Exhibit 10.35
FHLMC Loan No. 940993244
Twin Lakes Apartments

REPLACEMENT RESERVE AGREEMENT

(REVISION DATE 7-17-07)

This REPLACEMENT RESERVE AGREEMENT ("Agreement") is made and entered into, to be
effective as of September 14, 2007, by and between U. S. REALTY PARTNERS LIMITED
PARTNERSHIP, a Delaware limited partnership ("Borrower"), and CAPMARK BANK, a
Utah industrial bank ("Lender") and its successors and assigns.

W I T N E S S E T H:

WHEREAS, Lender has agreed to make and Borrower has agreed to accept the Loan,
which is to be evidenced by the Note and secured by the Security Instrument
encumbering the Land and the Improvements.  The Land is described on Exhibit "A"
attached to this Agreement; and

WHEREAS, as a condition of making the Loan, Lender is requiring Borrower to
establish the Replacement Reserve Fund for the funding of Capital Replacements
throughout the Loan term.

NOW, THEREFORE, for and in consideration of the Loan, the mutual promises and
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
agree as follows:

1.

Definitions.  The following terms used in this Agreement shall have the meanings
set forth below in this Section 1.  Any term used in this Agreement and not
defined shall have the meaning given to that term in the Security Instrument.

(a)

"Capital Replacement" means the replacement of those items listed on Exhibit "B"
of this Agreement and such other replacements of equipment, major components or
capital systems related to the Improvements as may be approved in writing or
required by Lender.

(b)

"Disbursement Period" means the interval between disbursements from the
Replacement Reserve Fund, which interval shall be no shorter than once a
quarter.

(c)

"Improvements" means the buildings, Personal Property and improvements situated
upon the Land, currently constituting a multifamily apartment project known as
Twin Lakes Apartments.

(d)

"Initial Deposit" means the amount of Zero Dollars ($0.00) made as of the date
of this Agreement.

(e)

"Inspection Fee" means a fee for performing any inspection required by this
Agreement in an amount not to exceed Three Hundred and 00/100 Dollars ($300.00)
per inspection.

(f)

"Investment Fee" means a one time fee for establishing the Replacement Reserve
Fund in the amount of Fifty and 00/100 Dollars ($50.00).

(g)

"Loan" means the loan from Lender to Borrower in the original principal amount
of One Million One Hundred Ten Thousand and 00/100 Dollars ($1,110,000.00), as
evidenced by the Note and secured by the Security Instrument.

(h)

"Minimum Disbursement Request Amount" means Two Thousand Five Hundred and 00/100
Dollars ($2,500.00).

(i)

"Monthly Deposit" means the amount of Five Thousand Twenty-Two and 00/100
Dollars ($5,022.00) per month to be deposited into the Replacement Reserve Fund
in accordance with this Agreement.

(j)

"Property" means the Land and Improvements.

(k)

"Replacement Reserve Deposit" means the Initial Deposit, the Monthly Deposit
and/or the Revised Monthly Deposit, as appropriate.

(l)

"Replacement Reserve Fund" means the account established pursuant to this
Agreement to defray the costs of Capital Replacements.

(m)

"Revised Monthly Deposit" means the adjusted amount per month that Lender
determines Borrower must deposit in the Replacement Reserve Fund following any
adjustment determination by Lender pursuant to Section 2(a)(iii), below.

(n)

"Security Instrument" means the mortgage, deed of trust, deed to secure debt, or
other similar security instrument encumbering the Property and securing
Borrower's performance of its Loan obligations.

2.

Replacement Reserve Fund.

(a)

Establishment; Funding.  

(i)

Upon the closing of the Loan, the parties shall establish the Replacement
Reserve Fund and, if required by Lender, Borrower shall pay the Initial Deposit
to Lender for deposit into the Replacement Reserve Fund.  

(ii)

Commencing on the date the first installment of principal and/or interest is due
under the Note and continuing on the same day of each successive month until the
Loan is paid in full, Borrower shall pay the Monthly Deposit to Lender for
deposit into the Replacement Reserve Fund, together with its regular monthly
payments of principal and interest as required by the Note and Security
Instrument.

