COMPENSATION AND FEES TO THE GENERAL
                             PARTNERS AND AFFILIATES


     In connection  with this Offering and the operation and  liquidation of the
Fund, the General Partners and certain Affiliates thereof will receive the types
and amounts of compensation, fees and distributions summarized below. References
herein to  deferred  fees or  commissions  (the  "Deferred  Fees")  refer to the
Deferred  Fees that will be paid by the Fund from the  proceeds  of  Operational
Stage  Financing or Sale,  or, if not paid within three years from the date that
Investors  are  first  admitted  to the Fund,  from  operating  revenues  or the
proceeds of additional indebtedness.


Entity Receiving Fee,           Type of Compensation or Distribution, Method of
Compensation or Distribution    Determination and Estimated Minimum and Maximum
                                Amounts

                        OFFERING AND ORGANIZATIONAL STAGE


Alex. Brown Realty              Selling Commissions of a maximum of 7% of
                                Capital Contributions, payable 5% from
Securities, Inc., the Selling   the proceeds of the Offering, and the remaining
                                2% deferred. Selling Commissions will
Agent*                          be reduced for certain volume purchases in
                                accordance with the schedule shown in
                                "Offer and Sale of Units."  Selling  Commissions
                                will be a maximum  of  $451,850  if the  Minimum
                                Offering Amount is raised  (payable  $322,750 at
                                the time that Investors are admitted to the Fund
                                and $129,100  deferred),  and a maximum total of
                                $1,890,000  if the  Maximum  Offering  Amount is
                                raised  (payable  $1,350,000  at the times  that
                                Investors  are admitted to the Fund and $540,000
                                deferred).    See    "Conflicts   of   Interest-
                                Transactions  Between  the Fund and the  General
                                Partners and Affiliates."

Administrative General          A non-accountable Offering and Promotional
                                Expenses Reimbursement Allowance of
Partner                         2% of Capital Contributions, payable from the
                                proceeds of the Offering. The allowance
                                will be $129,100 if the Minimum  Offering Amount
                                is raised and a total of $540,000 if the Maximum
                                Offering  Amount is raised.  The  Administrative
                                General  Partner  will  be  responsible  for all
                                offering and promotional  expenses in connection
                                with the Fund, including  accounting,  legal and
                                escrow  and  depository  fees,  printing  costs,
                                registration  and filing fees,  including  "Blue
                                Sky"  fees,  and   advertising,   marketing  and
                                promotion costs associated with the Offering. If
                                such expenses  exceed the allowance  paid by the
                                Fund, the  Administrative  General  Partner will
                                bear the expense;  conversely,  if such expenses
                                are less than the allowance,  the Administrative
                                General  Partner  will be entitled to retain the
                                remaining  balance.  See  "Fund  Objectives  and
                                Policies"        and        "Conflicts        of
                                Interest-Transactions  Between  the Fund and the
                                General Partners and Affiliates."

Flournoy Development            An Acquisition Fee of 4 % of Capital
                                Contributions, payable 3% from the proceeds of
Company**                       the Offering,  and l % deferred.  The fee will
                                be $290,475 if the Minimum Offering
                                Amount is raised (payable $193,650 at the time
                                that Investors are admitted to the Fund
                                and $96,825 deferred), and a total of $1,215,000
                                if the Maximum Offering Amount is
                                raised (payable $810,000 at the times that
                                Investors are admitted to the Fund and
                                $405,000 deferred). Flournoy Development Company
                                has provided or will provide services to the
                                Fund in connection with the acquisition and
                                planned development of the Properties, including
                                site selection, negotiation of purchase prices
                                and terms, undertaking of option agreements for
                                the acquisition of sites pending conveyance to
                                the Fund, work concerning zoning, permits, water
                                and sewer  connections and related matters,  and
                                project design and planning.
--------------
*An Affiliate of the Administrative General Partner.
**An Affiliate of the Development General Partner.


                                       13

<PAGE>





Entity Receiving Fee,           Type of Compensation or Distribution, Method of
                                Determination
Compensation or Distribution    and Estimated Minimum and Maximum Amounts

                  OFFERING AND ORGANIZATIONAL STAGE (continued)


                           See "Fund Objectives and Policies-The Properties" and
                           "Conflicts of Interest-Transactions Between the Fund
                           and the General Partners and Affiliates."

Administrative General          Organizationa and Start-Up Fee of 4 % of Capital
Partner                         Contributions,   payable  3%  from  the
                                proceeds of the Offering,  and 1 % deferred. The
                                fee will be  $290,475  if the  Minimum  Offering
                                Amount is raised  (payable  $193,650 at the time
                                that  Investors  are  admitted  to the  Fund and
                                $96,825 deferred),  and a total of $1,215,000 if
                                the Maximum  Offering  Amount is raised (payable
                                $810,000  at  the  times  that   Investors   are
                                admitted to the Fund and $405,000 deferred). The
                                Administrative  General Partner has provided and
                                will  provide  services to the Fund in preparing
                                the  structure  of  the  Fund,  consulting  with
                                various professionals regarding the organization
                                of the Fund, and  supervising  and reviewing the
                                preparation of all documents,  filings and other
                                instruments  related  to  the  Fund.  See  "Fund
                                Objectives   and  Policies"  and  "Conflicts  of
                                Interest-Transactions  Between  the Fund and the
                                General Partners and Affiliates."

Development General             $23,583, or $7,000 per acre, in payment
                                for the  sale to the Fund of  approximately  3.4
Partner                         acres  of  land  that  will   comprise
                                approximately  21% of the site for  Property II.
                                The Development  General Partner  purchased this
                                land in 1983 and will sell it to the Fund at the
                                per acre price paid at that time. The balance of
                                the  Property  II site,  or  approximately  12.9
                                acres,  will be purchased  from an  unaffiliated
                                individual   for  a  price   of   $147,540,   or
                                approximately  $11,440 per acre.  See "Conflicts
                                of Interest-  Transactions  Between the Fund and
                                the General  Partners and  Affiliates"  and "The
                                Properties-Acquisition of Sites."

                                                              OPERATIONAL STAGE


Flournoy Construction           Construction profit,  estimated to
Company, the General            be  7.8%  of the  amount  of  each  Construction
Contractor**                    Contract,  pursuant to a
                                guaranteed fixed price Construction Contract for
                                each Property.  The Construction Contract prices
                                were  determined  by  negotiation   between  the
                                Administrative  General  Partner and the General
                                Contractor,    are   based   on   the    General
                                Contractor's  costs  of  construction  of  prior
                                projects  similar  to the  Properties,  and  are
                                believed   by  the   General   Partners   to  be
                                reasonable   and   competitive.   The  estimated
                                construction   profit   with   respect   to  the
                                Properties is consistent  with or less than that
                                charged   by   the   General    Contractor    to
                                unaffiliated  parties for similar services.  See
                                "Management of the Fund-The General  Contractor"
                                and "Conflicts of Interest- Transactions Between
                                the   Fund   and  the   General   Partners   and
                                Affiliates."    It   is   estimated   that   the
                                construction   profit   will  be   approximately
                                $396,000  with  respect to Property I,  $376,000
                                with  respect  to  Property  II,  $445,000  with
                                respect  to  Property  III,  and  $387,000  with
                                respect  to   Property   IV.  If  the  costs  of
                                construction  exceed the  Construction  Contract
                                prices,  the  General  Contractor  will bear the
                                expense;    conversely,    if   the   costs   of
                                construction  are less than the contract prices,
                                the  General  Contractor  will  be  entitled  to
                                retain   any   savings.
--------------
**An Affiliate of the Development General Partner.



                                       14


<PAGE>




Entity Receiving Fee,           Type of Compensation or Distribution, Method of
                                Determination
Compensation or Distribution    and Estimated Minimum and Maximum Amounts

                          OPERATIONAL STAGE (continued)


                                Construction   payments  will  be  made  by  the
                                Administrative  General  Partner to the  General
                                Contractor     on    a     Property-by-Property,
                                percentage-of-completion  basis pursuant to draw
                                requests  certified by an architect  retained by
                                the  Fund  and   reviewed   by  an   independent
                                construction  monitor.  See "Fund Objectives and
                                Policies,"     "The      Properties-Construction
                                Contracts"        and        "Conflicts       of
                                Interest-Transactions  Between  the Fund and the
                                General Partners and Affiliates."

