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2. Presentation 1 Legal Discussion: Deed in Lieu of Foreclosure Eric Johnson Holme Roberts & Owen LLP Case Study: Environmentally Distressed Development Site Kenneth Ho Real Estate Generation, LLC

3. Legal Issues Concerning Deeds in Lieu of Foreclosure Eric E. Johnson Holme Roberts & Owen LLP 1700 Lincoln Street, Suite 4100 Denver, CO 80203 eric.johnson@hro.com Tel. 303-866-0657

4. When to Seek a Deed in Lieu Agreement • Debtor is cooperative and willing to negotiate an agreement. • Debtor is not attached (economically, physically or emotionally) to the property. • It is vital to remove the property from a potentially complicated bankruptcy case. • Debtor clearly has no equity in the property, and lender has a reliable appraisal establishing no equity. • Title to the property is relatively clean (i.e., no mechanic’s liens, senior liens, tax liens, etc.).

5. When is a Deed in Lieu Problematic? • Opposite of earlier factors. • Uncertainty regarding value creates possibility that Debtor might have significant equity in the property. • Prior liens on the property - - i.e. Lender is stepping into Borrower’s shoes and must deal with difficult senior or priority (mechanics or tax) liens. • Automatic landowner liability, as under environmental laws. • Difficult land-use or other regulatory restrictions that could create liability or impose constraints on ability to use, sell or develop land.

6. Components of a Deed in Lieu Agreement • Recital of history and defaults. • Conveyance of deed to Lender - - usually in escrow, pending expiration of cure period. • Global release of all claims and defenses against Lender. • Non-merger language, so Lender retains right to foreclose deed of trust and wipe out troublesome junior liens. • Non-release of Borrower, to permit foreclosure - - may require interim covenant not to sue Borrower, and global release with delayed effectiveness. • Allow Borrower short cure period, so agreement is not a naked forfeiture of Borrower’s statutory cure rights. • Escrow agreements should provide for delivery of deed based on unilateral notice by Lender; Borrower should have no rights in land as of cure date, to prevent land from staying in Borrower’s bankruptcy estate.

7. Fraudulent Transfer Risks Fraudulent Transfers: Did the Debtor Receive Reasonably Equivalent Value in Exchange for Transferring Assets? • Two types of fraudulent transfers. • Intentional Fraud: intent to hinder, delay or defraud creditors. • Constructive fraud: debtor’s insolvency or undercapitalization plus lack of reasonably equivalent value in exchange. • Depends entirely on valuation evidence of: (a) Debtor’s solvency; (b) property transferred; (c) property received in exchange. • Remedy is to nullify (“avoid”) the transfer and make the transferee disgorge or pay twice.

8. Fraudulent Transfer Risks What is Insolvency? • Balance Sheet Test. • Fair value of all property rights vs. liabilities at a snapshot in time. • Fair value is not GAAP book value. • Includes fair value of contingentliabilities (like guaranties or pending litigation).

9. Fraudulent Transfer Risks “Reasonably Equivalent Value” is Always the Key in Distressed Assets Transactions • Borrower is usually insolvent, so other fraudulent transfer test is all-important: is Borrower receiving “reasonably equivalent value” for the transfer in terms of debt relief? • An asset isn’t an “asset” capable of being fraudulently transferred, to the extent it’s subject to a valid lien. • Does the Borrower have value in the property over and above Lender’s lien (and other liens)? • Does Lender have a reliable appraisal to show absence of asset value for Borrower?

