PRIVATE PLACEMENT MEMORANDUM #102

THE PRES FUND I, L.P.

— A REAL ESTATE INVESTMENT FUND —
CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
 INTRODUCTION
This memorandum is being furnished to prospective investors on a confidential basis to consider
an investment in The PRES Fund I, L.P. (the “Fund”) and may not be used for any other purpose. This
memorandum may not be reproduced or provided to others without the prior written consent of PRES
Advisors LLC (the “General Partner”). By accepting delivery of this memorandum, each prospective
investor agrees to the foregoing.

In making an investment decision, investors must rely on their own examination of the person or
entity creating the securities and the terms of the offering, including the merits and risks involved. The
securities offered hereby have not been recommended by any federal or state securities commission or
regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or
determined the adequacy of this document. Any representation to the contrary is a criminal offense. The
limited partnership interests are offered subject to the right of the General Partner to reject any
subscription in whole or in part. If the General Partner rejects a subscription, the prospective investor will
be notified as soon as is practicable.

Offers and sales of limited partnership interests in the Fund will not be registered under the laws
of any jurisdiction (including the United States Securities Act of 1933, as amended (the “Securities Act”),
the laws of any state of the United States of America or the laws of any foreign jurisdiction) and may not
be sold or transferred without compliance with applicable securities laws. Neither the United States
Securities and Exchange Commission nor the securities commission or any other agency of any other
jurisdiction has reviewed or passed upon the merits of this offering. The partnership agreement of the
Fund (the “Partnership Agreement”) also has restrictions on transferability. Investors should be aware
that they will be required to bear the financial risks of this investment for an indefinite period of time.

Investment in the limited partnership interests will involve significant risks due, among other
things, to the nature of the Fund’s investments. Investors should have the financial ability and willingness
to accept the risks and lack of liquidity that are characteristic of the investment described herein. There
will be no public market for the limited partnership interests, and they will not be transferable without the
consent of the General Partner.

Prospective investors should not construe the contents of this memorandum as legal, tax,
investment or other advice. Each investor should make its own inquiries and consult its own advisors as
to the Fund and this offering and as to legal, tax and related matters concerning this investment.

This memorandum is qualified in its entirety by reference to the Partnership Agreement and the
subscription agreement (the “Subscription Agreement”) related thereto, copies of which will be made
available upon request and should be reviewed prior to purchasing an interest in the Fund. No person
has been authorized in connection with this offering to give any information or make any representations
other than as contained in this memorandum. Statements in this memorandum are made as of the date
of the initial distribution of this memorandum unless stated otherwise, and neither the delivery of this
memorandum at any time, nor any sale hereunder, shall under any circumstances create an implication
that the information contained herein is correct as of any other time subsequent to such date. Certain of
the information contained herein represents or is based upon forward-looking statements or information,
expectations of future Fund activity. The Fund and its affiliates believe that such statements and
information are based upon reasonable estimates and assumptions. However, forward-looking
statements and information are inherently uncertain and actual events or results may differ from those
projected. Therefore, undue reliance should not be placed on such forward-looking statements and
information. This memorandum does not constitute an offer or solicitation in any state or other jurisdiction
in which such an offer or solicitation is unlawful. The General Partner and its affiliates reserve the right to
modify any of the terms of the offering and the limited partnership interests described herein.

The Interests are being offered and sold by the Fund only to persons who are “accredited
investors” within the meaning of Regulation D promulgated under the Securities Act and who are
“qualified purchasers” under the Investment Company Act of 1940 (the “Investment Company Act”). An
“accredited investor” as defined in Regulation D includes any natural person (i) whose individual net
worth, or joint net worth with that person’s spouse, exceeds $1,000,000 or (ii) who had an individual
income in excess of $200,000 in each of the two most recent years or joint income with that person’s
spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year. A “qualified purchaser” as defined in the Investment Company Act
includes any natural person who owns not less than $ 5,000,000 in investments. Please note that there
are different rules for determining whether a trust or business entity is an “accredited investor” or a
“qualified purchaser.”

Please refer to Section X of this memorandum for an index of defined terms used in this
memorandum.

Prospective investors wishing to inquire about The PRES Fund I, L.P. are invited to contact the
following selected representatives of the Fund:

AARON A RIOS
SENIOR VICE PRESIDENT, INVESTOR SERVICES
THE PRES COMPANIES
(949) 261-7737, EXTENSION 224

BRADLEY W. SCHROTH JOHN W. FITZGIBBON, ESQ.

PRESIDENT AND CEO GENERAL COUNSEL AND COO
THE PRES COMPANIES THE PRES COMPANIES
(949) 261-7737, EXTENSION 223 (949) 261-7737, EXTENSION 243

JIM WOOD, JR. DOLF RENAUD, CPA

SENIOR VICE PRESIDENT-ACQUISITIONS DIRECTOR OF FINANCE
THE PRES COMPANIES THE PRES COMPANIES
(949) 261-7737, EXTENSION 236 (949) 261-7737, EXTENSION 231

THE PRES FUND I, L.P.

C/O THE PRES COMPANIES
1201 DOVE STREET
SUITE 100
NEWPORT BEACH, CALIFORNIA 92660
(949) 261-7737
FAX: (949) 442-1925

May 2003
 TABLE OF CONTENTS

Page

I. EXECUTIVE SUMMARY ...................................................................................... 1

Overview .............................................................................................................. 1
PRES ................................................................................................................... 1
The General Partner............................................................................................. 1
The Fund .............................................................................................................. 1
Investment Highlights ........................................................................................... 2
The Market Opportunity........................................................................................ 2
Management Team .............................................................................................. 2
Proprietary Deal Flow ........................................................................................... 2
Investment Track Record ..................................................................................... 2
Underwriting Parameters...................................................................................... 3
Principal Terms of the Fund.................................................................................. 4
II. THE OFFERING................................................................................................... 5
III. THE MARKET OPPORTUNITY............................................................................ 6
IV. MANAGEMENT TEAM......................................................................................... 8
V. PROPRIETARY DEAL FLOW; INVESTMENT TRACK RECORD; AND
PRES UNDERWRITING PARAMETERS ........................................................... 10
Proprietary Deal Flow ......................................................................................... 10
Real Estate Business ......................................................................................... 10
Extensive Network of Real Estate Relationships ................................................ 11
Other Sources of Transactions ........................................................................... 11
Investment Track Record ................................................................................... 11
Underwriting Parameters.................................................................................... 13
VI. STRUCTURE AND MANAGEMENT OF THE FUND ......................................... 15
Fund Structure.................................................................................................... 15
Fund Management ............................................................................................. 15
Investment Process ............................................................................................ 15
Investment Committee........................................................................................ 15
Investor Advisory Committee.............................................................................. 15
VII. SUMMARY OF TERMS...................................................................................... 16

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 TABLE OF CONTENTS
(continued)

Page
VIII. RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST...................... 25
Risk Factors........................................................................................................ 25
Potential Conflicts of Interest .............................................................................. 28
IX. CERTAIN TAX MATTERS.................................................................................. 30
U.S. Federal Income Tax Considerations........................................................... 30
Securities Law Matters ....................................................................................... 37
Investment Company Act of 1940....................................................................... 37
Investment Advisers Act of 1940 ........................................................................ 37
Non-United States Securities Law Matters ......................................................... 37
X. INDEX OF DEFINED TERMS ............................................................................ 38

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 I. EXECUTIVE SUMMARY

Overview
The Fund is a real estate investment fund being formed by The PRES Companies (“PRES”) to
make direct equity investments in real estate, primarily consisting of existing office, industrial and other
properties (which may include retail, commercial, storage, and parking facilities and multifamily housing
properties) in California with an emphasis on Southern California. Although the Fund will be PRES’ initial
real estate investment fund, PRES will continue its highly successful real estate investment activities.
Bradley W. Schroth and John W. Fitzgibbon, who have worked together at PRES for seven (7) years and
average 25 years of real estate experience, will direct the Fund. Under the leadership of Messrs. Schroth
and Fitzgibbon, PRES, through various general and limited partnership interests, has directly invested
over $3,300,000 in 14 real estate projects that are consistent with the Fund’s investment parameters.

The Fund is seeking total capital commitments up to $30 million. A capital commitment of
$500,000 in cash will be made by PRES Advisors LLC, a California limited liability company, the General
Partner of the Fund and a newly formed affiliate of PRES.

The Fund will seek to achieve a compounded annual return to its Limited Partners, net of all fees
and Fund expenses, of 14% to 16%. The Fund will seek to achieve superior risk adjusted returns by
identifying and creatively structuring investments responsive to the unique conditions of its targeted
market. PRES’ real estate investment strategy, together with its proprietary deal flow, provides a unique
framework to achieve the Fund’s investment objectives.

PRES
PRES, through its alliance with its affiliates, invests in commercial real estate on its own account
and on the behalf of a select group of institutional and private individuals. PRES’ team of seasoned real
estate professionals are experienced in the acquisition, financing, renovation, management, and leasing
of commercial properties.

The General Partner

PRES Advisors LLC, a California limited liability company will be the General Partner of the Fund.
The General Partner is a newly formed single purpose entity that is an affiliate of PRES. Its members are
comprised of Bradley W. Schroth, John W. Fitzgibbon, Michael J. Massaro, Jim Wood and Dolf Renaud.
It is expected that Messrs. Schroth, Fitzgibbon and Wood will devote a substantial portion of their time to
the Fund.

The Fund
The General Partner expects the Fund to make investments in existing income producing real
estate properties with target compounded annual returns to the Limited Partners of 14% to 16% in the
aggregate, net of all fees and Fund expenses. The Fund’s investments will be made in the State of
California with an emphasis on Southern California. Investment structures may include direct property
ownership or joint ventures. The investment opportunity, form and structure of the investments and the
nature of the property underlying each investment will vary depending on the real estate investment
environment prevailing in the local markets and economies at the time. In most situations, the Fund will
acquire properties directly and will utilize PRES’ multi-disciplinary staff to operate, market, lease or
develop the properties entirely in-house.

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Investment Highlights
The General Partner believes that the Fund possesses all of the characteristics required to
produce superior investment returns including: attractive investment opportunities, an experienced, highly
skilled and stable management team, access to a high volume of proprietary deal flow and a successful
investment track record.

The Market Opportunity

The Fund is focused on acquiring properties in the premier California office and industrial markets
based on land scarcity, difficult barriers to entry, job growth prospects and a favorable quality of life
environment. The Fund's primary markets will be Southern California including Orange County, Los
Angeles, San Diego and the Inland Empire. The Northern California markets, including the Silicon Valley,
East Bay and the Central Valley, will be considered on a deal by deal basis and monitored closely for
signs of economic recovery.

PRES believes that although Southern California has experienced a micro version of the slow
down in the national economy, the traditional office and industrial markets of Southern California are
positioned to rebound once tenant demand is re-established during the next 24-36 months.

Northern California is still experiencing dramatic turmoil in its local economy and commercial real
estate sector led by the implosion of the technology sector. Although the Bay Area markets are in
transition as rental rates and values adjust downward to reflect today's economic environment, the
Sacramento and Central Valley markets have remained stable over the past few years and continue to
perform well in today's economy. PRES will be monitoring the Northern California market closely for
opportunities.
Management Team
The Fund will be managed by the General Partner and an experienced team of professionals with
vast knowledge of the real estate business. The team will work as an integrated group to maximize
investor return. The team has been selected based on their experience, knowledge, area of expertise
and ability to work cohesively to provide a superior level of service. The team will be led by Bradley W.
Schroth, the CEO - President of PRES. Mr. Schroth built his career in the brokerage business, having
spent 15 years with Grubb & Ellis Company as the leading salesperson in their Newport Beach office. Mr.
Schroth will have overall supervision of the team and be responsible for the delivery of high value
services and investment strategies. John W. Fitzgibbon, Esq., the Chief Operating Officer and General
Counsel for PRES, will oversee the investment strategies and the administration of the Fund.

Proprietary Deal Flow

PRES' real estate business generates a unique, proprietary and constant stream of real estate
investment opportunities to which the Fund will have exclusive access as described in this Confidential
Private Placement Memorandum. The proprietary nature of the deal flow stems from PRES’ contacts
with its corporate accounts, direct relationships with owners, knowledge of the user markets and
relationships with appraisers, attorneys, accountants and other professionals. The General Partner
believes that the Fund's ability to access this deal flow for the transactions that offer the best risk-adjusted
return opportunities will create a substantial competitive advantage for the Fund over other real estate
investors. PRES often sees opportunities before they reach the open market.

Investment Track Record

PRES has used its multi-disciplinary and experienced management team and abundant
proprietary deal flow and creativity to build a growing investment portfolio. From 1998 through 2002,
PRES has directly invested in cash over $3,300,000 of equity capital in 14 transactions that were
consistent with the size and type of investment that the General Partner expects to be the focus of the
Fund’s investment strategy.
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Underwriting Parameters
The PRES acquisition team analyzes each investment opportunity individually to determine the unique
characteristics of each property and the underlying investment strategy. The PRES team is consistently
monitoring the general economy, macro market indicators and trends, along with tracking both investment
and leasing transactions on a daily basis in these targeted markets and submarkets. The proforma
created for each property will reflect the underlying business strategy PRES will deploy to create value
and maximize investor return.

[Remainder of page intentionally left blank.]

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 PRINCIPAL TERMS OF THE FUND

THE FUND The PRES Fund I, L.P., a Delaware limited partnership

THE GENERAL PARTNER PRES Advisors LLC, a California limited liability company
and an affiliate of PRES.

MANAGEMENT AND LEASING COMPANY PRES Property/Asset Management LLC, a California

limited liability company which is affiliated with PRES, or
any qualified independent third party property
management, leasing and/or brokerage company that
General Partner may select from time to time.

CONSTRUCTION MANAGEMENT COMPANY PRES Development & Construction Management

Services, Inc., a California corporation which is affiliated
with PRES, or any qualified independent third party
construction management company that General Partner
may select from time to time.

