Prepared by, and after recording return to:

Moss & Barnett (TLG)
A Professional Association
4800 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN  55402




                           MULTIFAMILY DEED OF TRUST,
                               ASSIGNMENT OF RENTS
                             AND SECURITY AGREEMENT

                      (MISSOURI - REVISION DATE 11-01-2000)

                            FHLMC Loan No. 002726165

<PAGE>

                           MULTIFAMILY DEED OF TRUST,
                             ASSIGNMENT OF RENTS AND
                               SECURITY AGREEMENT
                      (MISSOURI - REVISION DATE 11-01-2000)


   THIS  MULTIFAMILY DEED OF TRUST,  ASSIGNMENT OF RENTS AND SECURITY  AGREEMENT
(the  "Instrument") is made as of the 22nd day of February,  2001, among Secured
Investment  Resources  Fund,  L.P.  III,  a limited  partnership  organized  and
existing  under  the  laws of  Missouri,  whose  mailing  address  is c/o  Maxus
Properties,  Inc.,  104 Armour Road,  North Kansas  City,  MO 64116,  as grantor
("Borrower"),  Assured  Quality Title  Company,  whose  mailing  address is 1001
Walnut,  Kansas  City,  MO 64106,  as trustee  ("Truste  "), for the  benefit of
NorthMarq Capital,  Inc., a corporation organized and existing under the laws of
Minnesota,   whose  mailing  address  is  3500  West  80th  Street,  Suite  500,
Bloomington, Minnesota 55431-4435, as beneficiary ("Lender").

   Borrower,  in consideration of the Indebtedness and the trust created by this
Instrument,  irrevocably grants, bargains,  sells, conveys, confirms and assigns
to Trustee, in trust, with power of sale, the Mortgaged Property,  including the
Land  located in Platte  County,  State of Missouri  and  described in Exhibit A
attached to this Instrument.

   TO SECURE TO LENDER the repayment of the Indebtedness evidenced by Borrower's
Multifamily Note payable to Lender dated as of the date of this Instrument,  and
maturing on March 1, 2008, in the  principal  amount of  $8,350,000.00,  and all
renewals, extensions and modifications of the Indebtedness,  and the performance
of the covenants and agreements of Borrower contained in the Loan Documents.

   Borrower  represents  and warrants  that  Borrower is lawfully  seized of the
Mortgaged  Property and has the right,  power and authority to mortgage,  grant,
bargain,  sell, convey,  confirm and assign the Mortgaged Property, and that the
Mortgaged  Property is  unencumbered.  Borrower  covenants  that  Borrower  will
warrant and defend  generally  the title to the Mortgaged  Property  against all
claims  and  demands,  subject to any  easements  and  restrictions  listed in a
schedule  of  exceptions  to coverage in any title  insurance  policy  issued to
Lender  contemporaneously  with the execution and recordation of this Instrument
and insuring Lender's interest in the Mortgaged Property.

   Covenants. Borrower and Lender covenant and agree as follows:

   1. DEFINITIONS.  The following terms, when used in this Instrument (including
when used in the above recitals), shall have the following meanings:


<PAGE>

   (a) "Borrower" means all persons or entities  identified as "Borrower" in the
first paragraph of this Instrument, together with their successors and assigns.

   (b) "Collateral  Agreement" means any separate agreement between Borrower and
Lender for the purpose of  establishing  replacement  reserves for the Mortgaged
Property,   establishing   a  fund  to  assure  the  completion  of  repairs  or
improvements  specified  in  that  agreement,   or  assuring  reduction  of  the
outstanding  principal balance of the Indebtedness if the occupancy of or income
from the  Mortgaged  Property  does not  increase to a level  specified  in that
agreement,  or any other  agreement or  agreements  between  Borrower and Lender
which provide for the establishment of any other fund, reserve or account.

   (c) "Controlling  Entity" means an entity which owns,  directly or indirectly
through one or more  intermediaries,  (A) a general partnership interest or more
than 50% of the limited  partnership  interests  in Borrower  (if  Borrower is a
partnership or joint venture), (B) a manager's interest in Borrower or more than
50% of the  ownership  or  membership  interests  in Borrower  (if Borrower is a
limited liability company), or (C) more than 50% of any class of voting stock of
Borrower (if Borrower is a corporation).

   (d) "Environmental Permit" means any permit,  license, or other authorization
issued  under any  Hazardous  Materials  Law with respect to any  activities  or
businesses conducted on or in relation to the Mortgaged Property.

   (e) "Event of Default"  means the  occurrence  of any event listed in Section
22.

   (f)  "Fixtures"  means all  property  which is so attached to the Land or the
Improvements  as to  constitute  a  fixture  under  applicable  law,  including:
machinery,   equipment,  engines,  boilers,  incinerators,   installed  building
materials;  systems and equipment  for the purpose of supplying or  distributing
heating,  cooling,  electricity,  gas, water,  air, or light;  antennas,  cable,
wiring and conduits used in connection with radio,  television,  security,  fire
prevention,  or fire  detection or otherwise used to carry  electronic  signals;
telephone systems and equipment;  elevators and related machinery and equipment;
fire detection, prevention and extinguishing systems and apparatus; security and
access control systems and apparatus;  plumbing systems; water heaters,  ranges,
stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers,
dryers and other appliances;  light fixtures,  awnings,  storm windows and storm
doors; pictures,  screens,  blinds, shades,  curtains and curtain rods; mirrors;
cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants;
swimming pools; and exercise equipment.

   (g) "Governmental Authority" means any board, commission,  department or body
of any municipal, county, state or federal governmental unit, or any subdivision
of any of them, that has or acquires jurisdiction over the Mortgaged Property or
the use, operation or improvement of the Mortgaged Property.

