PARTNERSHIP INTEREST PURCHASE AGREEMENT


     This Agreement is made and entered into as of March 1, 2006, by and between
C.R.H.C.,  Incorporated  ("CRHC"),  a Delaware  corporation,  and Capital Realty
Investors - III Limited Partnership ("CRI-III"),  a Maryland limited partnership
(CRHC and CRI-III,  collectively,  "Seller"),  and H. William Walter, Matthew J.
Walter,   David  W.  Walter  and  Steven  J.  Perkins,   jointly  and  severally
(collectively,  "Purchaser"), with respect to partnership interests in Arboretum
Villages   Limited   Partnership,   an  Illinois   limited   partnership   ("the
"Partnership").

                                   Background
                                   ----------
     CRHC  owns a 0.01%  General  Partner  interest  and  CRI-III  owns a 98.99%
Limited Partner  interest in the Partnership  (collectively,  the  "Interests"),
which partnership owns a residential rental housing property in Lisle, Illinois,
commonly known as Arboretum Village Apartments; and

     The Purchaser owns Heartland Realty Investors, Inc., which acts as property
management  agent  for  the  apartments,  so  Purchaser  acknowledges  its  past
relationship with the Partnership; and

     Seller  desires  to sell,  and  Purchaser  desires  to  purchase,  Seller's
partnership  Interests  in the  Partnership  upon and  subject  to the terms and
conditions hereinafter set forth.

                                    Agreement
                                    ---------

     NOW,  THEREFORE,  in consideration of the mutual covenants herein contained
and  other  good and  valuable  consideration,  Seller  and  Purchaser  agree as
follows:

1.   DEFINITIONS

     When used herein, the following terms shall have the following meanings:

     Agreement: This Agreement.
     ---------

     Agreement Date:  The date first written above.
     ---------------

     Closing Date:  Such date as Purchaser  and Seller may mutually  agree upon;
provided,  however, that if the Closing Date has not occurred on or before March
31, 2006,  Seller shall have the right to terminate  the  Agreement  (unless the
failure to close is the result of a default by Seller hereunder),  in which case
the  Deposit  shall be  disbursed  to Seller and  neither  party  shall have any
further obligation hereunder except as expressly set forth herein.

                                      -1-

<PAGE>

     Deposit:  The initial amount of  Twenty-five  Thousand  Dollars  ($25,000),
which shall be deposited by Purchaser  with Escrow Agent within two (2) business
days after the Agreement  Date, to be held as earnest money subject to the terms
of this Agreement.  The Deposit shall be  nonrefundable  except as expressly set
forth herein.  All interest and other  earnings on the Deposit shall be added to
and become a part thereof.  The Deposit  shall be a credit  against the Purchase
Price if closing occurs.

     Escrow Agent:  Moss & Barnett of  Minneapolis,  MN, Attn:  William A. Haug,
     ------------
Esq.

     Interests:  CRHC's 0.01%  General  Partner  interest and  CRI-III's  98.99%
     ---------
Limited Partner interest in the Partnership.

     Lender:  Citicorp Real Estate,  Inc., the holder of a first mortgage on the
     -------
Partnership's property.

     Property:  The real property and improvements located thereon, and personal
     --------
property used in connection therewith, owned by the Partnership.

     Purchase Price:  The  consideration  payable by Purchaser to Seller for the
     --------------
Interests as provided in Section 3.


2.   PURCHASE AND SALE
     -----------------

     Subject to the terms and conditions of this Agreement,  Purchaser agrees to
purchase  and acquire  from  Seller,  and Seller  agrees to sell and transfer to
Purchaser,  the Interests:  specifically,  CRHC will transfer its entire General
Partner  Interest  to H.  William  Walter and CRI-III  will  transfer is Limited
Partner  Interests  to the  Purchaser as follows:  H.  William  Walter - 28.99%;
Mathew J. Walter - 30%;  David W. Walter - 30%;  and Steven J. Perkins - 10%. No
assets of the Partnership  shall be distributed to Seller in connection with the
closing of the sale of the  Interests,  except as set forth in  Section  10.3(f)
herein.

3.   PURCHASE PRICE
     --------------

     The  Purchase  Price for the  Interests  shall be Six Million  Nine Hundred
Eighty-Eight  Thousand Seven Hundred Fifty-Three Dollars ($6,988,753) to CRI-III
and Seven Hundred  Sixty-Eight  Dollars ($768) to CRHC, payable by wire transfer
of collected  Federal  funds on the Closing  Date.  The Deposit shall be applied
against the Purchase Price at Closing.