GEOGRAPHIC FOCUS California, with an emphasis on Southern California, a

75% cap in Orange County, California, and a 25% cap for
each of the other counties in California.

PROPERTY TYPE FOCUS Existing office, industrial, and other properties, with a
75% cap in office properties, a 75% cap in industrial
properties and a 15% cap in other properties (which may
include retail, commercial, storage, multifamily housing
and parking but which will expressly exclude properties
used for salvage, heavy manufacturing, automotive
repair, so called ‘brownfields’ properties, detached single
family housing, hospitals, clinics, surgery centers and
other similar medical uses, hotels, resorts and vacant
land and other non-income producing uses).

TARGET GROSS INVESTMENT PER ACQUISITION $2 million - $20 million.

TARGET LEVERAGE Not more than 75% of the cost basis of the Fund
investments.

TARGET FUND SIZE $30 million.

GENERAL PARTNER’S CAPITAL COMMITMENT $500,000.

MINIMUM SUBSCRIPTION $100,000, 5% payable with a signed Subscription

Agreement, 20% payable on the Closing Date and the
balance paid upon a ten (10) day capital call notice,
primarily for specific investments. Additional partnership
interests shall be sold in $100,000 increments. A
Subscription will not be accepted without the 5% deposit.

FUND MANAGEMENT FEE 0.5% of aggregate Capital Commitments per annum,

ratcheting down to 0.5% of the aggregate unreturned
Capital Contributions after the Commitment Period, to be
paid to General Partner on a quarterly basis contingent
on Fund cash flow. Fee will be cumulative and non-
interest bearing.

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ACQUISITION FEE/DISPOSITION FEE 0.75% of gross acquisition price for each property and
0.75% of gross disposition sales price for each property,
to be paid to the General Partner payable at the
consummation of each transaction.

PREFERRED RETURN 5% annual cumulative return of capital from the Closing

Date until the Fund makes its first investment and 9%
annual cumulative return of capital thereafter (the
“Preferred Return”). These returns will be paid quarterly
based on Fund cash flow and no Preferred Returns will
be paid for the first 12 months from the Closing Date.

GENERAL PARTNER PROFITS INTEREST 20% of current cash income after all Partner loans, Fund
operating expenses and preferred returns have been
paid.

COMMITMENT PERIOD Two years from the Closing Date.

REINVESTMENT PERIOD Five years from the Closing Date.

TERM OF THE FUND December 31, 2011, with two one-year extensions at the
option of the General Partner in its sole discretion.

See “Section VII— Summary of Terms” for further details on the terms of the Fund.

II. THE OFFERING

The General Partner seeks to raise up to $30 million in aggregate capital commitments (“Capital
Commitments”) with a minimum aggregate offering amount of $10 million in aggregate Capital
Commitments, including the General Partner’s Capital Commitment. No investor will be permitted to
invest less than $100,000 without the prior approval of the General Partner. The General Partner will
conduct only one closing (the “Closing”) at any time after receiving subscriptions for the minimum
aggregate Capital Commitments. The offering will terminate on September 1, 2003, or sooner if fully
subscribed. If the minimum aggregate subscriptions from qualified prospective investors are not received
by the General Partner by such date, the General Partner may extend or withdraw the offering.

The Interests are being offered and sold by the Fund only to persons who are “accredited
investors” within the meaning of Regulation D promulgated under the Securities Act and who are
“qualified purchasers” under the Investment Company Act. The Interests are being offered without
registration under the Securities Act pursuant to exemptions provided under Section 4(2) of the Securities
Act and Regulation D. Thus, the Partnership will offer and sell the Interests only as described herein; will
furnish such information to investors as may be required pursuant to Regulation D; will not offer or sell,
nor authorize any person acting on its behalf to offer or sell, the Interests by any form of general
solicitation or general advertising; and will exercise reasonable care to assure that the purchasers of the
Interests will not be “underwriters” within the meaning of the Securities Act by limiting transfer of the
Interests. In addition, the Fund will offer and sell the Interests on such terms and conditions as may be
required to comply with the securities or other applicable laws of any pertinent states. The Fund will not
be registered as an investment company under the Investment Company Act.

In order to invest in the Fund, an investor must deliver a fully completed and executed
Subscription Agreement and an executed signature page to the Partnership Agreement to the General
Partner, by no later than 5:00 pm, Pacific Standard Time, on September 1, 2003. Once executed and
delivered by the investor to the General Partner, an investor’s offer to subscribe shall be irrevocable
unless the minimum Capital Commitments are not subscribed for and delivered. The General Partner will

5
have the right to accept or reject any subscription or may accept a subscription for a lesser amount of
Interests than that subscribed for.

The Closing is expected to be held by September 30, 2003, but may be extended by the General
Partner in its sole and absolute discretion (the “Closing Date”) (however, a potential investor will be
released of any obligation to invest in the Fund if it is not closed by September 30, 2004). On the Closing
Date, the subscribers whose subscriptions have been accepted will be admitted as Limited Partners of
the Fund so long as such subscribers shall have made an initial capital contribution to the Partnership
equal to 25% of their Capital Commitments on the Closing Date. No certificates or other evidence of such
ownership need be issued by the Partnership to reflect the Interests of such subscribers. The General
Partner, acting pursuant to the various Subscription Agreements, will provide three (3) Business Days’
advance notice of the Closing Date and the amount of capital that will be due from each Limited Partner
on the Closing Date.

III. THE MARKET OPPORTUNITY

Target Markets

The Fund is focused on acquiring existing income producing properties in the premier California
office and industrial markets based on land scarcity, difficult barriers to entry, job growth prospects and a
favorable quality of life environment. The Fund’s primary markets will be Southern California, including
Orange County, Los Angeles, San Diego and the Inland Empire. The Northern California markets,
including the Silicon Valley, East Bay and the Central Valley, will be considered on a deal by deal basis
and monitored closely for signs of economic recovery.

Southern California

Southern California is experiencing a micro version of the slow down in the national economy.
The meltdown of the technology sector, a volatile stock market and the impact of higher costs for security,
energy and insurance premiums are being felt across the Southland. Low interest rates, moderate new
construction and the abundance of new capital have maintained most property values during this
recession. Rental rates are declining based on a supply and demand imbalance from an abundance of
technology failures and the availability of sub-lease spaces adding to the supply side. Tenant demand is
weak based on restructuring pressures from Wall Street and slow job growth in most sectors. Third
quarter 2002 absorption figures reflect this decline in tenant demand placing downward pressure on
rental rates.

PRES believes that the traditional office and industrial markets of Southern California are
positioned to rebound once tenant demand is re-established in the next 24 to 36 months. The non-
traditional tech spaces and difficult sub-lease spaces will lag the market recovery. PRES further believes
that properties which are purchased during this time period, based on realistic pricing and market rental
growth expectations, will be well positioned to realize gains in value as the national and local economy
rebounds.

The following table highlights the Southern California market conditions as of first quarter 2003,
published by CB Richard Ellis:

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Southern California Markets

Source: CB Richard Ellis – Q1-2003 market reports

Q1 - 2003 Square Feet of Under % of Avg. Ask Rate
Market Market Base Vacancy Net Absorption Construction Base FSG$/SF/mo.
Office Markets
Orange County 90,572,092 16.4% (398,197) 844,551 0.9% $2.01
Los Angeles 183,861,821 14.4% (396,211) 1,520,558 0.8% $2.07
San Diego 47,891,028 11.7% 442,322 949,365 2.0% $1.84
Inland Empire 16,544,932 11.4% 112,256 366,299 2.2% $1.58

Source: CB Richard Ellis – Q1-2003 market reports

Q1 – 2003 Square Feet of Under % of Avg. Ask Rate
Market Market Base Vacancy Net Absorption Construction Base NNN$/SF/mo.
Industrial Markets
Orange County 243,037,981 4.8% (903,679) 818,321 0.3% $0.58
Los Angeles 946,639,667 3.0% 1,055,609 6,838,172 0.7% $0.51
San Diego 166,800,176 7.7% (700,857) 2,475,898 1.4% $0.93
Inland Empire 268,273,019 4.7% 4,386,332 3,284,395 1.2% $0.38

Northern California

Northern California is still experiencing dramatic turmoil in its local economy and commercial real
estate sector led by the implosion of the technology sector. Bay Area markets benefited greatly during
the 1998-2000 technology boom, spiking up both rental rates and property values. The decline in
demand by technology-based tenants has forced significant amounts of sub-lease space on to the market
and left speculative new construction un-leased. The Bay area markets are in transition as rental rates
and values adjust downward to reflect today’s economic environment.

The Sacramento and Central Valley markets have remained stable over the past few years and
continue to perform well in today’s economy. The availability of land for new construction hampers the
upside to these markets as construction keeps pace with tenant demand not allowing for a sustained
supply/demand imbalance to occur.

The following table highlights the Northern California market conditions as of first quarter 2003, published
by CB Richard Ellis:

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Northern California Markets

Source: CB Richard Ellis – Q1-2003 market reports

Q1 - 2003 Square Feet of Under % of Avg. Ask Rate
Market Market Base Vacancy Net Absorption Construction Base FSG$/SF/mo.
Office Markets
San Francisco 80,776,800 18.7% (204,069) 232,700 0.3% $1.91
San Francisco Peninsula 41,142,292 26.5% (378,819) 400,960 1.0% $2.27
Silicon Valley 52,531,606 24.3% (90,844) 357,000 0.7% $2.20
Contra Costa 38,946,195 13.7% (389,853) 732,952 1.9% $2.01
East Bay 27,790,273 16.8% (197,278) 114,000 0.4% $1.94
Sacramento Area 41,798,842 10.8% 20,752 214,683 2.9% $1.66

Source: CB Richard Ellis – Q1-2003 market reports

Q1 – 2003 Square Feet of Under % of Avg. Ask Rate
Market Market Base Vacancy Net Absorption Construction Base NNN$/SF/mo.
Industrial Markets
San Francisco Peninsula 72,298,674 12.2% (13,539) 144,000 0.2% $0.65
Silicon Valley 286,631,855 15.6% (1,512,107) 0 0.0% $0.64
East Bay 186,203,900 10.8% (1,527,080) 618,145 0.3% $0.47
Sacramento Area 155,491,896 11.3% 1,055,058 524,600 0.3% $0.30

The Fund will monitor the Northern California markets and evaluate properties on a deal by deal basis.

IV. MANAGEMENT TEAM

The General Partner of the Fund is an affiliate of PRES. PRES was founded in 1995 as a full
service real estate concern. The Fund will be managed by the General Partner and an experienced team
of professionals with vast knowledge of the real estate business. The team will work as an integrated
group to maximize investor return. The team has been selected based on their experience, knowledge,
area of expertise and ability to work cohesively to provide a superior level of service.

The team will be led by Bradley W. Schroth, the CEO – President of PRES. Mr. Schroth built
his career in the brokerage business, having spent 15 years with Grubb & Ellis Company as the leading
salesperson in their Newport Beach office, representing such clients as Ingram Micro Inc., Alcoa Inc.,
Boeing Realty Company, Federal Express and the RREEF Funds. Over the course of his real estate
career, Mr. Schroth has engaged in over $1 billion in sales activity and established a vast network of
contacts in the brokerage and financial communities. During the past several years, Mr. Schroth has
focused on acquisitions and investments, utilizing his contacts to assemble a portfolio of investment
properties. Mr. Schroth will have overall supervision of the team and be responsible for the execution of
investment strategies and providing key services to maximize property values.

Mr. Schroth holds a B.A. from Bowling Green State University and is a licensed real estate broker
in the State of California. He was a finalist in 2001 in the Ernst & Young “Entrepreneur of the Year”
award, and is active in many local and civic organizations.

John W. Fitzgibbon, Esq., the Chief Operating Officer and General Counsel for PRES, will
oversee the investment strategies and the administration of the Fund. In addition, Mr. Fitzgibbon will
provide legal review and documentation on all investments. Mr. Fitzgibbon is well versed in real estate
law, finance, acquisitions, commercial leasing and due diligence review. Over his career, Mr. Fitzgibbon
has represented major lending institutions, developers and economic development authorities.
8
 Mr. Fitzgibbon holds a B.A., cum laude, from Bucknell University, and a J.D. from Seton Hall
University School of Law. He is a member of the American Bar Association – Corporate and Real Estate
Sections.

Jim Wood, Jr. is Senior Vice President, Acquisitions & Investments, for PRES. Mr. Wood will
have primary responsibility for identifying investment opportunities, and negotiating the economics of
each transaction. Mr. Wood has extensive experience in contract negotiations, underwriting criteria,
financial and market analysis. Prior to joining PRES, Mr. Wood was an executive with Spieker Properties,
where he sourced over $500 million of acquisitions and developments over a 5-year period.

Mr. Wood received his B.S.B.A. from the University of the Pacific, a Masters in Real Estate
Development from the University of Southern California and is a licensed real estate broker in the State of
California.

Michael J. Massaro is Senior Vice President, Brokerage Services, for PRES. Mr. Massaro will
perform the market analysis for each investment, and add his extensive knowledge of real estate
transactions to the group. Mr. Massaro has an intimate knowledge of both the Orange County and Inland
Empire markets, having handled over 2.1 million square feet of office or industrial buildings over the last
18 months.

Mr. Massaro holds a B.S. in Civil Engineering from Pennsylvania State University and is a
licensed real estate salesperson in the State of California.

Gary J. Levinski is Senior Vice President, Development & Construction Management Services,
for PRES. Mr. Levinski will have responsibility for managing all construction matters including due
diligence inspections, capital improvement budgets and tenant improvement costs. Mr. Levinski has
been a licensed general contractor (B-1) in the State of California for 13 years and is well-versed in
dealing with architects and engineers on cost control and value engineering, having been involved as a
Project Manager in numerous commercial projects throughout his career.

