Situation:

The hotel is a 100 room limited service hotel that was constructed in 2006.

The Borrower has been a developer / owner manager of hotels for 15 years and owns 8 other hotels.

Lender originated the loan in 2007 based on aggressive underwriting standards that were common at the time.

The loan was underwritten on the projected performance of the hotel as it was still in its ramp up period.

In 2007 and 2008 there were 2 additional hotels / 212 rooms that were completed within 3 miles of the subject hotel

During 2009 and into the first 3 months of 2010 the combination of the recession plus additional supply led to a 28% decline in Room Revenue and a 45% decline in Net Income.

The Borrower engaged R.W. Kline Companies in October of 2009 to assist them in working with the Lender to seek a resolution to the situation. On behalf of the Borrower, R.W. Kline Companies submitted a Letter of Imminent default to the Lender in November requesting that the loan be transferred to the Special Servicer for Modification.

After funding significant Debt Service Shortfalls through most of 2009, the loan went into default in December of 2009 and was transferred to the Special Servicer in January 2010.

While the hotel is in good condition, the Brand is requiring that new bedding and Hi-Definition TV's be in place at the Hotel by June of 2011 or the Hotel will lose its franchise. The cost to meet these requirements was significant.

Resolution Considerations:

During the time of default with guidance provided by R.W. Kline, the Borrower remitted to the lender excess cash flow and maintained a good relationship with the Special Servicer.

R.W. Kline completed an independent assessment of the market, obtained valuations and reviewed the Borrower's projections of net income over the next three years.

Based on the underwriting, it was apparent that there was insufficient future value to justify the current loan balance, as well as the additional costs to comply with the brand requirements.

On behalf of the Borrower, R.W. Kline requested that the lender consider a Discounted Payoff of the loan at an amount equal to 65% of the loan balance. This represented an aggressive cap rate on projected year 3 income. To show good faith, the Borrower was willing to provide a significant non refundable deposit and close in 60 days if the Lender approved the Borrowers request. R.W. Kline assisted the Borrower in identifying sources that could provide a loan to facilitate the pay off.

Lenders Considerations:

Within 60 days after transfer, the Special Servicer obtained a new appraisal that indicated that today's value of the Hotel was 55% of the current loan balance. In addition, the lender obtained brokers opinions of value that indicated a value of 72% of the loan amount was appropriate. The valuations did not consider the costs that would be encountered by a buyer to secure a new franchise.

The Hotel is located in a judicial Foreclosure state that would require the appointment of a receiver and a 240 day Foreclosure period should the lender elect to foreclose.

The lender estimated that the marketing and legal costs of a foreclosure process would cost at least 10% of the ultimate sales price and was aware from prior experience that the performance of the hotel under receivership might decline.

Resolution:

The Lender countered with a Discounted Payoff of 68% of the loan amount which was accepted by the Borrower.

The Lender retained all escrows that were held by the Master Servicer which enhanced their recovery to the Trust.

The transaction closed within 60 days of approval with minimal costs to the Trust.

R.W. Kline Capital and/or assigns funded the discounted payoff and R.W. Kline is currently servicing for the borrower.

Benefits to the Lender:

The resolution provided the Lender with a recovery that provided the highest net present value for the trust.

The resolution eliminated a lengthy and expensive legal process.

Situation:

The Property is a 350,000 Regional Mall that was constructed in 1990.

The Borrower purchased the property in 2006 as part of a 1031 exchange and retained an experienced owner / manager of comparable properties to manage the property on its behalf.

Lender originated the loan in January of 2006 based on a conservative 60% of value at the time. The loan matures in November of 2011. At the time the Property was 90% occupied. The Property was anchored by three national tenants that occupied 60% of the Properties space.

In late 2008, one of the anchors filed for bankruptcy and closed its operations. Due to depressed sales a second anchor demanded and obtained a significant rent reduction in late 2009.

The vacancy of the Mall's non-anchor space had risen to 20% by the middle of 2009.

During the time period from 2006 - 2008 a new 200,000 square foot Power Center as well as, a 150,000 square foot Upscale outdoor shopping center opened within 5 miles of the Mall.

While the demographic patterns and prospects for economic recovery in the area were promising the Mall's age and configuration would require significant capital and time to reposition the Property.

Common area expenses of $15.00 per square foot were not being reimbursed for 40% of the Mall. As a result, the Net Operating Income at the property had decreased by 50% and the Borrower was funding operating losses and Debt Service.

The Borrower engaged R.W. Kline Companies in December of 2009 to assist them in working with the Lender to seek a resolution to the situation. On behalf of the Borrower, R.W. Kline Companies submitted a Letter of Imminent default to the Lender in January requesting that the loan be transferred to the Special Servicer for Modification.

After funding significant Debt Service and Operating Shortfalls for 15 months the loan went into default in February of 2010 and the loan was transferred to the Special Servicer in March 2010.

Resolution Considerations:

During the time of default with the guidance provided by R.W. Kline the Borrower, remitted to the lender excess cash flow and maintained a good relationship with the Special Servicer.

R.W. Kline completed an independent assessment of the market, obtained valuations and reviewed the Borrower's projections of net income.

While the potential for a recovery and repositioning of the property were promising, the maturity of the loan in March 2011 and the current conservative nature of the debt markets would not provide sufficient basis to justify a full repayment of the loan at maturity let alone justify the cost of carrying the operations of the Property.

On behalf of the Borrower, R.W. Kline requested that the lender consider a Discounted Payoff of the loan at an amount equal to 60% of the loan balance. R.W. Kline also arranged for the current Management Company to acquire the property under terms acceptable to the Borrower and to fund the costs of the Discounted Payoff.

