Schwabe, Williamson & Wyatt’s

1. Schwabe, Williamson & Wyatt’s Real Estate and Business Seminar Series Risk Management Strategies For Multi-Family And Mixed Use Development May 10, 2006 Seattle, WA

2. Dennis DunphyShareholderSchwabe, Williamson & WyattDavid MacGregorSenior Vice PresidentW.G. Clark Construction Co.Dwight JarvisVice PresidentParker Smith & Feek Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

3. Risk Management Strategies For Multi-Family And Mixed Use Development Agenda Common Risks, Project Team Structure and Selection(MacGregor) Key Risks Addressed Through Contract Terms/Associated Legal Principles(Dunphy) Insurance and Related Risk Management Issues(Jarvis) Panel Discussion re Hypothetical Multi-Family Project, with Q&A(Dunphy, MacGregor & Jarvis) Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

4. Project Team: Structure and Selection • Owner • Design Team • Contractor

5. Key Risks Addressed Through Contract Terms and Associated Legal PrinciplesDennis Dunphy Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

6. Condominium Act Express Warranties: • Written affirmations of fact or promises must be kept • Models/examples must be met • Specified uses are lawful Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

7. Condominium Act Implied Warranties: • Unit in as good a condition as when conveyed • Unit and common elements • Free from defects • Meet sound engineering and construction standards • Workmanlike construction • Compliance with law • Appropriate for residential use Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

8. Condominium Act New Permitting Required: • Building enclosure design review • Inspection and testing • Water resistance test • Periodic review/inspection of construction • Certification prior to issuance of C.O. Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

9. Condominium Act Conversions: • Inspection of envelope with intrusive testing • Report with recommendations • Inclusion in offering statement Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

10. Other Contract and Common Law Warranties • Owner warranty to construction contractor • Liability of design professional • AIA repair warranty Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

11. Residential Warranties • Implied Warranty of Habitability • CPA Claims Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

12. Indemnity • Alignment of obligations to third parties • Use to transfer risk • Limitations on risk-shifting • Workers’ Compensation issue Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

13. Statutesof Limitation • Breach of written contract – 6 years • Warranty claims under Condominium Act – 4 years • Statute of Repose – 6 years • Claims against a dissolved LLC – 3 years Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

14. “Sans Surprises Domaines” • Developer owns a ¾ block which is currently leased to a self-park operator. Site is located in the City of Seattle. • Developer sees it as a very good site for either apartments or condominiums. Hasn’t decided which makes sense. • Developer has authorized some preliminary design work based on apartments, but is concerned that he is missing the boat on what s/he has heard are much better profit margins in condominium versus apartment development. • Architect thinks the site, with a 65 foot height limit, will accommodate 5 floors and about 150 units. • Developer doesn’t like surprises, just as the concept name suggests. • Condos vs. Apartments: How will the choice affect risk and the concepts already discussed? Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

15. Issue Prompts: “Sans Surprises Domaines” • How does the choice between Condominiums and Apartments affect: • Team Selection • Project Delivery Method/Team Functions • Insurance • Contract Documents and Terms • Budget • Risk • Reward • What impact will adding street level retail (i.e. mixed use elements) have? • How do these issues play out in a scenario where apartments are converted to condominiums? Schwabe, Williamson & Wyatt | Seattle, WA | Vancouver, WA | Portland, OR | Bend, OR | Salem, OR | Washington, DC

16. Insurance and Related Risk Management Issues Dwight Jarvis Parker, Smith & Feek

18. Why are condominium projects so challenging to insure for liability? What to do about it? What to watch out for? Overview

19. Poor construction in the 1990s Homeowner’s Association Lawsuits Insurance carrier exclusions Why are Condominiums Challenging?

20. Types – OCIP, CCIP, Rolling Wrap, Conversions Project specific rather than annual Covers Owner, General Contractor and Subcontractors of every tier General Liability coverage only Premises/Build-out coverage, Completed Operations coverage One insurer, one set of Limits What is a “Wrap–up” Policy?

21. Pros Control of claims Control of policy placement Uniformity in coverage Less administration Cons High cost Limited coverage Large deductibles Wrap-up Policy Pros/Cons

22. Deductible “pass through” Warranty work Defense costs within the limit Site designation Subsidence exclusion Final premium may increase What to Watch Out For

23. “Wrap-up” Insurance Premium Fees & Taxes Builder’s Risk Insurance Premium Quality Assurance Specialist Mold Coverage Home Builders Warranty Professional/Pollution Liability Deductibles/SIRs Cost of Risk