Mr. Levinski holds a B.A. from the University of California, Santa Barbara.

Dolf Renaud, CPA is the Director of Finance for PRES and will have responsibility for overseeing
the financial aspects of the Fund’s investment transactions, including the placing of debt financing and
negotiation of loan documentation. In addition, Mr. Renaud will monitor all financial reporting and
compliance for the Fund and the investment properties. Mr. Renaud is experienced in underwriting equity
and debt financings for the acquisition of office, retail and multi-family properties, auditing properties and
financial modeling. Prior to joining PRES, Mr. Renaud was the controller of three syndicated funds,
entailing both income property and raw land containing nearly 40 properties totaling over $100 million in
assets for Edison Capital. Prior to Edison Capital, Mr. Renaud worked at various public accounting firms,
most recently with Ernst & Young in their Kenneth Leventhal Real Estate Group in Newport Beach,
California.

Mr. Renaud holds a B.S.B.A. (concentration in Accounting) and a Master of Science Degree in
Taxation, both earned at Colorado State University and is a licensed real estate salesperson in the State
of California.

Chris J. Cramond is the Property Accounting Manager for PRES and will oversee the day-to-day
accounting and reporting requirements of the properties to be held within the Fund. Prior to joining
PRES, Mr. Cramond was a Senior Auditor with the “Big 5” accounting firm of Ernst & Young in their
Kenneth Leventhal Real Estate Group and later, a senior property accountant with Insignia ESG where
he was directly responsible for the accounting and reporting for over 1 million square feet of office
product.

Mr. Cramond holds a B.S.B.A. (concentration in Accounting) from California State University,
Long Beach.

9
 Joseph M. Bernhard is Vice President, Property/Asset Management, for PRES, and will have
day-to-day responsibility for the investment properties in the Fund. Mr. Bernhard is experienced in all
facets of asset and property management, including lease negotiations, tenant retention, bid processing,
construction management supervision, CAM reconciliations, financial reporting and preparation of
operating budgets. During his career, which included time at PM Realty Group and Sares Regis Group,
Mr. Bernhard has represented clients such as Bank of America, Chase, Citicorp, MetLife, Aetna, GE
Capital, Copley and JP Morgan.

Mr. Bernhard is a licensed real estate salesperson in the state of California, and has served as a
Receiver for the Superior Court for nearly 1 million square feet of commercial development within five
southern California counties.

Alison W. Sansone is Project Director, Property/Asset Management, for PRES, and a Certified
Property Manager. Ms. Sansone has extensive experience in all phases of property management and
will oversee daily operations and the asset management primarily of the Orange County-based portfolio.
Ms. Sansone is knowledgeable in operating and capital budget preparation, CAM reconciliations, financial
reporting, lease administration and tenant retention. Prior to joining the PRES team, Ms. Sansone gained
valuable experience in the asset and property management field with The Irvine Company, Trammell
Crow, and most recently, with Pacific Medical Buildings, L.P. where she was the Vice President of
Property Management.

Ms. Sansone holds a B.A. degree from the University of Arizona and is a licensed real estate
salesperson in the State of California.

Scott M. Flemer is Vice President of Marketing and Leasing for PRES. Mr. Flemer is a senior
real estate professional with an extensive background in marketing, leasing and asset management for
institutional and private investors. Mr. Flemer will monitor lease negotiation, due diligence, repositioning
of assets to maximize value and will be involved in tenant representation services for the various assets
to be held in the Fund.

Mr. Flemer holds a B.S. degree in Finance (emphasis in Real Estate) from San Diego State
University and is a licensed real estate salesperson in the State of California.

V. PROPRIETARY DEAL FLOW; INVESTMENT TRACK RECORD;

AND PRES UNDERWRITING PARAMETERS
Proprietary Deal Flow
PRES’ real estate business generates a unique, proprietary and constant stream of real estate
investment opportunities to which the Fund will have exclusive access as described in this memorandum.
The General Partner believes that the Fund’s ability to access this deal flow for the transactions that offer
the best risk-adjusted return opportunities will create a substantial competitive advantage for the Fund
over other real estate investors. PRES has used its multi-disciplinary and experienced management
team, abundant proprietary deal flow and creativity to build a record of success in real estate investments.
From 1998 through 2002, PRES has directly invested in cash over $3,300,000 of equity capital in 14
transactions that were consistent with the size and type of investment that the General Partner expects to
be the focus of the Fund’s investment strategy. The following are key drivers of PRES’ real estate deal
flow:

Real Estate Business

PRES is a full service real estate firm, staffed by knowledgeable and seasoned professionals.
Under the PRES umbrella are five (5) business units working collaboratively to meet the demands and
needs of its clients. These five (5) business units are (a) brokerage, (b) development and construction
management, (c) corporate consulting/financial analysis, (d) acquisitions and investments, and (e)
property and asset management.

10
 PRES’ foundation can be found in its brokerage business. The philosophy behind the brokerage
business has been a focus on “relationship” building rather than a single “transaction.” PRES operates
under a team approach, with no commissioned salespeople, thereby assuring the client’s best interests
will be served throughout the entire real estate process. PRES brings to each transaction a team of
specialists in disciplines directly related to the client’s objective.

PRES’ brokerage foundation has provided PRES with a natural entry into other services.
Supported by up-to-date knowledge of local, regional and national markets, PRES is able to match the
financial, operational and qualitative needs of the client with appropriate strategies and opportunities. In
addition, given PRES’ presence in the market, along with the ability to provide a complete range of
services, PRES has parlayed various opportunities into acquisitions and investments for its own portfolio.

PRES has aligned itself with a number of capital resources that enable it to act quickly on
investment opportunities. Additionally, PRES’ transition from the brokerage business to acquisitions and
investments has been made easier because of PRES’ strong relationship with the brokerage community
and its knowledge of the market conditions. PRES’ extensive network of contacts enables PRES to
source acquisition opportunities before the general public has knowledge of them.

Extensive Network of Real Estate Relationships

The Fund will have access to extensive and, in many cases, proprietary investment opportunities
that will originate from PRES’ network of relationships. Bradley W. Schroth and John W. Fitzgibbon, who
have been with PRES since its inception and have been in the real estate business for an average of 25
years, are engaged in all facets of PRES’ business. The General Partner believes that these
professionals, along with Messrs. Wood, Massaro and Renaud, have developed extensive networks of
relationships that will provide a competitive advantage in the market place for real estate deal flow.

PRES’ relationships have historically proved to be a valuable source of investment opportunities,

and the General Partner expects the Fund to benefit from these existing and well-established
relationships as a source of significant market insight and investment opportunities.

Other Sources of Transactions

The members of the General Partner and the senior professionals within PRES have developed a
network of relationships with (i) professionals who have expertise in specialized aspects of real estate
investment and operations with whom PRES has completed successful transactions, and (ii) advisors
who participate in transactions, including individuals from major law firms and accounting firms, as well as
real estate consulting, appraisal, brokerage and related firms. The General Partner expects the Fund to
gain access to additional investment opportunities through these relationships.

Investment Track Record

PRES has used its multi-disciplinary and experienced management team and abundant
proprietary deal flow and creativity to build a record of success in real estate investments. From 1998
through 2002, PRES invested over $3,300,000 of equity capital in 14 transactions (having an aggregate
acquisition cost exceeding $80,000,000) that were consistent with the size and type of investment that the
General Partner expects to be the focus of the Fund’s investment strategy. The table set forth on the
following page provides a breakdown of PRES’ current real estate inventory, and the total cost of, the
aforementioned projects.

11
 PRES INVESTMENTS LLC
REAL ESTATE INVENTORY

Total
Acquisition Property Property Purchase Acquisition PRES % PRES
PROJECT LOCATION Date Type Size (SF) Price Equity Equity Equity STATUS
PRES-directed

1101 Dove Street Newport Beach, CA 6/02 Office 33,400 $ 4,300,000 $ 1,250,000 $1,000,000 80% Operating

6133 Bristol Parkway Culver City, CA 7/02 Office 51,300 6,050,000 1,610,500 310,500 19% Operating

4200 Von Karman Ave Newport Beach, CA 4/00 Office 1,500 275,000 275,000 275,000 100% Operating

315 South Beverly Beverly Hills, CA 4/02 Office 67,000 12,250,000 4,327,000 250,000 6% Operating

50K SF bldg sold

Gillette Ave Buildings Irvine, CA 3/00 Industrial Converted to Office 150,000 9,000,000 3,280,000 161,700 5% 8/01, 100K SF bldg
currently for sale

801 Parkcenter Santa Ana, CA 5/02 Office 33,000 3,235,000 895,000 8,950 1% Operating

Total PRES-directed 336,200 35,110,000 11,637,500 2,006,150 17%

Active Co-Investments
7 bldgs sold, 4
Sycamore Business Center Vista, CA 11/99 Industrial 135,700 5,200,000 785,000 500,000 64%
remaining for sale
4040 Calle Platino Oceanside, CA 10/99 Industrial 80,000 3,525,000 760,000 480,300 63% Operating
Warner Redhill Center Tustin, CA 9/99 Office 95,000 11,200,000 2,147,000 114,600 5% project listed for sale
HM Electronics San Diego, CA 3/01 Office 63,400 6,930,000 1,643,000 55,100 3% Operating
2 bldgs. sold; 1 bldg.
Glendora Courtyard Glendora, CA 5/99 Office 84,000 6,800,000 1,594,000 53,200 3%
for sale
Scripps Center San Diego, CA 11/99 Office/Industrial 63,400 7,500,000 1,320,000 44,000 3% Operating

Total Co-Investments 521,500 41,155,000 8,249,000 1,247,200 15%

GRAND TOTAL 857,700 $ 76,265,000 $19,886,500 $3,253,350 16%
PRES-directed - Backlog
In Escrow,
19772 & 19782 MacArthur Newport Beach, CA TBD Office 66,400 10,500,000 2,625,000 525,000 20%
est close 7/03

TOTAL CURRENT BACKLOG 66,400 $ 10,500,000 $ 2,625,000 $ 525,000 20%

12
 While the past performance of PRES’ real estate investments cannot be taken as indicative
of future performance of the Fund, some characteristics of these investments should be
emphasized:

- Realized Returns: Successful, timely exits will be a critical element of PRES’ investment
strategy. Of the 14 investments, two have been sold.

- Consistency of Returns: The majority of investments are projected to achieve a gross

Internal Rate of Return (“IRR”)1 of between 16% to 23%.

- Portfolio Diversity: The 14 investments are diversified by location, investment size and
investment strategy.

PRES’ historical investment success in the real estate industry is due in great part to a consistent
ability to identify and capitalize early on emerging trends in the market, and the ability to use
creative structuring and to reposition assets to unlock value.

Underwriting Parameters
The PRES acquisition team analyzes each investment opportunity individually to determine
the unique characteristics of each property and the underlying investment strategy. Each property
is initially evaluated based on:

Location
Access
Amenities within surrounding area
Divisibility
Physical Appearance and Maintenance
Management Intensity
Tenant Mix and Credit
Current Operations and Tenant Relations
Leasing Program
Stability of Current Cash Flow
Review of Market Rents vs. In-Place Rents
Expense Levels and Efficiencies
On-going Capital Expenditures
Price vs. Replacement Value
Exit Strategy and Desirability

The PRES team is consistently monitoring the general economy, macro market indicators and
trends, and tracks investment and leasing transactions on a daily basis for its core markets. The
projections created for each property reflects the underlying property level strategy PRES will
deploy. Set forth below is a summary of the underwriting assumptions and guidelines PRES has
formulated and applied on recent acquisitions. These are based upon PRES’ recent experience in
the markets where it has been active and are tailored appropriately for each transaction. PRES
may make changes to these assumptions as it believes may be warranted either by a particular
investment opportunity or by changing market conditions:

1
Gross IRR excludes General Partner Profits Interest, Fund Management Fees, Acquisition/Disposition Fees,
Portfolio Reporting Fees, and other Fund Expenses. No expenses similar to the General Partner Profits Interest,
Asset Management Fees, Acquisition/Disposition Fees, Portfolio Reporting Fees or Fund Expenses are being
charged to the investments. Accordingly, if the Fund were to achieve identical investment returns, the net returns to
Fund investors would be lower.

13
Market Rents: PRES establishes a “snap shot” based on the current
market comparison and last deals completed in a project
adjusted for any concessions.

Rent Increases: Determined by the economy and trends or by the

projected value created through repositioning an asset. In
general, PRES has been projecting 2% to 4% rent growth,
with a suite by suite review to evaluate the appropriate-
ness of the projection.

Vacancy: In general, a minimum 5% vacancy and credit loss factor

is applied. In some cases, a greater vacancy factor may
be applied, if applicable.

Vacancy Lease Up: Typically a 4 to 6 month downtime is factored for lease up

periods.

Renewal Probability: Typically in the 60% to 70% range for multi-tenant office
space.

Expenses: Determined based on past operating history, experience

and comparable operations with adjustments as PRES
judges to be appropriate to fit its business plan. Taxes are
grossed up to reflect the purchase price.

Expense Growth: Typically 2% per year.

Capital Reserves: $0.15 to $0.20 PSF per year depending on age and first
year capital expenditures.

Average Lease Term: 5 Years

Lease Commissions: Adjusted for market conditions, typically 5% to 6%

Capital Expenditures: Varies widely by property depending on the business plan.

First year capital expenditures are capitalized into the
basis.

Tenant Improvements: New Spaces: $8 to $10 psf

Renewals: $3 to $5 psf
Shell Spaces: $30 to $35 psf

Property Management Fees: Adjusted for market and historical operations, typically 3%
to 4% of gross collections and, if applicable, reimburse-
ment of on-site administration.

Exit Cap Rate: Typically falls with 100 basis points of purchase cap rate
either way depending on business plan and market
conditions. In general, exit cap rates are in the 8.5% to
9.5% range. A test for PSF exit pricing is also reviewed.

