469 of the Code and the investment interest deduction provisions of Section 163(d) of the Code may also limit the current deduction of losses or items thereof of the Partnership by certain Limited Partners. Miscellaneous itemized deductions of individual taxpayers and, in certain cases, estates and trusts (including those incurred through pass-through entities) are generally deductible only to the extent they exceed two percent (2%) of the taxpayers adjusted gross income for the taxable year. Certain investment expenses of the Partnership, including all or part of the fees and other compensation payable to the General Partner, may constitute investment expenses subject to the two percent (2%) limitation. The 704(b) Regulations generally do not permit losses (other than certain losses attributable to nonrecourse borrowings by the Partnership) to be allocated to a Limited Partner in excess of the Limited Partners positive capital account balance, unless the Limited Partner would be obligated to make a payment to the Partnership upon liquidation of the Partnership or the Limited Partners interest in the Partnership equal to the deficit balance in its capital account resulting from such loss allocation. However, the Partnership Agreement does not so provide.
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Organizational and Syndication Expenditures Under section 709 of the Code, the costs incurred in organizing the Partnership may be amortized over a period of not less than 60 months. Fees, commissions and other costs incurred by the Partnership in connection with the offer and sale of Units must be capitalized and cannot be deducted currently or upon termination of the Partnership. Start-up and Development Costs The costs and expenses incurred by the Partnership with respect to the Partnerships investment in a property development prior to the date that the property actually commences operations will generally be required to be capitalized as part of the Partnerships cost of developing the property. Partnership Distributions and Redemptions Generally, distributions of money (whether current or in redemption of all or part of a Unit) will reduce the adjusted tax basis of a Limited Partners Units and, to the extent in excess thereof, result in treatment as gain from the sale or exchange of such interest. Distributions by the Partnership of property, other than money and, in certain cases, marketable securities, will generally not result in recognition of gain or loss by the Partnership or the distributee Limited Partner. Distributions that cause a shift in a Limited Partners proportionate share of certain Partnership ordinary income assets may, however, result in recognition of gain or loss by the distributee Limited Partner and possibly by the Partnership. A reduction in a Limited Partners share of Partnership liabilities will be treated as a deemed cash distribution to the Limited Partner equal to the amount of the reduction. A Limited Partners share of Partnership liabilities may be reduced as a result of, among other matters, reductions in the amount of Partnership liabilities, the redemption or withdrawal of a Limited Partner, admissions of new Limited Partners, and changes in a Limited Partners book capital account balance resulting from allocations of Partnership income and loss. A Limited Partner will generally recognize loss attributable to a distribution or redemption only upon a complete withdrawal by the Limited Partner from the Partnership and only if the distribution consists solely of money and certain ordinary income assets of the Partnership. Thus, a Limited Partner that sustains an economic loss upon a partial withdrawal from the Partnership will generally not be entitled to recognize that loss for federal income tax purpose at the time of the partial withdrawal. Sales or Exchanges of Units Gain or loss recognized by a Limited Partner upon the sale or other disposition of a Unit will generally be treated as capital gain or loss, except that the portion of any gain which is attributable to certain ordinary income assets held by the Partnership (including, among other things, unrealized receivables, depreciation recapture and inventory items) will be treated as ordinary income or loss. Capital gain or loss realized by a Limited Partner upon the sale or other disposition of a Unit will generally be long-term or short-term capital gain or loss depending upon whether the Unit has been held for more than twelve months. The amount realized by a Limited Partner upon a sale or other disposition of all or part of a Unit will include the Limited Partners allocable share of Partnership liabilities. Thus, gain recognized by a Limited Partner on the sale or other disposition of a Unit may result in a tax liability in excess of the actual proceeds of the disposition. Upon a sale or other disposition of a Unit, the selling Limited Partner is required to furnish certain information to the Partnership as provided in, among other sections, Section 6050K of the Code. Tax Elections The Partnership Agreement allows the General Partner to make an election for the Partnership as to basis adjustments under Section 754 of the Code if beneficial to a transferee of all or part of a Unit and the transferee agrees to reimburse the Partnership for its costs associated with the election. In general, a Section 754 election, if made, would permit the Partnership to adjust the tax basis of its assets with respect to a transferee Limited Partner to reflect the transferee Limited Partners cost basis in the transferred Units. Certain adjustments might also arise if Partnership assets are distributed in kind. Such an election could prove detrimental with respect to subsequent transfers if the Partnerships
