<PAGE>

                                                                     EXHIBIT 4.1
--------------------------------------------------------------------------------

                      UNIVERSAL HEALTH REALTY INCOME TRUST

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

                              Declaration of Trust

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

                                August __, 1986

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                                     INDEX

                                                                            Page
                                                                            ----

1.1    Name ............................................................      3
1.2    Places of Business ..............................................      3
1.3    Nature of Trust .................................................      4
1.4    Definitions .....................................................      5

                                   ARTICLE II
                                    TRUSTEES

2.1    Number, Term of Office and
         Qualifications of Trustees ....................................     16
2.2    Compensation and Other Renumeration .............................     18
2.3    Resignation, Removal and Death of Trustees ......................     18
2.4    Vacancies .......................................................     19
2.5    Successor and Additional Trustees ...............................     20
2.6    Actions by Trustees .............................................     21
2.7    Certification of Changes in Trustees ............................     22
2.8    Committees ......................................................     22
2.9    Power and Authority of Trustees .................................     23
2.10   Specific Powers and Authority ...................................     24
2.11   Employment of Advisor ...........................................     34
2.12   Bylaws ..........................................................     36

                                   ARTICLE III
                           THE SHARES AND SHAREHOLDERS

3.1    Description of Shares ...........................................     36
3.2    Certificates ....................................................     38
3.3    Fractional Shares ...............................................     40
3.4    Legal Ownership of Trust Estate .................................     40
3.5    Shares Deemed Personal Property .................................     41
3.6    Share Record; Issuance and Transferability
         of Shares .....................................................     41
3.7    Dividends or Distributions to Shareholders ......................     43
3.8    Transfer Agent, Dividend Disbursing
         Agent and Registrar ...........................................     44
3.9    Shareholders' Meetings ..........................................     44
3.10   Proxies .........................................................     46
3.11   Reports to Shareholders .........................................     46
3.12   Fixing Record Date ..............................................     47
3.13   Notice to Shareholders ..........................................     48
3.14   Shareholders' Disclosures; Trustees' Right to
         Refuse to Transfer Shares; Limitation on
         Holdings; Redemption of Shares ................................     48
3.15   Special Voting Requirements for Certain
         Business Combinations .........................................     52

                                   ARTICLE IV
                      LIABILITY OF TRUSTEES. SHAREHOLDERS,
                         OFFICERS. EMPLOYEES AND AGENTS,
                                AND OTHER MATTERS

4.1    Limitation of Liability of Shareholders,
         Trustees, Officers, Employees and Agents for
         Obligations of the Trust ......................................     56
4.2    Express Exculpatory Clauses and Instruments .....................     57
4.3    Limitation of Liability of Trustees, Officers,
         Employees and Agents to the Trust and to
         Shareholders for Acts of Omissions ............................     57
4.4    Limitation of Liability of Affiliated Trustees
         and Their Affiliates to the Trust and to
         Shareholders for Acts and Omissions ...........................     58
4.5    Indemnification and Reimbursement of Trustees,
       Officers, Employees and Agents ..................................     58
4.6    Certain Definitions .............................................     62
4.7    Identification and Reimbursement of
         Shareholder ...................................................     62
4.8    Right of Trustees, Officers, Employees and
         Agents to Own Shares or Other Property
         and to Engage in Other business ...............................     62
4.9    Transaction Between Trustees, Officers,
         Employees or Agents and the Trust .............................     65
4.10   Independent Counsel .............................................     68
4.11   Persons Dealing with Trustees, Officers,
         Employees or Agents ...........................................     68
4.12   Reliance ........................................................     69

                                    ARTICLE V
                             DURATION, AMENDMENT AND
                              TERMINATION OF TRUST

5.1    Duration of Trust ...............................................     70
5.2    Termination of Trust ............................................     70
5.3    Amendment Procedure .............................................     71
5.4    Amendments Effective ............................................     72
5.5    Transfer to Successor ...........................................     73

                                   ARTICLE VI
                                  MISCELLANEOUS

6.1    Applicable Law ..................................................     73
6.2    Index and Headings for Reference Only ...........................     74
6.3    Successors In Interest ..........................................     74
6.4    Inspection of Records ...........................................     74
6.5    Counterparts ....................................................     75
6.6    Provisions of the Trust in Conflict with
         Law or Regulations; Severability ..............................     75
6.7    Certifications ..................................................     76
<PAGE>

                              DECLARATION OF TRUST
                                       0F
                      UNIVERSAL HEALTH REALTY INCOME TRUST
                                 August __, 1986

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

      DECLARATION OF TRUST made as of the date set forth above by the
undersigned Trustees.

                                   WITNESSETH:

      WHEREAS, the Trustees desire to create a trust for the principal purpose
of investing in real property and interests therein: and

      WHEREAS, the Trustees desire that such trust qualify as a "real estate
investment trust" under the REIT Provisions of the Internal Revenue Code; and

      WHEREAS, in furtherance of such purpose the Trustees intend to acquire
certain real property and interests therein and to hold, manage and dispose of
all such property as Trustees in the manner hereinafter stated; and
<PAGE>

      WHEREAS, it is proposed that the beneficial interest in the Trust be
divided into transferable Shares of Beneficial Interest, evidenced by
certificates therefor, as hereinafter provided;

      NOW, THEREFORE, it as hereby agreed and declared that the Trustees will
hold any and all property of every type and description which they are acquiring
or may hereafter acquire as Trustees, together with the proceeds thereof, in
trust, to manage and dispose of the same for the benefit of the holders from
time to time of the Shares of Beneficial Interest being issued and to be issued
hereunder in the manner and subject to the stipulations contained herein.


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                                    ARTICLE I

                             THE TRUST; DEFINITIONS

      1.1 Name. The name of the Trust created by this Declaration of Trust shall
be "Universal Health Realty Income Trust" and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue or
be sued under that name, which name (and the word "Trust" wherever used in this
Declaration of Trust, except where the context otherwise requires) shall refer
to the Trustees collectively but not individually or personally nor to the
officers, agents, employees or Shareholders of the Trust or of such Trustees.
Under circumstances under which the Trustees determine that the use of such name
is not practicable or under circumstances in which the Trustees are
contractually bound to change that name, they may use such other designation or
they may adopt another name under which the Trust may hold property or conduct
its activities.

      1.2 Places of Business. The Trust shall maintain an office in Maryland at
The Corporation Trust Incorporated or such other place in Maryland as the
Trustees may determine from time to time. The Resident Agent of the Trust at
such office shall be The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The Trust may change such


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Resident Agent from time to time as the Trustees shall determine. The Trust may
have such other offices or places of business within or without the State of
Maryland as the Trustees may from time to time determine.

      1.3 Nature of Trust. The Trust shall be a real estate investment trust
within the meaning of Title 8 of the Corporations and Associations Article of
the Annotated Code of Maryland. It is also intended that the Trust shall carry
on a business as a "real estate investment trust" as described in the REIT
Provisions of the Internal Revenue Code. The Trust is not intended to be, shall
not be deemed to be, and shall not be treated as a general partnership, limited
partnership, joint venture, corporation or joint stock company (but nothing
herein shall preclude the Trust from being treated for tax purposes as an
association under the Internal Revenue Code) nor shall the Trustees or
Shareholders or any of them for any purpose be, nor be deemed to be, nor be
treated in any way whatsoever to be, liable or responsible hereunder as partners
or joint venturers. The relationship of the Shareholders to the Trustees shall
be solely that of beneficiaries of the Trust in accordance with the rights
conferred upon them by this Declaration.


                                      -4-
<PAGE>

      1.4 Definitions. The terms defined in this Section 1.4, wherever used In
this Declaration, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Wherever the singular number is used
in this Declaration and when permitted by the context, the same shall include
the plural, and the masculine gender shall include the feminine and neuter
genders, and vice versa. Where applicable, calculations to be made pursuant to
any such definition shall be made in accordance with generally accepted
accounting principles as in effect from time to time except as otherwise
provided in such definition.

            (a) Advisor. "Advisor" shall mean the Person employed by the
      Trustees in accordance with the provisions of the Bylaws.

            (b) Advisory Contract. "Advisory Contract" shall mean the contract
      between the Trust and the Advisor pursuant to which the Advisor is
      employed.

            (c) Affiliate. "Affiliate" shall mean, as to any Person, (i) any
      other Person directly or indirectly controlling, controlled by or under
      common control with such Person, (ii) any other Person that owns
      beneficially, directly or indirectly, five percent (5%) or more of the
      outstanding capital stock, shares or equity interests of such Person, or
      (iii) any officer, director, employee,


                                      -5-
<PAGE>

      general partner or trustee of such Person or of any Person controlling,
      controlled by or under common control with such Person (excluding trustees
      who are not otherwise an Affiliate of such Person).

            (d) Affiliated Trustee. "Affiliated Trustee" shall mean a Trustee
      who is not an Independent Trustee.

            (e) Annual Meeting of Shareholders. "Annual Meeting of Shareholders"
      shall mean the meeting described in the first sentence of Section 3.9.

            (f) Annual Report. "Annual Report" shall have the meaning set forth
      in Section 3.11.

            (g) Average Invested Real Estate Assets. "Average Invested Real
      Estate Assets" for any period shall mean the average of the aggregate book
      value of the consolidated assets of the Trust invested, directly or
      indirectly, in equity interests in, and loans secured by, real estate,
      before reserves for depreciation or bad debt or other similar noncash
      reserves, calculated by taking the average of such values at the end of
      each month during such period.

            (h) Book Value. "Book Value" of an asset or assets shall mean the
      value of such asset or assets of the Trust on the books of the Trust,
      without


                                      -6-
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      deduction for depreciation or other asset valuation reserves and without
      deduction for mortgages or other security interests to which such asset or
      assets are subject, except that no asset shall be valued at more than its
      fair market value as determined by or under procedures adopted by the
      Trustees, and the underlying assets of a partnership, joint venture or
      other form of indirect ownership, to the extent of the Trust's interest
      therein, shall be valued as if owned directly by the Trust.

            (i) Bylaws. "Bylaws" shall have the meaning set forth in Section
      2.12.

            (j) Continuing Trustee. "Continuing Trustee" shall mean each of the
      Trustees identified in this Declaration, or one elected or appointed prior
      to the time the Related Person (as defined in Section 15) in question
      acquires such status, or one designated as a Continuing Trustee (prior to
      his or her initial election or appointment) by all or all but one of the
      Trustees on the Board of Trustees, but only if all or all but one of the
      Trustees on the Board of Trustees shall then consist of Continuing
      Trustees.

            (k) Declaration. "Declaration" or "this Declaration" shall mean this
      Declaration of Trust,


                                      -7-
<PAGE>

      as amended, restated or modified from time to time. References in this
      Declaration to "herein" and "hereunder" shall be deemed to refer to this
      Declaration and shall not be limited to the particular text, article or
      section in which such words appear.

            (1) Independent Trustee. "Independent Trustee" shall mean a Trustee
      who, in his individual capacity, (i) is not an Affiliate of the Advisor
      and (ii) does not perform any services for the Trust except as Trustee.