10. Case Study Environmentally Distressed Development Site Kenneth Ho REGen, LLC 1125 17th Street, Suite 2500 Denver, CO 80202 kho@regenllc.com Tel. 303-295-1732

11. Background • Large, formerly industrial site (brownfield) purchased for redevelopment. • Non-recourse loans taken out for development activities (remediation, demolition) by strong sponsor with entitlements, public finance package and buyer under contract • 2Q 2006 Appraisal based on contract and public finance showed LTV of 50% • Remediation plan in place with regulators and supposedly funded

12. Background • Commensurate with capital markets distress: • Buyer dropped out; • Developer unable to provide additional funding for remediation or development • Demolition complete • Approximately $500,000 of remediation remains, chlorinated solvents in soil and groundwater • 4Q 2009 appraisals show value of property is ~50% of principal amount. Significant investment (~$20 million) required to complete development • Borrower offered Deed-in-Lieu

13. Outstanding Issues • Property taxes • Access & safety • Continued deterioration/ devaluation of asset • Environmental liability • Chain of title • Insurance coverage • Offsite concerns – environmental management • Active remediation vs. ongoing monitoring

14. At the end of the day… • Preserve entitlements • Met District • Public Financing – asset or liability • Development Agreement(s) • Short Sale • All-Cash for 50% of current appraised value? (~25% of Principal value) • Joint Venture? • Zombie asset remains in title with borrower, but decision-making/funding by bank

15. Presentation 2 Legal Discussion: Receivership Issues Robert A. Holmes Holme Roberts & Owen LLP Case Study: Receivership of a Condo/Hotel Resort Project Ferd Belz Real Estate Generation, LLC

16. Legal DiscussionRegarding Receivership Robert A. Holmes Holme Roberts & Owen LLP 1700 Lincoln Street, Suite 4100 Denver, CO 80203 robert.holmes@hro.com Tel. 303-866-0234 16

17. Why get a receiver? Conditions that would indicate a receiver may be appropriate • income producing properties • protection of the property • loss of entitlements • other potential acts or failures to act which may cause loss of value or damage to the property • relationship with Borrower 17

18. When should the receiver be appointed and how does that happen? • If a receiver is justified, generally the earlier the decision is made and action taken the better. • Does a foreclosure or anything else need to happen before a receiver can be appointed? • In general, if justification for appointing a receiver exists, that can be done quickly and without notice to the borrower. • courts will look to certain language in the deed of trust • the documentation is fairly standard and easy to draft and file with the court • the possible changing attitudes of the courts regarding ex parte appointment • some possible negative aspects of electronic filing 18

19. What are the costs associated with a receivership? • The costs of appointment. • Posting of a bond. • Payments to the receiver. • Funding additional construction/development if those activities cannot be paid from income from the property. • Other legal or related actions arising from the receivership or steps which must be taken to protect the property. 19

20. Benefits of a receiver • Control of the property. • Immediate (usually) control of the income and assets. • Stabilization with tenants. • Preservation of rights and other interests effecting the property. • Insulation from claims of lender liability. • General ability to maintain, protect and preserve the property. • Raising additional funds through receiver’s certificates or otherwise. • Ability to sell the asset 20

21. How to select an appropriate receiver • Experience • Fit the job • Economics 21

22. Case Study Receivership of a Condo/Hotel Resort Project Ferd Belz REGen, LLC 1125 17th Street, Suite 2500 Denver, CO 80202 fbelz@regenllc.com Tel. 303-295-1730 22

23. Background • 24 Unit Condo-Hotel • 48 hotel units with lock-offs • Property has full luxury amenities • Ski-in, ski-out location • Lender and Developer – AZ based • Constr. Loan 75% L-to-C, mezz to 95% L-to-C, Add Sub debt from related parties for cost overruns • Developer managed hotel • Only 4 units sold prior to default • Construction defects, mechanics liens and unpaid vendors on property

24. Background/Issues • AZ receiver put in, CO hotel advisor hired • Decision made to NOT replace hotel manager, due to: - small property and high cost - unique aspect of resort - liquor license • New marketing team hired

25. Next Steps/Issues • Mechanics Liens negotiated, “necessary” vendors paid • Mezzanine Lender – private investor - Buys 1st at 70c on dollar - Pays off mechanics lienholders - Takes property with deed in lieu • Brings in CO hotel advisor as receiver • Keeps marketing team