Flournoy Properties,  Inc.,     A Property  Management  Fee, payable monthly to
                                Fournoy Properties, Inc., for
the Property  Manager**         the management  of each
                                Property  of  5%  of  gross  monthly   operating
                                revenues of the Property.  See "Fund  Objectives
                                and    Policies,"    "The    Properties-Property
                                Management Agreements," "Management of the Fund"
                                and "Conflicts of Interest-Transactions  Between
                                the   Fund   and  the   General   Partners   and
                                Affiliates."

The Selling   Agent,*           Respectively,   payments  of
                                deferred  Selling  Commissions  of 2% of Capital
Flournoy Development            Contributions,  a deferred
                                Acquisition Fee of 1 % of Capital Contributions,
Company** and the               and a deferred  Organization
                                and Start-Up Fee of 1 % of Capital Contributions
Administrative General          (see discussion  Administrative  General of such
                                fees,  above). The Deferred Fees will be paid by
Partner                         the Fund no later than three years from
                                the date  Investors  are first  admitted  to the
                                Fund. See "Fund Objectives and Policies-Deferral
                                of Portions of Certain Fees and Commissions" and
                                "Conflicts of Interest-Transactions  Between the
                                Fund and the General Partners and Affiliates."

General Partners                The  Development   General   Partner's
                                Interest of 1%, and the  Administrative  General
                                Partner's  Interest of 1% in Net Cash Flow.  See
                                "Allocations and  Distributions"  and "Conflicts
                                of Interest."

General Partners                The  Development   General   Partner's
                                Interest of 1%, and the  Administrative  General
                                Partner's  Interest of 1% in the Net Proceeds of
                                Operational Stage Financing,  payable only after
                                the  payment  to  Investors  of  100%  of  their
                                Adjusted   Capital   Balance   plus  any  unpaid
                                Preferred    Return.    See   "Allocations   and
                                Distributions."

John F. Flournoy and Realty     Interests of 14% and 4%,
Associates  1986  Limited       respectively,   as  Class  B  Limited  Partners,
                                in
Partnership,* in their          the Net Proceeds of Operational Stage
capacities as Class
B Limited
Partners  of
the Fund                        Financing,  payable  only after  the payment to
                                Investors of 100% of their
                                Adjusted  Capital Balance plus
                                any unpaid  Preferred  Return.  See "Allocations
                                and Distributions."

General Partners  and/or        Fee for  securing  Operational
                                Stage Financing, payable if the General Partners
Affiliates                      and/or  their  Affiliates   actually
                                render  such  services.  Any  fee  paid  will be
                                reasonable  and   competitive   with  fees  then
                                charged by  unaffiliated  third parties for such
                                services  and is not  expected to exceed a total
                                of  1% of  the  principal  amount  of  the  debt
                                incurred.

--------------
*An Affiliate of the Administrative General Partner.
**An Affiliate of the Development General Partner.


                                       15

<PAGE>




Entity Receiving Fee,           Type of Compensation or Distribution, Method of
Compensation or Distribution    Determination and Estimated Minimum and Maximum
                                Amounts

                          OPERATIONAL STAGE (continued)


                                If both  General  Partners  render  services  to
                                secure Operational Stage Financing, the fee will
                                be  divided  between  them  commensurate,   with
                                actual services  rendered.  See "Fund Objectives
                                and  Policies-Operational  Stage  Financing" and
                                "Conflicts of Interest- Transactions Between the
                                Fund and the General Partners and Affiliates."

General Partners                Reimbursement  of certain actual costs
                                of administering  the Fund,  including  clerical
                                services,  Investor  communications services and
                                reports,   and  reports  and  filings   made  to
                                regulatory  authorities,  the costs of which are
                                estimated  to be  $20,000  for the  Fund's  1987
                                fiscal year if only the Minimum  Offering Amount
                                is  achieved.  See the  Financial  Forecast  for
                                Property  I,  attached   hereto  as  Exhibit  A,
                                "Management   of  the  Fund-The   Administrative
                                General   Partner   and   "Summary   of  Certain
                                Provisions of the Partnership Agreement."


                                                              LIQUIDATION STAGE


General Partners                The  Development   General   Partner's
                                Interest  of 1% and the  Administrative  General
                                Partner's  Interest  of 1% in Net  Proceeds  and
                                Profits  and  Losses  of Sale  of any  Property,
                                payable only after the payment and allocation to
                                Investors  of 100%  of  their  Adjusted  Capital
                                Balance plus any unpaid  Preferred  Return.  See
                                "Allocations and Distributions."

John F.  Flournoy  and Realty  Interests of 14% and 4%,  respectively,  as Class
Associates   1986  Limited     B  Limited   Partners,   in  the  Net  Proceeds
                               and
Partnership,* in their         Profits and Losses of Sale of any Property,
capacities as Class B Limited  payable only after the payment and  allocation
Partners of theFund             to Investors of 100% of
                                their Adjusted  Capital  Balance plus any unpaid
                                Preferred Return. See "Allocations and
                                Distributions."

General Partners and/or         Real estate brokerage commissions,  payable
                                if the  General  Partners
Affiliates                      and/or  their  Affiliates     actually
                                render   real  estate   brokerage   services  in
                                connection  with  the Sale of any  Property.  No
                                such  commissions will exceed 3% of the contract
                                price paid for the Property, and will be payable
                                only  after the return to  Investors  of 100% of
                                their Adjusted  Capital  Balance plus any unpaid
                                Preferred    Return.    See   "Allocations   and
                                Distributions."  If both  General  Partners  are
                                involved  in  rendering  real  estate  brokerage
                                services  to the Fund,  the  commission  will be
                                divided  between them  commensurate  with actual
                                services  rendered.  See  "Fund  Objectives  and
                                Policies,"  "The  Properties"  and "Conflicts of
                                Interest-Transactions  Between  the Fund and the
                                General Partners and Affiliates."


--------------
*An Affiliate of the Administrative General Partner.



                                       16
<PAGE>





                              CONFLICTS OF INTEREST


     Because of the businesses and activities of the General  Partners and their
Affiliates, and the nature of the relationships between the General Partners and
their Affiliates and the Fund,  certain  interests of the Fund may conflict with
certain  other  interests  of the General  Partners  and their  Affiliates.  The
General Partners will endeavor to make decisions for the benefit of the Fund, in
the good faith exercise of their  fiduciary  duties,  and believe that they will
generally be able to resolve such conflicts on an equitable basis.  Depending on
the relevant facts and circumstances,  however, the resolution of any particular
conflict  may  not  always  be in  favor  of  Investors.  A  resolution  that is
unfavorable to Investors will result only if the General Partners determine,  in
good faith,  that such resolution is appropriate to the situation and represents
the exercise of their fiduciary  duties to the Fund. This section  addresses the
transactions  of which the General  Partners are currently aware that may result
in  conflicts  of  interest,  although  no  assurances  can be given  that other
conflicts do not now exist or that additional conflicts will not occur.


Transactions Between the Fund and the General Partners and Affiliates

     The General Partners and their Affiliates will receive substantial fees and
other  compensation  in connection  with the Offering of Units,  the  selection,
development, construction and management of the Properties and, potentially, the
Operational  Stage  Financing  or  Sale of the  Properties.  There  has  been no
separate  representation  of the interests of Investors in the  determination of
such fees and  other  compensation.  The  arrangements  regarding  such fees and
compensation  by the Fund may be viewed as other than the result of  arms-length
negotiations,  although  the  General  Partners  believe  that all such fees and
compensation are or will be reasonable and competitive.

