PPM LBREF1193 AND 1195 LEHMAN BROTHERS REAL ESTATE FUND IIL, LP. AREAL ESTATE MERCHANT BANKING FUND CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM LAV002805LAV002806LEHMAN BROTHERS REAL ESTATE FUND III, L.P. Limited Partnership Interests his Confidential Private Placement Memorandum (this Memorandum”) is furnished on a confidential basis to a limited mimber of sophisticated investors for the purpose of providing certain information about an investment in limited parmership interests (the “Interests”) in Lehman Brothers Real Estate Fund tl, LP. (the “Fund”) and together with Lehman Brothers Real Estate Partners Il, LP, and the other Parallel Funds, “LBREP Ill"). The ‘merests have not heen approved or disapproved by the Securities and Exchange Commission (the "SEC") or by the vilies regulatory authority of any state or of any other jurisdiction, nor has the SEC or any such securities eculatory authority passed upon the accuracy or adequacy of tis Memorandum, Any representation tothe contrary is criminal offense This Memorandum is 10 be used by the offeree solely in connection with the consideration of the purchase of the Interests described herein. The information contained herein must be treated in a confidential manner and may not be reproduced ur used in whole or in part for any other purpose, nor may it be disclosed without the prior written consent Mf Lehman Brothers Real Estate Associates II, LP, he general partner of the Fund (the “General Partner"). Eaci investor accepting his Memorandum agrees 1 return it promptly upon request Norwithstanding anything in this Memorandum to the contrary, each recipient of this Memorandum (and any employee, representative, or other agent thereof) may disclose fo any and all persons, without limitation of any kind, the United Slates federal income tax treatment and tax structure of the Furd or any transactions undertaken by the Fund, it being tinderstoud and agreed, for this purpose, (i) the name of. or any other identifying information regarding, the Fund or liny existing or future investor (or any affiliate thereof) nthe Fund, or any invesiment or transaction entered into by the Fund, (i) any performance information relating o the Fund or its investments, or (i) any performance oF other information relating to previous funds or investments spansored by Lehman Brothers (as defined herein) do net Constitute such tax treatment ar ta structure information. The Imerests have not been registered under the Securities Act of 1933, as amended (the “Securities Act’), the securities laws of any state oF the securities laws of any other jurisdiction, nor is such registration contemplated. The Interests will be offered and sold under the exemption provided by Section 4(2) of the Securities Act and other ‘exemptions of similar import in the laws of the states and jurisdictions where the offering will be made. The Fund will tno be registered as an investmen: company under the Investment Company Act of 1940, as amended (the “Investment Company Act"). There is no public market for the Interests and no such market is expected to develop in the future. The Interests may not be sold or transferred () except as permitted under the limited partnership agreement ofthe Fund (os amended, restated or otherwise modfied from time to time, the “Partnership Agreement") and (i) unless they are Mluhuered under she Securities Act and under any other applicable securities laws or an exemption from such | registration thereunder is available Imerests are offered subject to the right of the General Partner to reject any subscriptions in whole or in part. Investment in the Interests will involve significant risks due fo, among other things, the nature of the Fund's investments. Potential investors should pay particular attention 10 the information under the caption “Risk Factors ard Potential Conflicts of Interest” ofthis Memorandum, Investment in the Fund is suitable only for sophisticated investors ind requires the financial ability and willingness to accept the high risks and lack of liquidity inherent in an investment in the Fund. Investors in the Fund must he prepared to bear such risks for an extended period of time. No assurance uy be given that the Fund's investment objective will be achieved or that investors will receive a return of their capital Inv making as investment decision, investors must rely on their own examination of the Fund amd the terms of this offering, including the merits and risks involved. Prospective investors should not consirue the contents of this Memorandum as legal. tax, investment ar accounting advice and each prospective investor is urged to consult with us ‘own advisors with respect (0 legal, tax, regulatory, nancial and accounting consequences of its investment in tie Fund This Memorandum contains a summary of the Partnership Agreement and certain other documents referred to herein. However, te summaries set forth in this