Closing Fees: In general, a 3.75% adjustment for commissions and costs

is applied against the purchase price.

Financing: Based on recent market quotes, as of March 2003, PRES

underwrites a non-recourse loan at a 70%-75% LTV,

14
 6.5%-7.0% interest rate, 1%-2% origination fee and 25-
year amortization.

These underwriting assumptions create a 5-year projected cash flow. Reviewing projected cash on
cash returns, a projected 5-year IRR and annual trending of a return on capital determine pricing
for each asset. The members of the PRES acquisition team and the Investment Committee
consistently challenge the proforma assumptions. There can be no assurance that the Partnership
will succeed in locating properties that meet the above underwriting criteria. See “Section VIII –
Rise Factors and Permitted Conflicts of Interest.”

VI. STRUCTURE AND MANAGEMENT OF THE FUND

Fund Structure
The Fund is a limited partnership formed under the laws of the State of Delaware. It will be
managed by the General Partner, PRES Advisors LLC, a California limited liability company, which
is an affiliate of PRES. The General Partner will commit $500,000 in cash of the Fund’s Capital
Commitments.

Fund Management
The day-to-day operations of the Fund will be managed by the General Partner, which is
staffed by a team of dedicated professionals led by Bradley W. Schroth and John W. Fitzgibbon.
See “Section IV — Management Team” for biographical information on Messrs. Schroth and
Fitzgibbon and the other members of the Team.

Investment Process
Prospective investments will be subject to an established approval and oversight
acquisition process that encompasses the critical evaluation and underwriting of each investment
individually and as part of the Fund’s overall investment strategy by the members of the General
Partner, which includes the following individuals: Bradley W. Schroth and John W. Fitzgibbon (the
“Real Estate Principals”). This oversight includes the initial analysis, structuring and negotiation
of each potential investment. The Investment Committee is responsible for the final oversight and
approval of all of the Fund’s investments. See “Section IV — Management Team” for biographical
information on the PRES members of the Investment Committee.

Investment Committee
The Partnership Agreement provides for the establishment of an Investment Committee
comprised of the membership of the General Partner (the “Investment Committee”). With limited
exceptions, the Investment Committee will review and approve all acquisitions and dispositions of
Fund assets. These decisions will bind the actions of the Fund and be binding upon the General
Partner and the Partnership.

Investor Advisory Committee

The Partnership Agreement provides for the establishment of an Investor Advisory
Committee consisting of three (3) limited partners (the “Investor Advisory Committee”). The
three (3) Investors Advisory Committee seats shall be filled by the three (3) largest individual
Investors who agree to serve on said Committee. With limited exceptions, the Investor Advisory
Committee will be strictly advisory and the Investor Advisory Committee’s recommendations will
not be binding upon General Partner or the Partnership. Generally, the Investor Advisory

15
Committee will be used to solicit feedback and input from a representative group of Limited
Partners. In addition, the Investor Advisory Committee shall (a) if requested by the General
Partner, advise the General Partner with respect to potential conflicts of interest and, if the Investor
Advisory Committee so determines, waive conflicts on behalf of the Partnership, (b) take certain
actions to the extent General Partner is in default under the Partnership Agreement, and (c) consult
with the General Partner on such matters as the General Partner presents to the Investor Advisory
Committee and to perform various additional duties set forth in the Partnership Agreement. No
fees will be paid to the members of the Investor Advisory Committee, although the Fund will pay all
expenses associated with the Investor Advisory Committee’s meetings.

VII. SUMMARY OF TERMS

The following information is presented as a summary of principal terms only and is
qualified in its entirety by reference to the Partnership Agreement, a copy of which will be provided
to each prospective investor upon request. The Partnership Agreement should be reviewed
carefully. In the event that the terms described herein are inconsistent with or contrary to the terms
of the Partnership Agreement, the Partnership Agreement shall control. An index of defined terms
is included at the end of this memorandum. See “Section X — Index of Defined Terms.”

THE FUND The PRES Fund I, L.P., a Delaware limited partnership organized
to invest in California real estate properties, with an emphasis on
Southern California. Limited Partners in the Fund are referred to
as the “Limited Partners”; the Limited Partners and the General
Partner of the Fund are referred to collectively as the “Partners.”

GENERAL PARTNER PRES Advisors LLC, a California limited liability company and an
affiliate of PRES. The General Partner is responsible for the
management and administration of the Fund’s affairs.

INVESTMENT OBJECTIVE The Fund’s investment objective is to achieve substantial capital

appreciation and provide its investors with superior risk adjusted
returns through equity and equity-related investments in office,
industrial, and other properties (which may include retail,
commercial, storage, and parking facilities and multifamily
housing properties), subject to certain restrictions on product and
geographic diversification set forth below. The Fund also may
make investments in joint ventures and companies with interests
in real estate that meet the Fund’s investment profile. The Fund
will not invest in properties used for salvage, automotive repair,
so called ‘brownfields’ properties and similar uses, single family
housing, hospitals, clinics, surgery centers and similar medical
uses, hotels, resorts, vacant land and non-income producing
uses; provided that an investment may be made in properties
where no more than 25% of the Acquisition Cost (as defined in
the Partnership Agreement) is attributable to undeveloped land
that could be parcelized and sold separately from the remainder
of the investment. The Fund will invest solely in California real
estate; however, it is expected that the Fund will focus primarily
on investment opportunities in Southern California.

OFFERING SIZE The General Partner seeks to raise up to $30 million in aggregate
Capital Commitments for the Fund, including the capital
commitment by the General Partner as described below. The
General Partner may accept a greater or lesser amount of

16
 Capital Commitments in its sole discretion but not less than $10
million, including the General Partners’ Capital Commitment.

MINIMUM CAPITAL $100,000 per Limited Partner. The General Partner may accept
COMMITMENT smaller Capital Commitments in its sole discretion.

GENERAL PARTNER’S General Partner will invest $500,000 in cash.

CAPITAL COMMITMENT

CLOSING; ADDITIONAL The General Partner will conduct the Closing at any time after
INVESTORS receiving a minimum of $10 million in Capital Commitments,
including the General Partner’s Capital Commitments. The
General Partner will not permit existing Limited Partners to
increase their Capital Commitments and will not admit any new
Limited Partners after the Closing Date, except in connection with
transfers permitted under the Partnership Agreement.

COMMITMENT PERIOD The “Commitment Period” will begin on the Closing Date and
end on the second anniversary of the Closing Date. After the
Commitment Period, all Limited Partners will be released from
their obligations with respect to their unfunded Capital
Commitments, except to the extent necessary to: (i) complete
investments which are in process at the end of the Commitment
Period, (ii) cover the expenses of the Fund, (iii) cover any
liabilities of the Fund, and (iv) make follow-up investments in
existing Fund assets. The Commitment Period may be
terminated earlier, at the discretion of the General Partner, at any
time after (a) the Partners’ aggregate Capital Commitments are
at least 75% invested, or (b) changes in applicable law or
regulations or in business conditions make such termination
necessary or advisable.

DRAWDOWNS All Partners will be required to fund 5% of their Capital

Commitment upon subscribing to the Fund and another 20% on
the Closing Date, all of which may be used to cover
Organizational Expenses, Operating Expenses, Fund
Management Fees, Acquisition and Disposition Fees, and
Portfolio Reporting Fees incurred and/or payable by the Fund
from time to time. Thereafter, Capital Commitments will be
drawn down pro rata (each a “Capital Contribution”), on an as-
needed basis, for specific investments (including the funding of
operating cash flow deficits, if any) and to cover Fund
Management Fees, Acquisition/Disposition Fees, Portfolio
Reporting Fees, Organizational Expenses, Operating Expenses,
and any amounts owing, or which may become due, under any
existing borrowings or other extensions of credit, with a minimum
of ten (10) days’ prior notice to the Limited Partners.

TERM The Fund will terminate at the earlier of: (i) December 31, 2011,
or (ii) the liquidation of all the Fund’s investments, after
termination of the Commitment Period and the Reinvestment
Period. The General Partner may in its sole discretion extend the
term for up to two additional one-year periods to allow for orderly
liquidation.

17
INVESTMENT LIMITATIONS Investments will be limited by the following diversification criteria:
(i) the total equity investment in any one investment may not
exceed 25% of the Capital Commitments; (ii) the total equity
investment in assets in Orange County, California may not
exceed 75% of the Capital Commitments; (iii) the total equity
investment in assets in any other California county may not
exceed 25% of the Capital Commitments; (iv) the total equity
investment in office property may not exceed 75% of the Capital
Commitments; (v) the total equity investment in industrial
property may not exceed 75% of the Capital Commitments; and
(vi) the total equity investment in other property (which may
include retail, commercial, storage, and parking facilities and
multifamily housing properties) may not exceed 15% of the
Capital Commitments. These limitations, in whole or in part, may
be waived by a majority in interest of the Limited Partners or the
Investor Advisory Committee.

REINVESTMENT The “Reinvestment Period” will begin on the Closing Date and
will end on the fifth anniversary of the Closing Date. During the
Reinvestment Period, proceeds distributable (or previously
distributed) to the Partners that constitute return of Capital
Contributions may be reinvested (or recalled for reinvestment) by
the General Partner. Accordingly, a Partner may be required to
fund an aggregate amount in excess of its Capital Commitment,
but at no time will a Partner have aggregate capital at risk in
excess of its original Capital Commitment.

DISTRIBUTIONS After the Closing Date, net proceeds from the operation,
disposition and refinancing of each investment or portion thereof
will be distributed among all Partners in the following order of
priority:

Operating Distributions

After the Closing Date, current cash income from each

investment shall be distributed among the Partners in the
following order of priority on a quarterly basis, or more frequently
at the discretion of General Partner:

First, 100% to the Partners in accordance with their respective

Capital Contributions until the Partners have received the
Preferred Return on such Partners’ Capital Contributions as of
the date of such distribution; and

Second, (A) 80% to the Partners in accordance with their

respective Capital Contributions, and (B) 20% to General
Partner.

Capital Distributions

After the Closing Date, disposition proceeds shall be distributed

among the Partners in the following order of priority:

First, 100% to the Partners in accordance with their respective

Capital Contributions until the cumulative amounts distributed to

18
 each Partner equals the aggregate of Capital Contributions made
by such Partner so that each Partner’s Unreturned Capital
Contribution Account (as defined in the Partnership Agreement)
is equal to zero;

Second, 100% to the Partners in accordance with their respective

Capital Contributions until the Partners have received the
Preferred Return on such Partners’ Capital Contributions as of
the date of such distribution; and

Third, (A) 80% to the Partners in accordance with their respective

Percentage Interests, and (B) 20% to General Partner.

The General Partner may withhold from any distributions

amounts necessary for operating or funding the Fund’s
investments and to create, in its discretion, appropriate reserves
for Fund obligations and activities as well as for any required tax
withholdings. Taxes paid or withheld that are allocable to one or
more Partners or investments will be deemed to have been
distributed to such Partners for the purposes of applying the
above calculations.

Distributions relating to the partial disposition of investments will

be made under the above formula, with that portion of the
investment disposed of treated as a separate investment from
the portion retained by the Fund, and prior distributions with
respect thereto shall be divided between such investments on a
pro rata basis.

Notwithstanding the foregoing, to the extent of available cash, the

General Partner may cause the Fund to make distributions from
time to time to the General Partner in amounts sufficient to permit
the payment of the tax obligation of the General Partner in
respect to allocations of income. Any such distributions shall be
taken into account in making subsequent distributions to the
Partners.

GENERAL PARTNER Upon liquidation of the Fund, the General Partner will contribute
NEGATIVE CAPITAL to the Fund for distribution to the Limited Partners an amount
ACCOUNT equal to its negative capital account balance, if any.

FUND MANAGEMENT FEE The General Partner shall be entitled to an annual fund
management fee (the “Fund Management Fee”) that will be
payable quarterly in arrears, equal to 0.5% of the aggregate
Capital Commitments of all Partners. After the Commitment
Period, the Fund Management Fee will be based on the
aggregate amounts in the Unreturned Capital Contributions
Account for all Partners. The Fund Management Fee will
commence as of the Closing Date.

ACQUISITION AND The General Partner shall be entitled to an acquisition fee equal
DISPOSITION FEES to 0.75% of the gross purchase price of each underlying
investment (including any indebtedness assumed or taken
subject to) upon acquisition thereof and a disposition fee equal to
0.75% of the sales price or contribution value of each underlying
investment upon disposition thereof (hereinafter referred to as
19
 “Acquisition/Disposition Fees”).

ORGANIZATIONAL The Limited Partners will bear legal and other organizational and
EXPENSES marketing expenses, including the out-of-pocket expenses of the
General Partner incurred in the formation of the Fund
(collectively, “Organizational Expenses”) up to an aggregate
amount for all Limited Partners of 7.5% of the Capital
Commitments, allocated pro rata based on Capital Commitments.
Organizational expenses in excess of this amount, if any, will be
borne by the General Partner.

OPERATING EXPENSES Except as provided below, the Fund will pay all expenses relating
to the activities of the Fund, including: (i) expenses related to the
operation of the Fund (including, without, limitation, appraisal
fees, photocopying and printing expenses, postage and delivery
charges, office supplies, the fees and expenses of accountants,
lawyers and other professionals incurred in connection with the
Fund’s annual audit, financial reporting, legal opinions and tax
return preparation); (ii) all fees, costs and expenses related to the
acquisition, holding, financing, refinancing and sale or other
disposition of investments and the evaluation of potential
investments regardless of whether the potential investments are
consummated; (iii) any expenses related to making temporary
investments and any interest expenses; (iv) Acquisition/
Disposition Fees and other fees paid to the General Partner; and
(v) any extraordinary administrative or operating fees or
expenses (e.g., litigation or indemnification expenses). The
foregoing expenses are referred to herein as “Operating
Expenses.” Operating Expenses will be allocated among the
Partners, pro rata based on Capital Commitments until the Fund
makes its first investment, and thereafter, based upon Capital
Contributions.