                                       2

<PAGE>

   (h)  "Hazardous   Materials"  means  petroleum  and  petroleum  products  and
compounds containing them, including gasoline,  diesel fuel and oil; explosives;
flammable materials;  radioactive materials;  polychlorinated biphenyls ("PCBs")
and  compounds   containing  them;  lead  and  lead-based  paint;   asbestos  or
asbestos-containing  materials  in any  form  that is or could  become  friable;
underground  or  above-ground  storage  tanks,  whether empty or containing  any
substance;  any  substance  the presence of which on the  Mortgaged  Property is
prohibited by any federal, state or local authority; any substance that requires
special  handling;  and any other  material  or  substance  now or in the future
defined as a "hazardous  substance,"  "hazardous  material,"  "hazardous waste,"
"toxic substance,"  "toxic pollutant,"  "contaminant," or "pollutant" within the
meaning of any Hazardous Materials Law.

   (i)  "Hazardous  Materials  Laws" means all federal,  state,  and local laws,
ordinances and regulations and standards, rules, policies and other governmental
requirements,  administrative  rulings and court judgments and decrees in effect
now or in the future and  including  all  amendments,  that relate to  Hazardous
Materials  and  apply  to  Borrower  or to  the  Mortgaged  Property.  Hazardous
Materials Laws include, but are not limited to, the Comprehensive  Environmental
Response,  Compensation and Liability Act, 42 U.S.C.  Section 9601, et seq., the
Resource  Conservation  and Recovery Act, 42 U.S.C.  Section 6901, et seq.,  the
Toxic  Substance  Control Act, 15 U.S.C.  Section 2601, et seq., the Clean Water
Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation
Act, 49 U.S.C. Section 5101, and their state analogs.

   (j) "Impositions" and "Imposition Deposits" are defined in Section 7(a).

   (k)  "Improvements"  means  the  buildings,  structures,   improvements,  and
alterations now  constructed or at any time in the future  constructed or placed
upon the Land, including any future replacements and additions.

   (l) "Indebtedness" means the principal of, interest on, and all other amounts
due at any time under,  the Note,  this  Instrument or any other Loan  Document,
including prepayment premiums,  late charges,  default interest, and advances as
provided in Section 12 to protect the security of this Instrument.

   (m) "Initial Owners" means, with respect to Borrower or any other entity, the
persons or entities who on the date of the Note own in the aggregate 100% of the
ownership interests in Borrower or that entity.

   (n) "Land" means the land described in Exhibit A.

   (o)  "Leases"  means all  present  and future  leases,  subleases,  licenses,
concessions or grants or other  possessory  interests now or hereafter in force,
whether oral or written,  covering or affecting the Mortgaged  Property,  or any
portion of the Mortgaged  Property  (including

                                       3
<PAGE>

proprietary leases or occupancy  agreements if Borrower is a cooperative housing
corporation), and all modifications, extensions or renewals.

   (p) "Lender" means the entity  identified as "Lender" in the first  paragraph
of this Instrument, or any subsequent holder of the Note.

   (q) "Loan  Documents" means the Note, this  Instrument,  all guaranties,  all
indemnity agreements,  all Collateral  Agreements,  O&M Programs,  and any other
documents now or in the future executed by Borrower,  any guarantor or any other
person in connection  with the loan evidenced by the Note, as such documents may
be amended from time to time.

   (r) "Loan  Servicer" means the entity that from time to time is designated by
Lender to collect payments and deposits and receive notices under the Note, this
Instrument  and any other Loan  Document,  and  otherwise  to  service  the loan
evidenced by the Note for the benefit of Lender. Unless Borrower receives notice
to the contrary,  the Loan Servicer is the entity  identified as "Lender" in the
first paragraph of this Instrument.

   (s) "Mortgaged  Property"  means all of Borrower's  present and future right,
title and interest in and to all of the following:

       (1)  the Land;

       (2)  the Improvements;

       (3)  the Fixtures;

       (4)  the Personalty;

       (5)  all current and future  rights,  including  air rights,  development
            rights,  zoning  rights  and  other  similar  rights  or  interests,
            easements,  tenements,  rights-of-way,  strips  and  gores  of land,
            streets,  alleys,  roads, sewer rights,  waters,  watercourses,  and
            appurtenances   related   to  or   benefitting   the   Land  or  the
            Improvements,  or both, and all rights-of-way,  streets,  alleys and
            roads which may have been or may in the future be vacated;

       (6)  all  proceeds  paid or to be paid by any  insurer  of the Land,  the
            Improvements,  the Fixtures, the Personalty or any other part of the
            Mortgaged  Property,  whether or not Borrower obtained the insurance
            pursuant to Lender's requirement;

       (7)  all awards,  payments and other  compensation  made or to be made by
            any municipal,  state or federal authority with respect to the Land,
            the

                                       4
<PAGE>

            Improvements,  the Fixtures, the Personalty or any other part of the
            Mortgaged  Property,  including any awards or settlements  resulting
            from condemnation  proceedings or the total or partial taking of the
            Land, the  Improvements,  the Fixtures,  the Personalty or any other
            part of the Mortgaged  Property under the power of eminent domain or
            otherwise and including any conveyance in lieu thereof;

       (8)  all  contracts,  options  and other  agreements  for the sale of the
            Land, the  Improvements,  the Fixtures,  the Personalty or any other
            part of the  Mortgaged  Property  entered into by Borrower now or in
            the  future,  including  cash  or  securities  deposited  to  secure
            performance by parties of their obligations;

       (9)  all proceeds from the conversion,  voluntary or involuntary,  of any
            of the  above  into  cash or  liquidated  claims,  and the  right to
            collect such proceeds;

       (10) all Rents and Leases;

       (11) all earnings,  royalties,  accounts  receivable,  issues and profits
            from the Land, the  Improvements  or any other part of the Mortgaged
            Property,  and all undisbursed  proceeds of the loan secured by this
            Instrument  and, if Borrower is a cooperative  housing  corporation,
            maintenance  charges  or  assessments  payable  by  shareholders  or
            residents;

       (12) all Imposition Deposits;

       (13) all refunds or rebates of  Impositions  by any  municipal,  state or
            federal   authority  or  insurance   company   (other  than  refunds
            applicable  to periods  before the real  property  tax year in which
            this Instrument is dated);

       (14) all tenant  security  deposits  which have not been forfeited by any
            tenant under any Lease; and

       (15) all names under or by which any of the above Mortgaged  Property may
            be operated or known, and all trademarks,  trade names, and goodwill
            relating to any of the Mortgaged Property.