     The  General  Partners,  and the  Class B  Limited  Partners  who are their
Affiliates,  will receive interests in the Fund in excess of their proportionate
share of all Capital  Contributions.  The General Partners have a right to cause
the Fund to transact business with themselves and their Affiliates; however, the
Partnership  Agreement  contains various  provisions that generally require that
compensation  that would be paid with respect to  transactions  with the General
Partners  or their  Affiliates  must be no less  favorable  to the Fund than the
terms obtainable from non affiliated  entities rendering  comparable services in
the  same  geographical  location.  In  particular,  the  Partnership  Agreement
provides that, under the Construction  Contracts or with regard to any fees paid
for obtaining  Operational Stage Financing,  services to be provided to the Fund
by the General  Partners or their  Affiliates will be provided at 90% or less of
the competitive price that would be charged by non-affiliated entities rendering
similar services in the same or comparable  geographic  locations.  In addition,
under the Partnership  Agreement the holders of a majority of the Units have the
right to  terminate  any  contract  between the Fund and any General  Partner or
Affiliate  thereof.  See  "Compensation  and Fees to the  General  Partners  and
Affiliates,"  "Fund Objectives and Policies" and "Summary of Certain  Provisions
of the Partnership Agreement."

Affiliated Selling Agent

     The Selling Agent is an Affiliate of the  Administrative  General  Partner.
Because  of  this  affiliation,  Investors  will  not  have  the  benefit  of an
independent investigation of the Fund or its General Partners as may be the case
in  offerings  in which  the  selling  agent is not an  Affiliate  of a  General
Partner.  Consistent  with their  fiduciary  duties,  the General  Partners will
endeavor to provide  information to and conduct the Fund's transactions with the
Selling  Agent in a manner  comparable  to such  dealings  with an  unaffiliated
entity.  The  Selling  Agent now acts and may in the future  act as the  selling
agent for other public and private real estate offerings,  and is not prohibited
from acting as a general partner, underwriter, selling agent or broker-dealer in
public or private  offerings of securities in real estate  partnerships or other
entities  that may  have  objectives  similar  to those of the Fund and that are
sponsored by affiliated or unaffiliated persons.


                                       17

<PAGE>



Insurance on the Properties

         The General  Partners  will obtain or cause to be obtained  appropriate
third party liability insurance coverage, both for the period of construction of
each Property and for the completed and  operational  Properties.  Such coverage
will  insure the Fund and the  General  Partners,  among  others.  In  addition,
property  insurance will be obtained,  upon the completion of each Property,  in
amounts at least equal to the full value of the improvements, to insure the Fund
against fire and certain other casualty losses. Certain types of losses, however
(generally those of a catastrophic  nature such as earthquakes,  floods or war),
are either  uninsurable or insurable only at  prohibitive  costs;  consequently,
these  types of losses may not be insured.  The Fund will also be insured  under
fidelity  insurance  policies  in  amounts  deemed  sufficient  by  the  General
Partners.  All such  insurance  coverage will be reviewed at least  annually and
adjusted to account for changes in values or risks.

     General Policies  and  Restrictions  on  Actions  of the
                                General Partners and the Fund

         The Fund will not:

         (i) purchase or acquire property, other than property incidental to the
purposes of the Fund, or undertake construction of any properties other than the
Properties specified in this Prospectus;

         (ii) issue Units in exchange for property;

         (iii)  make  loans of any  kind,  except  to the  extent  of  receiving
purchase money obligations in connection with the Sale of any Property;

         (iv)  except as  provided  in  Article V of the  Partnership  Agreement
relating  to the  Interim  Investments  and the  investment  of working  capital
reserves,  invest  in or  underwrite  securities  of any  type or  kind  for any
purpose,  or make investments other than in the Fund's Properties and operations
related thereto;

     (v) operate in such a manner as to be  classified as
                                an  "investment  company"  under the  Investment
                                Company Act of 1940;

         (vi)  except as set  forth in this  Prospectus,  purchase  or lease any
property  from or sell or  lease  property  to the  General  Partners  or  their
Affiliates;

         (vii)  receive any rebate or give-up,  or, except as  specifically  set
forth in this  Prospectus,  participate in any reciprocal  business  arrangement
with any General Partner or Affiliate thereof; or

         (viii)  obtain  financing  other  than  under  the   circumstances  and
conditions set forth in this Prospectus.

         See Article V of the  Partnership  Agreement for a description of other
investment restrictions and policies.


                                                               THE PROPERTIES

In General

         The Properties will consist of up to four apartment projects, which are
expected to be built in the order  described  below.  The General  Partners may,
however,  alter the order of  construction  of Properties  II, III and IV if, in
their  judgment,  circumstances  arise which make it  advantageous  to do so, or
if-the  General  Contractor  requests  such  changes and, in the judgment of the
Administrative  General  Partner,  such change would not be  detrimental  to the
Fund. See "Fund Objectives and Policies-The Properties."

         Property I: "South land Station," a 160-unit garden  apartment  complex
located in Warner  Robins,  Georgia.  $6,455,000  of the Gross  Proceeds  of the
Offering, or approximately 24% of the Maximum Offering Amount, will be allocated
to the development of Property I.

         Property  II:  "Hidden  Lake-Phase  Two," a 160-unit  garden  apartment
complex located in Union City, Georgia.  $6,246,000 of the Gross Proceeds of the
Offering, or approximately 23% of the Maximum Offering Amount, will be allocated
to the development of Property II.


                                       36

<PAGE>




         Property III: "Park Place," a 184-unit garden apartment complex located
in  Spartanburg,  South  Carolina.  $7,769,000  of  the  Gross  Proceeds  of the
Offering, or approximately 29% of the Maximum Offering Amount, will be allocated
to the development of Property III.

         Property IV: "High Ridge," a 160-unit garden apartment  complex located
in  Athens,  Georgia.  $6,530,000  of the Gross  Proceeds  of the  Offering,  or
approximately  24% of the Maximum  Offering  Amount,  will be  allocated  to the
development of Property IV.

         The following table,  which was compiled from information  generated by
the General  Partners,  compares the  Properties by numbers of apartment  units,
average  size of unit,  estimated  monthly  rents per unit as  expressed in 1986
dollars, construction costs per unit and estimated annual operating expenses per
unit as expressed in 1986 dollars:


                         Comparison of Properties I, II, III and IV:
<TABLE>
<CAPTION>


                                       Property I    Property II     Property III   Property IV    All Properties
<S>                                        <C>            <C>             <C>            <C>             <C>
Number of apartment units..............    160            160             184            160             664
Average unit size (sq. ft.)..............1,073          1,028           1,061          1,073           1,059
Weighted average anticipated
  monthly rent per unit
  (as expressed in 1986 dollars).......$   467      $     486       $     445      $     455       $     463
Average construction cost per unit..   $33,372        $32,278         $34,952        $33,747         $33,637
Average annual anticipated
  operating expenses per unit
  (as expressed in 1986 dollars and
  assuming full occupancy).............$ 1,494       $  1,374        $  1,458       $  1,487        $  1,440
</TABLE>

     The General Partners have  commissioned  Cushman & Wakefield,  Inc., Miami,
Florida  ("Cushman  &  Wakefield"),  an  independent  market  study and  project
analysis firm, to test the market feasibility of each Property.  The information
for each Property included in the "Market Data" and "Competition" sections below
has been derived from the reports submitted to the General Partners by Cushman &
Wakefield in May 1986.

     The  anticipated  monthly  rental amounts shown below for each Property are
estimates based on information  available to the General Partners.  There can be
no assurance, however, that such monthly rental amounts will be realized.

Property I: South land Station, Warner Robins, Georgia

General Description

     South land Station will be a 160-unit garden apartment  project situated on
approximately  15 acres  of land in  Warner  Robins,  Houston  County,  Georgia.
Property I will consist of twelve two-story garden apartment buildings, together
with a swimming pool, two tennis courts,  a clubhouse with an equipped  exercise
room, an entertainment  center and approximately 320 on-site parking spaces. The
buildings will be of wood frame construction with wood siding.

     Flournoy  Development  Company,  an  Affiliate of the  Development  General
Partner,  holds an option on the 65.75  acre  parcel of land that  contains  the
Property I site.  Approximately 15 acres of the total parcel will be conveyed to
the Fund for the  development  of Property I at the same price per acre,  plus a
pro  rata  per  acre  share  of  the  brokerage  commission  to  be  paid  to an
unaffiliated third party, that will be paid by Flournoy Development Company. The
Development  General Partner or his Affiliate may develop the remaining  acreage
as additional  residential  rental units and for  commercial and retail use. See
"Conflicts  of   Interest-Competing   Properties   and   Interests"   and  "Risk
Factors-Competition and Future Development."

