AGREEMENT OF LIMITED PARTNERSHIP
 
                                       OF

                           SOUTHWEST ASSOCIATES, L.P.
 
                   Dated as of the 31st day of December, 1996




THE INTERESTS  ISSUED UNDER THIS  AGREEMENT HAVE NOT BEEN  REGISTERED  UNDER THE
SECURITIES  ACT OF 1933,  AS AMENDED (THE  "SECURITIES  ACT"),  OR REGISTERED OR
QUALIFIED  UNDER THE APPLI-  CABLE  STATE  SECURITIES  LAWS,  IN  RELIANCE  UPON
EXEMPTIONS FROM  REGISTRATION AND  QUALIFICATION  PROVIDED IN THE SECURITIES ACT
AND THE APPLICABLE  STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE  REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION OR REGISTRATION  UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION  OF  COUNSEL  SATISFACTORY  TO THE  ISSUER  THAT  SUCH  REGISTRATION  OR
QUALIFICATION  IS NOT REQUIRED.  IN ADDITION,  THE  INTERESTS  ISSUED UNDER THIS
AGREEMENT MAY BE SOLD OR TRANSFERRED  ONLY IN COMPLIANCE WITH THE RESTRIC- TIONS
ON TRANSFER SET FORTH HEREIN.


<PAGE>

                        AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                           SOUTHWEST ASSOCIATES, L.P.



     THIS  AGREEMENT OF LIMITED  PARTNERSHIP  ("Agreement")  is made and entered
into as of the 31st day of December,  1996,  by and between  NPI-AP  Management,
L.P., a Delaware limited partnership, as a general partner and a limited partner
(in its capacity as a general partner the "Managing  General Partner" and in its
capacity as a limited partner, the "Insignia Limited Partner",  or generally the
"Insignia  Partner")  and  BRE/Southwest  Partners I L.P.,  a  Delaware  limited
partnership,  as a general partner (the "Blackstone  General Partner",  together
with the Managing General Partner,  the "General  Partners") and Blackstone Real
Estate Partners II L.P., a Delaware limited partnership,  Blackstone Real Estate
Partners II TE.1 L.P., a Delaware  limited  partnership,  Blackstone Real Estate
Partners II TE.2 L.P.,  a Delaware  limited  partnership,  and  Blackstone  Real
Estate Holdings II L.P., a Delaware  limited  partnership,  as limited  partners
(the "Blackstone Limited Partners",  together with the Insignia Limited Partner,
the "Limited  Partners" and each a "Limited  Partner") (the  Blackstone  Limited
Partners and the Blackstone General Partner are collectively  referred to as the
"Blackstone Partners" or "Blackstone") with reference to the following:


                                    RECITALS

     A. The  Insignia  Partner  and the  Blackstone  Partners  desire  to form a
limited  partnership  pursuant to the provisions of the Revised  Uniform Limited
Partnership  Act of the State of  Delaware,  Delaware  Code,  Title 6,  Sections
17-101,  et seq., as amended from time to time, and to constitute  themselves as
Southwest Associates,  L.P., a Delaware limited partnership (the "Partnership"),
on the terms and conditions set forth below.

     B. Each of the Insignia Partner and the Blackstone Partners desires to make
its  respective  capital  contribution  to the  Partnership as described in this
Agreement and to be admitted as a Partner of the Partnership.

     C. In order to effect the  foregoing,  the parties  hereto  desire to enter
into this Agreement as set forth herein.

     NOW,  THEREFORE,  in  consideration  of the mutual covenants and agreements
contained  herein (the receipt and sufficiency of which hereby are  acknowledged
by each party hereto),  the parties  hereto,  intending to be legally bound,  do
hereby agree as follows:


<PAGE>

                                    ARTICLE 1

                               GENERAL PROVISIONS

     1.1 Formation.  The General  Partners and the Limited  Partners hereby form
the Partnership as a Delaware limited partnership  pursuant to the terms of this
Agreement and the Act. This Agreement shall  constitute the agreement of limited
partnership  among the Partners.  All  capitalized  terms used and not otherwise
defined  herein  shall have the  meanings  set forth in Section 1.8 hereof.  The
Partners  further  agree to take such other  actions as may from time to time be
necessary or appropriate under the laws of the State of Delaware with respect to
the  formation,  operation and continued  good standing of the  Partnership as a
Delaware limited partnership.

     1.2 Name of Partnership.  The name of the  Partnership  shall be "Southwest
Associates, L.P."

     1.3 Compliance.

          1.3.1  Certificate of Limited  Partnership.  The General Partners have
     executed the Certificate of Limited  Partnership for the  Partnership,  and
     filed the same with the Office of the Secretary of State of Delaware, which
     certificate due to clerical error was filed on January 13, 1997. Due to the
     delay in the  filing of the  Certificate  of  Limited  Partnership  for the
     Partnership,  the  Partners  hereby  confirm and ratify all of the actions,
     covenants,  obligations,  duties,  liabilities,  indemnities,  waivers  and
     guarantees  made and given by the Partnership as of December 31, 1996 up to
     and  including  the  date  of the  filing  of the  Certificate  of  Limited
     Partnership  for the  Partnership.  The  General  Partners  shall cause the
     Partnership to take any other steps that are necessary for the  Partnership
     to  conduct  the  Partnership's  business  in the  states  in which it does
     business.  The Certificate shall be amended  whenever,  and within the time
     periods, required by the Act.

          1.3.2  Principal  Office,  Resident Agent and Registered  Office.  The
     principal office of the Partnership shall be located at c/o Blackstone Real
     Estate Advisors L.P., 345 Park Avenue, 31st Floor, New York, New York 10154
     or at such other  place or places as may from time to time be  Approved  by
     the General Partners;  provided, however, that the Partnership shall at all
     times  maintain a  registered  agent and an office in the State of Delaware
     and in such other  states as required  by law.  The name and address of the
     registered  agent for service of process on the Partnership in the State of
     Delaware  is  CT  Corporation  Systems,  1201  Orange  Street,  Wilmington,
     Delaware 19801. The address of the registered  office of the Partnership in
     the State of  Delaware  is CT  Corporation  Systems,  1201  Orange  Street,
     Wilmington,  Delaware 19801.  Such principal  office,  registered  agent or
     registered  office may be changed by the  Blackstone  General  Partner from
     time to time upon the Approval of the Managing General Partner,  so long as
     in accordance with the Act.

     1.4 Purposes of Partnership. The purposes of the Partnership shall be:

          1.4.1 (i) To acquire  the  limited  partnership  interests  in the REO
     Partnerships  listed on Exhibit D to this Agreement (the "REO Partnerships"
     and the "REO Partnership

<PAGE>

     Interests")  for  investment  purposes,  (ii) to enter into the amended and
     restated  agreements of limited  partnership  for each REO Partnership as a
     limited  partner  (together with any ancillary  documents to be executed by
     the Partnership in connection therewith the "REO Partnership  Agreements"),
     (iii)  to own,  hold,  finance,  refinance,  sell,  exchange,  transfer  or
     otherwise dispose of and otherwise exercise all rights, powers,  privileges
     and other  incidents  of ownership  or  possession  with respect to the REO
     Partnership  Interests,  and (iv) to enter into that  certain  contract  to
     acquire the REO Partnership  Interests dated as of December 31, 1996 by and
     among  the  Partnership  (with  respect  to  the  REO  Partnership  limited
     partnership interests), and GSSW-REO Ownership Corporation and GSSW Limited
     Partnership  (together  with any ancillary  documents to be executed by the
     Partnership  in connection  with the  Partnership's  acquisition of the REO
     Partnership  Interests)  (collectively,   the  "Purchase  Agreement").  The
     Purchase Agreement is hereby Approved by the General Partners (the "Initial
     Approved  Contract"  together with any other  agreements or other contracts
     Approved  by  the  General  Partners  from  time  to  time,  the  "Approved
     Contracts");

          1.4.2 The  Partnership may carry on and engage in other lawful general
     business  activities,  in  furtherance  of the  purposes  listed in Section
     1.4.1,  including,  borrowing  money from any  source,  whether  secured or
     unsecured,  acquiring  additional real and personal  property in connection
     with  its  acquisition  or  ownership  of the  REO  Partnership  Interests,
     contracting  for  necessary  or  desirable  services of  professionals  and
     others,  owning the REO  Partnership  Interests  and,  consistent  with the
     Partnership's  investment  purposes  with  respect  to the REO  Partnership
     Interests,  the Partnership may sell,  exchange or otherwise dispose of all
     or any portion of the REO Partnership Interests.

     1.5 Percentage Interests.

          1.5.1 The respective  Percentage  Interests in the  Partnership of the
     Partners  as of the  Agreement  Date  are  set  forth  on  Exhibit  A.  All
     references in this  Agreement to any Exhibit are references to such Exhibit
     as amended from time to time pursuant to this Agreement.

          1.5.2  Unless  the  context  otherwise  clearly  indicates,  the terms
     "interest" or  "interests"  in the  Partnership  shall include both General
     Partner interests and Limited Partner interests.  A Partner's "interest" in
     the  Partnership  shall mean and  include  its share of the  capital of the
     Partnership, its share of the Profits and Losses and other tax items of the
     Partnership, its share of the distributions of the Partnership, its Capital
     Account, and its other rights and obligations, all as determined under this
     Agreement.

     1.6 Other  Qualifications.  At the expense of the Partnership,  the General
Partners  shall cause the  Partnership  to be  qualified  to do business in each
jurisdiction in which such  qualification  becomes  necessary,  on or before the
date on which such qualification  becomes necessary,  in each case in accordance
with the requirements of Section 1.3.2.

     1.7 Term of Partnership.  The term of the Partnership  shall commence as of
the date of filing the  Certificate  and shall  continue  until the  Partnership
shall be dissolved,  liquidated  and  terminated  pursuant to the  provisions of
Article 8.


<PAGE>

     1.8 Definitions.

     As used in this  Agreement,  the  following  terms shall have the following
meanings:

          1.8.1  "Act"  shall  mean  the  Delaware   Revised   Uniform   Limited
     Partnership  Act,  Delaware  Code,  Title 6, Sections  17-101,  et seq., as
     amended from time to time.

          1.8.2 "Adjusted  Capital Account  Deficit" shall mean, with respect to
     any Partner, the deficit balance, if any, in such Partner's Capital Account
     as of the  end  of the  relevant  tax  year,  after  giving  effect  to the
     following adjustments:

               1.8.2.1  Credit to such  Capital  Account any amounts  which such
          Partner  is  obligated  to  restore  or is deemed to be  obligated  to
          restore to the Partnership  pursuant to the  penultimate  sentences of
          Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

               1.8.2.2  Debit to such  Capital  Account the items  described  in
          Sections   1.704-1(b)(2)(ii)(d)(4),    1.704-1(b)(2)(ii)(d)(5),    and
          1.704-1(b)(2)(ii)(d)(6) of the Regulations.

     The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section  1.704-1(b)(2)(ii)(d)  of the  Regulations
and shall be interpreted consistently therewith.

          1.8.3  "Affiliate"  shall mean (a) with respect to  Insignia:  (i) any
     Entity  Controlling  or under  common  Control  with  Insignia and (ii) any
     Entity  which is  Controlled  (directly  or  indirectly)  by one or more of
     (A) Insignia,  (B) Metropolitan Asset Enhancement, L.P. or (C) any of their
     respective Affiliates,  and (b) with respect to Blackstone:  (i) any Entity
     Controlling or under common Control with Blackstone, including the partners
     of Blackstone, (ii) any Entity which is Controlled (directly or indirectly)
     by one or more of  (A) Blackstone,  (B) Blackstone  Real Estate Advisors II
     L.P.,  The  Blackstone  Group L.P.  and/or any successor to their duties in
     connection   with   the   management   of   Blackstone,   or  (C)   any  of
     their respective  Affiliates.  For the purposes of this Agreement, the term
     "Control,"  or  any  derivative  thereof  (including   "Controlled  by"  or
     "Controlling"),  when used with respect to any specified Person, shall mean
     the possession, directly or indirectly, of the power to direct or cause the
     direction of the  management  or policies of such Person,  whether  through
     ownership of voting securities or partnership or other ownership interests,
     or by contract; provided, however, that, without limiting the generality of
     the  foregoing,   (a)  any  Person  which  owns,  directly  or  indirectly,
     securities representing more than 50% of the value or ordinary voting power
     of a corporation or more than 50% of the  partnership,  membership or other
     ownership  interests  (based  upon  value or vote) of any  other  Person is
     deemed to Control such  corporation or other Person,  (b) a general partner
     shall always be deemed to Control any  partnership of which it is a general
     partner,  and (c) a  member-manager  of a limited  liability  company shall
     always be deemed to Control any limited  liability company of which it is a
     member-manager.

<PAGE>
          1.8.4  "Agreement"  shall mean and refer to this  Agreement of Limited
     Partnership and all Exhibits  referred to herein and attached hereto,  each
     of which is hereby made a part  hereof,  as amended and in effect from time
     to time.

          1.8.5  "Agreement  Date" shall mean the date first written above as of
     which this Agreement is effective.

          1.8.6 "Approval" (and any variation  thereof) of the General Partners,
     the Blackstone  General Partner or the Managing  General Partner shall mean
     the prior written consent or approval (or deemed  approval) of such Partner
     or  Partners.  Approval of Major  Decisions  (other  than a Major  Decision
     described in Sections 5.5.5.1,  5.5.5.2, 5.5.5.4 or 5.5.5.12) after January
     1, 1998 may be unreasonably  withheld.  All other  decisions  requiring the
     Approval of a Partner shall not be withheld or delayed unreasonably..  Such
     Approval  shall be valid for a Partner who is not a natural  person only if
     given by at least one  Authorized  Representative  of such Partner.  If the
     Approval of a Partner to any action is required  under this  Agreement  and
     such Partner shall not have given notice of disapproval or Approval of such
     action to the  Partner  required  to be given such  notice  within ten (10)
     Business Days after receipt of the notice  requesting that such Approval be
     given (or such earlier or later date as may be established pursuant to this
     Agreement for the giving or  withholding  of such  Approval),  such Partner
     shall be deemed to have given such  Approval.  Any act taken or proposed to
     be taken by the Blackstone General Partner shall be deemed approved by that
     Partner. Notwithstanding the foregoing, or anything in this Agreement, with
     respect to any  decision  which is subject to the  dispute  resolution  set
     forth in Section 5.9, the Managing  General Partner shall be deemed to have
     approved such decision unless the Managing General Partner timely exercises
     its rights under Section 5.9.

          1.8.7 "Approved Contracts" is defined in Section 1.4.1

          1.8.8 "Authorized Representatives" is defined in Section 1.10.

          1.8.9 "Bankrupt" shall mean, with respect to any Partner, if:

          1.8.9.1  Such  Partner,  or a Person that  Controls  such Partner (the
     "Controlling  Person"),  shall  (i) apply for or consent to the appointment
     of,  or the  taking  of  possession  by, a  receiver,  custodian,  trustee,
     administrator,  liquidator  or  the  like  of  itself  or  of  all  or of a
     substantial portion of its assets, (ii) admit in writing its inability,  or
     be generally  unable or deemed unable under any applicable  law, to pay its
     debts as such debts become due,  (iii)  convene a meeting of creditors  for
     the purpose of consummating an out-of-court arrangement, or entering into a
     composition, extension or similar arrangement, with creditors in respect of
     all or a substantial  portion of its debts, (iv) make a general  assignment
     for the benefit of its  creditors,  (v) place  itself or allow itself to be
     placed,  voluntarily or  involuntarily,  under the protection of the law of
     any  jurisdiction  relating  to  bankruptcy,  insolvency,   reorganization,
     winding-up,  or composition or adjustment of debts, or (vi) take any action
     for the purpose of effecting any of the foregoing; or

               1.8.9.2 A  proceeding  or case shall be commenced in any court of
          competent jurisdiction,  seeking (i) the liquidation,  reorganization,
          dissolution,

<PAGE>
          winding-up,  or composition or  readjustment of debts, of such Partner
          or a Controlling Person with respect thereto,  (ii) the appointment of
          a trustee, receiver, custodian, administrator,  liquidator or the like
          of such Partner or of a Controlling  Person with respect thereto or of
          all or a  substantial  portion of such  Partner's or such  Controlling
          Person's assets, or (iii) similar relief in respect of such Partner or
          such  Controlling   Person  under  any  law  relating  to  bankruptcy,
          insolvency,  reorganization,  winding-up, or composition or adjustment
          of debts, in each case,  without the Approval of the General Partners,
          and such proceeding or case shall continue undismissed for a period of
          ninety  (90)  days,  or an  order,  judgment  or decree  approving  or
          ordering any of the foregoing  shall be entered and continue  unstayed
          and in effect for a period of sixty (60) days,  or an order for relief
          or other legal  instrument of similar  effect  against such Partner or
          such Controlling  Person shall be entered in an involuntary case under
          such law and shall continue for a period of sixty (60) days.

               1.8.10  "Bankruptcy"  shall mean any  condition  described in the
          definition of "Bankrupt" which renders a Partner a Bankrupt.

               1.8.11 "Blackstone" is defined in the Heading to this Agreement.

               1.8.12 "Blackstone Limited Partners" is defined in the Heading to
          this Agreement.

               1.8.13 "Blackstone General Partner" means BRE/Southwest  Partners
          I L.P., a Delaware limited partnership.

               1.8.14  "Business  Day"  shall  mean any day on which  commercial
          banks are  authorized  to do business  and are not  required by law or
          executive order to close in New York, New York.

               1.8.15 "Capital Account" shall mean, with respect to any Partner,
          the Capital Account maintained for such Partner in accordance with the
          provisions of Section 3.1.

               1.8.16 "Capital  Contribution" or "Capital  Contributions"  shall
          mean the amount of cash and the net fair market  value of any property
          contributed to the capital of the Partnership by the Partners pursuant
          to this Agreement.