   (t) "Note" means the Multifamily Note described on page 1 of this Instrument,
including all schedules,  riders, allonges and addenda, as such Multifamily Note
may be amended from time to time.

                                       5

<PAGE>

   (u) "O&M Program" is defined in Section 18(a).

   (v)  "Personalty"  means all furniture,  furnishings,  equipment,  machinery,
building materials,  appliances, goods, supplies, tools, books, records (whether
in written or electronic form),  computer equipment  (hardware and software) and
other tangible  personal property (other than Fixtures) which are used now or in
the future in connection with the ownership, management or operation of the Land
or the Improvements or are located on the Land or in the  Improvements,  and any
operating agreements relating to the Land or the Improvements,  and any surveys,
plans and  specifications  and  contracts  for  architectural,  engineering  and
construction  services  relating to the Land or the  Improvements  and all other
intangible  property  and  rights  relating  to the  operation  of,  or  used in
connection  with,  the  Land or the  Improvements,  including  all  governmental
permits relating to any activities on the Land.

   (w) "Property Jurisdiction" is defined in Section 30(a).

   (x) "Rents" means all rents  (whether  from  residential  or  non-residential
space),  revenues  and other income of the Land or the  Improvements,  including
parking fees,  laundry and vending machine income and fees and charges for food,
health care and other services provided at the Mortgaged  Property,  whether now
due, past due, or to become due, and deposits forfeited by tenants.

   (y) "Taxes" means all taxes, assessments, vault rentals and other charges, if
any,  general,  special or  otherwise,  including all  assessments  for schools,
public betterments and general or local improvements, which are levied, assessed
or imposed by any public authority or quasi-public authority,  and which, if not
paid, will become a lien, on the Land or the Improvements.

   (z) "Transfer" means (A) a sale,  assignment,  transfer or other  disposition
(whether  voluntary,  involuntary  or by  operation of law);  (B) the  granting,
creating or  attachment of a lien,  encumbrance  or security  interest  (whether
voluntary,  involuntary  or by  operation  of law);  (C) the  issuance  or other
creation of an ownership  interest in a legal  entity,  including a  partnership
interest,  interest in a limited  liability  company or corporate stock; (D) the
withdrawal,  retirement,  removal or  involuntary  resignation of a partner in a
partnership or a member or manager in a limited  liability  company;  or (E) the
merger,  dissolution,  liquidation,  or  consolidation  of a legal entity or the
reconstitution  of one type of legal entity into  another type of legal  entity.
"Transfer"  does not include (i) a  conveyance  of the  Mortgaged  Property at a
judicial or  non-judicial  foreclosure  sale under this  Instrument  or (ii) the
Mortgaged  Property  becoming  part of a  bankruptcy  estate by operation of law
under the United  States  Bankruptcy  Code.  For  purposes of defining  the term
"Transfer," the term "partnership" shall mean a general  partnership,  a limited
partnership,  a joint venture and a limited liability partnership,  and the term
"partner" shall mean a general partner, a limited partner and a joint venturer.

                                       6
<PAGE>

   2. UNIFORM  COMMERCIAL  CODE SECURITY  AGREEMENT.  This  Instrument is also a
security  agreement  under the Uniform  Commercial Code for any of the Mortgaged
Property  which,  under  applicable  law, may be subject to a security  interest
under the Uniform  Commercial Code,  whether acquired now or in the future,  and
all  products  and  cash  and  non-cash  proceeds  thereof  (collectively,  "UCC
Collateral"),  and Borrower  hereby grants to Lender a security  interest in the
UCC  Collateral.  Borrower  shall  execute and deliver to Lender,  upon Lender's
request,  financing statements,  continuation statements and amendments, in such
form as Lender  may  require  to  perfect or  continue  the  perfection  of this
security  interest.  Borrower  shall  pay all  filing  costs  and all  costs and
expenses  of any  record  searches  for  financing  statements  that  Lender may
require.  Without the prior written consent of Lender, Borrower shall not create
or  permit  to exist  any  other  lien or  security  interest  in any of the UCC
Collateral. If an Event of Default has occurred and is continuing,  Lender shall
have the  remedies  of a secured  party under the Uniform  Commercial  Code,  in
addition  to  all  remedies  provided  by  this  Instrument  or  existing  under
applicable  law. In exercising  any  remedies,  Lender may exercise its remedies
against the UCC Collateral separately or together,  and in any order, without in
any way affecting the  availability of Lender's other remedies.  This Instrument
constitutes  a financing  statement  with  respect to any part of the  Mortgaged
Property which is or may become a Fixture.