(iii)

Lender reserves the right to adjust the amount of the Monthly Deposit based on
Lender's assessment of the physical condition of the Property.  Lender will not
make such an adjustment prior to the date that is 120 months after the first
installment due date, nor more frequently than every 10 years thereafter during
the term of the Loan.  Upon written notice from Lender or Loan Servicer,
Borrower shall begin paying the Revised Monthly Deposit on the first monthly
payment date that is at least 30 days after the date of Lender's or Loan
Servicer's notice.  If Lender or Loan Servicer does not provide Borrower with
written notice of a Revised Monthly Deposit, Borrower shall continue to pay the
Monthly Deposit or the Revised Monthly Deposit then in effect.

(iv)

In the event the Borrower entered into a Repair Escrow Agreement with Lender in
connection with the Loan, Borrower acknowledges that a transfer of funds into
the Replacement Reserve Fund made pursuant to Section 17 of such Repair Escrow
Agreement shall not alter or reduce the amount of any Monthly Deposits due under
the terms of this Agreement.

(b)

Investment of Deposits.  Borrower and Lender agree that Lender shall hold all
moneys deposited into the Replacement Reserve Fund in an interest bearing
account, and any interest earned on such moneys shall be added to the principal
balance of the Replacement Reserve Fund and disbursed in accordance with the
provisions of this Agreement.  Borrower acknowledges and agrees that it shall
not have the right to direct Lender as to any specific investment of moneys in
the Replacement Reserve Fund.  Lender shall not be responsible for any losses
resulting from investment of moneys in the Replacement Reserve Fund or for
obtaining any specific level or percentage of earnings on such investment.
 Lender shall be entitled to deduct the Investment Fee from the Replacement
Reserve Fund for establishing the Replacement Reserve Fund.

(c)

Use.  Subject to the pledge and security interest and other rights of Lender set
forth in this Agreement, the Replacement Reserve Fund shall be maintained for
the payment of the costs of the Capital Replacements identified on Exhibit "B".

(d)

Deferral of Deposits.  Notwithstanding subsections 2(a) through (c) above,
Lender defers its right to require Borrower to make the Replacement Reserve
Deposit.  However, Lender reserves the right to require that Borrower begin
making the Replacement Reserve Deposit beginning on the installment due date
that is 120 months after the first installment due date under the Loan, or on
any installment due date thereafter if Lender reasonably determines that the
physical condition of the Property warrants that Borrower begin making such
deposit.  Lender's determination to require such deposit shall not depend on the
existence of any of the events set forth in subsection (e) below.

(e)

Reinstatement of Deposits.  Notwithstanding subsection 2(d) above, Lender
reserves the right to require at any time, upon written notice to Borrower, that
Borrower begin making the Replacement Reserve Deposit if Lender reasonably
determines that any of the following events have occurred:

(i)

Borrower’s default under the Note, Security Instrument, or any other document
delivered in connection with the Loan, or

(ii)

the occurrence of a Transfer which is prohibited under the terms of the Security
Instrument or which requires Lender’s consent, or

(iii)

Borrower’s failure to maintain the Property in a satisfactory manner and/or in
accordance with the requirements of the Security Instrument.

3.

Performance of Capital Replacements; Disbursements.

(a)

Requests for Disbursement.  Lender shall disburse funds from the Replacement
Reserve Fund, in its sole discretion, as follows:

(i)

Borrower's Request.  If Borrower determines, at any time or from time to time,
that a Capital Replacement is necessary or desirable, Borrower shall perform
such Capital Replacement and request from Lender, in writing, reimbursement for
such Capital Replacement.  Borrower's request for reimbursement shall include
(A) a detailed description of the Capital Replacement performed, together with
evidence, satisfactory to Lender, that the cost of such Capital Replacement has
been paid and (B) lien waivers from each contractor and material supplier
supplying labor or materials for such Capital Replacement, if required by
Lender.

(ii)

Lender's Request.  If Lender shall reasonably determine at any time or from time
to time, that a Capital Replacement is necessary for the proper maintenance of
the Property, it shall so notify Borrower, in writing, requesting that Borrower
obtain and submit to Lender bids for all labor and materials required in
connection with such Capital Replacement.  Borrower shall submit such bids and a
time schedule for completing each Capital Replacement to Lender within thirty
(30) days after Borrower's receipt of Lender's written notice.  Borrower shall
perform such Capital Replacement and request from Lender, in writing,
reimbursement for such Capital Replacement.  Borrower's request for
reimbursement shall include (A) a detailed description of the Capital
Replacement performed, together with evidence, satisfactory to Lender, that the
cost of such Capital Replacement has been paid and (B) lien waivers from each
contractor and material supplier supplying labor or materials for such Capital
Replacement, if required by Lender.