                                       37


<PAGE>





     Property I will contain the  following  types of apartment  units,  leasing
initially for the monthly rentals listed:

<TABLE>
<CAPTION>
                                                                       Estimated
                            Number of             Square                Monthly
   Type                       Units               Footage               Rental

<C>                            <C>                  <C>               <C>
1 bedroom ...............      16                   940               $ 375
1 bedroom with fireplace       16                   940               $ 390
1 bedroom with den ......      16                 1,173               $ 500
2 bedrooms ..............      40                 1,046               $ 470
2 bedrooms with fireplace      40                 1,046               $ 485
3 bedrooms ..............      32                 1,222               $ 510
</TABLE>


     The rents  shown  above  are on an  unfurnished  basis  and do not  include
utility costs, which will be paid directly by each tenant. The Fund will pay for
cold  water,  sewer  and  trash  removal.   Each  unit  will  have  washer/dryer
connections and will be furnished with a built-in  electric  range,  dishwasher,
disposal, vent-hood,  refrigerator, carpet and drapes. Apartments with dens will
feature Jennair charcoal-style grills, ice-makers and Jacuzzi whirlpool baths.

Market Data

     Warner Robins,  Georgia is located approximately 100 miles south of Atlanta
and 16 miles south of Macon. Property I is located about three miles from Robins
Air Force Base, which employs more than 20,000 civilian and military personnel.

     The Houston  County area had a population  of about 83,000  persons in 1985
and is projected to have a 1990 population of approximately 92,000.  Contrary to
national  trends,  average  household  size has  increased  since 1981.  Average
household  income is  approximately  $31,500,  about  $8,000  above the  Georgia
average.  More than half of the area's  households  have incomes in the range of
$20,000 to $50,000,  a range that represents a strong target market for Property
I.

     In addition to Robins Air Force Base, service and manufacturing  industries
provide significant employment in the Warner Robins area. Total non-agricultural
employment  grew by about 3.4% between 1984 and 1985.  The average  unemployment
rate for the area was 6.3%, just slightly below the state average. Planned plant
openings or expansions in the area are expected to add approximately 575 jobs in
1986-87.

     Based on an October 1985 housing survey conducted by the U.S. Department of
Housing  and Urban  Development  and on building  permit data and the  operating
results of comparable projects, it is estimated that the Houston County area can
absorb  approximately 264 multi-family  rental units per year. In 1985,  permits
for 453 units were  approved and an  additional  116 units were  approved in the
first  quarter  of 1986.  It is  anticipated  that most of these  units  will be
completed and leased by the time that Property I begins leasing.  A planned unit
residential  development has been proposed for a thousand acre site in the area,
which, if the developer's  zoning petition is approved,  could allow  additional
residential  units to be built. The first phase of the development is planned as
single  family  homes,  but no  date  has  been  set  for  the  commencement  of
construction.


                                       38

<PAGE>




Competition

     A recent survey  indicates  that the Houston  County  multi-family  housing
market  has an  overall  occupancy  level of about  93%.  The  names and a brief
description  of some of the existing  apartment  projects in the area with which
Property I may be expected to compete are listed  below.  Competitors  have been
selected on the basis of proximity to the Property I site and/or  important area
employers and commercial and retail facilities.  In addition,  consideration has
been given to the  comparability  of quality,  amenities,  rental rates and unit
sizes.

<TABLE>
<CAPTION>
                                                                                                      Occupancy
                                                                                                       Level as
       Projects in the                 Number of               Unit                Monthly             of April
      Warner Robins Area                 Units                 Types                Rental               1986
------------------------------      ----------------     -----------------      --------------     ----------------

<S>                                      <C>             <C>                    <C>                      <C>
Wellston Ridge                           120             1 bedroom              $345-395                 98%

Watson Bend                                              2 bedroom              $425
                                                         3 bedroom              $470

Northlake                                114             1 bedroom              $290                     98%
Northlake Drive                                          2 bedroom              $360-370

Oakdale Villas                           104             1 bedroom              $315                     97%
Corder Road                                              2 bedroom              $395

Shadowood                                 80             1 bedroom              $320                     96%
Engracin Drive                                           2 bedroom              $405

Lake Vista                               136             1 bedroom              $350                     96%
Northlake Drive                                          2 bedroom              $425-450
                                                         3 bedroom              $475

The Sandpiper                            514             1 bedroom              $290                     94%
Leisure Lake Drive                                       2 bedroom              $350-360

The Castaways                            151             1 bedroom              $250-275                 60%*
Leisure Lake Drive                                       2 bedroom              $335

---------------
*Recently sold.
</TABLE>

     Although,  as shown above, the estimated  monthly rents for the majority of
Property I apartments exceed those of competitors, the General Partners believe,
based on the market data set forth above,  that demand exists for higher quality
apartments  with the  amenity  packages  to be offered at  Property  I, and that
income levels in the Property I area should support such rent levels.

Property II: Hidden Lake-Phase Two, Union City, Georgia

General Description

     Hidden  Lake-Phase Two will be a 160-unit garden apartment complex situated
on approximately 16.2 acres of land in Union City, south Fulton County, Georgia.
Property II will consist of thirteen two-story garden apartment  buildings,  and
will share two swimming  pools,  two tennis  courts,  a sport court, a clubhouse
with  an  equipped  exercise  room  and  an  entertainment  center  with  Hidden
Lake-Phase One, an existing 160-unit  apartment complex adjacent to the Property
II site.  Hidden  Lake-Phase  One is owned by a partnership in which the General
Partners  are  the   Development   General  Partner  and  an  Affiliate  of  the
Administrative General Partner. Approximately 320 on-site parking spaces will be
constructed  for  Property  II  tenants.  The  buildings  will be of wood  frame
construction  with wood siding,  in the same  architectural  style as Phase One.
Phase One opened for rental in August  1985 and  construction  of all  apartment
units was completed in December  1985. As of March 31, 1986, and as of August 1,
1986, Phase One was 100% leased.

                                       39
<PAGE>




     John F. Flournoy is the owner of approximately  3.4 acres of land that will
be sold to the Fund to comprise  about 21% of the  Property  II site.  The price
paid by the Fund will be $7,000 per acre,  which is the same price Mr.  Flournoy
paid for the acreage in December  1983.  The balance of the site for Property II
will be purchased from an unaffiliated  individual for approximately $11,460 per
acre. See "Acquisition of Sites," below in this section,  and  "Compensation and
Fees to the General Partners and Affiliates."

     Property II will contain the following  types of apartment  units,  leasing
initially for the monthly rentals listed:

<TABLE>
<CAPTION>
                                    Estimated
                                                                                     Number of           Square  Monthly
                Type                                                                    Units            Footage Rental

<C>                                                                                                <C>    <C>   <C>
1 bedroom ...................................................................................      24     804   $ 425
1 bedroom with fireplace ....................................................................      24     804   $ 435
1 bedroom with den ..........................................................................      16   1,173   $ 475
2 bedrooms ..................................................................................      24   1,044   $ 490
2 bedrooms with fireplace ...................................................................      24   1,044   $ 505
2 bedrooms ..................................................................................      24   1,188   $ 525
2 bedrooms with fireplace ...................................................................      24   1,188   $ 545
</TABLE>

     The rents  shown  above  are on an  unfurnished  basis  and do not  include
utility costs, which will be paid directly by each tenant. The Fund will pay for
cold  water,  sewer  and  trash  removal.   Each  unit  will  have  washer/dryer
connections and will be furnished with a built-in  electric  range,  dishwasher,
disposal, vent-hood,  refrigerator, carpet and drapes. Apartments with dens will
feature Jennair charcoal-style grills, ice-makers and Jacuzzi whirlpool baths.

Market Data

     Union City,  Georgia is located in south Fulton  County,  approximately  25
minutes  by car south of  Atlanta's  central  business  district  and 10 minutes
southwest of Atlanta's Hartsfield  International  Airport. South Fulton County's
economy  relies  heavily on the Atlanta  airport,  which  employs  approximately
33,000  people,  and on two nearby Army  installations.  The south Fulton County
area  is  heavily  industrial  compared  to the  overall  Atlanta  region,  with
approximately 44% of non-agricultural employment in industry. Commercial, retail
and  light  industrial  employment  are  growing  in south  Fulton  County,  and
projections  through 1990 estimate increases of about 700 jobs per year in these
categories. A major business park is being developed in the area.