               1.8.17  "Capital  Receipts"  shall  mean  (i) the  sum of (a) the
          proceeds  received by the Partnership  from the sale,  exchange or any
          other disposition of all or any portion of the Properties or any other
          asset of the Partnership reduced by (ii) all  expenditures made by the
          Partnership  that are required in connection with such sale,  exchange
          or other disposition plus (b) amounts set aside as reserves  therefrom
          for Shortfall Disbursements.  For purposes of this Agreement,  Capital
          Receipts,  shall,  to the extent  necessary,  be determined at the REO
          Partnership level on a look through basis.

               1.8.18  "Certificate"  shall  mean  the  Certificate  of  Limited
          Partnership of the Partnership required to be filed with the Secretary
          of State of the  State of  Delaware  in  accordance  with the Act,  as
          amended and in effect from time to time.

<PAGE>

               1.8.19  "Code" shall mean the Internal  Revenue Code of 1986,  as
          amended  and in  effect  from  time  to  time  (or  any  corresponding
          provision of succeeding law).

               1.8.20  "Control" or "Controlled by" or  "Controlling" is defined
          in the definition of "Affiliate."

               1.8.21  "Controlling  Person" is defined in the definition of the
          term "Bankrupt."

               1.8.22 "Deadlock" is defined in Section 5.9.

               1.8.23 "Deadlock Election" is defined in Section 5.9(a)(i).

               1.8.24 "Deadlock Notice" is defined in Section 5.9.

               1.8.25  "Defaulting  Partner" shall have the meaning set forth in
          Section 2.2.2.

               1.8.26 "Determination Date" is defined in Section 5.8.

               1.8.27 "Due Date" is defined in Section 2.2.1.

               1.8.28 "Due  Diligence  Materials"  shall mean any documents that
          have been made available to the Partners in connection  with acquiring
          the REO  Partnerships  and the  Properties,  such as lease  abstracts,
          partnership  agreements and related schedules and exhibits,  contracts
          (including service contracts and brokerage agreements), title reports,
          engineering   and  geological   studies  and  reports,   environmental
          investigations  and  reports,  cost  analyses,   feasibility  studies,
          leases, financial projections and other such materials relating to the
          REO Partnerships and the Properties and any proposed investment by the
          Partnership therein.

               1.8.29 "Emergency" shall mean an event which reasonably  requires
          immediate action involving the expenditure of funds or other action in
          order to avert or mitigate  significant  damage to Persons or property
          in connection with the Partnership,  the Properties or any other asset
          of the Partnership.

               1.8.30  "Entity"  shall  mean any  general  partnership,  limited
          partnership,  limited liability company,  corporation,  joint venture,
          trust, business trust, joint-stock company,  cooperative,  association
          or other firm or any governmental or political  subdivision or agency,
          department or instrumentality thereof.

               1.8.31 "ERISA" shall mean the Employee Retirement Income Security
          Act of 1974, as amended from time to time, and any successor statute.

               1.8.32 "Family  Member" with respect to an individual  shall mean
          such  individual's  present or former  spouse,  brothers  and  sisters
          (whether by whole or half blood),


                                       12
<PAGE>

          lineal  ascendants or descendants or their  respective  spouses,  or a
          trustee or custodian for the benefit of any of them.

               1.8.33  "Force  Majeure"  shall  mean  any act of God  (including
          weather   disturbance,   earthquake,   fire,   mechanical  failure  of
          equipment,  disease and the like),  labor  strike or work  stoppage or
          slowdown,   material  shortages,   sabotage,  war,  riot,  moratorium,
          governmental  action or inaction,  or any other act of any third party
          that  reasonably  prevents an action from being taken through no fault
          of the party who is required to take such action.

               1.8.34 "Funding Notice" is defined in Section 2.1.2.

               1.8.35 "GAV Notice" is defined in Section 5.9(iii).

               1.8.36  "General  Partners"  shall  mean the  Blackstone  General
          Partner and the Managing General Partner.

               1.8.37 "Gross Asset Value" shall mean, with respect to any asset,
          the  adjusted  basis of the asset for  federal  income  tax  purposes,
          adjusted as provided in Section 3.8. 1.8.38 "Including" or "including"
          shall mean "including, without limitation."

               1.8.39 "Income Tax Regulations" or  "Regulations"  shall mean the
          final or temporary regulations promulgated from time to time under the
          Code or, if no final or  temporary  regulations  with respect to a tax
          issue then are in effect,  proposed  regulations then in effects,  and
          administrative and judicial interpretations thereof.

               1.8.40 "Initial Approved Contracts" is defined Section 1.4.1.

               1.8.41 "Insignia" is defined in the Heading to this Agreement.

               1.8.42  "Insignia  Limited  Partner" is defined in the Heading to
          this Agreement.

               1.8.43 "Liabilities" is defined in Section 5.5.3.

               1.8.44 "Limited  Partner" shall mean NPI-AP  Management,  L.P., a
          Delaware limited partnership, in its capacity as a limited partner and
          Blackstone   Real  Estate   Partners  II  L.P.,  a  Delaware   limited
          partnership,  Blackstone Real Estate Partners II TE.1 L.P., a Delaware
          limited  partnership,  Blackstone Real Estate Partners II TE.2 L.P., a
          Delaware limited  partnership,  and Blackstone Real Estate Holdings II
          L.P.,  a Delaware  limited  partnership  and/or any  successor  to any
          portion of such interests in the  Partnership  that is admitted to the
          Partnership  as a Limited  Partner  hereunder,  and any  other  Person
          admitted as a Limited Partner hereunder, for so long as such Person is
          a Limited Partner under the terms of this Agreement.

               1.8.45 "Liquidator" is defined in Section 8.3.


                                       13
<PAGE>
               1.8.46 "Major Decisions" is defined in Section 5.1.5.

               1.8.47 "Management Agreements" shall mean the property management
          agreements  between each REO Partnership and the Property  Manager for
          such REO Partnership.

               1.8.48 "Managing  General Partner" shall mean NPI-AP  Management,
          L.P., a Delaware limited partnership.

               1.8.49 "Net  Available  Cash," with respect to any period,  shall
          mean (i) the sum of all cash receipts of the  Partnership  during such
          period  from all sources  (including  Capital  Contributions,  Capital
          Receipts, Net Mortgage Proceeds, cash on hand at the beginning of such
          period to the  extent  not held in  reserves,  and any funds  released
          during such period from cash reserves previously  established),  minus
          (ii) Operating Costs for such period. Net Available Cash shall, to the
          extent necessary, be determined at the REO Partnership level on a look
          through basis.

               1.8.50 "Net Mortgage  Proceeds" shall mean (i) the sum of (a) the
          proceeds  of any loan made to the  Partnership  or the  proceeds  from
          refinancing any such loan, as applicable, plus (b) any amount released
          from  cash  escrow  accounts   established   under  any  loan  to  the
          Partnership,  reduced by (ii) the sum of (a) any  amounts  required to
          fund  the  Partnership's   capital  expenditures  that  are  otherwise
          permitted to be withheld from such amounts for such purpose under this
          Agreement,  (b) any and all expenses  incurred by the  Partnership  in
          connection  with  such  loan  or  refinancing,  (c)  amounts  used  as
          permitted under this Agreement to repay the loan being  refinanced and
          any other  indebtedness of the Partnership,  plus (d) amounts  thereof
          retained  as  reserves  under this  Agreement.  For  purposes  of this
          Agreement,  Net Mortgage Proceeds,  shall, to the extent necessary, be
          determined at the REO Partnership level on a look through basis.

               1.8.51 "Non-Defaulting Partner" is defined in Section 2.2.2.

               1.8.52  "Non-Discretionary Items" shall mean expenditures payable
          by the Partnership for taxes, utilities,  insurance,  debt service and
          expenses or other amounts required to be paid by the Partnership under
          contracts or agreements of the Partnership.

               1.8.53 "Nonrecourse Deductions" is defined in Section 3.4.6.

               1.8.54 "Nonrecourse Liability" is defined in Section 3.4.6.

               1.8.55  "Operating  Costs"  shall  mean  the sum of (i) all  cash
          expenditures of the Partnership made during a period for current costs
          and  expenses  (except  to the  extent  constituting  a  reduction  in
          computing Net Mortgage  Proceeds or Capital Receipts for such period),
          including  the  closing  costs   associated  with  the   Partnership's
          acquisition of the Properties, due diligence expenditures, payments of
          interest and  principal or other  monetary  obligations  due under any
          loan made to the  Partnership;  accounting,  legal and auditing  fees;
          taxes payable by the  Partnership;  public or private utility charges;
          sales, use, payroll taxes and withholding  taxes related thereto;  and
          all other entitlement,

                                       14
<PAGE>

          infrastructure,   subdivision,  surveying,  advertising,   management,
          leasing, and rezoning costs,  government approval, and other operating
          costs,  expenses and capital expenditures  (including fees of land use
          consultants,  engineers,  architects, municipal development fees, bond
          costs and the like)  actually  paid with respect to the  Properties or
          the Partnership's  business generally or reimbursed to Partners,  plus
          (ii) such  reserves  established  from time to time during such period
          (except  to the extent  constituting  a  reduction  in  computing  Net
          Mortgage  Proceeds or Capital Receipts for such period).  For purposes
          of this Agreement, Operating Costs, shall, to the extent necessary, be
          determined at the REO Partnership level on a look through basis.

               1.8.56 "Partner Assignee" is defined in Section 7.4.

               1.8.57 "Partner Group" is defined in Section 5.9(ii).

               1.8.58 "Partner  Nonrecourse  Debt" is defined in Section 3.5.6.4
          hereof.

               1.8.59  "Partner  Nonrecourse  Debt  Minimum  Gain" is defined in
          Section 3.5.6.3 hereof.

               1.8.60  "Partner  Nonrecourse  Deductions"  is defined in Section
          3.5.6.5 hereof.

               1.8.61 "Partners" shall mean, collectively,  the General Partners
          and  the  Limited  Partners,  and any of  their  successors  in  their
          respective  capacities  as  Partners  admitted to the  Partnership  as
          Partners  hereunder,  and any other Person admitted as a Partner under
          this Agreement,  for so long as any such Person is a Partner under the
          terms of this  Agreement,  and a  "Partner"  shall mean any one of the
          Partners.

               1.8.62   "Partnership"   shall   mean  the   applicable   limited
          partnership  described on Schedule A hereto and  operated  pursuant to
          this Agreement.

               1.8.63 "Partnership  Accounting Year" shall mean and refer to the
          accounting  year of the  Partnership  ending  on  December  31 of each
          calendar year or such shorter fiscal period during such year for which
          a relevant determination is being made under this Agreement.

               1.8.64  "Partnership  Minimum Gain" is defined in Section 3.4.6.6
          hereof.

               1.8.65 "Percentage Interest" of a Partner as of any relevant time
          shall mean the applicable  Percentage  Interest set forth on Exhibit A
          for such  Partner.  Such  Percentage  Interest  shall be  adjusted  as
          provided in Section 2.2.2.1 if a Partner becomes a Defaulting  Partner
          under Section 2.2.2.

               1.8.66 "Person" shall mean any individual or Entity.


                                       15
<PAGE>
               1.8.67  "Profit"  or  "Loss"  shall  mean,  for each  Partnership
          Accounting  Year,  an amount  equal to the  Partnership's  net taxable
          income or loss for such Accounting Year, determined in accordance with
          Code Section 703(a) (for this purpose, all items of income, gain, loss
          or deduction required to be stated separately pursuant to Code Section
          703(a)(1) shall be included in computing such taxable income or loss),
          with the following adjustments:

               1.8.67.1  Any  income  of the  Partnership  that is  exempt  from
          federal  income tax and not otherwise  taken into account in computing
          Profit or Loss shall be added to such taxable income or loss;

               1.8.67.2  In the  event  the  agreed  fair  market  value  of any
          Partnership  asset  is  adjusted   pursuant  to  Regulations   Section
          1.704-l(b)(2)(iv)(f)  or other pertinent sections of such Regulations,
          the amount of such adjustment shall be taken into account for purposes
          of  computing  Profit  or  Loss;  and in  lieu  of  the  depreciation,
          amortization and other cost recovery  deductions taken into account in
          computing  such  taxable  income or loss,  there  shall be taken  into
          account  depreciation,  amortization  or other cost recovery  computed
          with  reference  to the  Gross  Asset  Value of  Partnership  property
          Approved by the General  Partners (if different  from its adjusted tax
          basis) pursuant to Regulations Section  1.704-l(b)(2)(iv)(g)  for such
          Partnership Accounting Year; and

               1.8.67.3  Notwithstanding  any other provisions,  any items which
          are specially  allocated pursuant to Sections 3.3 and 3.4 shall not be
          taken into account in computing Profit or Loss.

               1.8.68  "Properties" shall mean the properties and assets held by
          each of the REO Partnerships.

               1.8.69 "Property  Managers" shall mean the property  managers for
          the Properties.

               1.8.70 "Purchase Agreement" is defined in Section 1.4.1.

               1.8.71  "Regulations" is defined in the definition of "Income Tax
          Regulations."

               1.8.72  "REIT"  shall mean a real  estate  investment  trust or a
          partnership or other joint venture with a real estate investment trust
          as a partner (directly or indirectly).

               1.8.73 "REO Partnerships" is defined in Section 1.4.1.

               1.8.74 "REO Partnership Agreements" is defined in Section 1.4.1.

               1.8.75 "REO Partnership Interests" is defined in Section 1.4.1.

               1.8.76 "Required Additional  Contributions" is defined in Section
          2.1.1.


                                       16
<PAGE>

               1.8.77 "Revalued Property" is defined in Section 3.4.3.2.

               1.8.78  "Securities  Act" is  defined  on the cover  page of this
          Agreement.

               1.8.79 "Shortfall Disbursement" is defined in Section 2.1.1.

               1.8.80 "Tax Matters Partner" is defined in Section 5.4.

               1.8.81 "Tax Termination" is defined in Section 7.5.1.3.

               1.8.82  "Transfer" shall mean (i) the issuance,  transfer,  sale,
          gift, grant,  conveyance,  assignment,  encumbrance,  hypothecation or
          redemption,  directly or indirectly,  of any equity ownership interest
          (whether  stock,   membership   interest,   partnership   interest  or
          otherwise) in the  Partnership  or in any Person  holding a direct (or
          indirect through tiered Entities) interest in the Partnership,  or the
          merger  or  consolidation  of any  such  Person  into or with  another
          Person, as the case may be; and (ii) the execution and delivery by the
          Partnership  or any Person  holding an equity  ownership  (directly or
          indirectly  through tiered Entities)  interest in the Partnership of a
          contract of sale,  option or other agreement  providing for any of the
          foregoing;  provided,  however, that the interests of a Partner in the
          Partnership  may be pledged to lenders as security for a loan or loans
          (and  such  pledge  shall  not be  considered  a  Transfer),  provided
          further, that in the event any such lender forecloses on (or otherwise
          acquires)  the  pledged  interest,  such  interest  shall be  deemed a
          limited partner interest with no approvals or consent rights.

     1.9 Authorized Acts. In furtherance of its purposes, but subject to all the
other provisions of this Agreement  including  required Approvals of the General
Partners  set  forth  in  this  Agreement   (including  under  Article  5),  the
Partnership (and the Blackstone General Partner on behalf of the Partnership) is
hereby authorized:

          1.9.1 To pursue any rights of the Partnership  with respect to the REO
     Partnerships  pursuant to any agreement to which it is a party,  and to own
     the  REO  Partnership   Interests  or  any  other  asset  acquired  by  the
     Partnership pursuant to the provisions of this Agreement,  including taking
     the actions described in Section 1.4;

          1.9.2 To own the REO Partnership Interests for investment purposes and
     to finance, sell, convey, assign,  transfer or mortgage the REO Partnership
     Interests,  any other asset of the Partnership,  or any of them, necessary,
     convenient  or  incidental  to the  accomplishment  of the  purposes of the
     Partnership;

          1.9.3 To  operate,  maintain,  improve,  develop  and lease any assets
     acquired by the Partnership;

          1.9.4 To take any and all actions necessary, convenient or appropriate
     as a limited  partner of the REO  Partnerships  and  exercise all rights or
     powers relating thereto and execute appropriate  documents on behalf of the
     Partnership in connection therewith;




                                       17
<PAGE>

          1.9.5  To  borrow  money on  behalf  of  itself  (whether  secured  or
     unsecured) and issue evidences of indebtedness in furtherance of any or all
     of the  purposes of the  Partnership,  and to secure the same by  mortgage,
     deed of trust, pledge or other lien on any assets of the Partnership;

          1.9.6 To borrow money on the general credit of the Partnership for use
     in the Partnership business;

          1.9.7 To enter  into,  perform  and carry out  contracts  of any kind,
     including  contracts with Affiliates of any of the Partners,  necessary to,
     in connection with or incidental to the  accomplishment  of the purposes of
     the Partnership;

          1.9.8  To  issue  Funding  Notices  calling  for  additional   Capital
     Contributions in accordance with the provisions of this Agreement;

          1.9.9 To enter into any kind of lawful  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  Partnership,
     including the Approved Contracts.

The Blackstone  General Partner hereby is authorized to cause the Partnership to
execute  and deliver all  documents  and  instruments  reasonably  necessary  or
appropriate to close any of the foregoing  transactions.  No Partner shall cause
the Partnership to execute and deliver any  conveyance,  loan or lease documents
without first obtaining the Approval of the General Partners; provided, however,
that once Approved by the General Partners,  the Blackstone  General Partner may
execute and deliver any such  documents  with such material  changes  thereto as
shall be Approved  by the  General  Partners,  and only the  Blackstone  General
Partner  shall  execute  such  documents  on  behalf  of the  Partnership  which
execution by the Blackstone General Partner shall be binding on the Partnership.
Third  parties  shall be entitled  to rely on the  authority  of the  Blackstone
General Partner to execute and deliver any document on behalf of the Partnership
without the execution thereof by the Managing General Partner being required;

          1.9.10 To enter  into and to  perform  the  Partnership's  obligations
     under any agreement to which it becomes a party; and

          1.9.11 To enter  into and to  perform  the  Partnership's  obligations
     under: (i) all conveyance  documents necessary to acquire the Partnership's
     interest in the REO  Partnerships,  (ii) to undertake all required  actions
     necessary  with respect to the operation of the REO  Partnership  Interests
     (including the obligation to sell, exchange or otherwise dispose of the REO
     Partnership Interests for the Partnership's  account), all of the foregoing
     to be  subject  to  such  approvals  of the  Partnership  and  the  General
     Partners, as are set forth herein (all of such documents are referred to as
     the  "Acquisition  Documents");  and (iii) any other agreement to which the
     Partnership becomes a party pursuant to this Agreement. Notwithstanding any
     provision  herein,  the Blackstone  General Partner may enforce  (including
     termination where permitted under the Management  Agreement) the Management
     Agreement


                                       18
<PAGE>

     in its  reasonable  discretion,  without any  approval  rights given to the
     Managing General Partner.

