Exhibit 10.1

                                                                       EXECUTION

================================================================================









                       MASTER LOAN AND SECURITY AGREEMENT



                              FOR A CREDIT FACILITY

                         IN AN AMOUNT UP TO $300,000,000



                            Dated as of June 8, 1998

                                  CAPITAL TRUST

                                   as Borrower


                                       and


                      MORGAN STANLEY MORTGAGE CAPITAL INC.

                                    as Lender










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<PAGE>






<TABLE>

<CAPTION>
                                                           TABLE OF CONTENTS

<S>                 <C>                                                                                   <C>
Recitals            .......................................................................................4

Section 1.          Definitions and Accounting Matters.....................................................4

       1.01         Certain Defined Terms..................................................................4
       1.02         Accounting Terms and Determinations...................................................17

Section 2           Loans, Note and Prepayments...........................................................18

       2.01         Loans.................................................................................18
       2.02         Notes.................................................................................18
       2.03         Procedures for Borrowing..............................................................18
       2.04         Mandatory Prepayments or Pledge.......................................................23

Section 3           Payments; Computations; Etc...........................................................24

       3.01         Repayment of Loans; Interest..........................................................24
       3.02         Payments..............................................................................25
       3.03         Computations..........................................................................25
       3.04         U.S. Taxes............................................................................25
       3.05         Booking of Loans......................................................................26
       3.06         Lender's Funding of Eurodollar Rate Loans.............................................26
       3.07         Breakage Costs........................................................................27
       3.08         Compensation for Increased Costs......................................................27
       3.09         Limitation on Types of Loans; Illegality..............................................28

Section 4           Collateral Security...................................................................28

       4.01         Collateral; Security Interest.........................................................28
       4.02         Further Documentation.................................................................29
       4.03         Changes in Locations, Name, etc.......................................................30
       4.04         Lender's Appointment as Attorney-in-Fact..............................................30
       4.05         Performance by Lender of Borrower's Obligations.......................................31
       4.06         Proceeds..............................................................................31
       4.07         Remedies..............................................................................32
       4.08         Limitation on Duties Regarding Preservation of Collateral.............................33
       4.09         Powers Coupled with an Interest.......................................................33
       4.10         Release of Security Interest..........................................................33
       4.11         Release of Collateral.................................................................33
       4.12         Substitution of Eligible Collateral...................................................33

Section 5           Conditions Precedent..................................................................34

       5.01         Initial Loan..........................................................................34
       5.02         Initial and Subsequent Loans..........................................................34
       5.03         Additional Requirements...............................................................36

Section 6           Representations and Warranties........................................................37

       6.01         Existence.............................................................................37



                                       i

<PAGE>



       6.02         Action................................................................................37
       6.03         Financial Condition...................................................................37
       6.04         Litigation............................................................................38
       6.05         No Breach.............................................................................38
       6.06         Approvals.............................................................................38
       6.07         Margin Regulations....................................................................38
       6.08         Taxes.................................................................................38
       6.09         Investment Company Act................................................................39
       6.10         Collateral; Collateral Security.......................................................39
       6.11         Chief Executive Office................................................................40
       6.12         Location of Books and Records.........................................................40
       6.13         True and Complete Disclosure..........................................................40
       6.14         Tangible Net Worth....................................................................40
       6.15         ERISA.................................................................................40

Section 7           Covenants of the Borrower.............................................................40

       7.01         Financial Statements, Reports, etc....................................................40
       7.02         Litigation............................................................................41
       7.03         Existence, etc........................................................................41
       7.04         Prohibition of Fundamental Changes....................................................42
       7.05         Borrowing Base Deficiency.............................................................42
       7.06         Notices...............................................................................42
       7.07         Reports...............................................................................43
       7.08         Transactions with Affiliates..........................................................43
       7.09         Foreclosure or Other Remediation by Borrower..........................................43
       7.10         Limitation on Liens...................................................................43
       7.11         Limitation on Distributions...........................................................44
       7.12         Maintenance of Tangible Net Worth.....................................................44
       7.13         Maintenance of Ratio of Earnings Before Interest......................................44
       7.14         Maintenance of Ratio of Total Indebtedness to Tangible Net Worth......................44
       7.15         Servicer; Servicing Tape..............................................................44
       7.16         Remittance of Prepayments.............................................................44

Section 8           Events of Default.....................................................................44

Section 9           Remedies Upon Default.................................................................46

Section 10          No Duty of Lender.....................................................................47

Section 11          Miscellaneous.........................................................................47

       11.01        Waiver................................................................................47
       11.02        Notices...............................................................................47
       11.03        Indemnification and Expenses..........................................................47
       11.04        Amendments............................................................................48
       11.05        Successors and Assigns................................................................48
       11.06        Survival..............................................................................48
       11.07        Captions..............................................................................49
       11.08        Counterparts..........................................................................49



                                       ii

<PAGE>



       11.09        Loan Agreement Constitutes Security Agreement; Governing Law..........................49
       11.10        SUBMISSION TO JURISDICTION; WAIVERS...................................................49
       11.11        WAIVER OF JURY TRIAL..................................................................49
       11.12        Acknowledgments.......................................................................50
       11.13        Hypothecation or Pledge of Loans......................................................50
       11.14        Servicing.............................................................................50
       11.15        Periodic Due Diligence Review.........................................................51
       11.16        Intent................................................................................52
       11.17        Change of Borrower's State of Formation...............................................52
       11.18        Trustee Exculpation...................................................................52

SCHEDULES

SCHEDULE 1            Filing Jurisdictions and Offices
SCHEDULE 2            Approved Appraisers
SCHEDULE 3            Approved Engineers
SCHEDULE 4            Approved Environmental Consultants

EXHIBITS

EXHIBIT A             Form of Promissory Note
EXHIBIT B             Form of Custodial Agreement
EXHIBIT C             Form of Opinion of Counsel to Borrower
EXHIBIT D             Form of Request for Borrowing
EXHIBIT E             Form of Lender's Release Letter
EXHIBIT F             Form of Bailee Agreement

</TABLE>



                                      iii

<PAGE>



                       MASTER LOAN AND SECURITY AGREEMENT

              MASTER  LOAN AND  SECURITY  AGREEMENT,  dated as of June 8,  1998,
between  CAPITAL TRUST, a California  business  trust  ("Borrower"),  and MORGAN
STANLEY MORTGAGE CAPITAL INC., a New York corporation ("Lender").

                                    RECITALS

              Borrower  has  requested  that  Lender  from  time  to  time  make
revolving  credit loans to it to finance certain conduit loans,  multifamily and
commercial mortgage loans, mezzanine loans, equity interests, and other approved
collateral owned by Borrower, and Lender is prepared to make such loans upon the
terms and  conditions  hereof.  In addition,  Borrower has requested that Lender
from  time  to  time  make  revolving  credit  loans  to it to  finance  certain
commercial  mortgage-backed  securities owned by Borrower and Lender is prepared
to make such loans pursuant to the terms and conditions of a loan, repurchase or
other agreement to be entered into separately  between  Borrower and Lender (the
"CMBS  Loan  Agreement").   References  herein  to  commercial  mortgage  backed
securities  and  related  terms  are  solely to set  forth  the  definitions  of
Eurodollar  Rate  Spread,  Advance  Rate  and  Maximum  Advance  Rate  for  such
collateral and the CMBS Loan Agreement shall govern as to all other matters.

              Lender and Borrower  further  understand  that  Borrower may enter
into loan  facilities  with other  parties  on a secured  and  unsecured  basis,
including,  without  limitation,  loans  secured  by  collateral  similar to the
Collateral hereunder.

              Accordingly, the parties hereto agree as follows:

              Section 1. Definitions and Accounting Matters

              1.01 "Certain Defined Terms". As used herein,  the following terms
shall have the following  meanings (all terms defined in this Section 1.01 or in
other  provisions  of this Loan  Agreement  in the  singular  will have the same
meanings when used in the plural and vice versa):

              "Advance  Rate" means,  for any item of Eligible  Collateral,  the
ratio, expressed as a percentage,  set forth opposite the collateral type in the
chart  provided in the  definition  of  Eurodollar  Rate Spread or as  otherwise
defined or limited herein.

              "Affiliate"  shall mean (i) with  respect  to  Lender,  any entity
which  controls,  is controlled by, or is under common control with Lender,  and
(ii) with respect to Borrower, any affiliate of Borrower as such term is defined
in the Bankruptcy Code.

              "Appraisal"  means an  appraisal  of any  Property  prepared  by a
licensed appraiser listed on Schedule 3 attached hereto, as such schedule may be
amended  from time to time by Borrower or Lender upon  approval by Lender in its
reasonable discretion,  in accordance with the Uniform Standards of Professional
Appraisal  Practice  of  the  Appraisal  Foundation,   in  compliance  with  the
requirements  of Title 11 of the  Financial  Institution  Reform,  Recovery  and
Enforcement Act and utilizing  customary  valuation  methods such as the income,
sales/market  or  cost  approaches,  as any  of  the  same  may  be  updated  by
recertification from time to time by the appraiser performing such Appraisal.



                                       4

<PAGE>



              "Asset-Specific   Loan  Balance"  means  a  portion  of  the  Loan
allocable  to each  item of the  Eligible  Collateral.  Such  portion  initially
consists of the sum of all advances of the Loan made on account of such Eligible
Collateral,  without  subtracting from such advances the Drawdown Fee,  Lender's
Transaction  Costs and other  advance  costs  and fees to the  extent  borrowed.
Wherever this Loan Agreement  states that  principal  payments on account of the
Loan are to be  allocated  or  applied  to or against  the  Asset-Specific  Loan
Balance of a specific  item of  Eligible  Collateral,  the  Asset-Specific  Loan
Balance of such item of Eligible  Collateral shall be deemed reduced accordingly
by the amount of the principal payments so applied.

              "Asset  Value" shall mean, as of any date in respect of an item of
Eligible  Collateral,  the price at which such Eligible Collateral could readily
be sold as  determined  in the sole good  faith of  Lender,  which  price may be
determined to be zero. Lender's  determination of Asset Value, which may be made
at any time  and  from  time to time,  shall  be  conclusive  upon the  parties.
Whenever an Asset Value  determination  is required  under this Loan  Agreement,
Borrower shall cooperate with Lender in its  determination of the Asset Value of
each item of Eligible Collateral (including,  without limitation,  providing all
information and documentation in the possession of Borrower  regarding such item
of Eligible  Collateral  or otherwise  required by Lender in its sole good faith
business discretion).

              "Bailee" shall mean Battle Fowler LLP or such other third party as
Lender may approve.

              "Bailee Agreement" shall mean the Bailee Agreement among Borrower,
Lender and Bailee in the form of Exhibit F hereto.

              "Bailee's  Trust  Receipt  and  Certification"  shall mean a Trust
Receipt  and  Certification  in the form  annexed  to the  Bailee  Agreement  as
Attachment 2.

              "Bankruptcy  Code" shall mean the United States Bankruptcy Code of
1978, as amended from time to time.

              "Base Rate" means,  as determined by Lender on a daily basis,  the
higher of (a) the rate per annum  established  by The Chase  Manhattan Bank from
time  to  time  as  its  "Prime"  Rate  or  "reference"   rate  (which  Borrower
acknowledges  is not  necessarily  such  bank's  lowest  rate) and (b)  one-half
percentage  point  (0.5%) (50 basis  points)  over the Federal  funds  rate,  as
determined by Lender in its sole discretion.

              "Borrower" shall have the meaning provided in the heading hereof.

              "Borrowing Base" shall mean the aggregate  Collateral Value of all
Eligible  Collateral pledged to secure the amounts from time to time outstanding
under this Loan Agreement.

              "Borrowing  Base  Deficiency"  shall have the meaning  provided in
Section 2.04 hereof.

              "Business  Day" shall  mean any day other  than (i) a Saturday  or
Sunday or (ii) a day on which the New York Stock  Exchange,  the Federal Reserve
Bank of New York or  Custodian  is  authorized  or obligated by law or executive
order to be closed.



                                       5

<PAGE>



              "Capital  Lease  Obligations"  shall  mean,  for any  Person,  all
obligations  of such  Person to pay rent or other  amounts  under a lease of (or
other  agreement  conveying  the  right  to use)  Property  to the  extent  such
obligations  are required to be classified  and accounted for as a capital lease
on a balance  sheet of such Person  under GAAP,  and,  for purposes of this Loan
Agreement,  the  amount  of such  obligations  shall be the  capitalized  amount
thereof, determined in accordance with GAAP.

              "CMBS"  shall  mean,  in the  singular  or plural  as the  context
requires,  securities  backed by mortgages  and other liens on  commercial  real
estate and related  collateral or by securities,  interests or other obligations
backed by such mortgages.

              "Code"  shall mean the Internal  Revenue Code of 1986,  as amended
from time to time.

              "Collateral"  shall have the meaning  provided in Section  4.01(b)
hereof.

              "Collateral Assignment" shall mean all documents pursuant to which
Borrower shall have collaterally  assigned all of its right,  title and interest
in, to and under an item of Collateral to secure a Loan made hereunder.

              "Collateral  Documents"  shall mean with respect to any Collateral
Loan, Equity Interest,  or Other Approved  Collateral,  the documents comprising
the Collateral File for such item of Collateral.

              "Collateral File" shall mean, as to each item of Collateral, those
documents  set forth in a schedule to be delivered  by Lender to  Custodian  and
which  are  delivered  to the  Custodian  pursuant  to the  terms  of this  Loan
Agreement  or  the  Custodial  Agreement  including,   without  limitation,  all
documents  required  by Lender to grant and  perfect a first  priority  security
interest in such item of Collateral.

              "Collateral Loan" shall mean, as applicable,  a Mortgage Loan or a
Mezzanine Loan.

              "Collateral  Obligor"  shall mean any obligor under any Collateral
Loan,  any issuer of any security  comprising  any portion of the Collateral and
any entity in which an Equity Interest comprises any portion of the Collateral.

              "Collateral   Report"  shall  mean  the  collateral  schedule  and
exception report prepared by Custodian pursuant to the Custodial Agreement.

              "Collateral  Schedule" shall mean a list of Eligible Collateral to
be  pledged   pursuant  to  this  Loan   Agreement,   attached  to  a  Custodial
Identification   Certificate   setting  forth,  as  to  each  item  of  Eligible
Collateral,  the applicable  information  for such  Collateral Type specified on
Annex 1 to the Custodial Agreement.

              "Collateral  Type"  shall mean a Mortgage  Loan,  Mezzanine  Loan,
Equity Interest and Other Approved Collateral.

              "Collateral  Value"  shall  mean,  with  respect  to each  item of
Eligible Collateral,  the Asset Value of such Eligible Collateral  multiplied by
the  applicable  Advance Rate set forth 



                                        6

<PAGE>



in the definition of  "Eurodollar  Rate Spread" set forth herein or as otherwise
defined or limited herein;  provided, that, the Collateral Value shall be deemed
to be zero or such  greater  amount as  determined  by Lender in respect of each
item of  Eligible  Collateral  (1) in  respect  of which  there is a breach of a
representation  or warranty  by a  Collateral  Obligor,  (2) in respect of which
there is a  delinquency  in the  payment  of  principal  and/or  interest  which
continues  for a period  in  excess  of 30 days  (such  period  to  include  any
applicable grace periods) unless otherwise  approved by Lender, or (3) which has
been released from the possession of Custodian under the Custodial  Agreement to
Borrower for a period in excess of 14 days.

              "Collection  Account" shall mean one or more accounts  established
by the Servicer  subject to a security  interest in favor of Lender,  into which
all Collections shall be deposited by the Servicer.

              "Collections"  shall  mean,  collectively,   all  collections  and
proceeds on or in respect of the Collateral,  excluding  collections required to
be paid to the Servicer or a borrower on the Collateral.

              "Conduit  Loan"  shall  mean a Mortgage  Loan,  secured by a first
mortgage on a real  property,  that in  Lender's  determination,  satisfies  the
following  criteria:  (i) principal balance not exceeding  $40,000,000.00;  (ii)
interest  at a fixed rate with  prepayment  protection  satisfactory  to Lender;
(iii)  single-asset,   bankruptcy  remote  property  owner  complying  with  all
nationally   recognized   statistical  rating  agency   requirements;   (iv)  no
subordinate  financing  and mortgage and  organizational  documents  prohibiting
subordinate   financing  or  unsecured   financing  not  otherwise   subject  to
intercreditor  agreements  satisfactory  to rating  agencies;  (v) debt  service
coverage ratio (as determined by Lender in its sole discretion) of not less than
1.25:1 or such higher debt service  coverage  ratio as may be required by rating
agencies;  (vi) not having any  characteristics  that would impair the rating of
any securities  issued pursuant to a securitization  that included a substantial
component of mortgages  similar to such mortgage;  and (vii) in full  compliance
with such other "conduit"  underwriting  and structuring  requirements as Lender
shall establish from time to time.

              "control"  shall  mean  possession  of  the  power,   directly  or
indirectly,  to (a) vote more than fifty percent (50%) of the voting  securities
having ordinary power for the election of directors of an entity,  or (b) direct
or cause the direction of the management and policies of such entity, whether by
contract or otherwise.

              "Custodial Agreement" shall mean the Custodial Agreement, dated as
of the date hereof, among Borrower,  Custodian and Lender,  substantially in the
form of Exhibit B hereto,  as the same shall be modified and supplemented and in
effect from time to time.

              "Custodial Identification  Certificate" shall mean the certificate
executed by Borrower in  connection  with the pledge of Eligible  Collateral  to
Lender in the form of Annex 3 to the Custodial Agreement.

              "Custodian"  shall mean LaSalle  National Bank as custodian  under
the Custodial Agreement, and its successors and permitted assigns thereunder.

              "Default"  shall  mean an Event of  Default  or an event that with
notice or lapse of time or both would become an Event of Default.



                                       7

<PAGE>



              "Diligence  Materials" means the Preliminary Due Diligence Package
together with the materials requested in the Supplemental Due Diligence List.

              "Direct  Mortgage"  means a recorded  mortgage or deed of trust in
favor of Lender on real property.

              "Dollars"  and "$" shall mean lawful money of the United States of
America.

              "Drawdown  Fee"  shall  mean,  for each Loan with  respect  to any
particular item of Eligible Collateral,  an amount equal to the product of 0.25%
and the principal amount of such Loan; provided,  however, that (a) the Drawdown
Fee  shall be equal to zero to the  extent  that  such  Loan is to be made  with
respect to a Conduit Loan as  Collateral  and (b) with respect to any other such
item of  Eligible  Collateral,  borrowings  which are  repaid  and  subsequently
reborrowed will not be charged a subsequent Drawdown Fee.

              "Due Diligence Review" shall mean the performance by Lender of any
or all of the reviews  permitted  under Section 11.15 hereof with respect to any
or all of the Collateral, as desired by Lender from time to time.

              "Effective  Date"  shall mean the date upon  which the  conditions
precedent set forth in Section 5.01 shall have been satisfied.

              "Eligible Collateral" shall mean Mortgage Loans,  Mezzanine Loans,
Equity Interests and Other Approved  Collateral as to which the  representations
and warranties in Section 6.10 hereof are correct.

              "Equity Interest" shall mean any interest in a Person constituting
a share of stock or a  partnership  or  membership  interest  or other  right or
interest in a Person not characterized as indebtedness under GAAP.

              "ERISA" shall mean the Employee  Retirement Income Security Act of
1974, as amended from time to time.

              "ERISA  Affiliate" shall mean any corporation or trade or business
that is a member of any group of  organizations  (i) described in Section 414(b)
or (c) of the Code of which Borrower is a member and (ii) solely for purposes of
potential  liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section  302(f) of ERISA and Section  412(n)
of the Code, described in Section 414(m) or (o) of the Code of which Borrower is
a member.

              "Eurocurrency  Reserve  Requirements"  shall mean,  for any day as
applied to a Loan, the aggregate  (without  duplication) of the rates (expressed
as a decimal fraction) of reserve  requirements in effect on such day (including
without  limitation basic,  supplemental,  marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental  Authority having jurisdiction with respect thereto),  dealing with
reserve requirements  prescribed for eurocurrency funding (currently referred to
as  "Eurocurrency  Liabilities"  in Regulation D of such Board)  maintained by a
member bank of such Governmental Authority.

              "Eurodollar  Base Rate" shall mean, with respect to any Eurodollar
Contract 



                                       8

<PAGE>



Period,  the rate per  annum  equal to the rate  appearing  at page  3750 of the
Telerate  Screen as 30, 60 or 90 day LIBOR on such date,  and if such rate shall
not be so quoted,  the rate per annum at which Lender is offered Dollar deposits
at or about 10:00 A.M.,  New York City time,  on such date by prime banks in the
interbank  eurodollar  market where the eurodollar and foreign currency exchange
operations in respect of its Loans are then being conducted for delivery on such
day for a period of 30, 60 or 90 days and in an amount  comparable to the amount
of the Loans to be outstanding on such day.