Memorandum do not purport to be complete and are subject to and qualified in their entirety by rference 0 the Partnership Agreement and such other documents. In the event that the descriptions LAV002807|v or terms of this Memorandum are inconsistent with or contrary to the descriptions in or terms of the Partnership ereement or such other documents, the Partnership Agreement and suck other documents shal control. In considering inexment performance information contained tn this Memorandum, prospective investor should bear | | in min that past performance isnot necessarily indicative offre results and there an be no assurance hat the Fund willachevw comparable res, tha targeted rus, dversfcation ov ase allocations wil be met or that he Fund willbe able 10 implement is imsesment strategy and mvesiment approach ar aceve is investment jective. Cinlens mervise dicated, imerralrtes of return (inclding largted rates of return) are presented on @ “gross” | hasis iether do not reflec he management fos, profits interes ase, transaction cts dd Other expense be horn bs isons inthe Fund, which inte egregate are expected tobe substantia). Acta retires on unretzed | imvcsiment il! depend on amon ctr factors, tre operating res, the value of easels and market conditions | Ur the tine of dliposton lege and contractual restrictions on tanser that ma lini liquidity, any related transaction | Costs andthe aiming and manner ef sae all of which may difer from th assumptions and circumstances on which the Valuations used nthe prior performance data comained herein are based. Accordingly, the actual realized returns an mead insesments may ifr materially from te rears inicated herein Certain information comained in this Memorandum constitutes “forward-looking statements," which can be identified hy the use of forward-looking terminology such as “may,” “will,” “seek,” “should,” “expect,” “anticipate,” project.” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, including those set forth under “Risk Factors and Potential Conflicts of Interest,” actual events or results or the actual performance of the Fund may differ materially rom shose reflected or contemplated in such forward-looking statements, Certain of the principals have joined Lehman Brothers recently and therefore would not generally be included in veferences 10 the "LBREP Principals as a group prior to the time they joined (see biographies under “Management of LBREP III"). None of the individual LBREP Principals or any employees or directors of Lehman Brothers referred 10 in hold themselves out to any person for any purpose as @ general pariner. Statements contained herein that are ‘ortributable to the LBREP Principals are not made in any person's individual capacity, but rather on behalf of Lehman Brothers Private Equity Advisers LLC (the Fund's investment advisor) and Lehman Brothers Real Estate Associates | HEAP. tthe Fund's general partner), which manage and implement the investment program of the Fund. Certain ecomomic, market and other information contained herein has been obiained from published sources prepared hy other parties (or in some cases obtained from companies in which investments by Lekman Brothers have been made) ‘and in certain eases has not been updated through the date hereof. While such sources are believed to be reliable, neither the Fund, the General Partner nor their respective affiliates and employees assume any responsibility for the accuracy or completeness of such information Each prospective mvesior is invited to meet with representatives of the Fund and to discuss with, ask questions of and | receive answers fram such representatives concerning the terms and conditions of this offering, and to obtain any additional information, to the extent thot such representatives possess such information or can acquire it without veasonable effort or expense, necessary fo verify the information contained herein. The General Parmer and it affiliates reserve the right to modify any of the terms of the offering and the Interests described herein and to revise and reissue this Memorandum | 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 and any representation or information not contained herein must not be relied upon ax having been authorized by the Fund or any of its partners or affiliates. The delivery of this Memorancluns does not imply that the information herein is correct as of any time subsequent to the date below. The distribution ofthis Memorandum and the offer and sale ofthe Interests in certain jurisdictions may be restricted by law. This Memorandum does not constitute an offer to sell or the solicitation of an offer to buy in any state or other jimisdiction 10 any person to whom it is unlawful to make such offer or solicitation in such state or jurisdiction Interests that are acquired by persons not entitled 1 hold them will be compulsorily redeemed. PROSPECTIVE INVESTORS SHOULD REVIEW THE ACCOMPANYING APPENDIX