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properties have depreciated in value. Other federal income tax elections available to the Partnership are generally permitted to be made by the General Partner in its discretion. Alternative Minimum Tax Each Limited Partner must include its allocable share of the Partnerships tax preference items, if any, in the computation of its federal alternative minimum tax liability. Due to the complexity of the alternative minimum tax computation and the fact that it is not possible to predict the effect of the alternative minimum tax provisions on the tax liability of a particular Limited Partner, prospective Limited Partners should consult their tax advisors as to the impact of the alternative minimum tax on an investment in Units. Partnership Tax Returns; Audits The Partnerships tax returns are subject to audit by the IRS and other tax authorities, who may dispute the positions taken by the Partnership in such returns. There can be no assurance that these authorities will not adjust the tax figures reported in the Partnerships returns. An audit of the Partnerships tax returns may also result in an audit of a Limited Partners tax returns, and any audit of a Limited Partners tax returns could result in adjustments of items of non-Partnership, as well as Partnership, income and deductions. An adjustment resulting from an audit of the Partnerships or a Limited Partners tax returns may require a Limited Partner to pay additional taxes, interest and penalties. Generally, upon an IRS audit, the tax treatment of Partnership items will be determined at the Partnership level pursuant to administrative or judicial proceedings conducted at the Partnership level. Each Limited Partner generally will be required to file its tax returns in a manner consistent with the information returns filed by the Partnership or be subject to possible penalties, unless the Limited Partner files a statement with its return on IRS Form 8082 describing any inconsistency. The General Partner in its capacity as the tax matters partner of the Partnership will be able to extend the statute of limitations on behalf of all Limited Partners with respect to Partnership items. A Limited Partner may file with the IRS a statement that the General Partner does not have the authority to enter into a settlement agreement on behalf of that Limited Partner. Tax Shelters Reportable Transaction Disclosure Rules Treasury Regulation Section 1.6011-4 (Requirement of statement disclosing participation in certain transactions by taxpayers) provides that every taxpayer that has participated in a reportable transaction (a Reportable Transaction) and who is required to file a tax return must attach to its return for the taxable year a disclosure statement. A taxpayer required to file a disclosure statement under these rules would file a completed Form 8886 (Reportable Transaction Disclosure Statement or a successor form) in accordance with the instructions to the form. If a taxpayer is required to file a Form 8886, such form must be attached to the taxpayers tax return for each tax year for which a taxpayer participates in a reportable transaction. For this purpose, Treasury Regulation Section 1.6011-4(b) provides that a reportable transaction includes (i) listed transactions, (ii) confidential transactions, (iii) transactions with contractual protection, (iv) loss transactions, (v) transactions with a significant book-tax difference, and (vi) transactions involving a brief asset holding period. However, in Notice 2006-6, 2006-5 I.R.B. 385, the Service announced that it was removing transactions with significant book-tax differences from the categories of reportable transactions under Treasury Regulation Section 1.6011-4(b)(1). Listed transactions A listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction. For existing guidance see the notices and other reference material listed in
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instructions to IRS Form 8886. Confidential transactions A confidential transaction is a transaction that is offered to a taxpayer under conditions of confidentiality and for which the taxpayer has paid an advisor a minimum fee. A transaction is considered to be offered to a taxpayer under conditions of confidentiality if the advisor who is paid the minimum fee places a limitation on disclosure by the taxpayer of the tax treatment or tax structure of the transaction and the limitation on disclosure protects the confidentiality of that advisors tax strategies. A transaction is treated as confidential even if the conditions of confidentiality are not legally binding on the taxpayer. A claim that a transaction is proprietary or exclusive is not treated as a limitation on disclosure if the advisor confirms to the taxpayer that there is no limitation on disclosure of the tax treatment or tax structure of the transaction. There are no limitations of any kind imposed by counsel on the Partnerships or the General Partners ability to disclose the tax treatment or tax structure of the Offering. Transactions with contractual protection A transaction with contractual protection is a transaction for which the taxpayer or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained. A transaction with contractual protection also is a transaction for which fees are contingent on the taxpayers realization of tax benefits from the transaction: All the facts and circumstances relating to the transaction will be considered when determining whether a fee is refundable or contingent, including the right to reimbursements of amounts that the parties to the transaction have not designated as fees or any agreement to provide services without reasonable compensation. Neither the Partnership nor the General Partner (nor any other person) has the right to a full or partial refund of fees if all or part of the intended tax consequences from the Offering is not sustained. In addition, no fees paid by the Partnership or the General Partner (or any other person) are contingent on any persons realization of tax benefits from the Offering. Loss transactions A loss transaction is any transaction resulting in the taxpayer claiming a loss under Section 165 of at least (A) $10 million in any single taxable year or $20 million in any combination of taxable years for corporations; (B) $10 million in any single taxable year or $20 million in any combination of taxable years for partnerships that have only corporations as partners (looking through any partners or beneficiaries that are themselves partnerships), whether or not any losses flow through to one or more partners; or $2 million in any single taxable year or $4 million in any combination of taxable years for all other partnerships, whether or not any losses flow through to one or more partners; (C) $2 million in any single taxable year or $4 million in any combination of taxable years for individuals, S corporations, or trusts, whether or not any losses flow through to one or more shareholders or beneficiaries; or (D) $50,000 in any single taxable year for