   3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

   (a) As part of the consideration for the  Indebtedness,  Borrower  absolutely
and  unconditionally  assigns  and  transfers  to Lender  all  Rents.  It is the
intention of Borrower to establish a present,  absolute and irrevocable transfer
and  assignment  to Lender of all Rents and to authorize  and empower  Lender to
collect and receive all Rents  without the  necessity  of further  action on the
part of Borrower.  Promptly upon request by Lender,  Borrower  agrees to execute
and deliver such further  assignments  as Lender may from time to time  require.
Borrower and Lender intend this assignment of Rents to be immediately  effective
and to  constitute an absolute  present  assignment  and not an  assignment  for
additional  security  only.  For  purposes  of giving  effect  to this  absolute
assignment of Rents, and for no other purpose, Rents shall not be deemed to be a
part of the  "Mortgaged  Property"  as that term is  defined  in  Section  1(s).
However, if this present,  absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property  Jurisdiction,  then the
Rents  shall  be  included  as a part of the  Mortgaged  Property  and it is the
intention of the Borrower that in this  circumstance  this Instrument create and
perfect a lien on Rents in favor of Lender,  which lien shall be effective as of
the date of this Instrument.

   (b) After the occurrence of an Event of Default,  Borrower  authorizes Lender
to  collect,  sue for and  compromise  Rents  and  directs  each  tenant  of the
Mortgaged  Property to pay all Rents to, or as  directed  by,  Lender.  However,
until the occurrence of an Event of Default,  Lender hereby grants to Borrower a
revocable  license to collect and receive all Rents,  to hold all Rents in trust
for the  benefit  of Lender  and to apply all Rents to pay the  installments  of
interest

                                       7
<PAGE>

and principal then due and payable under the Note and the other amounts then due
and payable under the other Loan Documents,  including Imposition Deposits,  and
to pay the current costs and expenses of managing, operating and maintaining the
Mortgaged Property,  including  utilities,  Taxes and insurance premiums (to the
extent not  included in  Imposition  Deposits),  tenant  improvements  and other
capital  expenditures.  So long as no  Event  of  Default  has  occurred  and is
continuing,  the Rents  remaining  after  application  pursuant to the preceding
sentence  may be  retained  by Borrower  free and clear of, and  released  from,
Lender's rights with respect to Rents under this Instrument.  From and after the
occurrence of an Event of Default,  and without the necessity of Lender entering
upon and taking and maintaining  control of the Mortgaged Property directly,  or
by a receiver, Borrower's license to collect Rents shall automatically terminate
and Lender shall without  notice be entitled to all Rents as they become due and
payable,  including Rents then due and unpaid. Borrower shall pay to Lender upon
demand all Rents to which Lender is  entitled.  At any time on or after the date
of Lender's demand for Rents,  Lender may give, and Borrower hereby  irrevocably
authorizes  Lender to give,  notice to all  tenants  of the  Mortgaged  Property
instructing  them to pay all Rents to Lender,  no tenant  shall be  obligated to
inquire further as to the occurrence or continuance of an Event of Default,  and
no tenant shall be  obligated to pay to Borrower any amounts  which are actually
paid to Lender in response to such a notice.  Any such notice by Lender shall be
delivered to each tenant  personally,  by mail or by  delivering  such demand to
each rental unit.  Borrower  shall not interfere  with and shall  cooperate with
Lender's collection of such Rents.

   (c) Borrower represents and warrants to Lender that Borrower has not executed
any prior  assignment  of Rents  (other  than an  assignment  of Rents  securing
indebtedness  that will be paid off and discharged with the proceeds of the loan
evidenced by the Note), that Borrower has not performed,  and Borrower covenants
and agrees that it will not perform,  any acts and has not  executed,  and shall
not execute,  any  instrument  which would prevent  Lender from  exercising  its
rights  under  this  Section  3,  and  that  at the  time of  execution  of this
Instrument  there has been no  anticipation  or prepayment of any Rents for more
than two months prior to the due dates of such Rents. Borrower shall not collect
or accept  payment of any Rents  more than two months  prior to the due dates of
such Rents.

   (d) If an Event of  Default  has  occurred  and is  continuing,  Lender  may,
regardless of the adequacy of Lender's  security or the solvency of Borrower and
even in the absence of waste,  enter upon and take and maintain  full control of
the  Mortgaged  Property  in  order  to  perform  all acts  that  Lender  in its
discretion  determines  to be  necessary  or  desirable  for the  operation  and
maintenance of the Mortgaged Property, including the execution,  cancellation or
modification  of Leases,  the collection of all Rents,  the making of repairs to
the Mortgaged  Property and the execution or termination of contracts  providing
for the management,  operation or maintenance of the Mortgaged Property, for the
purposes  of  enforcing  the  assignment  of Rents  pursuant  to  Section  3(a),
protecting  the Mortgaged  Property or the security of this  Instrument,  or for
such other purposes as Lender in its discretion may deem necessary or desirable.
Alternatively, if an Event of Default has occurred and is continuing, regardless
of the adequacy of Lender's security,

                                       8
<PAGE>

without regard to Borrower's  solvency and without the necessity of giving prior
notice  (oral or  written)  to  Borrower,  Lender may apply to any court  having
jurisdiction  for the  appointment  of a receiver for the Mortgaged  Property to
take any or all of the actions set forth in the  preceding  sentence.  If Lender
elects to seek the  appointment of a receiver for the Mortgaged  Property at any
time after an Event of Default has occurred and is continuing,  Borrower, by its
execution of this  Instrument,  expressly  consents to the  appointment  of such
receiver,  including  the  appointment  of a receiver ex parte if  permitted  by
applicable law. Lender or the receiver, as the case may be, shall be entitled to
receive a reasonable fee for managing the Mortgaged  Property.  Immediately upon
appointment  of a receiver or  immediately  upon the Lender's  entering upon and
taking  possession  and  control  of  the  Mortgaged  Property,  Borrower  shall
surrender possession of the Mortgaged Property to Lender or the receiver, as the
case may be, and shall  deliver to Lender or the  receiver,  as the case may be,
all  documents,  records  (including  records on electronic or magnetic  media),
accounts,  surveys, plans, and specifications relating to the Mortgaged Property
and  all  security  deposits  and  prepaid  Rents.  In the  event  Lender  takes
possession and control of the Mortgaged  Property,  Lender may exclude  Borrower
and its representatives from the Mortgaged Property.  Borrower  acknowledges and
agrees  that the  exercise by Lender of any of the rights  conferred  under this
Section 3 shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged  Property  so long  as  Lender  has not  itself  entered  into  actual
possession of the Land and Improvements.