              "Eurodollar  Contract Period" means, with respect to each Loan, an
interest  rate  contract  period of (i) such  period as shall be  determined  by
Borrower from time to time on the second Business Day prior to the expiration of
each  Eurodollar  Contract  Period,  which  Eurodollar  Contract Period shall be
thirty (30) days, sixty (60) days or ninety (90) days, or (ii) if Borrower shall
make no  determination  under clause (i) of this  definition,  thirty (30) days;
provided,   that:  (a)  Eurodollar  quotations  for  the  period  requested  are
reasonably  available  to Lender in the  Eurodollar  market for such  Eurodollar
Contract  Period;  (b) in no event shall a  Eurodollar  Contract  Period  extend
beyond the  Termination  Date; (c) the initial  Eurodollar  Contract Period with
respect to each  Asset-Specific  Loan  Balance  shall  commence  on the  related
Funding Date and each  succeeding  Eurodollar  Contract Period shall commence on
the day on which the  immediately  preceding  Eurodollar  Contract  Period shall
expire, and (d) if a Eurodollar  Contract Period would otherwise  terminate on a
day that is not a Business Day, such Eurodollar  Contract Period shall terminate
on (1) if the next  succeeding  Business  Day occurs  during  the same  calendar
month, the next succeeding  Business Day and (2) if the next succeeding Business
Day occurs during the following calendar month, the next preceding Business Day.

              "Eurodollar  Rate" shall mean,  with respect to each day a Loan is
outstanding,  a rate per annum  determined  by Lender in its sole  discretion in
accordance with the following formula (rounded upwards to the nearest 1/100th of
one percent),  which rate as  determined  by Lender shall be  conclusive  absent
manifest error by Lender:

                            Eurodollar Base Rate
              ----------------------------------------------
                     1.00 minus Eurocurrency Reserve
                               Requirements



                                       9

<PAGE>



              "Eurodollar  Rate  Spread"  means  as to  each  Advance  Rate  the
applicable Eurodollar Rate Spread set forth below opposite such Advance Rate for
the applicable  Collateral  type, or such other Eurodollar Rate Spread as may be
mutually agreed to by Borrower and Lender:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------
           Collateral Type                            Advance             Eurodollar Rate Spread (expressed
                                                       Rate                 as percentage points per annum
                                                                                and as basis points)



-------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                      <C>             <C> 
Conduit Loan                                           90%                      0.75%           75bp
                                                       95%                      1.00%           100bp
-------------------------------------------------------------------------------------------------------------
Non-Conduit Mortgage Loans
     First Mortgage (75% LTV maximum)                  90%                      1.45%           145bp
     First Mortgage (75% LTV maximum)                  95%                      1.65%           165bp
-------------------------------------------------------------------------------------------------------------
     Subordinate Mortgage Loans, Mezzanine             65%                      1.75%           175bp
     Loans, CMBS and Equity Interests*                 75%                      1.85%           185bp
                                                       80%                      2.20%           220bp
-------------------------------------------------------------------------------------------------------------
</TABLE>

*    Solely  for  illustrative  purposes,  Borrower  and  Lender  agree that the
     following example of a transaction  illustrates their intent:  with respect
     to an item of Collateral  for which the appraised  value of the  underlying
     real property is $100,000,000,  on which Mortgage Loans and Mezzanine Loans
     have  been  made  in the  aggregate  amount  of  $85,000,000,  with  Lender
     advancing  hereunder  95%  of  a  75%  LTV  ($71,250,000),  plus  80%  of a
     subordinate  Mortgage  Loan or Mezzanine  Loan (80% of  $10,000,000  equals
     $8,000,000),  the  aggregate  loans from  Lender to  Borrower  would  equal
     $79,250,000,  resulting  in  a  93.2%  underlying  loan-to-loan  value.  In
     addition,  Lender  will  finance  loans  originated  by  Borrower  with  an
     aggregate  underlying LTV up to 95% and above 95% on a case-by-case  basis.
     The  Eurodollar  Rate Spread may exceed the levels set forth above on loans
     with underlying LTVs in excess of 90%.

              "Eurodollar Substitute Rate" means a rate of interest equal to (a)
the Base Rate minus (b) Two and eighty-five hundredths percent (2.85%) per annum
(285 basis points).

              "Event of Default"  shall have the  meaning  provided in Section 8
hereof.

              "Federal Funds Rate" shall mean, for any day, the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve  System  arranged by federal  funds  brokers,  as  published on the next
succeeding  Business Day by the Federal  Reserve  Bank of New York,  or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations  for the day of such  transactions  received  by  Lender  from  three
federal funds brokers of recognized standing selected by Lender.

              "Funding  Costs"  shall mean,  collectively,  the actual  costs to
Lender of breaking a Eurodollar contract (or costs that would have been incurred
if Lender had entered  into and broken a  Eurodollar  contract  for a Eurodollar
Contract  Period  as  requested  by  Borrower)  prior to the  expiration  of the
Eurodollar  Contract  Period  applicable  thereto  in  connection  with  (a) any
prepayment  (whether  voluntary  or  involuntary)  of all or any  portion  of an
Asset-Specific Loan Balance or other principal  repayments required or permitted
under  the  Security  Documents,  that  is made at any  time  other  than at the
expiration  of the related  Eurodollar  Contract  Period,  (b) any  voluntary or
involuntary acceleration of the Termination Date, such that the Termination Date
occurs on any date that is not the expiration  date of the  Eurodollar  Contract
Period with respect to any Asset-Specific Loan Balance, and (c) any other set of
circumstances  not  attributable   solely  



                                       10

<PAGE>



to Lender's acts. Subject to the foregoing,  Funding Costs shall not include any
diminution  in yield  suffered by Lender upon  re-lending  or  re-investing  the
principal of the Loan after any prepayment of the Loan.

              "Funding  Date"  shall  mean  the  date  on  which  a Loan is made
hereunder.

              "GAAP"  shall  mean  generally  accepted   accounting   principles
consistently applied as in effect from time to time in the United States.

              "Governmental Authority" shall mean any nation or government,  any
state or other political  subdivision thereof, any entity exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government and any court or arbitrator  having  jurisdiction over any obligor
on  any  underlying  loan,  Borrower,  any  of  its  Subsidiaries  or any of its
properties.

              "Guarantee"  shall mean, as to any Person,  any obligation of such
Person directly or indirectly  guaranteeing any Indebtedness of any other Person
or in any manner  providing  for the  payment of any  Indebtedness  of any other
Person or  otherwise  protecting  the holder of such  Indebtedness  against loss
(whether by virtue of partnership  arrangements,  by agreement to keep-well,  to
purchase assets, goods, securities or services, or to take-or-pay or otherwise);
provided  that the term  "Guarantee"  shall not  include  (i)  endorsements  for
collection or deposit in the ordinary course of business, or (ii) obligations to
make servicing  advances for delinquent taxes and insurance or other obligations
in respect of a Mortgaged Property, to the extent required by Lender. The amount
of any Guarantee of a Person shall be deemed to be an amount equal to the stated
or  determinable  amount of the  primary  obligation  in  respect  of which such
Guarantee  is made or, if not stated or  determinable,  the  maximum  reasonably
anticipated  liability in respect  thereof as  determined by such Person in good
faith.  The  terms  "Guarantee"  and  "Guaranteed"  used  as  verbs  shall  have
correlative meanings.

              "Indebtedness"   shall  mean,  for  any  Person:  (a)  obligations
created,  issued or incurred by such Person for borrowed money (whether by loan,
the  issuance  and sale of debt  securities  or the sale of  Property to another
Person subject to an  understanding  or agreement,  contingent or otherwise,  to
repurchase  such Property from such Person);  (b)  obligations of such Person to
pay the deferred  purchase or acquisition  price of Property or services,  other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses  incurred,  in the  ordinary  course of  business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective  services are rendered;  (c)  Indebtedness of others
secured by a Lien on the Property of such Person,  whether or not the respective
Indebtedness  so  secured  has been  assumed  by such  Person;  (d)  obligations
(contingent  or  otherwise)  of such  Person in  respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person;  (e) Capital Lease  Obligations of such Person;  (f)
obligations of such Person under repurchase agreements or like arrangements; (g)
Indebtedness  of others  Guaranteed by such Person;  (h) all obligations of such
Person  incurred in connection  with the acquisition or carrying of fixed assets
by such  Person;  and (i)  Indebtedness  of general  partnerships  of which such
Person is a general partner.

              "Interest Rate Protection  Agreement"  shall mean, with respect to
any or all of the  Mortgage  Loans and  Mezzanine  Loans,  any short  sale of US
Treasury  Securities,  or futures  contract,  or mortgage related  security,  or
Eurodollar futures contract, or options related contract, 



                                       11

<PAGE>



or interest rate swap, cap or collar agreement or similar arrangements providing
for protection against fluctuations in interest rates or the exchange of nominal
interest obligations, either generally or under specific contingencies,  entered
into by any  obligor  on any  underlying  loan or  Borrower  (specifically  with
respect to such items of Collateral) and acceptable to Lender.

              "Lender" shall have the meaning provided in the heading hereto.

              "Lien" shall mean any mortgage, lien, pledge, charge, encumbrance,
security interest or adverse claim.

              "Loan" and  "Loans"  shall have the  meanings  provided in Section
2.01(a) hereof.

              "Loan   Agreement"  shall  mean  this  Master  Loan  and  Security
Agreement,  as the same may be amended,  supplemented or otherwise modified from
time to time.

              "Loan  Documents" shall mean,  collectively,  this Loan Agreement,
the Note and the Custodial Agreement.

              "LTV" shall mean,  as to any Eligible  Collateral,  the ratio that
(x) the aggregate  outstanding  principal balances of all loans (including Loans
hereunder) and preferred  equity  interests  secured in whole or in part by real
property or direct or indirect  beneficial  interests  therein  relating to such
Eligible  Collateral  bears  to  (y)  the  value,  determined  by  an  Appraisal
reasonably  acceptable  to  Lender,  of the  real  property  (together  with all
applicable   appurtenant   interests  and  subject  to  all  applicable   liens,
encumbrances and tenancies),  or direct or indirect  beneficial  interests which
form the basis of such Eligible Collateral.

              "Material  Adverse Effect" shall mean a material adverse effect on
(a) the  Property,  business,  operations,  financial  condition or prospects of
Borrower  taken  as a  whole,  (b)  the  ability  of  Borrower  to  perform  its
obligations  under  any of the Loan  Documents  to which it is a party,  (c) the
validity  or  enforceability  of any of the Loan  Documents,  (d) the rights and
remedies of Lender under any of the Loan  Documents,  (e) the timely  payment of
the principal of or interest on the Loans or other amounts payable in connection
therewith or (f) the aggregate value of the Collateral.

              "Maximum  Advance  Rate"  shall  mean,  as to any item of Eligible
Collateral,  the  maximum  Advance  Rate that shall be  determined  by Lender in
Lender's  sole and  absolute  discretion;  provided,  that,  with respect to the
specific  categories  of Eligible  Collateral  referred to in the  definition of
Eurodollar Rate Spread, the Maximum Advance Rate shall not exceed the respective
Advance Rates set forth in such definition.

              "Maximum  Credit"  shall mean Two Hundred  Fifty  Million  Dollars
($250,000,000.00);  provided,  however,  that if no  Default or Event of Default
shall have  occurred  and shall be  continuing,  Borrower  shall be  entitled to
increase   the   Maximum   Credit   up  to   Three   Hundred   Million   Dollars
($300,000,000.00)  at any time prior to the Termination Date upon the payment by
Borrower  to  Lender  of an  amount  equal to (i) the  amount  of the  requested
increase in the Maximum Credit then in effect multiplied by (ii) 30 basis points
(0.30%) multiplied by (iii) the number of days remaining to, and including,  the
Termination  Date  divided  by (iv) the  number  of days from and after the date
hereof to, and including,  the  Termination  Date (the "Maximum  Credit Increase
Fee").  The  Maximum  Credit  under this Loan  Agreement  shall be 



                                       12

<PAGE>



reduced by an amount equal to the amount from time to time outstanding under the
CMBS Loan Agreement such that in no event shall the aggregate amount outstanding
under this Loan Agreement and the CMBS Loan Agreement exceed  $250,000,000  (or,
in the event the Maximum Credit has been increased to  $300,000,000  pursuant to
the terms hereof, $300,000,000).

              "Mezzanine  Loan" shall mean a loan  secured by a pledge of Equity
Interests  in one  or  more  entities  holding  direct  or  indirect  beneficial
interests  in an  entity  owning  (or  having  a  ground  lease  interest  in) a
commercial or multi-family residential property, preferred equity interests or a
second mortgage.

              "Monthly  Statement"  shall mean,  for each calendar  month during
which this Loan  Agreement  shall be in  effect,  Borrower's  reconciliation  in
arrears of beginning  balances,  interest,  principal,  paid-to-date  and ending
balances  for each  asset  constituting  the  Collateral,  together  with (a) an
Officer's Certificate with respect to all Collateral pledged to Lender as at the
end of such month,  (b) a written report of any  developments or events that are
reasonably likely to have a Material Adverse Effect, (c) a written report of any
and  all  written  modifications  to  any  documents  underlying  any  items  of
Collateral and (d) such other internally  prepared reports as mutually agreed by
Borrower  and Lender which  reconciliation,  Officer's  Certificate  and reports
shall be  delivered  to Lender for each  calendar  month during the term of this
Loan  Agreement  within ten (10) days  following  the end of each such  calendar
month.

              "Mortgage"  shall  mean  the  mortgage,  deed of  trust  or  other
instrument  securing a Mortgage  Note,  which creates a valid lien on the fee or
leasehold  interest  in  real  property  securing  the  Mortgage  Note  and  the
assignment of rents and leases related thereto.

              "Mortgage  Loan" shall mean a mortgage  loan  (including,  without
limitation,  a Conduit  Loan) which  Custodian  has been  instructed to hold for
Lender  pursuant to the Custodial  Agreement,  and which Mortgage Loan includes,
without  limitation,  (i) the  indebtedness  evidenced  by a  Mortgage  Note and
secured by a related Mortgage and (ii) all right, title and interest of Borrower
in and to the Mortgaged Property covered by such Mortgage.

              "Mortgage Note" shall mean the original  executed  promissory note
or other evidence of the  indebtedness of a mortgagor with respect to a Mortgage
Loan.

              "Mortgaged  Property" shall mean the real property  (including all
improvements,  buildings,  fixtures,  building  equipment and personal  property
thereon and all additions,  alterations and  replacements  made at any time with
respect to the foregoing)  and all other  Collateral  securing  repayment of the
debt evidenced by a Mortgage Note.

              "MS &  Co."  shall  mean  Morgan  Stanley  & Co.  Incorporated,  a
registered broker-dealer.

              "MS  Indebtedness"  shall mean all Indebtedness  from time to time
owed by  Borrower  to  Lender or any  Affiliate  of  Lender  including,  without
limitation,  under  this  Loan  Agreement,  the  CMBS  Loan  Agreement,  or  any
repurchase or other  agreement  between Lender,  or an Affiliate of Lender,  and
Borrower.

              "Multiemployer  Plan" shall mean a  multiemployer  plan defined as
such in Section 3(37) of ERISA to which  contributions have been or are required
to be made by 



                                       13

<PAGE>



Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.

              "'Non-Table'  Funded Eligible  Collateral" shall mean the items of
Eligible Collateral as described in Section 2.03(e) of this Loan Agreement.

              "Note"  shall mean the  promissory  note  provided  for by Section
2.02(a) hereof for Loans and any promissory  note delivered in  substitution  or
exchange  therefor,  in each  case  as the  same  shall  be  modified,  amended,
supplemented or extended and in effect from time to time.

              "Officer's   Certificate"   shall  mean  the   certificate   of  a
Responsible Officer as set forth in Section 5.02(b) hereof.

              "Other  Approved  Collateral"  shall mean such other  Property  of
Borrower as Lender shall accept as Collateral for the Loans.

              "Payment  Date" shall mean,  with respect to each Loan,  the first
Business Day of each calendar month following the related Funding Date.

              "PBGC" shall mean the Pension Benefit Guaranty  Corporation or any
entity succeeding to any or all of its functions under ERISA.

              "Person"  shall  mean  any   individual,   corporation,   company,
voluntary association,  partnership,  joint venture,  limited liability company,
trust, unincorporated association or government (or any agency,  instrumentality
or political subdivision thereof).

              "Plan" shall mean an employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate  during the five-year period ended
immediately  before the date of this Loan  Agreement or to which Borrower or any
ERISA Affiliate  makes, is obligated to make or has, within the five-year period
before the date of this Loan Agreement,  been required to make contributions and
that is covered  Title IV of ERISA or Section 302 of ERISA or Section 412 of the
Code, other than a Multiemployer Plan.

              "Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount under this Loan  Agreement,  the Note or any other Loan
Document  that is not paid when due to Lender  (whether at stated  maturity,  by
acceleration,  by optional or mandatory  prepayment  or  otherwise),  a rate per
annum during the period from and  including  the due date to but  excluding  the
date on which  such  amount is paid in full  equal to 4% per annum plus the Base
Rate.

              "Preliminary  Due  Diligence  Package"  means with  respect to any
proposed  Collateral,  the following due diligence  information relating to such
proposed  Collateral to be provided by Borrower to Lender  pursuant to this Loan
Agreement:

              (i)    a summary  memorandum  outlining the proposed  transaction,
                     including potential  transaction  benefits and all material
                     underwriting  risks, all Underwriting  Issues and all other
                     characteristics of the proposed  transaction that a prudent
                     lender would consider material;

              (ii)   current rent roll, if applicable;



                                       14

<PAGE>



              (iii)  cash   flow  pro-forma,  plus  historical  information,  if
                     available;

              (iv)   description  of the property (real  property,  pledged loan
                     or other Collateral);

              (v)    indicative debt service coverage ratios;

              (vi)   indicative loan-to-value ratio;

              (vii)  Borrower's  or  any   affiliate's  relationship   with  its
                     potential underlying borrower or any affiliate;

              (viii) if  applicable,  Phase  I  environmental  report (including
                     asbestos and lead paint report);

              (ix)   if applicable, engineering and structural reports;

              (x)    third  party   reports,   to  the  extent   available   and
                     applicable, including:

                     (a) current Appraisal;

                     (b) Phase II or other  follow-up  environmental  report  if
                         recommended in Phase I;

                     (c) seismic reports; and

                     (d) operations  and   maintenance   plan  with  respect  to
                         asbestos containing materials;

              (xi)   analyses  and reports  with  respect to such other  matters
                     concerning  the  Collateral  as  Lender  may  in  its  sole
                     discretion require;

              (xii)  documents  comprising  such  Collateral,  or current drafts
                     thereof, including, without limitation, underlying debt and
                     security  documents,   guaranties,   underlying  borrower's
                     organizational documents,  warrant agreements, and loan and
                     collateral pledge agreements, as applicable; and

              (xiii) a  list  that  specifically  and  expressly  identifies any
                     Collateral Documents that relate to such Collateral but are
                     not in Borrower's possession.

              "Property"  shall mean any right or  interest in or to property of
any kind  whatsoever,  whether real,  personal or mixed and whether  tangible or
intangible.

              "Regulations T, U and X" shall mean  Regulations T, U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the same
may be modified and supplemented and in effect from time to time.

              "Responsible  Officer"  shall mean,  as to any  Person,  the chief
executive  officer,  any vice chairman and the chief  financial  officer of such
Person or, for the purpose of executing  



                                       15

<PAGE>



certificates, the vice president and counsel responsible therefor.

              "Secured  Obligations"  shall have the meaning provided in Section
4.01(a) hereof.

              "Security Documents" means this Loan Agreement,  the Note, and all
other  agreements,  instruments,  certificates and documents  delivered by or on
behalf  of  Borrower  to  evidence  or  secure  the  Loan(s)  or   otherwise  in
satisfaction of the requirements of this Loan Agreement,  or the other documents
listed above as same may be amended or modified from time to time.

              "Servicer"  shall have the meaning  provided  in Section  11.14(c)
hereof.

              "Servicing  Agreement"  shall have the meaning provided in Section
11.14(c) hereof.

              "Servicing  Records"  shall have the  meaning  provided in Section
11.14(b) hereof.