     Since 1980, the  population of south Fulton County has grown  approximately
7%, to approximately  50,000 in 1985. Average household size has decreased since
1980,  and the number of households in the area has grown by about 7,000.  It is
projected  that about 32% of  households in the area will have incomes in excess
of $38,000 by 1990,  compared to about 20% of households in the overall  Atlanta
region.

     The building of multi-family  housing in the northern areas of metropolitan
Atlanta has been slowed by permit restrictions effected because of limited water
and sewer system capacities.  These restrictions have caused developers to focus
on  the  southern   metropolitan   Atlanta  area,  where  building  permits  for
multi-family rental units have been increasing steadily for the past five years.
Figures for south Fulton  County show  absorption  of  approximately  350 rental
units per year.  As building  restrictions  in the  northern  part of the region
force growth south, it is believed that this absorption figure could increase.

     Construction  of a 225-uriit  rental project similar in quality to Property
II is planned to begin  within the year on land near the  Property  II site.  An
additional  148-unit  development of comparable  quality is also planned for the
area.  General  red estate  trends in the  neighborhood  of Property II tend now
toward a mixture of  commercial/light  industry and  residential.  Modest single
family homes are scattered  throughout  the area, and new single family homes in
the $56,000-$68,000 range are being built in the vicinity.

                                       40


<PAGE>




Competition

     A recent survey indicates that the south Fulton County multi-family housing
market has an overall occupancy level of approximately  90-93%.  The names and a
brief description of some of the existing  apartment  complexes in the area with
which Property II may be expected to compete are listed below.  Competitors have
been selected on the basis of proximity to the Property II site and/or important
area employers and commercial and retail facilities. In addition,  consideration
has been given to the comparability of quality, amenities, rental rates and unit
sizes.

<TABLE>
<CAPTION>

                                                                                                      Occupancy
    Projects in the South/                                                                             Level as
      Southeast Atlanta                Number of               Unit                Monthly             of April
      Metropolitan Area                  Units                 Types                Rental               1986
------------------------------      ----------------     -----------------      --------------     ----------------

<S>                                      <C>             <C>                    <C>                      <C>
Hidden Lake-Phase One                    160             1 bedroom              $425                     100%
Union City                                               2 bedroom              $490-540
                                                         3 bedroom              $545-560

Summerwind at Tara                       208             1 bedroom              $480-495                 98%
Jonesboro                                                2 bedroom              $545-565

Embarcadero                              404             1 bedroom              $385-400                 94%
College Park                                             2 bedroom              $440-460
                                                         3 bedroom              $550

Chase Ridge                              176             1 bedroom              $485                     80%*
Riverdale                                                2 bedroom              $525-545

Walden Walk                              213             1 bedroom              $415                     70%*
Stone Mountain                                           2 bedroom              $495-585

Hidden Pointe                            235             1 bedroom              $415                     50%*
Stone Mountain                                           2 bedroom              $495-585

The Crossings                            200             1 bedroom              $355-380                 23%*
Lithonia                                                 2 bedroom              $465-490
                                                         3 bedroom              $505-530

---------------
</TABLE>
   * Recently  completed  projects  that are still in initial  rent-up  periods.
   Absorption for Chase Ridge, which began leasing in July 1985, has averaged 17
   units per month;  for  Walden  Walk,  which  began  leasing  in August  1985,
   absorption has averaged 18.5 units per month; for Hidden Pointe,  which began
   leasing in February 1986, absorption has averaged 58 units per month; for The
   Crossings,  which began  leasing in March 1986,  absorption  has  averaged 20
   units per month.

Property III: Park Place, Spartanburg, South Carolina

General Description

     Park  Place  will  be  a  184-unit  garden  apartment  complex  located  on
approximately 14.4 acres of land in Spartanburg County, South Carolina. Property
III will consist of thirteen two-story garden apartment buildings, together with
a swimming pool, two tennis courts,  a clubhouse with an equipped  exercise room
and entertainment  center,  and  approximately  368 on-site parking spaces.  The
buildings will be of wood frame construction, with hardboard siding.

                                       41


<PAGE>





     Property III will contain the following types of apartment  units,  leasing
initially for the monthly rentals listed:


<TABLE>
<CAPTION>
                                                                                          Estimated
                                                                                          Number of            Square  Monthly
                Type                                                                           Units   Footage Rental

<C>                                                                                               <C>    <C>   <C>
1 bedroom ..................................................................................      24     804   $ 375
1 bedroom with fireplace ...................................................................      24     804   $ 390
1 bedroom with den .........................................................................      16   1,173   $ 490
2 bedrooms .................................................................................      24   1,044   $ 420
2 bedrooms with fireplace ..................................................................      24   1,044   $ 435
2 bedrooms .................................................................................      24   1,188   $ 450
2 bedrooms with fireplace ..................................................................      24   1,188   $ 475
3 bedrooms .................................................................................      12   1,284   $ 525
3 bedrooms with fireplace ..................................................................      12   1,284   $ 550

</TABLE>

     The rents  shown  above  are on an  unfurnished  basis  and do not  include
utility costs, which will be paid directly by each tenant. The Fund will pay for
cold  water,  sewer  and  trash  removal.   Each  unit  will  have  washer/dryer
connections and will be furnished with a built-in  electric  range,  dishwasher,
disposal, vent-hood,  refrigerator, carpet and drapes. Apartments with dens will
feature Jennair charcoal-style grills, ice-makers and Jacuzzi whirlpool baths.

Market Data

     Spartanburg, South Carolina is located in Spartanburg County, approximately
25  miles  north  of  Greenville,  South  Carolina  and 65  miles  southwest  of
Charlotte, North Carolina. Historically, the Piedmont Region, as the surrounding
area is known, has been  economically  dependent on the textile  industry.  This
dependence  has  lessened,  however,  as textile  employment  has  declined  and
Spartanburg  has  diversified  its  economic  base to  include  other  types  of
manufacturing and service industries and wholesale and retail trade. The City is
sponsoring  development of a new 30-acre  industrial  park, and additional hotel
and retail development is planned.

     Spartanburg  County grew by about 17% between 1970 and 1980, and has had an
average annual growth rate of about 1.2% in the 1980s.  It is estimated that the
area will gain more than 1,000 new  households  per, year through  1990,  with a
projected population of approximately 218,000 by that time. During the past five
years,  an  estimated  86% of the  county's  growth has taken place in the urban
fringe of the city,  where the  Property  III site is  located.  The 1984 median
income for the Spartanburg County area was approximately $22,000.

     Multi-family  rental unit absorption for the Spartanburg  area is estimated
at about 300 units per year. As part of a large mixed-use  development including
a hotel,  retail space,  offices and apartments,  200 rental units comparable in
quality to Property III are scheduled to be  constructed  sometime in 1986.  150
additional  units are planned for  construction,  beginning in late 1986,  by an
existing competitor, the Country Club Apartments.



                                       42

<PAGE>




Competition

     A recent survey indicates that the Spartanburg  multi-family housing market
currently has an overall occupancy level of approximately  92-95%. The names and
brief descriptions of some of the existing apartment  complexes in the area with
which Property III may be expected to compete are listed below. Competitors have
been  selected  on the  basis of  proximity  to the  Property  III  site  and/or
important  area employers and  commercial  and retail  facilities.  In addition,
consideration has been given to the comparability of quality,  amenities, rental
rates and unit sizes.

<TABLE>
<CAPTION>

                                                                                                      Occupancy
                                                                                                       Level as
       Projects in the                 Number of               Unit                Monthly             of April
       Spartanburg Area                  Units                 Types                Rental               1986
------------------------------      ----------------     -----------------      --------------     ----------------

<S>                                      <C>             <C>                    <C>                    <C>
Hunt Club                                204             1 bedroom              $360-385                Opened
Hunt Club Lane                                           2 bedroom              $395-435               May 1986

Country Club                             216             1 bedroom              $335                     55%*
Apartments                                               2 bedroom              $375
County Club Road

The Bluffs                               144             1 bedroom              $335-345                 96%
Vanderbilt Lane                                          2 bedroom              $380-385
                                                         3 bedroom              $450

Foxfire Apartments                       116             1 bedroom              $310-345                 94%
Camelot Drive                                            3 bedroom              $400

Key Pines                                241             Efficiency             $295                     90%
Power Mill Road                                          1 bedroom              $310-340
                                                         2 bedroom              $320-390
                                                         3 bedroom              $395-460

The Corners                              176             Efficiency             $285                     85%
Fernwood Drive                                           1 bedroom              $350
                                                         2 bedroom              $410

The Briarcliffe                           98             1 bedroom              $275                     81%
Blackstock Road                                          2 bedroom              $290
                                                         3 bedroom              $330

Georgetown Village                        74             1 bedroom              $285                     78%
Reidville Road                                           2 bedroom              $320
                                                         3 bedroom              $385

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

</TABLE>
     * The County Club Apartments began leasing in December 1985. Absorption has
averaged 24 units per month.