                                      -2-

<PAGE>

4.   ESCROW
     ------

     The parties  shall  establish an escrow with the Escrow Agent through which
the transactions  contemplated  herein shall be closed. The parties shall direct
the Escrow  Agent to invest the Deposit in accounts or  securities  permitted by
Escrow Agent at the highest available rate of earnings,  which earnings shall be
added to and become a part of the Deposit. The escrow shall be auxiliary to this
Agreement,  and this  Agreement  shall not be  merged  into,  nor in any  manner
superseded by, the escrow.  The escrow costs and fees shall be paid by Purchaser
and Seller equally, with each paying one-half of the costs and fees.

5.   CONDITION OF INTERESTS
     ----------------------

     Purchaser agrees, with respect to the condition and status of the Interests
and the Partnership Property, that:

     (a)  Purchaser  is in as good a position as Seller to know the  information
relevant to its decision to purchase the Interests  because one of Purchasers is
a current  General  Partner and all Purchasers are affiliated  with the property
manager  of  the  Partnership.  Accordingly,  Purchaser  agrees  to  accept  the
Partnership  Interests and their concomitant interests in all Partnership assets
and liabilities, "AS IS, WITH ALL FAULTS."

     (b)  The  sale  of the  Interests  is  subject  only  to  Seller's  express
warranties and representations set forth in this Agreement. SELLER DISCLAIMS ANY
LIABILITIES OR WARRANTIES,  EXPRESS OR IMPLIED, EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT.

6.   CONDITION PRECEDENT
     -------------------

     The  following  is a condition  precedent  to the  obligation  of Seller to
close:

     Purchaser  shall  either  (i) obtain  and  deliver  to Seller the  Lender's
written consent to the transaction  contemplated  herein,  releasing Seller from
any  post-Closing  Date  liabilities,  OR (ii) indemnify Seller from any and all
claims of Lender and its successors and assigns  arising out of or in connection
with the election not to obtain Lender consent to the  transaction  and/or as to
any post-closing  matters,  such  indemnification to include Seller's reasonable
attorneys' fees and costs. This  indemnification  shall be the joint and several
obligation of Purchaser and its affiliate, Heartland Realty Investors, Inc., and
shall survive closing or other termination of this Agreement.

7.   REPRESENTATIONS AND WARRANTIES OF SELLER
     ----------------------------------------

     CRHC and CRI-III each  individually  represent  and warrant to Purchaser as
follows:

                                      -3-

<PAGE>

     (a) Except for the Lender  consent  discussed in Section 6 above,  CRHC and
CRI-III  each have full  capacity  and  authority  to execute and  perform  this
Agreement  and all  documents  to be executed  by Seller  pursuant  hereto.  The
undersigned  signatory has full power and authority to execute this Agreement on
behalf of each of CRHC and CRI-III.

     (b) CRHC is the sole owner of its Interests in the  Partnership  (holding a
0.01%  General  Partner  Interest),  free  and  clear  of  any  liens,  security
interests, pledges, options or other encumbrances.  CRI-III is the sole owner of
its Interests in the Partnership  (holding a 98.99% Limited  Partner  Interest),
free and clear of any  liens,  security  interests,  pledges,  options  or other
encumbrances.

8.   REPRESENTATIONS AND WARRANTIES OF PURCHASER
     -------------------------------------------

     Purchaser each  individually  hereby  represent and warrant to Seller that,
except for the Lender  consent  discussed in Section 6 above,  the Purchaser has
full  capacity  and  authority  to execute and perform  this  Agreement  and all
documents to be executed by Purchaser pursuant hereto.

9.   BROKERAGE
     ---------

     Seller  and  Purchaser  each  warrant  and  represent  to the other that no
brokerage fee or commission  relating to this  transaction  is due to any party.
Seller and Purchaser  each agree to indemnify and hold each other  harmless from
and against  all costs  relating  to any claim by third  parties  for  brokerage
commissions,  finder's or other fees relating to the transaction contemplated in
this Agreement alleged to be due because of authorization or other action by the
indemnifying party.

10.  CLOSING
     -------

     10.1 Time and Place The transaction  contemplated hereby shall close on the
Closing Date at such date, time and place as the parties may mutually agree.

     10.2  Seller's  Deliveries  On the Closing  Date,  Seller shall  deliver to
Purchaser:

     (a) Five executed  counterpart  originals of an Assignment  and  Assumption
Agreement  with  respect to all of  Seller's  right,  title and  interest to the
Interests;

     (b) Two executed  counterpart  originals of an Amendment to the Partnership
Agreement reflecting the transfer and withdrawal of CRHC and CRI-III;

                                      -4-

<PAGE>

     (c) Two executed  counterpart  originals of an Amendment to the Certificate
of Limited  Partnership  reflecting the withdrawal of CRHC as a General Partner;
and

     (d) Such other instruments and certificates as may be reasonably  requested
by Purchaser to consummate fully the transaction contemplated hereby.