              "Subsidiary"   shall  mean,  with  respect  to  any  Person,   any
corporation,  partnership  or other  entity of which at least a majority  of the
securities or other  ownership  interests  having by the terms thereof  ordinary
voting  power to elect a majority  of the board of  directors  or other  persons
performing  similar functions of such  corporation,  partnership or other entity
(irrespective  of  whether  or not at the time  securities  or  other  ownership
interests  of any other  class or classes of such  corporation,  partnership  or
other entity shall have or might have voting power by reason of the happening of
any  contingency)  is at the time directly or indirectly  owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.

              "Supplemental  Due  Diligence  List"  means,  with  respect to any
proposed  Collateral,   information  or  deliveries   concerning  such  proposed
Collateral,  such items that Lender shall request in addition to the Preliminary
Due  Diligence  Package  including,   without  limitation,   a  credit  approval
memorandum representing the final terms of the underlying  transaction,  a final
LTV ratio  computation and a final debt service  coverage ratio  computation for
such proposed Collateral.

              "'Table  Funded'  Eligible  Collateral"  shall  mean the  items of
Eligible Collateral as described in Section 2.03(e) of this Loan Agreement.

              "Tangible Net Worth" shall mean, as of a particular date,

              (a) all amounts  which would be included  under  capital (it being
agreed  that any  convertible  trust  preferred  securities  will be included as
capital) on a balance  sheet of Borrower at such date,  determined in accordance
with GAAP, less

              (b)  (i)amounts   owing  to  Borrower  from  Affiliates  and  (ii)
intangible assets.

              "Termination  Date" shall mean  December  __, 1999 or such earlier
date on which  this  Loan  Agreement  shall  terminate  in  accordance  with the
provisions hereof or by operation of law.



                                       16

<PAGE>



              "Title  Insurance  Policy"  shall mean,  with  respect to any real
property  underlying a Collateral Loan, a mortgagee's  title insurance policy or
policies  issued to Lender and Lender's  successors and assigns (or,  subject to
the prior  written  approval  of Lender,  an  endorsement  to  Borrower's  title
insurance policy insuring the collateral  assignment to Lender of the applicable
mortgage)  by one or more title  companies  reasonably  satisfactory  to Lender,
which policy or policies shall be in form and substance reasonably acceptable to
Lender,  with such  endorsements  as Lender shall  reasonably  require and, with
respect to any Collateral Loan, a mortgagee's title insurance policy or policies
issued to Lender and  Lender's  successors  and/or  assigns by one or more title
companies reasonably satisfactory to Lender reflecting Lender's interest in such
Collateral Loan.

              "Total  Indebtedness"  shall mean,  for any period,  the aggregate
Indebtedness  of Borrower  during such period less the amount of any nonspecific
balance sheet reserves maintained in accordance with GAAP.

              "Transaction  Costs"  shall mean,  with  respect to any Loan,  all
actual  out-of-pocket  reasonable  costs and expenses paid or incurred by Lender
and payable by Borrower  relating  to the making of such Loan  (including  legal
fees and other fees described in Section 11.03 hereof). Lender shall endeavor to
limit the  Transaction  Costs  associated  with such Loan (excluding the initial
Loan) to $5,000,  but the foregoing shall not limit Borrower's  obligations with
respect to Transaction  Costs or constitute a "cap" on Transaction Costs for any
Loan.  Transaction Costs shall not include costs incurred by Lender for overhead
and general administrative expenses.

              "Trust  Receipt"  shall mean the receipt  delivered  by  Custodian
pursuant to the provisions of Section 4 of the Custodial Agreement acknowledging
receipt of a Collateral  File in connection with a Loan hereunder in the form of
Annex 2 to the Custodial Agreement.

              "Underwriting  Issues" means with respect to any  Collateral as to
which  Borrower  intends to  request a Loan,  all  information  that has come to
Borrower's  attention,  based on the  making  of  reasonable  inquiries  and the
exercise of reasonable care and diligence under the  circumstances,  which would
be  considered a  materially  "negative"  factor  (either  separately  or in the
aggregate with other information), or a material defect in loan documentation or
closing deliveries (such as any absence of any material Collateral Document(s)),
to a  reasonable  institutional  lender in  determining  whether to originate or
acquire the Collateral in question.

              "Uniform  Commercial Code" shall mean the Uniform  Commercial Code
as in effect on the date  hereof in the State of New York;  provided  that if by
reason  of  mandatory  provisions  of  law,  the  perfection  or the  effect  of
perfection  or  non-perfection  of the security  interest in any  Collateral  is
governed by the Uniform  Commercial  Code as in effect in a  jurisdiction  other
than New York,  "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in such other  jurisdiction  for purposes of the provisions  hereof
relating to such perfection or effect of perfection or non-perfection.

              1.02  Accounting  Terms and  Determinations.  Except as  otherwise
expressly   provided   herein,   all  accounting  terms  used  herein  shall  be
interpreted,  and all financial  statements and  certificates  and reports as to
financial  matters  required  to be  delivered  to  Lender  hereunder  shall  be
prepared, in accordance with GAAP.



                                       17

<PAGE>



              Section 2. Loans, Note and Prepayments

              2.01. Loans

              (a) Lender agrees to consider,  as provided  herein,  from time to
time  Borrower's  requests that Lender make, on the terms and conditions of this
Loan  Agreement,  loans (each,  individually,  a "Loan" and,  collectively,  the
"Loans") to Borrower in Dollars,  from and including  the Effective  Date to and
including the Termination Date, in an aggregate principal amount at any one time
outstanding up to but not exceeding the Maximum Credit as in effect from time to
time.  Nothing in this Loan  Agreement  shall be  interpreted as a commitment by
Lender to make any Loans,  but rather  sets forth the  procedures  to be used in
connection with periodic  requests for Loans and the conditions to the making of
any Loans.  Borrower hereby  acknowledges  that Lender is under no obligation to
agree to make, or to make, any Loan pursuant to this Loan Agreement.

              (b) Subject to the terms and  conditions  of this Loan  Agreement,
during such period Borrower may borrow, prepay and reborrow hereunder.

              2.02. Notes

              (a) The  Loans  made by  Lender  shall  be  evidenced  by a single
promissory note of Borrower substantially in the form of Exhibit A hereto, dated
the date  hereof,  payable to Lender in the  principal  amount of Three  Hundred
Million  Dollars  ($300,000,000.00),  as  otherwise  duly  completed;  provided,
however, that until such time as Borrower has satisfied all conditions precedent
to  the  increase  of  the  Maximum  Credit  amount  from   $250,000,000.00   to
$300,000,000.00,  Borrower shall not be permitted to borrow amounts in excess of
$250,000,000.00.  Lender  shall have the right to have its Note  subdivided,  by
exchange for  promissory  notes of lesser  denominations  or otherwise and shall
have the right to sell participating interests in such Note; provided,  however,
that Lender must retain (i) in excess of fifty percent (50%) ownership  interest
in the Note and (ii) control over all decisions with respect to loan pricing and
the exercise of remedies with respect to each item of Collateral;  and provided,
further,  however,  that Lender may subject up to one hundred  percent (100%) of
the Loans made hereunder to a repurchase agreement.

              (b) The date, amount and interest rate of each Loan made by Lender
to Borrower, and each payment made on account of the principal thereof, shall be
recorded by Lender on its books and, prior to any transfer of the Note, endorsed
by Lender on the  schedule  attached  to the Note or any  continuation  thereof;
provided that the failure of Lender to make any such  recordation or endorsement
shall not affect the  obligations  of Borrower to make a payment when due of any
amount owing hereunder or under the Note in respect of the Loans.

              2.03. Procedures for Borrowing

              (a) Preliminary Approval of Proposed Collateral.

              (i)  Borrower  may,  from  time  to  time,   submit  to  Lender  a
Preliminary  Due Diligence  Package for Lender's review and approval in order to
request a borrowing  hereunder  with  respect to any  proposed  Collateral  that
Borrower  proposes to pledge to Lender and to be included in the Borrowing  Base
in connection with such borrowing.



                                       18

<PAGE>



              (ii) Upon Lender's receipt of a complete Preliminary Due Diligence
Package, Lender within two (2) Business Days shall have the right to request, in
Lender's  sole and  absolute  discretion,  additional  diligence  materials  and
deliveries that Lender shall specify on a Supplemental  Due Diligence List. Upon
Lender's  receipt of all of the Diligence  Materials or Lender's waiver thereof,
Lender,  within five (5) Business Days,  shall either (i) notify Borrower of the
Maximum  Advance  Rate (which may be less than the Advance Rate set forth in the
definition  of  Eurodollar  Rate  Spread) and the Asset  Value for the  proposed
Collateral or (ii) deny, in Lender's  sole and absolute  discretion,  Borrower's
request for an advance.  Lender's failure to respond to Borrower within five (5)
Business Days following  receipt of all Diligence  Materials or Lender's written
waiver  thereof  shall be  deemed to be a denial of  Borrower's  request  for an
advance, unless Lender and Borrower have agreed otherwise in writing. Nothing in
this Section 2.03(a)(ii) or elsewhere in this Loan Agreement shall, or be deemed
to,  prohibit  Lender from  determining  in its sole  discretion  the  adequacy,
correctness and appropriateness of, or from disapproving,  any and all financial
and other  underwriting data required to be supplied by Borrower under this Loan
Agreement.

              (b)  Final   Approval  of  Proposed   Collateral.   Upon  Lender's
notification to Borrower of the Maximum Advance Rate and the Asset Value for any
proposed  Collateral,  Borrower shall, if Borrower desires to obtain one or more
advances secured by such proposed  Collateral,  satisfy the conditions set forth
below (in addition to  satisfying  the  conditions  precedent to obtaining  each
advance,  as set  forth in  Section  5 of this  Loan  Agreement)  as  conditions
precedent to Lender's approval of such proposed Collateral as Collateral, all in
a manner, and pursuant to documentation,  satisfactory in all respects to Lender
and its counsel:

                   (i)  Environmental  and  Engineering.  If applicable,  Lender
shall have received an Environmental  Report and an Engineering  Report, each in
form and  substance  satisfactory  to Lender,  by an Engineer and  Environmental
Consultant  listed on Schedules 3 and 4 attached hereto,  respectively,  as each
such  schedule  may be  amended  from time to time by  Lender in its  reasonable
discretion.

                   (ii) Appraisal. If applicable,  Lender shall have received an
Appraisal.

                   (iii) Insurance.  With respect to proposed Collateral that is
real  property,  Lender shall have received  certificates  or other  evidence of
insurance  demonstrating  insurance coverage in respect of such real property of
types,  in amounts,  with insurers and  otherwise in compliance  with the terms,
provisions and conditions set forth in the Collateral  Documents or the Security
Documents.  Such  certificates  or other evidence shall  indicate  Borrower,  as
lender,  will be named as an  additional  insured as its interest may appear and
shall contain a loss payee endorsement in favor of such additional  insured with
respect to the property  policies required to be maintained under the Collateral
Documents.

                   (iv)  Survey.  With  respect to a Mortgage  Loan, a Mezzanine
Loan or an  Equity  Interest,  to the  extent  obtained  by  Borrower  from  the
Collateral  Obligor with respect to any item of Collateral at the origination of
the underlying loan or equity  interest,  as the case may be, relating  thereto,
Lender  shall have  received  with respect to proposed  Collateral  that is real
property,  a current  Survey of such real  property  in a form  satisfactory  to
Lender.

                   (v) Lien Search  Reports.  Lender or Lender's  counsel  shall
have



                                       19

<PAGE>



received,  as reasonably  requested by Lender,  satisfactory reports of UCC, tax
lien,  judgment  and  litigation  searches  and title  reports and  updates,  as
applicable,  conducted  by search firms and/or  title  companies  acceptable  to
Lender with  respect to the  Collateral,  Borrower  and the  related  underlying
obligor,  such searches to be conducted in each location Lender shall reasonably
designate.

                   (vi) Title Insurance  Policy.  (A) With respect to a Mortgage
Loan, Borrower shall have delivered to Lender (1) an unconditional commitment to
issue title insurance policies in favor of Lender and Lender's successors and/or
assigns with respect to Lender's  interest in the related real  property with an
amount of insurance that shall be not less than the related  Asset-Specific Loan
Balance  (taking  into  account the  proposed  advance) or such other  amount as
Lender  shall  require  in  its  sole   discretion  or  (2)  an  endorsement  or
confirmatory  letter  from the  existing  title  company to the  existing  Title
Insurance Policy in favor of Lender and Lender's  successors and/or assigns that
amends the  existing  title  insurance  policy by stating that the amount of the
insurance is no less than the related  Asset-Specific  Loan Balance (taking into
account the proposed  advance) or such other amount of title  coverage as Lender
shall require in its sole discretion.

         (B) With respect to a Mezzanine  Loan or an Equity  Interest,  Borrower
shall have delivered to Lender such evidence as Lender,  in its sole discretion,
shall  require of the  ownership of the real  property  underlying  such item of
Collateral  including,  without  limitation,  a copy of a title insurance policy
dated a date, and by a title insurer,  in each case  acceptable to Lender in its
sole discretion,  showing that title is vested in the related Collateral Obligor
or in an entity in whom such Collateral Obligor holds a beneficial interest.

                   (vii)  Security  Documents.  Borrower shall have executed and
delivered  to  Lender,  in form and  substance  satisfactory  to Lender  and its
counsel,  all security  documents  perfecting  Lender's security interest in the
proposed  Collateral  (and in any Interest Rate  Protection  Agreements  held by
Borrower  with  respect  thereto)  which shall be subject to no Liens  except as
expressly permitted by Lender. Each of the security documents shall contain such
representations and warranties concerning the proposed Collateral and such other
terms as shall be reasonably satisfactory to Lender.

                   (viii)  Opinions of Counsel.  Lender shall have received from
counsel  to  Borrower  its  legal  opinion  as to  enforceability  of this  Loan
Agreement and all documents executed and delivered  hereunder in connection with
such  Loan,  (at  Lender's  option)  an opinion  from  local  counsel  where the
applicable property is located and an opinion to Borrower and its successors and
assigns  from  counsel  to  the  underlying   obligor  on  the  underlying  loan
transaction, as applicable, as to enforceability of the loan documents governing
such  transaction  and such other  matters as Lender shall  require  (including,
without limitation,  opinions as to due formation,  authority, choice of law and
perfection of security  interests).  Such legal  opinions  shall be addressed to
Lender and its  successors and assigns,  dated the related  Funding Date, and in
form and substance reasonably satisfactory to Lender.

                   (ix) Additional  Real Estate Matters.  To the extent obtained
by Borrower from the  Collateral  Obligor  relating to any item of Collateral at
the  origination of the underlying  loan or equity  interest  relating  thereto,
Borrower  shall  have  delivered  to  Lender  such  other  real  estate  related
certificates and documentation as may have been requested by Lender, such as (i)
certificates  of  occupancy  and  letters  certifying  that the  property  is in
compliance with



                                       20

<PAGE>



all applicable  zoning laws, each issued by appropriate  Governmental  Authority
and (ii) abstracts of all Leases in effect at the real property relating to such
Collateral.

                   (x) Other  Documents.  Lender shall have  received such other
documents  as Lender or its counsel  shall  request  with respect to each or any
item of Collateral.

              (c) Collateral  Approval or  Disapproval.  Within two (2) Business
Days  following  the date upon which  Borrower has tendered  performance  of the
conditions  enumerated in Sections 2.03(b)(i) through (x), or has delivered such
items or documents fully executed,  if applicable,  in final form,  Lender shall
either (i) if the Collateral Documents or the Security Documents with respect to
the proposed Collateral are not reasonably satisfactory in form and substance to
Lender,  notify Borrower that Lender has not approved the proposed Collateral as
Collateral  or (ii) notify  Borrower  and Bailee that  Lender has  approved  the
proposed  Collateral as Collateral  and such notice shall identify the documents
to be  delivered  to  Custodian  in  connection  with such  proposed  Collateral
pursuant to Sections 2.03 and 5 of this Loan  Agreement  and shall  identify the
party whom Lender shall designate to record and/or file, as the case may be, any
security  documents  necessary  to perfect  Lender's  security  interest  in the
Eligible Collateral. The terms of delivery and filing and/or recordation of such
security documents shall be set forth in a separate agreement between Lender and
its designee.  Lender's  failure to respond to Borrower  within two (2) Business
Days shall be deemed to be a denial of  Borrower's  request that Lender  approve
the proposed  Collateral,  unless Lender and Borrower  have agreed  otherwise in
writing.

              (d) Procedure for Borrowing  with Respect to Eligible  Collateral.
Once Lender has approved  the  Collateral  in  accordance  with Section  2.03(c)
above,  Borrower  may request a Loan  hereunder,  on any Business Day during the
period from and including the  Effective  Date to and including the  Termination
Date, by delivering to Lender, with a copy to Custodian,  an irrevocable written
request for borrowing,  substantially  in the form of Exhibit D attached hereto,
which  request  must be  received by Lender  prior to 11:00 a.m.,  New York City
time, one (l) Business Day prior to the requested Funding Date. Such request for
borrowing shall (1) attach a schedule  identifying the Eligible  Collateral that
Borrower  proposes to pledge to Lender and to be included in the Borrowing  Base
in connection with such borrowing,  (2) specify the requested  Funding Date, and
(3) attach an Officer's  Certificate signed by a Responsible Officer of Borrower
as required by Section  5.02(b) hereof.  Contemporaneously  with the delivery of
the  request  for  borrowing,  Borrower  shall  deliver to Lender with a copy to
Custodian,  a Custodial  Identification  Certificate along with the accompanying
Collateral  Schedule  with respect to all  proposed  Eligible  Collateral  to be
pledged to Lender on the applicable Funding Date.

              (e) Delivery of Collateral Files and Security Documents.

                  "Non-Table Funded" Eligible Collateral:

              1) By no later  than  1:00  p.m.,  New  York  City  time,  one (1)
Business Day prior to any Funding  Date,  the  Borrower  and/or the Bailee shall
deliver to the Custodian as to any Eligible  Collateral on a case-by-case basis,
(i) original  counterparts of all Collateral Documents comprising the Collateral
File, (ii) the security documents  described in Section  2.03(b)(vii) above, and
(iii)  to the  extent  applicable,  any  other  documents,  reports  or  updated
information  as Lender  shall  request  pursuant to Section  2.03(b)(i)-(x)  and
Section 5.03(b) not heretofore finally 



                                       21

<PAGE>



approved by Lender.

                  "Table Funded" Eligible Collateral:

              1) By no later than 1:00 p.m.,  New York City time, on the Funding
     Date,  the Borrower  shall cause the Bailee to deliver to the  Custodian by
     facsimile  (i) as to  each  item  of  Eligible  Collateral,  the  note,  if
     applicable,  evidencing  the  making  of a loan  secured  by such  Eligible
     Collateral,  a fully executed  Bailee  Agreement and Bailee's Trust Receipt
     and  Certification  issued by the Bailee  thereunder,  (ii) as to all other
     categories of Eligible  Collateral on a case-by-case basis, the delivery of
     all fully executed documents and instruments required by Lender to comprise
     the  Collateral  File and (iii)  evidence  satisfactory  to Lender that all
     documents   necessary  to  perfect  Borrower's  interest  in  the  Eligible
     Collateral  have  been  delivered  to a  party  acceptable  to  Lender  for
     recordation and filing.

              2) By no later  than 1:00 p.m.,  New York City time,  on the third
     Business Day following the  applicable  Funding  Date,  the Borrower  shall
     cause the Bailee to deliver to the Custodian the Collateral File.

              (f) No later than 1:00 p.m.,  New York City time,  on each Funding
Date,  Borrower shall provide  Custodian with a final  Custodial  Identification
Certificate  and  related  Collateral  Schedule  with  respect  to the  Eligible
Collateral  to be pledged to the Lender on such  Funding  Date,  indicating  any
changes,  if any,  from the  Custodial  Identification  Certificate  and related
Collateral  Schedule  heretofore  delivered to Lender and Custodian  pursuant to
Section 2.03(d) above.

              (g) If Borrower  shall deliver a request for a borrowing  pursuant
to Section  2.03(d)  hereof and all  conditions  precedent set forth in Sections
2.03(a),  2.03(b), 2.03(c), 5.01 and 5.02 have been met, and provided no Default
or Event of Default shall have occurred and be  continuing,  Lender shall make a
Loan to Borrower on the  requested  Funding Date, in the amount so requested and
approved by Lender.



                                       22

<PAGE>



              (h) Subject to the delivery by Custodian to Borrower and Lender of
a Trust Receipt with a Collateral  Schedule in respect to all Collateral pledged
to Lender on such  Funding  Date by no later then 3:00 p.m.  on such  date,  and
subject further to the provisions of Section 5 hereof,  such borrowing will then
be made available to Borrower by Lender transferring,  via wire transfer, to the
following account of Borrower: Bank of New York, 530 Fifth Avenue, New York, New
York, Account No. 630-0439428 for the benefit of Capital Trust, ABA# 021-000018,
Attn: Tarryn Kone ((212) 852-4219), in the aggregate amount of such borrowing in
funds immediately available to Borrower.