Property IV: High Ridge, Athens, Georgia

General Description

     High  Ridge  will  be a  160-unit  garden  apartment  complex  situated  on
approximately 18 acres of land in Athens,  Clarke County,  Georgia.  Property IV
will consist of eleven two- and three-story garden apartment buildings, together
with approximately 320 on-site parking spaces.  Property IV will have a swimming
pool, two tennis courts, a clubhouse with an equipment room and an entertainment
center. The buildings will be of wood frame construction, with wood siding.

                                       43
<PAGE>




     Property IV will contain the following  types of apartment  units,  leasing
initially for the monthly rentals listed:

<TABLE>
<CAPTION>
                                                                                          Estimated
                                                                                          Number of           Square  Monthly
                Type                                                                         Units   Footage Rental

<S>                                                                                               <C>    <C>   <C>
1 bedroom ..................................................................................      16     940   $ 375
1 bedroom with fireplace ...................................................................      16     940   $ 390
1 bedroom with den .........................................................................      16   1,173   $ 475
2 bedrooms .................................................................................      40   1,046   $ 450
2 bedrooms with fireplace ..................................................................      40   1,046   $ 465
3 bedrooms .................................................................................      32   1,222   $ 510

</TABLE>

     The rents  shown  above  are on an  unfurnished  basis  and do not  include
utility costs, which will be paid directly by each tenant. The Fund will pay for
cold  water,  sewer  and  trash  removal.   Each  unit  will  have  washer/dryer
connections and will be furnished with a built-in  electric  range,  dishwasher,
disposal, vent-hood,  refrigerator, carpet and drapes. Apartments with dens will
feature Jennair charcoal-style grills, ice makers and Jacuzzi whirlpool baths.

Market Data

     The  Property IV site is located  just outside of the western city limit of
Athens,  in  Clarke  County,  Georgia.  Athens,  the home of the  University  of
Georgia,  is about 65 miles northeast of Atlanta.  The 18 acre site is a part of
the High Ridge subdivision,  a low-density planned development that now contains
single  family homes selling in the $150,000 to $250,000  range.  Under a zoning
plan approved in 1985, overall density for the High Ridge subdivision is limited
to 3.9 units per acre.  Other than the Property IV site,  which has an allowable
density of 9 units per acre,  only one other  tract  within the  subdivision  is
zoned for multi-family housing.

     The Property IV site is hilly and heavily  wooded.  Although the setting is
secluded,  the Athens central business district is within a 15 minute drive, and
new industrial and commercial  growth,  including the area's largest  industrial
park, its only regional  shopping  center,  and two business  parks,  are easily
accessible.  The city's two major  hospitals are within a 10 minute drive of the
site.

     Although the  University of Georgia is by far the area's  largest  employer
and has a  significant  economic  impact on the area,  the economy of the Athens
area is diversified.  The manufacturing sector employs  approximately 25% of the
workforce.  The apparel,  textiles and food  processing  industries  also employ
significant  numbers of people.  Retail  trade and service  industries  combined
account for about 30% of the area's  employment.  During  1984 and 1985,  Clarke
County's  unemployment  rate has averaged  5.4%,  more than 1% below the Georgia
average.

     Clarke  County had a non-student  population of about 140,000 in 1984,  and
has grown by about 2,000  persons  per-year  since 1980.  It is expected to gain
about 1,500  persons or  approximately  600  households  per year through  1990.
Household income is expected to average approximately $42,800 by 1989.

     Approximately  16,000 of the University's 25,000 full-time students live in
non-University  housing,  and a number of Athens  area  apartment  projects  are
marketed to, and occupied  almost  exclusively by,  students.  Although a recent
survey of building permit activity and occupancy figures over the past few years
indicates that approximately  200-250  multi-family rental units can be absorbed
annually in the Athens  area,  the survey also  indicates  that the  non-student
population of the area may be underserved  due to the lack of rental housing not
dominated  by  students.  Property  IV will be  marketed  as an adult and family
community  based on its location (which is about 20 minutes from the University)
and its restrictions on the numbers of unrelated adults who may occupy a unit.

     In 1985, permits for 624 multi-family units were issued in the Athens area,
none of which were for  projects  likely to be  competitive  with  Property  IV.
Although other land in the area is zoned for multi-family  housing,  no building
permits  have been issued and no  immediate  plans for  competitive  development
appear to exist.

                                       44


<PAGE>



Competition

     A recent survey indicates that the Athens area multi-family  housing market
has an overall  occupancy  level of  approximately  90-95%.  The names and brief
descriptions of some of the existing apartment  complexes in the area with which
Property IV may be expected to compete are listed below.  Competitors  have been
selected on the basis of proximity to the Property IV site and/or important area
employers and commercial and retail facilities.  In addition,  consideration has
been given to the comparability of quality,  amenities, rental rates, unit sizes
and non-student marketing efforts and tenant populations.

<TABLE>
<CAPTION>

                                                                                                      Occupancy
                                                                                                       Level as
       Projects in the                 Number of               Unit                Monthly             of April
         Athens Area                     Units                 Types                Rental               1986
------------------------------      ----------------     -----------------      --------------     ----------------

<S>                                       <C>            <C>                    <C>                      <C>
Appleby Mews                              90             2 bedroom              $550                     100%
Carr Street                                              2 bedroom              $550
                                                           townhouse

Rivers Edge                              106             2 bedroom              $525                     98%
Sycamore Drive                                           3 bedroom              $625

Villas East and West                     238             1 bedroom              $285                     95%
Woodlake Place                                           2 bedroom              $335-345
                                                         3 bedroom              $405

Le Chateau Club                          212             1 bedroom              $280-300                 93%
Chateau Terrace                                          2 bedroom              $300-375
                                                         3 bedroom              $380-405

The Westchester                          135             1 bedroom              $270-290                 82%*
Westchester Circle                                       2 bedroom              $320-355
                                                         3 bedroom              $380

Wingate Chase                             56             2 bedroom              $385-445                 30%**
Prince Avenue

The Georgian                              33             1 bedroom              $525-550                 6%***
Washington Street                                        2 bedroom              $675-745

---------------
</TABLE>
 *January-March  is  lowest  season.  100%  occupancy  for fall and  winter.
**Opened October 1985. Low occupancy attributed to location and undesirable unit
floor plans.
***Downtown hotel renovation, opened in March 1986.

Property Management Agreements

     Pursuant  to the terms of a Property  Management  Agreement  with the Fund,
each of the  Properties  will be  managed  by  Flournoy  Properties,  Inc.,  the
Property Manager,  for an initial term of five years,  renewable thereafter on a
year-to-year  basis. The Property Manager will receive a Property Management Fee
for each  Property of 5% of gross  monthly  operating  revenues of the Property.
Under the terms of each of the  Property  Management  Agreements,  the  Property
Manager will be responsible for  performing,  or paying others to perform on its
behalf,  all  leasing-related  and other  property  management  services for the
Properties.  See  "Conflicts of  Interest-Transactions  Between the Fund and the
General Partners and Affiliates."

Cash Flow Deficit Guaranty Agreement

     Under the terms of a Cash Flow Deficit Guaranty Agreement to be executed by
the Fund and the Development  General Partner,  the Development  General Partner
will agree to fund, on a monthly basis, any operating  deficits generated in the
aggregate by the  Properties  until a period  ending two years after the date of
completion of construction of the last Property. The Development General Partner
will not be required to fund more than $500,000 in the  aggregate,  and all such
payments made by the Development General

                                       45

<PAGE>



 Partner  will be deemed  non-interest  bearing  loans to the Fund for which the
Development  General  Partner will be reimbursed  from the first  available cash
flow of the Fund or the  proceeds of an  Operational  Stage  Financing  or Sale,
whichever shall first occur.