(b)

Conditions Precedent.  Disbursement from the Replacement Reserve Fund shall be
made no more frequently than once every Disbursement Period and, except for the
final disbursement, no disbursement shall be made in an amount less than the
Minimum Disbursement Request Amount.  Disbursements shall be made only if the
following conditions precedent have been satisfied, as reasonably determined by
Lender:

(i)

Payment for Capital Replacement.  The Capital Replacement has been performed
and/or installed on the Property in a good and workmanlike manner with suitable
materials (or in the case of a partial disbursement, performed and/or installed
on the Property to an acceptable stage) and paid for by Borrower as evidenced by
copies of all applicable paid invoices or bills submitted to Lender by Borrower
at the time Borrower requests disbursement from the Replacement Reserve Fund.

(ii)

No Default.  There is no condition, event or act that would constitute a default
(with or without notice and/or lapse of time) under this Agreement or any other
Loan Document.

(iii)

Representations and Warranties.  All representations and warranties of Borrower
set forth in this Agreement and in the Loan Documents are true in all material
respects.

(iv)

Continuing Compliance.  Borrower is in full compliance with the provisions of
this Agreement, the other Loan Documents and any request or demand by Lender
permitted hereby.

(v)

No Lien Claim.  No lien or claim based on furnishing labor or materials has been
filed or asserted against the Property, unless Borrower has properly provided
bond or other security against loss in accordance with applicable law.

(vi)

Approvals.  All licenses, permits, and approvals of governmental authorities
required for the Capital Replacement as completed to the applicable stage have
been obtained.

(vii)

Legal Compliance.  The Capital Replacement as completed to the applicable stage
does not violate any laws, ordinance, rules or regulations, or building lines or
restrictions applicable to the Property.

4.

Right to Complete Capital Replacements.  If Borrower abandons or fails to
proceed diligently to undertake and/or complete any Capital Replacement in a
timely fashion or is otherwise in default under this Agreement for 30 days after
written notice of such failure by Lender to Borrower, Lender shall have the
right (but not the obligation) to enter upon the Property and take over and
cause the completion of such Capital Replacement.  However, no such notice or
grace period shall apply in the case of such failure which could, in Lender's
judgment, absent immediate exercise by Lender of a right or remedy under this
Agreement, result in harm to Lender or impairment of the security given under
the Security Instrument or any other Loan Document.  Any contracts entered into
or indebtedness incurred upon the exercise of such right may be in the name of
Borrower, and Lender is hereby irrevocably appointed the attorney in fact of
Borrower, such appointment being coupled with an interest, to enter into such
contracts, incur such obligations, enforce any contracts or agreements made by
or on behalf of Borrower (including the prosecution and defense of all actions
and proceedings in connection with the Capital Replacement and the payment,
settlement or compromise of all bills and claims for materials and work
performed in connection with the Capital Replacement) and do any and all things
necessary or proper to complete any Capital Replacement including signing
Borrower's name to any contracts and documents as may be deemed necessary by
Lender.  In no event shall Lender be required to expend its own funds to
complete any Capital Replacement, but Lender may, in its sole discretion,
advance such funds.  Any funds advanced shall be added to the outstanding
balance of the Loan, secured by the Security Instrument and payable to Lender by
Borrower in accordance with the provisions of the Security Instrument pertaining
to the protection of Lender's security and advances made by Lender.  Borrower
waives any and all claims it may have against Lender for materials used, work
performed or resultant damage to the Property.

5.

Inspection.  Lender or any representative of Lender may periodically inspect any
Capital Replacement in process and upon completion during normal business hours
or at any other reasonable time upon reasonable prior written notice to Borrower
(except in an emergency, as determined by Lender in its discretion or after an
Event of Default, in which event no such prior notice shall be required).
 Lender shall be entitled to deduct the Inspection Fee from the Replacement
Reserve Fund for performing any such inspection.  If Lender, in its sole
discretion, retains a professional inspection engineer or other qualified third
party to inspect any Capital Replacement, Lender also shall be entitled to
deduct from the Replacement Reserve Fund an amount sufficient to pay all
reasonable fees and expenses charged by such third party inspector.