Lenders Considerations:

Within 60 days after transfer, the Special Servicer obtained a new appraisal that indicated that today's value of the Mall was 55% of the current loan balance. In addition the lender obtained brokers opinions of value that indicated a value of 75% of the loan amount was appropriate. All of the broker opinions of value were based on what was considered appropriate levels of revenue but failed to accurately estimate the costs to reposition the Property.

The upcoming maturity of the loan in November of 2011 did not coincide with the 3 to 5 years that would be required for the property to generate sufficient value to repay the full amount of the loan.

The lender was comfortable with the integrity of the Borrower and the plan and financial projections of the Management Company.

The Property was located in a Judicial Foreclosure state that would have provided the appointment of a receiver and a 180 day Foreclosure period should the lender elect to foreclose.

The Lender estimated that the marketing and legal costs of a foreclosure process would cost at least 20% of the ultimate sales price and from prior experience knew that the sale of a foreclosed property taints a property's value.

Resolution:

The Lender accepted the Borrowers Discounted Payoff of 60% of the loan amount which was accepted by the Borrower.

The Lender retained all escrows that were held by the Master Servicer which enhanced their recovery to the Trust.

The transaction closed within 60 days of approval with minimal costs to the Trust.

R.W. Kline Capital and/or assigns funded the discounted payoff and R.W. Kline is currently servicing for the borrower.

Benefits to the Lender:

The Lender benefitted from the experience and track record that the current Management Company had with the property and the cooperation from the Borrower to not pursue Bankruptcy options to resolve the loan and with a recovery that provided the highest net present value for the trust.

The resolution avoided a maturity default.

The resolution eliminated the Lenders cost to fund operations and to reposition the property.

Situation:

The Property is a 50,000 square foot Class B Office Building that was constructed in 1996.

The Borrower has been a developer / owner / manager of office buildings for 20 years and owns multiple properties in the area.

Lender originated the loan in 2005. At the time, the Property was 95% occupied. The market had a vacancy of 10%.

From 2004 to 2008 there was a 35% increase in new office supply added to the market. Only 35% of the space in the new supply was preleased.

With the collapse of the financial markets in late 2008, demand for office space stopped with many businesses closing their doors and walking from their leases. The combination of the unoccupied recently constructed space, as well as space that was available for sublease increased the market vacancy to 30% by the end of 2009.

50% of the leases at the subject property, were expiring in 2010 - 2013 and the current rents were 20% higher than current market rents for newer space.

Several leases in the subject property expired in the first half of 2009 that lowered the buildings occupancy to 75%.

The reduction in income from the vacating tenants and the decrease in reimbursed expenses, resulted in a 30% reduction in net income and required the Borrower to fund $100,000 in Debt Service Shortfalls through August of 2009.

The Borrower engaged R.W. Kline Companies in September of 2009 to assist them in working with the Lender to seek a resolution to the situation. On behalf of the Borrower, R.W. Kline Companies submitted a Letter of Imminent default to the Lender in October requesting that the loan be transferred to the Special Servicer for Modification which occurred in November of 2009.

After funding significant Debt Service Shortfalls throughout 2009, the loan went into default in December of 2010. December of 2009 and was transferred to the Special Servicer in January 2010.

Resolution Considerations:

During the time of default with the guidance provided by R.W. Kline, the Borrower remitted to the lender excess cash flow and maintained a good relationship with the Special Servicer.

R.W. Kline completed an independent assessment of the market, obtained valuations and reviewed the Borrower's projections of net income over the next three years.

While the Property was in good condition, the current rents at the building were above market and the quality of the building was inferior to the current available supply. In addition, there was very little demand for space with concessions and significant tenant improvements required for new leases and renewals.

With the decrease in income, the Property was having a difficult time covering operating costs.

Based on the underwriting, it was apparent that there was insufficient future value to justify the current loan balance, as well as the additional costs to carry the operations, pay real estate taxes, and enhance the building to keep its current tenancy, let alone attract new tenants.

On behalf of the Borrower, R.W. Kline requested that the lender consider a Discounted Payoff of the loan at an amount equal to 50% of the loan balance. This represented an aggressive cap rate on projected year 3 income. To show good faith, the Borrower was willing to provide a significant non refundable deposit and close in 60 days if the Lender approved the Borrowers request. R.W. Kline assisted the Borrower in identifying sources that could provide a loan to facilitate the pay off.

Lenders Considerations:

Within 60 days after transfer, the Special Servicer obtained a new appraisal that indicated that today's value of the Property was 45% of the current loan balance. In addition, the lender obtained brokers opinions of value that indicated a value of 62% of the loan amount was appropriate. All of the broker opinions of value were based on projected revenue and included absorption estimates that were not presently being realized in the market.

The Property was located in a non-judicial Foreclosure state that would have provided the appointment of a receiver and a 90 day Foreclosure period should the lender elect to foreclose.

The lender solicited the Brokers that had provided the opinions of value for potential buyers that would actually buy the Property after foreclosure. The Brokers could not produce any buyer willing to pay more than 55% of the current loan balance.

The Lender estimated that the marketing and legal costs of a foreclosure process would cost at least 10% of the ultimate sales price and from prior experience knew that the sale of a foreclosed property taints a property's value.

Resolution:

The Lender countered with a Discounted Payoff of 55% of the loan amount with was accepted the Borrower.

The Lender retained all escrows that were held by the Master Servicer which enhanced their recovery to the Trust.

The transaction closed within 60 days of approval with minimal costs to the Trust.

R.W. Kline Capital and/or assigns funded the discounted payoff and R.W. Kline is currently servicing for the borrower.

Benefits to the Lender:

The resolution provided the Lender with a recovery that provided the highest net present value for the trust.

The resolution eliminated the Lenders potential need to fund operations, pay real estate taxes, and carry the Property during a foreclosure process.