AND THEIR SUBSCRIPTION AGREEMENTS FOR CERTAIN INFORMATION RELATING TO OFFERS AND SALES OF INTERESTS IN THE FUND | TO INVESTORS IN THE UNITED STATES AS WELL AS CERTAIN NON-US. JURISDICTIONS. LAV002808Prospective investors wishing to inquire about Lehman Brothers Real Estate Fund Ill, L.P. are invited to contact the following selected representatives of the Fund: Real Estate Private Equity Brett Bossung Mark H. Newman Managing Director Managing Director Global Head Global Head +1.212,526.5350 444.20.7102.4207 Rodolpho Amboss Tanya T. Oblak Managing Director Vice President Chief Financial Officer Investor Relations 1.212.526.2503 1.212.526.5771 7 Private Fund Marketing Group —— Christopher D. Kirsten Managing Director Head of Marketing & Sales +1.212.526.1311 Lehman Brothers Real Estate Fund III, L-P. LEHMAN BROTHERS INC 399 Park Ave New York, New York 10022 +1.212,526.7000 October 2007 Copy No. LAV002809LAV002810Table of Contents 1 EXECUTIVE SUMMARY Overview : ss eel Investment Highlights... 3 Summary o a son 8 Principal Terms of the Fund : 7 9 Il. LEHMAN BROTHERS’ ORIGINATION N ADVANTAGE. n Global Real Estate Group LBREP Principals. Lehman Brothers Private Equity Division. “ sosnnnnane ID Lehman Brothers’ Global Footprint... See 8 Ill, PROVEN INVESTMENT STRATEGY 15 Overview. AS Investing with Proven Operating Partners : cre soe IS Leveraging Deal Flow to Access Proven Themes wns sree IS Exploiting Emerging Market Trends. a Looking Beyond the Bricks AB Executing Fundamental, Value-Driven Investment and Exit Strategies .. 18 IV. _ INVESTMENT PERFORMANCE, 21 \. THE INVESTMENT PROCESS. 25 Investment Analysis. a sone BS Investment Monitoring and Asset Management Process so 6 Investor Advisory Committee 27 Asset Management. S 28 VI. STRUCTURE AND MANAGEMENT OF LBREP IIT eee 29 Structure of the Fund sn 2) Management of LBREP IIL VI MANAGEMENT OF LBREP IIL LBREP Principals. Private Equity Executive Management... The Investment Committee VIII, THE CONTINUING MARKET OPPORTUNITY, Global Economie Strength LAV002811Table of Contents (continued) Page Fundamentals and Liquidity Drive Real Estate Expansion sn oT Prolonged Economic Expansion in the United States.......nann 48 Economic, Political and Regulatory Convergence of European Economies... 49 Determined Economie Growth in Asia... 49 Summary See SL IX, SUMMARY OF TERMS 53 RISK FACTORS AND POTENTIAL CONFLICTS OF INTEREST... 1 Risk Factors = al Potential Conflicts of Interest... 81 Xl CERTAIN TAX, ERISA AND REGULATORY MATTERS. 89 USS, Federal Income Tax Considerations French Real Property Tax Considerations sos a ‘Certain Considerations Applicable to ERISA, Governmental and Other Plan Investors sn semen OM ‘Securities Law and Regulatory Matters... a 106 XIL__ INDEX OF DEFINED TERMS. sean 109 APPENDIX A: ADDITIONAL INFORMATION REGARDING INVESTMENT PERFORMANCE . Al APPENDIX B: INFORMATION REQUIRED BY THE SECURITIES LAWS OF CERTAIN JURISDICTIONS... Bel APPENDIX C: LEHMAN BROTHERS OFFSHORE REAL ESTATE FUND Ill, LP, SPECIAL SUPPLEMENT TO PRIVATE PLACEMENT MEMORANDUM OF LEHMAN BROTHERS REAL ESTATE FUND IM, L.P. cr LAV0028121. EXECUTIVE SUMMARY Lehman Brothers Real Estate Fund III, L.P. (the “Fund” together with Lehman Brothers Real Estate Partners Ill, L.P. and its parallel funds, “LBREPTII") is a global real estate merchant banking fund’ being formed to continue Lehman Brothers’ successful real estate investment activities. LBREP IM is the third generation opportunistic real estate private equity fund of Lehman Brothers Holdings Ine. (“Lehman Brothers” or the “Firm”) and follows the success of Lehman Brothers Real Estate Partners il, LP. (“LBREP II"), a $2.4 billion fund formed in December 2004, and its predecessor Lehman Brothers Real Estate Partners, LP. (CLBREP 1°), a $1.6 billion real estate fund formed in 2000 (together, the “LBREP Funds”). The Fund will be managed by Lehman Brothers Real Estate Associates IIL, L.P. (the “General Partner"). LBRED II is targeting total capital commitments of $4.0 billion for opportunistic real estate equity investments primarily in North America, Europe and Asia. As with the LBREP Funds, Lehman Brothers and its employees will make a substantial contribution to LBREP Ill, totaling at least the lesser of 20% of the total commitment and $800 million. This significant investment substantially aligns the interests among Lehman Brothers and its employees, the limited partners of the Fund (the “Limited Partners”) and the management and employees dedicated to LBREP IIL LBREP II] will benefit from its position in the Real Estate Private Equity Group (*REPE”), an integrated component of Lehman Brothers’ Global Private Equity business, headed by Michael Odrich, and the Global Real Estate Group (the “Global Real Estate Group” or GREG"), led by Mark Walsh. LBREP III will be Lehman Brothers’ primary vehicle for opportunistic investment in real estate and will be managed by Global Co-Heads, Brett Bossung, and Mark H. Newman, cach