The General Partner will bear its own “overhead” associated with
the Fund’s activities (e.g., office space and employee personnel
costs) (hereinafter referred to as “Administrative Expenses”).

FEES PAYABLE TO THIRD If General Partner engages unaffiliated third parties to perform
PARTIES AND CERTAIN property management or leasing agent services, the General
PRES AFFILIATES Partner will be permitted to pay such parties management fees
and reimbursable expenses equal to the prevailing market fees
and commissions payable in the market where the investment is
located. In the event any improvement is undertaken on any
investment and an unaffiliated third party serves as construction
manager, such construction manager will receive as
compensation for such services a fee equal to the prevailing
market rate in the area where the investment is located. In the
event an unaffiliated third party serves as general contractor for
the construction of such improvements, such general contractor
will receive as compensation for its services a fee not in excess
of the prevailing market rate in the market where the investment
is located. If an unaffiliated third party serves as general
contractor with respect to such improvements but the General
Partner determines that it is in the Fund's best interests that there
also be a construction manager performing the sole function of
overseeing such improvements, then the construction

20
 management fee payable to the overseeing party shall not be in
excess of the market rate prevailing in the area for such oversight
service. In lieu of retaining unaffiliated third parties to provide the
foregoing services, the General Partner shall be entitled to
engage (in General Partner's sole and absolute discretion) the
following affiliated entities, subject to the enumerated limitations:

(a) PRES Property/Asset Management LLC. General Partner

shall be entitled to engage PRES Property/Asset Management
LLC for property management services and leasing services in
accordance with, and subject to, the provisions of a Management
Agreement in the form attached to the Partnership Agreement.
The property management fees and/or leasing fees payable to
PRES Property/Asset Management LLC shall not exceed four
percent (4%) of the aggregate rent and other income collected for
the property covered by such agreement for the applicable
period.

(b) PRES Development & Construction Management Services,

Inc. General Partner shall be entitled to engage PRES
Development & Construction Management Services, Inc. for
construction management services in accordance with, and
subject to, the provisions of a Construction Management
Agreement in the form attached to the Partnership Agreement.
The construction management fees payable to PRES
Development & Construction Management Services, Inc. shall
not exceed five percent (5%) of construction costs.

BORROWINGS The Fund will utilize leverage in the acquisition, operation and
ownership of its investments and will refinance its investments, if
desirable. Debt may take the form of mortgage or seller
financing at the property or Fund level. PRES may provide the
debt, be a lender to the Fund or act as an intermediary or
underwriter of the debt with the approval of the Investor Advisory
Committee (see “Section VIII — Risk Factors and Potential
Conflicts of Interest”). The General Partner may also arrange a
revolving credit facility that will be secured by deeds of trust or
mortgages on Fund investments. As further described in the
Partnership Agreement, the General Partner expects the Fund
leverage not to exceed 75% of the cost basis of the Fund
investments. However, the amount of debt against any asset of
the Fund may be greater or less than the target or limit. The
General Partner will provide any guarantees as may be required
by selected lenders.

CREDIT FACILITY The General Partner may arrange for a revolving credit facility to
pay expenses and fees, make deposits and acquire assets
through borrowings in lieu of, or in advance of, Capital
Contributions. The credit facility may be secured by deeds of
trust or mortgages on Fund investments.

EXCLUSIVITY During the Commitment Period, neither PRES, the General

Partner nor its members will manage or serve as the primary
source of transactions for another newly formed (after the
Closing Date) pooled investment vehicle that in PRES’, the
General Partner or its members good faith judgment has, as its

21
 primary investment objective, privately negotiated equity
investments that are substantially similar to the types of
investments to be made by the Fund (a “Competing Entity”),
until the later of (i) the end of the Commitment Period or (ii) such
time as at least 75% of the aggregate Capital Commitments to
the Fund are committed to investments. If a Competing Entity is
organized after such time, investment opportunities will be
allocated between the Competing Entity and the Fund by the
General Partner on a basis that the General Partner believes to
be fair and reasonable.

Notwithstanding the above, PRES, the General Partner and its

members and any funds organized by PRES, et. al. in the future,
will not be restricted from making certain investments, including,
but not limited to: (i) investments in real estate properties and
companies whose gross acquisition cost, in each instance,
exceeds $7.5 million or is less than $2 million, (ii) investments in
debt instruments or debt securities; (iii) equity investments that
are made as a form of compensation; (iv) strategic investments
(including acquisitions) made in connection with the operation or
conduct of PRES’ non-private equity businesses, including
without limitation new lines of business; (v) investments that the
Fund is restricted from making or that do not meet or are not
within the investment criteria of the Fund; (vi) investments made
pursuant to any commitment of PRES or its affiliates prior to the
Closing; (vii) investments in portfolios that do not consist
substantially of assets meeting the Fund’s investment criteria;
(viii) investments that the Fund cannot participate in because of
conflicts of interest (e.g., investments acquiring assets from
Limited Partners or entities in which any Limited Partner has an
interest); and (ix) investments pursuant to an offer made on an
unsolicited basis specifically to PRES for investment only by
PRES or its affiliates (other than the Fund).

CO-INVESTMENTS The General Partner may in its discretion give certain persons,
including PRES, its affiliates, Limited Partners or third parties, an
opportunity to co-invest alongside the Fund. The terms of any
such co-investment will be set by the General Partner on a basis
the General Partner believes to be fair and reasonable to the
Fund.

TRANSACTIONS WITH The Fund may not engage in transactions with its affiliates by
PRES purchasing investments from or through PRES or co-investing
with PRES and its affiliates in investments. In addition, the Fund
may not invest in entities in which PRES or its affiliates hold a
material interest.
Notwithstanding the foregoing, with the prior approval of the
Investor Advisory Committee, the Fund shall be entitled to take
an assignment from PRES (and any affiliate of PRES) of its
interest in any purchase agreement for the acquisition of an
investment to the extent that the Fund would have been entitled
to enter into such purchase agreement with the prospective seller
directly.

22
TRANSFER OF INTERESTS Except in certain limited circumstances, such as transfers to
affiliates or successor trustees or state agencies, a Limited
Partner may not sell, assign or transfer any interest in the Fund
without the prior written consent of the General Partner, which
the General Partner may withhold in its sole and absolute
discretion. Such sale, transfer or assignment shall be subject to
a right of first refusal, on the same economic terms, by the Fund
or, if the Fund declines, by the General Partner.

WITHDRAWAL No Limited Partner will be permitted to withdraw from the Fund or

to withdraw any portion of its capital account.

DEFAULT PROVISIONS Upon failure of a Partner to pay any portion of its Capital
Commitment on the due date called for by the General Partner,
such Partner will be in default (a “Defaulting Partner”).
Any Defaulting Partner shall (i) effectively forego future income or
gains (and distributions in respect thereof) on investments made
prior to its default, but continue to be subject to losses or
reduction in value on such investments; (ii) be assessed a 25%
reduction in its capital account balance, which reduction will
accrue one-third to the General Partner and two-thirds to the
non-defaulting Partners on a pro rata basis; (iii) lose any right to
vote its limited partnership interest; (iv) lose any right to be a
member of the Investor Advisory Committee; and (v) lose the
right to make Capital Contributions and participate in future
investments. The General Partner in its sole and absolute
discretion may waive any of the foregoing remedies other than
items (iii) and (iv).
The General Partner may require a pro rata increase in Capital
Contributions of other non-defaulting Limited Partners of the
Fund on any investment, but no Limited Partner will be required
to fund amounts in excess of its unfunded Capital Commitment.
The Defaulting Partner will be liable to the Fund for any damages
incurred as a result of the failure of such Defaulting Partner to
make its Capital Contribution as and when required hereunder;
the General Partner is authorized to offset against any
distributions otherwise payable to such Defaulting Partner, the
amount of such defaulted Capital Contribution, with interest until
fully paid and any damages incurred by the Fund as a result of
such defaulted Capital Contribution.

As security for the prompt and complete payment of each

Partner’s obligation to make Capital Contributions, each Partner
will grant a security interest in and continuing lien on all of such
Partner’s right, title and interest in the Fund. The Fund shall be
entitled to enforce this security interest in order to collect any
unpaid Capital Contributions.

INVESTOR ADVISORY The Partnership Agreement provides for the establishment of an

COMMITTEE Investor Advisory Committee consisting of three (3) limited
partners (the “Investor Advisory Committee”). With limited
exceptions, the Investor Advisory Committee will be strictly
advisory and the Investor Advisory Committee’s
recommendations will not be binding upon General Partner or the

23
 Partnership. Generally, the Investor Advisory Committee will be
used to solicit feedback and input from a representative group of
Limited Partners. In addition, the Investor Advisory Committee
shall (a) at the request of the General Partner, advise the
General Partner with respect to potential conflicts of interest, (b)
take certain actions to the extent General Partner is in default
under the Partnership Agreement, and (c) consult with the
General Partner on such matters as the General Partner
presents to the Investor Advisory Committee and to perform
various additional duties set forth in the Partnership Agreement.
No fees will be paid to the members of the Investor Advisory
Committee, although the Fund will pay all expenses associated
with the Investor Advisory Committee’s meetings.

INDEMNIFICATION The Fund will indemnify and hold harmless the General Partner
and its affiliates and their respective directors, officers, members
and employees and members of the Investor Advisory
Committee (each an “Indemnitee”) from and against liabilities
arising in connection with the Fund; provided that the Fund’s
obligations shall not apply to the Indemnitee’s willful misconduct,
fraud, gross negligence or bad faith. Indemnitees will have the
benefit of certain provisions that limit their liability to the Fund
which parallel the foregoing indemnification provisions.

REPORTS The General Partner will use reasonable efforts to send all
Partners within sixty (60) days after the end of each calendar
year an audit report including a balance sheet and statements of
income, changes in Partners’ equity and changes in cash flows,
prepared in accordance with accounting principles used to
prepare the Fund’s federal income tax return, plus a schedule
and summary description of the investments owned by the Fund
at year-end and a statement for each Partner of its capital
account and tax information necessary for completion of its tax
returns (subject to the Fund receiving information needed to
prepare such tax information from entities in which it holds a
direct or indirect interest). The General Partner also will send the
Partners unaudited financial statements on a quarterly basis and
a schedule and summary description of the investments made by
the Fund during such quarter.

AMENDMENTS The Partnership Agreement may be amended in accordance with

the terms and provisions of the Partnership Agreement.

PARTNER MEETINGS The Fund will hold an annual meeting with its Partners.

TAX CONSIDERATIONS Certain U.S. Federal income tax considerations applicable to this
offering are summarized under Section IX — “Certain Tax
Matters.” Each prospective investor should consult with its own
tax advisor regarding all Federal, state, local and foreign tax
considerations regarding its own tax situation applicable to an
investment in the Fund.

RISK FACTORS AND This offering involves significant risks. Prospective investors
CONFLICTS OF INTEREST should carefully review the matters discussed under “Section VIII
— Risk Factors and Potential Conflicts of Interest.”

24
LEGAL COUNSEL The General Partner has been represented by Mayer, Brown,
Rowe & Maw (“MBR&M”) in connection with the formation of the
Fund, the drafting of this Confidential Private Offering
Memorandum, the drafting of the Partnership Agreement and the
drafting of the Subscription Agreement. The potential conflict of
interest that may arise from such representation is set forth in
“Section VIII – Risk Factors and Potential Conflicts of Interest”.

AUDITOR Grant Thorton LLP

SUBSCRIPTION MATTERS Persons interested in investing in the Fund are required to

complete and return to the General Partner the subscription
documents for the Fund, a copy of which will be made available
to each prospective investor. Subscriptions may be rejected in
whole or in part in the General Partner’s sole discretion. All
persons interested in investing in the Fund must attest that they
are qualified purchasers under the Investment Company Act, as
amended, and accredited investors under the Securities Act.

VIII. RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST

Prospective investors should carefully consider, among other factors, the matters
described below, each of which could have an adverse effect on the value of the interests in the
Fund. As a result of these factors, as well as other risks inherent in any investment or set forth
elsewhere in this Memorandum (see, for example, “Section IX — Certain Tax Matters”), there can
be no assurance that the Fund will meet its investment objectives or otherwise be able to
successfully carry out its investment program. The Fund’s returns will be unpredictable. An
investor should only invest in the Fund as part of an overall investment strategy and only if the
investor is able to withstand a total loss of its investment. Investors should not construe the
performance of earlier investments by PRES as providing any assurances regarding the future
performance of the Fund.

Risk Factors
General Real Estate Considerations. Real property investments are subject to varying
degrees of risk. Real estate values are affected by a number of factors, including (i) changes in the
general economic climate, (ii) local conditions (such as an oversupply of space or a reduction in
demand for space), (iii) the quality and philosophy of management, (iv) competition based on rental
rates, (v) attractiveness and location of the properties, (vi) financial condition of tenants, buyers and
sellers of properties, (vii) quality of maintenance, insurance and management services, and (viii)
changes in operating costs. Real estate values also are affected by such factors as government
regulations (including those governing usage, improvements, zoning and taxes), interest rate
levels, the availability of financing and potential liability under changing environmental and other
laws.

Risks Associated with Unspecified Transactions. As of the date of this memorandum,

the Fund’s investments have not been identified. Investors will be relying on the ability of the
General Partner to identify and evaluate the investments to be made by the Fund. Because such
investments may occur over a substantial period of time, the Fund faces the risks of changes in
long-term interest rates and adverse changes in the real estate markets. Even if the investments of
the Fund are successful, the returns may not be realized by the Partners for a period of several
years.

25
 Speculative Nature of Investments. The investments to be made by the Fund are
speculative in nature and the possibility of partial or total loss of capital will exist. Investors should
not subscribe to or invest in the Fund unless they can readily bear the consequences of such loss.