individuals or trusts, whether or not the loss flows through from an S corporation or partnership, if the loss arises with respect to a Section 988 transaction (as defined in Section 988(c)(1) relating to foreign currency transactions). In determining whether a transaction results in a taxpayer claiming a loss that meets the threshold amounts over a combination of taxable years, only losses claimed in the taxable year that the transaction is entered into and the five succeeding taxable years are combined. In determining the thresholds above, the amount of a Code Section 165 loss is adjusted for any salvage value and for any insurance or other compensation received. However, a Code Section 165 loss does not take into account offsetting gains, or other income or limitations. The full amount of a Section 165 loss is taken into account for the year in which the loss is sustained, regardless of whether all or part of the loss enters into the computation of a net operating loss under Section 172 or a net capital loss under Section 1212 that is a carryback or carryover to another year. A Section 165 loss does not include any portion of a loss, attributable to a capital loss carryback or carryover from another year, that is treated as a deemed capital loss under Section 1212. For this purpose, a Code Section 165 loss includes an amount deductible pursuant to a provision that treats a transaction as a sale or other disposition, or otherwise results in a deduction under Section 165. A Code Section 165 loss includes, for example, a loss resulting from a sale or exchange of a partnership interest under Code Section 741.
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A taxpayer has participated in a loss transaction if the taxpayers tax return reflects a Code Section 165 loss and the amount of the Code Section 165 loss equals or exceeds the threshold amount applicable to the taxpayer. If a taxpayer is a partner in a partnership and a Code Section 165 loss flows through the partnership to the taxpayer (whether such distribution is made to one or more taxpayers), the taxpayer has participated in a loss transaction if the taxpayers tax return reflects a Code Section 165 loss and the amount of the Code Section 165 loss that flows through to the taxpayer equals or exceeds the threshold amounts applicable to the taxpayer. If a transaction becomes a loss transaction because the losses equal or exceed the threshold amounts, a disclosure statement must be filed as an attachment to the taxpayers tax return for the first taxable year in which the threshold amount is reached and to any subsequent tax return that reflects any amount of Code Section 165 loss from the transaction. Transactions involving a brief asset holding period A transaction involving a brief asset holding period is any transaction resulting in the taxpayer claiming a tax credit exceeding $250,000 (including a foreign tax credit) if the underlying asset giving rise to the credit is held by the taxpayer for 45 days or less. Reportable Transaction Penalties Code Section 6707A imposes a penalty of $10,000 on natural persons who fail to include on any return or statement any information with respect to a reportable transaction that is required under Code Section 6011. Corporations are subject to a $50,000 penalty for the same violation. For failures with respect to listed transactions, the penalty is increased to $100,000 for natural persons and $200,000 for corporations. Counsel has not expressed an opinion on whether the Offering is a Reportable transaction under Code Section 6011, Treasury Regulation section 1.6011-4 or Code Section 6707A. The General Partner does not intend to treat the Offering as a reportable transaction under Treasury Regulation section 1.6011-4. Material Advisor Disclosure Rules Under Code Section 6111(a), each material advisor with respect to any reportable transaction shall make a return setting forth (i) information identifying and describing the transaction, (ii) information describing any potential tax benefits expected to result from the transaction, and (iii) such other information as the Secretary may prescribe including, but not limited to, disclosing a reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor in accordance with Section 301.6111-3(d)(2). Notice 2004-80, 2004-50 I.R.B. 1, and Notice 2005-22, 2005-12 I.R.B. 756, provide interim rules implementing the requirements of Code Section 6111 until the Service prescribes regulations. Notice 2006-6, 2006- 5 IRB 385, Notice 2007-85, 2007-45 I.R.B. 965, among other sources, further clarifies the requirements relating to Code Sections 6111 and 6112. Thus, unless further modified, the definition of a reportable transaction, the definition of a material advisor, and the requirements for filing a return under Code Section 6111 are set forth in Notice 2004-80, Notice 200522, Notice 2006-6, and Notice 2007-85. Under Notice 2007-85, each material advisor required to file a disclosure statement under 301.6111-3 must file a completed Form 8918 Material Advisor Disclosure Statement (or successor form). The Form 8918 must be filed with the Office of Tax Shelter Analysis (OTSA) by the last day of the calendar month that follows the end of the calendar quarter in which the advisor became a material advisor with respect to the reportable transaction or in which the circumstances necessitating an amended disclosure occur. For purposes of Code Section 6111(a), Notice 2004-80, as clarified by Notice 2006-6, provides that a reportable transaction (including listed transactions) generally is defined in Treasury Regulation Section 1.6011-4(b), but specifically excluding (b)(6). Thus, a reportable transaction for purposes of the material advisor rules includes the reportable transactions described above. In addition, the rules in Treasury Regulations Section 301.6112-1(b)(2) and (c)(2) (without regard to provisions relating to a transaction required to be registered under former Section 6111) will
