Ownership Model for Medical/Professional Office Building
The Oaks model is based on the philosophy that three parties are ultimately needed to assure the long-term success of a project and each of these parties should share equitably in the returns. These parties are:

1. The developer
2. The equity investor
3. The tenant

We believe that all three parties should have ownership in the Building. The ownership is structured to:

1. Fairly reward each party for their contribution, providing tenants with ownership “from day one”
2. Maintain a project risk profile lower than similar commercial real estate
3. Maximize available exit strategies
4. Provide equal or better than market rates of return
5. Provide complete separation between the operations of the tenant’s practice and the ownership in the building

Ownership Structure
Our experience has shown us that the building is more valuable if it is owned by a singlepurpose entity in its entirety, rather than being condominiumized. A condominium structure would be considered for each building project if desired, however we do not believe that this strategy that will create the most valuable building.

The five primary reasons a condominium structure diminishes overall value relate to:

1. Overall control of the Building
2. Equity liquidity
3. Expansion opportunity
4. Exit strategies
5. Market Valuations

For purposes of this discussion we assume that a single Limited Liability Company (the “LLC”) wholly owns the asset. The members in the LLC may be either individuals or other entities (LLC, PLLC, Corporation, Trust, etc.).

The ownership percentages for the asset are:

1. Equity Investors 25% + % Preferred Return
   (Preferred % may vary by market)
2. Developer 25%
3. Tenants 50%

Owner's Responsibilities
Each party that brings value to the Building will have certain responsibilities as a part of providing that value. Following are the responsibilities of each party required for equity ownership:

Developer
Project Development - consists of the core components driving the overall project. It is a catch all of project related functions such as:

• Defining the strategic goals;
• Creating substantive agreements among members, tenants and lenders (including all buy-sell arrangements; leases; operating agreement; management agreement; cash disbursements);
• Enhancing project value and minimizing investor risk;
• Maximizing tax efficiency;
• Tenant relations during the development process and ongoing;
• Short term and long term financial analysis;
• Space planning for maximum tenant utilization and growth; and
• Oversight of long-term management of the property as well as the day-to-day operations.

Financing - includes all equity and debt used to fund the project. Financing decisions are driven by the strategic goals of the project. There are several financial elements to consider when making funding decisions:

• Risk versus rate of return;
• Cash flow;
• Tax issues;
• Exit strategy;
• Interest rate environment; and
• Lender relationships

Equity Investor
Provide cash to finance project costs not funded by debt.

Tenant Owner

• Sign new 10 year lease at agreed upon rental rate
• Sign mortgage note guarantee (if necessary) equal to pro-rata portion of Building occupancy