              (i) From time to time, the Borrower shall forward to the Custodian
additional  original  documents  or  additional  documents  evidencing  any  (i)
assumption,  modification,  consolidation  or extension of a Collateral Loan, or
(iii)  any  amendment  to the  operative  documents  with  respect  to an Equity
Interest,  in each case approved by the Lender in  accordance  with the terms of
this Loan Agreement and upon receipt of any such other documents,  the Custodian
shall hold such other documents as the Lender shall request from time to time.

              (j) With respect to any documents which have been delivered or are
being delivered to recording offices for recording and have not been returned to
the Borrower in time to permit their delivery hereunder at the time required, in
lieu of delivering such original  documents,  Borrower shall deliver to Lender a
true copy thereof with an Officer's  Certificate  certifying that such copy is a
true, correct and complete copy of the original,  which has been transmitted for
recordation. The Borrower shall deliver such original documents to the Custodian
promptly when they are received.

              2.04. Mandatory Prepayments or Pledge

              (a) Lender may determine and  re-determine  the Borrowing  Base on
any Business Day and on as many  Business  Days as it may elect.  If at any time
(i) the aggregate  outstanding  principal  amount of Loans exceeds the Borrowing
Base (a  "Borrowing  Base  Deficiency"),  as  determined  by  Lender in its sole
discretion and notified to Borrower on any Business Day, Borrower shall no later
than one Business Day after receipt of such notice,  or (ii) Borrower shall have
received a prepayment of the principal of any loan or preferred  equity interest
comprising  a portion of the  Collateral  (including,  without  limitation,  the
payment of casualty or condemnation  proceeds),  Borrower shall,  not later than
one (1) Business Day after receipt of such  prepayment,  either prepay the Loans
in part or in whole or pledge  additional  Collateral (which Collateral shall be
in all respects  acceptable to Lender) to Lender,  such that after giving effect
to such prepayment or pledge the aggregate  outstanding  principal amount of the
Loans does not exceed the Borrowing  Base as  re-determined  by Lender after the
addition of  Collateral.  So long as no Default or Event of Default has occurred
and is then  continuing,  all partial  repayments  shall be applied  against the
Asset-Specific Loan Balance relating to the Loan being repaid.

              (b)  If at any  time  under  any  Collateral  Document  evidencing
Eligible  Collateral  (x) there is an Event of Default,  or event with which the
giving of notice or lapse of time or both would  become an Event of Default,  or
(y)  any  representation  or  warranty  made  by or on  behalf  of the  relevant
Collateral  Obligor  becomes false or misleading in any material  respect or (z)
the  relevant  Collateral  Obligor  fails to  perform or  observe  any  material
covenant or other  obligation,  Lender may, in its sole  discretion  and without
regard to any  determination  of 



                                       23

<PAGE>



the Asset Value of such Eligible Collateral,  notify Borrower of such occurrence
and may require that the  Asset-Specific  Loan  Balance  related to the relevant
Eligible  Collateral  be  prepaid  in whole or in part in the  determination  of
Lender.  Not later than one (1)  Business  Day after the receipt of such notice,
Borrower shall prepay the  Asset-Specific  Loan Balance related to such Eligible
Collateral.  Lender may, in its sole discretion,  determine and re-determine the
amount to be prepaid  irrespective of whether or not either (i) any statement of
fact  contained  in any  Officer's  Certificate  delivered  pursuant  to Section
5.02(b) or (ii) any  representation  of Borrower  set forth in Section  6.13 was
true to Borrower's actual knowledge.

              Section 3. Payments; Computations; Etc

              3.01. Repayment of Loans; Interest

              (a) Borrower  hereby  promises to repay in full on the Termination
Date the aggregate outstanding principal amount of the Loans.

              (b)  Borrower  hereby  promises  to pay to Lender  interest on the
unpaid  principal amount of each Loan for the period from and including the date
of such Loan to but  excluding  the date such Loan  shall be paid in full,  at a
rate per annum equal to the Eurodollar Rate plus the applicable  Eurodollar Rate
Spread.  Notwithstanding  the  foregoing,  Borrower  hereby  promises  to pay to
Lender,  to the extent  permitted by applicable law,  interest at the applicable
Post-Default  Rate on any principal of any Loan and on any other amount  payable
by Borrower  hereunder or under the Note that shall not be paid in full when due
(whether at stated  maturity,  by  acceleration  or by mandatory  prepayment  or
otherwise)  for the  period  from  and  including  the due date  thereof  to but
excluding the date the same is paid in full.  Payment and acceptance of interest
pursuant to this  subsection  shall not  constitute  a waiver of any Default and
shall not  otherwise  limit or prejudice  any right of Lender  hereunder.  In no
event  shall  Lender be  entitled  to receive  any  proceeds  received  from any
Collateral  Obligor in connection with the refinancing and/or final distribution
to Lender with respect to any Eligible Collateral to the extent same exceeds the
sums provided to be paid to Lender under Section 7.l6 of this Loan Agreement.

              (c)  Accrued  interest  on each Loan shall be  payable  monthly in
arrears  on the first  Business  Day of each month and for the last month of the
Loan  Agreement  on  the  first  Business  Day of  such  last  month  and on the
Termination  Date,  except that interest payable at the Post-Default  Rate shall
accrue daily and shall be payable upon such accrual.

              (d) The Loans may be  prepaid in whole or in part at any time upon
two (2)  Business  Days prior  written  notice,  without any penalty or premium;
provided,  however,  that any such prepayment  shall be accompanied by an amount
representing  accrued  interest on the  principal  amount being  prepaid and all
other amounts then due under the Loan Documents (including,  without limitation,
all  amounts  due under  Section 3  hereof).  Each  partial  prepayment  that is
voluntary (as opposed to mandatory under the terms of this Loan Agreement) shall
be in an amount of not less than One Hundred  Thousand  Dollars  ($100,000).  So
long as no Default or Event of Default has occurred and is then continuing, each
voluntary  prepayment shall be applied to reduce any Asset-Specific Loan Balance
as designated by Borrower to Lender in writing.

              (e) With respect to any item of  Collateral,  Borrower shall repay
to Lender 



                                       24

<PAGE>



an amount equal to the amount of casualty or  condemnation  proceeds paid to, or
for the benefit of,  Borrower or any underlying  obligor in respect of such item
of Collateral to the extent that Borrower is not required  under the  underlying
loan documents with Borrower's  obligor to reserve,  escrow,  readvance or apply
such proceeds for the benefit of such obligor or the  underlying  real property.
So long as no Default or Event of Default has occurred  and is then  continuing,
such amounts paid to Lender shall be applied in reduction of the  Asset-Specific
Loan Balance relating to such item of Collateral.

              3.02. Payments

              (a) Except to the extent otherwise  provided herein,  all payments
of principal,  interest and other amounts to be made by Borrower under this Loan
Agreement and the Note shall be made in Dollars, in immediately available funds,
without deduction,  set-off or counterclaim,  to Lender at the following account
maintained by Lender:  Account No. 40615114, for the account of MSMCI, Citibank,
N.A., ABA No. 021000089, Attn: Whole Loan Operations, Mortgage-Backed Securities
Department, Fixed Income Division, not later than 1:00 p.m., New York City time,
on the date on which such  payment  shall become due (and each such payment made
after  such time on such due date  shall be deemed to have been made on the next
succeeding  Business  Day).  Borrower  acknowledges  that  it has no  rights  of
withdrawal from the foregoing account.  Lender shall endeavor to send Borrower a
detailed  bill on the date which is two (2)  Business  Days prior to the date on
which payment is due; provided,  however, that the failure of Lender to send, or
of Borrower to receive,  such bill shall in no way affect Borrower's  obligation
to pay amounts due under this Loan Agreement.

              (b) Except to the extent otherwise  expressly  provided herein, if
the due  date of any  payment  under  this  Loan  Agreement  or the  Note  would
otherwise  fall on a day that is not a Business Day, such date shall be extended
to the next  succeeding  Business  Day,  and  interest  shall be payable for any
principal so extended for the period of such extension.

              3.03 Computations.  Interest on the Loans shall be computed on the
basis of a 360-day year for the actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.  Lender shall
determine  any  rate  of  interest   payable  on  Loans   hereunder,   and  such
determination shall be conclusive and binding, absent manifest error.

              3.04. U.S. Taxes

              (a) Borrower  agrees to pay to Lender such  additional  amounts as
are  necessary  in order  that  the net  payment  of any  amount  due to  Lender
hereunder  after  deduction  for or  withholding  in respect of any U.S. Tax (as
defined below) imposed with respect to such payment (or in lieu thereof, payment
of such U.S. Tax by Lender),  will not be less than the amount  stated herein to
be then due and payable;  provided  that the  foregoing  obligation  to pay such
additional amounts shall not apply:

              (ii) to any payment to Lender  hereunder unless Lender is entitled
     to submit a Form 1001  (relating  to Lender and  entitling it to a complete
     exemption  from  withholding on all interest to be received by it hereunder
     in respect  of the  Loans) or Form 4224  (relating  to all  interest  to be
     received by Lender hereunder in respect of the Loans), or



                                       25

<PAGE>



              (iii) to any U.S.  Tax imposed  solely by reason of the failure by
     Lender to comply with applicable certification,  information, documentation
     or other  reporting  requirements  concerning the  nationality,  residence,
     identity or connections with the United States of America of Lender if such
     compliance  is required by statute or  regulation  of the United  States of
     America as a precondition to relief or exemption from such U.S. Tax.

For the  purposes  of this  Section  3.03,  (x) "Form 1001" shall mean Form 1001
(Ownership,  Exemption,  or Reduced Rate  Certificate)  of the Department of the
Treasury of the United  States of America,  (y) "Form 4224" shall mean Form 4224
(Exemption  from  Withholding  of Tax on Income  Effectively  Connected with the
Conduct of a Trade or Business in the United  States) of the  Department  of the
Treasury  of the United  States of America  (or in  relation to either such Form
such  successor  and  related  form as may from time to time be  adopted  by the
relevant taxing  authorities of the United States of America to document a claim
to which such Form  relates),  and (z) "U.S.  Taxes"  shall mean any  present or
future tax,  assessment  or other  charge or levy imposed by or on behalf of the
United  States of America,  any  political  subdivision  of the United States of
America or any taxing authority thereof or therein.

              (b) Within 30 days after  paying  any such  amount to Lender,  and
within  30  days  after  it is  required  by  law to  remit  such  deduction  or
withholding to any relevant taxing or other authority, Borrower shall deliver to
Lender evidence satisfactory to Lender of such deduction, withholding or payment
(as the case may be).

              (c) Lender  represents  and warrants to Borrower  that on the date
hereof  Lender is either  incorporated  under the laws of the United States or a
State  thereof  or is  entitled  to submit a Form 1001  (relating  to Lender and
entitling  it to a complete  exemption  from  withholding  on all interest to be
received by it hereunder in respect of the Loans) or Form 4224  (relating to all
interest  to be received by Lender  hereunder  in respect of the Loans).  Lender
shall not assign or sell participation interests in the Loans made or to be made
hereunder  to a foreign  bank if as a result  thereof  Lender shall be unable to
make the representations set forth in this Section 3.04(c).

              3.05.  Booking of Loans.  Without limitation of Lender's rights to
sell,  assign  or  transfer  a  Loan  or any  interest  therein,  including  any
participation  interest  therein,  at any time and from time to time, Lender may
make,  carry or  transfer  such Loan at,  to, or for the  account  of any of its
branch offices or the office of an Affiliate of Lender; provided,  however, that
the  representation  in Section 3.04(c) shall remain true throughout the term of
such Loan.

              3.06.  Borrower  hereby  expressly  acknowledges  and agrees  that
Lender  may fund a Loan in any manner it sees fit,  including  (i)  through  the
actual purchase of a Eurodollar  deposit  bearing  interest at the rate obtained
pursuant  to the  definition  of  Eurodollar  Rate  in an  amount  equal  to the
principal  amount of such Loan and having a maturity  comparable to the relevant
interest period or (ii) through Lender's entering into or purchase of repurchase
agreements,  interest rate agreements,  swap agreements or other arrangements in
such amounts as Lender  shall  determine  (and which  amounts may or may not, in
Lender's sole  discretion,  be "match funded" to such Loan).  Calculation of all
amounts  payable to Lender under this Section 3.06 and under  Section 3.07 shall
be made as though Lender had actually funded such Loan through the purchase of a
Eurodollar  deposit  bearing  interest  at the  rate  obtained  pursuant  to the
definition of Eurodollar  Rate in an amount equal to the amount of 



                                       26

<PAGE>



such Loan and having a maturity  comparable to the relevant  interest period and
through the transfer of such  Eurodollar  deposit  from an  off-shore  office of
Lender to a domestic office of Lender in the United States of America; provided,
however,  that  Lender  may fund  such  Loan in any  manner  it sees fit and the
foregoing assumptions shall be utilized only for purposes of calculating amounts
payable under this Section 3.06 and under Section 3.07, if any.

              3.07.  Funding Costs. (a) Borrower shall compensate  Lender,  upon
written  request  by  Lender  (which  request  shall  set  forth  the  basis for
requesting such amounts), for all Funding Costs.

              (b) Lender shall deliver to Borrower a statement setting forth the
amount and basis of determination of any Funding Cost, it being agreed that such
statement  and the method of  calculation  shall be  conclusive  and  binding on
Borrower,  absent manifest error.  In addition,  in the event Borrower  provides
Lender not less than five (5) Business Days prior  written  notice of a proposed
voluntary prepayment  hereunder,  Lender shall deliver to Borrower a non-binding
good faith  estimate of the  applicable  components  and amount of Funding Costs
which  would be  incurred  by  Borrower  if  Borrower  were to make a  voluntary
prepayment hereunder;  provided,  however, that Borrower shall remain liable for
all Funding  Costs shown on the statement  referred to in the first  sentence of
this subsection (b), notwithstanding such good faith estimate.

              (c) In lieu of prepaying  the Loan when and as otherwise  required
or  permitted  by this  Loan  Agreement,  Borrower  may on any  Business  Day (a
"Deposit  Funding  Date")  instead  deposit  with Lender an amount  equal to the
applicable  prepayment,  to be held by Lender (the  "Prepayment  Deposit") until
such date as application of the Prepayment  Deposit on account of the Loan would
not cause Lender to suffer Funding Costs (the "Deposit  Application  Date"). Any
Prepayment Deposit held by Lender shall: (a) constitute  additional security for
the Loan,  for which the parties shall enter into such security  documents  (and
account establishment and administration documents) as Lender shall require; (b)
be held by Lender in an interest-bearing  account selected and controlled solely
by Lender, interest on which shall be added to principal and applied in the same
manner as principal;  (c) at Lender's  option,  be  accompanied by a payment (as
estimated by Lender) equal to the  difference  between the interest to be earned
on the Prepayment  Deposit and the interest that will accrue on a portion of the
Loan equal to the Prepayment  Deposit during the period from the Deposit Funding
Date to the  Deposit  Application  Date;  (d) with  respect  to the  Collateral,
entitle  Borrower  to the same  rights  and  benefits  (including  the  right to
releases,  if any) that would have been  available  to Borrower if Borrower  had
prepaid the Loan (and designated  Asset-Specific  Loan  Balance(s)) by an amount
equal to the  Prepayment  Deposit;  and (e) be  applied  on  account of the Loan
(principal and interest) on the Deposit Application Date.

              3.08.  Compensation  for Increased  Costs. If Lender shall in good
faith  determine  that any  change  in any law,  treaty  or  governmental  rule,
regulation or order,  or in the  interpretation,  administration  or application
thereof,  or  any  determination  of  a  court  or  governmental  authority,  or
compliance  with any  guideline,  request  or  directive  issued  or made by any
central bank or other governmental or  quasi-governmental  authority (whether or
not having the force of law):

              (a) imposes,  modifies or holds applicable any reserve  (including
     any marginal, emergency,  supplemental,  special or other reserve), special
     deposit,  compulsory  loan, FDIC insurance or similar  requirement  against
     assets held by, or deposits or other  liabilities in or for the account of,
     or advances or



                                       27

<PAGE>



     loans by, or other credit  extended by, or any other  acquisition  of funds
     by, any office of Lender; or

              (b)  imposes any other  condition  on or  affecting  Lender or its
     obligations hereunder or the interbank Eurodollar market;

and the  result of any of the  foregoing  is to  increase  the cost to Lender of
agreeing to make,  making or  maintaining  the Loan  hereunder  or to reduce any
amount received or receivable by Lender with respect thereto;  then, in any such
case,  Borrower shall promptly (but in any event no later than five (5) Business
Days  following any notice from Lender of the same) pay to Lender,  upon receipt
of the statement  referred to in the next sentence,  such  additional  amount or
amounts as may be necessary to compensate  Lender for any such increased cost or
reduction in amounts received or receivable  hereunder.  Lender shall deliver to
Borrower a written  statement,  setting forth in reasonable detail the basis for
calculating the additional amounts owed to Lender under this Section 3.08, which
statement  shall be  conclusive  and  binding  upon all  parties  hereto  absent
manifest error.

              3.09. Limitation on Types of Loans; Illegality. Anything herein to
the contrary notwithstanding, if:

              (a) Lender determines,  which  determination  shall be conclusive,
that quotations of interest rates for the relevant  deposits  referred to in the
definition  of  "Eurodollar  Base  Rate" in  Section  1.01  hereof are not being
provided in the relevant amounts or for the relevant  maturities for purposes of
determining rates of interest for Loans as provided herein; or

              (b) Lender determines,  which  determination  shall be conclusive,
that the relevant rate of interest  referred to in the definition of "Eurodollar
Base Rate" in Section  1.01  hereof upon the basis of which the rate of interest
for Loans is to be determined is not likely adequate to cover the cost to Lender
of making or maintaining Loans; or

              (c) Lender determines,  which  determination  shall be conclusive,
that it is or will be  unlawful  for Lender to honor its  obligation  to make or
maintain Loans  hereunder  using a Eurodollar  Rate as a result of compliance by
Lender  in good  faith  with any law,  treaty,  governmental  rule,  regulation,
guideline or order (or would conflict with any such treaty,  governmental  rule,
regulation,  guideline  or order not  having  the force of law even  though  the
failure to comply therewith would not be unlawful);

              then Lender shall give Borrower prompt notice thereof and, so long
as such condition remains in effect, Lender shall be under no obligation to make
additional  Loans,  and Borrower  shall,  either prepay all such Loans as may be
outstanding  or pay  interest  on such  Loans at a rate per  annum  equal to the
Eurodollar Substitute Rate.

              Section 4. Collateral Security

              4.01. Collateral; Security Interest

              (a)  Borrower  hereby  assigns,  pledges  and  grants  a  security
interest in all of its right, title and interest in, to and under the Collateral
described  in  Section  4.01(b)  below to  Lender  to secure  the  repayment  of
principal  of and  interest on all Loans and all other  amounts  owing to Lender
hereunder,  under the Note,  under the other Loan  Documents  and any and all MS



                                       28

<PAGE>



Indebtedness  from  time  to  time  outstanding   (collectively,   the  "Secured
Obligations").  Borrower  agrees to mark its  computer  records to evidence  the
interests granted to Lender hereunder.

              (b) All of Borrower's  right,  title and interest in, to and under
each of the following items of property  pledged by Borrower to Lender from time
to time and whether now owned or hereafter  acquired,  now existing or hereafter
created and wherever  located,  is  hereinafter  individually  and  collectively
referred to as the "Collateral":

              (i) all Mortgage  Loans,  Mezzanine  Loans,  Equity  Interests and
     Other Approved Collateral;

              (ii) all Collateral  Documents,  including without  limitation all
     promissory  notes,  any  collateral  pledged or otherwise  relating to such
     Collateral,  all representations and warranties made to, or for the benefit
     of, Borrower by any Collateral  Obligor,  all Servicing Records (as defined
     in Section  11.14(b)  below) and  servicing  agreements,  together with all
     files,  documents,  instruments,  surveys,  certificates,   correspondence,
     appraisals,  computer programs,  computer storage media, accounting records
     and other books and records relating thereto, in each case subject to prior
     liens and encumbrances permitted by Lender;

              (iii)  all  guaranties  and  insurance   (issued  by  governmental
     agencies or otherwise)  and any  insurance  certificate  or other  document
     evidencing such guaranties or insurance  relating to any Collateral and all
     claims and payments thereunder;

              (iv) all other insurance  policies and insurance proceeds relating
     to any Collateral or the related Property;

              (v) all Interest Rate Protection Agreements;

              (vi) the  Collection  Account  and all monies from time to time on
     deposit in the Collection Account;

              (vii) all "general intangibles", "accounts" and "chattel paper" as
     defined in the Uniform  Commercial Code relating to or constituting any and
     all of the foregoing; and

              (viii) any and all replacements, substitutions,  distributions on,
     or proceeds (including, without limitation,  condemnation proceeds) of, any
     and all of the  foregoing  set  forth in items  (i)  through  (vii) of this
     Section 4.01(b),  whether now owned or hereafter acquired,  now existing or
     hereafter created and wherever located.