     10.3.  Purchaser's  Deliveries On the Closing Date, Purchaser shall deliver
to Seller:

     (a) The Purchase Price, payable as set forth in Section 3;

     (b) A copy of the consent of Lender to the  transaction  or an indemnity by
Purchaser and Heartland Realty Investors,  Inc. of Seller with respect to claims
of Lender;

     (c) Five executed  counterpart  originals of the  Assignment and Assumption
Agreement;

     (d) Two executed  counterpart  originals of an Amendment to the Partnership
Agreement reflecting the transfer and withdrawal of CRHC and CRI-III;

     (e) Two executed  counterpart  originals of an Amendment to the Certificate
of Limited Partnership reflecting the withdrawal of CRHC as a General Partner;

     (f) An amount to be agreed by the parties  prior to the  Closing  Date that
represents  Seller's  pro rata share of  Partnership's  2006 cash flow,  tax and
insurance escrows and replacement reserves This amount shall not be considered a
part of the  Purchase  Price,  but shall be a deemed  distribution  of cash flow
earned  prior to the Closing  Date.  Prorations  shall be based on the number of
days during the year each party owned its interests in the  Partnership  and the
parties'  respective  percentage  interests  in the  Partnership.  This  Section
10.3(f) shall survive closing; and

     (g) Such other  instruments and certificates as may be reasonably  required
by Seller to consummate fully the transaction contemplated hereby.

     In addition,  Purchaser  agrees to deliver to Seller,  within ten (10) days
after they have been  completed  by the  Partnership's  auditors,  copies of the
annual financial  statements and tax returns of the Partnership for that portion
of 2006 during which Seller was a partner.

                                      -5-

<PAGE>

     10.4.  Closing  Costs.  Purchaser  agrees  to bear any  costs  involved  in
obtaining Lender consent to the transaction, any state or local taxes imposed on
the transfer of  partnership  interests,  and any  recording  costs  involved in
amending the  Partnership  Agreement or  Partnership  Certificate to reflect the
transfers of the  Interests.  Any escrow or closing fees charged by Escrow Agent
shall be shared equally between Purchaser and Seller.

11.  BREACH AND REMEDIES
     -------------------

     11.1 Breach Seller or Purchaser,  as the case may be, shall be in breach in
the event that:


     (a) It fails to timely and duly perform any of its obligations set forth in
this Agreement (except as set forth in subsection (b) below); or

     (b) It fails or refuses to close the sale or purchase of the  Interests (as
the case may be) in a  timely  manner,  except  if the  failure  to close is (i)
specifically  excused under the terms of the Agreement  (e.g. due to the failure
of a condition  precedent to its obligation to close),  or (ii) due to breach by
the other party.

     11.2 Purchaser's Remedies In the event of a breach by Seller, Purchaser may
at its option,  after written notice to Seller  specifying the breach and giving
Seller a five (5)  business  day  cure  period,  seek  either  of the  following
remedies:

     (a)  Enforce the terms of the  Agreement  by seeking  specific  performance
hereof; or

     (b)  Terminate  the Agreement by written  notice to Seller  specifying  the
breach  and  obtain a refund of the  Deposit,  provided  there is no  concurrent
breach by Purchaser.

     Purchaser  agrees that the remedies set forth in this Section 11.2 shall be
Purchaser's only remedies,  Purchaser hereby expressly waives all other remedies
at law or in  equity,  including  without  limitation,  special,  consequential,
incidental and/or punitive damages.

     11.3 Seller's  Remedies In the event of a breach by  Purchaser,  Seller may
terminate this  Agreement by written  notice to Purchaser  specifying the breach
and  (except  in the case of a  breach  described  in  Section  11.1(b))  giving
Purchaser a five (5) business  day cure  period,  in which event Seller shall be
entitled  to retain  the  Deposit,  as  liquidated  damages,  not as a  penalty.
PURCHASER AND SELLER AGREE THAT IT WOULD BE EXTREMELY  DIFFICULT OR  IMPRACTICAL
TO QUANTIFY THE ACTUAL  DAMAGES TO SELLER IN THE EVENT OF A BREACH BY PURCHASER,
THAT THE AMOUNT OF THE DEPOSIT IS A REASONABLE  ESTIMATE OF SUCH ACTUAL DAMAGES,
AND THAT  SELLER'S  REMEDY  IN THE EVENT OF A BREACH  BY  PURCHASER  SHALL BE TO
RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES AND NOT AS PENALTY.

                                      -6-

<PAGE>

     11.4 Costs in the Event of Breach The parties agree that, in the event of a
breach of this Agreement as determined by a court of competent jurisdiction, the
party determined to be in breach shall pay all costs incurred by the other party
or parties in enforcing the remedies afforded herein including,  but not limited
to, court costs and reasonable attorneys' fees.