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apply for purposes of determining whether a transaction is a reportable transaction with respect to a material advisor. Notice 2004-80 and Notice 2005-22 provide that, for purposes of Code Section 6111(a), a material advisor is defined in Treasury Regulation Section 301.6112-1(c)(2). Such Regulations generally provide that a person is a material advisor with respect to a transaction that is a potentially abusive tax shelter if (i) the person is required to register the transaction under Code Section 6111, or (ii)(a) the person receives or expects to receive at least a minimum fee with respect to the transaction and (b) makes a tax statement to or for the benefit of (A) a taxpayer who is required to disclose the transaction under Treasury Regulations Section 1.6011-4 because the transaction is a listed transaction; or (B) a taxpayer who the potential material advisor (at the time the transaction is entered into) knows is, or reasonably expects to be, required to disclose the transaction under Treasury Regulations Section 1.6011-4 because the transaction is or is reasonably expected to become a reportable transaction (a transaction described in Treasury Regulations Sections 1.6011-4(b)(2) through (5), inclusive, and (7)). For this purpose, a tax statement generally means any statement, oral or written, that relates to a tax aspect of a transaction that causes the transaction to be a reportable transaction. Notice 2005-22 provides that, until further guidance is issued, a material advisor will be treated as becoming a material advisor under Section 6111 when all of the following events have occurred: (1) the material advisor makes a tax statement, (2) the material advisor receives (or expects to receive) the minimum fees, and (3) the transaction is entered into by the taxpayer. Material advisors, including those who cease providing services prior to the time the transaction is entered into, must make reasonable and good faith efforts to determine whether the taxpayer entered into the transaction. Code Section 6111(b) generally provides that the threshold amount for fees is (a) $50,000 in the case of a reportable transaction substantially all of the tax benefits from which are provided to natural persons, and (b) $250,000 in any other case. If a material advisor is required to file an information return under Code Section 6111(a), such return is filed on Form 8918, Material Advisor Disclosure Statement (or successor form), and must be completed in the manner described in Notice 2007-85 and, as applicable, among other regulations, Notice 2004-80 and Notice 2005-22. If a material advisor fails to file an information return, or files a false or incomplete information return, with respect to a reportable transaction (including a listed transaction), such material advisor is subject to a penalty for each failure. However, if the failure relates to a listed transaction, the penalty is substantially increased. If a material advisor intentionally disregards the requirement to disclose a listed transaction, the penalty increases further. List Maintenance Rules Under Code Section 6112, each material advisor with respect to any reportable transaction is required to maintain a list that (i) identifies each person with respect to whom the advisor acted as a material advisor with respect to the transaction and (ii) contains other information the IRS requires. For purposes of Code Section 6112, the existing rules under Section 301.6112-1 (without regard to the provisions relating to a transaction required to be registered under former Section 6111) relating to the preparation, maintenance, retention, and furnishing of lists will apply to material advisors required to maintain lists with respect to a reportable transaction. Treasury Regulation Section 301-6112-1(e)(3) provides that if required to maintain a list, the material advisor must include the following items, if known: (1) the name of each transaction and its registration number, if any, under Code Section 6111; (2) the taxpayer identification number, if required, for the transaction; (3) the name, address and TIN of each person required to be on the list; (4) the number of units or percentage interest, if applicable, acquired by each person; (5) the date on which each person required to be included on the list entered into each transaction; (6) the amount invested in each transaction by each person on the list; (7) a detailed description of each transaction that includes both the tax structure and its expected tax treatment; (8) a summary or schedule of the tax treatment that each person is intended or expected to derive from participation in each transaction; (9) copies of any additional written materials, including tax analyses or opinions, relating to each transaction that are material to an understanding of the purported tax treatment or tax structure that have been shown or provided to any person who acquired or may acquire an interest in the transaction, or to their representatives, tax advisors, or agents; and (10) for each person required to be
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on the list, if the interest in the transaction was not acquired from the material advisor maintaining the list, the name of the person from whom the interest was acquired. Under Code Section 6708, a penalty is imposed on a material advisor who fails to make a list available upon written request by the Service within 20 business days after the date of the request. A material advisor who is required to maintain a list and fails to make the list available to the Service within 20 days after a written request is subject to a $10,000-per-day penalty. The penalty also applies to persons who fail to maintain the list, maintain an incomplete list, or refuse to provide their list to the Service. Even though the Offering may not be a reportable transaction, the General Partner plans to maintain a list of investors in accordance with the requirements of Code Section 6112. Certain State and Local Tax Matters Limited Partners may be subject to income and other tax return filing obligations and income, franchise and other taxes in state and local jurisdictions in which the Partnership operates, as well as a Limited Partners state or locality of residence or domicile. The Partnership may also incur income and other tax liabilities in state and local jurisdictions in which it operates, including withholding taxes on certain items of Partnership income. MANY OF THE MATTERS DISCUSSED IN THIS SECTION CERTAIN TAX CONSIDERATIONS MAY NOT BE IN FINAL FORM. ALL STATEMENTS AND REFERENCES CONTAINED HEREIN MAY NOT BE RELIED UPON AND MUST BE INDEPENDENTLY VERIFIED AND ADVISED UPON BY A PROSPECTIVE INVESTORS LEGAL COUNSEL OR FINANCIAL OR TAX ADVISOR.
SUITABILITY STANDARDS FOR PROSPECTIVE LIMITED PARTNERS