Acquisition of Sites

     The site for each  Property  will be  purchased by the Fund from or through
Flournoy  Development  Company, an Affiliate of the Development General Partner,
or, in one  instance,  as to a portion of the site for Property II, from John F.
Flournoy,  the Development General Partner,  individually.  Flournoy Development
Company or Mr.  Flournoy  has  previously  acquired  (and,  in three  instances,
exercised) four options  pursuant to which the following sites will be available
for purchase, at the following prices and terms, by the Fund:

     Property I: A 65.75 acre site has been  purchased  by Flournoy  Development
Company, from a group of individuals  unaffiliated with the Fund, for a price of
$503,000,  plus a  commission  of $25,000  paid to an  unaffiliated  real estate
broker.  Approximately  15 acres of the total 65.75  acres  acquired by Flournoy
Development  Company  will be conveyed to the Fund,  for which the Fund will pay
$120,000,  which amount is a pro rata per acre share of the total purchase price
and brokerage commission paid. See "Conflicts of Interests-Competing  Properties
and Interests" and "Risk Factors-Competition and Future Development."

     Property  II: A 12.875  acre site will be  purchased  from an  unaffiliated
individual  for a price of  approximately  $11,460 per acre, or $147,500,  and a
3.369 acre site will be purchased from John F. Flournoy, the Development General
Partner,  for a price of $7,000 per acre,  or  $23,583.  The price of $7,000 per
acre is identical to the price Mr. Flournoy paid to an  unaffiliated  individual
for such property in December  1983. See  "Compensation  and Fees to the General
Partners and Affiliates."

     Property III: A 14.357 acre site,  and an adjacent 50 foot boundary  strip,
has been purchased from two unaffiliated entities for a total price of $552,200.

     Property  IV: An 18.05 acre site has been  purchased  from an  unaffiliated
entity for a price of $300,000.

     Flournoy  Development Company will sell to the Fund the Property III and IV
sites,  the portion of the Property II site to be purchased from an unaffiliated
individual,  and the portion of the  Property I site to be conveyed to the Fund,
at the respective  price per acre paid to the sellers  thereof,  plus a pro rata
per acre share of any brokerage commissions paid.

     Flournoy  Development Company will receive an Acquisition Fee of a total of
4 % of Capital Contributions for its services to the Fund in connection with the
acquisition and planning of the  development of the  Properties,  including site
selection, negotiations of options, entering into option agreements and, in some
instances,  acquisition  and holding of sites  pending  conveyance  to the Fund.
Flournoy  Development  Company has also directed all work concerning  zoning and
annexation,  permits,  water and sewer connections and related matters,  and has
also completed the project design and planning.  See  "Compensation  and Fees to
the General Partners and Affiliates."

Construction Contracts

     Each  of the  Properties  will be  constructed  for  the  Fund by  Flournoy
Construction  Company  pursuant  to  the  terms  of  a  guaranteed  fixed  price
Construction  Contract to be executed for each Property.  The  guaranteed  fixed
price  under  each  Construction  Contract  will  be as  follows:  (a)  Property
I-$5,080,000; (b) Property II-$4,817,000;  (c) Property III-$5,704,000;  and (d)
Property  IV-$4,960,000.  Under the terms of each  Construction  Contract,  each
Property  must  be  completed  by a  date  no  more  than  18  months  from  the
commencement of construction.  See "Conflicts of  Interest-Transactions  Between
the Fund and the General Partners and Affiliates.

     Each of the  Construction  Contracts  will provide that:  (a) (i) until the
project is 50% complete,  the General  Contractor is entitled to receive monthly
progress  payments  equal to 90% of the portion of the contract  price  properly
allocable to work in place, and equipment and materials suitably stored, for the
period covered by the progress payment,  less the aggregate  amounts  previously
paid to the General  Contractor,  (ii)  thereafter,  the General  Contractor  is
entitled to receive monthly progress payments equal to 100% of

                                       46
<PAGE>




 the portion of the contract  price  properly  allocable  to work in place,  and
equipment and materials  suitably stored, for the period covered by the progress
payment,  less the aggregate amounts  previously paid to the General  Contractor
and less the 10% holdback  provided under item (i) above;  (b) it is a condition
to the making of each such progress payment that (i) the independent  inspecting
architect  retained  by the Fund will have  inspected  construction  in order to
ensure on-site  conformity with plans and  specifications and will have reviewed
the draw request of the General  Contractor;  (ii) Columbus Bank & Trust Company
shall have  certified to the Fund as to the  percentage  of the project that has
been  completed  as of the end of the  period  for which  payment is to be made,
(iii)  the  percentage  of the total  contract  price  then paid to the  General
Contractor, after giving due effect to the progress payment then being requested
(together with the retainage,  if any,  applicable to such payments),  shall not
exceed the  percentage  of  completion,  as certified  by Columbus  Bank & Trust
Company,  (iv) Columbus  Bank & Trust  Company shall have  certified to the Fund
that the remaining funds  available to it for the  construction of the Property,
after  giving  due  effect to the  progress  payment  requested  by the  General
Contractor,  are  sufficient  to pay the  remaining  costs of  completion of the
Property,  and (v) the  Administrative  General Partner shall have approved such
payment, which approval shall not be unreasonably withheld; (c) final payment of
the  contract  price  will  be  due  when  the  work  has  been  completed,  the
Construction Contract fully performed,  a final certificate for payment has been
issued by the independent  inspecting architect,  and the Administrative General
Partner  shall  have  approved  such  payments,  which  approval  shall  not  be
unreasonably  withheld; (d) the General Contractor will be liable for liquidated
damages for each calendar day of delay until the work is substantially completed
equal to $15 per incomplete  apartment unit per day; and (e) the  Administrative
General Partner,  or the Investors,  by the vote of Investors holding a majority
of the Units,  may, at its or their sole option,  as the case may be,  terminate
the  Construction  Contract in whole, or from time to time in part, at any time,
without penalty, by written notice thereof to the General Contractor.

Guaranties of Timely and Lien-Free Completion

     Under the terms of a Guaranty  of Timely  and  Lien-Free  Completion  to be
executed  in  connection  with each  Property,  the General  Contractor  and the
Development  General  Partner will agree with the Fund to jointly and  severally
guaranty the timely and lien-free  completion of each Property.  The. guaranties
will  extend to the full net worth of both  guarantors  and will be  secured  by
irrevocable letters of credit in the amount of 15% of each Construction Contract
price.  Upon a  default  by the  guarantors  under  any of the  guaranties,  the
Administrative  General  Partner  will have the right,  at its sole  option,  to
immediately  draw upon the applicable  letter of credit,  or to pursue any other
remedy that may be available  to the Fund.  See "Risk  Factors-Construction  and
Operation of the Properties."


                             MANAGEMENT OF THE FUND

     The General Partners of the Fund are Brown Equity Income Properties,  Inc.,
the  Administrative  General  Partner,  and John F.  Flournoy,  the  Development
General  Partner.  The Fund's  principal  executive  offices are located at 3810
Buena Vista Road, Columbus, Georgia 31907, telephone (404) 687-4301. The General
Partners have had primary  responsibility  for the selection and  negotiation of
terms  concerning the acquisition of the Properties'  sites and  construction of
the  Properties,  selecting  a  manager  for the  Interim  Investments,  and the
structure of the Offering and the Fund. 'The General  Partners will have primary
responsibility  for  overseeing  the  performance of those who contract with the
Fund,  as well as making  decisions  with  respect  to the  financing,  sale and
liquidation of the Fund's assets.  The General  Partners will be responsible for
all reports to and  communications  with Investors and others, all distributions
and allocations to Investors,  the administration of the Fund's business and all
filings with the Securities  and Exchange  Commission and other federal or state
regulatory  authorities.  The  Fund's  Partnership  Agreement  provides  for the
removal of a General Partner and the election of Successor or Additional General
Partners by Investors holding a majority of the Units.