6.

Insufficient Account.  If Borrower requests disbursement from the Replacement
Reserve Fund for a Capital Replacement in accordance with this Agreement in an
amount which exceeds the amount on deposit in the Replacement Reserve Fund,
Lender shall disburse to Borrower only the amount on deposit in the Replacement
Reserve Fund.  Borrower shall pay all additional amounts required in connection
with any such Capital Replacement from Borrower's own funds.

7.

Security Agreement.  To secure Borrower's obligations under this Agreement and
to further secure Borrower's obligations under the Note, Security Instrument and
other Loan Documents, Borrower hereby conveys, pledges, transfers and grants to
Lender a security interest pursuant to the Uniform Commercial Code of the
Property Jurisdiction or any other applicable law in and to all money in the
Replacement Reserve Fund, as same may increase or decrease from time to time,
all interest and dividends thereon and all proceeds thereof.

8.

Post Default.  If Borrower defaults in the performance of its obligations under
this Agreement or under the Note, Security Instrument or any other Loan
Document, after the expiration of any applicable notice or cure period, Lender
shall have all remedies available to them under Article 9 of the Uniform
Commercial Code of the Property Jurisdiction and under any other applicable law.
 In addition, Lender may retain all money in the Replacement Reserve Fund,
including interest, and in Lender's discretion, may apply such amounts, without
restriction and without any specific order of priority, to the payment of any
and all indebtedness or obligations of Borrower set forth in the Note, Security
Instrument or any other Loan Document, including, but not limited to, principal,
interest, taxes, insurance, reasonable attorneys' fees and costs (including
those of Lender’s in-house counsel) and disbursements actually incurred and/or
repairs to the Property.

9.

Termination.  If not sooner terminated by written concurrence of the parties,
this Agreement shall terminate upon the payment in full of the Loan and all
indebtedness incurred in connection therewith and upon such termination, Lender
shall pay to Borrower all funds remaining in the Replacement Reserve Fund.

10.

No Amendment.  Nothing contained in this Agreement shall be construed to amend,
modify, alter, change or supersede the terms and provisions of the Note,
Security Instrument or any other Loan Document; and, if there is a conflict
between the terms and provisions of this Agreement and those of the Note,
Security Instrument, or any other Loan Document then the terms and provisions of
the Note, Security Instrument or such other Loan Document shall control.

11.

Release; Indemnity.

(a)

Release.  Borrower covenants and agrees that, in performing any of its duties
under this Agreement, none of Lender, any Loan Servicer, or any of their
respective agents or employees shall be liable for any losses, claims, damages,
liabilities and expenses that  may be incurred by any of them as a result of
such performance, except that no such party will be released from liability for
any losses, claims, damages, liabilities or expenses arising out of the willful
misconduct or gross negligence of such party.

(b)

Indemnity.  Borrower hereby agrees to indemnify and hold harmless Lender, Loan
Servicer and their respective agents and employees against any and all losses,
claims, damages, liabilities and expenses including, without limitation,
reasonable attorneys' fees and costs (including those of Lender's in-house
counsel) and disbursements, which may be imposed or incurred by any of them in
connection with this Agreement except that no such party will be indemnified
from liability for any losses, claims, damages, liabilities or expenses arising
out of the willful misconduct or gross negligence of such party.

12.

Choice of Law.  This Agreement shall be construed and enforced in accordance
with the laws of the Property Jurisdiction.

13.

Successors and Assigns.   Lender may assign its rights and interests under this
Agreement in whole or in part and upon any such assignment, all the terms and
provisions of this Agreement shall inure to the benefit of such assignee to the
extent so assigned.  The terms used to designate any of the parties herein shall
be deemed to include the heirs, legal representatives, successors and assigns of
such parties; and the term "Lender" shall also include any lawful owner, holder
or pledgee of the Note.  Reference herein to "person" or "persons" shall be
deemed to include individuals and entities.  Borrower may not assign or delegate
its rights, interests, or obligations under this Agreement without first
obtaining Lender's prior written consent.