     1.10  Authorized  Representatives.  The "Authorized  Representatives"  of a
General  Partner  that is not a natural  person  shall be those  representatives
designated by notice to the Blackstone General Partner by such Partner from time
to time to represent such Partner in connection with the Partnership, unless and
until replaced or removed by notice from such Partner to the Blackstone  General
Partner.   The  written   statements  and   representations   of  an  Authorized
Representative  for a  Partner  that is not a natural  Person  shall be the only
authorized  statements and  representations  of such Partner with respect to the
matters covered by this Agreement.  The initial Authorized  Representatives  are
(i) Thomas J. Saylak,  Gary M. Sumers,  and Stavros  Galiotos for the Blackstone
General Partner and (ii) John  Lines,  Jeffrey  Goldberg and James Aston for the
Managing General Partner.  The written  statement or  representation  of any one
Authorized  Representative  of such  Partner  shall be  sufficient  to bind such
Partner  with respect to all matters  pertaining  to the  Partnership.  The term
"Approved  by" or "Consented  to by" or "Consent of" or  "satisfactory  to" with
respect to a Partner  that is not a natural  Person  means a decision  or action
which has been consented to in writing by an Authorized  Representative  of such
Partner, and with respect to a Partner who is an individual, means a decision or
action which has been consented to in writing by such individual. In order for a
decision or action to be "Approved by the General  Partners"  (or any  variation
thereof),  the  decision or action  must be Approved by at least one  Authorized
Representative  of the  Blackstone  General  Partner  and the  Managing  General
Partner or otherwise  deemed  approved in accordance with the provisions of this
Agreement.


                                    ARTICLE 2
 
                              CAPITAL CONTRIBUTIONS
                           AND ADDITION CONTRIBUTIONS

     2.1 Capital Contributions.

          2.1.1 Initial Capital Contributions.  On the date hereof, each Partner
     has contributed the amount in cash to the capital of the Partnership)  that
     is  set  forth  for  such  Partner  on  Exhibit  A  as  its  Section  2.1.1
     Contribution.

          2.1.2 Required  Additional  Contributions.  Except as provided in this
     Section   2.1.2,   no  Partner  shall  be  required  to  make  any  Capital
     Contributions  other than those  described in Section  2.1.1.  Each Partner
     shall  be  required  to  make  additional  Capital   Contributions  to  the
     Partnership  if the  Blackstone  General  Partner or the  Managing  General
     Partner  gives notice to all Partners (a "Funding  Notice")  that meets the
     requirements  of this  Section  2.1.2.  The  amount of  additional  Capital
     Contributions  so required  from each  Partner  shall be an amount equal to
     (a) such Partner's Percentage Interest multiplied by (b) the amount of cash
     that is  reasonably  needed  ("Shortfall  Disbursement")  for  expenditures
     necessary  to  undertake  the  actions  that are  Approved  by the  General
     Partners  (or  permitted  to be taken  under this  Agreement  without  such
     Approval) with respect to the operation of the


                                       19
<PAGE>

     REO   Partnerships   or  the   Partnership  and  with  respect  to  capital
     expenditures and rehabilitation expenditures  ("Rehabilitation Costs") that
     have not previously been Approved by the General Partners,  in each case as
     set forth in such Funding Notice;  provided,  however,  that the Blackstone
     General Partner shall be the only Partner entitle to issue a Funding Notice
     for Rehabilitation Costs and neither the Blackstone General Partner nor the
     Managing  General Partner shall be required to issue a Funding Notice under
     any  circumstances,  and provided,  further,  that with respect to each REO
     Partnership,  no Partner shall be required to make any  additional  Capital
     Contributions pursuant to this Section 2.1.2 in an aggregate amount for all
     periods   greater   than  (i) its   Percentage   Interest   multiplied   by
     (ii) $1,000,000, and provided, further, that in the aggregate among all the
     REO  Partnerships,  no Partner  shall be  required  to make any  additional
     Capital Contributions pursuant to this Section 2.1.2 in an aggregate amount
     for all periods  greater than (i) its  Percentage  Interest  multiplied  by
     (ii) $3,500,000.   Each  Funding   Notice  shall   describe  the  Shortfall
     Disbursement  and set forth the Required  Additional  Contribution  of each
     Partner as determined  pursuant to this Section 2.1.2.  If a Funding Notice
     is properly  issued as provided above in this Section  2.1.2,  each Partner
     shall  contribute  the amount  required to be  contributed  by such Partner
     pursuant to this Section 2.1.2 ("Required Additional  Contributions") on or
     before the Due Date therefor under Section 2.2.1.

     2.2 Withdrawal of Capital;  Return of Capital;  Deficit  Balance in Capital
Account; Additional Capital Contributions and Capital Calls.

          2.2.1 If a Funding Notice is properly given by the Blackstone  General
     Partner  pursuant  to  Section  2.1.2  or  the  general  partner  of an REO
     Partnership  pursuant to Section  2.1.2 of the REO  Partnership  Agreement,
     each Partner shall have the obligation to contribute additional cash to the
     capital  of the  Partnership  (and  the  general  partners  shall  have the
     obligation  to  contribute  additional  cash  to the  capital  of  the  REO
     partnership  pursuant to the REO Partnership  Agreement) in an amount equal
     to the product of (a) the  Shortfall  Disbursement  multiplied  by (b) such
     Partner's  Percentage  Interest,  which amount shall be used to satisfy the
     items described in such Funding Notice.  Each Partner shall  contribute its
     share of any Shortfall Disbursement within ten (10) Business Days after the
     later to occur of (i) the  date on which the Funding  Notice  with  respect
     thereto  has been  received  (or deemed  received  hereunder)  or  (ii) the
     required  funding  date  that  is set  forth  in the  Funding  Notice  (the
     expiration of such ten-day period is referred to as the "Due Date").  There
     shall be a cure  period of ten (10)  Business  Days  after the Due Date for
     each Partner to contribute  its share of such  Shortfall  Disbursement,  as
     provided in Section 2.2.2.

          2.2.2 If any  Partner  fails to  contribute  the  full  amount  of its
     Additional  Capital  Contributions  required to be made pursuant to Section
     2.1.2 within ten (10)  Business  Days after the Due Date  thereunder  (such
     Partner,  the "Defaulting  Partner"),  then, as the exclusive remedy of the
     Partnership  and the other  Partners who are not  Defaulting  Partners (the
     "Non-Defaulting  Partners"),  the Non-Defaulting Partners (in proportion to
     their Percentage interests) may contribute to the Partnership the amount of
     such  Capital  Contribution  that was not  made  timely  by the  Defaulting
     Partner  with such  contribution,  at the  election  of the  Non-Defaulting
     Partners, deemed a loan (a "Default Loan") to the Defaulting Partner by the
     Non-Defaulting Partner and a Capital Contribution


<PAGE>

     by the Defaulting Partner to the Partnership.  All distributions payable to
     the Defaulting Partner hereunder will be paid to the Non-Defaulting Partner
     until the  Non-Defaulting  Partner  has  received  distributions  otherwise
     payable to the  Defaulting  Partner in an amount  equal to the Default Loan
     and interest  thereon at a rate equal to the  interest  provided in section
     2.4 below.

          2.2.2.1 If the  Non-Defaulting  Partners  that timely  contribute  the
     amount  of  the   Capital   Contribution   required   to  be  made  by  the
     Non-Defaulting  Partners  and the  Non-Defaulting  Partners do not elect to
     treat  such  contribution  as a loan as  provided  in  Section  2.2.2,  the
     Percentage Interests shall be adjusted, by reducing the Percentage Interest
     of the Defaulting  Partner (and  increasing the Percentage  Interest of the
     Non-Defaulting  Partners  by the  amount of such  reduction)  to the amount
     determined by  subtracting  from such  Percentage  Interest the  percentage
     obtained by multiplying (A) the Defaulting Partner's Percentage Interest by
     (B) a  fraction,  (x) the  numerator  of which is 150% of the amount of the
     Required Additional Contribution that was not made timely by the Defaulting
     Partner, and (y) the denominator of which shall be the sum of the numerator
     plus the  Capital  Contributions  made by the  Defaulting  Partner  for all
     periods.   The  Capital   Contributions   made  (or  deemed  made)  by  the
     Non-Defaulting  Partners  instead of the  Defaulting  Partner  pursuant  to
     Section 2.2.2.1   shall  be  treated  as  Capital   Contributions   of  the
     Non-Defaulting  Partners for all purposes of this Agreement  (including for
     purposes of  determining  whether such Partner has  satisfied its potential
     maximum Capital Contribution under Section 2.1.2).

     The foregoing  adjustments  shall not require a  reallocation  of Profit or
     Loss, or any other tax items for any Partnership Accounting Year in respect
     of which such tax items  already were  allocated  among the Partners on any
     tax return of the Partnership that was filed prior to the event giving rise
     to the adjustment.

     If none of the  Partners  timely  contributes  any  portion of its  Capital
     Contribution  required  pursuant  to a Funding  Notice,  there  shall be no
     reduction of any Partner's  Percentage  pursuant to this Section 2.2.2 with
     respect to the  failure of a partner to timely make  Capital  Contributions
     under such Funding Notice.

          2.2.3 Except as otherwise specifically set forth in this Agreement, no
     Partner  shall have the right to (i) make any Capital  Contribution  to the
     Partnership, (ii) withdraw such Partner's Capital Contribution or to demand
     or receive  the return of a Capital  Contribution  or make any claim to any
     portion of  Partnership  capital or (iii) demand or receive  property other
     than cash in return for a Capital  Contribution  or to receive  any cash in
     return for a Capital Contribution.

          2.2.4 Except as expressly provided in this Agreement, no Partner shall
     have personal liability to make any Capital Contribution.

          2.2.5 A deficit Capital Account of a Partner (or of a partner,  member
     or  venturer of a Partner)  shall not be deemed to be a  liability  of such
     Partner (or of such partner, member or venturer) or an asset or property of
     the Partnership (or any


                                       
<PAGE>

     Partner).  Furthermore,  no  Partner  shall  have  any  obligation  to  the
     Partnership or any other Partner for any deficit  balance in such Partner's
     Capital Account.

     2.3 Use of Capital Contributions; Certain Expenses.

          2.3.1 The initial Capital Contributions made pursuant to Section 2.1.1
     shall be used as  follows:  (i) to pay  unpaid  third-party  formation  and
     start-up  costs of the  Partnership,  including  the costs of entering into
     this Agreement and any  reimbursements  to the Partners with respect to due
     diligence,  formation and start-up expenditures,  including attorneys' fees
     and expenses  and  qualification  costs (and to reimburse  each Partner for
     portions  thereof  already  paid by such Partner or its  Affiliates),  such
     amounts  (a) to include  the  Partners'  attorneys'  fees and  expenses  in
     connection  with  the  preparation  of this  Agreement,  and the  documents
     contemplated  hereby,  and (b) to be paid or  reimbursed to the Partners on
     behalf of the Partnership out of such Capital Contributions  promptly after
     invoices for such amounts are submitted to the General  Partners,  and (ii)
     the balance,  if any, shall be held in reserves pending  expenditure as set
     forth in an Approved  Budget (or  otherwise  as Approved by the Partners or
     permitted without such Approval under Section  5.1.3.2).  The Partnership's
     reasonable  expenses of acquiring  the REO  Partnership  Interests  and the
     Properties  that have been  funded  by the  Partners  shall be set forth on
     Exhibit B and Exhibit B-1,  respectively,  promptly following the Agreement
     Date. Such payments shall be treated as Capital  Contributions  pursuant to
     Section 2.1.1,  shall be credited to the Partner's Capital Account, in each
     case as of the Agreement Date and shall be reimbursed by the Partnership as
     necessary  to cause the  Capital  Contributions  of the  Partners  to be in
     proportion to the Partners' respective Percentage Interests.

     2.4 Loans to the Partnership. To the extent available cash flow, borrowings
and Capital  Contributions,  including Required  Additional  Contributions under
Section 2.1.2,   are  insufficient  for  the  reasonable   requirements  of  the
Partnership  and the REO  Partnerships,  and the Partners fail,  within ten (10)
days after receiving notice from the Blackstone  General Partner or the Managing
General  Partner  requesting  same,  to Approve  the  Partners'  making  Capital
Contributions  in  excess of the  remaining  amount  of  Contributions  that are
required under  Section 2.1.2,  the Blackstone  Partners or the Insignia Partner
shall,  upon  notice  to the  other,  have  the  unilateral  right  (but not the
obligation)  to finance  (directly,  or through an  Affiliate)  any  Partnership
expenditure  by making a loan or loans to the  Partnership  at an interest  rate
equal to the  lesser of  (a) twelve  percent  (12%) per  annum,  cumulative  and
compounded  quarterly,  or (b) the  maximum  rate  permitted  by law,  provided,
however, that prior to making any loan pursuant to this Section 2.4, the lending
Partners  shall give at least ten (10) Business Days prior written notice to the
other  Partners and offer to the other  Partners the  opportunity to participate
(in proportion to the Percentage  Interests of the other  Partners) in such loan
or loans. Any notice from a General Partner  pursuant to this Section 2.4  shall
specify the amount of such loan,  the share  thereof  which each Partner (or its
Affiliates)  may lend and the earliest  date on which such loan is to be made to
the Partnership  (which date shall not, except in case of Emergency,  be earlier
than ten  (10)  Business  Days  after  such  notice  is  received  by the  other
Partners).  The other  Partners  may  participate  in any loan  pursuant to this
Section 2.4, if at all, only by delivery to the Partnership,  not later than the
date specified in such notice, of its share of such loan. All

<PAGE>

loans  described  in this  Section 2.4 shall be  repayable  as  provided  for in
Sections 4.1  and 4.2. If the Insignia  Partner  elects not to  participate in a
loan, the Blackstone General Partner, on behalf of the Blackstone Partners,  may
elect to loan a proportionate amount to the Insignia Partner to be loaned to the
Partnership by the Insignia Partner.

                                    ARTICLE 3

                                   ALLOCATIONS

     3.1 Establishment and Maintenance of Capital Accounts;  Partnership Status.
The  Blackstone  General  Partner shall  establish and cause the  Partnership to
maintain a single Capital Account for each Partner which reflects each Partner's
Capital  Contributions  to the  Partnership.  Each  Capital  Account  shall also
reflect the allocations and distributions  made pursuant to Articles 3 and 4 and
otherwise be adjusted in accordance with Code Section 704 and the principles set
forth  in  Regulations   Sections  1.704-l(b)  and  1.704-2.  In  applying  such
principles,  any  expenditures  of the  Partnership  described  in Code  Section
705(a)(2)(B) or treated as Code Section  705(a)(2)(B)  expenditures  pursuant to
Regulations Section  1.704-l(b)(2)(iv)(i)  shall be allocated among the Partners
in the same manner as such  expenditures  would be allocated  among the Partners
pursuant to this Article 3 if such expenditures were treated as additional items
of  deduction  of the  Partnership  that  were  recognized  and  required  to be
allocated  among the  Partners  pursuant to this  Article 3  with respect to the
Partnership  Accounting Year in which such  expenditures were made. The Partners
intend that the Partnership be treated as a partnership for tax purposes.

     3.2  Profit  and Loss  Allocations.  Except as  expressly  provided  to the
contrary in this  Section  3.2,  for  purposes of  determining  Capital  Account
balances  under  this  Section  3.2,  (a)  Profit  and Loss with  respect to any
Partnership  Accounting  Year  shall  be  allocated  prior to  reducing  Capital
Accounts by any distributions with respect to such Partnership  Accounting Year,
and  (b)   Section  3.2  shall  be  applied   before   applying   Section   3.3.
Notwithstanding  anything to the contrary in this Article 3, the  allocations of
Profit  and  Loss  pursuant  to this  Article  3 are  intended  to  satisfy  the
"fractions"  and  "substantial  economic  effect"  rules  contained  in  Section
514(c)(9)(E)  of the Code,  and Profits and Losses shall be allocated  among the
Partners only to the extent that such allocations would not violate such rules.

          3.2.1 Loss. For each  Partnership  Accounting  Year from the Agreement
     Date  until the  termination  of the  Partnership,  Loss  from  Partnership
     operations  shall be allocated among the Partners in the following order of
     priority:

               3.2.1.1 First, to offset any cumulative  Profits allocated to the
          Partners pursuant to Section 3.2.2.2; and

               3.2.1.2  Thereafter,  after giving effect to the allocations made
          pursuant to  Section 3.2.1.1,  among the Partners in proportion to the
          Partners' then respective Percentage Interests.


                                       
<PAGE>

          3.2.2 Profit.  For each Partnership  Accounting Year,  Profit shall be
     allocated in the following order of priority:

               3.2.2.1 First, to offset any cumulative  losses  allocated to the
          Partners pursuant to Section 3.2.1.2,

               3.2.2.2  Thereafter,   giving  effect  to  the  Allocations  made
          pursuant to Section  3.2.2.1,  among the Partners in proportion to the
          Partners' then effective Percentage Interests.