            (m) Internal Revenue Code. "Internal Revenue Code" shall mean the
      Internal Revenue Code of 1954, as now enacted or hereafter amended, or
      successor statutes and applicable rules and regulations thereunder.

            (n) Invested Assets. "Invested Assets" shall mean the Book Value of
      all the Real Estate Investments of the Trust.

            (o) Mortgage Loans. "Mortgage Loans" shall mean notes, debentures,
      bonds and other evidences of indebtedness or obligations, whether
      negotiable or nonnegotiable, and which are secured or collateralized by
      Mortgages.


                                      -8-
<PAGE>

            (p) Mortgages. "Mortgages" shall mean mortgages, deeds of trust or
      other security interests in Real Property.

            (q) Net Assets. "Net Assets" shall mean the total assets (other than
      intangibles) at cost before deducting depreciation or other non-cash
      reserves less total liabilities, calculated at least quarterly on a basis
      consistently applied.

            (r) Net Income. "Net Income" for any period shall be calculated on
      the basis of the Trust's audited financial statements and shall mean total
      revenues applicable to such period, less the expenses applicable to such
      period, other than additions to reserves for depreciation or bad debts or
      other similar non-cash reserves.

            (s) Person. "Person" shall mean and include individuals,
      corporations, limited partnerships, general partnerships, joint stock
      companies or associations, joint ventures, associations, companies,
      trusts, banks, trust companies, land trusts, business trusts and other
      entities and governments and agencies and political subdivisions thereof.

            (t) Real Estate Investment. "Real Estate Investment" shall mean any
      direct or indirect investment in any interest in Real Property or in


                                      -9-
<PAGE>

      any Mortgage Loan, or in any Person whose principal purpose is to make any
      such investment.

            (u) Real Property. "Real Property" shall mean and include land,
      leasehold interests (including but not limited to interests of a lessor or
      lessee therein), rights and interests in land, and in any building's
      structures, improvements, furnishings and fixtures located on or used in
      connection with land, leasehold interests or rights in land or interests
      therein, but does not include investments in Mortgages, Mortgage Loans or
      interests therein.

            (v) REIT. "REIT" shall mean a real estate investment trust as
      defined in the REIT Provisions of the Internal Revenue Code.

            (w) REIT Provisions of the Internal Revenue Code. "REIT Provisions
      of the Internal Revenue Code" shall mean Parts II and III of Subchapter M
      of Chapter 1 of Subtitle A of the Internal Revenue Code or any successor
      provision.

            (x) Securities. "Securities" shall mean any stock, shares, voting
      trust certificates, bonds, debentures, notes or other evidences of
      indebtedness or in general any instruments commonly known as "securities"
      or any certificates of interest,


                                      -10-
<PAGE>

      shares or participations in, temporary or interim certificates for,
      receipts for, guarantees of, or warrants, options or rights to subscribe
      to, purchase or acquire any of the foregoing.

            (y) Shareholders. "Shareholders" shall mean as of any particular
      time all holders of record of outstanding Shares at such time.

            (z) Shares. "Shares" or, as the context may require, "shares" shall
      mean the shares of beneficial interest of the Trust as described in the
      first sentence of Section 3.1 hereof.

            (aa) Total Assets. "Total Assets" shall mean the Book Value of all
      the assets of the Trust, as such Book Value appears on the most recent
      quarterly balance sheet of the Trust.

            (bb) Total Operating Expenses. "Total Operating Expenses" shall be
      calculated on the basis of the Trust's annual audited financial statement
      and shall mean the aggregate annual expenses regarded as ordinary
      operating expenses (including any compensation payable to the Advisor)
      exclusive of the following:

            (i) the cost of borrowed money;


                                      -11-
<PAGE>

            (ii) taxes on income and taxes and assessments on real property, if
      any, and all other taxes applicable to the Trust;

            (iii) legal, auditing, accounting, underwriting, brokerage, listing,
      reporting, registration and other fees, and printing, engraving and other
      expenses and taxes incurred in connection with the issuance, distribution,
      transfer, trading, registration and stack exchange listing of the Trust's
      securities;

            (iv) expenses of organizing, revising, amending, converting,
      modifying or terminating the Trust;

            (v) fees and expenses paid to Trustees and officers of the Trust who
      are not employees or Affiliates of the Advisor, independent advisors,
      independent contractors, mortgage servicers, consultants, managers, local
      property managers or management firms, accountants, attorneys and other
      agents employed by or on behalf of the Trust who are employees or
      Affiliates of the Advisor to the extent set forth in the Advisory
      Contract;

            (vi) expenses directly connected with the acquisition, disposition
      and ownership of real estate interests or other property (including the


                                      -12-
<PAGE>

      costs of foreclosure, insurance premiums, legal services, brokerage and
      sales commissions, maintenance, repair, improvement and local management
      of property), other than expenses with respect thereto of employees of the
      Advisor, to the extent that such expenses are to be borne by the Advisor
      pursuant to the terms of the Advisory Contract;

            (vii) all insurance costs incurred in connection with the Trust
      (including officer and trustee liability insurance);

            (viii) expenses connected with payments of dividends or interest or
      contributions in cash or any other form made or caused to be made by the
      Trustees to holders of securities of the Trust;

            (ix) all expenses connected with communications to holders of
      securities of the Trust and other bookkeeping and clerical work necessary
      to maintaining relations with holders of securities, including the cost of
      printing and mailing certificates for securities and proxy solicitation
      materials and reports to holders of the Trust's securities;

            (x) transfer agent's, registrar's and indenture trustee's fees and
      charges;


                                      -13-
<PAGE>

            (xi) legal, accounting and auditing fees and expenses;

            (xii) expenses relating to any office or office facilities
      maintained by the Trust separate from the office of the Advisor;

            (xiii) non-cash provisions for depreciation, depletion and
      amortization;

            (xiv) losses on the disposition of assets and provisions for such
      losses; and

            (xv) other extraordinary charges including, without limitation,
      litigation costs.

            (cc) Trust. "Trust" shall mean the Trust created by this
      Declaration.

            (dd) Trustees. "Trustees" shall mean, as of any particular time, the
      original signatories hereto as long as they hold office hereunder and
      additional and successor trustees, and shall not include the officers,
      employees or Agents of the Trust or the Shareholders. Nothing herein shall
      be deemed to preclude the Trustees from also serving as officers,
      employees, or agents of the Trust or owning Shares.

            (ee) Trust Estate. "Trust Estate" shall mean as of any particular
      time any and all property, real, personal or otherwise, tangible or


                                      -14-
<PAGE>

      intangible, which is transferred, conveyed or paid to or purchased by the
      Trust or Trustees and all rents, income, profits and gains therefrom and
      which at such time is owned or held by or for the Trust or the Trustees.


                                      -15-
<PAGE>

                                   ARTICLE II

                                    TRUSTEES

            2.1 Number, Term of Office and Qualifications of Trustees. There
shall be no fewer than three (3) nor more than seven (7) Trustees. The initial
number of Trustees shall be seven (7) until changed by a two-thirds (2/3) vote
of the Continuing Trustees or by an amendment of this Declaration duly adopted
by the Shareholders. The Board of Trustees shall be classified into three
classes, with three (3) Trustees in Class I, two (2) Trustees in Class II, and
two (2) Trustees in Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of Trustees constituting the entire
Board of Trustees. If the number of Trustees is changed, any increase or
decrease shall be apportioned among the classes so that the number of Trustees
in each class remains as nearly equal as possible. Each Trustee in Class I shall
serve for an initial term ending at the annual meeting of Shareholders in 1987;
each Trustee in Class II shall serve for an initial term ending at the annual
meeting of Shareholders in 1988; and each Trustee in Class III, shall serve for
an initial term ending at the annual meeting of Shareholders in 1989. After the
respective initial terms of the groups indicated, each such group of Trustees
shall be elected for successive terms ending at the


                                      -16-
<PAGE>

annual meeting of Shareholders held during the third year after election.

The names of the initial Trustees who will serve as Trustees until the
expiration of their respective terms and until their successors are elected and
qualify are as follows:

            Class I:   Alan B. Miller, Lee Ducat and Peter Linneman
            Class II:  Joseph P. Gaynor, III and Daniel M. Cain
            Class III: Sidney Miller and Robert E. Cawthorn

            The initial Trustees shall be the signatories hereto. No reduction
in the number of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term. Subject to the provisions of Section
2.3, each Trustee shall hold office until the election and qualification of his
successor. There shall be no cumulative voting in the election of Trustees. A
Trustee shall be an individual at least twenty-one (21) years of age who is not
under legal disability. A majority of the Trustees shall at all times be persons
who are Independent Trustees and at least one independent Trustee shall serve in
each Class; provided, however, that upon a failure to comply with this
requirement because of the resignation, removal or death of a Trustee who is an
Independent Trustee, such requirement shall


                                      -17-
<PAGE>

not be applicable for a period of ninety (90) days. Nominees to serve as
Independent Trustees shall be nominated by the then current Independent
Trustees, if any. Unless otherwise required by law, no Trustee shall be required
to give bond, surety or security in any jurisdiction for the performance of any
duties or obligations hereunder. The Trustees in their capacity as Trustees
shall not be required to devote their entire time to the business and affairs of
the Trust.

            2.2 Compensation and Other Remuneration. The Trustees shall be
entitled to receive such reasonable compensation for their services as Trustees
as the Trustees may determine from time to time. The Trustees and Trust officers
shall be entitled to receive remuneration for services rendered to the Trust in
any other capacity. Subject to the Sections 4.8 and 4.9, such services may
include, without limitation, services as an officer of the Trust, legal,
accounting or other professional services, or services as a broker, transfer
agent or underwriter, whether performed by a Trustee or any person affiliated
with a Trustee.

            2.3 Resignation, Removal and Death of Trustees. A Trustee may resign
at any time by giving written notice to the remaining Trustees at the principal
office of the Trust. Such resignation shall take effect on the date specified in
such notice, without need for prior accounting. A Trustee may be removed at any
time with or without cause by vote or


                                      -18-
<PAGE>

consent of holders of Shares representing two-thirds of the total votes
authorized to be cast by Shares then outstanding and entitled to vote thereon,
or with cause by all remaining Trustees. A Trustee judged incompetent or
bankrupt, or for whom a guardian or conservator has been appointed, shall be
deemed to have resigned as of the date of such adjudication or appointment. Upon
the resignation or removal of any Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining Trustees
shall require for the conveyance of any Trust property held in his name, shall
account to the remaining Trustees as they require for all property which he
holds as Trustee and shall thereupon be discharged as Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall perform the
acts set forth in the preceding sentence and the discharge mentioned therein
shall run to such legal representative and to the incapacitated Trustee or the
estate of the deceased Trustee, as the case may be.

