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u Mr. Thomas Paschke April 22, 2009 Page 2 • The first phase of the building would basically be approximately 60°/o of the east end of the building. This would include all of the common areas needed to support a 95-unit community. This Phase would include 51 of the 95 units, with the remaining 44 units being built in Phase II. We would finish the west end of this first Phase with an attractive roof line and windows so it would appear complete until the second Phase is developed. Seventy percent of 51 units gives us a pre-sale target of 36 homes which we are relatively confident we can achieve. Currently we have 74 reservation holders, and we have historically captured approximately 50% of reservation holders when it comes time to convert to Subscription Agreements and take down payments. We also feel that having Phase I under construction or completed will be a significant help in marketing Phase II. It is certainly quite possible that Phase II will be started prior to the completion of Phase I should things improve and additional buyers commit. The benefits to United Properties and the City are as follows: • The phasing of this project appears to be one of the only practical ways of getting this project started in 2009. • The City will benefit by an increased tax base on the initial 51 units compared to the current vacant land. • The City and Parks and Rec will get the Langton Lake Park access road as a result of this first Phase. • The City and Parks and Rec will receive a Park Dedication Fee on each of the initial 51 units. It is hard to come up with any real "down side" to this approach. Residents in the first Phase really have the biggest issue in potentially having to live through construction of a second phase, but we have discussed ways of compensating them for this inconvenience. It seems to be a good solution for both us and the City. As we move forward, a couple things come to mind. First, I think we would need to replat the parcel that the Cooperative sits on. The new lot line would cut through the building where the two Phases meet. This would allow us to sell the first building (Phase I) to the Cooperative and obtain appropriate financing. We would retain the right via the Cooperative Documents and any agreement with the City to add the second Phase of 44 units when we have achieved acceptable pre-sale levels for that Phase. There would be no Guarantee that the second Phase would ever be built, but the only thing that we would be pre-approved to build as far as the City is concerned would be the second Phase of the project. The replatting may require some setback language. For example, if the parcel is segregated between Phases, basically both Phases are built right up to the lot line given the fact that they are actually connected. We would probably need some sort of language allowing for this if the two Phases are constructed as proposed. Should the second Phase never be built, there could be setback language relative to the demised lot line that would maintain an acceptable distance between Phase I and a future structure should a stand-alone use be proposed. �I