          3.2.3 Rules of Construction.

               3.2.3.1 For  purposes  of  applying  Section 3.3 as a result of a
          disposition  occurring with respect to part (but less than all) of any
          capital asset of the Partnership,  a Partner's Capital Account balance
          shall be deemed to be increased by such Partner's share of Partnership
          Minimum Gain and Partner Nonrecourse Debt Minimum Gain remaining after
          such  disposition  as  determined  under the  Regulations  under  Code
          Section 704(b).

               3.2.3.2  Except as is  otherwise  provided in this  Article 3, an
          allocation of Partnership  taxable income or taxable loss to a Partner
          shall be treated as an allocation to such Partner of the same share of
          each item of income, gain, loss and deduction that has been taken into
          account in computing such taxable income or taxable loss.

     3.3 Minimum Gain Chargeback and Qualified Income Offset.

          3.3.1 No Impermissible  Deficits.  Notwithstanding any other provision
     of this  Agreement,  taxable  loss (or  items of  deduction)  shall  not be
     allocated to a Partner to the extent that the Partner has or would have, as
     a result of such  allocations,  an Adjusted  Capital Account  Deficit.  Any
     taxable loss (or items of deduction)  which otherwise would be allocated to
     a Partner,  but which cannot be  allocated  to such Partner  because of the
     application  of  the  immediately  preceding  sentence,  shall  instead  be
     allocated to the other Partners.

          3.3.2 Qualified Income Offset.  In order to comply with the "qualified
     income offset"  requirement of the  Regulations  under Code Section 704(b),
     and  notwithstanding  any other provision of this Agreement to the contrary
     except  Sections  3.3.3 and  3.4.3  below,  in the event a Partner  for any
     reason (whether or not expected) has an Adjusted  Capital Account  Deficit,
     items of Profits  (consisting  of a pro rata portion of each item of income
     comprising the Partnership's Profits,  including both gross income and gain
     for the taxable  year) shall be  allocated to such Partner in an amount and
     manner  sufficient to eliminate as quickly as possible the Adjusted Capital
     Account Deficit.

          3.3.3  Minimum Gain  Chargeback.  In order to comply with the "minimum
     gain chargeback" requirements of Regulations Sections 1.704-2(f)(1) and


                                     
<PAGE>

     1.704-2(i)(4), and notwithstanding any other provision of this Agreement to
     the contrary,  in the event there is a net decrease in a Partner's share of
     Partnership  Minimum  Gain and/or  Partner  Nonrecourse  Debt  Minimum Gain
     during  a  Partnership  taxable  year,  such  Partner  shall  be  specially
     allocated  items of income and gain for that year (and if necessary,  other
     years)  in an amount  equal to its  respective  share of such net  decrease
     during such year,  determined  pursuant to Regulations  Sections 1.704-2(g)
     and  1.704-(2)(i)(5)  as required  by and in  accordance  with  Regulations
     Sections 1.704-2(f) and 1.704-2(i)(4) before any other allocation is made.

     3.4 Other Tax Allocation Provisions.
 
          3.4.1  Income  Characterization.   For  purposes  of  determining  the
     character (as ordinary  income or capital gain) of any Profit  allocated to
     the  Partners  pursuant to Section 3.3 or 3.4,  such portion of the taxable
     income  of the  Partnership  allocated  pursuant  to  Section  3.3 which is
     treated as ordinary  income  attributable  to the recapture of depreciation
     shall,  to the extent  possible,  be  allocated  among the  Partners in the
     proportion  which (i) the amount of  depreciation  previously  allocated to
     each Partner bears to (ii) the total of such depreciation  allocated to all
     Partners.  This  Section  3.4.1  shall not alter the amount of  allocations
     among the  Partners  pursuant  to Section 3.2 but merely the  character  of
     income so allocated.

          3.4.2 Change in Percentage  Interests.  Notwithstanding the foregoing,
     in the event any Partner's Percentage Interest changes during a fiscal year
     for any  reason  other  than an  adjustment  thereof  pursuant  to  Section
     2.2.2.1,  including  the Transfer of any interest in the  Partnership,  the
     allocations   of  taxable   income  or  loss  under  this  Article  3,  and
     distributions,  shall be  adjusted  as  necessary  to reflect  the  varying
     interests of the Partners  during such year using an interim closing of the
     books  method as of the date of such  change,  or such  other  method as is
     Approved by the General Partners.

          3.4.3 Mandatory  Allocations -- Section 704(c) and Partner Nonrecourse
     Debt.

               3.4.3.1  Notwithstanding  the  foregoing,  (i) in the event  Code
          Section  704(c) or Code Section  704(c)  principles  applicable  under
          Regulations Section 1.704-1(b)(2)(iv) require allocations of income or
          loss of the  Partnership  in a manner  different  than  that set forth
          above,  the  provisions  of Code  Sections  704(b)  and 704(c) and the
          Regulations  thereunder  shall  control  such  allocations  among  the
          Partners;  and (ii)  all tax  deductions  and  taxable  losses  of the
          Partnership  that,  pursuant to  Regulations  Section 1.704- 2(i), are
          attributable to a Partner  Nonrecourse  Debt for which a Partner (or a
          Person  related to such Partner  under  Treasury  Regulations  Section
          1.752-4(b))  bears the  economic  risk of loss  (within the meaning of
          Regulations  Section  1.752-2)  shall be  allocated to such Partner as
          required by Regulations Section 1.704-2.

               3.4.3.2 Any item of income, gain, loss and deduction with respect
          to any  property  (other  than  cash) that has been  contributed  by a
          Partner to the capital of the  Partnership  or which has been revalued
          for Capital Account


                                     
<PAGE>

          purposes pursuant to Regulations Section  1.704-1(b)(2)(iv)  and which
          is required or  permitted  to be  allocated to such Partner for income
          tax purposes  under Code Section 704(c) so as to take into account the
          variation  between the tax basis of such  property and its fair market
          value  at  the  time  of  its  contribution  or at  the  time  of  its
          revaluation  for Capital  Account  purposes  pursuant  to  Regulations
          Section  1.704-1(b)(2)(iv)  (such  contributed or revalued property is
          referred to as  "Revalued  Property")  shall be  allocated  solely for
          income tax purposes in the manner so required or permitted  under Code
          Section 704(c) using the "traditional method" described in Regulations
          Section 1.704-3(b) (or any successor Regulation),  such allocations to
          be made as  shall  be  Approved  by the  General  Partners;  provided,
          however,   that  curative   allocations   consisting  of  the  special
          allocation of gain or loss upon the sale or other  disposition  of the
          Revalued Property shall be made in accordance with Regulations Section
          1.704-3(c) to the extent necessary to eliminate any disparity,  to the
          extent  possible,  between the Partners' book and tax Capital Accounts
          attributable to such property; and further provided, however, that any
          other method  allowable  under  applicable  Regulations may be used in
          connection  with any  Revalued  Property  as shall be  Approved by the
          General  Partners.  Notwithstanding  anything in this Agreement to the
          contrary,  the  determination  of  Gross  Asset  Value  for any  asset
          contributed to the  Partnership,  distributed  from the Partnership or
          any  other  Revalued  Property  shall be as  Approved  by the  General
          Partners.

          3.4.4 Guarantee of Partnership  Indebtedness.  Except for arrangements
     expressly  described  in  this  Agreement  (including  loans  described  in
     Section 2.2.2  or 2.4),  no Partner  shall enter into (or permit any Person
     related to the Partner to enter into) any  arrangement  with respect to any
     liability of the Partnership that would result in such Partner (or a Person
     related to such Partner under Regulations  Section 1.752- 4(b)) bearing the
     economic risk of loss (within the meaning of Regulations  Section  1.752-2)
     with respect to such liability unless such arrangement has been Approved by
     the General Partners. To the extent a Partner is permitted to guarantee the
     repayment of any Partnership indebtedness under this Agreement, each of the
     other  Partners  shall  be  afforded  the  opportunity  to  guarantee  such
     Partner's  pro rata share of such  indebtedness,  determined  in accordance
     with the Partners' respective Percentage Interests. If a loan is to be made
     to the  Partnership  and such loan is to be  guaranteed  by any Partners or
     their Affiliates  (which guaranty by a Partner or such Partner's  Affiliate
     shall occur only upon the Approval of the General Partners and the Approval
     of such Partner),  then such guaranty shall be made in the proportion  that
     is Approved by the General  Partners.  Nothing in this Section  3.4.4 shall
     prohibit the Blackstone  General Partner from entering into any contract or
     other  arrangement  that has been  Approved  by the  General  Partners  (or
     otherwise is permitted to be entered into under this Agreement  without the
     Approval of the General Partners) and that results in contingent  liability
     for the  Blackstone  General  Partner by  operation of law by reason of the
     Blackstone General Partner being a general partner of the Partnership.

          3.4.5 References to Regulations.  Any reference in this Agreement to a
     provision of final,  proposed and/or  temporary  Regulations  shall, in the
     event such provision is modified or  renumbered,  be deemed to refer to the
     successor  provision as so modified or  renumbered,  but only to the extent
     such successor provision applies to the


                                      
<PAGE>

     Partnership  under the effective  date rules  applicable to such  successor
     provision or the Partners  otherwise so Approve under applicable  elections
     contained in such Regulations.

          3.4.6 Tax Definitions.

               3.4.6.1  "Nonrecourse  Deductions"  has the  meaning set forth in
          Regulations Section 1.704-2(c).  The amount of Nonrecourse  Deductions
          for a Partnership  Accounting  Year equals the excess,  if any, of the
          net increase, if any, in the amount of Partnership Minimum Gain during
          that  fiscal  year,  over the  aggregate  amount of any  distributions
          during that fiscal year of proceeds of a  Nonrecourse  Liability  that
          are allocable to an increase in Partnership  Minimum Gain,  determined
          according to the provisions of Regulations Section 1.704-2(c).

               3.4.6.2  "Nonrecourse  Liability"  has the  meaning  set forth in
          Regulations Section 1.704-2(b)(3).

               3.4.6.3 "Partner  Nonrecourse Debt Minimum Gain" means an amount,
          with  respect  to  each  Partner   Nonrecourse   Debt,  equal  to  the
          Partnership Minimum Gain that would result if such Partner Nonrecourse
          Debt were treated as a Nonrecourse Liability, determined in accordance
          with Regulations Section 1.704-2(i)(2).

               3.4.6.4 "Partner  Nonrecourse  Debt" has the meaning for the term
          "Partner  Nonrecourse  Debt" set forth in  Regulations  Section 1.704-
          2(b)(4).

               3.4.6.5 "Partner Nonrecourse  Deductions" has the meaning for the
          term "Partner Nonrecourse Deductions" set forth in Regulations Section
          1.704-2(i).  The amount of Partner Nonrecourse Deductions with respect
          to a Partner Nonrecourse Debt for a Partnership Accounting Year equals
          the excess, if any, (i) of the net increase,  if any, in the amount of
          the Partnership  Minimum Gain attributable to such Partner Nonrecourse
          Debt during such Partnership  Accounting Year, over (ii) the aggregate
          amount of any distributions during such year to the Partner that bears
          the  economic  risk of loss for such Partner  Nonrecourse  Debt to the
          extent  such   distributions   are  from   proceeds  of  such  Partner
          Nonrecourse   Debt  and  are  allocable  to  an  increase  in  Partner
          Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
          Debt,  determined  according to the provisions of Regulations  Section
          1.704-2(i).

               3.4.6.6  "Partnership  Minimum Gain" has the meaning  ascribed to
          the term  "Partnership  Minimum Gain" in  Regulations  Section  1.704-
          2(d)(1).

     3.5 Basis  Elections.  In the event of a  transfer  of all or any part of a
Partner's  interest in the Partnership,  the Partnership shall make the election
described  in Code Section 754 to adjust the basis of the  Partnership's  assets
under  Code  Section 743(b).  The  transferor  or  transferee  of a  Partnership
interest  shall  pay all  costs of  preparing  and  filing  all  instruments  or
documents necessary to effectuate such election if made.


                                      
<PAGE>

     3.6 General  Allocation Rules. All Profit and Loss of the Partnership shall
be allocated with respect to each Partnership  Accounting Year (or part thereof)
as of the end of, and within ninety (90) days after the end of, such year, or as
soon  thereafter  as is  practically  possible.  All  Profit  and Loss  shall be
allocated to the Partners  shown on the records of the  Partnership to have been
Partners as of the last day of the  Partnership  Accounting  Year for which such
allocation  is to be made,  except that,  if a Partner  sells or  exchanges  its
interest in the  Partnership or otherwise is admitted as a substituted  Partner,
the Profit or Loss shall be allocated  between the transferor and the transferee
by taking into account their varying interests during the Partnership Accounting
Year in accordance  with Code Section  706(d),  using the interim closing of the
books method or such other method as shall be Approved by the General Partners.

     3.7 Sharing of  Partnership  Nonrecourse  Debt.  Throughout the term of the
Partnership,  the  nonrecourse  debt  of the  Partnership  (other  than  Partner
Nonrecourse  Debt) shall be  allocated  for tax  purposes  among the Partners in
accordance with their then respective Percentage  Interests.  To the extent that
any Partner's share of such nonrecourse debt as so specified exceeds the amounts
referred to in Regulations  Sections  1.752-3(a)(1) and (2), it is intended that
the foregoing  shares shall be viewed and treated as reasonably  consistent with
allocations (which have substantial economic effect) of some significant item of
partnership   income  or  gain  within  the  meaning  of   Regulations   Section
1.752-3(a)(3).

     3.8 Adjustment of Gross Asset Value. Gross Asset Value, with respect to any
asset,  shall be the  adjusted  basis for  federal  income tax  purposes of that
asset, except as follows:

          3.8.1  Except as provided in  Section 2.1.1,  the initial  Gross Asset
     Value of any asset  contributed (or deemed  contributed  under  Regulations
     Section  1.708-1(b)(1)(iv))  by a Partner to the  Partnership  shall be the
     fair market value of the asset on the date of the contribution, as Approved
     by the General Partners (subject to Section 5.9(iii).

          3.8.2  The  Gross  Asset  Values of all  Partnership  assets  shall be
     adjusted  to equal the  respective  fair market  values of the  assets,  as
     Approved by the General Partners (subject to Section 5.9(iii):

               3.8.2.1 If the Partners  Approve that an  adjustment is necessary
          or  appropriate  to reflect the  relative  economic  interests  of the
          Partners in the Partnership,  as a result of (i) the acquisition of an
          additional  interest in the Partnership by any new or existing Partner
          in  exchange  for more  than a de  minimis  capital  contribution;  or
          (ii) the  distribution  by the Partnership to a Partner of more than a
          de minimis  amount of  Partnership  property as  consideration  for an
          interest in the Partnership; and

               3.8.2.2  As of the  liquidation  of the  Partnership  within  the
          meaning of Regulations Section 1.704-1(b)(2)(ii)(g).

<PAGE>

          3.8.3 The Gross Asset Value of any  Partnership  asset  distributed to
     any Partner  shall be the gross fair market  value of the asset on the date
     of  distribution  as Approved by the General  Partners  (subject to Section
     5.9(iii) (less any  liabilities  assumed by the  distributee  Partner or to
     which such asset is subject as of the time of distribution).

          3.8.4 The Gross Asset Values of Partnership  assets shall be increased
     or decreased to reflect any  adjustment to the adjusted basis of the assets
     under  Code  Section  734(b) or  743(b),  but only to the  extent  that the
     adjustment  is taken into account in  determining  Capital  Accounts  under
     Regulations Section 1.704-1(b)(2)(iv)(m),  provided that Gross Asset Values
     shall not be  adjusted  under this  Section  3.8.4 to the  extent  that the
     General  Partners  Approve  that  an  adjustment  under  Section  3.8.2  is
     necessary  or  appropriate  in  connection  with a  transaction  that would
     otherwise result in an adjustment under this Section 3.8.4.

     After the Gross  Asset Value of any asset has been  determined  or adjusted
     under Section 3.8.1, 3.8.2 or 3.8.4, Gross Asset Value shall be adjusted by
     the depreciation  taken into account with respect to the asset for purposes
     of computing Profits or Loss.


     3.9 Approvals Relating to Tax Issues.

     During all periods, all material tax elections,  the determination of Gross
Asset Value for any property, other decisions relating to taxes and tax returns,
require the Approval of the General Partners.

                                    ARTICLE 4
 
                               LOAN REPAYMENTS AND
                                  DISTRIBUTIONS

     4.1 Net Available Cash. The Blackstone General Partner shall, at the end of
each quarter, determine the amount of Net Available Cash. All Net Available Cash
for any period shall be  distributed in the following  order of priority  within
thirty (30) days after the end of each calendar  quarter,  after first  repaying
any loans to the  Partnership  from the Partners  under Section 2.4 (loans which
have been  outstanding  the  longest  shall be  repaid  first and if two or more
Partners have loans which have been outstanding for equal periods,  repayment of
such  loans  shall  be made  pro  rata,  in  proportion  to the  Partners'  then
respective  loan  balances,  with  payments  first  repaying  accrued but unpaid
interest and then repaying  principal) and subject to the terms of  Sections 4.2
and 4.3, to the Partners in proportion to the  Partners'  respective  Percentage
Interests.

     4.2 Proceeds and Distributions in Liquidation. The proceeds received by the
Partnership in connection with the liquidation and winding up of the Partnership
shall be applied in the following order of priority:

<PAGE>

          4.2.1 First, to the payment of creditors of the Partnership (including
     any creditors  that are also  Partners),  except  secured  creditors  whose
     obligations  will be assumed or otherwise  transferred  on a liquidation of
     the Partnership property or assets;

          4.2.2 Second,  to the payment of expenses  incurred in the dissolution
     and termination of the Partnership; and

          4.2.3 Third, the balance, if any, shall be distributed to the Partners
     in accordance with the positive Capital Asset balances of the Partners.