              (c) Pursuant to the Custodial Agreement,  Custodian shall hold the
Collateral  Documents as exclusive bailee and agent for Lender pursuant to terms
of the Custodial  Agreement  and shall deliver to Lender Trust  Receipts each to
the effect that it has reviewed such  Collateral  Documents in the manner and to
the extent required by the Custodial  Agreement and identifying any deficiencies
in such Collateral Documents as so reviewed.

              4.02. Further Assurances

              (a)  Borrower  shall  undertake,  with  respect  to  each  item of
Collateral  



                                       29

<PAGE>



pledged  hereunder as security for a Loan, any and all actions deemed  necessary
by Lender for the  granting  by  Borrower  to Lender of a valid  first  priority
security  interest in such  Collateral.  Without  limiting the generality of the
foregoing, Borrower shall take such steps as are for the granting and perfection
of a first priority security interest in Securities and related Collateral.

              (b) At any time and from time to time, upon the written request of
Lender,  and at the sole expense of Borrower,  Borrower  will  promptly and duly
execute and deliver,  or will promptly cause to be executed and delivered,  such
further  instruments  and documents  and take such further  action as Lender may
reasonably  request for the purpose of obtaining or preserving the full benefits
of this Loan Agreement and of the rights and powers herein  granted,  including,
without limitation, the filing of any financing or continuation statements under
the Uniform  Commercial Code in effect in any  jurisdiction  with respect to the
Liens created hereby.  Borrower also hereby  authorizes  Lender to file any such
financing or  continuation  statement  without the  signature of Borrower to the
extent permitted by applicable law. A carbon, photographic or other reproduction
of this Loan Agreement  shall be sufficient as a financing  statement for filing
in any jurisdiction.

              4.03.  Changes in Locations,  Name,  etc.  Borrower  shall not (i)
change the location of its chief executive  office/chief  place of business from
that  specified  in  Section  6 hereof or (ii)  change  its  name,  identity  or
corporate  structure  (or the  equivalent)  or  change  the  location  where  it
maintains its records with respect to the Collateral  unless it shall have given
Lender  at least ten (10) days  prior  written  notice  thereof  and shall  have
delivered  to Lender  all  Uniform  Commercial  Code  financing  statements  and
amendments  thereto as Lender shall request and taken all other  actions  deemed
necessary by Lender to continue its perfected  status in the Collateral with the
same or better priority.

              4.04. Lender's Appointment as Attorney-in-Fact.

              (a) Borrower  hereby  irrevocably  constitutes and appoints Lender
and any officer or agent thereof,  with full power of substitution,  as its true
and lawful  attorney-in-fact  with full  irrevocable  power and authority in the
place and stead of Borrower and in the name of Borrower or in its own name, from
time to time in Lender's  discretion,  for the purpose of carrying out the terms
of this Loan Agreement,  to take any and all  appropriate  action and to execute
any and all  documents  and  instruments  which may be necessary or desirable to
accomplish  the  purposes of this Loan  Agreement,  and,  without  limiting  the
generality of the foregoing,  Borrower  hereby gives Lender the power and right,
on behalf of Borrower,  without assent by, but with notice to,  Borrower,  if an
Event of Default shall have occurred and be continuing, to do the following:

              (i) in the name of Borrower or its own name, or otherwise, to take
     possession  of  and  endorse  and  collect  any  checks,   drafts,   notes,
     acceptances  or other  instruments  for the payment of moneys due under any
     mortgage  insurance or with respect to any other Collateral and to file any
     claim or to take any  other  action  or  proceeding  in any court of law or
     equity or  otherwise  deemed  appropriate  by  Lender  for the  purpose  of
     collecting any and all such moneys due under any such mortgage insurance or
     with respect to any other Collateral whenever payable;

              (ii) to pay or  discharge  taxes and Liens  levied or placed on or
     threatened against the Collateral; and



                                       30

<PAGE>



              (iii) (A) to direct  any party  liable for any  payment  under any
     Collateral  to make  payment  of any and all  moneys  due or to become  due
     thereunder  directly  to Lender or as Lender  shall  direct;  (B) to ask or
     demand  for,  collect,  receive  payment of and  receipt  for,  any and all
     moneys,  claims  and  other  amounts  due or to  become  due at any time in
     respect of or arising  out of any  Collateral;  (C) to sign and endorse any
     invoices,  assignments,  verifications,  notices  and  other  documents  in
     connection  with any of the  Collateral;  (D) to commence and prosecute any
     suits, actions or proceedings at law or in equity in any court of competent
     jurisdiction  to collect the  Collateral or any part thereof and to enforce
     any other  right in  respect  of any  Collateral;  (E) to defend  any suit,
     action  or  proceeding   brought  against  Borrower  with  respect  to  any
     Collateral;  (F) to  settle,  compromise  or  adjust  any  suit,  action or
     proceeding described in clause (E) above and, in connection  therewith,  to
     give such  discharges or releases as Lender may deem  appropriate;  and (G)
     generally, to sell, transfer, pledge and make any agreement with respect to
     or otherwise  deal with any of the  Collateral  as fully and  completely as
     though Lender were the absolute owner thereof for all purposes,  and to do,
     at Lender's  option and Borrower's  expense,  at any time, and from time to
     time,  all acts and things  which  Lender  deems  reasonably  necessary  to
     protect, preserve or realize upon the Collateral and Lender's Liens thereon
     and to  effect  the  intent  of  this  Loan  Agreement,  all as  fully  and
     effectively as Borrower might do.

Borrower  hereby  ratifies all that said attorneys shall lawfully do or cause to
be done by virtue  hereof.  This power of  attorney is a power  coupled  with an
interest  and shall be  irrevocable  until the  repayment in full of all Secured
Obligations hereunder.

              (b) Borrower also authorizes  Lender, at any time and from time to
time,  to execute,  in  connection  with any sale  provided  for in Section 4.07
hereof,  any  endorsements,  assignments  or other  instruments of conveyance or
transfer with respect to the Collateral.

              (c) The powers  conferred on Lender are solely to protect Lender's
interests  in the  Collateral  and shall  not  impose  any duty  upon  Lender to
exercise any such powers.  Lender shall be accountable  only for amounts that it
actually receives as a result of the exercise of such powers, and neither Lender
nor any of its  officers,  directors,  or  employees  shall  be  responsible  to
Borrower  for any act or  failure  to act  hereunder,  except  for its own gross
negligence or willful misconduct.

              4.05. Performance by Lender of Borrower's Obligations. If Borrower
fails to  perform or comply  with any of its  agreements  contained  in the Loan
Documents  and  Lender  may  itself  perform  or  comply,   or  otherwise  cause
performance or compliance,  with such agreement, the expenses of Lender incurred
in  connection  with such  performance  or  compliance,  together  with interest
thereon at a rate per annum equal to the Post-Default  Rate, shall be payable by
Borrower to Lender on demand and shall constitute Secured Obligations.

              4.06.  Proceeds.  If an  Event  of  Default  shall  occur  and  be
continuing,  (a) all proceeds of Collateral  received by Borrower  consisting of
cash,  checks and other  near-cash  items shall be held by Borrower in trust for
Lender,  segregated from other funds of Borrower,  and, within two Business Days
of  receipt  by  Borrower,  shall be turned  over to  Lender  in the exact  form
received by Borrower (duly endorsed by Borrower to Lender, if required, in order
to be  negotiated  by  Lender),  and (b) any and all such  proceeds  received by
Lender  (whether  from  Borrower or  otherwise)  may, in the sole  discretion of
Lender, be held by Lender as collateral 



                                       31

<PAGE>



security  for,  and/or then or at any time  thereafter  may be applied by Lender
against,   the  Secured  Obligations   (whether  matured  or  unmatured),   such
application  to be in such  order as Lender  shall  elect.  Any  balance of such
proceeds  remaining after the Secured  Obligations  shall have been paid in full
and this  Loan  Agreement  shall  have  been  terminated  shall be paid  over to
Borrower  or to  whomsoever  may be lawfully  entitled to receive the same.  For
purposes  hereof,  proceeds shall include,  but not be limited to, all principal
and  interest   payments,   all  prepayments  and  payoffs,   insurance  claims,
condemnation awards, sale proceeds, real estate owned rents and any other income
and all other amounts received with respect to the Collateral.

              4.07.  Remedies.  If an  Event  of  Default  shall  occur  and  be
continuing,  Lender may  exercise,  in addition to all other rights and remedies
granted to it in this Loan  Agreement  and in any other  instrument or agreement
securing,  evidencing  or relating to the  Secured  Obligations,  all rights and
remedies of a secured party under the Uniform  Commercial Code. Without limiting
the generality of the  foregoing,  Lender without demand of performance or other
demand,  presentment,  protest,  advertisement or notice of any kind (except any
notice  required  by law  referred  to below) to or upon  Borrower  or any other
Person (each and all of which demands,  presentments,  protests,  advertisements
and notices are hereby waived),  may in such  circumstances  forthwith  collect,
receive,  appropriate  and realize  upon the  Collateral,  or any part  thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing),  in one or more parcels or as an entirety at public
or private sale or sales, at any exchange, broker's board or office of Lender or
elsewhere  upon such terms and  conditions as it may deem  advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.  Lender shall have the right upon any such public
sale or sales,  and, to the extent  permitted by law, upon any such private sale
or sales,  to purchase the whole or any part of the Collateral so sold,  free of
any right or equity of redemption  in Borrower,  which right or equity is hereby
waived or released.  Borrower further agrees, at Lender's  request,  to assemble
the  Collateral  and make it  available  to Lender at places  which Lender shall
reasonably  select,  whether at Borrower's  premises or elsewhere.  Lender shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale,  after deducting all reasonable costs and expenses of every
kind incurred  therein or incidental  to the care or  safekeeping  of any of the
Collateral  or in any way  relating  to the  Collateral  or the rights of Lender
hereunder,   including  without  limitation   reasonable   attorneys'  fees  and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as Lender may elect,  and only after such  application  and after the
payment by Lender of any other amount  required or permitted by any provision of
law, including without limitation Section  9-504(1)(c) of the Uniform Commercial
Code,  need Lender account for the surplus,  if any, to Borrower.  To the extent
permitted by applicable law, Borrower waives all claims,  damages and demands it
may acquire  against  Lender arising out of the exercise by Lender of any of its
rights hereunder,  other than those claims, damages and demands arising from the
gross  negligence or willful  misconduct of Lender.  If any notice of a proposed
sale or other  disposition  of Collateral  shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other  disposition.  Borrower  shall remain liable for any  deficiency  (plus
accrued interest thereon as contemplated  pursuant to Section 3.01(b) hereof) if
the proceeds of any sale or other  disposition of the  Collateral  (net of costs
incurred in connection with such sale or other  disposition) are insufficient to
pay the Secured  Obligations  and the fees and  disbursements  of any  attorneys
employed by Lender to collect such deficiency.



                                       32

<PAGE>



              4.08.  Limitation on Duties Regarding  Preservation of Collateral.
Lender's duty with respect to the custody, safekeeping and physical preservation
of  the  Collateral  in its  possession,  under  Section  9-207  of the  Uniform
Commercial  Code or  otherwise,  shall be to deal with it in the same  manner as
Lender deals with similar  property for its own account.  Neither Lender nor any
of its directors,  officers or employees  shall be liable for failure to demand,
collect or realize  upon all or any part of the  Collateral  or for any delay in
doing so or shall be under any  obligation  to sell or otherwise  dispose of any
Collateral upon the request of Borrower or otherwise.

              4.09.  Powers  Coupled with an Interest.  All  authorizations  and
agencies  herein  contained with respect to the Collateral are  irrevocable  and
powers coupled with an interest.

              4.10. Release of Security Interest.  Upon termination of this Loan
Agreement  and the CMBS Loan  Agreement  and  repayment to Lender of all Secured
Obligations and the performance of all obligations  under the Loan Documents and
under the CMBS Loan Agreement, Lender shall release its security interest in any
remaining Collateral.

              4.11. Release of Collateral.  Provided that no Default or Event of
Default shall exist (other than one that (a) relates solely to the Collateral to
be released  and (b) will be cured  simultaneously  with such  release) and that
Borrower shall have paid all sums then due under the Loan relating thereto, upon
(i) Borrower's payment in full of the  Asset-Specific  Loan Balance with respect
to a portion of the Collateral  and (ii) receipt by Lender of a written  request
from  Borrower  for the  release  of such  Collateral,  Lender  shall as soon as
practicable  release (and Lender shall  reasonably  cooperate  with  Borrower to
facilitate  reasonable escrow arrangements to facilitate a simultaneous  release
of) the related  Collateral  Documents and the related  Collateral and any liens
related  thereto to Borrower or, to the extent  necessary to  facilitate  future
savings of mortgage tax in states that impose mortgage taxes,  assign such liens
as Borrower shall request;  provided, that any such assignments shall be without
recourse,  representation  or warranty  of any kind  except  that  Lender  shall
represent and warrant that such Collateral has not been  previously  assigned by
Lender.  Lender shall with reasonable  promptness,  after a written request from
Borrower,  execute any  document or  instrument  necessary  to  effectuate  such
release or assignment.

              4.12. Substitution of Eligible Collateral. From time to time until
the Custodian is otherwise  notified by the Lender,  which notice shall be given
by the Lender only  during the  existence  of an Event of Default,  and with the
prior written consent of the Lender, the Borrower may substitute for one or more
items  of  Eligible  Collateral  constituting  the  Collateral  with one or more
substitute items of Eligible Collateral having aggregate  Collateral Value equal
to or greater than the Collateral Value of the Collateral being substituted for,
or obtain the release of one or more items of Collateral constituting Collateral
hereunder:  provided that, after giving effect to such  substitution or release,
the Secured  Obligations then  outstanding  shall not exceed the Borrowing Base,
which  determination  shall be made solely by the Lender. In connection with any
such requested  substitution or release, the Borrower will provide notice to the
Custodian and the Lender no later than 3:00 p.m. New York City time, on the date
of such request,  specifying  the items of Collateral to be  substituted  for or
released  and the items of  substitute  Collateral  to be pledged  hereunder  in
substitution  thereof,  if any,  and shall  deliver with such notice a Custodial
Identification  Certificate  and a revised  Collateral  Schedule  indicating any
substitute Collateral.



                                       33

<PAGE>



              Section 5. Conditions Precedent

              5.01.  Initial Loan.  The obligation of Lender to make its initial
Loan  hereunder  is  subject  to  the  satisfaction,  immediately  prior  to  or
concurrently  with the  making of such Loan,  of the  condition  precedent  that
Lender shall have received all of the  following  items and  documents,  each of
which shall be satisfactory to Lender and its counsel in form and substance:

              (a) Loan Documents.

              (i) This Loan Agreement, duly completed and executed;

              (ii) The Note, duly completed and executed, together with a fee in
the amount of $750,000.00;

              (iii) The  Custodial  Agreement,  duly  executed and  delivered by
Borrower and Custodian. In addition, Borrower shall have taken such other action
as Lender  shall have  requested  in order to  perfect  the  security  interests
created pursuant to the Loan Agreement;

              (b)  Organizational  Documents.  Certified  copies  of  the  trust
agreement (or equivalent  documents) of Borrower and of all requisite  authority
for Borrower with respect to the execution, delivery and performance of the Loan
Documents and each other  document to be delivered by Borrower from time to time
in connection  herewith (and Lender may  conclusively  rely on such  certificate
until it receives notice in writing from Borrower to the contrary);

              (c)  Legal  Opinion.  A legal  opinion  of  counsel  to  Borrower,
substantially in the form attached hereto as Exhibit C;

              (d) Trust Receipt and Collateral  Schedule and Exception Report. A
Trust Receipt,  substantially in the form of Annex 2 of the Custodial Agreement,
dated the Effective  Date, from  Custodian,  duly  completed,  with a Collateral
Schedule and Exception Report attached thereto;

              (e) Servicing Agreement(s).  Any Servicing Agreement, certified as
a true,  correct  and  complete  copy of the  original,  with the  letter of the
applicable  Servicer (i) consenting to  termination of such Servicing  Agreement
upon the  occurrence of an Event of Default and (ii) agreeing to hold all moneys
received  in  respect  of each item of  Collateral  for the  benefit  of Lender,
attached; and

              (f) Other Documents. Such other documents as Lender may reasonably
request.

              5.02.  Initial and  Subsequent  Loans.  The making of each Loan to
Borrower  (including  the initial  Loan) on any  Business  Day is subject to the
delivery of all Collateral Documents pertaining to the Eligible Collateral to be
pledged  for  such  Loan,  together  with all  documents  set  forth in  Section
2.03(b)(i)-(x)   and  the  satisfaction  of  the  following  further  conditions
precedent,  both  immediately  prior to the  making of such Loan and also  after
giving effect thereto and to the intended use thereof:

              (a) no Event of  Default or Default  shall  have  occurred  and be
continuing  on 



                                       34

<PAGE>



such date either before or after giving effect to the making of the advance;

              (b) Lender shall have received  from  Borrower and Borrower  shall
have received from each Collateral Obligor such  representations  and warranties
as Lender shall, in its sole discretion, deem satisfactory.  The representations
and  warranties  made by Borrower in Section 6 hereof,  and elsewhere in each of
the Loan  Documents,  shall be true  and  complete  on and as of the date of the
making of such Loan in all material respects (in the case of the representations
and  warranties  in Section  6.10,  solely with  respect to Eligible  Collateral
included in the Borrowing Base) with the same force and effect as if made on and
as of such date (or, if any such  representation or warranty is expressly stated
to have been made as of a specific date, as of such specific date). Lender shall
have  received  an  officer's  certificate  signed by a  Responsible  Officer of
Borrower certifying as to the truth and accuracy of the above, which certificate
shall also include a representation  that (i) Borrower is in compliance with all
governmental  licenses  and  authorizations,  (ii)  Borrower is  qualified to do
business, validly existing and, to the extent determinable, in good standing, in
all required jurisdictions, (iii) the facts set forth in the Diligence Materials
related to the  Collateral  for such Loan are, to the best knowledge of Borrower
after  diligent  inquiry,  true and correct (or shall fully  explain all adverse
changes from the information previously supplied to Lender), (iv) there has been
no change in the  organizational  and  authority  documents  provided  to Lender
pursuant  to  Section   5.01(b)  hereof  since  the  date  of  the  most  recent
certification  thereof to  Lender,  and (v) there has been no  Material  Adverse
Effect since the date of the last advance to Borrower hereunder.

              (c) the aggregate  outstanding principal amount of the Loans shall
not exceed the Borrowing Base;

              (d) subject to Lender's right to perform one or more Due Diligence
Reviews  pursuant to Section 11.15 hereof,  Lender shall have  completed its due
diligence  review of the  Collateral  Documents for each item of Collateral  and
such other documents, records, agreements,  instruments, mortgaged properties or
information relating to such item of Collateral as Lender in its sole discretion
deems  appropriate to review and such review shall be  satisfactory to Lender in
its sole discretion;

              (e) Lender shall have  received  from  Custodian a Trust  Receipt,
together with a Collateral  Schedule and Exception  Report with  Exceptions  (as
defined in the  Custodial  Agreement)  as are  acceptable  to Lender in its sole
discretion,  in respect of the Eligible  Collateral  to be pledged  hereunder on
such Business Day;

              (f) Lender shall have received  from  Borrower a Lender's  Release
Letter  substantially  in the form of  Exhibit  E hereto  (or  such  other  form
acceptable  to Lender)  covering each item of Collateral to be pledged to Lender
to the extent such Collateral is subject to a lender's lien;

              (g)  none  of  the  following   shall  have  occurred   and/or  be
continuing:

              (i) an  event or  events  shall  have  occurred  resulting  in the
     effective  absence of a "repo  market" or comparable  "lending  market" for
     financing  debt  obligations  secured by mortgage loans or securities for a
     period of (or reasonably expected to be) at least 30 consecutive days or an
     event or events shall have  occurred  resulting in Lender not being able to
     finance any Loans



                                       35

<PAGE>



     through  the  "repo   market"  or   "lending   market"   with   traditional
     counterparties  at rates  which  would  have been  reasonable  prior to the
     occurrence of such event or events;

              (ii) an event or  events  shall  have  occurred  resulting  in the
     effective  absence  of a  "securities  market"  for  securities  backed  by
     mortgage loans for a period of (or  reasonably  expected to be) at least 30
     consecutive  days or an event or events  shall have  occurred  resulting in
     Lender not being able to sell securities backed by mortgage loans at prices
     which would have been reasonable prior to such event or events; or

              (iii) there shall have occurred a material  adverse  change in the
     financial  condition of Lender which effects (or can reasonably be expected
     to  effect)  materially  and  adversely  the  ability of Lender to fund its
     obligations under this Loan Agreement;

              (h)  Drawdown  Fee.  Borrower  shall  have  paid  Lender  from the
proceeds of the advance to be made in connection  with such Loan, a Drawdown Fee
calculated on the amount of such Loan then being disbursed.