            2.4 Vacancies. If any or all the Trustees cease to be Trustees
hereunder, whether by reason of resignation, removal, incapacity, death or
otherwise, such event shall not terminate the Trust or effect its continuity.
Until vacancies are filled, the remaining Trustee or Trustees (even though fewer
than three (3) may exercise the powers of the Trustees hereunder. Vacancies
(including vacancies created


                                      -19-
<PAGE>

by increases in numbers) may be filled by the remaining Trustee or by a majority
of the remaining Trustees (or a majority of the remaining Independent Trustees,
if any, if the vacant position was formerly held by an Independent Trustee or is
required to be held by an Independent Trustee). If at any time there shall be no
Trustees in office, successor Trustees shall be elected by the Shareholders as
provided in Section 3.9. Any Trustee elected to fill a vacancy created by the
resignation, removal or death of a former Trustee shall hold office for the
unexpired term of such former Trustee.

            2.5 Successor and Additional Trustees. The right, title and interest
of the Trustee in and to the Trust Estate shall also vest in successor and
additional Trustees upon their qualification, and they shall thereupon have all
the rights and obligations of Trustees hereunder and until such qualification,
the right, title and interest in the Trust Estate shall vest in the remaining
Trustee on a pro rata basis. Such right, title and interest shall vest in the
Trustees whether or not conveyancing documents have been executed and delivered
pursuant to Section 2.3 or otherwise. Appropriate written evidence of the
election and qualification of successor and additional Trustees shall be filed
with the records of the Trust and in such other offices or places as the
Trustees may deem necessary, appropriate or desirable.


                                      -20-
<PAGE>

            2.6 Actions by Trustees. The Trustees may act with or without a
meeting. A quorum for all meetings of the Trustees shall be a majority of the
Trustees; provided, however, that, whenever pursuant to Section 4.9 or otherwise
the vote of a majority of a particular group of Trustees is required at a
meeting, a quorum for the consideration of the matter requiring such a majority
at such meeting shall be a majority of the Trustees which shall include a
majority of such group. Unless specifically provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (if a quorum for such meeting is present) or
without a meeting by written consents of a majority of the Trustees, which
consents shall be filed with the records of meeting of the Trustees. Any action
or actions permitted to be taken by the Trustees in connection with the business
of the Trust may be taken pursuant to authority granted by a meeting of the
Trustees conducted by a telephone conference call, and the transaction of Trust
business represented thereby shall be the same authority and validity as if
transacted at a meeting of the Trustees held in person or by written consent.
The minutes of any Trustees' meeting held by telephone shall be prepared in the
same manner as a meeting of the Trustees held in person. Any agreement, deed,
mortgage, lease or other instrument or writing executed by one or more of the
Trustees


                                      -21-
<PAGE>

or by any authorized Person shall be valid and binding upon the Trustees and
upon the Trust when authorized or ratified by action of the Trustees or as
provided in the Bylaws.

            With respect to the actions of the Trustees, Trustees who have, or
are Affiliates of Persons who have, any direct or indirect interest in or
connection with any matter being acted upon may be counted for all quorum
purposes under this Section 2.6 and, subject to the provisions of Section 4.9,
may vote on the matter as to which they or their Affiliates have such interest
or connection.

            2.7 Certification of Changes in Trustees. No alteration in the
number of Trustees, no removal of a Trustee and no election or appointment of
any individual as Trustee (other than an individual who was serving as a Trustee
immediately prior to such election or appointment) shall become effective unless
and until there shall be delivered to the secretary of the Trust an instrument
in writing signed by a majority of the Trustees, certifying to such alteration
in the number of trustees and/or to such removal of a Trustee and/or naming the
individual so elected or appointed as Trustee, together with his written
acceptance thereof and agreement to be bound thereby.

            2.8 Committee. The Trustees may appoint from among their number an
audit committee and such other standing committees as the Trustees determine.
Each standing commit-


                                      -22-
<PAGE>

tee shall consist of three or more members. All members of the audit committee
shall be Independent Trustees. A majority of the members of each other standing
committee shall be Independent Trustees; provided however, that upon a failure
to comply with this requirement because of the resignation, removal or death of
a Trustee who is an Independent Trustee, such requirement shall not be
applicable for a period of ninety (90) days. Each committee shall have such
powers, duties and obligations as the Trustees may deem necessary or
appropriate. The standing committees shall report their activities periodically
to the Trustees.

            2.9 Power and Authority of Trustees. The Trustees, subject only to
the specific limitations contained in this Declaration, shall have, without
further or other authorization, and free from any power or control on the part
of the Shareholders, full, absolute and exclusive power, control and authority
over the Trust Estate and over the business and affairs of the Trust to the same
extent as if the Trustees were the sole owners thereof in their own right, and
may do all such acts and things as in their sole judgment and discretion are
necessary for or incidental to or desirable for the carrying out of or
conducting the business of the Trust. Any construction of this Declaration or
any determination made in good faith by the Trustees of the purposes of the
Trust or the existence of any power or authority hereunder


                                      -23-
<PAGE>

shall be conclusive. In construing the provisions of this Declaration,
presumption shall be in favor of the grant of powers and authority to the
Trustees. The enumeration of any specific power or authority herein shall not be
construed as limiting the aforesaid powers or the general powers or authority or
any other specified power or authority conferred herein upon the Trustees.

            2.10 Specific Powers and Authority. Subject only to the express
limitations contained in this Declaration and in addition to any powers and
authority conferred by this Declaration or which the Trustees may have by virtue
of any present or future statute or rule or law, the Trustees without any action
or consent by the Shareholders shall have and may exercise at any time and from
time to time the following powers and authorities which may or may not be
exercised by them in their sole judgment and discretion and in such manner and
upon such terms and conditions as they may from time to time deem proper:

            (a) to retain, invest and reinvest the capital or other funds of the
      Trust in, and to acquire, purchase, or own, real or personal property of
      any kind, wherever located in the world, and make commitments for such
      investments, all without regard to whether any such property is authorized
      by law for the investment of trust funds or produces or may produce
      income; to pos-


                                      -24-
<PAGE>

      sess and exercise all the rights, powers and privileges appertaining to
      the ownership of the Trust Estate; and to increase the capital of the
      Trust at any time by the issuance of any additional authorized Shares
      (subject to the Bylaws or other Securities of the Trust for such
      consideration as they deem advisable;

            (b) without limitation of the powers set forth in paragraph (a)
      above, to invest in, purchase or otherwise acquire for such consideration
      as they deem proper, in cash or other property of through the issuance of
      shares or through the issuance of notes, debentures, bonds or other
      obligations of the Trust, and to hold for investment, the entire or any
      participating interests in any Mortgage Loans or interest in Real
      Property, including ownership of, or participations in the ownership of,
      or rights to acquire, equity interests in Real Property or in Persons
      owning, developing, improving, operating or managing Real Property, which
      interests may be acquired independently of or in connection with other
      investment activities of the Trust and, in the latter case, may include
      rights to receive additional payments based on gross income or rental or
      other income from the Real Property or improvements thereon; to invest in
      loans secured by the pledge or transfer of Mortgage Loans;


                                      -25-
<PAGE>

            (c) to sell, rent, lease, hire, exchange, release, partition,
      assign, mortgage, pledge, hypothecate, grant security interests in,
      encumber, negotiate, convey, transfer or otherwise dispose of any and all
      the Trust Estate by deeds (including deeds in lieu of foreclosure), trust
      deeds, assignments, bills of sale, transfers, leases, mortgages, financing
      statements, security agreements and other instruments for any of such
      purposes executed and delivered for and on behalf of the Trust or the
      Trustees by one or more of the Trustees or by a duly authorized officer,
      employee, agent or nominee of the Trust, provided that no disposition of a
      Real Estate Investment shall be accomplished without the approval of a
      majority of the Trustees (including a majority of the Independent
      Trustees);

            (d) to issue Shares, bonds, debentures, notes or other evidences of
      indebtedness, which may be secured or unsecured and may be subordinated to
      any indebtedness of the Trust, to such Persons for such cash, property or
      other consideration (including Securities issued or created by, or
      interests in any Person) at such time or times and on such terms as the
      Trustees may deem advisable and to list any of the foregoing Securities
      issued by the Trust on any securities exchange and to purchase or
      otherwise acquire, hold, cancel, reissue, sell and


                                      -26-
<PAGE>

      transfer any of such Securities, and to cause the instruments evidencing
      such Securities to bear an actual or facsimile imprint of the seal of the
      Trust (if the Trustees shall have adopted such a seal) and to be signed by
      manual or facsimile signature or signatures (and to issue such Securities,
      whether or not any Person whose manual or facsimile signature shall be
      imprinted thereon shall have ceased to occupy the office with respect to
      which such signature was authorized), provided that, where only facsimile
      signatures for the Trust are used, the instrument shall be countersigned
      manually by a transfer agent, registrar or other authentication agent; and
      to issue any of such Securities of different types in combinations or
      units with such restrictions on the separate transferability thereof as
      the Trustees shall determine;

            (e) to enter into leases of real and personal property as lessor or
      lessee and to enter into contracts, obligations and other agreements for a
      term, and to invest in obligations having a term, extending beyond the
      term of office of the Trustees and beyond the possible termination of the
      Trust, or having a lesser term;

            (f) to borrow money and give negotiable or non-negotiable
      instruments therefor; to guarantee, indemnify or act as surety with
      respect to payment or performance


                                      -27-
<PAGE>

      of obligations of third parties; to enter into other obligations on behalf
      of the Trust; and to assign, convey, transfer, mortgage, subordinate,
      pledge, grant security interests in, encumber or hypothecate the Trust
      Estate to secure any indebtedness of the Trust or any other of the
      foregoing obligations of the Trust;

            (g) to lend money, whether secured or unsecured;

            (h) to create reserve funds for any purpose;

            (i) to incur and pay out of the Trust Estate any charges or
      expenses, and to disburse any funds of the Trust, which charges, expenses
      or disbursements are, in the opinion of the Trustees, necessary or
      incidental to or desirable for the carrying out of any of the purposes of
      the Trust or conducting the business of the Trust, including without
      limitation taxes and other governmental levies, charges and assessments,
      of whatever kind or nature, imposed upon or against the Trustees in
      connection with the Trust Estate or any part thereof, and for any of the
      purposes herein;

            (j) to deposit funds of the Trust in banks, trust companies, savings
      and loan associations and other depositories, whether or not such deposits
      will draw interest, the same to be subject to withdrawal on such terms and
      in such manner and by such Person or Persons (including any one or more
      Trustees or officers, em-


                                      -28-
<PAGE>

            ployees or agents of the Trust) as the Trustees may determine;

            (k) to possess and exercise all the rights, powers and privileges
      pertaining to the ownership of all or any Mortgages or Securities issued
      or created by, or interests in, any Person, forming part of the Trust
      Estate, to the same extent that an individual might do so, and, without
      limiting the generality of the foregoing, to vote or give any consent,
      request or notice, or waive any notice, either in person or by proxy or
      power of attorney, with or without power of substitution, to one or more
      Persons, which proxies and powers of attorney may be for meetings or
      action generally or for any particular meeting or action, and may include
      the exercise of discretionary powers;

            (l) to cause to be organized or assist in organizing any Person
      under the laws of any jurisdiction to acquire the Trust Estate or any part
      or parts thereof or to carry on any business in which the Trust shall
      directly or indirectly have any interest, and to sell, rent, lease, hire,
      convey, negotiate, assign, exchange or transfer the Trust Estate or any
      part or parts