Leverage. The Fund will typically leverage its investments with debt financing. Leverage
also may be present at the property or operating company level. Although the use of leverage may
enhance returns and increase the number of investments that can be made, it also may
substantially increase the risk of loss of principal.

Possible Lack of Diversification. While diversification is an objective of the Fund, there

is no assurance as to the degree of diversification that will actually be achieved in the Fund’s
investments, either by geographic region or asset type. If the Fund makes an investment in a
single transaction with the intent of refinancing or selling a portion of the investment, there is a risk
that the Fund will be unable to successfully complete such a financing or sale. This could lead to
increased risk as a result of the Fund having an unintended long-term investment and reduced
diversification.

Lack of Liquidity of Investments. The investments to be made by the Fund are likely to
be illiquid. Illiquidity may result from the absence of an established market for the investments, as
well as legal, contractual or other restrictions on their resale by the Fund. Dispositions of
investments may be subject to contractual and other limitations on transfer or other restrictions that
would interfere with subsequent sales of such investments or adversely affect the terms that could
be obtained upon any disposition thereof.

Taxation in Foreign Jurisdictions. The Fund or the Partners may be subject to income
taxes or other taxes in jurisdictions outside of the United States. In addition, withholding taxes or
other taxes may be imposed on earnings of the Fund from investments in such jurisdictions. Local
taxes incurred in foreign jurisdictions by the Fund or entities through which it invests may not be
creditable to or deductible by the Partners. See “U.S. Federal Income Tax Considerations —
Foreign Taxes.”

Development Risks. The Fund may acquire equity interests in properties that require
rehabilitation or renovation. To the extent that the Fund invests in such properties, it will be subject
to the risks normally associated with such activities. Such risks include, without limitation, risks
relating to the availability and timely receipt of zoning and other regulatory approvals, the cost and
timely completion of construction (including risks beyond the control of the Fund, such as weather
or labor conditions or material shortages) and the availability of both construction and permanent
financing on favorable terms. These risks could result in substantial unanticipated delays or
expenses and, under certain circumstances, could prevent completion of development activities
once undertaken, any of which could have an adverse effect on the investment and on the amount
of funds available for distribution to the Partners.

Potential Environmental Liability. Under various federal, state and local laws,
ordinances and regulations, an owner of real property may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property. Such laws often
impose such liability without regard to whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances. The cost of any required remediation and the
owner’s liability therefore as to any property are generally not limited under such laws and could
exceed the value of the property and/or the aggregate assets of the owner. The presence of such
substances, or the failure to properly remediate contamination from such substances, may
adversely affect the owner’s ability to sell the real estate or to borrow funds using such property as
collateral, which could have an adverse effect on the Fund’s return from such investment.

Investment in Distressed Assets. The Fund may make investments in under performing
or other distressed assets utilizing leveraged capital structures. By their nature, these investments
will involve a high degree of financial risk, and there can be no assurance that the Fund’s rate of
26
return objectives will be realized or that there will be any return of capital. Furthermore,
investments in properties operating in workout modes or under Chapter 11 of the United States
Bankruptcy Code are, in certain circumstances, subject to certain additional potential liabilities that
may exceed the value of the Fund’s original investment. In addition, under certain circumstances,
payments to the Fund and distributions by the Fund to the Partners may be reclaimed if such
payments or distributions are later determined to have been fraudulent conveyances or preferential
payments. Numerous other risks also arise in the workout and bankruptcy contexts.

Third-Party Involvement. The Fund may co-invest with third parties 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 Fund may at
any time have economic or business interests or goals that are inconsistent with those of the Fund,
or may be in a position to take action contrary to the Fund’s investment objectives. As a result, the
Fund may be unable to fully realize its expected return on any such investment. In addition, in
certain circumstances the Fund may be liable for actions of its co-venturer or partners.

Lack of Limited Partner Control over Fund Policies. The management, financing,
leasing and disposition policies of the Fund and its policies with respect to certain other activities,
including its distributions and operating policies, are determined by the General Partner. To the
extent permitted by the Partnership Agreement, these policies may be changed from time to time at
the discretion of the General Partner without a vote of the Partners of the Fund, although the
General Partner has no present intention to make any such changes. Any such changes could be
detrimental to the Limited Partners’ interests in the Fund.

Absence of Recourse to General Partner. The Partnership Agreement includes

exculpation and indemnification provisions that will limit the circumstances under which the General
Partner can be held liable to the Fund. As a result, Partners may have a more limited right of
action in certain cases than they would in the absence of such limitations.

Dependence on Key Personnel. The General Partner’s ability to successfully manage

the Fund’s affairs currently depends on the Real Estate Principals. The General Partner will be
relying extensively on the experience, relationships and expertise of the Real Estate Principals.
There can be no assurance that these individuals will remain in the employ of the General Partner,
or otherwise continue to be able to carry on their current duties throughout the term of the Fund, or
that any replacements for them will perform as well. The Real Estate Principals may have
substantial responsibilities outside the management of the Fund. However, they intend to devote a
significant portion of their professional time to the Fund, and, in any event, they will devote at least
as much time as is reasonably necessary to carry on the business and affairs of the Fund.

No Market for Interests in the Fund. Interests in the Fund will not be registered under
the Securities Act or any other securities law and ordinarily will not be transferable. In addition,
interests may not be sold, transferred (except to certain affiliates) or assigned without the prior
written consent of the General Partner in its sole discretion. Such a sale, transfer or assignment
also shall be subject to a right of first refusal, on the same economic terms, by the Fund or, if the
Fund declines, by the General Partner. There is no market for interests in the Fund and none is
expected to develop. Therefore, each prospective investor must consider its investment to be
illiquid.

Projections; Opinions. Statements contained in this memorandum that are not historical
facts are based on current expectations, estimates, projections, opinions and beliefs of the General
Partner. Such statements involve known and unknown risks, uncertainties and other factors, and
undue reliance should not be placed thereon. No assurance can be given that returns from the
Fund will be equal or similar to those achieved or expected to be achieved by prior investments of
PRES or by the Real Estate Principals, and no assurances can be given that actual results will
achieve the Fund’s stated objectives.

27
 Diverse Limited Partners. The Limited Partners of the Fund may include persons, who
may have conflicting investment, tax and other interests with respect to their investments in the
Fund. The conflicting interests of individual Limited Partners may relate to or arise from, among
other things, the nature of investments made by the Fund, the structuring of the acquisition of Fund
investments and the timing of disposition of investments. Such structuring of Fund investments
may result in different returns being realized by different Limited Partners. As a consequence,
conflicts of interest may arise in connection with decisions to be made by the General Partner,
including with respect to the nature or structuring of investments, that may be more beneficial for
one investor than for another investor, especially with respect to investors’ individual tax situations.
In selecting and structuring investments appropriate for the Fund, the General Partner will consider
the investment and tax objectives of the Fund as a whole, not the investment, tax or other
objectives of any Limited Partner individually.

Potential Conflicts of Interest

Client Relationships. PRES and its affiliates have existing and potential relationships
with a significant number of corporations, institutions and individuals. In providing services to its
clients and the Fund, PRES may face conflicts of interest with respect to activities recommended to
or performed for such clients, on the one hand, and the Fund, the Limited Partners of the Fund or
the entities in which the Fund invests, on the other hand. PRES also may face conflicts of interest
in connection with any purchase or sale transactions (involving an investment by the Fund) with a
PRES client, including with respect to the consideration offered by, and the obligations of, such
PRES client. In determining whether to pursue a particular transaction on behalf of the Fund, these
relationships could be considered by PRES, and there may be certain potential transactions which
will not be pursued on behalf of the Fund in view of such relationships. As a result, there can be no
assurance that all potentially suitable investment opportunities which come to the attention of
PRES will be made available to the Fund. In addition, the Fund may co-invest with clients of PRES
in particular investment opportunities and the relationship with such clients may influence the
decisions made by the General Partner with respect to such investments.

Real Estate Activities. PRES often represents potential purchasers and sellers in real
estate transactions. PRES will continue to accept such assignments after establishment of the
Fund. In these cases, PRES’ client may seek to prohibit PRES and its affiliates (including the
Fund) from making certain real estate investments. Accordingly, no assurances can be given that
all potentially suitable investment opportunities will be made available to the Fund.

Material, Non-Public Information. As a result of the advisory activities of PRES, as well

as investments made by PRES and its affiliates for their own accounts, PRES frequently comes
into possession of confidential or material, non-public information. Disclosure of such information
within PRES is on a need-to-know basis only. Therefore, the Fund may not have access to
material, non-public information in the possession of PRES which might be relevant to an
investment decision to be made by the Fund, and the Fund may initiate a transaction or sell an
investment which, if such information had been known to it, may not have been undertaken.

In the event any material, non-public information is disclosed to any of the Real Estate
Principals (including in their capacity as a member of a company’s board of directors), any member
of the Investment Committee or any other person responsible for the affairs of the Fund, the Fund
may be prohibited by applicable securities laws and PRES’ internal policies from acting upon any
such information. Due to these restrictions, the Fund may not be able to make an investment that it
otherwise might have made or sell an investment that it otherwise might have sold.

Fees for Services. From time to time, companies in which PRES owns an equity interest
may be retained to provide services to the Fund or entities in which the Fund invests. In that event,
PRES may indirectly receive financial benefits from such retention. Any such company will be

28
retained only on the terms disclosed under the “Fees Payable to Third Parties” section in “Section
VII – Summary of Terms.”

Transactions with Affiliates. Except as disclosed below, the Fund is prohibited from
engaging in transactions with its affiliates including the purchase of investments from PRES or its
affiliates, or involving the sale or disposition of investments to PRES or its affiliates, but may,
subject to certain restrictions, co-invest with PRES and its affiliates. Except as otherwise disclosed
below, any such transaction will be made only on terms, including the consideration to be paid, that
are approved by the Investor Advisory Committee. Notwithstanding the foregoing, (a) the Fund
may retain affiliates to provide services for the Fund upon the terms disclosed under the “Fees
Payable to Third Parties” section on “Section VII – Summary of Terms”, and (b) with the approval of
the Investor Advisory Committee, the Fund shall be entitled to take an assignment from PRES (and
any affiliate of PRES) of its interest in any purchase agreement for the acquisition of any
investment that the Fund would have been entitled to enter into a purchase agreement with the
prospective seller thereunder directly.

From time to time PRES may provide financing or other forms of credit to a company or
property in which the Fund invests. In such circumstances it is possible that PRES’ interests as a
lender could be in conflict with those of the Fund as an equity holder of such company or property.
In addition, the Fund may enter into transactions in which PRES or one of its affiliates serves as
the counterparty or principal. The General Partner will approve such transactions only on terms
that are approved by the Investor Advisory Committee.

The Fund may make a real estate investment in conjunction with an investment made by
other PRES affiliates. When making such investments, the General Partner and the other PRES
affiliates may have conflicting interests. For example, conflicts could arise where the Fund invests
in debt instruments while an affiliate invests in equity securities. In addition, conflicts may arise in
determining the amount of an investment, if any, to be allocated among potential investors and the
respective terms thereof. There can be no assurance that the return on the Fund’s investment will
be equivalent to or better than the returns obtained by the other affiliates participating in the
transaction.

Further conflicts could arise once the Fund and other affiliates have made their respective
investments. For example, if a company is unable to meet its payment obligations or comply with
covenants relating to investments held by the Fund, such other affiliates may have an interest that
conflicts with the interests of the Fund. If additional financing is necessary as a result of financial or
other difficulties, it may not be in the best interests of the Fund to provide such additional financing.
If the other affiliates were to lose their respective investments as a result of such difficulties, the
ability of the General Partner to recommend actions in the best interests of the Fund might be
impaired. The General Partner also may face conflicts of interest in connection with any purchase
or sale transactions with affiliates, including with respect to the consideration offered and the
obligations of such affiliates.

Finally, in the event the General Partner and/or management retains another real estate
development, management, leasing or service company in which PRES owns an equity stake,
PRES may indirectly receive financial benefits from such retention. The General Partner will retain
any such third-party developer, leasing and/or manager only on terms believed by the General
Partner to be fair and reasonable to the Fund.

Investments by PRES and Other PRES Partnerships. The Partnership Agreement is

expected to provide that PRES may not make certain real estate related privately negotiated equity
investments that are substantially similar to the types of investments to be made by the Fund
outside of the Fund except in certain specified cases set forth in the Partnership Agreement. See
“Section VII — Summary of Terms.” Conflicts may arise in determining whether these exceptions
are applicable in particular circumstances.

29
 General Partner Profit Interest. Although the General Partner’s significant Capital
Commitment is intended to minimize any such incentive, the existence of the General Partner’s
participation in the Fund’s profit could create an incentive for the General Partner to make more
speculative investments on behalf of the Fund than it would otherwise make in the absence of such
performance-based compensation. In addition, the method of calculating the General Partner’s
participation in the Fund’s profit may result in conflicts of interest between the General Partner and
the Limited Partners with respect to the management and disposition of investments and the
determination of the timing and amount of distributions by the Fund.

Management of the Fund. It is expected that the officers and employees of the General
Partner will devote themselves to the Fund. However, the Real Estate Principals also may work on
various projects for PRES or its affiliates, and conflicts of interest may arise in allocating time,
services or functions of these officers and employees.

Determination of Reserves. The amount of net cash flow available for distribution to the
Partners is subject to, among other things, the determination by the General Partner, in its sole and
absolute discretion, of reserves for the Funds liabilities. Because these reserves may be applied to
satisfy Fund obligations including, without limitation, fees and/or reimbursements to the General
Partner and/or affiliates of the General Partner, the General Partner may elect to maintain higher
reserves (as opposed to distributing net cash flow to the Partners) in order to ensure that the
foregoing obligations will be satisfied. Any such increased reserves will reduce or defer any cash
flow distributions that would otherwise be made to the Partners.