The Units will not be registered under the Securities Act, or any other securities laws, including state securities or blue sky laws. The Units will be offered in reliance upon the exemption from registration thereunder provided by Sections 4(2) and 3(b) thereof and/or Regulation D promulgated thereunder. Each prospective Limited Partner will be required to represent, among other customary private placement representations, whether it is an accredited investor as defined in Regulation D and is acquiring the Units for investment purposes only and not for resale or distribution. The Partnership will accept subscriptions only from individuals and entities ultimately owned by individuals who represent that they are accredited investors (as defined in Regulation D). A prospective Limited Partner is an accredited investor only if such prospective Limited Partner meets one or more of the following tests: the prospective Limited Partner is a natural person who has a net worth or joint net worth with that persons spouse exceeding $1 million at the time of purchase; the prospective Limited Partner is a natural person who individually had income in excess of $200,000 in each of the two most recent years or joint income with that persons spouse in excess of $300,000 in each of those years and who reasonably expects income in excess of those levels in the current year; the prospective Limited Partner is a manager, director or executive officer of the General Partner or Partnership; the prospective Limited Partner is either (a) a bank as defined in Section 3(a)(2) of the Securities Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity, (b) any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, (c) an insurance company as defined in Section 2(13) of the Securities Act, (d) an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a) (48) of such Act, (e) a Small Business Investment Company licensed by the United States Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958,
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(e) any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5 million, or (g) an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income Security Act of 1974, as amended, if the investment decision is made by a plan fiduciary which is either a bank, a savings and loan association, insurance company, or registered investment advisor, or if the plan has assets in excess of $5 million or, if a selfdirected plan, with investment decisions made solely by persons that are accredited investors; the prospective Limited Partner is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; the prospective Limited Partner is any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, limited liability company, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5 million; the prospective Limited Partner is any trust, with total assets in excess of $5 million, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as defined in section 230.506(b)(2)(ii) of Regulation D promulgated under the Securities Act; or the prospective Limited Partner is any entity in which all of the equity owners are accredited investors.
In the case of a husband and wife subscribing jointly, satisfaction of the net worth standards must be determined by aggregating their net worth and satisfaction of the income standards must be determined by joint or individual tax returns, as the case may be. Any other persons subscribing for Units jointly, including members of partnerships formed for the purpose of purchasing Units, must each satisfy the applicable net worth and income standards without regard to the other joint purchasers. In the case of a subscriber that is itself a partnership (other than a partnership formed for the purpose of purchasing Units) or a trust, the applicable net worth and income standards must be satisfied by the entity. In the case of a subscriber purchasing as custodian for a minor, the applicable net worth and income standards must be satisfied by the custodian. In addition, Units will be sold only to a person or entity who or which represents, among other things that: it is acquiring the Units for its own account, for investment only and not with a view toward the resale or distribution thereof; it does not presently have any reason to anticipate any change in its present financial circumstances or other particular occasion or event which would cause it to sell the Units; it has adequate means for providing for its current financial needs, and it has no need now and anticipates no need in the future to sell the Units for which it subscribed; it has such knowledge and experience in financial and business matters, and that it is capable, either alone or together with one or more advisors, of evaluating the merits and risks of investing in the Units; it and its advisors have been provided the opportunity to ask questions and receive answers concerning the terms and conditions of this Offering and to obtain any additional information which the Partnership possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished in this Memorandum; it is aware that the Units have not been registered under the Securities Act or any state securities laws; it is aware that its right to transfer, assign, or otherwise dispose of its interest in the Units is restricted by the Securities Act and applicable state securities laws; it is aware there is no market for the Units and that no such market may develop; and it satisfies the other representations and warranties contained in the Partnership Agreement and Subscription Agreement.