              (i)  Transaction  Costs.  Borrower shall have paid Lender from the
proceeds of the advance to be made in connection with such Loan, all Transaction
Costs for which  bills have been  submitted;  provided,  however,  that  nothing
herein shall be deemed to waive  Borrower's  obligation  to pay all  Transaction
Costs whether billed before or after the making of a Loan pursuant to which such
Transaction Costs were incurred.

              (j)  Other  Documents.  Lender  shall  have  received  such  other
documents,  and Borrower  shall have taken such other action in order to perfect
the security  interests created  hereunder,  as Lender or its counsel shall deem
necessary.

              Each  request  for  a  borrowing  by  Borrower   hereunder   shall
constitute a certification by Borrower that all the conditions set forth in this
Section 5 have been  satisfied  (both as of the date of such notice,  request or
confirmation and as of the date of such borrowing).

              5.03. Additional Requirements

              (a) Borrower and Lender recognize and agree that the categories of
Collateral  set forth in the  Recital  paragraph  hereof and  defined  herein as
categories  of assets which may be submitted by Borrower to Lender for review by
Lender as Eligible Collateral  hereunder are general in nature and that the full
scope  of  such  Collateral  categories  may  be  unknown.   Consequently,   the
appropriate  requirements  are not  fully  known  for (i)  the  documents  to be
provided by Borrower for  underwriting  and due  diligence  review by Lender and
(ii)  submittals  by Borrower  in order to create and  perfect a first  priority
security interest in the Collateral.  Therefore, Borrower and Lender agree that,
as a further condition  precedent to funding a Loan in respect of any Collateral
hereunder, Borrower shall have delivered to Lender all information and documents
determined  by Lender in good  faith to be  required  for its  underwriting  and
examination  of such  Collateral  and for the granting and perfection of a first
priority security interest therein.



                                       36

<PAGE>



              (b) Without  limiting  the  generality  of the  foregoing  Section
5.03(a),  Borrower  shall  execute and deliver all  documents  necessary for the
granting of a first priority security  interest in any Collateral  determined by
Lender to be Eligible Collateral hereunder, including without limitation (i) all
instruments  evidencing  indebtedness payable to Borrower or pledged to Borrower
as security for a loan, (ii) all  instruments  granting or perfecting a security
interest  for the benefit of  Borrower or pledged to Borrower as security  for a
loan (including, without limitation,  collateral assignments,  pledge agreements
and UCC financing  statements),  (iii) all instruments evidencing an interest in
an entity  pledged  to  Borrower  as  security  for a loan  (including,  without
limitation,  partnership  interests,  shares of corporate  stock,  participation
interests,  and other  beneficial  interests of any kind),  (iv) all instruments
guaranteeing  the  repayment of  indebtedness  owed to  Borrower,  or pledged to
Borrower for the  repayment of a Loan and (v) all  agreements  among  holders of
debt or  equity  interests  providing  for a  priority  among  such  parties  of
interests in related assets forming the basis of an item of Collateral.

              Section 6. Representations and Warranties

              Borrower  represents  and warrants to Lender that  throughout  the
term of this Loan Agreement:

              6.01.  Existence.  Borrower (a) is a business trust duly organized
and validly existing under the laws of the jurisdiction of its organization, (b)
has all requisite  power,  and has all  governmental  licenses,  authorizations,
consents and approvals  necessary to own its assets and carry on its business as
now  being  or as  proposed  to be  conducted,  except  where  the  lack of such
licenses, authorizations,  consents and approvals would not be reasonably likely
to have a  Material  Adverse  Effect  on its  Property,  business  or  financial
condition or prospects;  and (c) is qualified to do business,  validly  existing
and is, to the extent determinable, in good standing, in all other jurisdictions
in which the nature of the  business  conducted  by it makes such  qualification
necessary,  except where failure so to qualify  would not be  reasonably  likely
(either  individually or in the aggregate) to have a Material  Adverse Effect on
its Property, business or financial condition or prospects.

              6.02.  Action.  Borrower has all  necessary  power,  authority and
legal right to execute,  deliver and perform its  obligations  under each of the
Loan Documents;  the execution,  delivery and performance by Borrower of each of
the Loan  Documents  have been duly  authorized by all  necessary  action on its
part; and each Loan Document has been duly and validly executed and delivered by
Borrower and  constitutes  a legal,  valid and binding  obligation  of Borrower,
enforceable against Borrower in accordance with its terms.

              6.03. Financial Condition.  Borrower agrees to promptly deliver to
Lender all publicly filed financial  information when and to the extent that the
same is made available to the general public.  Borrower has heretofore furnished
to Lender a copy of (a) its  consolidated  balance  sheet  and the  consolidated
balance sheets of its consolidated  Subsidiaries for the fiscal year of Borrower
ended  December 31, 1997 and the related  consolidated  statements of income and
retained   earnings  and  of  cash  flows  for  Borrower  and  its  consolidated
Subsidiaries  for such fiscal year,  setting  forth in each case in  comparative
form the figures for the previous year, (b) its  consolidated  balance sheet and
the consolidated balance sheets of its consolidated Subsidiaries for such fiscal
year and the related consolidated statements of income and retained earnings and
of cash flows for Borrower  and its  consolidated  Subsidiaries  for such fiscal
year,  setting  forth  in each  case in  comparative  form the  figures  for the
previous year,  with the opinion  thereon of 



                                       37

<PAGE>



Ernst & Young and Coopers & Lybrand and (c) its  consolidated  balance sheet and
the  consolidated  balance  sheets  of its  consolidated  Subsidiaries  for  the
quarterly  fiscal  period  of  Borrower  ended  March 31,  1998 and the  related
consolidated  statements  of income and  retained  earning and of cash flows for
Borrower and its  consolidated  Subsidiaries  for such quarterly fiscal periods,
setting  forth in each case in  comparative  form the figures  for the  previous
year. All such financial statements are complete and correct and fairly present,
in all material respects,  the consolidated  financial condition of Borrower and
its  Subsidiaries  and the  consolidated  results of their operations as at such
dates and for such fiscal  periods,  all in  accordance  with GAAP  applied on a
consistent  basis.  Since March 31,  1998,  there has been no  material  adverse
change in the  consolidated  business,  operations  or  financial  condition  of
Borrower and its consolidated  Subsidiaries taken as a whole from that set forth
in said financial statements.

              6.04.  Litigation.  There  are no  actions,  suits,  arbitrations,
investigations  or  proceedings  pending  or,  to the  best  of  its  knowledge,
threatened  against  Borrower or any of its Subsidiaries or affecting any of the
Property  of any of them  before  any  Governmental  Authority  (i) as to  which
individually or in the aggregate there is a reasonable  likelihood of an adverse
decision  which could be reasonably  likely to have a Material  Adverse  Effect,
(ii) which questions the validity or enforceability of any of the Loan Documents
or any  action  to be taken in  connection  with the  transactions  contemplated
hereby or (iii)  makes a claim or claims in an  aggregate  amount  greater  than
$1,000,000.00.

              6.05.  No Breach.  Neither (a) the  execution  and delivery of the
Loan Documents nor (b) the consummation of the transactions therein contemplated
in compliance with the terms and provisions thereof will conflict with or result
in a breach of the trust  agreement of Borrower,  or any applicable law, rule or
regulation,  or any  order,  writ,  injunction  or  decree  of any  Governmental
Authority,  or any Servicing Agreement or other material agreement or instrument
to which Borrower or any of its  Subsidiaries is a party or by which any of them
or any of  their  Property  is  bound or to  which  any of them is  subject,  or
constitute a default under any such  material  agreement or instrument or result
in the creation or imposition of any Lien (except for the Liens created pursuant
to this Loan Agreement) upon any Property of Borrower or any of its Subsidiaries
pursuant to the terms of any such agreement or instrument.

              6.06. Approvals. No authorizations,  approvals or consents of, and
no filings or registrations  with, any Governmental  Authority or any securities
exchange are necessary for the execution, delivery or performance by Borrower of
the Loan  Documents or for the  legality,  validity or  enforceability  thereof,
except for filings and  recordings in respect of the Liens  created  pursuant to
this Loan Agreement.

              6.07.  Margin   Regulations.   Neither  the  making  of  any  Loan
hereunder,  nor the use of the proceeds thereof, will violate or be inconsistent
with any provisions of Regulation T, U or X.

              6.08. Taxes.  Borrower and its Subsidiaries have filed all Federal
income tax returns and all other  material  tax returns  that are required to be
filed by them and have paid all taxes due  pursuant to such  returns or pursuant
to any  assessment  received  by any of them,  except  for any such taxes as are
being  appropriately   contested  in  good  faith  by  appropriate   proceedings
diligently  conducted  and with  respect to which  adequate  reserves  have been
provided.  The  charges,  accruals and reserves on the books of Borrower and its
Subsidiaries  in respect of taxes and other  governmental  charges  are,  in the
opinion of Borrower, adequate.



                                       38

<PAGE>



              6.09.  Investment  Company  Act.  Neither  Borrower nor any of its
Subsidiaries  is  an  "investment  company",  or a  company  "controlled"  by an
"investment  company" within the meaning of the Investment  Company Act of 1940,
as amended.

              6.10. Collateral; Collateral Security

              (a) Borrower has not assigned,  pledged,  or otherwise conveyed or
encumbered  any  Collateral to any other Person,  and  immediately  prior to the
pledge of such  Collateral  to Lender,  unless  otherwise  approved by Lender in
writing,  Borrower  was the  sole  owner  of such  Collateral  and had  good and
marketable  title thereto,  free and clear of all Liens, in each case except for
Liens to be released  simultaneously  with the Liens  granted in favor of Lender
hereunder.  No Collateral  pledged to Lender  hereunder was acquired by Borrower
from an Affiliate of Borrower unless otherwise approved by Lender in writing.

              (b) The  provisions of this Loan Agreement are effective to create
in favor of Lender a valid security interest in all right, title and interest of
Borrower in, to and under the Collateral.

              (c) (i)  Upon (x)  receipt  by  Custodian  of each  Mortgage  Note
evidencing a Mortgage Loan,  endorsed in blank by a duly  authorized  officer of
Borrower,  (y) the  recordation of the mortgage to Lender securing such Mortgage
Loan and an assignment of such mortgage and (z) the filing of a UCC-1  financing
statement with respect to such assignment of mortgage, Lender shall have a fully
perfected first priority security interest therein,  subject only to prior liens
and encumbrances permitted by Lender, in the Mortgage Loan evidenced thereby and
in Borrower's interest in the related Property.

              (ii) Upon (x)  receipt  by  Custodian  of each note  evidencing  a
Mezzanine Loan, endorsed in blank by a duly authorized officer of Borrower,  (y)
the  delivery  of a duly  executed  pledge to  Borrower  of  direct or  indirect
beneficial  interests  in the  underlying  property  and  the  filing  of  UCC-1
financing statements with respect thereto, and (z) the delivery by Borrower of a
duly  executed  pledge  of such  pledged  interests  and  the  filing  of  UCC-3
assignment statements with respect thereto,  Lender shall have a fully perfected
first  priority  security  interest  therein,  in the Mezzanine  Loan  evidenced
thereby, and in Borrower's interest in the related Property.

              (iii) As to all other Collateral, upon receipt by Custodian of all
documents  set forth in Lender's  notice to Borrower and  Custodian  pursuant to
Section  2.03(b)(x)  hereof,  Lender shall have a fully perfected first priority
security interest therein and in Borrower's interest in the related Property.

              (d) Upon the filing of financing  statements  on Form UCC-1 naming
Lender  as  "Secured  Party"  and  Borrower  as  "Debtor",  and  describing  the
Collateral,  in the  jurisdictions  and  recording  offices  for which  security
interests  may be perfected  in the  Collateral  by the filing of UCC  financing
statements,  the security  interests  granted  hereunder in the Collateral  will
constitute fully perfected first priority  security  interests under the Uniform
Commercial  Code in all right,  title and  interest of Borrower in, to and under
such  Collateral  which can be perfected by filing under the Uniform  Commercial
Code.



                                       39

<PAGE>



              6.11. Chief Executive Office. Borrower's chief executive office on
the Effective  Date is located at 605 Third Avenue,  26th Floor,  New York,  New
York 10016.

              6.12.  Location of Books and Records.  The location where Borrower
keeps its books and records,  including all computer tapes and records  relating
to the Collateral is its chief executive office.

              6.13.  True and Complete  Disclosure.  The  information,  reports,
financial  statements,  exhibits  and  schedules  furnished  in writing by or on
behalf of Borrower to Lender in connection with the negotiation,  preparation or
delivery of this Loan Agreement and the other Loan Documents or included  herein
or therein or delivered  pursuant hereto or thereto,  when taken as a whole, (x)
do not  contain  any untrue  statement  of  material  fact and (y)  contain  all
statements of material fact necessary to make the statements  herein or therein,
in light of the  circumstances  under  which they were made,  true.  All written
information  furnished  after the date  hereof by or on  behalf of  Borrower  to
Lender in connection  with this Loan  Agreement and the other Loan Documents and
the transactions  contemplated  hereby and thereby,  will be true,  complete and
accurate in every material  respect,  or (in the case of  projections)  based on
reasonable  estimates,  on the date as of which  such  information  is stated or
certified.  There is no fact  known to the  actual  knowledge  of a  Responsible
Officer of Borrower,  after due inquiry,  that could  reasonably  be expected to
have a Material Adverse Effect that has not been disclosed  herein, in the other
Loan  Documents  or  in  a  report,  financial  statement,   exhibit,  schedule,
disclosure  letter or other  writing  furnished to Lender for use in  connection
with the transactions contemplated hereby or thereby.

              6.14.  Tangible Net Worth. On the Effective Date, the Tangible Net
Worth is not less than the sum of (i) $100,000,000  plus (ii) an amount equal to
75% of the aggregate of positive changes in Borrower's book equity,  since March
31, 1998 (without deduction for quarterly losses).

              6.15.  ERISA. Each Plan to which Borrower or its Subsidiaries make
direct  contributions,  and, to the  knowledge of Borrower,  each other Plan and
each Multiemployer Plan, is in compliance in all material respects with, and has
been  administered in all material  respects in compliance  with, the applicable
provisions  of ERISA,  the Code and any other  Federal or State law. No event or
condition has occurred and is continuing as to which  Borrower would be under an
obligation to furnish a report to Lender under Section 7.01(d) hereof assuming a
request therefor has been made by Lender.

              Section 7.  Covenants of Borrower.  Borrower  covenants and agrees
with Lender that, so long as any Loan is  outstanding  and until payment in full
of all Secured Obligations:

              7.01.  Financial  Statements,  Reports,  etc.  Borrower  agrees to
promptly deliver to Lender all publicly filed financial  information when and to
the extent same is available to the general  public.  In addition to such public
financial  information,  Borrower  shall also  provide the  following  financial
information:

              (a) the Monthly Statement;

              (b) within forty-five (45) days following the end of each quarter,
a status  



                                       40

<PAGE>



report with respect to such quarter which  describes the cumulative  sources and
uses of the funds for the immediately  preceding  calendar quarter on each asset
pledged  under this Loan  Agreement and a detailed  report in a form  reasonably
satisfactory to Lender;

              (c) within forty-five (45) days following the end of each quarter,
a  certificate  from a  Responsible  Officer of Borrower  in form and  substance
reasonably satisfactory to Lender that there has been no Event of Default and no
Material Adverse Effect;

              (d) within fifteen (15) Business Days after Lender's request, such
further  information  with respect to the  operation of any real  property,  the
Collateral,  the  financial  affairs of Borrower and any Plan and  Multiemployer
Plan as may be requested by Lender,  including all business plans prepared by or
for Borrower; provided, however, that with respect to information not previously
known to, or in the possession of, Borrower relating to any Multiemployer  Plan,
Borrower  shall only be required to provide such  information as may be obtained
through good faith efforts;

              (e) upon Lender's request, a copy of any financial or other report
Borrower  shall receive from any  underlying  obligor with respect to an item of
Collateral within fifteen (15) days after Borrower's receipt thereof; and

              (f) such other reports as Lender shall reasonably require.

              7.02. Litigation.  Borrower will promptly, and in any event within
10 days after service of process on any of the following,  give to Lender notice
of all  litigation,  actions  suits,  arbitrations,  investigations  (including,
without  limitation,  any of the foregoing  which are pending or  threatened) or
other  legal  or  arbitrable  proceedings  affecting  Borrower  or  any  of  its
Subsidiaries  or  affecting  any of the  Property  of any  of  them  before  any
Governmental  Authority  that  (i)  questions  or  challenges  the  validity  or
enforceability  of any of the  Loan  Documents  or any  action  to be  taken  in
connection  with the  transactions  contemplated  hereby,  (ii) makes a claim or
claims in an  aggregate  amount  greater  than  $1,000,000.00,  or (iii)  which,
individually or in the aggregate,  if adversely  determined  could reasonably be
likely to have a Material Adverse Effect.

              7.03. Existence, etc. Borrower will:

              (a)  preserve  and  maintain  its legal  existence  and all of its
material rights,  privileges,  licenses and franchises (provided that nothing in
this Section  7.03(a) shall prohibit any transaction  expressly  permitted under
Section 7.04 hereof);

              (b) comply with the  requirements of all applicable  laws,  rules,
regulations  and  orders  of  Governmental   Authorities   (including,   without
limitation,  all environmental laws) if failure to comply with such requirements
would be reasonably  likely (either  individually or in the aggregate) to have a
Material  Adverse Effect on its Property,  business or financial  condition,  or
prospects;

              (c) keep adequate records and books of account,  in which complete
entries will be made in accordance with GAAP consistently applied;

              (d) not move its chief executive  office from the address referred
to in Section 6.11 unless it shall have  provided  Lender 10 days' prior written
notice of such change;



                                       41

<PAGE>



              (e) pay and  discharge  all taxes,  assessments  and  governmental
charges  or levies  imposed  on it or on its  income or profits or on any of its
Property prior to the date on which  penalties  attach  thereto,  except for any
such tax, assessment,  charge or levy the payment of which is being contested in
good faith and by proper  proceedings  and against which  adequate  reserves are
being maintained; and

              (f) permit  representatives  of  Lender,  during  normal  business
hours, to examine, copy and make extracts from its books and records, to inspect
any of its  Properties,  and to  discuss  its  business  and  affairs  with  its
officers, all to the extent reasonably requested by Lender.

              7.04. Prohibition of Fundamental Changes. Borrower shall not enter
into any transaction of merger or consolidation  or amalgamation,  or liquidate,
wind  up  or  dissolve  itself  (or  suffer  any  liquidation,   winding  up  or
dissolution)  or sell all or  substantially  all of its assets;  provided,  that
Borrower  may  enter  into a merger or  consolidation  if (a) the  surviving  or
resulting entity shall be a corporation or partnership  organized under the laws
of the United  States or any state  thereof;  (b) such  entity  shall  expressly
assume by written  agreement,  in form and substance  satisfactory  to Lender in
Lender's  sole  discretion,  the  performance  of all of  Borrower's  duties and
obligations under this Loan Agreement,  the Note and the Loan Documents; and (c)
such entity shall be at least as  creditworthy  as Borrower,  as  determined  by
Lender in Lender's sole and absolute discretion; and, provided, further, that if
after giving effect thereto,  no Default would exist hereunder.  Notwithstanding
the foregoing,  Borrower shall not enter into or be subject to any  transaction,
and no direct or indirect  change in the ownership  structure of Borrower  shall
occur (whether or not within Borrower's  control),  if as a result thereof:  (a)
any of Craig M.  Hatkoff,  John R. Klopp and Samuel Zell would no longer  retain
his  respective  present or comparable or more senior offices (Vice Chairman and
Chairman of the Executive Committee;  Chief Executive Officer and Vice Chairman;
and Chairman of the Board,  respectively) and directorships,  or (b) in Lender's
judgment, such individuals would no longer collectively retain effective control
of Borrower's business and operations.

              7.05.  Borrowing  Base  Deficiency.  If at any time there exists a
Borrowing Base  Deficiency,  Borrower shall cure same in accordance with Section
2.04 hereof.