Compensation to the General Partner. The General Partner will receive substantial fees
for services rendered to the Fund and the General Partner will also be entitled to be reimbursed for
out-of-pocket expenses incurred in connection with the business or affairs of the Fund. These fees
were not the result of arm’s length negotiations. Further, there is a conflict of interest with respect
to the payment of the foregoing fees since the General Partner may be motivated to establish
higher reserves than necessary in order to ensure that the foregoing fees will be paid. In addition,
the General Partner may have incentives to cause the Fund to pay the foregoing fees to the
General Partner to the detriment of other third-party creditors of the Fund. Any of the foregoing
decisions may be detrimental to the Limited Partners and may reduce the return of or any return on
the investments made by the Limited Partners pursuant to the offering.

Lack of Separate Representation. The General Partner and its affiliates (including,
without limitation, PRES) have been represented by MBR&M in connection with the formation of
the Fund, the drafting of the Partnership Agreement, the Subscription Agreement and this
Confidential Private Offering Memorandum and other aspects of this transaction (the
“Transaction”). Neither the Fund nor the Limited Partners have been (or will be) represented by
MBR&M in connection with any aspect of the Transaction. It is also contemplated that MBR&M
and other attorneys, accountants and consultants who have previously performed services for
General Partner (and/or its affiliates) may in the future perform services for the Fund, the General
Partner and/or their respective affiliates that are unrelated to this Confidential Private Offering
Memorandum.

IX. CERTAIN TAX MATTERS

U.S. Federal Income Tax Considerations

General. The following description is a summary of certain U.S. federal income tax
considerations of an investment in the Fund and does not address every potential tax consequence
that may be applicable to investors subject to special rules, including tax-exempt investors. This
summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the
“Code”), applicable Treasury regulations, Internal Revenue Service (the “Service”) rulings and
judicial decisions, as of the date of this memorandum. No assurance can be given that future

30
legislative, regulatory or administrative changes or court decisions will not significantly modify the
statements made herein. Any such changes or decisions may be retroactive and thereby be
applied to transactions entered into prior to the date of their enactment or release. No assurance
can be given that the Service will not challenge any of the positions taken by the Fund and that
such challenge, if any, will not be successful.

Prospective investors that are exempt from federal income taxation (collectively, “Tax-
Exempt Entities”) and other types of investors should consult with their own tax advisors regarding
other U.S. federal, state and local tax effects of investing in the Fund. In particular, this
memorandum does not address any alternative minimum tax effects of investing in the Fund or the
limitations imposed by the Code on the ability of Partners to deduct net losses, if any, incurred by
the Fund. Because the specific investments that may be made by the Fund have not yet been
determined, no representation is made as to any tax benefits, including deductions or credits, being
available as a result of an investment in the Fund. It is not expected that an investment in the Fund
will reduce the cumulative tax liability of an investor with respect to any year. The Fund’s primary
objective is to realize capital appreciation through the direct investment in real estate or through
investments in real estate operating companies and partnerships, not to reduce the tax liabilities of
the Partners.

Partnership Status of the Fund. The Fund has not sought a ruling from the Service that
it will be treated for federal income tax purposes as a partnership rather than as an association
taxable as a corporation. However, Section 7704 of the Code provides that a “publicly traded
partnership” shall be treated as a corporation for federal income tax purposes unless such
partnership has met and continues to meet certain requirements regarding the types of gross
income received by such partnership. Section 7704 defines “publicly traded partnership” as any
partnership if interests in such partnership are traded on an established securities market or are
readily tradable on a secondary market or the substantial equivalent thereof (any such partnership
is referred to as a “Publicly Traded Partnership”). The General Partner has represented that it
will not admit as a substitute Limited Partner any person whose admittance would cause the Fund
to be treated as a publicly traded partnership.

If the Fund were classified as an association (or a publicly traded partnership) taxable as a
corporation, the Fund would pay federal income tax at corporate rates on its net income, and
distributions to the Partners in general would be dividends to the extent of the earnings and profits
of the Fund, with distributions in excess thereof being treated first as a return of capital and
thereafter as capital gain. Such tax would result in a reduction in the amount of cash available for
distribution to Partners.

Taxation of Partners on Income of the Fund. Generally, partnerships are not subject to
federal income tax. Instead, each partner includes such partner’s allocable share of the
partnership’s items of taxable income, gains, losses, deductions and credits in determining its
taxable income, whether or not cash is actually distributed to such partner. Consequently, a
Partner may be allocated income from the Fund although he has not received a cash distribution
from the Fund. The tax information returns filed by the Fund may be audited by the Service.
Adjustments, if any, resulting from such an audit may require each Limited Partner to file an
amended tax return and may possibly result in an audit of such return. Any audit of a Partner’s
return could result in adjustments of non-Fund as well as Fund items.

Under Code Section 704(b), a partnership’s tax allocations generally will be respected for
federal income tax purposes if they have “substantial economic effect” or they are in accordance
with the partners’ interests in the partnership. If a partnership’s allocations do not comply with
Code Section 704(b), the Service may reallocate partnership tax items in accordance with the
interests of the partners in the partnership.

A Partner must treat Fund items in a manner consistent with the Fund’s treatment of those
items, unless the Partner notifies the Service of the inconsistent treatment. Information necessary
31
for the Partners to prepare their annual tax returns will be furnished by the Fund after the close of
the Fund’s taxable year.

In addition, in the case of taxable Limited Partners that are individuals or certain types of
corporations, the ability to utilize any tax losses generated by the Fund may be limited under the “at
risk” limitations in Code Section 465, the passive activity loss limitations in Code Section 469 and
other provisions of the Code. Furthermore, in the case of Limited Partners that are individuals, the
ability to utilize certain specific items of deduction attributable to the investment activities of the
Fund (as opposed to its activities that represent a trade or business for federal income tax
purposes) may be limited, among other things, under the investment interest limitation in Code
Section 163(d), and the 2% floor on miscellaneous itemized deductions (including investment
expenses) in Code Section 67. The extent to which any of the foregoing provisions of the Code will
be applicable will depend upon the nature of the Fund’s future operations and the tax situations of
each of the taxable Limited Partners.

Fees to the General Partner and its Affiliates. As described elsewhere in this
memorandum, the Fund will pay certain fees and expense reimbursements to the General Partner
and its affiliates. The General Partner intends to cause the Fund to treat any fees, expense
reimbursements and other items payable to the General Partner or its affiliates in the same manner
as if such amounts were payable to unrelated parties. Such treatment may include currently
deducting such amounts, or capitalizing and amortizing or depreciating such amounts.

There can be no assurance that the Service will not challenge the tax treatment of these
items, possibly asserting that (a) all or a portion of certain fees and expenses are in fact
compensation for other services, (b) such fees are not reasonable in amount or (c) such fees and
expenses must be recovered, if at all, over a longer period of time. If such a challenge were
successful, it could result in either (i) the deferral or disallowance of the deduction of the fees and
expenses or (ii) the recharacterization of such fees and expenses as a nondeductible and
unamortizable item, such as a syndication expense which must be capitalized. In such event, the
net income (or net loss) allocated to the Limited Partners would be increased (or reduced).

Sale or Transfer of Limited Partner Interests. Upon a sale of a partner’s Fund interest,
a Limited Partner will recognize gain or loss equal to the difference between (a) the proceeds of
such sale plus such partner’s share of the Fund’s non-recourse liabilities and (b) such partner’s tax
basis in such partner’s Fund interest. Such gain or loss recognized on a sale of a Fund interest by
a Limited Partner, who does not hold such Fund interest as a “dealer” and who has held such Fund
interest for more than 12 months will generally be long-term capital gain or loss, as the case may
be, except that the portion of the selling Partner’s gain allocable to (or amount realized, in excess
of basis, attributable to) “inventory items” and “unrealized receivables” of the Fund as defined in
Code Section 751 will be treated as ordinary income.

Liquidation of the Fund. Upon liquidation of the Fund, its property will be distributed in
kind or sold and any gain or loss on any such sales will be allocated in accordance with the
Partnership Agreement.

In the event of the liquidation of the Fund, each taxable Limited Partner will recognize gain
to the extent that the cash and marketable securities received in the liquidation exceed his adjusted
basis for his Interest. See “Sale or Transfer of Limited Partner Interests” above.

Upon liquidation, a loss would be recognized only in the event the Limited Partner receives
only cash, unrealized receivables (within the meaning of Section 751(c) of the Code) or inventory
items (within the meaning of Section 751(d)(2) of the Code) and then only if (and to the extent that)
the Limited Partner’s adjusted basis for his Interest exceeds the sum of money distributed and his
share of the adjusted basis for unrealized receivables and inventory items. During the year of
liquidation, each Limited Partner may be allocated income from the operations of the Fund.

32
 Investment by Non-U.S. Persons. The Fund has reserved the right to sell interests to
non-U.S. corporations, trusts and estates and individuals who are neither citizens nor residents of
the United States (“Foreign Investors”). In addition to the federal income tax consequences
discussed below, Foreign Investors may also be required to file returns with and pay taxes to state
or local taxing jurisdictions in connection with the holding or disposing of interests in the Fund.
Each Foreign Investor is advised to consult its tax advisors regarding the U.S. tax effects of an
investment in the Fund, including information return and reporting requirements, the possible
applicability of tax treaties and other matters. A Foreign Investor should also consult its tax
advisors regarding the non-U.S. consequences of investing in the Fund.

Taxation of Effectively Connected Income. The Fund generally will be treated for U.S.
tax purposes as being engaged in the conduct of a U.S. trade or business. Foreign Investors will
therefore generally be treated as being engaged in the conduct of a U.S. trade or business. Thus,
each such Foreign Investor will be subject to U.S. federal income taxation, at graduated rates, on
its distributive share of the Fund’s income, gain or loss (whether ordinary or capital) that is
effectively connected with the conduct of the Fund’s U.S. trade or business (“ECI”).

In addition to the regular income tax that must be paid by a foreign corporation on its ECI,
the Code provides for a 30 percent “branch profits” tax. This tax is imposed on the deemed
distributed earnings and profits of a foreign corporation that is attributable to ECI, modified for
increases or decreases in the U.S. net equity of the foreign corporation. A Foreign Investor that is
a foreign corporation would be subject to the branch profits tax, to the extent that such Foreign
Investor’s distributive share of the Fund’s income or gain is taken into account under applicable
Treasury regulations in computing such Foreign Investor’s effectively connected earnings and
profits. Certain income tax treaties may reduce or eliminate the branch profits tax; however, under
certain circumstances, the branch profits tax may override income tax treaty benefits.

Withholding on ECI. ECI earned by the Fund is subject to withholding under Code
Sections 1445 and 1446. Any amounts properly withheld under Code Section 1445 or 1446
generally can be applied as a credit against the U.S. federal income tax liability of a Foreign
Investor and can be recovered as a refund in the event of overpayment.

Under Code Section 1445, 35 percent (or, to the extent provided in Treasury regulations,
20 percent) of the gain recognized from the disposition by the Fund of a United States real property
interest and allocable to a Foreign Investor must be withheld and remitted to the IRS. Alternatively,
the Fund may elect under certain circumstances to withhold the tax from the cash distributions
made to Foreign Investors subsequent to such a disposition.

Under Code Section 1446, the Fund is required to make periodic installment payments to
the IRS of withholding tax based on the amount of its Foreign Investors’ allocable share of ECI.
The applicable rate for calculating such withholding tax is the highest corporate or individual rate,
whichever is applicable. Withholding is not required under Code Section 1445 to the extent the
Fund withholds as required under Code Section 1446.

Taxation of Non-ECI. If the Fund earns certain types of periodic income from United
States sources (e.g., dividends or interest) which are not ECI, each Foreign Investor will be subject
to a flat 30 percent withholding tax on its allocable share of the gross amount of such income. This
30 percent tax is sometimes reduced or eliminated by income tax treaty, provided that proper
certification is supplied when necessary. This tax is collected through withholding by the Fund. To
secure exemption from 30 percent withholding on gross income that is ECI, each Foreign Investor
must properly complete and file in duplicate with the Fund IRS Form 4224 (“Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a U.S. Trade or
Business”) or IRS Form W-8ECI. These forms should be filed by each Foreign Investor at the
time such Foreign Investor acquires an interest in the Fund, and annually thereafter. Under
applicable Treasury regulations, Foreign Investors generally have to provide the IRS Form W-8ECI
in lieu of Form 4224 beginning January 1, 2000, and every three years thereafter unless the
33
information on the form changes before that date. A Form 4224 existing on January 1, 2000, will
continue to be effective until December 31, 2000. The United States will not tax Foreign Investors
on foreign source income that is not ECI.

Filing and Reporting Requirements. A Foreign Investor will be required to file federal
income tax returns with respect to its ECI, even if the Fund withholds taxes under Sections 1445
and 1446. A Foreign Investor will not be required to file a return showing amounts of non-ECI
subject to the 30 percent withholding tax. In addition to filing an annual income tax return, Foreign
Investors may be required to comply with certain reporting requirements under applicable Treasury
regulations.

Disposition of Partnership Interests. A Foreign Investor that disposes of its interest in

the Fund, by sale or otherwise, may be subject to U.S. federal income taxation on such disposition.
A transferee of an interest in the Fund may be required to deduct and withhold a tax equal to 10
percent of the gross amount realized on such disposition. Any amount so withheld can be applied
as a credit against the U.S. federal income tax liability of the Foreign Investor and can be
recovered as a refund in the event of overpayment.

FIRPTA. The Foreign Investment in Real Property Tax Act of 1980, as amended
(“FIRPTA”), imposes a tax on gain realized on disposition by a foreign person of a “United States
real property interest” (“USRPI”) by treating such gain as ECI, generally giving rise to the tax
consequences described above. A USRPI generally includes both a direct investment in real
estate and an investment in a real estate operating company if such corporation is a “United States
real property holding company” (“USRPHC”). A USRPHC generally includes any domestic
corporation in which the fair market value of its USRPI represents one-half or more of the
aggregate fair market value of its business assets and real property assets at any time during the
preceding five years (or shorter period during which the Fund has held an interest in the
corporation). A USRPI held by a partnership is deemed to be owned proportionately by its
partners. A partnership interest in certain circumstances can itself be deemed a USRPI for
purposes of computing the withholding of proceeds from a sale of such interest.