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The satisfaction of the suitability standards referred to above does not necessarily mean that the Units are a suitable investment for a prospective Limited Partner. The Partnership may make or cause to be made such further inquiry and obtain such additional information as it considers appropriate with regard to the suitability of prospective Limited Partners. The Partnership, in its absolute discretion, may reject subscriptions, in whole or in part, or allot to a particular prospective Limited Partner fewer than the number of Units for which such prospective Limited Partner subscribed. The Partnership reserves the right to modify or increase the suitability standards with respect to certain prospective Limited Partners in order to comply with any applicable international, federal, state or local laws, rules or regulations, or otherwise.
HOW TO SUBSCRIBE
In order to become a Limited Partner, a prospective Limited Partner should: (i) complete and execute two originals of the Subscription Agreement (available upon request), indicating the amount of capital commitment, residence address and taxpayer identification or social security number (or other identification reasonably acceptable to the General Partner); (ii) complete and execute two originals of the signature page of the Partnership Agreement; and (iii) return both originals of each of the documents referred to in (i) and (ii) to Main and Main Core Asset Opportunity Fund, Ltd., at 1010 Mustang Drive, Suite 102, Grapevine, Texas 76051, through August 31, 2008, Attention: Garrett Reed, Fund Manager and beginning September 1, 2008 to 1212 Corporate Drive, Suite 500, Irving, TX 75038-2517, Attention: Garrett Reed, Fund Manager. After receipt of the Subscription Agreement, the General Partner will notify each prospective Limited Partner whose subscription has been accepted in writing by the General Partner of the date (the Admission Date) by which it will be required to transmit the amount of its initial capital contribution, and the amount of such contribution. Shortly after the Admission Date, the General Partner will return to each new Limited Partner copies of the Subscription Agreement and the signature page of the Partnership Agreement as executed by the General Partner. In order to comply with United States and international laws aimed at the prevention of money laundering and terrorist financing, each prospective Limited Partner will be required to represent in the Subscription Agreement that, among other things, he or she is not, nor is any person or entity controlling, controlled by or under common control with the prospective Limited Partner, a Prohibited Person as defined in the Subscription Agreement (generally, a person involved in money laundering or terrorist activities, including those persons or entities that are included on any relevant lists maintained by the U.S. Treasury Departments Office of Foreign Assets Control, any senior foreign political figures, their immediate family members and close associates, and any foreign shell bank). Further, each prospective Limited Partner that is an entity will be required to represent in the Subscription Agreement that, among other things, (i) it has carried out thorough due diligence to establish the identities of its beneficial owners, (ii) it reasonably believes that no beneficial owner is a Prohibited Person, (iii) it holds the evidence of such identities and status and will maintain such information for at least five years from the date of its complete withdrawal from the Partnership, and (iv) it will make available such information and any additional information that the Partnership may require upon request that is required under applicable regulations. The General Partner reserves the right to request such further information as it considers necessary to verify the identity of a prospective Limited Partner. In the event of delay or failure by the prospective Limited Partner to produce any information required for verification purposes, the General Partner may refuse to accept a capital contribution until proper information has been provided and any funds received will be returned without interest to the account from which the monies were originally debited.
ADDITIONAL INFORMATION
The Partnership will make available, during the course of the Offering, to each prospective Limited Partner the opportunity to ask questions of, and receive answers from, representatives of the Partnership concerning the Partnership or the terms of the Offering and to obtain any additional information, to the extent that the Partnership possesses such information or can obtain it without unreasonable effort or expense, necessary to verify the accuracy of the information contained in this Memorandum.
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If prospective Limited Partners desire additional information, they may contact Garrett Reed, the Fund Manager of the General Partner, at telephone number (817) 421-3312. Copies of all documents, contracts and other Partnership records referred to herein or provided to any prospective Limited Partners will be available for inspection, upon request, at the Partnerships offices at: 1010 Mustang Drive, Suite 102, Grapevine, Texas 76051 through August 31, 2008, and beginning September 1, 2008 1212 Corporate Drive, Suite 500, Irving, TX 75038-2517. Because of their confidential nature, copies of some of such documents, contracts and other records may not be made.
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CONFIDENTIAL