                                      -29-
<PAGE>

      thereof to or with any such Person or any existing Parson in exchange for
      the Securities thereof or otherwise, and to merge or consolidate the Trust
      with or into any Person or merge or consolidate any Person into the Trust,
      and to lend money to, subscribe for the Securities of, and enter into any
      contracts with, any Person in which the Trust holds or is about to acquire
      Securities or any other interest;

            (m) to enter into joint ventures, general or limited partnerships,
      participation or agency arrangements and any other lawful combinations or
      associations; provided, however, that the Trustees may not enter into any
      such joint venture or other association as aforesaid unless it has first
      received from counsel an opinion to the effect that such joint venture or
      other association as aforesaid will be treated for tax purposes as a
      partnership;

            (n) to elect, appoint, engage or employ such officers for the Trust
      as the Trustees may determine, who may be removed or discharged at the
      discretion of the Trustees, such officers to have such powers and duties,
      and to serve such terms, as may be prescribed by the Trustees or by the
      Bylaws; to engage or employ any Persons (including, subject to the
      provisions of Sections 4.8 and 4.9, any Trustee or officer, agent or
      employee of the Trust and any Person in which any Trustee, officer


                                      -30-
<PAGE>

      or agent is directly or indirectly interested or with which he is directly
      or indirectly connected) as agents, representatives, employees, or
      independent contractors (including without limitation real estate
      advisors, investment advisors, transfer agents, registrars, underwriters,
      accountants, attorneys at law, real estate agents, managers, appraisers,
      brokers, architects, engineers, construction managers, general contractors
      or otherwise) in one or more capacities, and to pay compensation from the
      Trust for services in as many capacities as such Person may be so engaged
      or employed; and to delegate any of the powers and duties of the Trustees
      to any one or more Trustees, agents, representatives, officers, employees,
      independent contractors or other Persons; provided, however, that no such
      delegation shall be made to an Affiliate of the Advisor, except with the
      approval of a majority of the Independent Trustees;

            (o) to determine or cause to be determined from time to time the
      value of all or any part of the Trust Estate and of any services,
      Securities, property or other consideration to be furnished to or acquired
      by the Trust, and from time to time to revalue or cause to be revalued all
      or any part of the Trust Estate in accordance with such appraisals or
      other information as


                                      -31-
<PAGE>

      are, in the Trustees sole judgment, necessary and/or satisfactory;

            (p) to collect, sue for and receive all sums of money coming due to
      the Trust, and to engage in, intervene in, abandon or adjust, by
      arbitration or otherwise, any actions, suits, proceedings, disputes,
      claims, controversies, demands or other litigation relating to the Trust,
      the Trust Estate or the Trust's affairs, to enter into agreements
      therefor, whether or not any suit is commenced or claim accrued or
      asserted and, in advance of any controversy, to enter into agreements
      regarding arbitration, adjudication or settlement thereof;

            (q) to renew, modify, release, compromise, extend, consolidate or
      cancel, in whole or in part, any obligation to or of the Trust or
      participate in any reorganization of obligors to the Trust;

            (r) to self-insure or to purchase and pay for out of the Trust
      Estate insurance contracts and policies, including contracts of indemnity,
      insuring the Trust Estate and/or all or any of the Trustees, the
      Shareholders, or the officers, employees or agents of the Trust against
      any and all claims and liabilities of every nature asserted by any person
      arising by reason of any action alleged to have been taken or omitted by
      the


                                      -32-
<PAGE>

      Trust or by the Trustees, Shareholders, officers, employees or agents,
      whether or not the Trust would have the power to indemnify such Person or
      Persons against any such claim or liability;

            (s) to cause legal title to any of the Trust Estate to be held by
      and/or in the name of the Trustees, or, except as prohibited by law, by
      and/or in the name of the Trust or one or more of the Trustees or any
      other Person, on such terms, in such manner and with such powers in such
      Person as the Trustees may determine, and with or without disclosure that
      the Trust or Trustees are interested therein;

            (t) to adopt a fiscal year for the Trust, and from time to time to
      change such fiscal year;

            (u) to adopt and use a seal (but the use of a seal shall not be
      required for the execution of instruments or obligations of the Trust);

            (v) to the extent permitted by law, to indemnify or enter into
      agreements with respect to indemnification with any Person with which the
      Trust has dealings, including without limitation any broker/dealer,
      investment bank, investment advisor or independent contractor, to such
      extent as the Trustees shall determine;

            (w) to confess judgment against the Trust;


                                      -33-
<PAGE>

            (x) to discontinue the operations of the Trust;

            (y) to repurchase or redeem Shares and other Securities issued by
      the Trust;

            (z) to declare and pay dividends or distributions, consisting of
      cash, property or Securities, to the holders of Shares of the Trust out of
      any funds legally available therefor; and

            (aa) to do all other such acts and things as are incident to the
      foregoing, and to exercise all powers which are necessary or useful to
      carry on the business of the Trust and to carry out the provisions of this
      Declaration.

            2.11 Employment of Advisor. The Trustees are responsible for the
general policies of the Trust and for the general supervision of the business of
the Trust conducted by all officers, agents, employees, advisors, managers or
independent contractors of the Trust. However, the Trustees are not and shall
not be required personally to conduct the day to day business of the Trust, and
consistent with their ultimate responsibility as stated above and upon such
terms as are specified in the Bylaws, the Trustees shall have the power to
appoint, employ or contract with any Person (including one or more of themselves
or any corporation, partnership, or trust in which one or more of them may be
directors,


                                      -34-
<PAGE>

officers, stockholders, partners or trustees) as the Trustees may deem necessary
or proper for the transaction of the business of the Trust. The Trustees may
therefore employ or contract with such Person (herein referred to as the
"Advisor") and, consistent with their ultimate responsibility as set forth in
this Section 2.11 and upon such terms as are specified in the Bylaws, the
Trustees may grant or delegate such authority to the Advisor as the Trustees may
in their sole discretion deem necessary or desirable without regard to whether
such authority is normally granted or delegated by trustees. Such granted or
delegated authority shall, however, be revocable by a majority vote of the
Independent Trustees. The Advisor shall be required to use its best efforts to
supervise the operation of the Trust in a manner consistent with the investment
policies and objectives of the Trust.

            Subject to the provisions of Article IV of the Bylaws and Section
4.9 of the Declaration, the Trustees shall have the power to determine the terms
and compensation of the Advisor or any other Person whom they may employ or with
whom they may contract for advisory services. The Trustees may exercise broad
discretion in allowing the Advisor to administer and regulate the operations of
the Trust, to act as agent for the Trust, to execute documents on behalf of the
Trustees and to make executive decisions which conform to general


                                      -35-
<PAGE>

policies and general principles previously established by the Trustees.

            2.12 Bylaws. The Trustees may make or adopt and from time to time
amend or repeal Bylaws (the "Bylaws") not inconsistent with law or with this
Declaration, containing provisions relating to the business of the Trust and the
conduct of its affairs and in such Bylaws may define the duties of the officers,
employees and agents of the Trust.


                                   ARTICLE III

                           THE SHARES AND SHAREHOLDERS

            3.1 Description of Shares. The interest of the Shareholders shall be
divided into 100,000,000 shares of beneficial interest, 95,000,000 of which
shall be designated as "Common Shares," and 5,000,000 or which shall be
designated as "Preferred Shares," and all of which shall be known collectively
as "Shares," all of which shall be validly issued, fully paid and nonassessable
by the Trust upon receipt of full consideration for which they have been issued
or without additional consideration if issued by way of share dividend or share
split. Each holder of Shares shall as a result thereof be deemed to have agreed
to and be bound by the terms of this Declaration. The Shares may be issued for
such consideration as the Trustees shall deem advisable. The


                                      -36-
<PAGE>

Shares shall have a par value of $.01 per share. The Trustees are hereby
expressly authorized at any time, and from time to time, to provide for issuance
of Shares upon such terms and conditions and pursuant to such agreements as the
Trustees may determine. The Trustees may classify or reclassify Preferred Shares
from time to time by setting (or changing, if such class has previously been
established) the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of such Preferred Shares. The Preferred Shares may
further be divided by the Trustees into special classes or series. However, such
classification or reclassification shall not be done in such manner so as to
result in any Person holding Excess Shares.

            Except as otherwise determined by the Trustees with respect to any
class or series of Preferred Shares, the holders of Shares shall be entitled to
the rights and powers hereinafter set forth in this Section 3.1. The holders of
Shares shall be entitled to receive, when as declared from time to time by the
Trustees out of any funds legally available for the purpose, such dividends or
distributions as may be declared from time to time by the Trustees. In the event
of the termination of the Trust pursuant to Section 5.1 or otherwise, or upon
the distribution of its assets, the assets of the Trust available for payment
and distribution to Share-


                                      -37-
<PAGE>

holders shall be distributed ratably among the holders of Shares at the time
outstanding in accordance with Section 5.2. All Shares shall have equal
noncumulative voting rights at the rate of one vote per Share, and equal
dividend, distribution, liquidation and other rights, and shall have no
preference, conversion, exchange, sinking fund or redemption rights. Absent a
contrary written agreement of the Trust authorized by the Trustees, and
notwithstanding any other determination by the Trustees with respect to any
class or series of Preferred Shares, no holder of Shares shall be entitled as a
matter of right to subscribe for or purchase any part of any new or additional
issue of Shares of any class whatsoever of the Trust, or of securities
convertible into any shares of any class whatsoever of the Trust, whether now or
hereafter authorized and whether issued for cash or other consideration or by
way of dividend.

            3.2 Certificates. Ownership of Shares shall be evidenced by
certificates. Every Shareholder shall be entitled to receive a certificate, in
such form as the Trustees shall from time to time approve, specifying the number
of Shares of the applicable class held by such Shareholder. Subject to Sections
3.6 and 3.14(c) hereof, such certificates shall be treated as negotiable and
title thereto and to the Shares represented thereby shall be transferred by
delivery thereof to the same extent in all respects as a dock certif-


                                      -38-
<PAGE>

icate, and the Shares represented thereby, of a Maryland business corporation.
Unless otherwise determined by the Trustee, such certificates shall be signed by
the Chairman, if any, or the President and shall be countersigned by a transfer
agent, and registered by a registrar if any, and such signatures may be
facsimile signatures in accordance with Section 2.10(d) hereof. There shall be
filed with each transfer agent a copy of the form of certificate so approved by
the Trustees, certified by the Chairman, President, or Secretary, and such form
shall continue to be used unless and until the Trustees approve some other form.

            In furtherance of the provisions of Section 3.14(c) hereof, each
certificate evidencing Shares shall contain legends imprinted thereon to
substantially the following effect or such other legend as the Trustees may from
time to time adopt:

      REFERENCE IS MADE TO THE DECLARATION OF TRUST OF THE TRUST FOR A STATEMENT
      OF ALL THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF
      EACH CLASS OR SERIES OF SHARES THAT THE TRUST IS AUTHORIZED TO ISSUE, THE
      VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES OF ANY PREFERRED OR
      SPICIAL CLASS OF SHARES IN SERIES, TO THE EXTENT THEY HAVE BEEN FIXED AND
      DETERMINED, AND THE AUTHORITY OF THE TRUSTEES TO FIX AND DETERMINE THE
      RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. ANY SUCH STATEMENT
      SMALL BE FURNISHED WITHOUT CHARGE ON REQUEST TO THE TRUST AT ITS PRINCIPAL
      PLACE OF BUSINESS OR REGISTERED OFFICE.