     4.3 General  Distribution Rules. The timing and amount of all distributions
shall be in accordance with Sections 4.1, 4.2, 8.4 and 8.5. All distributions of
cash shall be made to the Partners  shown on the records of the  Partnership  to
have been  Partners on the date of the  distribution.  All  distributions,  upon
request by a Partner,  shall be made by wire transfer in  immediately  available
funds to such Partner's account specified in such request.  Distributions of Net
Available  Cash made to a Partner  shall be deemed to be  advances on account of
such Partner's share of the distributable  amounts thereof. For purposes of this
Agreement,  the term  "distributable"  with respect to such distributions  shall
mean the amount of such  distributions  as finally  determined  pursuant  to the
provisions of this Agreement by the Partners for the Partnership Accounting Year
in respect of which they were made and for the term of the Partnership.

     4.4 Source of  Distributions.  Each Partner shall look solely to the assets
of the Partnership for the return of its Capital  Contributions and its share of
distributions  and shall have no recourse upon dissolution or otherwise  against
the Partnership, the Partners or the Liquidator. No holder of an interest in the
Partnership shall have any right to receive any distributions except as provided
in this  Agreement  or any right to demand or receive  property  other than cash
upon dissolution and termination of the Partnership.


                                    ARTICLE 5

                  MANAGEMENT; DUTIES AND POWERS OF THE GENERAL
               PARTNER AND PARTNERS; RIGHTS AND DUTIES OF PARTNERS

     5.1  Management of Business;  Partner  Obligations;  Reimbursements;  Major
Decisions; Retained Approvals.

          5.1.1  Management.  The Partnership shall be managed by the Blackstone
     General  Partner,  subject to the Approval  rights of the Managing  General
     Partner  under this  Agreement.  Except to the extent the  Approval  of the
     Managing  General Partner is expressly  required under this  Agreement,  no
     consent or Approval of the Managing  General Partner shall be required with
     respect to any action or decision of the  Blackstone  General  Partner with
     respect  to  Partnership  matters.  Except as  otherwise  provided  in this
     Agreement,   the  Blackstone  General  Partner  shall  be  responsible  for
     supervising and undertaking the


<PAGE>

     business of the  Partnership  and shall make all  decisions  affecting  the
     day-to-day  operations  of  the  Partnership,  the  REO  Partnerships.  The
     Blackstone  General  Partner and the Managing  General  Partner shall cause
     each  of its  Authorized  Representatives  to  devote  as  much  time as is
     reasonably  necessary  to fulfill  such  Partner's  obligations  under this
     Agreement.

          The General Partners, at Partnership expense, shall be responsible for
     obtaining  appropriate  information and conducting due diligence concerning
     the Properties and the REO Partnerships and negotiating the purchase of the
     Properties  and the REO  Partnerships  on  behalf of the  Partnership.  The
     General  Partners shall  negotiate all documents with respect to Properties
     and the  REO  Partnerships  that  are  Approved  by the  General  Partners,
     including the Approved  Contracts,  contracts with  surveyors,  architects,
     governmental  authorities and others  concerning  entitlements,  easements,
     surveying,   landscaping,   insuring,   zoning,   construction,    grading,
     improvements,  and the like, all leases related to the  Properties,  offers
     and terms of sale of the  Partnership  assets,  and contracts for necessary
     goods or services or borrowings regarding the Properties; all to the extent
     Approved by the General Partners from time to time.

          The signature of the Blackstone  General  Partner shall be required on
     all  contracts and  documents of the  Partnership  and shall be required to
     bind and shall be binding upon the Partnership for all purposes,  and third
     parties  shall  be  entitled  to rely on the  authority  of the  Blackstone
     General  Partner  to  take  any  action  on  behalf  of  the   Partnership.
     Notwithstanding  the foregoing,  the Blackstone  General  Partner shall not
     take any action  requiring  Approval  of the  General  Partners  under this
     Agreement unless the provisions of this Agreement  concerning such Approval
     have been fully satisfied.

          The exercise by the Limited Partner of any right or power conferred to
     it herein shall not be construed to constitute participation by the Limited
     Partner in the control of the business of the Partnership so as to make the
     Limited  Partner liable as a general  partner for the debts and obligations
     of the Partnership.  If any right or power conferred on the Limited Partner
     herein would have the effect of causing the Limited Partner to be liable as
     a general partner of the  Partnership,  the Limited Partner shall be deemed
     to not have such right or power.

               5.1.2    Compensation;    Reimbursement.    Other    than   fees,
          reimbursements   or  commissions   otherwise   permitted   under  this
          Agreement,  no compensation shall be payable by the Partnership to any
          Partner or to an  Affiliate  of any  Partner.  The  Partnership  shall
          reimburse the Partners for their actual and  reasonable  out-of-pocket
          expenses  incurred  in  connection  with  Partnership  business to the
          extent such Partner is authorized to take the action resulting in such
          expenses,  including those expenses that are described in this Section
          5.1, or that are otherwise  specifically  authorized by this Agreement
          (including Section 5.1.3).  Promptly following the Agreement Date, the
          General  Partners shall cause the  Partnership to reimburse or pay, as
          the  case  may be  (from  the  initial  Capital  Contributions  to the
          Partnership), the expenses described in Section 2.3.

               5.1.3  Permitted  Expenditures.  The Blackstone  General  Partner
          shall not, without the Approval of the Managing General Partner,  make
          any

<PAGE>

          expenditure  of funds of the  Partnership,  or commit to make any such
          expenditure,  other  than  in  response  to an  Emergency,  except  as
          provided for in an Approved  Budget of an REO  Partnership;  provided,
          however,  the  provisions  of this Section 5.1.3 shall in no way limit
          the  General  Partner's  authority  to cause the  Partnership  to fund
          Emergency  expenditures or Non- Discretionary  Items when due that are
          billed to or  incurred by the  Partnership  or an REO  Partnership  in
          excess  of  the  amounts  budgeted   therefor.   Notice  of  Emergency
          expenditures  or  actions  shall be given  by the  Blackstone  General
          Partner as soon as  practicable  after such  expenditures  are made or
          actions are taken.

               5.1.4  Powers of the  General  Partner.  The  Blackstone  General
          Partner,  in extension and not in limitation of the powers given to it
          by law or this  Agreement,  shall  have full  power and shall have the
          obligation,  without the  necessity of  obtaining  the Approval of the
          Managing  General Partner,  and at the expense of the Partnership,  to
          take all actions required to conduct the day-to-day  operations of the
          Partnership and, subject to the availability of Partnership  funds and
          the  funding  limitations  of  Section  5.1.3.,  implement  the  Major
          Decisions and other  decisions  that have been Approved by the General
          Partners  and  pay  expenses  of the  Partnership  to the  extent  the
          Approval of the Managing  General  Partner with respect thereto is not
          required under this Agreement.

               5.1.4.1 Employees. The Partnership shall not have any employees.

               5.1.4.2 General Partner  Duties.  The Blackstone  General Partner
          shall use its  reasonable  efforts,  subject  to the  availability  of
          Partnership  funds,  to (i) cause  the  Partnership  to enter into any
          Approved  Contracts  and take the other  actions that are described in
          Section 1.4  and 1.9 that have been Approved by the General  Partners,
          (ii)  cause  the Major  Decisions  and  other  actions  that have been
          Approved by the General  Partners to be  implemented,  (iii) cause the
          Partnership to timely issue the reports and tax returns required under
          this  Agreement,  (iv)  undertake  its other  obligations  under  this
          Agreement.  and  (v) monitor  and supervise the performance of Persons
          contracting with the Partnership. The Blackstone General Partner shall
          not be required to conduct the Partnership's day-to-day operations and
          implement Major Decisions as the General  Partner's sole and exclusive
          function,  and it and its  Affiliates  may (and  expect to) have other
          business  interests and may (and expect to) engage in other activities
          in addition to those  relating to the  Partnership,  without having or
          incurring any  obligation to offer any interest in such  activities to
          the  Partnership or any Partner.  Notwithstanding  the foregoing,  the
          Blackstone General Partner shall be obligated to devote, and cause its
          Controlling   persons  to  devote,  so  much  of  their  time  to  the
          Partnership's  business  as shall be  reasonably  required to meet the
          Blackstone General Partner's obligations hereunder and the obligations
          of any of its Affiliates to the  Partnership  under any contracts with
          the Partnership.

               5.1.5 Major  Decisions.  The following are major  decisions  (the
          "Major Decisions") requiring the Approval of the General Partners:

                    5.1.5.1  Any  act in  contravention  of  this  Agreement  or
               extending the term of the Partnership.

<PAGE>


                    5.1.5.2  Amending this Agreement to the benefit or detriment
               of any Partner.

                    5.1.5.3  Establishing  or adjusting  Gross Asset Value under
               Section 3.8 for any  contributed  asset or  distributed  asset or
               other Revalued  Properties;  Indemnification  of any Person other
               than a Partner or its  Affiliates  pursuant  to Section  5.5.2 or
               otherwise as permitted by this Agreement;

                    5.1.5.4  Except  for  liabilities  to which  the  Blackstone
               General  Partner is subject as a matter of law by reason of being
               a General  Partner,  entering into any agreement  (i) which would
               cause any Partner to become personally liable on or in respect of
               or to guarantee any indebtedness of the Partnership or (ii) which
               is not nonrecourse to such Partner;

                    5.1.5.5  Causing the Partnership to redeem or repurchase all
               or any portion of the  interest of a Partner (not  including  any
               change in Percentage  Interests  pursuant to Section  2.2.2.1) or
               causing the  Partnership to enter into any contract in connection
               with the  acquisition,  leasing or  disposition of the Properties
               other  than an  Approved  Contract;  or to  borrow  money  from a
               Partner or its  Affiliates  except  pursuant to Sections 2.2.2 or
               2.4;

                    5.1.5.6  Causing or permitting the  Partnership to be merged
               with  any  other   entity;   selling   Partnership   assets   for
               consideration  including notes payable; or otherwise disposing of
               Partnership assets;

                    5.1.5.7  Establishing  or adjusting  Gross Asset Value under
               Section 3.8 for any  contributed  asset or  distributed  asset or
               other Revalued Property;

                    5.1.5.8  Causing or permitting the Partnership to make loans
               to, or (except for  Approved  Contracts or as provided in the REO
               Partnership  Agreements) enter into any contract with any Partner
               or any Affiliate of a Partner;

                    5.1.5.9   Dissolving,   terminating   or   liquidating   the
               Partnership, except as provided in Article 8 of this Agreement;

                    5.1.5.10 Terminating or substantially modifying any Approved
               Contract,  disposing of the REO  Partnership  Interests any other
               asset of the Partnership  (or any portion  thereof) or permitting
               an encumbrance  to be placed on Partnership  assets other than as
               contemplated  by the Approved  Contracts,  unless such action has
               been  Approved  by  the  General  Partners.  Notwithstanding  any
               provision  herein,  the  Blackstone  General  Partner may enforce
               (including  termination  where  permitted  under  the  Management
               Agreement)  the  Management  Agreement  in its  sole  discretion,
               without  any  approval  rights  given  to  the  Managing  General
               Partner);


<PAGE>

                    5.1.5.11  Obtain  any  third-party  loans  other  than those
               Approved by the General Partners to be entered into in connection
               with the Approved Contracts  (whether secured or unsecured),  or,
               in connection with any  third-party  loan Approved by the General
               Partners,  execute or deliver  on behalf of the  Partnership  any
               guarantee or other  agreement  whereby the  Partnership is or may
               become liable for any obligations of any other Entity;

                    5.1.5.12  Acquire any asset other than  pursuant to Approved
               Contracts,  or take any action on behalf of the Partnership  that
               is not within the scope of the Partnership  purposes as set forth
               in Sections 1.4 and 1.9;

                    5.1.5.13 Modify, prepay or refinance any indebtedness of the
               Partnership  other than those Approved by the General Partners to
               be lenders in connection with the Approved Contracts;

                    5.1.5.14 Commence, dismiss, terminate or settle any material
               litigation matter,  material condemnation claim, or any matter or
               claim (including an insurance claim) in connection with which the
               amount in  controversy  is  reasonably  expected  to  exceed  One
               Hundred Thousand Dollars ($100,000);

                    5.1.5.15  Make any  distribution  except as permitted  under
               Article  4  except  in  connection  with the  liquidation  of the
               Partnership under Article 8, or make any Partnership  expenditure
               except as otherwise  permitted or  authorized  by this  Agreement
               (including Section 5.1.3);

                    5.1.5.16  Except as otherwise  provided in  Sections 7.1(a),
               admit  transferee  Partners  to the  Partnership  as  substituted
               Partners or enter into  financing that  participates  in profits;
               or, except as provided in  Article 7,  permit any Transfer of any
               interest in the Partnership to the extent Approval of the General
               Partners for such Transfer is required under this Agreement; or

                    5.1.5.17  Confess any judgment  against the  Partnership  or
               cause the Partnership to file for Bankruptcy or other relief from
               creditors; or

The  enumeration  of the  foregoing  rights  shall not  diminish  or affect  the
existence or exercise of other rights expressly  granted to each of the Partners
under this  Agreement.  In the event of a deadlock in obtaining  the Approval of
the General  Partners with respect to any Major Decision,  the deadlock shall be
resolved as provided in Section 5.9.

                    5.1.5.18 Approval  Procedure.  Notice of the request for the
               Managing General Partner's  Approval of any matter for which such
               Approval  is  required   pursuant  to  this  Agreement  shall  be
               delivered by the Blackstone  General  Partner to each  Authorized
               Representative  of the Managing  General  Partner,  the Partner's
               summary and analysis of any other matter for which such  Approval
               is requested  and the Partner's  recommendations  with respect to
               any matter for which  Approval  is  requested.  Unless some other
               time  is  specified  in  this  Agreement,  each  such  Authorized
               Representative shall approve

<PAGE>

               or  disapprove  such matter by notice to the  Blackstone  General
               Partner given within ten (10) Business Days following delivery of
               such notice.  Failure of all  Authorized  Representatives  of any
               Managing  General  Partner to timely respond by written notice to
               the Authorized Representatives of the Blackstone General Partner,
               indicating  Approval  or  disapproval  of such  matter,  shall be
               deemed Approval by all Authorized  Representative  of such matter
               for  which  Approval  is  requested.  From  and  after  any  such
               submission to the Authorized Representatives of the Partners, and
               continuing  until the matters  addressed in such  submission  are
               Approved   or   otherwise   resolved,    each   such   Authorized
               Representative  shall,  upon  request  to  the  Partner  who  has
               possession  thereof,  be furnished promptly with access to or, if
               feasible,  copies  of  such  additional  information  and all Due
               Diligence  Materials which become  available to such Partner that
               are requested by the Partner whose Approval has been sought.

               Notwithstanding  anything to the contrary  contained herein,  (i)
               the Blackstone  General Partner may enter into commercial  leases
               without the Managing  General  Partner's  Approval  provided such
               commercial leases cover demised premises of 5,000 rentable square
               feet or less, and (ii) no Approval shall be required with respect
               to any financing or  refinancing  that meets the  parameters  set
               forth in the letter attached hereto as Exhibit C.

     5.2 Sale of Properties.

     Right  to Sell.  The  foregoing  notwithstanding,  in  connection  with any
proposed sale of any REO Partnership Interest by the Partnership, the Blackstone
General  Partner shall in good faith  consider  retention of an affiliate of the
Managing General Partner as the exclusive broker for marketing such interest for
sale and to complete a sale of any such interest for  compensation  commensurate
with that which would be paid to a third party performing  similar services in a
similar geographic location.

     5.3 Reporting Requirements; Financials; Meetings.

          5.3.1 Governmental Reports;  Meetings.  The Blackstone General Partner
     shall,  at  Partnership  expense,  use  reasonable  efforts  to cause to be
     prepared  and timely  filed with  appropriate  federal,  state and  foreign
     regulatory and administrative bodies, all reports required to be filed with
     such entities under then current  applicable  laws,  rules and regulations.
     Such  reports  shall be  prepared  on the  accounting  or  reporting  basis
     required by such regulatory  bodies.  The Partners shall be provided with a
     copy of any such  report.  No meeting  of the  Partners  shall be  required
     unless  requested by any Partner upon notice to all Partners,  which notice
     may be  given by any  Partner  at any  time.  All  Partners  shall be given
     written notice of any meeting of the  Partnership at least twenty (20) days
     prior to any such  meeting by the  Partner  requesting  such  meeting.  Any
     meetings shall be held at the  record-keeping  office of the Partnership or
     at any other reasonably convenient location within the United States as the
     Partners may Approve and specify in such notice.

          5.3.2 Access;  Audit. The Blackstone  General Partner shall permit any
     Partner to review and copy,  during normal  business hours at the office of
     the Partnership,  all Partnership  financial records and information.  Each
     Partner shall have the

<PAGE>

     right to have  such  records  and  information  audited  at such  Partner's
     expense to the extent  such audit is not  required at  Partnership  expense
     under Section 5.3.3(i).  The Blackstone  General Partner shall maintain (at
     the office of the Partnership)  reports required or otherwise  prepared and
     delivered  hereunder,  copies of which shall be  furnished  to each Partner
     when  available,   at  the  Partnership's   expense,   together  with  such
     supplementary   records  and  reports  as  are  necessary  to  reflect  the
     allocation  among the  Partners of the tax items and  distributions  of the
     Partnership.  The Partnership's annual financial statements (and such other
     financial statements as required by loan documents to which the Partnership
     is a party) shall be audited at the Partnership's expense.