with over 18 years of industry experience. The close working relationship between REPE and GREG offers LBREP III a unique opportunity to access the Firm's ddcal flow globally and enjoy the benefit of the many relationships established by Lehman Brothers with real estate entreprencurs around the world. REPE enjoys tremendous continuity among its staff, which should benefit LBREP III, including the continued investment, finance and asset management oversight by several principals originally engaged by LBREP I and IL The principals of LBREP Ili (the “LBREP Principals") have a proven and exceptional investment track record. The LBREP Funds are projected to achieve a weighted gross IRR of 41% and a 2.4x multiple of capital’ on combined invested capital of $3.9 billion. These funds have already realized significant gross proceeds of $3.4 billon, or 86% of total equity invested, through the successful liquidation program of LBREP I, which is currently 65% realized, and through scveral early successes in the LBREP II portfolio. The LBREP Principals have demonstrated a steady and robust pace of investing, with LBREP II fully committed within two The weighted average gross IRR is before deduction for management fees, partnership expenses and general partner profits interest. Past and projected performance of the LBREP Funds is not necessarily indicative of the future retums for the Fund. The ultimate returns to be realized by the LBREP Funds will depend poo numerous factors, which are subject to unceraimy. Accordingly, there can be no assurance that any retum, ‘objectives will actually be realized, LAV002813and a half years of its initial closing, The investment team is highly entrepreneurial and has demonstrated an ability to continually access high-quality investments forthe funds. Additionally, the team employs a highly disciplined investment process which has ensured consistency of rowrs to the LBREP Funds in the past. Sec “Section 1V—Investment Performance” for additional information, LBREP III will seek to achieve compounded annual retumns to the Limited Partners in excess of 18% in the aggregate, net of management fees, LBREP Ill expenses, and General Partner Profits Interest. LBREP II] will seek to achieve attractive risk-adjusted retums by identifying and creatively structuring investments for the unique conditions of each local market through various instruments including direct property ownership, joint ventures, mortgages and investments in equity and debt instruments of private and public real estate, operating and service companies. In most situations, LBREP III will enter into a partnership or joint venture with an operating partner or a management team that has specialized expertise in the operation, marketing, leasing or development of the property or the business type. The General Partner believes that LBREP III’s experienced investment team, primary ‘ecess to the opportunistic deal flow of Lehman Brothers” leading Global Real Estate Group and its proven investment strategy create a significant and sustainable competitive advantage for the LBREP III and provide @ proprietary framework for achieving LBREP III's investment objectives. 1 Seen sp wit roven + Leting deer of le 1 Toeningn proves hes ‘rosary Ete cme teats More than 400 ra nals + Unlocking iddee vase T Deeledguedigrec andar 1 Mosering anda pales, Muli sunings and Final ovesment “+ Aolysng demand supply a yer Commace pro + Gap m epty od pty Eye pcg prcyton onus * See footnote | above. LAV002814Investment Highlights Experienced Management and Investment Team The General Partner believes that the leadership of Messrs, Walsh, Bossung and Newman, along with the support of a dedicated team of experienced real estate professionals, ‘will provide a significant competitive advantage for LBREP Il]. Through their respective responsibilities at Lehman Brothers and with each drawing on over 18 years of real estate experience, they have been key contributors to the strategic planning, development, growth and implementation of the Real Estate Private Equity Group. Additionally, Messrs. Walsh, Bossung and Newman are well known to the senior members of Lehman Brothers, which should allow them to maximize the Firm’s relationships and deal flow. Together with the LBREP Principals, they have extensive relationships with real estate industry participants which will provide an additional and complementary source of potential transactions and market knowledge. LBREP III will benefit from a high degree of continuity with the LBREP Funds, as the acquisitions, finance and asset management teams of the LBREP Funds are expected to continue in largely the same capacities for LBREP III. In addition to the dedicated team of more than 80 professionals, the activities of LBREP IMI will be supported by more than 400 Lehman Brothers real estate professionals with tremendous depth and breadth of experience in all facets of the real estate