      IF NECESSARY TO EFFECT COMPLIANCE BY THE TRUST WITH REQUIREMENTS OF THE
      INTERNAL REVENUE CODE RELATING TO REAL ESTATE INVESTMENT TRUSTS, THE
      SHARES REPRESENTED BY THIS CERTIFICATE MAY BE REDEEMED BY THE TRUST AND/OR
      THE TRANSFER THEREOF MAY BE PROHIBITED ALL UPON THE TERMS


                                      -39-
<PAGE>

      AND CONDITIONS SET FORTH IN THE DECLARATION OF TRUST. THE TRUST WILL
      FURNISH A COPY OF SUCH TERMS AND CONDITIONS TO THE REGISTERED HOLDER OF
      THIS CERTIFICATE UPON REQUEST AND WITHOUT CHARGE.

            3.3 Fractional Shares. In connection with any issuance of Shares,
the Trustees may issue fractional Shares or may adopt provisions for the
issuance of scrip including without limitation, the time within which any such
scrip must be surrendered for exchange into full Shares and the rights, if any,
of holders of scrip upon the expiration of the time so fixed, the rights, if
any, to receive proportional distributions, and the rights, if any, to redeem
scrip for cash, or the Trustees may in their discretion, or if they see fit at
the option of each holder, provide in lieu of scrip for the adjustment of the
fractions in cash. The provisions of Section 3.2 hereof relative to certificates
for Shares shall apply so far as applicable to such scrip, except that such
scrip may in the discretion of the Trustees be signed by a transfer agent alone.

            3.4 Legal Ownership of Trust Estate. The legal ownership of the
Trust Estate and the right to conduct the business of the Trust are vested
exclusively in the Trustees (subject to Section 2.10(s), and the Shareholders
shall have no interest therein (other than beneficial interest in the Trust
conferred by their Shares issued hereunder) and they shall have no right to
compel any partition, division, dividend or distribution of the Trust or any of
the Trust Estate.


                                      -40-
<PAGE>

            3.5 Shares Deemed Personal Property. The Shares shall be personal
property and shall confer upon the holders thereof only the interest and rights
specifically set forth or provided for in this Declaration. The death,
insolvency or incapacity of a Shareholder shall not dissolve or terminate the
Trust or affect its continuity nor give his legal representative any rights
whatsoever, whether against or in respect of other Shareholders, the Trustees or
the Trust Estate or otherwise, except the sole right to demand and, subject to
the provisions of this Declaration, the Bylaws and any requirements of law, to
receive a new certificate for Shares registered in the name of such legal
representative, in exchange for the certificate held by such Shareholder.

            3.6 Share Record; Issuance and Transferability of Shares. Records
shall be kept by or on behalf of and under the direction of the Trustees, which
shall contain the names and addresses of the Shareholders, the number of Shares
held by them respectively, and the numbers of the certificates representing the
Shares, and in which there shall be recorded all transfers of Shares. The Trust,
the Trustees and the officers, employees and agents of the Trust shall be
entitled to deem the Persons in whose names certificates are registered on the
records of the Trust to be the absolute owners of the Shares represented thereby
for all purposes of the


                                      -41-
<PAGE>

Trust; but nothing herein shall be deemed to preclude the Trustees or officers,
employees or agents of the Trust from inquiring as to the actual ownership of
Shares. Until a transfer is duly effected on the records of the Trust, the
Trustees shall not be affected by any notice of such transfer, either actual or
constructive.

            Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing upon
delivery to the Trustees or a transfer agent of the certificate or certificates
therefor, properly endorsed or accompanied by duly executed instruments of
transfer and accompanied by all necessary documentary stamps together with such
evidence of the genuineness of each such endorsement, execution or authorization
and of other matters as may reasonably be required by the Trustees or such
transfer agent. Upon such delivery, the transfer shall be recorded in the
records of the Trust and a new certificate for the Shares so transferred shall
be issued to the transferee and in case of a transfer of only a part of the
Shares represented by any certificate, a new certificate for the balance shall
be issued to the transferor. Any Person becoming entitled to any Shares in
consequence of the death of a Shareholder or otherwise by operation of law shall
be recorded as the holder of such Shares and shall receive a new certificate
therefor but only


                                      -42-
<PAGE>

upon delivery to the Trustees or a transfer agent of instruments and other
evidence required by the Trustees or the transfer agent to demonstrate such
entitlement, the existing certificate for such Shares and such releases from
applicable governmental authorities as may be required by the Trustees or
transfer agent. In case of the loss, mutilation or destruction of any
certificate for shares, the Trustees may issue or cause to be issued a
replacement certificate on such terms and subject to such rules and regulations
as the Trustees may from time to time prescribe. Nothing in this Declaration
shall impose upon the Trustees or a transfer agent a duty, or limit their
rights, to inquire into adverse claims.

            3.7 Dividends or Distributions to Shareholders. Subject to the
Bylaws, the Trustees may from time to time declare and pay to Shareholders such
dividends or distributions in cash, property or assets of the Trust or
Securities issued by the Trust, out of current or accumulated income, capital,
capital gains, principal, interest, surplus, proceeds from the increase or
financing or refinancing of Trust obligations, or from the sale of portions of
the Trust Estate or from any other source as the Trustees in their discretion
shall determine. Shareholders shall have no right to any dividend or
distribution unless and until declared by the Trustees. The Trustees shall
furnish the Shareholders with a statement in writing advising as to the source
of the funds


                                      -43-
<PAGE>

so distributed not later than ninety (90) days after the close of the fiscal
year in which the distribution was made.

            3.8 Transfer Agent, Dividend Disbursing Agent and Registrar. The
Trustees shall have power to employ one or more transfer agents, dividend
disbursing agents and registrars (including the Advisor or its Affiliates) and
to authorize them on behalf of the Trust to keep records to hold and to disburse
any dividends or distributions and to have and perform, in respect of all
original issues and transfers to Shares, dividends and distributions and reports
and communications to Shareholders, the powers and duties usually had and
performed by transfer agents, dividend disbursing agents and registrars of a
Maryland business corporation.

            3.9 Shareholders' Meetings. There shall be an annual meeting of the
Shareholders, at such time and place as shall be determined by or in the manner
prescribed in the Bylaws, at which the Trustees shall be elected and any other
proper business may be conducted. The Annual Meeting of Shareholders shall be
held after delivery to the Shareholders of the Annual Report, commencing with
the fiscal year ending December 31, 1986. Special meetings of Shareholders may
be called by the chief executive officer of the Trust or by a majority of the
Trustees or of the Independent Trustees and shall be called by the chief
executive officer of the Trust upon the written request of Shareholders holding
in the


                                      -44-
<PAGE>

aggregate not less than ten percent (10%) of the total votes authorized to be
cast by the outstanding Shares of the Trust entitled to vote at such meeting in
the manner provided in the Bylaws. If there shall be no Trustees, the officers
of the Trust shall promptly call a special meeting of the Shareholders entitled
to vote for the election of successor Trustees. Notice of any special meeting
shall state the purposes of the meeting.

            The holders of Shares entitled to vote at the meeting representing a
majority of the total number of votes authorized to be cast by Shares then
outstanding and entitled to vote on any question present in person or by proxy
shall constitute a quorum at any such meeting for action on such question. Any
meeting may be adjourned from time to time by a majority of the votes properly
cast upon the question, without regard to class, whether or not a quorum is
present, and, except as otherwise provided in the Bylaws, the meeting may be
reconvened without further notice. At any reconvened session of the meeting at
which there shall be a quorum, any business may be transacted at the meeting as
originally noticed.

            Whenever any action is to be taken by the Shareholders, it shall,
except as otherwise clearly indicated in this Declaration or the Bylaws, be
authorized by the affirmative vote of the holders of Shares representing a
majority of


                                      -45-
<PAGE>

all the votes cast at a meeting at which a quorum is present. At all elections
of Trustees, voting by Shareholders shall be conducted under the noncumulative
method and the election of Trustees shall be by the affirmative vote of the
holders of Shares representing a majority of all the votes cast at a meeting at
which a quorum is present.

            No action required to be taken or which may be taken at any annual
or special meeting of Shareholders may be taken without a meeting, and the power
of Shareholders to consent in writing, without a meeting, to the taking of any
action is specifically denied.

            3.10 Proxies. Whenever the vote or consent of a Shareholder entitled
to vote is required or permitted under this Declaration, such vote or consent
may be given either directly by such Shareholder or by a proxy in the form
prescribed in, and subject to the provisions of, the Bylaws. The Trustees may
solicit such proxies from the Shareholders or any of them entitled to vote in
any matter requiring or permitting the Shareholders' vote or consent.

            3.11 Reports to Shareholders. Not later then ninety (90) days after
the close of each fiscal year of the Trust, the Trustees shall mail or deliver a
report of the business and operations of the Trust during such fiscal year to
the Shareholders, which report shall constitute the accounting of the Trustees
for such fiscal year. Subject to


                                      -46-
<PAGE>

Section 8-401 of the Annotated Code of Maryland, the report (the "Annual
Report") shall be in such form and have such content as the Trustees deem
proper. The Annual Report shall include a balance sheet, an income statement and
a surplus statement, each prepared in accordance with generally accepted
accounting principles. Such financial statements shall be certified by an
independent public accountant based on a full examination of the books and
records of the Trust conducted in accordance with generally accepted auditing
procedure. Manually signed copies of the Annual Report and of the auditor's
certificate, will be filed with the Maryland Department of Assessments and
Taxation. A manually signed copy of the accountant's report shall be filed with
the Trustees.

            3.12 Fixing Record Date. The Bylaws may provide for fixing or, in
the absence of such provision, the Trustees may fix, in advance, a date as the
record date for determining the Shareholders entitled to notice of or to vote at
any meeting of Shareholders or to express consent to any proposal without a
meeting or for the purpose of determining Shareholders entitled to receive
payment of any dividend or distribution (whether before or after termination of
the Trust) or any Annual Report or other communication from the Trustees, or for
any other purpose. The record date so fixed shall be not less than ten (10) days
nor more than sixty (60)


                                      -47-
<PAGE>

days prior to the date of the meeting or event for the purposes of which it is
fixed.

            3.13 Notice to Shareholders. Any notice of meeting or other notice,
communication or report to any Shareholder shall be deemed duly delivered to
such Shareholder when such notice, communication or report is deposited, with
postage thereon prepaid, in the United States mail, addressed to such
Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.

            3.14 Shareholders' Disclosures; Trustees' Right to Refuse to
Transfer Shares; Limitation on Holdings; Redemption of Shares.

            (a) The Shareholders shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of the
Shares as the Trustees deem necessary or appropriate to comply with the REIT
Provisions of the Internal Revenue Code or to comply with the requirements of
any taxing authority or governmental agency.