          5.3.3  Financials and Status Reports.  The Blackstone  General Partner
     shall cause the following reports to be issued:

               (i) At Partnership  expense, the Blackstone General Partner shall
          use  reasonable  efforts to cause to be issued to the Partners  annual
          financials,  in  reasonable  detail,  which  shall be  prepared by the
          Partnership's  independent certified public accountants at Partnership
          expense,  within  sixty  (60)  days  after  the  close  of  each  year
          (including a balance sheet and income and expense statements,  sources
          and uses of funds, cash on hand,  distributions,  changes in financial
          position, tax information, and unrepaid Partner loans). Such financial
          reports  shall be  prepared  on an income tax basis and in  accordance
          with generally  accepted  accounting  rules. As soon as is practicable
          after the  execution of this  Agreement,  the  Partners  shall meet to
          discuss the methodology to be used in preparing such reports;

               (ii) At Partnership  expense,  the Managing General Partner shall
          use reasonable efforts to cause to be issued to the Partners quarterly
          unaudited  financials,  in reasonable  detail,  within sixty (60) days
          after the close of each calendar quarter (commencing with the calendar
          quarter  beginning  on January 1, 1997),  including  a balance  sheet,
          income and  expense  statements,  sources  and uses of funds,  cash on
          hand,  distributions,  changes in  financial  position,  and  unrepaid
          Partner loans;

               (iii) At Partnership  expense, the Managing General Partner shall
          cause to be issued to the limited Partner a monthly income and expense
          statement,  in  reasonable  detail  within  thirty (30) days after the
          close of each month, showing sources and uses of Partnership funds and
          changes in the Partnership's  financial position during such month. In
          connection  with preparing such monthly income and expense  statement,
          the Managing General Partner shall use commercially reasonable efforts
          to review the data  provided  by the  Property  Manager  that is to be
          presented  in such  income and  expense  statement,  such review to be
          commenced   and  completed  to  the  extent   possible,   after  using
          commercially  reasonable efforts to do so, before the Managing General
          Partner  furnishes such  statement to the Partners.  If such review is
          not completed prior to furnishing such statement, such review shall be
          completed  as soon as is  practicable  thereafter  (with  notice being
          given  to the  Blackstone  General  Partner  by the  Managing  General
          Partner of any variance from such  statement that is discovered by the
          Managing General Partner in such review); and


<PAGE>

               (iv) In preparing  reports  required  under this  Agreement,  the
          Blackstone  General  Partner  and the  Managing  General  may  rely on
          information  furnished by the Property  Managers to the extent that it
          is reasonable to do so.

     5.4 Tax Matters  Partner;  Tax Returns.  The Blackstone  General Partner is
hereby  designated  as the "Tax  Matters  Partner",  as such term is  defined in
Section  6231(a)(7)  of the  Code,  and it shall  serve  as such at  Partnership
expense with all powers  granted to a tax matters  partner under the Code.  Each
Partner shall give prompt notice to each other Partner of any and all notices it
receives  from the  Internal  Revenue  Service (or any other  taxing  authority)
concerning the Partnership,  including any notice of audit, any notice of action
with respect to a revenue agent's  report,  any notice of a 30-day appeal letter
and any notice of a deficiency  in tax  concerning  the  Partnership's  federal,
state or local  income tax  returns.  At  Partnership  expense,  the Tax Matters
Partner shall furnish each Partner with status reports regarding any negotiation
between  the  Internal  Revenue  Service  (or other  taxing  authority)  and the
Partnership promptly after any material new development. The Tax Matters Partner
shall use its  reasonable  efforts  to cause the  Partnership's  accountants  to
prepare and file on a timely basis,  without regard to  extensions,  all tax and
information  returns  which the  Partnership  may be required to file. No tax or
information return shall be filed without the reasonable Approval of the General
Partners  in  all  cases.  The  Blackstone   General  Partner  shall  cause  the
Partnership's  accountants to prepare and deliver,  at Partnership  expense,  to
each Partner on a timely basis an information  reporting return (K-1) reflecting
each  Partner's  distributive  share  of all  income,  gain,  loss,  deductions,
allowances or credits of the Partnership for each  Partnership  Accounting Year,
as computed pursuant to Article 3.

     5.5 Indemnification and Liability of Partners.

          5.5.1 No  Partner  shall be  liable,  responsible  or  accountable  in
     damages or otherwise to any of the Partners or the  Partnership for any act
     or  omission  performed  or  omitted  by it in good  faith on behalf of the
     Partnership and in a manner reasonably  believed by it to be (i) within the
     scope of the authority granted to it by this Agreement and (ii) in the best
     interests of the Partnership,  the Partners or their Affiliates unless such
     Partner  or  such   Partner's   Affiliate  has  engaged  in  actual  fraud,
     intentional  misappropriation  of  funds,  gross  negligence  or  breach of
     fiduciary duty in connection with such act or omission.

          5.5.2 The  Partnership  shall indemnify and hold harmless each Partner
     and its  Affiliates  from and  against  any  obligations,  actual  damages,
     penalties,  actions,  judgments,  suits, expenses,  disbursements,  losses,
     costs or liabilities of any kind or nature  whatsoever which may be imposed
     upon,  incurred or asserted  against such Partner or its Affiliates (or the
     Affiliates,  partners  and  members  of  such  Partner  or its  Affiliates)
     (including  reasonable  attorneys' and paralegals' fees and court costs) in
     connection  with,  due to or  arising  out of such  Partner's  serving as a
     Partner  or the  Blackstone  General  Partner  of the  Partnership  if such
     Partner acted in good faith,  with reasonable belief that such actions were
     within the scope of authority granted to such Partner under this Agreement.

<PAGE>

          5.5.3  Each  Partner  shall  indemnify  and hold  harmless  each other
     Partner  and  the  Partnership   from  and  against  any  direct  (and  not
     consequential  or  incidental)  obligations,   actual  damages,  penalties,
     actions,  judgments,  suits,  expenses,  disbursements,  losses,  costs  or
     liabilities  (collectively,  the  "Liabilities")  incurred  or paid by such
     other Partners or the Partnership  (to the extent such  Liabilities are not
     reimbursed by insurance proceeds or indemnities from third parties), to the
     extent such  Liabilities  are caused by, and such Partner or such Partner's
     Affiliate  has engaged in, actual fraud,  intentional  misappropriation  of
     funds, gross negligence or breach of fiduciary duty.

          5.5.4 In any case where indemnity is sought by a Partner, such Partner
     shall give notice of the request for indemnification to the Partnership and
     the other  Partners  from whom the  indemnity is required and give them the
     opportunity  to the  extent  reasonably  possible,  to  participate  in the
     defense  of the  claim  giving  rise to the  claim  for  indemnity,  all at
     Partnership  expense and subject to the reasonable  Approval of the General
     Partners.

     5.6 Limitation of Liability.  Each Partner's  liability shall be limited as
set  forth in this  Agreement,  the Act and  other  applicable  law.  Except  as
provided  in Sections  5.5.1,  5.5.3 or 7.4, a Partner  shall not be  personally
liable  for  any  debts  or  losses  of the  Partnership  beyond  the  Partner's
respective interest in the Partnership,  other than distributions  received by a
Partner as to which,  by terms of the Act,  such Partner is obligated to return.
Except as expressly provided in this Agreement, the Limited Partner shall not be
liable for the debts or obligations  of the  Partnership.  No partner,  officer,
director,  shareholder,  manager or member of a Partner  shall be liable for the
obligations  of such Partner to the  Partnership or the other Partners under any
circumstances.

     5.7 No Priorities.  Except as specifically  provided in this Agreement,  no
Partner  shall have any priority  over any other Partner as to the return of his
or its Capital Contributions or as to distributions or allocations of Profits or
Losses or other tax items.

     5.8  Determination  Date  for  Indemnity  Payments.  For  purposes  of this
Agreement,  until the  "Determination  Date"  (defined  below) has occurred,  no
amount  shall be due and owing by any Partner to the  Partnership  or to another
Partner  pursuant to Section 5.5.1 or 5.5.3, 7.5 or 9.2, if there is a bona fide
dispute  as  to  whether   such  amount  is  due  or  whether  a  Partner.   The
"Determination  Date" shall be deemed to have  occurred only upon the earlier to
occur of the  following:  (a) the final  determination  by a Court  described in
Section 9.4 that an amount described in Section 5.5.1,  5.5.3, 7.5 or 9.2 is due
and  payable,  and time to file a notice of appeal from such  determination  has
expired  without  such notice  having been filed;  or (b) the  affirmation  of a
determination described in preceding clause (a) by the entry of judgment to such
effect by the court to which such determination has been appealed.

     5.9 Deadlock. On and after January 1, 1998, upon (i) a bona fide dispute as
to  whether  any Major  Decision  (other  than the Major  Decisions  in  Section
5.1.5.1,  5.1.5.2,  5.1.5.4,  and 5.1.5.12)  proposed by the Blackstone  General
Partner  should  be  Approved  by the  Managing  General  Partner  or  (ii)  the
termination of Management

<PAGE>

Agreements  (other than  terminations by the Property  Manager or as a result of
dispositions of the assets held by the REO  Partnership)  with respect to 25% or
more of the REO  Partnerships (a "Deadlock"),  the Managing  General Partner may
issue a notice thereof to the Blackstone General Partner (a "Deadlock  Notice").
The Deadlock  Notice shall describe the Deadlock and the resolution  proposed by
the  Partner  issuing  the  Deadlock  Notice.  If a Deadlock  Notice is properly
issued, the Partners shall meet in good faith during the 10-day period after the
Deadlock  Notice has been received.  If (i) a Major Decision that is the subject
of the  Deadlock is not  resolved  within  such 10-day  period or (ii) any Major
Decision that is the subject of the Deadlock at any of the REO  Partnerships  is
not resolved within the 10-day period applicable to such Major Decision, then:

          (i) Unless the Major  Decision is described in this Section  5.9(i) or
     Section  5.9(iii),  (a) the Managing  General Partner may elect to exercise
     the buy\sell  provisions set forth in Section  5.9(ii) below (the "Deadlock
     Election")  by giving  written  notice of such  election to the  Blackstone
     General  Partner within ten (10) Business Days after the end of such 10-day
     period,  or (b) absent the timely  issuance of such a Deadlock  Election by
     the Managing General Partner,  the Blackstone  General  Partner's  decision
     with  respect to the Major  Decision  that is the subject of such  Deadlock
     shall be deemed  Approved.  The Major  Decision  described  in this Section
     5.9(i)  for which a  Deadlock  Election  may not be  issued  is a  Deadlock
     concerning  whether a Funding  Notice  may be  issued  to the  extent  such
     Funding  Notice would require  Capital  Contributions  exceeding the dollar
     limitation  contained in Section 2.1.2 (the sole remedy provided under this
     Agreement for such a Deadlock is provided in Section 2.4).

          (ii)  Within  thirty  (30) days  after a Deadlock  Election  is timely
     issued by the Managing General Partner pursuant to Section  5.9(i)(a),  the
     Managing  General Partner shall give notice (a "Deadlock Amount Notice") to
     the Blackstone General Partner of the amount (the "Deadlock Amount"), which
     would determine the price at which the Insignia  Partners or its Affiliates
     or  designees  would  be  willing  to (i)  acquire  all  of the  Blackstone
     Partners'  interests  in  the  Partnership  and  the  REO  Partnerships  or
     (ii) sell the Insignia  Partners'  interests in the Partnership and the REO
     Partnerships  to the  Blackstone  Partners or an Affiliate or designee (the
     Blackstone  Partners and the Insignia  Partners are each referred to herein
     as a "Partner Group").  The Deadlock Amount shall be an amount equal to the
     gross value of the assets of the  Partnership  and the REO  Partnerships as
     determined by the Managing General  Partner.  The amount which the Insignia
     Partners (or Affiliates and designees) shall pay to the Blackstone Partners
     and the amount which the Blackstone  Partners (or Affiliates and designees)
     shall pay, if the Blackstone  Partners elect, to the Insignia  Partners for
     their  respective  interests in the Partnership  and the REO  Partnerships,
     shall be the amounts the selling  Partner Group would  receive  pursuant to
     Sections  4.2.2 and 4.2.3 of this  Agreement  with respect to their general
     and limited  partner  interests  and the REO  Partnership  Agreements  with
     respect to their general partnership interests if all

<PAGE>
     the assets of the REO  Partnerships  were sold for the Deadlock  Amount and
     the Partnership and the REO Partnerships were liquidated,  after paying all
     liabilities  set  forth  on  the  books  of the  Partnership  and  the  REO
     Partnerships  (the  "Insignia  Buy-Out  Price" or the  "Blackstone  Buy-Out
     Price",  as  applicable).  Within sixty (60) days after receipt of a timely
     Deadlock Amount Notice,  the Blackstone General Partner may elect by giving
     notice  to the  Managing  General  Partner  to  purchase  (or to cause  its
     Affiliate or designees to purchase) the Insignia  Partners' interest in the
     Partnership and the REO Partnerships for the Insignia Buy-Out Price. If the
     Blackstone  General  Partner  fails to elect to  purchase  (or to cause its
     Affiliates  or designees to purchase) the Insignia  Partners'  interests in
     the  Partnership  and the REO  Partnerships  (including any general partner
     interests in any of the REO  Partnerships  held by  Affiliates of Insignia)
     pursuant  to  the  preceding   sentence  within  such  60-day  period,  the
     Blackstone  Partners shall sell their  interests in the Partnership and the
     REO Partnerships (including any general partner interests in any of the REO
     Partnerships  held by Affiliates  of  Blackstone)  to the Managing  General
     Partner (or its Affiliates) for the Blackstone  Buy-Out Price. The purchase
     and  sale of the  interests  in the  Partnership  and the REO  Partnerships
     pursuant  to  this  Section  5.9(ii)  shall  be  consummated  on or  before
     thirtieth day  following  the  expiration of the 60-day period within which
     the  Blackstone  General  Partner may elect (the "GP Election") to purchase
     (or cause its Affiliate to purchase) the Blackstone  Partners' interests in
     the Partnership  and the REO  Partnerships  without the Blackstone  General
     Partner  having made such  election  (the "Deemed  Election");  The Partner
     Group  obligated to purchase  hereunder shall put a deposit in escrow equal
     to five (5) percent of the purchase  price (the  "Deposit")  with an escrow
     agent  selected  by  selling  Partner  Group  within  10 days  after the GP
     Election is received or the Deemed Election  occurs.  Such Deposit shall be
     (i) nonrefundable except in the case of a default by the purchasing Partner
     Group and (ii)  credited  toward  the  amount to be paid at  Closing by the
     purchasing  Partner Group. If the purchasing  Partner Group defaults in its
     obligation to purchase the applicable  Partnership Interests of the selling
     Partner  Group,  the Deposit  will be  distributed  to the selling  Partner
     Group.  At the  closing,  the selling  Partner  Group shall  deliver to the
     Partnership and the REO Partnerships and the purchasing  Partner Group such
     instruments  of  assignment,  conveyance  and  transfer  as the  purchasing
     partners may  reasonably  deem  necessary or  appropriate to consummate the
     purchase and sale, and the  purchasing  Partner Group shall pay cash to the
     selling Partner Group in an amount equal to the Blackstone Buy-Out Price or
     the Insignia  Buy-Out Price,  as applicable.  The purchasing  Partner Group
     shall pay all transfer  taxes  related to the purchase and sale.  Following
     the closing date, the Partnership,  the REO partnerships and the purchasing
     Partner Group shall indemnify and hold each selling  Partner  harmless from
     and against all  liabilities of the  Partnership  and the REO  Partnerships
     arising  from acts taken or omitted to be taken by the  Partnership  or the
     REO Partnerships  after the date of the closing of the sale of such selling
     Partner Group's interests to the

<PAGE>

     purchasing  Partner Group,  except to the extent such selling Partner Group
     is not entitled to be indemnified therefor under Section 5.5.2.

          (iii) in the case of a Major Decision  described in Section 5.1.5.7 of
     this Agreement or any REO Partnership  Agreement concerning the Gross Asset
     Value of any property, the Deadlock concerning such Major Decision shall be
     resolved in the following  manner.  Unless and until such Gross Asset Value
     has been Approved by the General Partners or determined as provided in this
     paragraph (iii), the transaction  giving rise to the determination of Gross
     Asset Value shall not be consummated by the Blackstone General Partner. The
     Managing General Partner may give notice to the Blackstone  General Partner
     stating  that such  Partner is invoking the  following  procedure,  setting
     forth its proposed  Gross Asset Value for such property (the "GAV Notice"),
     and appointing a "qualified  appraiser"  (defined  below).  Within five (5)
     Business Days after receiving a GAV Notice,  the Blackstone General Partner
     shall,  by  notice  to the  Managing  General  Partner,  appoint  a  second
     qualified  appraiser.  If the Blackstone General Partner fails timely to so
     appoint  such second  qualified  appraiser,  the Gross Asset Value shall be
     deemed to be that set forth in the GAV Notice.  If the  Blackstone  General
     Partner  timely  so  appoints  such  second  qualified  appraiser,  the two
     appraisers so appointed  shall appoint a third qualified  appraiser  within
     ten (10)  Business Days after the notice of the  appointment  of the second
     appraiser  is received by the  Managing  General  Partner.  Within five (5)
     Business Days after being appointed, the third appraiser shall (A) consider
     the evidence  submitted by the General Partners and (B) upon notice to both
     General  Partners,  determine  such  Gross  Asset  Value.  The  cost of the
     appraisal shall be funded by the  Partnership,  and the Partners shall bear
     their own attorneys  fees,  during the appraisal.  A "qualified  appraiser"
     means  any  M.A.I.  appraiser  who has  had  over  fifteen  (15)  years  of
     experience in valuing multi-family real estate.

          (iv) Until it has been  determined  which Partner Group,  if any, will
     sell its Partnership Interests pursuant to Section 5.9(ii), no action shall
     be taken with  respect  to the Major  Decision  that is the  subject of the
     Deadlock.  The  Partner  Group  that is  determined  to be the Buyer of the
     Partnership Interests shall have the right to decide the Major Decision.

                                    ARTICLE 6

                        BOOKS, RECORDS AND BANK ACCOUNTS

     6.1 Books and Records.  At  Partnership  expense,  the  Blackstone  General
Partner shall cause to be kept (at the office of the Partnership  referred to in
Section  1.3.2)  accurate,  just and true books of  account,  in which  shall be
entered fully and accurately each and every transaction of the Partnership.  The
books and records of the Partnership shall separately identify, and account for,
the  Partnership's  investment  in, and the  Profits,  Losses and  distributions
attributable to, the Properties. The books shall be kept in accordance with

<PAGE>

the  Partnership's  method of reporting for federal  income tax purposes  (which
shall  be  the  accrual  method  of  accounting),   with  supplementary  records
maintained  on a cash basis.  Tax  accounting  elections,  including  methods of
depreciation and deduction or  capitalization  of interest,  taxes and insurance
premiums  during a  construction  period,  if any,  shall be made as the General
Partners shall Approve. The Partnership's financial statements shall be prepared
in  accordance  with  generally  accepted  accounting  principles,  consistently
applied.