14.

Attorneys' Fees.  In the event that Lender engages the services of an attorney
at law to enforce the provisions of this Agreement against Borrower, then
Borrower shall pay all costs of such enforcement, including any reasonable
attorneys' fees and costs (including those of Lender’s in-house counsel) and
disbursements actually incurred.

15.

Compliance with Laws; Insurance Requirements.  

(a)

Compliance with Laws.  Borrower shall ensure that all Capital Replacements
comply with all applicable laws, ordinances, rules and regulations of all
governmental authorities having jurisdiction over the Property and applicable
insurance requirements including, without limitation, applicable building codes,
special use permits, environmental regulations, and requirements of insurance
underwriters.

(b)

Insurance Requirements.  In addition to any insurance required under the Loan
Documents, Borrower shall provide or cause to be provided workers' compensation,
builder's risk (if required by Lender), and public liability insurance and other
insurance required under applicable law in connection with any of the Capital
Replacements.  All such policies that can be endorsed with standard mortgage
clauses making losses payable to Lender or its assigns shall be so endorsed.
 The originals of such policies shall be deposited with Loan Servicer.

16.

Remedies Cumulative.  In the event of Borrower's default under this Agreement,
Lender may exercise all or any one or more of its rights and remedies available
under this Agreement, at law or in equity.  Such rights and remedies shall be
cumulative and concurrent, and may be enforced separately, successively or
together, and Lender's exercise of any particular right or remedy shall not in
any way prevent Lender from exercising any other right or remedy available to
Lender.  Lender may exercise any such remedies from time to time as often as
Lender chooses.

17.

Determinations by Lender.  Unless otherwise provided in this Agreement, in any
instance where the consent or approval of Lender may be given or is required, or
where any determination, judgment or decision is to be rendered by Lender under
this Agreement, the granting, withholding or denial of such consent or approval
and the rendering of such determination, judgment or decision shall be made or
exercised by Lender (or its designated representative) at its sole and exclusive
option and in its sole and absolute discretion.

18.

Completion of Capital Replacements.  Lender's disbursement of moneys from the
Replacement Reserve Fund or other acknowledgment of completion of any Capital
Replacement in a manner satisfactory to Lender shall not be deemed a
certification by Lender that the Capital Replacement has been completed in
accordance with applicable building, zoning or other codes, ordinances,
statutes, laws, regulations or requirements of any governmental authority or
agency.  Borrower shall at all times have the sole responsibility for ensuring
that all Capital Replacements are completed in accordance with all such
governmental requirements.

19.

No Agency or Partnership.  Nothing contained in this Agreement shall constitute
Lender as a joint venturer, partner or agent of Borrower, or render Lender
liable for any debts, obligations, acts, omissions, representations or contracts
of Borrower.

20.

Entire Agreement.  This Agreement and the other Loan Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements.  There are no oral
agreements between the parties.  All prior or contemporaneous agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement and the other Loan Documents.  Neither this Agreement nor any of
its provisions may be waived, modified, amended, discharged or terminated except
in writing signed by the party against which the enforcement of the waiver,
modification, amendment, discharge or termination is sought, and then only to
the extent set forth in writing; provided, however, that in the event of a
Transfer requiring Lender's consent under the terms of the Security Instrument,
one or more or all of the Modifications to Agreement set forth in Exhibit C (if
any) may be modified or rendered void by Lender at Lender’s option by notice to
Borrower/transferee.

21.

Counterparts.  This Agreement may be executed in multiple counterparts, each of
which shall constitute an original document and all of which together shall
constitute one agreement.

ATTACHED EXHIBITS.  The following Exhibits are attached to this Agreement:

X

 

Exhibit A

Legal Description of the Land (required)

    

X

 

Exhibit B

Capital Replacements (required)

    

X

 

Exhibit C

Modifications to Agreement

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first written above.

[Remainder of page intentionally left blank; signatures follow]

BORROWER:

U. S. REALTY PARTNERS LIMITED PARTNERSHIP, a Delaware limited partnership

By:

U. S. Realty I Corporation, a South Carolina corporation, its corporate general
partner

By: /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

LENDER:

CAPMARK BANK, a Utah industrial bank

By: /s/Max W. Foore

Max W. Foore

Limited Signer