            (b) Whenever in good faith the Trustees deem it reasonably necessary
to protect the status of the Trust as a REIT they may require a statement or
affidavit from each Shareholder or proposed transferee of Shares setting forth
the number of Shares already owned by such Shareholder or proposed transferee
and any related Person specified in the


                                      -48-
<PAGE>

form prescribed by the Trustee for that purpose. If, in the opinion of the
Trustees, which shall be binding upon any Shareholder, or proposed transferee of
Shares, any proposed transfer of Shares would jeopardize the status of the Trust
as a REIT, the Trustees shall have the right, but not the duty, to refuse to
permit such transfer.

            (c) The Trustees, by notice to the holder thereof, may purchase any
or all Shares that have been transferred in a transaction which, in the opinion
of the Trustees, would jeopardize the status of the Trust as a REIT. Without
limiting the generality of the foregoing, if the Trustees shall, at any time and
in good faith, be of the opinion that direct or indirect ownership of Shares
representing more than 9.8% in value of the total Shares outstanding (the
"Excess Shares") has or may become concentrated in the hands of one Person
(taking into account the constructive ownership rules of Sections 318 and 544 of
the Internal Revenue Code), the Trustees shall have the power (i) by lot or
other means deemed equitable by them to call for the purchase from any
Shareholder of such Excess Shares, and (ii) to refuse to transfer or issue
Shares to any Person whose acquisition of such Shares would, in the opinion of
the Trustees, result in any Person's direct or indirect ownership of Excess
Shares. The purchase price for any Shares shall be equal to the fair market
value of the Shares reflected in the closing sale


                                      -49-
<PAGE>

price for the Shares, if then listed on a national securities exchange, or such
price for the Shares on the principal exchange if then listed on more than one
national securities and exchange, or if the Shares are not then listed on a
national securities exchange, the latest bid quotation for the Shares if then
traded over-the-counter, on the last trading day immediately preceding the day
on which notices of such acquisition are sent, or, if no such closing sales
prices or quotations are available, then the purchase price shall be equal to
the net asset value of such Shares as determined by the Trustees in accordance
with the provisions of applicable law. Payment of the purchase price shall be
made in cash or with a note by the Trust at such time, in such manner and upon
such terms as may be determined by the Trustees. From and after the date fixed
for purchase by the Trustees, and so long as payment of the purchase price for
the Shares to be so redeemed shall have been made or duly provided for, the
holder of any Excess Shares so called for purchase shall cease to be entitled to
distributions, voting rights and other benefits with respect to such Shares,
excepting only the right to payment of the purchase price fixed as aforesaid.
Any transfer of Shares, options, warrants or other securities convertible into
Shares that would create a direct or indirect beneficial owner of Excess Shares
shall be deemed void ab initio and the intended transferee shall be deemed


                                      -50-
<PAGE>

never to have an interest therein. If the foregoing provision is determined to
be void or invalid by virtue of any legal decision, statute, rule or regulation,
then the transferee of such Shares, options, warrants or other securities
convertible into Shares shall be deemed, at the option of the Trust to have
acted as agent on behalf of the Trust in acquiring such Shares and to hold such
Shares on behalf of the Trust.

            In addition, if any Person knowingly holds Excess Shares and the
Trust loses its REIT qualification under the Internal Revenue Code or becomes a
personal holding company, that Person would be required to indemnify the Trust
for the full amount of any damages and expenses resulting from the loss of its
REIT qualification or its becoming a personal holding company. This liability
might include, but should not be limited to, increased corporate taxes,
attorneys' fees, and administrative costs.

            (d) Notwithstanding any other provision in this Declaration of Trust
or the Bylaws, the foregoing provision may not be amended or repealed without
the affirmative vote of holders of Shares entitled to cast 95% of the votes
outstanding.

            (e) Notwithstanding any other provision of this Declaration of Trust
to the contrary, any purported


                                      -51-
<PAGE>

acquisition of Shares of the Trust which would result in the disqualification of
the Trust as a REIT shall be null and void.

            (f) Nothing contained in this Section 3.14 or in any other provision
of this Declaration of Trust shall limit the authority of the Trustees to take
such other action as they deem necessary or advisable to protect the Trust and
the interests of the Shareholders by preservation of the Trust's status as a
REIT.

            (g) If any provision of this Section 3.14 or any application of any
such provision is determined to be invalid by any federal or state court having
jurisdiction over the issues, the validity of the remaining provisions shall not
be affected and other applications of such provision shall be affected only to
the extent necessary to comply with the determination of such court. To the
extent this Section 3.14 may be inconsistent with any other provision of this
Declaration of Trust, this Section 3.14 shall be controlling.

            3.15 Special Voting Requirements for Certain Business Combinations.

            (a) The affirmative vote of the holders of Shares representing 95%
of the total number of votes authorized to be cast by holders of Shares then
outstanding and entitled to vote thereon shall be required for the approval or
authorization of any "Business Combination" (as hereinafter defined)


                                      -52-
<PAGE>

of the Trust with any "Related Person" (as hereinafter defined). However, such
95% voting requirement shall not be applicable if: (1) the Board of Trustees by
the vote or written consent of all or all but one of the Continuing Trustees
shall have expressly approved in advance the acquisition of the outstanding
Shares of the Trust that caused the Related Person to become a Related Person or
shall have approved the Business Combination prior to the Related Person
involved in the Business Combination having become a Related Person; or (2) the
Business Combination is solely between the Trust and another trust or
corporation, 100% of the voting securities of which is owned directly or
indirectly by the Trust.

            (b) For purposes of this Section 3.15:

            (i) The term "Business Combination" shall mean (a) any merger or
consolidation of the Trust with or into a Related Person, (b) any sale, lease,
exchange, transfer or other disposition, including without limitation a mortgage
or any other security device, of all or any "Substantial Part" (as hereinafter
defined) of the assets of the Trust (including without limitation any voting
securities of a subsidiary) to a Related Person, (c) any merger or
consolidation of a Related Person with or into the Trust, (d) any sale, lease,
exchange, transfer or other disposition of assets of a Related Person to the
Trust having a book value


                                      -53-
<PAGE>

equal to more than 10% of the Invested Assets of the Trust as of the end of the
Trust's most recent fiscal year ending prior to the time the determination is
made, (e) the issuance of any Securities (other than by way of pro rata
distribution to all Shareholders) of the Trust to a Related Person or to a
person who would become a Related Person upon issuance of any of or all of such
securities, and (f) any agreement, contract or other arrangement providing for
any of the transactions described in this definition of Business Combination.

            (ii) The term "Related Person" shall mean and include any
individual, corporation, partnership or other person or entity which, together
with its "affiliates" and "associates" (as defined on October 1, 1982, in Rule
12b-2 under the Securities Exchange Act of 1934), "beneficially owns" (as
defined on October 1, 1982, in Rule 13d-3 under the Securities Exchange Act of
1934) in the aggregate, shares of beneficial interest of the Trust representing
5% of the total number of votes authorized to be cast by holders of Shares then
outstanding entitled to vote generally in the election of Trustees. A Related
Person is also deemed to own beneficially Shares owned, directly or indirectly,
by any "Affiliate" of the Related Person, as well as (1) Shares which it or any
such Affiliate has a right to acquire, (2) Shares issuable upon the exercise of
options or rights, or upon conversion of convertible securities, held by the
Related


                                      -54-
<PAGE>

Person, and (3) Shares beneficially owned by any other person with whom the
Related Person or any of his Affiliates acts as a partnership, syndicate or
other group pursuant to an agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of shares of the Trust.

            (iii) The term "Substantial Part" shall mean an amount equal to more
than 10% of the Invested Assets of the Trust as of the end of its most recent
fiscal year ending prior to the time the determination is being made.

            (iv) Without limitation, any Shares that any Related Person has the
right to acquire pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise, whether exercisable currently or at
some time in the future, shall be deemed beneficially owned by the Related
Person.

            (c) The Trust elects not to be governed by the provisions of
Subtitle 6 of Title 3 of the Corporations and Associations Article of the
Annotated Code of Maryland, and the provisions of subparagraphs (a) and (b) of
this Section 3.15 shall be in substitution for and to the exclusion of said
Subtitle 6 of Title 3.

            (d) Except as otherwise provided in this Section 3.15, the Trust may
effect any merger or consolidation in accordance with applicable law.


                                      -55-
<PAGE>

                                   ARTICLE IV

                 LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS,

                     EMPLOYEES AND AGENTS, AND OTHER MATTERS

            4.1 Limitation of Liability of Shareholders, Trustees, Officers,
Employees and Agents for Obligations of the Trust. The Trustees and the
officers, employees and agents of the Trust, in incurring any debts liabilities
or obligations or in taking or omitting any other actions for or in connection
with the Trust, are, and shall be deemed to be, acting as trustees, officers,
employees or agents of the Trust and not in their own individual capacities.
Except as otherwise provided in Sections 4.3 and 4.4 hereof with respect to
liability of Trustees or officers, agents or employees of the Trust to the Trust
or to Shareholders, no Shareholder, Trustee or officer, employee or agent of the
Trust shall be liable for any debt, claim, demand, judgment decree, liability or
obligation of any kind (in tort, contract or otherwise) of, against or with
respect to the Trust or arising out of any action taken or omitted for or on
behalf of the Trust, and the Trust shall be solely liable therefor and resort
shall be had solely to the Trust Estate for the payment or performance thereof,
and no Shareholder, Trustee or officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever, in tort, contract or otherwise, to
any other Person or Persons in connection.


                                      -56-
<PAGE>

with the Trust Estate or the affairs of the Trust (or any actions taken or
omitted for or on behalf of the Trust). All such other Persons shall look solely
to the Trust Estate for satisfaction of claims of any nature arising in
connection with the Trust Estate or the affairs of the Trust (or any action
taken or omitted for or on behalf of the Trust).

            4.2 Express Exculpatory Clauses and Instruments. Any written
instrument creating an obligation of the Trust shall include a reference to this
Declaration and provide that neither the Shareholders nor the Trustees nor any
officers, employees or agents of the Trust shall be liable thereunder and that
all Persons shall look solely to the Trust Estate for the payment of any claim
thereunder or for the performance thereof; however, the omission of such
provision from any such instrument shall not render the Shareholders, any
Trustee, or any officer, employee or agent of the Trust liable nor shall the
Shareholders, any Trustee or any officer, employee or agent of the Trust be
liable to anyone for such omission.

            4.3 Limitation of Liability of Trustees, Officers, Employees and
Agents to the Trust and to Shareholders for Acts and Omissions. No Trustee or
officer, employee or agent of the Trust shall have any greater duties than those
established by this Declaration of Trust or, in cases as to which such duties
are not so established, than those of the directors,


                                      -57-
<PAGE>

officers, employees and agents of a Maryland business corporation in effect from
time to time. Subject to the provisions of Section 4.4 hereof, no Trustee or
officer, employee or agent of the Trust shall be liable to the Trust,
Shareholders or to any other Person for any act or omission except for his own
wilful misfeasance, bad faith, gross negligence or reckless disregard of duty.