   (e) If  Lender  enters  the  Mortgaged  Property,  Lender  shall be liable to
account  only to Borrower  and only for those Rents  actually  received.  Lender
shall not be liable to Borrower,  anyone  claiming under or through  Borrower or
anyone  having an interest in the  Mortgaged  Property,  by reason of any act or
omission  of Lender  under this  Section 3, and  Borrower  hereby  releases  and
discharges  Lender from any such  liability to the fullest  extent  permitted by
law.

   (f) If the Rents are not  sufficient  to meet the costs of taking  control of
and managing the Mortgaged Property and collecting the Rents, any funds expended
by Lender for such purposes shall become an additional part of the  Indebtedness
as provided in Section 12.

   (g) Any  entering  upon and taking of control of the  Mortgaged  Property  by
Lender or the  receiver,  as the case may be,  and any  application  of Rents as
provided  in this  Instrument  shall not cure or waive any Event of  Default  or
invalidate any other right or remedy of Lender under  applicable law or provided
for in this Instrument.

   4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

   (a) As part of the consideration for the  Indebtedness,  Borrower  absolutely
and  unconditionally  assigns and transfers to Lender all of  Borrower's  right,
title and  interest  in, to and under the Leases,  including  Borrower's  right,
power  and  authority  to  modify  the  terms of any such  Lease,  or  extend or
terminate  any such  Lease.  It is the  intention  of  Borrower  to  establish a

                                       9

<PAGE>

present,  absolute and  irrevocable  transfer and assignment to Lender of all of
Borrower's right,  title and interest in, to and under the Leases.  Borrower and
Lender intend this  assignment of the Leases to be immediately  effective and to
constitute an absolute  present  assignment and not an assignment for additional
security only. For purposes of giving effect to this absolute  assignment of the
Leases, and for no other purpose, the Leases shall not be deemed to be a part of
the "Mortgaged  Property" as that term is defined in Section 1(s).  However,  if
this  present,  absolute  and  unconditional  assignment  of the  Leases  is not
enforceable by its terms under the laws of the Property  Jurisdiction,  then the
Leases  shall be  included  as a part of the  Mortgaged  Property  and it is the
intention of the Borrower that in this  circumstance  this Instrument create and
perfect a lien on the Leases in favor of Lender,  which lien shall be  effective
as of the date of this Instrument.

   (b) Until Lender gives notice to Borrower of Lender's  exercise of its rights
under  this  Section 4,  Borrower  shall have all  rights,  power and  authority
granted to Borrower under any Lease (except as otherwise limited by this Section
or any other  provision  of this  Instrument),  including  the right,  power and
authority  to modify  the terms of any Lease or extend or  terminate  any Lease.
Upon the  occurrence of an Event of Default,  the  permission  given to Borrower
pursuant to the preceding  sentence to exercise all rights,  power and authority
under  Leases  shall  automatically  terminate.  Borrower  shall comply with and
observe   Borrower's   obligations  under  all  Leases,   including   Borrower's
obligations  pertaining to the  maintenance  and  disposition of tenant security
deposits.

   (c)  Borrower  acknowledges  and agrees that the  exercise by Lender,  either
directly or by a receiver,  of any of the rights  conferred under this Section 4
shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged
Property so long as Lender has not itself entered into actual  possession of the
Land and the  Improvements.  The  acceptance by Lender of the  assignment of the
Leases  pursuant to Section 4(a) shall not at any time or in any event  obligate
Lender to take any  action  under this  Instrument  or to expend any money or to
incur any  expenses.  Lender  shall  not be liable in any way for any  injury or
damage  to person or  property  sustained  by any  person  or  persons,  firm or
corporation in or about the Mortgaged  Property.  Prior to Lender's actual entry
into and taking  possession of the Mortgaged  Property,  Lender shall not (i) be
obligated to perform any of the terms, covenants and conditions contained in any
Lease (or  otherwise  have any  obligation  with respect to any Lease);  (ii) be
obligated to appear in or defend any action or proceeding  relating to the Lease
or the Mortgaged Property;  or (iii) be responsible for the operation,  control,
care,  management  or repair of the  Mortgaged  Property  or any  portion of the
Mortgaged  Property.   The  execution  of  this  Instrument  by  Borrower  shall
constitute  conclusive  evidence  that  all  responsibility  for the  operation,
control,  care,  management and repair of the Mortgaged Property is and shall be
that of Borrower, prior to such actual entry and taking of possession.

   (d) Upon  delivery of notice by Lender to  Borrower  of Lender's  exercise of
Lender's  rights  under this  Section 4 at any time after the  occurrence  of an
Event of Default,  and without the necessity of Lender  entering upon and taking
and maintaining control of the Mortgaged

                                       10

<PAGE>

Property directly, by a receiver, or by any other manner or proceeding permitted
by the laws of the  Property  Jurisdiction,  Lender  immediately  shall have all
rights, powers and authority granted to Borrower under any Lease,  including the
right,  power and authority to modify the terms of any such Lease,  or extend or
terminate any such Lease.