12.  NOTICES
     -------

     Any notice,  request or other document required or permitted to be given or
served  hereunder  shall be in writing and shall be delivered  personally or via
overnight  express  courier,  postage  prepaid,  and addressed to the parties at
their respective addresses set forth below, and the same shall be effective upon
receipt.  A party may change its  address for receipt of notices by service of a
notice of such change in accordance herewith.

         If to Purchaser:    c/o Heartland Realty Investors, Inc.
                             4802 Nicollet Avenue South
                             Minneapolis, MN  55419
                             Attn: Mr. Matthew J.  Walter, Vice President
                             Tel. No. 612 823-6275, ext. 15
                             Fax No.  612 823-3210
                             Email:  mwalter@heartland-ri.com

         If to Seller:       CRHC and/or CRI-III
                             11200 Rockville Pike, Suite 500
                             Rockville, MD  20852
                             Attn: Mr. Michael F. Murphy, Senior Vice
                                   President
                                   and
                             Office of General Counsel
                             Tel. No. 301 468-9200
                             Fax No. 301
                             468-3150 Email: mmurphy@crimail.com

13.  MISCELLANEOUS
     -------------

     13.1 Entire  Agreement;  Amendments;  Waivers This  Agreement  contains the
entire  agreement and  understanding  of the parties with respect to the subject
matter hereof, merging herein and superseding any negotiations and/or prior oral
or written  agreements  between the parties as to the  purchase  and sale of the
Interests.  This Agreement may not be amended,  modified or discharged,  nor may
any of its terms be waived,  except by an  instrument  in writing  signed by the
party to be bound thereby.

     13.2 Further Assurances The parties each agree to do, execute,  acknowledge
and deliver all such further acts,  instruments  and  assurances and to take all
such  further  action  before  or after the  closing  as shall be  necessary  or
desirable to carry out fully this  Agreement  and to  consummate  and effect the
transactions contemplated hereby.

                                      -7-

<PAGE>

     13.3 No Third Party  Benefit This  Agreement is for the sole and  exclusive
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns, and no third party is intended to or shall have any rights hereunder.

     13.4 Assignment  Purchaser may not assign its rights hereunder  without the
prior written consent of Seller, which may be withheld in its sole discretion.

     13.5 Interpretation

     (a) The  headings  and captions  herein are  inserted  for  convenience  of
reference  only and the same shall not limit  construction  of the  sections  or
paragraphs to which they apply or otherwise affect the interpretation hereof.

     (b) The terms  "include",  "including" and similar terms shall be construed
as if followed by phrase "without being limited to".

     (c) Each party hereto  certifies that it has been represented by counsel of
its own choosing in the  negotiation of this  Agreement,  and that the Agreement
shall not be construed as if either party is the maker thereof.

     13.6  Counterparts  This Agreement and any document or instrument  executed
pursuant  hereto may be  executed  in any number of  counterparts  each of which
shall be deemed an original,  but all of which together shall constitute one and
the same instrument.  A fax copy of a signature on this Agreement shall have the
same  effect as an original  provided  that an original is received by the other
party hereto within two business days thereafter.

     13.7 Time

         (a) Whenever under the terms of this Agreement the time for performance
of a covenant or condition falls upon a Saturday, Sunday or holiday, such time
for performance shall be extended to the next business day. Otherwise all
references herein to "days" shall mean calendar days.

     (b) Time is of the essence with respect to all aspects of this Agreement.

                                      -8-

<PAGE>

     13.8  Governing  Law This  Agreement  shall be governed  and  construed  in
accordance  with  the laws of the  State  of  Illinois,  without  regard  to its
conflict or choice of laws rules,  but venue for any action arising out of or in
any way  related  to this  Agreement  shall  lie in the state or  Federal  court
nearest to Rockville, Maryland.

     IN WITNESS  WHEREOF,  this  Agreement  has been  executed and  delivered by
authorized  representatives  of Seller  and  Purchaser  as of the date first set
forth above.


SELLER:                                              PURCHASER:

C.R.H.C., INCORPORATED


By:      ------------------------               --------------------------------
         Michael F. Murphy                      H. WILLIAM WALTER
Its:     Senior Vice President
         and

CAPITAL REALTY INVESTORS-III                    --------------------------------
         LIMITED PARTNERSHIP                    MATTHEW J. WALTER
By:      C.R.I., Inc.
Its:     Managing General Partner


By:      ------------------------               --------------------------------
         Michael F. Murphy                      DAVID W. WALTER
Its:     Senior Vice President


                                                --------------------------------
                                                STEVEN J. PERKINS


AGREED in his capacity as a                     AGREED as to Section 6 only:
General Partner of the Partnership:
                                                Heartland Realty Investors, Inc.

                                                By:-----------------------------
---------------------------------                     Matthew J. Walter
H. WILLIAM WALTER                               Its:  Vice President


                                      -9-