              7.06. Notices. Borrower shall give notice to Lender:

              (a) promptly upon receipt of notice or knowledge of the occurrence
of any Default or Event of Default;

              (b) with respect to any  Collateral  pledged to Lender  hereunder,
immediately  upon  receipt of any  principal  payment  (in full or  partial)  or
payment in respect of an Equity Interest;

              (c) with respect to any  Collateral  pledged to Lender  hereunder,
immediately upon receipt of notice or knowledge that the underlying Property has
been damaged by waste,  fire,  earthquake or earth movement,  windstorm,  flood,
tornado or other casualty,  or otherwise  damaged so as to affect  adversely the
Asset Value of such pledged Collateral;

              (d)  promptly  upon  receipt  of  notice or  knowledge  of (i) any
default  related 



                                       42

<PAGE>



to any Collateral unless otherwise  specifically  approved by Lender in writing,
(ii) any Lien or security interest (other than security interests created hereby
or by the other  Loan  Documents)  on,  or claim  asserted  against,  any of the
Collateral,  (iii) any event or change in circumstances  has or could reasonably
be expected to have an adverse affect on the Collateral  Value of the Collateral
for a Loan or (iv) any event or change in  circumstances  which could reasonably
be expected to have a Material Adverse Effect;

              (e) with  respect  to any item of  Collateral  pledged  to  Lender
hereunder,   promptly  upon  entering  into  a  modification  of  any  documents
pertaining to such item of Collateral which would have a material adverse effect
on such item of Collateral; and

              (f) with respect to any  Collateral  pledged to Lender  hereunder,
immediately  upon the  acquisition  or receipt by Borrower or any  Affiliate  of
Borrower  of any  interest  of any  kind in  respect  of such  Collateral  which
interest has not been pledged to Lender as Collateral under this Loan Agreement.

              Each notice  pursuant to this Section  shall be  accompanied  by a
statement of a  Responsible  Officer of Borrower  setting  forth  details of the
occurrence  referred to therein and stating  what action  Borrower  has taken or
proposes to take with respect thereto.

              7.07.  Reports.  Borrower  shall  provide  Lender with a quarterly
report,  which report shall include,  among other items, a summary of Borrower's
delinquency  and loss  experience  with  respect to any  Collateral  serviced by
Borrower,  any  Servicer  or any  designee of either,  plus any such  additional
reports as Lender may  reasonably  request  with  respect to  Borrower's  or any
Servicer's servicing portfolio or pending originations of Collateral.

              7.08.  Transactions with Affiliates.  Borrower will not, except as
approved by Lender in writing, enter into any transaction in any manner relating
to any item of Collateral hereunder,  including without limitation any purchase,
sale,  lease or exchange of property or the  rendering of any service,  with any
Affiliate;  provided,  however,  that Lender may  consider for approval any such
transaction which is (a) otherwise  permitted under this Loan Agreement,  (b) in
the ordinary  course of  Borrower's  business  and (c) upon fair and  reasonable
terms no less  favorable to Borrower than it would obtain in a comparable  arm's
length  transaction  with a Person which is not an Affiliate,  or make a payment
under such transactions that is not otherwise  permitted by this Section 7.08 to
any Affiliate.  In no event shall Borrower pledge to Lender  hereunder any items
of Collateral acquired by Borrower from an Affiliate of Borrower.

              7.09.  Foreclosure or Other Remediation by Borrower.  Borrower may
propose,  and Lender will  consider but shall be under no obligation to approve,
strategies  for the  foreclosure  or other  realization  upon the  security  for
underlying loans held by Borrower relating to items of Collateral hereunder.

              7.10.  Limitation on Liens.  Borrower  will defend the  Collateral
against,  and will take such other action as is  necessary to remove,  any Lien,
security  interest  or claim on or to the  Collateral,  other than the  security
interests  created,  or  otherwise  specifically  permitted in writing by Lender
under this Loan  Agreement,  and  Borrower  will  defend  the  right,  title and
interest  of  Lender's  in and to any of the  Collateral  against the claims and
demands of all  persons  whomsoever.  Borrower  may  request  from time to time,
subject  to  Lender's   approval  in  Lender's  sole   determination,   to  sell
participation  interests in its  interests in items of  Collateral,  the sale of



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<PAGE>



which participation  interests shall be arm's length transactions and subject to
such terms and conditions as Lender in its sole discretion shall require.

              7.11. Limitation on Distributions. After the occurrence and during
the continuation of any Event of Default, Borrower shall not make any payment on
account of, or set apart assets for, a sinking or other  analogous  fund for the
purchase, redemption,  defeasance, retirement or other acquisition of any equity
or partnership interest of Borrower,  whether now or hereafter  outstanding,  or
make any other  distribution in respect thereof,  either directly or indirectly,
whether in cash or property or in obligations of Borrower.

              7.12. Maintenance of Tangible Net Worth. Borrower shall not permit
Tangible Net Worth at any time to be less than the sum of (i) $100,000,000  plus
(ii) an amount equal to 75% of the  aggregate of positive  changes in Borrower's
book equity since March 31, 1998.

              7.13.  Maintenance of Ratio of Earnings  Before  Interest,  Taxes,
Depreciation  and  Amortization  to Interest and Preferred  Dividends.  Borrower
shall not permit the ratio of (a) earnings before interest,  taxes, depreciation
and  amortization  to (b) the sum of (i)  interest  expense  and (ii)  preferred
dividends  (specifically excluding any convertible trust preferred dividends) to
be less than 1.20:1.

              7.14.  Maintenance of Ratio of Total  Indebtedness to Tangible Net
Worth. Borrower shall not permit the ratio of Total Indebtedness to Tangible Net
Worth at any time to be  greater  than 5:1.  Lender  may  consider  waiving  the
foregoing  requirement  under  certain  circumstances  if requested by Borrower;
however, Lender shall be under no obligation to do so.

              7.15.  Servicer;  Servicing Tape. Borrower shall provide to Lender
on the fifth  Business  Day of each month a computer  readable  file  containing
servicing  information,  including without  limitation those fields specified by
Lender from time to time, on a  loan-by-loan  basis and in the  aggregate,  with
respect to the Mortgage  Loans,  Mezzanine Loans and Equity  Interests  serviced
hereunder by Borrower or any Servicer.  Borrower  shall not cause any Collateral
to be  serviced  by any  Servicer  other than a Servicer  expressly  approved in
writing by Lender.

              7.16.  Remittance  of  Prepayments.  Borrower  shall  remit,  with
sufficient detail to enable Lender to appropriately identify the Loan, or Loans,
to which any amount  remitted  applies,  to Lender on each Thursday (or the next
Business Day if such Thursday is not a Business  Day) all principal  prepayments
that  Borrower has received  during the previous  week in an amount equal to the
sum of the  Asset-Specific  Loan  Balances  being  prepaid,  together  with  all
interest due thereon  through the date of such  remittance,  any and all charges
due with  respect to such Loans and any and all costs and  expenses  incurred by
Lender (as  provided in this Loan  Agreement)  in  connection  with such Loan or
Loans and the prepayment thereof.

              Section 8. Event of Default.  Each of the  following  events shall
constitute an event of default (an "Event of Default") hereunder:

              (a) Borrower  shall  default in the payment of any principal of or
interest on any Loan when due (whether at stated maturity,  upon acceleration or
at mandatory or optional prepayment); or



                                       44

<PAGE>



              (b) Borrower  shall  default in the payment of any principal of or
interest  on any MS  Indebtedness  when due  (whether at stated  maturity,  upon
acceleration or at mandatory or optional prepayment); or

              (c)  Borrower  shall  default in the  payment of any other  amount
payable by it hereunder or under any other Loan Document after  notification  by
Lender of such default,  and such default shall have  continued  unremedied  for
seven (7) Business Days; or

              (d) any  representation,  warranty or certification made or deemed
made  herein,  or in any other Loan  Document  by  Borrower  or any  certificate
furnished to Lender pursuant to the provisions  hereof or thereof shall prove to
have been false or  misleading  in any  material  respect as of the time made or
furnished (other than the  representations and warranties set forth in Section 6
hereof  which  shall be  considered  solely for the  purpose of Section  2.04(b)
hereof;  unless Borrower shall have made any such representations and warranties
with knowledge that they were materially  false or misleading at the time made);
or

              (e) Borrower shall fail to comply with the requirements of Section
7.03(a), Section 7.04, Section 7.05, Section 7.06, or Sections 7.08 through 7.16
hereof;  or Borrower  shall  otherwise fail to comply with the  requirements  of
Section 7.03 hereof and such default shall  continue  unremedied for a period of
ten (10) Business  Days; or Borrower  shall fail to observe or perform any other
covenant  or  agreement  contained  in this Loan  Agreement  or any  other  Loan
Document and such failure to observe or perform shall continue  unremedied for a
period of ten (10) Business Days; or

              (f) a final  judgment  or  judgments  for the  payment of money in
excess of  $5,000,000.00  in the aggregate shall be rendered against Borrower or
any of its Subsidiaries by one or more courts, administrative tribunals or other
bodies having  jurisdiction and the same shall not be satisfied,  discharged (or
provision  shall  not be  made  for  such  discharge)  or  bonded,  or a stay of
execution thereof shall not be procured, within sixty (60) days from the date of
entry thereof, and Borrower or any such Subsidiary shall not, within said period
of sixty (60) days,  or such longer  period  during which  execution of the same
shall  have been  stayed or bonded,  appeal  therefrom  and cause the  execution
thereof to be stayed during such appeal; or

              (g) Borrower shall admit in writing its inability to pay its debts
as such debts become due; or

              (h)  Borrower  or any of its  Subsidiaries  shall (i) apply for or
consent to the  appointment  of, or the  taking of  possession  by, a  receiver,
custodian,  trustee, examiner or liquidator or the like of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of its creditors,  (iii)  commence a voluntary  case under the Bankruptcy  Code,
(iv) file a petition  seeking to take  advantage  of any other law  relating  to
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or readjustment of debts, (v) fail to controvert in a
timely and  appropriate  manner,  or acquiesce in writing to, any petition filed
against it in an  involuntary  case under the  Bankruptcy  Code or (vi) take any
corporate or other action for the purpose of effecting any of the foregoing; or

              (i)  a  proceeding  or  case  shall  be  commenced,   without  the
application or consent of Borrower or any of its  Subsidiaries,  in any court of
competent   jurisdiction,   seeking   (i)   its   reorganization,   liquidation,
dissolution,  arrangement or winding-up,  or the  composition or 



                                       45

<PAGE>



readjustment of its debts,  (ii) the appointment of, or the taking of possession
by, a receiver, custodian, trustee, examiner, liquidator or the like of Borrower
or any such  Subsidiary or of all or any  substantial  part of its property,  or
(iii) similar relief in respect of Borrower or any such Subsidiary under any law
relating to bankruptcy, insolvency,  reorganization,  liquidation,  dissolution,
arrangement  or  winding-up,  or  composition  or adjustment of debts,  and such
proceeding or case shall continue  undismissed,  or an order, judgment or decree
approving  or  ordering  any of the  foregoing  shall be  entered  and  continue
unstayed and in effect, for a period of sixty (60) or more days; or an order for
relief  against  Borrower  or  any  such  Subsidiary  shall  be  entered  in  an
involuntary case under the Bankruptcy Code; or

              (j)  the  Custodial  Agreement  or any  Loan  Document  shall  for
whatever  reason be terminated  or cease to be in full force and effect,  or the
enforceability thereof shall be contested by Borrower; or

              (k)  Borrower  shall  grant,  or suffer to exist,  any Lien on any
Collateral  except  the Liens  contemplated  hereby;  or the Liens  contemplated
hereby shall cease to be first  priority  perfected  Liens on the  Collateral in
favor of Lender or shall be Liens in favor of any Person other than Lender; or

              (l) Borrower or any of Borrower's  Affiliates  shall be in default
under any note, indenture, loan agreement, guaranty, swap agreement or any other
contract to which it is a party (other than MS Indebtedness),  which default (i)
involves  the  failure  to  pay  a  matured  obligation,  or  (ii)  permits  the
acceleration of the maturity of obligations by any other party to or beneficiary
of such note,  indenture,  loan  agreement,  guaranty,  swap  agreement or other
contract,  in  any  such  case  in  which  the  amount  of  such  obligation  or
obligations, in the aggregate, exceed $10,000,000.00; or

              (m) any  materially  adverse  change  in the  Property,  business,
financial  condition or prospects of Borrower or any of its  Subsidiaries  shall
occur, in each case as determined by Lender in its sole discretion, or any other
condition shall exist which, in Lender's sole discretion, constitutes a material
impairment  of  Borrower's  ability to perform its  obligations  under this Loan
Agreement, the Note or any other Loan Document.

              Section 9. Remedies Upon Default

              (a) Upon the  occurrence  of one or more  Events of Default  other
than those referred to in Section 8(g) or (h),  Lender may  immediately  declare
the  principal  amount  of the  Loans  then  outstanding  under  the  Note to be
immediately  due and payable,  together  with all interest  thereon and fees and
expenses accruing under this Loan Agreement.  Upon the occurrence of an Event of
Default referred to in Sections 8(g) or (h), such amounts shall  immediately and
automatically  become due and payable  without any further action by any Person.
Upon  such  declaration  or  such  automatic  acceleration,   the  balance  then
outstanding  on the Note  shall  become  immediately  due and  payable,  without
presentment,  demand, protest or other formalities of any kind, all of which are
hereby expressly waived by Borrower.

              (b) Upon the  occurrence of one or more Events of Default,  Lender
shall have the right to obtain physical  possession of the Servicing Records and
all  other  files of  Borrower  relating  to the  Collateral  and all  documents
relating  to the  Collateral  which  are then or may  thereafter  come in to the
possession of Borrower or any third party acting for Borrower and 




                                       46

<PAGE>



Borrower  shall  deliver to Lender such  assignments  as Lender  shall  request.
Lender shall be entitled to specific  performance  of all agreements of Borrower
contained in this Loan Agreement.

              (c) Upon the occurrence of an Event of Default,  without  limiting
any other  rights or remedies of Lender,  Lender shall have the right to set off
and apply any and all deposits (general or special, time or demand,  provisional
or final) at any time held by or for account of Lender or Lender's Affiliates to
any indebtedness at any time owing to Lender to the credit or for the account of
Borrower  against any and all of the  Indebtedness of Borrower,  irrespective of
whether Lender shall have made any demand under this Loan  Agreement,  the Note,
any other Security  Document or any other document  executed in connection  with
any other MS Indebtedness.

              Section  10. No Duty of  Lender.  The powers  conferred  on Lender
hereunder are solely to protect  Lender's  interests in the Collateral and shall
not  impose  any duty  upon it to  exercise  any such  powers.  Lender  shall be
accountable  only for  amounts  that it  actually  receives  as a result  of the
exercise  of such  powers,  and neither it nor any of its  officers,  directors,
employees or agents shall be  responsible  to Borrower for any act or failure to
act  hereunder,  except  for  its or  their  own  gross  negligence  or  willful
misconduct.

              Section 11. Miscellaneous

              11.01. Waiver. No failure on the part of Lender to exercise and no
delay in exercising,  and no course of dealing with respect to, any right, power
or privilege  under any Loan  Document  shall operate as a waiver  thereof,  nor
shall any single or partial exercise of any right,  power or privilege under any
Loan Document  preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

              11.02.  Notices.  Except as otherwise  expressly permitted by this
Loan  Agreement,  all notices,  requests and other  communications  provided for
herein and under the  Custodial  Agreement  (including  without  limitation  any
modifications  of, or waivers,  requests or consents under, this Loan Agreement)
shall be given or made in  writing  (including  without  limitation  by telex or
telecopy)  delivered  to the  intended  recipient  at the  "Address for Notices"
specified below its name on the signature pages hereof or thereof; or, as to any
party,  at such other  address as shall be designated by such party in a written
notice to each other party.  Except as otherwise provided in this Loan Agreement
and except for notices given under  Section 2 (which shall be effective  only on
receipt),  all such communications  shall be deemed to have been duly given when
transmitted  by telex or telecopy or  personally  delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid.

              11.03. Indemnification and Expenses

              (a) Borrower  agrees to hold Lender  harmless  from and  indemnify
Lender against all liabilities,  losses, damages,  judgments, costs and expenses
of any kind which may be imposed  on,  incurred by or  asserted  against  Lender
(collectively,  the "Costs")  relating to or arising out of this Loan Agreement,
the Note,  any other Loan  Document or any  transaction  contemplated  hereby or
thereby,  or any  amendment,  supplement  or  modification  of, or any waiver or
consent under or in respect of, this Loan  Agreement,  the Note,  any other Loan




                                       47

<PAGE>



Document or any transaction  contemplated hereby or thereby, that, in each case,
results  from  anything  other  than  Lender's   gross   negligence  or  willful
misconduct. Without limiting the generality of the foregoing, Borrower agrees to
hold Lender harmless from and indemnify Lender against all Costs with respect to
all  Collateral  Loans and Equity  Interests  relating  to or arising out of any
violation or alleged violation of any  environmental  law, rule or regulation or
any consumer credit laws,  including without limitation the Truth in Lending Act
and/or the Real Estate  Settlement  Procedures Act, that, in each case,  results
from anything other than Lender's gross negligence or willful misconduct. In any
suit,  proceeding or action brought by Lender in connection  with any Collateral
for any sum owing  thereunder,  or to enforce any  provisions of any  Collateral
Documents,  Borrower  will save,  indemnify  and hold Lender  harmless  from and
against all expense, loss or damage suffered by reason of any defense,  set-off,
counterclaim,  recoupment  or reduction or liability  whatsoever  of the account
debtor  or  obligor  thereunder,  arising  out of a breach  by  Borrower  of any
obligation  thereunder or arising out of any other  agreement,  indebtedness  or
liability at any time owing to or in favor of such account  debtor or obligor or
its successors  from Borrower.  Borrower also agrees to reimburse  Lender as and
when billed by Lender for all Lender's reasonable costs and expenses incurred in
connection  with the  enforcement or the  preservation  of Lender's rights under
this Loan  Agreement,  the Note,  any other  Loan  Document  or any  transaction
contemplated hereby or thereby, including without limitation the reasonable fees
and   disbursements  of  its  counsel.   Borrower  hereby   acknowledges   that,
notwithstanding  the fact  that  the  Note is  secured  by the  Collateral,  the
obligation of Borrower under the Note is a recourse obligation of Borrower.

              (b) Borrower agrees to pay as and when billed by Lender all of the
reasonable  out-of-pocket  costs and expenses  incurred by Lender in  connection
with  the  development,   preparation  and  execution  of,  and  any  amendment,
supplement or  modification  to, this Loan  Agreement,  the Note, any other Loan
Document or any other  documents  prepared in connection  herewith or therewith.
Borrower  agrees to pay as and when  billed by Lender  all of the  out-of-pocket
costs  and  expenses   incurred  in  connection   with  the   consummation   and
administration  of the transactions  contemplated  hereby and thereby  including
without  limitation (i) all the reasonable fees,  disbursements  and expenses of
counsel to Lender and (ii) all the due diligence, inspection, testing and review
costs and expenses incurred by Lender with respect to Collateral under this Loan
Agreement,  including,  but not limited to, those costs and expenses incurred by
Lender pursuant to Sections 11.03(a), 11.14 and 11.15 hereof.

              11.04. Amendments.  Except as otherwise expressly provided in this
Loan  Agreement,  any  provision  of this  Loan  Agreement  may be  modified  or
supplemented  only by an instrument in writing signed by Borrower and Lender and
any provision of this Loan Agreement may be waived by Lender.

              11.05.  Successors  and  Assigns.  This  Loan  Agreement  shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.

              11.06.  Survival.  The obligations of Borrower under Sections 3.03
and 11.03 hereof shall survive the repayment of the Loans and the termination of
this Loan  Agreement.  In addition,  each  representation  and warranty  made or
deemed to be made by a request for a borrowing,  herein or pursuant hereto shall
survive the making of such representation and warranty,  and Lender shall not be
deemed to have waived,  by reason of making any Loan, any Default that may arise
because any such  representation  or  warranty  shall have proved to be false 



                                       48

<PAGE>



or misleading,  notwithstanding  that Lender may have had notice or knowledge or
reason to believe that such  representation  or warranty was false or misleading
at the time such Loan was made.

              11.07.  Captions.  The table of contents  and captions and section
headings  appearing  herein are included solely for convenience of reference and
are not  intended to affect the  interpretation  of any  provision  of this Loan
Agreement.

              11.08.  Counterparts.  This Loan  Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same  instrument,  and any of the parties hereto may execute this Loan Agreement
by signing any such counterpart.