Main & Main Core Asset Opportunity Fund, Ltd.

Limited Partnership Interests

Confidential Private Placement Memorandum

CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

Main and Main Core asset o p p o rt u n i t y F u n d , L t d .

MaXiMuM: $250,000,000 usd

UNITS OF LIMITED PARTNERSHIP INTERESTS $1,000,000 USD MINIMUM INVESTMENT

Main and Main Core Asset Opportunity Fund, Ltd.

Investment Philosophy & Process

Investment Track Record

(This page has been left blank intentionally.)

(This page has been left blank intentionally.)

Investment Objective and Strategy

The General Partner

Organizational and Offering Expenses

Transfer and Withdrawal

Reports to Limited Partners

Risks and Conflicts of Interest

Liability of Limited Partners

Default by a Limited Partner

Income Without Cash and Character of Income

Admin Support Team

Vice President of Investor Relations

Director of Asset Management

Senior Financial Analyst

Vice President of Development

Garrett M. Reed Founder / CEO

Ralph D. Reed Founder / CFO

Howard L. Heald S.V.P. of Office

Eric Reed S.V.P. of Retail

Investment & Philosophy Process

Investment & Philosophy Process

Best Relative Value Bottom-Up

Property Selection/ Disposition

Investment & Philosophy Process

Investment & Philosophy Process

Property Selection / Disposition Process

Investment & Philosophy Process

Investment & Philosophy Process

Investment & Philosophy Process

Investment & Philosophy Process

Investment Track Record

Investment Track Record

Location: Houston, Texas

Property Type Class A office

Square Feet 481,000

Total Value $62,130,000

Realized IRR 38%

Investment Track Record

Texaco Heritage Plaza

Property Type Class A office

Square Feet 1,149,140

Total Value $153,500,000

Realized IRR 29%

Investment Track Record

Location: Houston, Texas

Property Type Class A office

Square Feet 242,000

Total Value $21,250,000

Realized IRR 23%

Investment Track Record

Location: Fort Worth, Texas