Hearthstone Closes Out Funds, Homes Valued $3 Billion.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Sept. 18, 2003

Hearthstone, the largest institutional investor of residential developments in the nation, has announced the close-out of four investment funds in 2003.

Mark Porath, chief financial officer, reported activity

When Hearthstone was formed in 1992, homebuilders suffered a shortage of capital resulting from changes in federal laws affecting the banking industry, as well as loss of investor confidence in real estate. Hearthstone today provides long-term investment opportunities in single-family homebuilding to institutional investors. It additionally commissions national studies and provides expert opinions about the state of the homebuilding industry in America, focusing on controversial issues/conflicts and home-buying and financing trends.

The four completed funds are the first to be closed out by Hearthstone. The average aggregate net return to investors is 21%:

-- Hearthstone Housing Partners Fund (CalPERS) - inaugurated

in 1992, funded the build out of 8,812 homes valued at

$1.7 billion.

-- Hearthstone Acquisition & Development Fund (CalPERS) -

inaugurated in 1996, funded 1,750 lots valued at $100

million.

-- Hearthstone-RFC (Residential Funding Corp., a

Minneapolis-based, GMAC subsidiary) Homebuilding Fund -

inaugurated in 1998, paired with the Hearthstone-OLY

Homebuilding Fund, funded 6,751 homes and lots valued at

$1.0 billion.

-- Hearthstone-OLY (State of Washington Investment Board)

Homebuilding Fund - inaugurated in 1998, paired with the

Hearthstone-RFC Homebuilding Fund, funded 6,751 homes and

lots valued at $1.0 billion.

Hearthstone also announced it has raised nearly $200 million in its ninth and tenth funds, Hearthstone Multi-State Residential Value-Added Fund III and Hearthstone-Separate Account II Homebuilding Investors, Series 2. Both have a targeted return of 20% to investors, who include: CalPERS, Dallas Police and Fire, the Cities of Boston and Seattle and the State of North Dakota. These funds will finance 13,500 homes and lots with an estimated "for sale" value of $2.5 billion.

Hearthstone has committed $7 billion since its inception, financing 339 communities and 45,000 homes in 20 states. It manages investment capital from public and private pension plans, university endowments, blue-chip companies and large private trusts.

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