              11.09. Loan Agreement  Constitutes  Security Agreement;  Governing
Law. This Loan Agreement shall be governed by New York law without  reference to
choice of law doctrine,  and shall  constitute a security  agreement  within the
meaning of the Uniform Commercial Code.

              11.10.  SUBMISSION  TO  JURISDICTION;   WAIVERS.  BORROWER  HEREBY
IRREVOCABLY AND UNCONDITIONALLY:

              (A)  SUBMITS FOR ITSELF AND ITS  PROPERTY  IN ANY LEGAL  ACTION OR
PROCEEDING  RELATING  TO THIS  LOAN  AGREEMENT,  THE  NOTE  AND THE  OTHER  LOAN
DOCUMENTS,  OR FOR  RECOGNITION  AND  ENFORCEMENT  OF ANY  JUDGMENT  IN  RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK,  THE FEDERAL  COURTS OF THE UNITED  STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

              (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING  MAY BE BROUGHT IN
SUCH COURTS AND, TO THE EXTENT  PERMITTED BY LAW,  WAIVES ANY OBJECTION  THAT IT
MAY NOW OR HEREAFTER  HAVE TO THE VENUE OF ANY SUCH ACTION OR  PROCEEDING IN ANY
SUCH COURT OR THAT SUCH  ACTION OR  PROCEEDING  WAS  BROUGHT IN AN  INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

              (C)  AGREES  THAT  SERVICE  OF  PROCESS  IN  ANY  SUCH  ACTION  OR
PROCEEDING  MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY  SUBSTANTIALLY  SIMILAR  FORM OF  MAIL),  POSTAGE  PREPAID,  TO ITS
ADDRESS SET FORTH UNDER ITS  SIGNATURE  BELOW OR AT SUCH OTHER  ADDRESS OF WHICH
LENDER SHALL HAVE BEEN NOTIFIED; AND

              (D) AGREES THAT  NOTHING  HEREIN  SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION.

              11.11.  WAIVER OF JURY TRIAL.  EACH OF BORROWER AND LENDER  HEREBY
IRREVOCABLY  WAIVES,  TO THE FULLEST EXTENT 



                                       49

<PAGE>



PERMITTED  BY  APPLICABLE  LAW,  ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING  ARISING OUT OF OR RELATING  TO THIS LOAN  AGREEMENT,  ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

              11.12. Acknowledgments. Borrower hereby acknowledges that:

              (a) it has been advised by counsel in the  negotiation,  execution
and delivery of this Loan Agreement, the Note and the other Loan Documents;

              (b) Lender has no  fiduciary  relationship  to  Borrower,  and the
relationship  between Borrower and Lender is solely that of debtor and creditor;
and

              (c) no joint venture exists between Lender and Borrower.

              11.13.  Hypothecation  or Pledge of Loans.  Lender shall have free
and  unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude Lender from engaging in repurchase  transactions with the Collateral or
otherwise pledging, repledging, transferring,  hypothecating, or rehypothecating
the  Collateral  or pledging  or  otherwise  transferring  its rights to payment
hereunder  in respect of any Loan made  hereunder;  provided,  that no action by
Lender referred to in this sentence shall confer on any Person other than Lender
any right against  Borrower to require any prepayment  under Section 2.04 hereof
or any  right to  enforce  against  Borrower  any other  provision  of this Loan
Agreement,  but may grant to any Person  the right to require  Lender to enforce
any such  provisions.  Nothing  contained in this Loan Agreement  shall obligate
Lender to segregate any Collateral delivered to Lender by Borrower.

              11.14. Servicing.

              (a) Borrower  covenants to maintain or cause the  servicing of the
Collateral to be maintained  with respect to each type of Collateral  pledged to
Lender hereunder in conformity with accepted and prudent servicing  practices in
the industry for such same type of Collateral  and in a manner at least equal in
quality to the servicing Borrower provides for assets similar to such Collateral
which it owns.  In the event  that the  preceding  language  is  interpreted  as
constituting one or more servicing contracts, each such servicing contract shall
terminate  automatically upon the earliest of (i) an Event of Default,  (ii) the
date on which all the  Secured  Obligations  have been paid in full or (iii) the
transfer of servicing  approved by Borrower and Lender,  which Lender's  consent
shall not be  unreasonably  withheld.  Midland Loan Services,  L.P. shall be the
initial servicer.

              (b) If the  Collateral,  or any  portion  thereof,  is serviced by
Borrower,  (i)  Borrower  agrees that Lender is the  collateral  assignee of all
servicing  records,   including  but  not  limited  to  any  and  all  servicing
agreements,  files,  documents,  records,  data bases, computer tapes, copies of
computer tapes, proof of insurance  coverage,  insurance  policies,  appraisals,
other closing  documentation,  payment  history  records,  and any other records
relating to or  evidencing  the  servicing of such  Collateral  (the  "Servicing
Records"),  and (ii) Borrower grants Lender a security interest in all servicing
fees and rights relating to such Collateral and all Servicing  Records to secure
the  obligation of Borrower or its designee to service in  conformity  with this
Section and any other  obligation of Borrower to Lender.  Borrower  covenants to
safeguard such  



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<PAGE>


Servicing  Records  and to  deliver  them  promptly  to Lender  or its  designee
(including Custodian) at Lender's request.

              (c) If the Collateral,  or any portion  thereof,  is serviced by a
third party servicer (such third party servicer,  the "Servicer"),  Borrower (i)
shall  provide a copy of the  servicing  agreement to Lender,  which shall be in
form and substance  acceptable to Lender (the "Servicing  Agreement");  and (ii)
hereby  irrevocably  assigns to Lender and Lender's  successors  and assigns all
right,  title,  interest of Borrower in, to and under,  and the benefits of, any
Servicing  Agreement  with  respect to such  Collateral.  Any  successor  to the
Servicer  shall be  approved  in  writing  by Lender  prior to such  successor's
assumption of servicing obligations with respect to such Collateral.

              (d) Borrower  shall  provide to Lender a letter from  Borrower (if
Borrower is the  Servicer)  or the  Servicer,  as the case may be, to the effect
that upon the  occurrence  of an Event of  Default,  Lender  may  terminate  any
Servicing  Agreement  and  transfer  servicing  to its  designee,  at no cost or
expense to  Lender,  it being  agreed  that  Borrower  will pay any and all fees
required to terminate the Servicing  Agreement and to effectuate the transfer of
servicing to the designee of Lender.

              (e) After the Funding Date,  until the pledge of any Collateral is
relinquished  by  Custodian,  Borrower will have no right to modify or alter the
terms of any of the documents  pertaining to such  Collateral  and Borrower will
have no obligation  or right to repossess  such  Collateral or substitute  other
Collateral,  except as provided in the Custodial Agreement;  provided,  however,
that so long as no Default or Event of Default has occurred  and is  continuing,
Borrower may enter into such  modifications of the terms of such documents as do
not, as to any individual item of Collateral,  (i) result in a negative monetary
effect or (ii) constitute a material adverse effect.

              (f) In the  event  Borrower  or its  Affiliate  is  servicing  any
Collateral,   Borrower  shall  permit  Lender  to  inspect   Borrower's  or  its
Affiliate's  servicing  facilities,  as the  case  may be,  for the  purpose  of
satisfying  Lender that Borrower or its  Affiliate,  as the case may be, has the
ability to service such Collateral as provided in this Loan Agreement.

              (g)  Borrower  shall cause the  Servicer to provide a copy of each
report and notice sent to Borrower to be sent to Lender concurrently therewith.

              11.15.  Periodic Due Diligence Review.  Borrower acknowledges that
Lender has the right to perform continuing due diligence reviews with respect to
the Collateral,  for purposes of verifying  compliance with the representations,
warranties and specifications made hereunder,  or determining and re-determining
the Borrowing  Base under Section  2.04(a)  hereof,  or otherwise,  and Borrower
agrees  that  Lender,  at its  option,  has the  right at any time to  conduct a
partial  or  complete  due  diligence  review  on any  or all of the  Collateral
securing the Loans, including,  without limitation,  ordering new credit reports
and  Appraisals on the  applicable  Collateral  and otherwise  regenerating  the
information used to originate such Eligible Collateral.  Upon reasonable (but no
less  than one (1)  Business  Day)  prior  notice  to  Borrower,  Lender  or its
authorized  representatives  will be permitted  during normal  business hours to
examine,  inspect, and make copies and extracts of, the Collateral Files and any
and all documents,  records, agreements,  instruments or information relating to
such  Collateral  in the  possession  or under the  control of  Borrower  and/or
Custodian.  Borrower  also  shall  make  available  to  Lender  a  



                                       51

<PAGE>



knowledgeable  financial  or  accounting  officer for the  purpose of  answering
questions respecting the Collateral Files and the Collateral. Borrower agrees to
cooperate  with Lender and any third party  underwriter  designated by Lender in
connection  with such  underwriting,  including,  but not limited to,  providing
Lender and any third party  underwriter  with  access to any and all  documents,
records,  agreements,  instruments or information relating to such Collateral in
the possession, or under the control, of Borrower.  Borrower further agrees that
Borrower shall reimburse Lender for any and all out-of-pocket costs and expenses
incurred  by Lender in  connection  with  Lender's  activities  pursuant to this
Section 11.15.

              11.16.   Intent.  The  parties  recognize  that  each  Loan  is  a
"securities  contract" as that term is defined in Section 741 of Title 11 of the
United States Code, as amended. 

              11.17. Change of Borrower's State of Formation.  If Borrower shall
change the State under whose laws Borrower  shall be organized,  Borrower  shall
promptly provide Lender with a copy of its new Declaration of Trust, Articles of
Incorporation or similar document,  certified by the Secretary of State or other
appropriate  official  of  Borrower's  new State of  formation,  if  applicable,
together with such opinions of counsel  regarding such change as Lender,  in its
sole discretion, shall require.

              11.18.  Trustee  Exculpation.  The  parties  agree that except for
fraudulent acts, willful  misrepresentation  or gross negligence,  no trustee of
Borrower shall have personal liability hereunder to Lender and any obligation of
Borrower  hereunder  to Lender  shall be  satisfied  solely  from the  assets of
Borrower.

                            [SIGNATURE PAGE FOLLOWS]



                                       52

<PAGE>



              WITNESS  WHEREOF,   the  parties  hereto  have  caused  this  Loan
Agreement to be duly  executed and  delivered as of the day and year first above
written.



                                      BORROWER

                                      CAPITAL TRUST

                                      By:/s/ Edward Shugrue
                                         ---------------------------------
                                      Name:  Edward L. Shugrue III
                                      Title: Chief Financial Officer

                                      Address for Notices:

                                      605 Third Avenue, 26th Floor
                                      New York, New York  10016
                                      Attention: Edward L. Shugrue, III
                                      Peter S. Ginsberg, Esq.
                                      John Felleter
                                      Telecopier No.: (212) 655-0044
                                      Telephone No:   (212) 655-0225

                                      With a copy to:
                                      Battle Fowler LLP
                                      75 East 55th Street
                                      New York, New York 10022
                                      Attention: John A. Cahill, Esq.
                                      Telecopier No.: (212) 856-7801
                                      Telephone No.:  (212) 856-6930


                                      LENDER

                                      MORGAN STANLEY MORTGAGE
                                      CAPITAL INC.

                                      By:/s/ Christian B. Malone
                                         ---------------------------------
                                      Name:  Christian B. Malone
                                      Title: Vice President

                                      Address for Notices:

                                      1585 Broadway
                                      New York, New York  10036
                                      Attention:  Whole Loan Operations
                                      Mortgage-Backed Securities Department,
                                      Fixed-Income Division
                                      Telecopier No.: 212-761-0710
                                      Telephone No.:  212-761-2063



                                       53

<PAGE>



                                      With a copy to:
                                      Rogers & Wells LLP
                                      200 Park Avenue
                                      New York, New York 10166-0153
                                      Attention: Frederick B. Utley, III, Esq.
                                      Telecopier No.: (212) 878-8375
                                      Telephone No.:  (212) 878-8356



                                       54

<PAGE>



                                   SCHEDULE 1

                        FILING JURISDICTIONS AND OFFICES
                     [TO BE PROVIDED BY COUNSEL TO BORROWER]



                                     S-1-55

<PAGE>



                                   SCHEDULE 2

                               APPROVED APPRAISERS




1.       KTR Appraisal Services

2.       Cushman & Wakefield, Inc.

3.       Landauer Real Estate Counselors

4.       CB Commercial

5.       The Weitzman Group

6.       Greenwich Group

7.       Arthur Anderson

8.       Joseph Blake



                                     S-2-56

<PAGE>



                                   SCHEDULE 3

                               APPROVED ENGINEERS

1.       EMG

2.       KTR Realty Services

3.       Merritt & Harris, Inc.

4.       C.A. Rich, Inc.

5.       IVI

6.       Dames & Moore

7.       Law

8.       Echland

9.       EM&CA

10.      Acqua Terra

11.      ATC (BCM Engineers)

12.      Horn Chandler & Thomas



                                     S-3-57

<PAGE>



                                   SCHEDULE 4

                       APPROVED ENVIRONMENTAL CONSULTANTS

1.       Acqua Terra

2.       Law Environmental

3.       KTR Realty Services

4.       EMG

5.       Clayton

6.       Dames & Moore

7.       Brown & Root

8.       C.A. Rich, Inc.

9.       Echland

10.      EM&CA

11.      ATC (BCM Engineers)

12.      Front Royal



                                     S-4-58

<PAGE>



                                                                       EXHIBIT A
                            [FORM OF PROMISSORY NOTE]
$ 300,000,000.00                                                    June 8, 1998
                                                              New York, New York

              FOR VALUE  RECEIVED,  CAPITAL TRUST,  a California  business trust
(the "Borrower"), hereby promises to pay to the order of MORGAN STANLEY MORTGAGE
CAPITAL INC. (the "Lender"), at the principal office of Lender at 1585 Broadway,
New York,  New  York,  10036,  in  lawful  money of the  United  States,  and in
immediately  available funds, the principal sum of THREE HUNDRED MILLION DOLLARS
($300,000,000.00)  (or such lesser  amount as shall equal the  aggregate  unpaid
principal  amount  of the  Loans  made by  Lender  to  Borrower  under  the Loan
Agreement),  on the  dates and in the  principal  amounts  provided  in the Loan
Agreement, and to pay interest on the unpaid principal amount of each such Loan,
at such office,  in like money and funds, for the period  commencing on the date
of such Loan until  such Loan shall be paid in full,  at the rates per annum and
on the dates provided in the Loan Agreement.

              The date,  amount and interest rate of each Loan made by Lender to
Borrower,  and each payment made on account of the principal  thereof,  shall be
recorded  by  Lender on its  books  and,  prior to any  transfer  of this  Note,
endorsed by Lender on the schedule attached hereto or any continuation  thereof;
provided, that the failure of Lender to make any such recordation or endorsement
shall not affect the  obligations  of Borrower to make a payment when due of any
amount owing under the Loan  Agreement or hereunder in respect of the Loans made
by Lender.

              This Note is the Note  referred to in the Master Loan and Security
Agreement  dated  as of June 8,  1998 (as  amended,  supplemented  or  otherwise
modified and in effect from time to time, the "Loan Agreement") between Borrower
and Lender,  and evidences Loans made by Lender  thereunder.  Terms used but not
defined in this Note have the respective  meanings  assigned to them in the Loan
Agreement.

              Borrower  agrees  to pay all  Lender's  costs  of  collection  and
enforcement  (including reasonable attorneys' fees and disbursements of Lender's
counsel) in respect of this Note when incurred,  including,  without limitation,
reasonable attorneys' fees through appellate proceedings.

              Notwithstanding  the  pledge of the  Collateral,  Borrower  hereby
acknowledges,  admits and agrees that Borrower's obligations under this Note are
recourse  obligations of Borrower to which  Borrower  pledges its full faith and
credit.

              Borrower,  and any endorsers or guarantors  hereof,  (a) severally
waive  diligence,  presentment,  protest  and demand and also notice of protest,
demand,  dishonor and  nonpayment of this Note,  (b)  expressly  agree that this
Note, or any payment  hereunder,  may be extended from time to time, and consent
to the acceptance of further Collateral,  the release of any Collateral for this
Note, the release of any party primarily or secondarily  liable hereon,  and (c)
expressly  agree that it will not be necessary  for Lender,  in order to enforce
payment of this Note, to first institute or exhaust  Lender's  remedies  against
Borrower or any other party  liable  hereon or against any  Collateral  for this
Note.  No  extension  of time for the payment of this Note,  or any  installment
hereof,  made by agreement by Lender with any person now or hereafter liable for
the  payment  of this  Note,  shall  affect  the  liability  under  this Note of
Borrower, even if Borrower is not a party to



                                       A-1

<PAGE>



such  agreement;  provided,  however,  that  Lender  and  Borrower,  by  written
agreement between them, may affect the liability of Borrower.

              Any  reference  herein to Lender  shall be deemed to  include  and
apply to every  subsequent  holder of this Note.  Reference  is made to the Loan
Agreement  for  provisions   concerning  optional  and  mandatory   prepayments,
Collateral, acceleration and other material terms affecting this Note.

              This Note shall be governed by and construed under the laws of the
State of New York  (without  reference  to choice of law  doctrine)  whose  laws
Borrower expressly elects to apply to this Note. Borrower agrees that any action
or proceeding brought to enforce or arising out of this Note may be commenced in
the  Supreme  Court of the State of New York,  Borough of  Manhattan,  or in the
District Court of the United States for the Southern District of New York.

                                            CAPITAL TRUST
                                                a California business trust


                                            By:
                                               ----------------------------
                                            Name:  Edward L. Shugrue, III
                                            Title: Chief Financial Officer



                                      A-2

<PAGE>



                                SCHEDULE OF LOANS

              This Note  evidences  Loans made under the  within-described  Loan
Agreement  to  Borrower,  on the dates,  in the  principal  amounts  and bearing
interest  at the  rates  set  forth  below,  and  subject  to the  payments  and
prepayments of principal set forth below.

<TABLE>
<CAPTION>
---------------- --------------------- ------------- ------------------- ---------------------- ------------
   Date Made            Principal         Interest      Amount Paid         Unpaid Principal      Notation
                     Amount of Loan         Rate         or Prepaid               Amount           Made by
---------------- --------------------- ------------- ------------------- ---------------------- ------------
<S>              <C>                   <C>           <C>                 <C>                    <C>
---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

---------------- --------------------- ------------- ------------------- ---------------------- ------------

</TABLE>



                                       A-3

<PAGE>



                                                                       EXHIBIT B
                          [FORM OF CUSTODIAL AGREEMENT]
                         [STORED AS A SEPARATE DOCUMENT]



                                       B-1

<PAGE>



                                                                       EXHIBIT C

                    [FORM OF OPINION OF COUNSEL OF BORROWER]



                                      C-1

<PAGE>



                                                                       EXHIBIT D

                         [FORM OF REQUEST FOR BORROWING]

              Master Loan and Security Agreement, dated as of June __, 1998 (the
"Loan and  Security  Agreement"),  by and between  Borrower  and Morgan  Stanley
Mortgage Capital Inc. (the "Lender"),

Lender:                                     Morgan Stanley Mortgage Capital Inc.

Borrower:                                   [NAME OF BORROWER]

Requested Fund Date:
                                             ------------------------------
Transmission Date:
                                             ------------------------------
Transmission time:
                                             ------------------------------
[Type of Funding:
(Wet or Dry)
                                             ------------------------------]
[Type of Loan requested:
Committed or Uncommitted
                                             ------------------------------]
Number of Mortgage
Loans to be Pledged:
                                             ------------------------------
Unpaid Principal Balance:                   $
                                             ------------------------------
Requested Wire Amount:                      $
                                             ------------------------------
Wire Instructions:





Requested by:

[NAME OF BORROWER]



By:
   ---------------------------
   Name:
   Title:



                                      D-1

<PAGE>



                                                                       EXHIBIT E

                        [FORM OF LENDER'S RELEASE LETTER]

                                     (Date)


Morgan Stanley Mortgage Capital Inc.
1585 Broadway
New York, New York 10036
Attention:
Facsimile:

         Re:   Certain Collateral Identified on Schedule A hereto and owned by 
[BORROWER]

              The undersigned hereby releases all right, interest, lien or claim
of any kind with respect to the Collateral described in the attached Schedule A,
such release to be  effective  automatically  without any further  action by any
party upon payment in one or more installments,  in immediately  available finds
of $        , in accordance with the following wire instructions:

 ................................................................................

 ................................................................................

 ........................

                                               Very truly yours,

                                               [LENDER]


                                               By:
                                                  ---------------------------
                                               Name:
                                               Title:



                                     E-1-1

<PAGE>



                                                                       EXHIBIT F

                           [FORM OF BAILEE AGREEMENT]



                                     F-1-1

<PAGE>