     6.2 Bank Accounts.  The funds of the Partnership  shall be deposited in the
name of the  Partnership,  in such  bank  account  or  accounts  as the  General
Partners  shall  Approve  and  direct  from time to time.  Such  funds  shall be
invested by the Blackstone  General Partner in short term  instruments.  Each of
the  Blackstone  General  Partner and the Managing  General  Partner shall be an
individual signatory on all Partnership accounts, with the signature of any such
Partner or its designee being sufficient to effect withdrawals.


                                    ARTICLE 7

                       TRANSFERS OF PARTNERSHIP INTERESTS

     7.1  Restrictions  on  Transfer.  (a) Except as  hereinafter  provided,  no
Partner  shall be  permitted  to Transfer all or any part of its interest in the
Partnership  [or permit any  Transfer of  ownership  interests  in such  Partner
unless such Transfer does not result in a change in Control of such Partner. Any
attempted  or actual  Transfer  shall be null and void ab initio and of no force
and effect.

          (b) Notwithstanding the foregoing,  a Partner may Transfer all or part
     of its  interest in the  Partnership,  or allow the  Transfer of  ownership
     interests in such Partner, as follows:

          7.1.1 To the  Partnership or another  Partner or a partner,  member or
     shareholder  or  Affiliate  of a Partner;  provided  however  that the term
     Affiliate  for purposes of this Section  7.1.1.  shall not include any REIT
     (or any  similar  entity  that is not  subject  to  income  tax if it meets
     certain requirements  relating to distributions to its shareholders and the
     character of its income and assets);

          7.1.2 If the proposed transferor is a natural Person, by succession or
     testamentary disposition upon his death;

          7.1.3 If the proposed  transferor is a natural Person,  to a trust for
     the benefit of any Family  Member with respect to the proposed  transferor,
     but only if the  proposed  transferor  retains  Control of the  interest so
     transferred;

          7.1.4 Any other Transfer which is Approved by the General Partners;


<PAGE>

          7.1.5  In  connection  with  (or as the  method  for) a sale of all or
     substantially all of the assets of the Partnership; and

          7.1.6  Transfers of any interests  within the limited  partners (which
     are  Affiliates  of  Blackstone)  of the  Limited  Partner  as  long  as an
     Affiliate of Blackstone remains in Control of the Limited Partner.

          The  following  shall be conditions to any Transfer of any interest in
     the  Partnership  pursuant  to this  Article 7: (i) with  respect to direct
     Transfers of interests in the Partnership only, the transferee shall assume
     in writing each of the  obligations of the  transferor to the  Partnership;
     (ii) with respect to direct Transfers of interests in the Partnership only,
     such transferee shall agree in writing to be bound by each of the terms and
     conditions of this  Agreement;  (iii) the  transferee  shall deliver to the
     Partnership  instruments of assumption and security Approved by the General
     Partners,  for  the  payment  and  performance  of  all  obligations  of or
     attendant  to  the  interest  so  transferred  and  assumed;  and  (iv) the
     requirements of Sections 7.3 and 7.4 shall be satisfied.

     7.2  Take-Along  Rights.  There  shall be no right of any other  Partner to
participate in any Transfer permitted by a Partner under this Agreement.

     7.3  Substitution  of Partner.  Subject to the  restrictions  and  Approval
rights of the Partners as set forth in Section 7.1 and the provisions of Section
7.4, with respect to direct Transfers of interests in the Partnership  only, the
assignee  of any  Transfer by a Partner (a "Partner  Assignee")  shall  become a
substitute Partner only if (i) the assignor Partner so provides in an instrument
of assignment,  (ii) the  Partner  Assignee agrees in writing to be bound by the
provisions of this Agreement and of the  Certificate  and any amendments  hereto
and thereto,  and (iii) each General Partner Approves such  substitution,  which
Approval  may be given or withheld in its sole and absolute  discretion.  If the
assignor  Partner so  provides  and the Partner  Assignee  agrees to be bound as
aforesaid,  the  Partner  Assignee  shall have the right to become a  substitute
Partner upon payment to the  Partnership  of all costs and expenses of reviewing
the  instrument  of  assignment,  if  appropriate,  and,  if required by law, an
amendment to the Certificate to reflect such substitution. In such event, if and
as  required  by law,  the  Partners  shall  prepare or cause to be  prepared an
amendment to the  Certificate  to be signed by the  Partners  and, to the extent
required,  by the  Partner  Assignee.  The  Partners  shall  attend  to the  due
execution and filing of an amendment to the  Certificate,  if such  amendment is
required.  Unless named in this Agreement, or unless admitted to the Partnership
as provided in this Agreement,  no Person shall be considered a Partner, and the
Partnership,  each  Partner  and any  other  Persons  having  business  with the
Partnership  need deal only with  Partners so named or so admitted and shall not
be required to deal with any other Person by reason of an  assignment  or pledge
by a  Partner  (or  realization  of a  pledge)  or by  reason  of the death of a
Partner.  In the absence of the substitution of a Partner for a deceased Partner
as provided in Section 7.1(a) or this Section 7.3, any payment to the executors,
administrators or personal representatives of such deceased Partner shall acquit
the  Partnership  of all  liability  with  respect to such  payment to any other
Persons  who may be  interested  in such  payment by reason of the death of such
Partner.  A  Partner  Assignee  of an  interest  in the  Partnership  who is not
admitted as a

<PAGE>

substitute  Partner as provided in this Section 7.3 shall be entitled to receive
the economic benefits of the interest  purported to be Transferred but shall not
be  considered a Partner for any purposes and shall have none of the rights of a
Partner under this Agreement or under the Act.

     7.4 Additional Transfer Restrictions.

          7.4.1 Notwithstanding any provision of this Agreement to the contrary,
     and subject to the  limitations  in Sections  7.1 through  7.3, a Partner's
     ability to Transfer all or any portion of its Partnership  interest,  or to
     permit  the  Transfer  of  ownership  interests  in such  Partner  relating
     specifically  or generally to such Partner's  interest in the  Partnership,
     shall be subject to the following additional restrictions:

               7.4.1.1 No Transfer of all or any portion of such interest  shall
          be  effective  unless  (i) such  Transfer  complies  with the Transfer
          restrictions  in all  agreements  to  which  the  Partnership  or such
          Partner is a party,  and (ii) such  interest is  registered  under the
          Securities  Act  and  any  applicable  state  securities  laws,  or an
          exemption from registration is available, and, for any direct Transfer
          of an interest in the Partnership, the Partnership shall have received
          an opinion of counsel,  Approved by the other General Partner, to such
          effect (unless the requirement that the Partnership receive such legal
          opinion is waived by the other Partner);

               7.4.1.2 No Partner  shall be permitted to Transfer any portion of
          its  Partnership  interest or take any other  action which would cause
          the Partnership to be (i) treated as a "publicly  traded  partnership"
          within  the  meaning  of Code  Section  7704 or  (ii) classified  as a
          corporation (or as an association taxable as a corporation) within the
          meaning of Code Section 7701(a);

               7.4.1.3 Unless arrangements  concerning  withholding are Approved
          by the General  Partners not making a Transfer (if such withholding is
          required  of the  Partnership),  no  Partner  shall  be  permitted  to
          Transfer all or any portion of its interest in the  Partnership to any
          Person,  unless  such Person is a United  States  Person as defined in
          Code  Section  7701(a)(30)  and is not subject to  withholding  of any
          federal tax; and

               7.4.1.4 No Partner  shall be  permitted  to  Transfer  all or any
          portion of its  Partnership  interest if such Transfer will  (i) cause
          the assets of the  Partnership  to be deemed to be "plan assets" under
          ERISA or its  accompanying  regulations  or the Code or (ii) result in
          any  "prohibited   transaction"   under  ERISA  or  its   accompanying
          regulations affecting the Partnership.

          7.4.2 Any purported transfer or any other action taken in violation of
     this Section 7.4 shall be void ab initio.

          7.5 Transfer Indemnification and Contribution Provisions.


<PAGE>

     Each Partner shall indemnify, defend and hold the Partnership and the other
Partner,  and  the  shareholders,   partners,  employees,  agents,  members  and
Affiliates  thereof,  harmless from any  Liabilities in any way arising from the
failure of a Transfer of any interest in the Partnership (including any Transfer
of an interest in any  partners,  members or  shareholders  of the  indemnifying
Partner,  or the partners,  members or shareholders  therein,  and regardless of
whether occurring before or after the date of this Agreement) to comply with all
applicable  federal and state  securities  laws,  including all  registration or
qualification  requirements and anti-fraud  requirements,  or the impact of such
Transfer  upon  compliance  of the  Partnership  and  its  Partners  with  those
securities laws in connection  with any previous  Transfer of an interest in the
Partnership.  Should the  preceding  indemnity be  unenforceable  to any extent,
then,  to such  extent  the  Partner  otherwise  required  to so  indemnify  the
Partnership  and the other Partner shall be obligated to contribute to any loss,
liability,  cost or expense resulting from the actions,  omissions or events set
forth in the above indemnification to the extent of its responsibility therefor,
as determined by the trier of fact.

     7.6 Basis for Restrictions and Remedies.  The Partners acknowledge that the
relationship  of each Partner to the other  Partners is a personal  relationship
and that the  restrictions  on the power of each Partner to withdraw or Transfer
its interest in the Partnership  and permit the Transfer of ownership  interests
in such Partner  (i) are  necessary to preserve such personal  relationship  and
safeguard the  investment of the other Partners in the  Partnership  and, in the
case  of  Transfer   restrictions  under  current  law,  to  help  preserve  the
Partnership's  status as a partnership  for tax  purposes,  (ii) were a material
inducement to the other Partner entering into this Agreement, and (iii) shall be
enforceable  notwithstanding  the  Bankruptcy  of any Partner or any  applicable
prohibition against restraints on alienation.

     7.7 Representations, Warranties and Covenants.

     Each Partner  hereby  represents and warrants to each of the other Partners
as follows:

          7.7.1  Such  Partner,  if not a natural  Person,  is duly  formed  and
     validly  existing under the laws of the  jurisdiction  of its  organization
     with full power and  authority to enter into this  Agreement and to conduct
     its business to the extent contemplated in this Agreement;

          7.7.2 This Agreement has been duly authorized,  executed and delivered
     by such Partner and constitutes the valid and legally binding  agreement of
     such  Partner,  enforceable  in  accordance  with its  terms  against  such
     Partner,  except  as such  enforceability  may be  limited  by  bankruptcy,
     insolvency, moratorium and other similar laws relating to creditors' rights
     generally,  by general equitable  principles and by any implied covenant of
     good faith and fair dealing;

          7.7.3 The execution and delivery of this Agreement by such Partner and
     the performance of its duties and obligations  hereunder do not result in a
     breach of any of the terms,  conditions or  provisions  of, or constitute a
     default under, any indenture,

<PAGE>

     mortgage,  deed of  trust,  credit  agreement,  note or other  evidence  of
     indebtedness,  or any lease or other  agreement,  or any  license,  permit,
     franchise or certificate to which such Partner is a party or by which it is
     bound or to which its properties  are subject or require any  authorization
     or  approval  under or  pursuant  to any of the  foregoing,  or violate any
     statute,  regulation,  law, order, writ, injunction,  judgment or decree to
     which such Partner is subject;

          7.7.4 Such Partner is not in default (nor has any event occurred which
     with notice,  lapse of time,  or both,  would  constitute a default) in the
     performance  of any  obligation,  agreement or  condition  contained in any
     indenture,  mortgage,  deed of  trust,  credit  agreement,  note  or  other
     evidence of indebtedness or any lease or other  agreement,  or any license,
     permit, franchise or certificate,  to which it is a party or by which it is
     bound or to which any of its properties are subject, nor is it in violation
     of any statute,  regulation,  law,  order,  writ,  injunction,  judgment or
     decree to which it is subject,  in each case if such  default or  violation
     would materially and adversely  affect such Partner's  ability to carry out
     its obligations under this Agreement;

          7.7.5  There  is no  litigation,  investigation  or  other  proceeding
     pending or, to the  knowledge  of such  Partner,  threatened  against  such
     Partner or any of its  Affiliates  which,  if adversely  determined,  would
     materially  and adversely  affect such  Partner's  ability to carry out its
     obligations under this Agreement, and, to the knowledge of such Partner and
     its Affiliates, (i) there is no lawsuit pending against such Partner or its
     Affiliates  alleging  fraud  against  them  and (ii)  there is no  criminal
     investigation or indictment pending against such Partner or its Affiliates;

          7.7.6 To the  knowledge  of such  Partner,  no  consent,  approval  or
     authorization of, or filing,  registration or qualification with, any court
     or  governmental  authority on the part of such Partner is required for the
     execution  and  delivery  of  this   Agreement  by  such  Partner  and  the
     performance of its obligations and duties hereunder;

          7.7.7 Such Partner is acquiring  its interest in the  Partnership  for
     investment purposes and without a view toward its resale or distribution;

          7.7.8 Such Partner is sophisticated in real estate  transactions,  has
     been  granted  access  to such  financial  and other  material  information
     concerning the  Partnership,  its purchase of the REO  Partnerships and the
     Properties,  the Initial Approved Contracts and all Due Diligence Materials
     as it has requested in connection  with its investment in the  Partnership,
     is able,  either  directly  or through its agents and  representatives,  to
     evaluate such information and any Due Diligence  Materials provided or made
     available  to it  from  time  to time  hereunder,  and is able to bear  the
     financial risk of loss presented by an investment in the Partnership (which
     includes  the  risk  of  loss  of  such   Partner's   entire   investment),
     particularly  in  light  of the  fact  that  the  Property  is  subject  to
     unpredictable  real estate values,  and the other risks of owning equity or
     debt investments concerning real estate;



<PAGE>

          7.7.9  Such  Partner  is aware  that  transfers  of  interests  in the
     Partnership and within such Partner are not permitted except in the limited
     circumstances  expressly  as  provided  in  Article  7  hereof  and that an
     investment  in  the  Partnership  is  a  long-  term  investment,   without
     liquidity;

          7.7.10 Such Partner and its Affiliates are not relying upon any of the
     other Partners,  nor any of their  Affiliates in connection with any of the
     matters   referred  to  in  this  Agreement,   including  any  projections,
     information,  due diligence,  representations,  statements or other matters
     concerning  the  Partnership,  the  REO  Partnerships,  the  Properties  or
     otherwise;

          7.7.11 None of the Partner's  agents or  representatives  has made any
     binding  representations,  warranties,  projections  or  assurances to such
     Partner  with  respect to the  Partnership,  the REO  Partnerships  and the
     Properties,  the performance of the  Partnership  and the  Properties,  the
     safety  or the  risks  involved  and/or  the tax or  economic  consequences
     thereof;

          7.7.12 Such Partner is aware that the other  Partner  and/or the other
     Partner's  Affiliates  now and in the future  will be, and in the past have
     been,  engaged  in  businesses  which  are  competitive  with  that  of the
     Partnership, the REO Partnerships and/or the Property, and that, no Partner
     or its Affiliates is required to bring any Properties  opportunities to the
     attention of the Partnership, the REO Partnerships or any Partner (or their
     Affiliates) for investment;

          7.7.13 Such Partner understands that the federal,  state and local tax
     liability  of such Partner and its  Affiliates  with respect to the taxable
     income and gain allocated to such Partner and its Affiliates  hereunder for
     any year may exceed the cash  distributions  from the  Partnership  to such
     Partner and its Affiliates, and such Partner and its Affiliates may have to
     look to sources other than  distributions  from the Partnership to pay such
     tax;

          7.7.14  Except as  specifically  provided in this  Section  7.7,  such
     Partner is not  relying  upon any  representation  or warranty of any other
     Partner, the Partnership or any of their respective Affiliates,  express or
     implied, oral or written;

          7.7.15 No Partner is required to cause the controlling persons of such
     Partner  to  devote  any  specific  portion  of their  time to  Partnership
     business  other than as  necessary to fulfill  such  Partner's  obligations
     under this Agreement,  and such  controlling  persons are expected to spend
     substantial  amounts of their time on activities  that are unrelated to the
     Partnership; and

          7.7.16 Such Partner  understands that the Partnership and its Partners
     are  relying  on the  accuracy  of the  representations  set  forth in this
     Section 7.7 in entering  into this  Agreement  without  requiring  that the
     interests  in  the  Partnership  be  registered   under  federal  or  state
     securities laws.


<PAGE>

                                   ARTICLE 8

                        TERM, DISSOLUTION AND TERMINATION

     8.1 Events of Dissolution.  The  Partnership  shall continue until December
31, 2025, or such later date as is Approved by the General  Partners;  provided,
however,  that  dissolution and liquidation  shall occur prior to that date upon
the occurrence of any one of the following events:

          8.1.1 An election to dissolve the Partnership being made in writing by
     the Approval of the General Partners;

          8.1.2  The sale for  cash,  exchange  or other  disposition  of all or
     substantially  all of the assets of the  Partnership and the receipt of the
     proceeds of such sale; or

          8.1.3 The Bankruptcy or  dissolution  (without  reconstitution  within
     sixty (60) days  thereafter)  of the  Blackstone  General  Partner  and the
     Managing General Partner.

     8.2 Limitation on  Dissolution.  Until the  dissolution of the  Partnership
otherwise occurs, the General Partners shall not voluntarily  retire,  resign or
withdraw from the  Partnership,  take any step voluntarily to dissolve itself or
voluntarily  cause a  dissolution  of the  Partnership,  except as  provided  in
Section 8.1.