26. Next Steps/Issues • To foreclose or not - Effect on sales effort and further taint - Add sub debt is with related parties • Sue on construction defects - Effect on sales effort and further taint - Contractor is a “close friend” - Impact on potential future litigation • Hotel performance improving • Marketing team success – 6 more units sold

27. Next Steps/Issues • Current owner exit strategy - Sell remaining units - Turn over property to HOA • Outstanding risks - Sales market remains challenging - Hotel performance uncertain - Potential future litigation with HOA on construction defects

28. Presentation 3 Legal Discussion: Foreclosure Issues Robert A. Holmes Holme Roberts & Owen LLP Case Study: Bank Foreclosure on a Partially Completed Development Project Rick Wells Real Estate Generation, LLC

29. Legal DiscussionRegarding Foreclosure Robert A. Holmes Holme Roberts & Owen LLP 1700 Lincoln Street, Suite 4100 Denver, CO 80203 robert.holmes@hro.com Tel. 303-866-0234 29

30. Factors to be considered in deciding whether or not to foreclose. • Chances of a restructure or deed in lieu? • Is there equity or a chance there will be equity? • Is there personal liability of borrower or guarantor? • Are there a lot of unknowns or potential risks in taking title to the property? • Are there junior or senior liens? • Will additional capital have any possible benefits? • Judicial versus non-judicial. 30

31. Positive and negative effects of a foreclosure. • Leads to control and ownership by the lender to facilitate disposition. • Extinguishes junior liens. • Possible negative (or positive?) stigma. • The time involved and what happens in the interim? • Certainty of the process and difficult to derail. 31

32. The mechanics and costs • The process is form driven and the costs are fairly easily determined. • Non-judicial foreclosure takes approximately five months versus a potentially indeterminate time on a judicial foreclosure. 32

33. Issues to consider • Junior and senior liens. • Mechanics liens. • Marketing the asset during the foreclosure process. • Discussions regarding whose interest to distinguish during the foreclosure. • Possible bankruptcy. 33

34. Case Study Bank Foreclosure on a Partially Completed Development Project Rick Wells REGen, LLC 1125 17th Street, Suite 2500 Denver, CO 80202 rwells@regenllc.com Tel. 303-295-1731 34

35. Background • Borrower owned 6 acres of land with a plan to build 100+ townhomes in multiple buildings. • One building (8 units) is completed and 2 units sold; 3 bldgs. partially complete. • 4 acres undeveloped with some good infrastructure. • Bank foreclosed on land and buildings. 35

36. Location, location, location • Located next to a large new rental project; a hotel; office buildings; a small work/live condominium project; a 6,500 seat events center; a large public parking garage; and some new local retail. • New pedestrian bridge across Hiway 36 to connect the Project to an existing RTD bus station and a “some day” commuter rail station. • Good location, bad timing? 36

37. Bank Solution Solution – rent finished units and sell the rest quick. Bank incurs ongoing maintenance headaches and costs of ownership and selling. Bank owns a deteriorating asset (liability?) in the unfinished buildings. Bank becomes the “big pockets” owner in chain of title on buildings that are ripe for builder defect lawsuits. 37

38. Longer Term/Higher Value Solution Create an LLC with a qualified real estate developer/investor (cash) as the Manager and Bank (buildings) as a member. New developer completes the 3 buildings as a rental project, manages the rental of units, in exchange for first cash flow and preferred interest. Exit strategy - Sell the rental property to the developer/investor or a third party at a higher value than “abandoned buildings”. Bank could hold or sell the remaining vacant land with a higher value due to adjacent improvements. 38

39. Advantages and Issues • Avoids negative cash flow or new investment by bank. • Increases overall value achieved by bank. • Mitigates litigation risk from bank ownership. • Bank holds buildings and land longer to allow time for successful implementation. • Bank must find a developer to participate. 39