            4.4 Limitation of Liability of Affiliated Trustees and Their
Affiliates to the Trust and to Shareholders for Acts and Omissions. No
Affiliated Trustee and no Affiliate (as defined in Section 4.6 hereof) of such
Affiliated Trustee shall have any liability to the Trust or to any Shareholder
for any loss suffered by the Trust which arises out of any action or inaction of
such Affiliated Trustee or Affiliate if such Affiliated Trustee or Affiliate, in
good faith, determined that such course of conduct was in the best interest of
the Trust, and such course of conduct did not constitute negligence or
misconduct of such Affiliated Trustee or Affiliate.

            4.5 Indemnification and Reimbursement of Trustees, Officers,
Employees and Agents.

            (a) Except as otherwise provided in paragraph (b) of this Section
      4.5, any Person made a party to any action, suit or proceeding or against
      whom a claim or liability is asserted by reason of the fact that he, his


                                      -58-
<PAGE>

testator or intestate was or is a Trustee, Officer, employee or agent of the
Trust shall be indemnified and held harmless by the Trust against judgments,
fines, amounts paid on account thereof (whether in settlement or otherwise) and
reasonable expenses, including attorneys' fees, actually and reasonably incurred
by him in connection with the defense of such action, suit, proceeding, claim or
alleged liability or in connection with any appeal therein, whether or not the
same proceeds to judgment or is settled or otherwise brought to a conclusion;
provided, however, that no such Person shall be so indemnified or reimbursed for
any claim, obligation or liability which shall have been adjudicated to have
arisen out of or been based upon his wilful misfeasance, bad faith, gross
negligence or reckless disregard of duty; and provided, further, that such
Person gives prompt notice thereof, executes such documents and takes such
action as will permit the Trust to conduct the defense or settlement thereof and
cooperates therein. In the event of a settlement approved by the Trustees of any
such claim, alleged liability, action, suit or proceeding, indemnification and
reimbursement shall be provided except as to such matters covered by the
settlement which the Trust is advised by its counsel would, if adjudicated,
likely be adjudicated


                                      -59-
<PAGE>

to have arisen out of or been based upon such Person's wilful misfeasance, bad
faith, gross negligence, or reckless disregard of duty. Such rights of
indemnification and reimbursement shall be satisfied only out of the Trust
Estate. The rights accruing to any Person under these provisions shall not
exclude any other right to which he may be lawfully entitled, nor shall anything
contained herein restrict such Person's right to contribution as may be
available under applicable law. The Trustees may make advance payments in
connection with indemnification under this Section 4.5, provided that the
indemnified Person shall have given a written undertaking to reimburse the
Trust in the event it is subsequently determined that he is not entitled to such
indemnification. Any action taken by or conduct on the part of a Trustee,
officer, employee or agent of the Trust in conformity with or in good faith
reliance upon the provisions of this Declaration (including without limitation
any provision in Article 7 hereof) shall not constitute wilful misfeasance, bad
faith, gross negligence or reckless disregard of duty.

      (b) Each Affiliated Trustee and any Affiliates (as defined in Section 4.6
hereof) of such Affiliated Trustee shall be indemnified by the Trust against any
losses, judgments, liabilities, expenses and amounts


                                      -60-
<PAGE>

paid in settlement of any claims sustained by them in connection with the Trust,
provided that the same were not the result of negligence or misconduct on the
part of such Affiliated Trustee or Affiliate. Notwithstanding the foregoing,
Affiliated Trustees and their Affiliates and any person acting for the Trust as
a broker/dealer shall not be indemnified for any losses, liabilities or expenses
arising from or out of an alleged violation of federal or state securities laws
unless (i) there has bean a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee or
(ii) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee or (iii) a court of
competent jurisdiction approves a settlement of the claim against the particular
indemnitee. In any claim for indemnification for federal or state securities law
violations, the party seeking indemnification shall place before the court the
position of the Securities and Exchange Commission and the Maryland Division of
Securities with respect to the issue of indemnification for securities law
violations. The Trust shall not incur the cost of that portion of any insurance,
other than public liability insurance, which insures any party


                                      -61-
<PAGE>

against any liability the indemnification of which is prohibited by this Section
4.5(b).

            4.6 Certain Definitions. For the purposes of Sections 4.4 and 4.5(b)
hereof, the term "Affiliate," when used in connection with the term "Affiliated
Trustee," shall mean any person performing services on behalf of the Trust who
(i) directly or indirectly controls, is controlled by, or is under common
control with such Affiliated Trustee; (ii) owns or controls ten percent (10%) or
more of the outstanding voting securities of such Affiliated Trustee; (iii) is
an officer, director, partner or trustee of such Affiliated Trustee; or (iv) is
a company for which such Affiliated Trustee acts as an officer, director,
partner or trustee. For the purposes of the above definition, the terms
"control," "controlling," "controlled by," and "under common control with" refer
to the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contrast, or otherwise.

            4.7 Indemnification and Reimbursement of Shareholder. Any
Shareholder made a party to any action, suit or proceeding or against him a
claim or liabilities asserted by reason of the fact that he, his testate or
intestate was or is a Shareholder shall be indemnified and held harmless by the
Trust against judgments, fines, amounts paid on account


                                      -62-
<PAGE>

thereof (whether in settlement or otherwise) and reasonable expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with the
defense of such action, suit, proceeding, claim or alleged liability or in
connection with any appeal therein, whether or not the same proceeds to judgment
or is settled or otherwise brought to a conclusion; provided, however, that such
Shareholder gives prompt notice thereof, executes such documents and takes such
action as will permit the Trust to conduct the defense of settlement thereof and
cooperates therein. In the event that the assets of the Trust Estate are
insufficient to satisfy the Trust's indemnity obligations hereunder, each
Shareholder shall be entitled to such indemnification pro rata from the Trust
Estate.

            4.8 Right of Trustees, Officers, Employees and Agents to Own Shares
or Other Property and to Engage in Other Business. Any Trustee or officer,
employee or agent of the Trust may acquire, own, hold and dispose of Shares in
the Trust, for his individual account, and may exercise all rights of a
Shareholder to the same extent and in the same manner as if he were not a
Trustee or officer, employee or agent of the Trust. Any Trustee or officer,
employee or agent of the Trust may, in his personal capacity or in the capacity
of trustee, officer, director, stockholder, partner, member, advisor or employee
of any Person or otherwise, have


                                      -63-
<PAGE>

business interests and engage in business activities similar to or in addition
to those relating to the Trust, which interests and activities may be similar to
and competitive with those of the Trust and may include the acquisition,
syndication, holding, management, development, operation or disposition, for his
own account, for the account of such Person or others, of interests in
Mortgages, interests in Real Property, or interests in Persons engaged in the
real estate business. Each Trustee, officer, employee and agent of the Trust
shall be free of any obligation to present to the Trust any investment
opportunity which comes to him in any capacity other than solely as Trustee,
officer, employee or agent of the Trust even if such opportunity is of a
character which, if presented to the Trust, could be taken by the Trust. Subject
to the provisions of Article IV and Section 4.9, any Trustee or officer,
employee or agent of the Trust may be interested as trustee, officer, director,
stockholder, partner, member, advisor or employee or, otherwise have a direct or
indirect interest in, any Person who may be engaged to render advice or services
to the Trust, and may receive compensation from such Person as well as
compensation as Trustee, officer, employee or agent or otherwise hereunder. None
of these activities shall be deemed to conflict with his duties and powers as
Trustee or officer, employee or agent of the Trust.


                                      -64-
<PAGE>

            4.9 Transaction Between Trustees, Officers, Employees or Agents and
the Trust. Except as otherwise provided by this Declaration, and in the absence
of fraud, a contract, act or other transaction between the Trust and any other
Person in which the Trust is interested, shall be valid, and no Trustee or
officer, employee or agent of the Trust shall have any liability as a result of
entering into any such contract, act or transaction, even though (a) one or more
of the Trustees or officers, employees or agents of the Trust are directly or
indirectly interested in or connected with or are trustees, partners, directors,
employees, officers or agents of such other Person, or (b) one or more of
the Trustees or officers, employees or agents of the Trust individually or
jointly with others, is a party or are parties to, or are directly or indirectly
interested in or connected with, such contract, act or transaction; provided
that in each such case (i) such interest or connection is disclosed or known to
the Trustees and thereafter the Trustees authorize or ratify such contract, act
or other transaction by affirmative vote of a majority of the Trustees who are
not so interested or (ii) such interest or connection is disclosed or known to
the Shareholders, and thereafter such contract, act or transaction is approved
by Shareholders holding a majority of the Shares then outstanding and entitled
to vote thereon.


                                      -65-
<PAGE>

            Notwithstanding any other provisions of this Declaration, the Trust
shall not engage in a transaction with (a) any Trustee, officer, employee or
agent of the Trust (acting in his individual capacity), (b) any director,
trustee, partner, officer, employee or agent (acting in his individual capacity)
of the Advisor or any other investment advisor of the Trust, (c) the Advisor or
any other investment advisor of the Trust or (d) an Affiliate of any of the
foregoing, except to the extent that such transaction has, after disclosure of
such affiliation, been approved or ratified by the affirmative vote of a
majority of the Trustees including a majority of the Independent Trustees (or,
if the transaction is with a Person other than the Advisor or an Affiliate of
the Advisor, a majority of the Trustees not having any interest in such
transaction and not Affiliates of any party to the transaction) after a
determination by them that to the extent applicable:

                  (A) such transaction is fair and reasonable to the Trust and
            the Shareholders;

                  (B) based upon an appraisal by a qualified independent real
            estate appraiser who shall, in each case, have been approved by a
            majority of the Independent Trustees (or, if the transaction is with
            a Person other than the Advisor or an Affiliate of the Advisor, a
            majority of the Trustees not


                                      -66-
<PAGE>

      having any interest in such transaction and not Affiliates of any party
      to the transaction), the total consideration is not in excess of the
      appraised value of the interest in Real Property being acquired, if an
      acquisition in involved, or not less than the appraised value of the
      interest in Real Property being disposed of, if a disposition is involved;
      and

            (C) if such transaction involves payments by the Trust for services
      rendered to the Trust by a Person in a capacity other than that of
      Advisor, Trustee or Trust officer, (1) the compensation is not in excess
      of the compensation, if any, paid to such Person by any other Person who
      is not an Affiliate of such Person, for any comparable services in the
      same geographic area, and (2) the compensation is not greater than the
      charges for comparable services generally available in the same geographic
      area from other Persons who are competent and not affiliated with any of
      the parties involved.

This Section 4.9 shall not prevent any sale of Shares issued by the Trust for
the public offering thereof in accordance with a registration statement filed
with the Securities and Exchange Commission under the Securities Act of 1933.
The


                                      -67-
<PAGE>

Trustees are not restricted by this Section 4.9 from forming a corporation,
partnership, trust or other business association owned by any Trustee, officer,
employee or agent or by their nominees for the purpose of holding title to
property of the Trust or managing property of the Trust, provided that the
Trustees make a determination that the creation of such entity for such purpose
is in the best interest of the Trust.