business. As was the case with the LBREP Funds, Lehman Brothers intends to directly align the interests of the LBREP Principals with those of the Limited Partners, requiring them to invest in the General Partner’s interest and permitting them to invest as Limited Partners in LBREP III. See “Section VII—Management of LBREP II” for additional information on the LBREP Principals Superior Investment Performance NOTE: PAST AND PROJECTED PERFORMANCE OF THE LBREP INVESTMENTS IS NOT NECESSARILY INDICATIVE OF THE FUTURE RETURNS FOR LBREP Hl. IN ADDITION, THE RETURNS SUMMARIZED BELOW HAVE NOT BEEN AUDITED AND DO NOT REFLECT THE PAYMENT OF MANAGEMENT FEES, THE GENERAL PARTNER'S PROFITS INTEREST AND LBREP III EXPENSES. THE ULTIMATE RETURNS TO BE REALIZED BY THE LBREP FUNDS WILL DEPEND UPON NUMEROUS FACTORS, WHICH ARE SUBJECT TO UNCERTAINTY. "THERE CAN BE NO ASSURANCE. ‘THAT ANY RETURN OBJECTIVES WILL ACTUALLY BE REALIZED. AS OF MARCH 31, 2007, SRE “APPENDIX. A—ADDITIONAL INFORMATION REGARDING INVESTMENT PERFORMANCE” AND ACCOMPANYING NOTES FOR THE ASSUMPTIONS AND CONVENTIONS USED IN THE (CALCULATIONS UNDERLYING THE INVESTMENT PERFORMANCE. Since the inception of LBREP I in 2000, the LBREP Funds have invested more than $3.9 billion of equity across 135 investments (the “LBREP Investments”) in the Americas, Europe and Asia, which are projected to achieve a blended gross IRR of 41% with a multiple of invested capital of 2.4x.? The following table summarizes the actual and projected investment performance of the LBREP Investments as of March 31, 2007: See footnote 1 above LAV002815ean ee Weghted Toul Average Ivesed Rested rejected Gres Equity __Procteds__ Profs IRR. capita rer Reshned Trancons sist sans size 45% re eee Tracom Is ‘si 399 S565 Los “Tol AREY an 3302 38H 23 Ren Tramacions 5 sist st ss 212% ate Unedined Traction 6. sig 55, s2901___ 32% 250 ‘Total CBREP It * Sh $380" [sue ea Combined Returns Real Tramatons 68 $208 om as Unread Tamaston iss S340 2 bie “Tora LAREP Lt 38 a aa While the past performance of the LBREP Investments cannot be taken as indicative of future performance of LBREP III, some characteristics of these investments should be noted: © Steady and Robust Pace of Investment: The LBREP Principals have maintained a isciplined approach to underwriting, identified a steady flow of investment ‘opportunities and successfully invested an average of $600 million per year since the inception of LBREP I. Moreover, LBREP II has invested or committed to invest $2.1 billion (90% of committed equity) by March 31, 2007 and has been fully committed ‘within two and a half years of the four-year investment period. + Significant Realized Proceeds: The LBREP Funds have generated $3.4 billion of gross realized proceeds, or 86% of invested equity, since fund inception. LBREP I has realized 158% of invested equity, while LBREP II has realized 26% of invested equity as of March 31, 2007 + Repeat Business with Proven Operating Partners: In total, 109 of the LBREP Investments (representing 74% of invested equity) were made with existing or repeat partners of the Global Real Estate Group. Of the 93 operating partners who have Weighted average gross IRR based on projected investment-level cash flows weighted by invested equity, exclusive of Nexity investment, which generated a gross IRR in excess of 26,000%. Inclusive of Nexity, the ‘weielted average gross IRR is 95%. Gross IRR based on 2ggregation ofall projected investmentlevel cash flows without weighting by invested equity (inclusive of Nexity) is 38%. Applying ilustrative adjustments (1.75% management fe, fund expenses of 0.5% and 20% profit sharing) tothe above calculation to simulate the net return to limited partners of the fund, the projected net IRR is 30%. Weighted average gross IRR based on projected investment-level cash lows weighted by invested equity. Gross IRR based on aggrezation ofall projected investment-level cash flows without weighting by invested equity is, 35%. Applying illustrative adjustments (1.75% management fe, fund expenses of 0.5% and 20% profit sharing) tothe above caleulation to simulate the net return to Himited partners of the fund, the projected net IRR is 25% LAV002816worked with the LBREP Funds, 27 have completed two or more transactions with the LBREP Funds, with nine partners completing four or more transactions to date Well-Diversified Portfolio: The LBREP Investments are well diversified across geographies, asset classes, transaction sizes and investment strategies. The LBREP Funds have invested in 27 states and districts in the U.S. and 21 countries throughout the Americas, Europe and Asia across multiple asset classes, with investments ranging in size from $2 million to $250 million. Ouistanding Returns: The LBREP Funds are projected to achieve a weighted average ‘gross IRR of 41% and a 2.4x multiple of capital. Proven Investment Strategy The General Partner intends to employ the same fundamental, value-driven