Business Risks

The Company’s business, operations, and financial performance are subject to various risks and uncertainties. The Company has described below some risk factors which may adversely affect its business, operations, financial performance or industry. The Investor should carefully consider these risk factors, together with other information in the Offering Memorandum, before making any investment decision about the Promissory Notes.

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Increased costs of operation may limit or eliminate the Company’s capacity to repay the Promissory Notes on their terms or at all.

In the course of operating its portfolio of commercial properties (“Properties”), the Company incurs certain costs and expenses, including but not limited to professional services, utilities, materials, real estate taxes and labor. Increases in these costs could decrease the net operating income of the Properties and could negatively impact the value of the Company’s Properties. Cost increases could be severe enough that the Company’s capacity to meet its debt obligations, including payments to Investors, could be compromised.

Institutional Lending for refinancing of balloon payments owed by the Company may not be available, which would have an adverse impact on the Company’s financial condition.

The Company is currently indebted to some so-called “institutional” lenders, such as banks and credit unions. Most of these debts do not amortize to a zero loan balance at maturity but, instead, have shorter maturities (most commonly between three and five years) that require so-called “balloon payments” of debt upon maturity. Balloon payments are normally satisfied by refinancing the property with the same or a similar institutional lender. However, a decrease in the ability or willingness of institutional lenders to lend could make refinancing difficult, impossible or only able to be achieved by paying higher than desirable interest rates, agreeing to a faster than desirable amortization, or “right-sizing” the loan by making a significant cash pay down of the principal as a condition of refinancing. Any of the foregoing would have a negative impact upon the Company’s financial condition and could, therefore, affect its ability to pay amounts due on the Promissory Notes.

Overall economic conditions could adversely affect the Company’s operations and its capacity to pay amounts due on the Promissory Notes.

Future economic conditions affecting consumer income, such as employment levels, business conditions, changes in housing market conditions, the availability of credit, tax rates, fuel and energy costs, the impact of natural disasters or acts of terrorism and other matters could reduce consumer spending. These could adversely affect the ability of the Company’s commercial property tenants to pay rent. These effects could also depress the creation of new businesses or would-be tenants that would otherwise occupy vacancies within the Company’s Properties or contribute to demand that would allow the Company to raise the rents of existing tenants.

Unforeseen risks could adversely affect the Company’s business.

Although the Company has sought to describe in this Memorandum the risks that it can conceptualize with respect to an investment in Promissory Notes, it is impossible for the Company to foresee or articulate every possible type of risk that could have an adverse impact upon the Company or upon an Investor’s investment in a Promissory Note.