   (e) Borrower  shall,  promptly  upon Lender's  request,  deliver to Lender an
executed  copy  of each  residential  Lease  then  in  effect.  All  Leases  for
residential  dwelling units shall be on forms  approved by Lender,  shall be for
initial terms of at least six months and not more than two years,  and shall not
include options to purchase.

   (f)  Borrower  shall not lease any  portion  of the  Mortgaged  Property  for
non-residential use except with the prior written consent of Lender and Lender's
prior written  approval of the Lease  agreement.  Borrower  shall not modify the
terms of, or extend or terminate,  any Lease for  non-residential use (including
any Lease in existence on the date of this Instrument) without the prior written
consent of  Lender.  Borrower  shall,  without  request  by  Lender,  deliver an
executed copy of each non-residential  Lease to Lender promptly after such Lease
is signed.  All  non-residential  Leases,  including  renewals or  extensions of
existing Leases, shall specifically provide that (1) such Leases are subordinate
to the lien of this  Instrument;  (2) the tenant  shall attorn to Lender and any
purchaser at a  foreclosure  sale,  such  attornment  to be  self-executing  and
effective upon  acquisition of title to the Mortgaged  Property by any purchaser
at a  foreclosure  sale or by Lender in any  manner;  (3) the  tenant  agrees to
execute such further  evidences of  attornment  as Lender or any  purchaser at a
foreclosure  sale may from  time to time  request;  (4) the  Lease  shall not be
terminated by foreclosure or any other transfer of the Mortgaged  Property;  (5)
after  a  foreclosure  sale  of the  Mortgaged  Property,  Lender  or any  other
purchaser at such foreclosure sale may, at Lender's or such purchaser's  option,
accept or terminate such Lease; and (6) the tenant shall, upon receipt after the
occurrence  of an Event of Default of a written  request  from  Lender,  pay all
Rents payable under the Lease to Lender.

   (g)  Borrower  shall not  receive  or accept  Rent  under any Lease  (whether
residential or non-residential) for more than two months in advance.

   5. PAYMENT OF  INDEBTEDNESS;  PERFORMANCE  UNDER LOAN  DOCUMENTS;  PREPAYMENT
PREMIUM.  Borrower shall pay the  Indebtedness  when due in accordance  with the
terms of the Note and the other Loan  Documents and shall  perform,  observe and
comply  with all  other  provisions  of the Note and the other  Loan  Documents.
Borrower shall pay a prepayment  premium in connection with certain  prepayments
of the  Indebtedness,  including a payment made after  Lender's  exercise of any
right of acceleration of the Indebtedness, as provided in the Note.

   6. EXCULPATION. Borrower's personal liability for payment of the Indebtedness
and for  performance  of the other  obligations to be performed by it under this
Instrument is limited in the manner, and to the extent, provided in the Note.

                                       11

<PAGE>

   7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

   (a) Borrower  shall  deposit with Lender on the day monthly  installments  of
principal  or  interest,  or both,  are due  under the Note (or on  another  day
designated  in writing by Lender),  until the  Indebtedness  is paid in full, an
additional  amount  sufficient to accumulate with Lender the entire sum required
to pay, when due (1) any water and sewer charges which,  if not paid, may result
in a lien on all or any part of the  Mortgaged  Property,  (2) the  premiums for
fire and other hazard insurance, rent loss insurance and such other insurance as
Lender may  require  under  Section  19, (3) Taxes,  and (4)  amounts  for other
charges and expenses  which  Lender at any time  reasonably  deems  necessary to
protect  the  Mortgaged  Property,  to prevent  the  imposition  of liens on the
Mortgaged  Property,  or  otherwise  to  protect  Lender's  interests,   all  as
reasonably  estimated  from  time to  time by  Lender,  plus  one-sixth  of such
estimate.  The amounts  deposited under the preceding  sentence are collectively
referred to in this Instrument as the "Imposition Deposits".  The obligations of
Borrower  for  which the  Imposition  Deposits  are  required  are  collectively
referred to in this  Instrument as  "Impositions".  The amount of the Imposition
Deposits shall be sufficient to enable Lender to pay each Imposition  before the
last date upon which such  payment  may be made  without any penalty or interest
charge being added.  Lender shall  maintain  records  indicating how much of the
monthly Imposition  Deposits and how much of the aggregate  Imposition  Deposits
held by Lender are held for the purpose of paying Taxes,  insurance premiums and
each other  obligation of Borrower for which  Imposition  Deposits are required.
Any waiver by Lender of the requirement that Borrower remit Imposition  Deposits
to Lender may be revoked by Lender,  in  Lender's  discretion,  at any time upon
notice to Borrower.

   (b) Imposition Deposits shall be held in an institution (which may be Lender,
if Lender is such an  institution)  whose  deposits or  accounts  are insured or
guaranteed by a federal agency. Lender shall not be obligated to open additional
accounts or deposit  Imposition  Deposits in  additional  institutions  when the
amount of the  Imposition  Deposits  exceeds the  maximum  amount of the federal
deposit insurance or guaranty. Lender shall apply the Imposition Deposits to pay
Impositions  so long as no Event of  Default  has  occurred  and is  continuing.
Unless applicable law requires, Lender shall not be required to pay Borrower any
interest,  earnings  or  profits on the  Imposition  Deposits.  Borrower  hereby
pledges and grants to Lender a security  interest in the Imposition  Deposits as
additional security for all of Borrower's  obligations under this Instrument and
the other Loan Documents. Any amounts deposited with Lender under this Section 7
shall not be trust  funds,  nor shall they  operate to reduce the  Indebtedness,
unless applied by Lender for that purpose under Section 7(e).