40. Presentation 4 Legal Discussion: Bankruptcy Issues Eric Johnson Holme Roberts & Owen LLP Case Study: Government Lease Building Hal Hultquist American Property Solutions 40

41. General Bankruptcy Considerations Affecting Distressed Real Estate Eric E. Johnson Holme Roberts & Owen LLP 1700 Lincoln Street, Suite 4100 Denver, CO 80203 eric.johnson@hro.com Tel. 303-866-0657 41

42. Fundamental Bankruptcy Principles Mandatory collective process Encompasses all claims against the debtor (accelerates all debts). Encompasses all assets of the debtor (the "Estate"). No creditor may opt-out of the proceedings. Automatic stay over all actions against the debtor or its property. Everything is valued at the date debtor files for bankruptcy. 42

43. Fundamental Bankruptcy Principles Cash Collateral Debtor needs cash from rents to operate. Secured creditor, with a lien on rents, needs to prevent the debtor from squandering cash. Debtor cannot use cash collateral unless the secured creditor consents, or is adequately protected with a substitute or additional lien. In Colorado, a debtor is automatically permitted to use rents to preserve property, as a receiver would. Usually complex cash collateral agreements (like credit agreements) with detailed budgets, monitoring and enforcement provisions. 43

44. Fundamental Bankruptcy Principles Relief from stay Bankruptcy depends upon preventing creditors from opting-out of the process by seizing and selling their collateral. All actions against debtor or its property are automatically stayed. The bankruptcy court may grant relief from the automatic stay if a creditor can prove: Creditor’s interest in property is not adequately protected; or Debtor has no equity in the collateral and the collateral is not necessary to the debtor’s effective reorganization. “Single Asset Real Estate” bankruptcy Creditor automatically gets relief from stay 90 days after bankruptcy petition unless: Debtor has filed a plan of reorganization that has a reasonable chance of being confirmed; or Debtor is paying monthly interest, at the non-default rate, on the value of the creditor’s interest in the real estate (lower of real estate value or secured claim). 44

45. Fundamental Bankruptcy Principles Asset Sales: the Hottest Thing in Bankruptcy Property subject to a lien can be sold “free and clear” of liens, claims and interest, with the lien transferred to proceeds. Many bankruptcies are filed simply to “launder” assets to a purchaser, free from other claims. Existing secured creditor wants to “credit bid” its debt. Controversies over: Break-up fees Provisions to chill competitive bidding Recent cases challenge ability to credit bid and ability to sell “free and clear” of junior liens. 45

46. Effect on Guarantors No automatic stay unless you file for bankruptcy. Guarantors are still liable and may be collected against. Lenders in bankruptcy cases should keep preserving and reserving rights against guarantors. Many bankruptcy plans try to discharge guarantors - - watch out! 46

47. Benefits of Bankruptcy Provides orderly, court-supervised process for administering or liquidating debtor’s business. Lots of reporting requirements for debtor and vehicles for getting access to debtor’s financial records. Cash collateral is protected and monitored. “Free and clear” sale can maximize sale price for collateral. 47

48. Costs of Bankruptcy Generally an expensive, time-consuming and debtor-friendly forum. Automatic stay prevents creditors from foreclosing on collateral until debtor exhausts alternatives. Creditor loses control over the process, which is subject to ultimate control by Bankruptcy Judge, creating uncertainty. Multi-party proceeding, where all constituencies are represented by counsel and entitled to notice; increases costs, delay and extortion through protracted litigation proceedings. Bankruptcy sales require a public auction where initial bidder’s sale terms are widely-publicized and subject to overbids. 48

49. When to File for Bankruptcy When there is no reasonable alternative to protect assets or equity. When you have reasonable confidence that you can control, or at least predict, the outcome. 49

50. Case Study Government Lease Building Hal Hultquist American Property Solutions 1610 Wynkoop Street, Suite 450Denver, CO 80202 hhultquist@apropertysolutions.com Tel. 303-296-8500 50