investment strategy and approach that the LBREP Funds and Lehman Brothers have historically used to achieve superior risk-adjusted returns in the real estate sector. The LBREP Principals will seek to maximize returns on investments in properties, real estate companies and service businesses ancillary to the real estate industry by: Investing with operating partners that have established capabilites in their given property type and geographical market of expertise, and that also have a proven track record with LBREP and Lehman Brothers’ Global Real Estate Group. Leveraging deal flow through access to Lehman Brothers’ global market presence and extensive network of relationships to invest in proven themes and markets. Exploiting first-mover advantage in new market penetration and emerging trends before they are generally recognized and pursued by other investors. Looking bevond the bricks by evaluating opportunities to participate in operations, create ancillary revenues through services and financial products, build brands and other trademarks and engineer financial and! tax solutions to improve investment profitability. Employing active, value-driven asset management of investments and considering ‘multiple exit strategies to attempt to maximize total return throughout the investment holding period. See “Section IlI—Proven Investment Strategy” for additional information. LAV002817Lehman Brothers’ Proprietary Deal Flow Lehman Brothers is a recognized innovator in the financial world serving the needs of corporations, institutions, governments and high net worth individuals worldwide. Lehman Brothers maintains leadership positions in investment banking, private client services, equity and fixed income sales, trading and research and private equity investments. The Firm actively participates in the global capital markets through a closely integrated network of $2 offices in 23 countries, anchored by worldwide headquarters in New York and regional headquarters in London and Tokyo, Named “Most Admired Securities Firm” in 2007 by Fortune magazine, Lehman Brothers has demonstrated its global reputation as a best-in-class investment banking, franchise. The General Partner believes that LBREP III will gamer a competitive advantage in its investment activities as a result of its access to the capital markets expertise, intellectual capital and global reach of Lehman Brothers. In addition, the Fund is expected to directly benefit from its position within the Global Private Equity Group, tapping into the proven relationships that the group has cultivated in its 23-year operating history. LBREP Ill should also benefit from its position within Lehman Brothers’ Global Real Estate Group, a leading global underwriter of real estate securities, which hhas participated in more than $300 billion in real estate-related transactions since 2000. Lehman Brothers’ Global Real Estate Group, under the leadership of Mark Walsh since 1993, generates a Uunique, proprietary and consistent stream of real estate equity investment opportunities from which prior funds have benefited and to which the Fund will have access going forward (except as outlined in discussion of “Exclusivity” in “Section IX—Summary of Terms"). Additionally, together with Messrs. Bossung and Newman, the LBREP Principals have developed extensive ‘elationships with real estate industry participants, which are expected to provide an additional and complementary source of deal flow to LBREP III Rigorous Investment Process ‘The General Partncr’s investment strategy will continue to be implemented through a disciplined underwriting, investment and asset management process undertaken by the LBREP Principals. In particular, the senior principals will regularly review the composition of the portfolio and ongoing pipeline to ensure that LBREP III's capital is optimally allocated. There is 2 consistent approach to asset underwriting, which includes the use of REPE’s proprietary investment appraisal tools and comprehensive due diligence, resulting in a thorough analysis of each transaction’s investment strategy, market risk and financing, as well as any tax, structuring and curreney risks. Each transaction is subject to a rigorous approval process, including multiple sereenings ‘by LBREP Principals and final approval by Lehman Brothers’ Investment Committee, which is comprised of Messrs. Walsh, Bossung and Newman as well as senior members of the Firm independent from REPE. Upon closing, investments are transitioned to LBREP III's dedicated asset management team, ensuring a focus on timely and successful execution of each jnvestment’s business plan throughout the investment holding period. Finally, Lehman Brothers’ significant investment in LBREP II seeks to ensure the integrity of the investment decision-making and monitoring process and aligns the interest of Lehman Brothers, the General Partner and the limited partners of LBREP Ill LAV002818