Special FIRPTA rules apply to any Fund investment in a REIT. Specifically, (i) a
distribution by a REIT attributable to gain from the disposition of a USRPI will be treated under
FIRPTA as ECI (giving rise to the consequences described above for ECI); (ii) any other dividend
distribution by a REIT will be subject to withholding in the manner described above applicable to
dividends generally; and (iii) a Foreign Investor will not be taxable on any gain from the disposition
of a Fund investment in a REIT, provided that the REIT is “domestically controlled,” i.e., less than
50% of its stock is held (directly or indirectly) by foreign shareholders. Foreign Investors should be
aware, however, that there is no assurance that the Fund will be able to dispose of an investment
in a domestically controlled REIT by selling its stock of such REIT (as opposed to causing the REIT
to sell its assets).

Debt Investments. With respect to any investments in indebtedness that do not constitute
inventory property and are not otherwise considered to produce ECI, withholding tax will be
imposed on a Foreign Investor’s allocable share of interest income at the statutory rate of 30%,
subject to reduction or elimination pursuant to any applicable income tax treaty, and subject also to
the “portfolio interest” exemption under the Code. In order to avoid the imposition of withholding
tax upon interest income otherwise qualifying for the “portfolio interest” exemption under the Code,
a Foreign Investor will have to comply with applicable requirements as to certification of its foreign
status.

FOREIGN INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS

CONCERNING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP.

Foreign Taxes. The Fund may be subject to foreign income tax with respect to its
business and operations. In addition, dividends, interest and other income received by the Fund
34
from sources within foreign countries may be subject to withholding taxes or other taxes imposed
by such countries. Tax treaties may reduce or eliminate the amount of such taxes. It is impossible
to predict the rate of foreign tax the Fund will pay because the precise amount of the Fund’s assets
to be invested in various countries is not yet known. In some cases it is possible that Partners
could have to file tax returns reporting income earned in a particular country or may have to file a
refund claim if taxes are withheld by a country. However, the Fund will attempt to structure its
business and operations in a manner that minimizes the tax burden with respect to its investment in
a particular country, to the extent reasonably practicable.

Any foreign taxes paid or withheld on a U.S. Partner’s allocable share of the Fund’s income
may, subject to various conditions and limitations, be eligible for deduction or credit against the
U.S. Partner’s U.S. federal income tax liability. U.S. Partners will be informed by the Fund as to
their proportionate share of the foreign taxes paid by the Fund. Because of these limitations, U.S.
Partners may be unable to claim a credit for the full amount of their proportionate share of the
foreign taxes paid by the Fund. If a U.S. Partner elects to credit foreign taxes, the amount of credit
that may be claimed in any year may not exceed the amount of U.S. federal income taxes that the
U.S. Partner would otherwise pay with respect to its taxable income from foreign sources. This
limitation is applied separately to certain categories of income (called “baskets”), including passive,
high withholding tax interest and financial services, among others, and the related foreign taxes
that are attributable to the income falling within such income baskets. The characterization of
income into a specific basket depends on the nature of the activities to which such income is
attributable and the identity of the U.S. taxpayer. Thus, each U.S. Partner should consult its tax
advisor with respect to the application of the foreign tax credit to its allocable share of the Fund’s
income. A U.S. Partner that is tax-exempt will not ordinarily benefit from such credit or deduction
unless such credit or deduction is generated from income subject to unrelated business income
taxation for U.S. federal income tax purposes.

Tax Treatment of U.S. Partners with respect to Foreign Corporations

Controlled Foreign Corporations. If a United States Person, including the Fund, owns
actually or constructively at least 10% of the voting stock of a foreign corporation, such United
States Person is considered a “United States Shareholder” with respect to the foreign
corporation. For the purposes of this discussion, a “United States Person” is a United States
citizen, resident of the United States, a corporation, partnership or other entity created or organized
in the United States or under the law of the United States or any political subdivision thereof, an
estate the income of which is subject to U.S. federal income taxation regardless of its source or a
trust (i) which is subject to the supervision of a court within the United States and the control of one
or more United States persons as described in Section 7701(a)(30) of the Code or (ii) that has a
valid election in effect under applicable U.S. Treasury regulations to be treated as a United States
person. If United States Shareholders in the aggregate own more than 50% of the voting power or
value of the stock of such corporation, the foreign corporation will be classified as a “controlled
foreign corporation” (a “CFC”). If the corporation qualified as a CFC for an uninterrupted period of
30 days or more during the taxable year, the United States Shareholders of the CFC would
generally be subject to current United States tax on certain types of income of the foreign
corporation (e.g., dividends, interest, certain rents and royalties, gain from the sale of property
producing such income, certain income from sales and services) and, in certain circumstances, on
earnings of the CFC that are invested in United States property, regardless of cash distributions
from the company. In addition, gain on the sale of the CFC’s stock by a United States Shareholder
(during the period that the corporation is a CFC and thereafter for a five-year period) would be
classified in whole or in part as ordinary income.

Foreign Personal Holding Companies. If five or fewer of United States individuals own,
or are treated as owning under certain attribution rules, in the aggregate more than 50% of the
voting power or value of the stock of a foreign corporation and at least 60% (50% in certain
circumstances) of the “gross income” of such corporation is made up of certain passive type
income (e.g., dividends, interest, certain rents and royalties and gain from the sale of stock or

35
securities) for a taxable year, then such corporation will be treated as a “foreign personal holding
company” (an “FPHC”). Foreign corporations owned by the Fund may meet the stock ownership
portion of the FPHC test. If a foreign corporation qualifies as an FPHC, all United States Persons
that own shares in the FPHC (regardless of the size of their shareholding and regardless of
whether they are individuals) would generally be subject to current United States tax on their share
of the FPHC’s undistributed foreign personal holding company income (“FPHCI”) for the taxable
year or part thereof. FPHCI is, broadly, taxable income with certain adjustments. In addition,
United States Persons that are required under these rules to include undistributed taxable income
for a taxable year and that own at least 5% of the value of the FPHC’s shares are required to
comply with certain reporting requirements under the Code. It is possible that a company in which
the Fund invests will be treated as an FPHC.

Passive Foreign Investment Companies: United States tax law contains special
provisions dealing with “passive foreign investment companies” (“PFICs”). A PFIC is defined as
any foreign corporation in which either (i) 75% or more of its gross income for the taxable year is
“passive income” or (ii) 50% or more of its assets (by value) produce “passive income.” There are
no minimum stock ownership requirements for PFICs. Once a corporation qualifies as a PFIC with
respect to a United States shareholder, it is, subject to certain exceptions, always treated as a
PFIC with respect to such shareholder, regardless of whether it satisfies either of the qualification
tests in subsequent years. If the Fund were to invest in a PFIC, any gain on disposition of stock of
the PFIC as well as income realized on certain “excess distributions” by the PFIC, would be treated
as though realized ratably over the shorter of a Limited Partner’s holding period of its partnership
interest or the Fund’s holding period for the PFIC. Such gain or income would be taxed as ordinary
income. In addition, an interest charge would be imposed on the Partner based on the tax deferred
from prior years. If the Fund were to invest in a PFIC and the Fund elected to treat its interest in
the PFIC as a “qualified electing fund” (a “QEF”) under the Code, in lieu of the foregoing treatment,
such partner would be required to include in income each year a portion of the ordinary earnings
and net capital gains of the qualified fund, even if not distributed to the Fund or the Partners. In
order to make such election, among other things, the Service would have to be supplied with an
information statement provided by the PFIC. Alternatively, an election may be made in the case of
certain “marketable stock” to “mark to market” the stock of a PFIC on an annual basis. Pursuant to
such an election, a United States Partner would include in each year as ordinary income the
excess, if any, of the fair market value of such stock over its adjusted basis at the end of the
taxable year. There can be no assurance that a company in which the Fund invests will not qualify
as a PFIC or that a PFIC in which the Fund does invest will provide the information necessary for a
QEF election to be made.

Possible Legislative or Other Actions Affecting Tax Aspects. Prospective investors

should recognize that the present federal income tax treatment of investment in the Fund may be
modified by legislative, judicial or administrative action at any time and that any such action may
affect investments and commitments previously made. The rules dealing with federal income
taxation are constantly under review by persons involved in the legislative process and by the
Service and the Treasury Department, resulting in revisions of regulations and revised
interpretations of established concepts as well as statutory changes. Revisions in federal tax laws
and interpretations thereof could adversely affect the tax aspects of investment in the Fund.

State and Local Tax Consequences. Prospective investors should consider the state
and local tax consequences of an investment in the Fund. The Fund or the Limited Partners, or
both, may be subject to state and local taxes or filing requirements in various jurisdictions, including
not only the states in which they are deemed to reside, but also the states in which the Fund may
be deemed to be doing business and/or in which the properties underlying the Fund’s investments
are situated. Such taxes may include (but are not limited to) real property and income taxes. In
light of the foregoing, each investor is urged to consult with its own tax advisors regarding the state
and local tax consequences of an investment in the Fund.

36
Securities Law Matters
The limited partnership interests described herein are not registered under the Securities
Act, in reliance upon the exemption for transactions not involving a public offering. Investors will be
required to make certain representations to the Fund, including that they are “accredited investors”
(as defined in Regulation D under the Securities Act) and are acquiring an interest in the Fund for
their own account, for investment purposes only and not with a view to its distribution.

Investment Company Act of 1940

The Fund will not be subject to regulation under the Investment Company Act, because the
outstanding securities of the Fund will be beneficially owned either by not more than 100 persons
or exclusively by persons who are “qualified purchasers” (as defined by the Investment Company
Act). All investors will be required to make certain representations as to their status as “qualified
purchasers” under the Investment Company Act.

Investment Advisers Act of 1940

The General Partner is not expected to register as an investment advisor under the
Investment Advisers Act of 1940, as amended. If the General Partner does so register, it may in its
discretion seek the approval of the Investor Advisory Committee or the Limited Partners in
connection with approvals required under the Investment Advisers Act of 1940, as amended,
including Section 206(3) thereunder, or otherwise. The approval of Limited Partners may be
sought from Limited Partners having a majority of the aggregate Limited Partner commitments, or
from those having a majority of the capital invested in a particular investment. Any such approval
of the Investor Advisory Committee or the Limited Partners will be binding upon the Fund and each
Limited Partner.

Non-United States Securities Law Matters

Offers and sales of limited partnership interests in the Fund will not be registered under the
laws of any jurisdiction. Neither the securities commission of any non-United States jurisdiction nor
any other agency has reviewed or passed upon the merits of this offering.

37
 X. INDEX OF DEFINED TERMS

Term Page

Acquisition/Disposition Fees.....................................................................................19-20
Administrative Expenses ............................................................................................... 20
Capital Commitments ...................................................................................................... 5
Capital Contribution ....................................................................................................... 17
CFC ............................................................................................................................... 35
Closing ............................................................................................................................ 5
Closing Date .................................................................................................................... 6
Code.............................................................................................................................. 30
Commitment Period....................................................................................................... 17
Competing Entity ........................................................................................................... 22
Defaulting Partner.......................................................................................................... 23
ECI ................................................................................................................................ 33
FIRPTA.......................................................................................................................... 34
Foreign Investors........................................................................................................... 33
FPHC............................................................................................................................. 36
FPHCI............................................................................................................................ 36
Fund ............................................................................................................... Introduction
Fund Management Fee ................................................................................................. 19
General Partner .............................................................................................. Introduction
Indemnitee..................................................................................................................... 24
Investment Committee................................................................................................... 15
Investment Company Act ............................................................................... Introduction
Investor Advisory Committee......................................................................................... 15
IRR ................................................................................................................................ 13
Limited Partners ............................................................................................................ 16
MBR&M ......................................................................................................................... 25
Operating Expenses ...................................................................................................... 20
Organizational Expenses............................................................................................... 20
Partners ......................................................................................................................... 16
Partnership Agreement................................................................................... Introduction
PFICs ............................................................................................................................ 36
Preferred Return.............................................................................................................. 5
PRES............................................................................................................................... 1
Publicly Traded Partnership........................................................................................... 31
QEF ............................................................................................................................... 36
Real Estate Principals ................................................................................................... 15
Reinvestment Period ..................................................................................................... 18
Securities Act.................................................................................................. Introduction
Service .......................................................................................................................... 30
Tax-Exempt Entities ...................................................................................................... 31
Transaction.................................................................................................................... 30

38
United States Person..................................................................................................... 35
United States Shareholder ............................................................................................ 35
USRPHC ....................................................................................................................... 34
USRPI ........................................................................................................................... 34

39
 ADDITIONAL INFORMATION

This memorandum is intended to present a general outline of the policies and structure of the Fund and
the General Partner. The Partnership Agreement and the Subscription Agreement, which specify the rights and
obligations of the Partners, should be reviewed thoroughly by each prospective Limited Partner. The section
hereof entitled “Summary of Terms,” which contains a summary of certain provisions of the Partnership
Agreement, is necessarily incomplete and is qualified by reference to the Partnership Agreement. Copies of the
Subscription Agreement and the Partnership Agreement will be made available upon request and should be
reviewed prior to purchasing an interest in the Fund. The General Partner will be available to answer questions
regarding the terms and conditions of this offering and to provide additional information that may be requested
by prospective investors.

AARON A RIOS
SENIOR VICE PRESIDENT, INVESTOR SERVICES
THE PRES COMPANIES
1201 DOVE STREET, SUITE 100
NEWPORT BEACH, CALIFORNIA 92660

(949) 261-7737, EXTENSION 224

FAX: (949) 442-1925