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<PAGE>




                        TRANSFER AND REPURCHASE OF UNITS


In General

     The Fund does not  anticipate  that a public  market  will  develop for the
Units.  Transfer of Units by an Investor  and purchase of Units by the Fund may,
however,  be accommodated under the following terms and conditions.  See Article
VII of the  Partnership  Agreement,  attached  hereto as  Exhibit  B, for a more
complete discussion of transfer and repurchase issues.

Transfer of Units

     Record  ownership  of Units  may be  transferred  with the  consent  of the
General Partners, after submission of transfer documents and satisfaction of all
other  requirements  concerning  transfer  set  forth  in  Article  VII  of  the
Partnership  Agreement,  which is attached  hereto as Exhibit B. Such  transfers
will be recognized  by the Fund as of the first day of the first fiscal  quarter
following  such  transfer.   As  between   transferors  and  transferees,   Fund
allocations will be recognized and  distributions  will be made according to the
principles set forth in "Allocations and Distributions."

     Although  Units  are  generally  transferable,  the  Partnership  Agreement
imposes certain  limitations on the transfer of Units  (including the discretion
of the General Partners to refuse to consent to such a transfer) and may require
the deferral of a transfer if necessary to avoid a "termination" of the Fund for
tax purposes.  Therefore, the registration of any transfer of a Unit (other than
a transfer by will or intestacy upon death of the  transferor)  will be deferred
if it would  result  in 50% or more of all  Units  having  been  transferred  by
assignment or otherwise within a 12-month period. Any deferred  registrations of
transfer will be made (in chronological  order to the extent  practicable) as of
the first day of the first fiscal quarter following the end of any such 12-month
period.

     An Investor  desiring to sell his Units will be required to comply with the
minimum purchase and retention  requirements and investor suitability  standards
imposed by applicable  federal or state securities laws and the minimum purchase
and retention  requirements imposed by the Fund. The Fund will require that such
standards be met before the General  Partners  consent to any transfer of Units.
For  example,  any sale or  transfer  of  Units in  California  or  involving  a
California  resident will require the prior written consent of the  Commissioner
of Corporations of the State of California ("Commissioner"),  except as provided
in the Commissioner's  rules. In addition, a transfer will not be registered if,
immediately thereafter, any transferor not transferring all of his Units, or any
transferee,  would hold less than five  Units (or two Units for an IRA),  or any
transferor or transferee would hold a fraction of a Unit.

     Alex. Brown & Sons Incorporated, an Affiliate of the Administrative General
Partner  ("Alex.  Brown"),  intends to provide  certain  services  to  Investors
desiring to sell their Units; provided,  however, that such services will not be
available until after the completion by the Fund of its last Property. Investors
may authorize  Alex.  Brown to offer their Units at a price set by the Investor.
Alex.  Brown will attempt to notify potential buyers of the availability of such
Units and the price or prices at which  they are  available,  and will  maintain
records of inquiries  received from potential  buyers,  if any. Alex. Brown will
not set Unit prices,  and information as to the actual market value of a Unit at
any given date will not be available.  To facilitate  such  transactions,  Alex.
Brown will make available to Investors,  on a regular basis, the prices at which
Units have been sold.  Because this  arrangement  will not make a market for the
Units, no "market  orders" or "stop orders" will be accepted by Alex.  Brown. It
is possible  that no buy orders  will be  received  by Alex.  Brown at the price
specified by an Investor in his sell order.  For its services in acting as agent
in sales transactions,  Alex. Brown may charge a fee of up to 6% of the purchase
price of the Units to the buyer,  which fee will be  subject  to change  without
notice. Further information about this service can be obtained from Alex. Brown.
This service may be discontinued or suspended at any time without notice, and is
likely to be suspended once the Fund begins to dispose of the Properties.

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<PAGE>



Repurchase by the Fund

     After the Termination Date of the Offering,  the Fund may, in response to a
request by an Investor,  elect to purchase Units from the Investor upon mutually
agreeable  terms,  provided that such purchase  does not  materially  impair the
capital or operations of the Fund. The  determination  of the value of any Units
purchased will be based, among other factors, upon the current fair market value
of the  Properties  and Fund  assets,  less its  debts  and  obligations.  Units
acquired  by the  General  Partners  and  Affiliates  will not be  eligible  for
purchase by the Fund. Units purchased by the Fund during any fiscal quarter will
be deemed  cancelled  as of the first day of the fiscal  quarter  following  the
effective date of such purchase.

     THE FUND  WILL NOT  PURCHASE  UNITS  PRIOR TO THE  TERMINATION  DATE OF THE
OFFERING,  AND IS NOT  OBLIGATED  TO  PURCHASE  UNITS AT ANY  TIME.  THERE IS NO
ASSURANCE THAT THE FUND WILL EVER PURCHASE ANY UNITS.


                           SUMMARY OF SALES MATERIALS

     In addition to and apart from this Prospectus, the Fund may utilize certain
sales  materials in connection  with the Offering of the Units.  These materials
may include fact sheets to be used internally by broker-dealers,  investor sales
promotion brochures,  prepared speeches for public seminars, videotape and slide
presentations for use at public seminars, invitations to attend public seminars,
letters, mailing cards,  "tombstone"  advertisements and a program summary to be
used by the members of the selling group.  Some such sales  materials may not be
available in certain jurisdictions.  This Offering is made only by means of this
Prospectus,  and, other than as described above, the Fund has not authorized the
use of other sales materials.  Although the information  contained in such sales
materials  does not  conflict  with  any of the  information  contained  in this
Prospectus,  such materials are not complete and should not be considered a part
of this Prospectus or the  Registration  Statement of which this Prospectus is a
part, or as incorporated in this  Prospectus or said  Registration  Statement by
reference, or as forming the basis of the Offering of the Units.


           SUMMARY OF CERTAIN PROVISIONS OF THE PARTNERSHIP AGREEMENT

     The rights and  obligations of the Partners are governed by the Partnership
Agreement,  the form of which is set out in its  entirety  as  Exhibit B to this
Prospectus. Subscribers should review the Partnership Agreement carefully before
subscribing  for Units.  The following  statements and other  statements in this
Prospectus  concerning the Partnership  Agreement and related matters are merely
summaries,  are  qualified in their  entirety by  reference  to the  Partnership
Agreement and in no way modify or amend the Partnership Agreement.

Rights and Duties of the Partners

     The General Partners have the exclusive right to manage the business of the
Partnership.  Decisions to be made by the General  Partners  will be made by the
joint agreement of the General Partners; provided, however, that, subject to the
authority of Investors,  as set forth below, the Administrative  General Partner
has the sole  authority and power,  on behalf of the Fund,  to review,  approve,
terminate,  modify,  enforce,  continue  or  otherwise  deal  with the  Property
Management Agreements,  the Cash Flow Deficit Guaranty Agreement, the Guaranties
of Timely and Lien-Free Completion,  the Construction Contracts, the Acquisition
Agreements or any other agreements between the Fund and the Development  General
Partner or any of his Affiliates.

     Except as limited below,  the General  Partners are authorized  for, in the
name of, and on behalf of the Fund:  (i) to enter into any kind of activity  and
to perform and carry out contracts of any kind  necessary,  to, or in connection
with, or incidental to the  accomplishment  of the purposes of the Fund, so long
as such  activities  and contracts may be lawfully  carried on or performed by a
limited partnership;  (ii) to engage Persons, including the Sponsors, to provide
services or goods to the Fund, upon such terms as the General Partners deem fair
and reasonable and in the best interest of the Fund, provided, however, that, as
to certain services or goods provided by a Sponsor,  (a) the  compensation  paid
must be comparable  and  competitive  with that of any other Person who provides
comparable  services or goods,  and, as to services,  will not exceed 90% of the
competitive  price that would be charged by  non-affiliated  persons or entities
rendering similar services in the same or comparable geographic  locations;  (b)
the  compensation  and other terms of such contracts must be fully  disclosed to
Investors in the reports of the Fund, (c) the Sponsor must have been  previously
engaged in the business of providing such services or goods,  independent of the
Fund and as an ongoing business,  and (d) all such transactions must be embodied
in a contract  that  describes  the  services  or goods to be  provided  and the
compensation  to be paid,  which contract may be modified by a vote of Investors
holding a majority of the Units, and which contract must permit

                                       85