   (c) If Lender receives a bill or invoice for an Imposition,  Lender shall pay
the Imposition from the Imposition Deposits held by Lender. Lender shall have no
obligation to pay any  Imposition to the extent it exceeds  Imposition  Deposits
then  held by  Lender.  Lender  may pay an  Imposition  according  to any  bill,
statement or estimate from the  appropriate  public office

                                       12

<PAGE>

or insurance company without inquiring into the accuracy of the bill,  statement
or estimate or into the validity of the Imposition.

   (d) If at any time the amount of the  Imposition  Deposits held by Lender for
payment of a specific  Imposition exceeds the amount reasonably deemed necessary
by Lender plus one-sixth of such estimate,  the excess shall be credited against
future  installments  of Imposition  Deposits.  If at any time the amount of the
Imposition  Deposits held by Lender for payment of a specific Imposition is less
than the amount reasonably estimated by Lender to be necessary plus one-sixth of
such estimate,  Borrower shall pay to Lender the amount of the deficiency within
15 days after notice from Lender.

   (e) If an Event of Default has occurred and is  continuing,  Lender may apply
any Imposition  Deposits,  in any amounts and in any order as Lender determines,
in  Lender's  discretion,  to pay any  Impositions  or as a credit  against  the
Indebtedness.  Upon payment in full of the Indebtedness,  Lender shall refund to
Borrower any Imposition Deposits held by Lender.

   8. COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts as
may be  required  by any  Collateral  Agreement  and  shall  perform  all  other
obligations of Borrower under each Collateral Agreement.

   9. APPLICATION OF PAYMENTS. If at any time Lender receives,  from Borrower or
otherwise,  any amount  applicable  to the  Indebtedness  which is less than all
amounts  due and  payable at such time,  then  Lender may apply that  payment to
amounts  then due and  payable  in any  manner  and in any order  determined  by
Lender, in Lender's  discretion.  Neither Lender's acceptance of an amount which
is less than all amounts then due and payable nor Lender's  application  of such
payment in the manner  authorized  shall  constitute  or be deemed to constitute
either  a  waiver  of  the  unpaid  amounts  or  an  accord  and   satisfaction.
Notwithstanding  the  application  of  any  such  amount  to  the  Indebtedness,
Borrower's   obligations  under  this  Instrument  and  the  Note  shall  remain
unchanged.

   10.  COMPLIANCE WITH LAWS.  Borrower shall comply with all laws,  ordinances,
regulations  and  requirements  of any  Governmental  Authority and all recorded
lawful covenants and agreements relating to or affecting the Mortgaged Property,
including  all  laws,  ordinances,   regulations,   requirements  and  covenants
pertaining to health and safety,  construction  of improvements on the Mortgaged
Property,  fair  housing,  zoning and land use, and Leases.  Borrower also shall
comply with all applicable  laws that pertain to the maintenance and disposition
of  tenant  security  deposits.  Borrower  shall at all times  maintain  records
sufficient to  demonstrate  compliance  with the  provisions of this Section 10.
Borrower shall take appropriate  measures to prevent, and shall not engage in or
knowingly permit,  any illegal  activities at the Mortgaged  Property that could
endanger tenants or visitors, result in damage to the Mortgaged Property, result
in forfeiture of the Mortgaged Property, or otherwise materially impair the lien
created by this  Instrument  or  Lender's  interest in the  Mortgaged  Property.
Borrower  represents

                                       13

<PAGE>

and  warrants to Lender that no portion of the  Mortgaged  Property  has been or
will be purchased with the proceeds of any illegal activity.

   11. USE OF PROPERTY.  Unless required by applicable  law,  Borrower shall not
(a) except for any change in use  approved by Lender,  allow  changes in the use
for which all or any part of the  Mortgaged  Property  is being used at the time
this  Instrument  was executed,  (b) convert any  individual  dwelling  units or
common  areas to  commercial  use,  (c) initiate or acquiesce in a change in the
zoning   classification  of  the  Mortgaged  Property,   or  (d)  establish  any
condominium or cooperative regime with respect to the Mortgaged Property.

   12. PROTECTION OF LENDER'S SECURITY.

   (a) If Borrower fails to perform any of its obligations under this Instrument
or any other Loan  Document,  or if any action or proceeding is commenced  which
purports to affect the Mortgaged Property,  Lender's security or Lender's rights
under this Instrument,  including eminent domain, insolvency,  code enforcement,
civil  or  criminal   forfeiture,   enforcement  of  Hazardous  Materials  Laws,
fraudulent  conveyance or reorganizations or proceedings involving a bankrupt or
decedent,  then Lender at Lender's  option may make such  appearances,  disburse
such sums and take such actions as Lender  reasonably deems necessary to perform
such  obligations of Borrower and to protect  Lender's  interest,  including (1)
payment of fees and out of pocket expenses of attorneys, accountants, inspectors
and consultants, (2) entry upon the Mortgaged Property to make repairs or secure
the Mortgaged Property, (3) procurement of the insurance required by Section 19,
and (4) payment of amounts  which  Borrower has failed to pay under  Sections 15
and 17.

   (b) Any amounts disbursed by Lender under this Section 12, or under any other
provision of this Instrument  that treats such  disbursement as being made under
this Section 12, shall be added to, and become part of, the principal  component
of the  Indebtedness,  shall be  immediately  due and  payable  and  shall  bear
interest  from the date of  disbursement  until paid at the "Default  Rate",  as
defined in the Note.

   (c) Nothing in this Section 12 shall  require  Lender to incur any expense or
take any action.

   13. INSPECTION. Lender, its agents,  representatives,  and designees may make
or cause to be made  entries  upon and  inspections  of the  Mortgaged  Property
(including environmental inspections and tests) during normal business hours, or
at any other reasonable time.

