Investment Strategy:

Land Acquisition, Entitlement and Development

The Orchards of Highfill is located in the Town of Highfill in Benton County and adjacent to Northwest Arkansas Regional Airport (XNA) in the Northwest Arkansas MSA. XNA is one of the newest and the fastest growing airports in the country, opening in 1997 and exceeding 1 million emplanements in 2004. In early 2005, the FAA appropriated funds for the design of an additional runway at XNA to meet the projected service demands. Benton County continues to be the fastest growing county in Arkansas and according to US Census Bureau estimates. The economic boom in Northwest Arkansas is being spurred by major corporations located in the area, including Wal-Mart, Tyson Foods and J. B. Hunt resulting in an estimated 250 families per month relocating into Benton County.

The purchase contract was entered into in August, 2004 with a price of $15,000,000. During the contract period, the property was master-planned and an application for a 1,582-acre PUD district was created by Stonehill-PRM and approved by the Highfill Town Council December 9, 2004. The investment closed in February, 2005. With the approved PUD in place, the property was appraised by the lender on an "as-is" basis for $37,378,600. The result of the successful planning and entitlement process is approximately $22 million of created equity value. The total build out value of this project is +/- $900 million.

The Orchards, a 1,702-acre master planned mixed-use development, consists of a 1,582-acre PUD with approvals for 6,168 residential units on 1,084 acres, 293 acres of commercial/retail space, 57 acres of industrial development and over 250 acres of open space, recreational amenities and new public roadways. Stonehill-PRM is working in concert with the Airport Authority on mutually beneficial planned roadway improvements and has made application for a Foreign Trade Zone designation on a portion of the commercial land that abuts XNA Airport.

Stonehill-PRM plans to market the property to builders and developers in stand-alone development parcels under the guidelines of the master association. The PUD includes ten residential parcels raging from 38 to 185 acres, six commercial parcels ranging from 16 to 48 acres and three industrial parcels ranging from 8 to 34 acres. Stonehill-PRM may opt to develop the internal infrastructure within one or more of the parcels and market finished lots or building pads to local developers. Stonehill-PRM will also consider contributing its land into co-development ventures with other operators.

This investment was capitalized with first mortgage financing from an Arkansas based bank with equity provided by a Dallas based family trust.