            4.10 Independent Counsel. In the event of a dispute between the
Trust and the Advisor or its Affiliates, or should it be necessary for the Trust
to prepare and negotiate contracts and agreements between the Trust and the
Advisor or its Affiliates which in the good faith judgement of a majority of the
Independent Trustees require the advice or assistance of separate counsel or
accountants from that of the Advisor or its Affiliates, the Trust will retain
such separate counsel or accountants for such matters, the choice of which shall
be made by a majority of the Independent Trustees.

            4.11 Persons Dealing with Trustees, Officers, Employees or Agents.
Any act of the Trustees or of the officers, employees or agents of the Trust
purporting to be done in their capacity as such, shall, as to any Persons
dealing with such Trustees, officers, employees or agents, be conclusively
deemed to be within the purposes of this Trust and within the powers of such
Trustees or officers, employees


                                      -68-
<PAGE>

or agents. No Person dealing with the Trustees or any of them or with the
officers, employees or agents of the Trust shall be bound to see to the
application of any funds or property passing into their hands or control. The
receipt of the Trustees or any of them, or of authorized officers, employees or
agents of the Trust, for moneys or other consideration, shall be binding upon
the Trust.

            4.12 Reliance. The Trustees and the officers, employees and agents
of the Trust may consult with counsel (which may be a firm in which one or more
of the Trustees or the officers, employees or agents, including the Advisor and
its Affiliates, of the Trust is or are members) and the advice or opinion of
such counsel shall be full and complete personal protection to all the Trustees
and the officers, employees and agents of the Trust in respect of any action
taken or suffered by them in good faith and in reliance on or in accordance with
such advice or opinion. In discharging their duties, Trustees or officers,
employees or agents of the Trust, when acting in good faith, may rely upon
financial statements of the Trust represented to them to fairly present the
financial position or results of operations of the Trust by the chief financial
officer of the Trust or the officer of the Trust having charge of its books of
account, or stated in written report by an independent certified public
accountant fairly to present the financial position or results of


                                      -69-
<PAGE>

operations of the Trust. The Trustees and the officers, employees and agents of
the Trust may rely, and shall be personally protected in acting, upon any
instrument or other document believed by them to be genuine.

                                    Article V

                  DURATION, AMENDMENT AND TERMINATION OP TRUST

            5.1 Duration of Trust. The duration of the Trust shall be perpetual;
provided, however, the Trust may be terminated at any time by the affirmative
vote at a meeting of Shareholders of the holders of Shares representing 95% of
the total number of Shares then outstanding and entitled to vote thereon or by a
unanimous vote of the Continuing Trustees.

            5.2 Termination of Trust.

            (a) upon the termination of the Trust:

            (i) the Trust shall carry on no business except for the purpose of
      winding up its affairs;

            (ii) the Trustees shall proceed to wind up the affairs of the Trust
      and all the powers of the Trustees under this Declaration shall continue
      until the affairs of the Trust shall have been wound up, including the
      power to fulfill or discharge the contracts of the Trust, collect its
      assets, sell, convey, assign, exchange, transfer or otherwise dispose of
      all or any part


                                      -70-
<PAGE>

      of the remaining Trust Estate to one or more persons at public or private
      sale (for consideration which may consist in whole or in part of cash,
      Securities or other property of any kind), discharge or pay its
      liabilities, and do all other acts appropriate to liquidate its business;
      and

            (iii) after paying or adequately providing for the payment of all
      liabilities, and upon receipt of such releases, indemnities and refunding
      agreements, as they deem necessary for their protection, the Trustees may
      distribute the remaining Trust Estate (in cash or in kind or partly each)
      among the Shareholders according to their respective rights.

            (b) After termination of the Trust and distribution of the Trust
Estate to the Shareholders as herein provided, the Trustees shall execute and
lodge among the records of the Trust an instrument in writing setting forth the
fact of such termination and such distribution, a copy of which instrument shall
be filed with the Maryland Department of Assessments and Taxation, and the
Trustees shall thereupon be discharged from all further liabilities and duties
hereunder and the rights and interests of all Shareholders shall thereupon
cease.

            5.3 Amendment Procedure. This Declaration may be amended (except
that the provision governing the personal


                                      -71-
<PAGE>

liability of the Shareholders, Trustees and of the officers, employees and
agents of the Trust and the prohibition of assessments upon Shareholders may not
be amended in any respect that could increase the personal liability of such
Shareholders, Trustees or officers, employees and agents of the Trust) at a
meeting of Shareholders by holders of Shares representing ninety-five percent
(95%) of the total number of votes authorized to be cast in respect of Shares
then outstanding and entitled to vote thereon. Notwithstanding the foregoing, if
all or all but one of the Continuing Trustees vote in favor of any proposed
amendment, the affirmative vote of holders of Shares representing a majority of
the total number of votes authorized to be cast in respect of Shares then
outstanding and entitled to vote thereon, will be required to amend this
Declaration. Two-thirds (2/3) of the Continuing Trustees may, after fifteen
(15) days written notice to the Shareholders, also amend this Declaration
without the vote or consent of Shareholders if in good faith they deem it
necessary to conform this Declaration to the requirements of REIT Provisions of
the Internal Revenue Code, but the Continuing Trustees shall not be liable for
failing to do so. Actions by the Trustees pursuant to Section 3.1 or pursuant to
Section 6.6(a) that result in an amendment to this Declaration shall be effected
without vote or consent of Shareholders.

            5.4 Amendments Effective. Any amendment pursuant to any Section of
this Declaration shall not become effective


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<PAGE>

until it is duly filed with the Maryland Department of Assessments and Taxation.

            5.5 Transfer to Successor. Subject to Section 3.15 above, the
Trustees, with the approval of a majority of the Trustees (including a majority
of the Independent Trustees) and the affirmative vote, approving a plan for
this purpose, of the holders of Shares representing ninety-five percent (95%) of
the total number of votes authorized to be cast by Shares then outstanding and
entitled to vote thereon, may (a) cause the organization of a corporation,
association, trust or other organization to take over the Trust Estate and carry
on the affairs of the Trust, (b) merge the Trust into, or sell, convey and
transfer the Trust Estate to, any such corporation, association, trust or
organization in exchange for Securities thereof, or beneficial interests
therein, and the assumption by such transferee of the liabilities of the Trust
and (c) thereupon terminate this Declaration and deliver such shares, Securities
or beneficial interests among the Shareholders in accordance with such plan.

                                   ARTICLE VI

                                  MISCELLANEOUS

            6.1 Applicable Law. This Declaration is executed and acknowledged by
the Trustees with reference to the statutes and laws of the State of Maryland,
and the rights of


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<PAGE>

all parties and the construction and effect of every provision hereof shall be
subject to and construed according to the statutes and laws of such State.

            6.2 Index and Headings for Reference Only. The index and headings
preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the meaning,
construction or effect of this Declaration.

            6.3 Successors in Interest. This Declaration and the Bylaws shall be
binding upon and inure to the benefit of the undersigned Trustees and their
successors, assigns, heirs, distributees and legal representatives, and every
Shareholder and his successors, assigns, heirs, distributees and legal
representatives.

            6.4 Inspection of Records. Trust records shall be available for
inspection by Shareholders at the same time and in the same manner and to the
extent that comparable records of a Maryland business corporation would be
available for inspection by shareholders under the laws of the State of
Maryland. Except as specifically provided for in this Declaration or in Title 8
of the Annotated Code of Maryland, Shareholders shall have no greater right than
shareholders of a Maryland business corporation to require financial or other
information from the Trust, Trustees or Officers of the Trust. Any Federal or
state securities administrator or the


                                      -74-
<PAGE>

Maryland Department of Assessments and Taxation shall have the right, at
reasonable times during business hours and for proper purposes, to inspect the
books and records of the Trust.

            6.5 Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.

            6.6 Provisions of the Trust in Conflict with Law or Regulations;
Severability.

            (a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any one or more of
such provisions (the "Conflicting Provisions") are in conflict with the REIT
Provisions of the Internal Revenue Code, the Conflicting Provisions shall be
deemed never to have constituted a part of the Declaration; provided, however,
that such determination by the Trustees shall not affect or impair any of the
remaining provisions of this Declaration or render invalid or improper any
action taken or omitted (including but not limited to the election of Trustees)
prior to such determination. An amendment in recordable form signed by a
majority of the Trustees setting forth any such determination and


                                      -75-
<PAGE>

reciting that it was duly adopted by the Trustees, or a copy of this
Declaration, with the Conflicting Provisions removed pursuant to such a
determination, in recordable form, signed by a majority of the Trustees, shall
be conclusive evidence of such determination when filed with the Maryland
Department of Assessments and Taxation. The Trustees shall not be liable for
failure to make any determination under this Section 6.6(a). Nothing in this
Section 6.6(a) shall in any way limit or affect the right of the Trustees to
amend this Declaration as provided in Section 5.3.

            (b) If any provision of this Declaration shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other provision of this Declaration, and this Declaration shall be carried
out as if any such invalid or unenforceable provision were not contained herein.

            6.7 Certifications. The following certifications shall be final and
conclusive as to any Persons dealing with the Trust:

            (a) a certification of a vacancy among the Trustees by reason of
resignation, removal, increase in the number of Trustees, incapacity, death or
otherwise, when made in writing by a majority of the remaining Trustees;


                                      -76-
<PAGE>

            (b) a certification as to the individuals holding office as
Trustees or officers at any particular time, when made in writing by the
secretary of the Trust;

            (c) a certification that a copy of this Declaration or of the Bylaws
is a true and correct copy thereof as then in force, when made in writing by the
secretary of the Trust;

            (d) the certifications referred to in Section 2.7, 5.4 and 6.6(a);
and

            (e) a certification as to any actions by Trustees, other than the
above, when made in writing by the secretary of the Trust or by any Trustee.


                                      -77-
<PAGE>

            IN WITNESS THEREOF, the undersigned have signed these presents all
on the day and year first above written.


                                          /s/ Alan B. Miller
                                    -------------------------------------
                                              Alan B. Miller

                                    Address:
                                            -----------------------------
                                    -------------------------------------

                                       /s/ Joseph P. Gaynor, III
                                    -------------------------------------
                                           Joseph P. Gaynor, III

                                    Address:
                                            -----------------------------
                                    -------------------------------------


                                         /s/ Robert E. Cawthorn
                                    -------------------------------------
                                             Robert E. Cawthorn

                                    Address:
                                            -----------------------------
                                    -------------------------------------


                                           /s/ Sidney Miller
                                    -------------------------------------
                                               Sidney Miller

                                    Address:
                                            -----------------------------
                                    -------------------------------------


                                           /s/ Daniel M. Cain
                                    -------------------------------------
                                               Daniel M. Cain

                                    Address:
                                            -----------------------------
                                    -------------------------------------


                                              /s/ Lee Ducat
                                    -------------------------------------
                                                  Lee Ducat

                                    Address:
                                            -----------------------------
                                    -------------------------------------


                                      -78-
<PAGE>


                                          /s/ Peter Linneman
                                    -------------------------------------
                                              Peter Linneman

                                    Address:-----------------------------
                                    -------------------------------------


                                      -79-