     8.3 Liquidation and Winding Up.

          8.3.1 If the  Partnership is dissolved for any reason , the Blackstone
     General Partner (the  "Liquidator"),  shall commence to wind up the affairs
     of the  Partnership  and to liquidate and sell or otherwise  dispose of and
     the  Properties  and  any  other  asset  of  the  Partnership  (unless  the
     distribution of any Partnership  asset or interests  therein in-kind to the
     Partners  is  Approved by the  General  Partners)  in an orderly  manner as
     Approved by the General  Partners as soon as is practicable  thereafter.  A
     third-party  liquidator  may  be  appointed  if  Approved  by  the  General
     Partners.  Any Liquidator  other than the Blackstone  General Partner shall
     have sufficient business expertise and competence to conduct the winding up
     and  termination of the business of the  Partnership as it has  theretofore
     been conducted or (subject to the limitations  hereinafter set forth) which
     the Partnership  may thereafter  enter into. No Liquidator who is a Partner
     or an  Affiliate  of a Partner  shall be paid any  compensation  or fee for
     conducting the liquidation of the Partnership.

          8.3.2  The  Liquidator  shall  proceed  with  such  liquidation  in as
     expeditious a manner as is reasonably practicable. The holders of interests
     in the  Partnership  shall  continue to share income and losses  during the
     period of liquidation in accordance with Article 4.


<PAGE>

          8.3.3 If a Partner or an  Affiliate  of a Partner  desires to purchase
     any of the Partnership's  remaining assets, the price, terms and conditions
     of such purchase shall be subject to the Approval of the General Partners.

          8.3.4 Except as expressly  provided in this Article 8, any  Liquidator
     which is not the Blackstone General Partner shall have and may exercise all
     of the powers conferred upon the Blackstone General Partner under the terms
     of  this  Agreement  (but  subject  to all of the  applicable  limitations,
     contractual and otherwise, upon the exercise of such powers), to the extent
     necessary  or  desirable in the good faith  judgment of the  Liquidator  to
     carry out the duties and  functions  of the  Liquidator  hereunder  for and
     during the Liquidation Period.

          8.3.5 If (i) the  Partnership  is  dissolved  for any reason  (ii) the
     General  Partners have become Bankrupt or been dissolved,  and (iii) within
     ninety  (90)  days  following  the  date of  dissolution  a  Liquidator  or
     successor  Liquidator has not been appointed by remaining Partners pursuant
     to  Section  8.3.1,  any  interested  party  shall  have the  right to seek
     judicial  supervision of the winding up of the Partnership  pursuant to the
     Act.

          8.3.6 After making  payment or provision  for payment of all debts and
     liabilities  of the  Partnership  and  all  expenses  of  liquidation,  the
     Liquidator may establish,  for a period not to exceed  eighteen (18) months
     after the date the  liquidation  is  complete,  such cash  reserves  as the
     General  Partners  may  Approve  to be  necessary  for  any  contingent  or
     unforeseen liabilities or obligations of the Partnership.

     8.4  Distribution  Upon Dissolution and Capital Account  Adjustments.  Upon
dissolution  of the  Partnership  without  reconstitution  as  permitted by this
Article 8,  the Partnership's  assets shall be sold or otherwise  disposed of to
third  parties as directed by the  Liquidator  (unless  the  Partners  Approve a
distribution  of any  Partnership  asset or  interests  therein  in-kind  to the
Partners),  and,  after paying or providing for  liabilities  owing to creditors
(including  Partners) and the  establishment  of such reserves as the Liquidator
reasonably   deems  necessary  for  contingent  or  unforeseen   liabilities  or
obligations of the  Partnership for a period of up to eighteen (18) months after
the liquidation has been completed,  the remaining liquidation proceeds (and the
reserves,  after the  expiration  of a period of time deemed  reasonable  by the
Liquidator for a period of up to eighteen (18) months after the  liquidation has
been completed) shall be distributed pursuant to Section 4.2.

     8.5  Compliance   with  Timing   Requirements   of  Treasury   Regulations.
Notwithstanding  anything in this  Article 8 to the  contrary,  in the event the
Partnership  is   "liquidated"   within  the  meaning  of  Regulations   Section
1.704-1(b)(2)(ii)(g),  distributions  shall be made to the  Partners  within the
time  required  by  Regulations  Section  1.704-1(b)(2)(ii)(b)(2)  to the extent
practicable.  However, a liquidation  occurring as a result of a Tax Termination
shall not  require  an actual  distribution  of  Partnership  assets,  but shall
instead be treated as a constructive  liquidation  and reformation in the manner
provided in Regulations Section  1.708-1(b)(1)(iv),  or otherwise as required by
successor Regulations, if any.


<PAGE>
                                    ARTICLE 9

                                  MISCELLANEOUS

     9.1 Other  Interests.  No Partner and no Affiliate of a Partner  shall have
any right, by virtue of this Agreement or otherwise,  to share or participate in
or to Approve any other  investments  or  activities of any other Partner or the
income or proceeds derived therefrom, no Partner and no Affiliate of any Partner
shall be obligated to offer or to bring

<PAGE>


to the  attention  of the  Partnership  or the  Partners  any  property or other
business  investment  or  opportunity,  whether  or not  within the scope of the
Partnership's  purposes, and any Partner and any Affiliate of any Partner may at
any time during the term of the  Partnership  own, invest in, develop or manage,
directly  or  indirectly,   any  property  or  other   business   investment  or
opportunity,  whether or not competitive with the Partnership, the Properties or
the Partnership's  other assets or otherwise within the scope of the Partnership
purposes. Each of the Partners acknowledges and agrees that each Partner and its
Affiliates  have  engaged or invested  in, are now engaged and  investing in and
will in the future be offered,  consider, engage and/or invest in other business
or real property  ventures of every kind and nature,  including  the  ownership,
acquisition,  financing, leasing, operating, management,  syndication, brokerage
and  development of real property and other  investments  and oppor- tunities to
make or  purchase  loans  which  are  competitive  with the  Properties  and the
business of the Partnership,  and none of the Partners or their Affiliates shall
have any obligation or responsibility  to disclose,  account for or offer any of
such real  properties,  investments or  opportunities  to the Partnership or any
Partner  or their  Affiliates,  and the  Partnership,  the  Partners  and  their
Affiliates shall have no rights or interests therein.

     9.2 Damages;  Certain Cure Rights;  Offset. Each Partner shall be liable to
the Partnership and the other Partners for any actual (but not  consequential or
incidental)  damages  arising  from any breach  hereof.  Except as  provided  in
Sections 2.2.2.1, 3.5.4, 5.5.1, 5.5.3 or 7.4, the liability of any Partner shall
be limited to the extent of such Partner's interest in the Partnership. Upon any
alleged  breach or  default  of this  Agreement  by any  Partner,  it shall be a
condition to any action  against  such  Partner that such Partner have  received
notice of such  alleged  breach or default  (which  may be any notice  otherwise
required by this Agreement) and that such Partner shall have failed to cure such
alleged  breach or  default  within  thirty  (30) days  following  such  notice.
Notwithstanding anything in this Agreement to the contrary, the only cure period
for failure timely to make a Capital  Contribution  under Article 2 is set forth
in Sections 2.2.1 and 2.2.2.

     9.3 No Agency. Except as provided herein, nothing herein contained shall be
construed to constitute any Partner hereof the agent of any other Partner hereof
or to  limit  in  any  manner  the  carrying  on of  each  Partner's  respective
businesses or activities.

     9.4  Governing  Law.  It is the  intent  of the  parties  hereto  that  all
questions with respect to the  construction of this Agreement and the rights and
liabilities  of the parties  hereto shall be determined  in accordance  with the
provisions  of the laws of the  State of  Delaware  as  applicable  to a limited
liability company formed under the Act. The United States District Court for the
Southern District of New York and the Supreme Court

<PAGE>

for New York  County,  New York  shall be the  exclusive  appropriate  venues to
litigate  questions of interpretation  under this Agreement or the rights of the
parties  hereunder.  Each of the parties hereto hereby waives any and all rights
to a trial by jury with  respect  to any  dispute  among the  Partners  or their
Affiliates or among a Partner (or its Affiliates) and the Partnership concerning
this  Agreement,  the  Partnership or the  Properties.  In any dispute among the
Partners  concerning the Partnership or this Agreement,  the prevailing  Partner
shall be entitled to recover its reasonable attorneys' fees and costs (including
litigation and collection costs) from the non-prevailing Partners.

     9.5 Notices. Any notices or solicitations of Approval required or permitted
to be given under the terms of this  Agreement  shall be in writing and shall be
deemed to have been given when  (i) personally  delivered  with signed  delivery
receipt  obtained,  (ii) when  transmitted  by facsimile  machine,  with printed
confirmation of successful transmission to the facsimile number set forth in the
appropriate  address listed below being obtained by the sender from the sender's
facsimile  machine,  or  (iii)  by a  nationally  recognized  overnight  courier
service, fees prepaid, when delivered, in each case addressed as follows:

     If to Blackstone or the Limited Partner, to it in care of:

           Blackstone Real Estate Advisors II L.P.
           345 Park Avenue, 31st Floor
           New York, New York 10154
 
           Attn:  Stavros Galiotos
           Phone: 212-754-7321
           Fax:      212-754-8730
 

           with a copy to:

           Simpson Thacher & Bartlett
           425 Lexington Avenue
           New York, New York 10017

           Attn: Glenn D. Kesselhaut, Esq.
           Phone: 212-455-7075
           Fax:  212-455-2500


           If to Insignia, to it in care of:


           Mr. James Aston, Mr. Jeffrey Goldberg
           and Mr. John Lines
           One Insignia Financial Plaza
<PAGE>

           Greenville, South Carolina  29601
           Phone:  (864) 239-1000
           Fax:  (864) 239-1096

           with a copy to:
           Akin, Gump, Strauss, Hauer & Feld LLP
           399 Park Avenue
           New York, New York 10022
           Attn: Robert G. Koen, Esq.
           Phone:  (212) 872-1071
           Fax:  (212) 872-1002

The time to respond to any notice shall  commence to run on the date of delivery
at the  appropriate  addresses  (or  attempted  delivery  if delivery is refused
during normal business hours). A Partner may change the address to which notices
shall be sent to it, or any of its Authorized Representatives, by written notice
to all Partners (said change of address or of Authorized  Representatives  to be
effective upon receipt by all Partners).

     9.6 Pronouns and Plurals.  References  herein to the singular shall include
the plural and to the plural shall include the singular,  and  references to the
masculine gender shall include the feminine and neuter genders (and vice versa),
except where the same shall not be appropriate.

     9.7 Waiver. No consent or waiver,  express or implied, by any Partner to or
of any breach or default by any other Partner in the performance by the other of
its obligations hereunder shall be deemed or construed to be a consent or waiver
to or of any other  breach or  default by the other in the  performance  by such
other  party of the same or any other  obligations  of such  Partner  hereunder.
Failure  on the part of any  Partner  to  object  to or  complain  of any act or
failure to act of any other  Partner or to declare any other Partner in default,
irrespective of how long such failure  continues,  shall not constitute a waiver
by such Partner of its rights hereunder.

     9.8  Severability.  If any provision of this  Agreement or the  application
thereof to any Person or circumstance  shall be invalid or  unenforceable to any
extent,  the remainder of this Agreement and the  application of such provisions
to other  Persons or  circumstances  shall not be affected  thereby and shall be
enforced to the greatest extent permitted by law.

     9.9  Titles  and  Captions.  All  Article  or  Section  titles or  captions
contained in this Agreement are for  convenience  only and shall not be deemed a
part of the content of this Agreement.

     9.10 Agreement in  Counterparts.  This Agreement may be executed in several
counterparts,  each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.  In addition, this Agreement may contain
more than

<PAGE>

one  counterpart  of the signature page and the Agreement may be executed by the
affixing  of the  signatures  of  each  of the  Partners  to one or more of such
counterpart signature pages; all of such signature pages shall be read as though
one,  and shall have the same force and effect as though all of the  signers had
signed a single  signature  page.  A party to this  Agreement  may  execute  and
deliver this Agreement by executing a counterpart of the signature  pages hereto
and sending a copy thereof to the other  parties to this  Agreement by facsimile
transmission.  Any party who executes and delivers  this  Agreement by facsimile
transmission  shall deliver four (4) manually  executed copies of such signature
page to each other party to this Agreement  within three (3) Business Days after
such facsimile  transmission (but failure to do so shall not affect the validity
of  such  party's  execution  and  delivery  by  facsimile  transmission).  This
Agreement  shall not be effective or binding on any party to this  Agreement for
any  purpose  unless and until each party to this  Agreement  has  executed  and
delivered a counterpart signature page to this Agreement to the other parties to
this Agreement.

     9.11 Binding Agreement.  Subject to the restrictions on Transfers set forth
herein,  this  Agreement  shall inure to the benefit of and be binding  upon the
undersigned  Partners and their respective heirs,  executors,  legal or personal
representatives, successors and assigns. Whenever in this instrument a reference
to any party or Partner  is made,  such  reference  shall be deemed to include a
reference to the heirs, executors, legal or personal representatives, successors
and assigns of such party or Partner.

     9.12  Further  Assurances.  The  Partners  shall  execute and deliver  such
further  instruments  and do such further acts and things as may  reasonably  be
required to carry out the intent and purposes of this  Agreement  promptly  upon
request from either Partner.

     9.13 Waiver of Partition.  Unless otherwise  specifically  provided in this
Agreement  (including  Article 8), no Partner  shall,  and each  Partner  hereby
irrevocably waives the right to, either directly or indirectly,  take any action
to require  partition or appraisement of the Partnership,  the Properties or any
part  thereof,  and,  notwithstanding  any  provision of  applicable  law to the
contrary,  each Partner hereby  irrevocably waives any and all right to maintain
any action for  partition  or to compel any sale with respect to its interest in
the Partnership or with respect to the assets of the Partnership,  including the
Properties, or any part thereof.

     9.14  Entire  Agreement.  This  Agreement  contains  the final  and  entire
agreement  among the parties  hereto with respect to the subject  matter hereof,
including the Properties,  and they shall not be bound by any terms, conditions,
statements or  representations,  oral or written,  with respect thereto that are
not contained  herein.  This Agreement does not modify any other agreement among
the parties hereto or their  Affiliates  except to the extent  specifically  set
forth in this Agreement.

     9.15  Amendments.  Except as  expressly  provided in this  Agreement,  this
Agreement  may be  modified  or amended  only upon the  Approval  of the General
Partners.


<PAGE>

     9.16 No  Drafting  Presumption.  In  interpreting  the  provisions  of this
Agreement,  no presumption  shall apply against any Partner that otherwise would
operate  against such Partner by reason of such document  having been drafted by
such  Partner  or at the  direction  of such  Partner  or an  Affiliate  of such
Partner.

     9.17 No Third-Party Beneficiaries. The provisions of this Agreement are not
intended to be for the benefit of any creditor or other  Person  (other than the
Partners  in  their  capacities  as  such) to whom  any  debts,  liabilities  or
obligations are owed by (or who otherwise have a claim against or dealings with)
the  Partnership  or the  Partners,  and no such  creditor or other Person shall
obtain  any  rights  under  any of such  provisions  (whether  as a  third-party
beneficiary  or  otherwise) or shall by reason of any such  provisions  make any
claim in respect to any debt,  liability or obligation (or otherwise)  including
any debt, liability or obligation with respect to Capital Contributions, against
the  Partnership  or the  Partners.  In  addition,  no  deficit  balance  in any
Partner's  Capital Account or in the capital account of any partner or member of
a  Partner  shall  be an  asset  of the  Partnership,  and no  Partner  shall be
obligated to restore any such deficit balance.

[signatures begin on next page]

<PAGE>

     IN WITNESS  WHEREOF,  this Agreement is executed,  and is effective for all
purposes, as of the date first set forth above.

PARTNERS:

BLACKSTONE GENERAL PARTNER

BRE/Southwest Partners I L.P., a Delaware limited
partnership


By: BRE/Southwest Partners I L.L.C., its general
partner


By:  Stavros Galiotos
---------------------
Name:
Title:

MANAGING GENERAL PARTNER AND LIMITED
PARTNER


NPI-AP MANAGEMENT, L.P., a Delaware
limited partnership


By: NPI Property Management Corporation, its
general partner


By:   Jeffrey L. Goldberg
-------------------------
Name:
Title:


[Signatures Continue]


<PAGE>


LIMITED PARTNERS


BLACKSTONE REAL ESTATE PARTNERS II L.P.,
a Delaware limited partnership

By: Blackstone Real Estate Associates II L.P., a
Delaware limited partnership, its general
partner


By: Blackstone Real Estate Management
Associates II L.P., its general partner

 
By: BREA II L.L.C., a Delaware
limited liability company, its
general partner

By:  /s/ Stavros Galiotos
-------------------------
Name:
Title:




<PAGE>

BLACKSTONE REAL ESTATE PARTNERS II TE.1
L.P., a Delaware limited partnership


By: Blackstone Real Estate Associates II L.P., a
Delaware limited partnership, its general
partner


By: Blackstone Real Estate Management
Associates II L.P., its general partner

 
By: BREA II L.L.C., a Delaware
limited liability company, its
general partner

By: /s/ Stavros Galiotos
------------------------
Name:
Title:

BLACKSTONE REAL ESTATE PARTNERS II TE.2
L.P., a Delaware limited partnership


By: Blackstone Real Estate Associates II L.P., a
Delaware limited partnership, its general
partner


By: Blackstone Real Estate Management
Associates II L.P., its general partner

 
By: BREA II L.L.C., a Delaware
limited liability company, its
general partner

By:  /s/ Stavros Galiotos
-------------------------
Name:
Title:


[signatures continue]

<PAGE>


BLACKSTONE REAL ESTATE HOLDINGS II L.P.,
a Delaware limited partnership


By: Blackstone Real Estate Management
Associates II L.P., its general partner

 
By: BREA II L.L.C., a Delaware
limited liability company, its
general partner

By:  /s/ Stavros Galiotos
-------------------------
Name:
Title:




[signatures conclude]