   14. BOOKS AND RECORDS; FINANCIAL REPORTING.

                                       14
<PAGE>

   (a) Borrower  shall keep and maintain at all times at the Mortgaged  Property
or the  management  agent's  offices,  and  upon  Lender's  request  shall  make
available at the Mortgaged Property,  complete and accurate books of account and
records  (including copies of supporting bills and invoices) adequate to reflect
correctly  the operation of the  Mortgaged  Property,  and copies of all written
contracts,  Leases,  and other instruments which affect the Mortgaged  Property.
The books, records,  contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.

   (b) Borrower shall furnish to Lender all of the following:

       (1)  within 120 days after the end of each  fiscal  year of  Borrower,  a
            statement  of income and expenses  for  Borrower's  operation of the
            Mortgaged  Property  for that fiscal year, a statement of changes in
            financial  position of Borrower  relating to the Mortgaged  Property
            for that fiscal year and, when requested by Lender,  a balance sheet
            showing  all assets and  liabilities  of  Borrower  relating  to the
            Mortgaged Property as of the end of that fiscal year;

       (2)  within 120 days after the end of each fiscal year of  Borrower,  and
            at any other time upon  Lender's  request,  a rent  schedule for the
            Mortgaged  Property  showing the name of each  tenant,  and for each
            tenant,  the space  occupied,  the lease  expiration  date, the rent
            payable for the current month,  the date through which rent has been
            paid, and any related information requested by Lender;

       (3)  within 120 days after the end of each fiscal year of  Borrower,  and
            at any other  time  upon  Lender's  request,  an  accounting  of all
            security deposits held pursuant to all Leases, including the name of
            the institution (if any) and the names and identification numbers of
            the accounts (if any) in which such  security  deposits are held and
            the name of the  person to contact  at such  financial  institution,
            along with any  authority or release  necessary for Lender to access
            information regarding such accounts;

       (4)  within 120 days after the end of each fiscal year of  Borrower,  and
            at any other time upon Lender's request, a statement that identifies
            all owners of any  interest in Borrower and any  Controlling  Entity
            and the interest held by each,  if Borrower or a Controlling  Entity
            is a  corporation,  all officers  and  directors of Borrower and the
            Controlling  Entity,  and if Borrower or a  Controlling  Entity is a
            limited liability company, all managers who are not members;

                                       15

<PAGE>

       (5)  upon Lender's request,  quarterly income and expense  statements for
            the Mortgaged Property;

       (6)  upon  Lender's  request  at any time  when an Event of  Default  has
            occurred and is continuing,  monthly  income and expense  statements
            for the Mortgaged Property;

       (7)  upon Lender's request, a monthly property  management report for the
            Mortgaged Property,  showing the number of inquiries made and rental
            applications  received  from  tenants  or  prospective  tenants  and
            deposits received from tenants and any other  information  requested
            by Lender; and

   (8) upon  Lender's  request,  a balance  sheet,  a  statement  of income  and
expenses  for  Borrower  and a  statement  of changes in  financial  position of
Borrower for Borrower's most recent fiscal year.

   (c) Each of the statements,  schedules and reports  required by Section 14(b)
shall be certified to be complete and accurate by an individual having authority
to bind  Borrower,  and shall be in such form and contain  such detail as Lender
may reasonably require.  Lender also may require that any statements,  schedules
or reports be audited at  Borrower's  expense by  independent  certified  public
accountants acceptable to Lender.

   (d) If Borrower fails to provide in a timely manner the statements, schedules
and  reports  required  by Section  14(b),  Lender  shall have the right to have
Borrower's  books and records  audited,  at Borrower's  expense,  by independent
certified  public  accountants  selected  by  Lender  in  order to  obtain  such
statements,  schedules and reports, and all related costs and expenses of Lender
shall become  immediately due and payable and shall become an additional part of
the Indebtedness as provided in Section 12.

   (e) If an Event of Default has occurred  and is  continuing,  Borrower  shall
deliver to Lender  upon  written  demand all books and  records  relating to the
Mortgaged Property or its operation.

   (f) Borrower  authorizes  Lender to obtain a credit report on Borrower at any
time.

   15. TAXES; OPERATING EXPENSES.

   (a) Subject to the  provisions of Section 15(c) and Section  15(d),  Borrower
shall pay,  or cause to be paid,  all Taxes when due and before the  addition of
any interest, fine, penalty or cost for nonpayment.

                                       16

<PAGE>

   (b)  Subject to the  provisions  of  Section  15(c),  Borrower  shall pay the
expenses  of  operating,  managing,  maintaining  and  repairing  the  Mortgaged
Property  (including  insurance premiums,  utilities,  repairs and replacements)
before  the last date upon  which  each such  payment  may be made  without  any
penalty or interest charge being added.

   (c) As long as no Event of Default  exists and Borrower has timely  delivered
to Lender any bills or premium notices that it has received,  Borrower shall not
be obligated to pay Taxes, insurance premiums or any other individual Imposition
to the extent that  sufficient  Imposition  Deposits  are held by Lender for the
purpose of paying  that  specific  Imposition.  If an Event of  Default  exists,
Lender may  exercise  any  rights  Lender  may have with  respect to  Imposition
Deposits without regard to whether Impositions are then due and payable.  Lender
shall have no liability to Borrower  for failing to pay any  Impositions  to the
extent that any Event of Default has  occurred and is  continuing,  insufficient
Imposition Deposits are held by Lender at the time an Imposition becomes due and
payable or Borrower has failed to provide Lender with bills and premium  notices
as provided above.

   (d)  Borrower,   at  its  own  expense,  may  contest  by  appropriate  legal
proceedings,  conducted  diligently and in good faith, the amount or validity of
any Imposition other than insurance premiums, if (1) Borrower notifies Lender of
the commencement or expected commencement of such proceedings, (2) the Mortgaged
Property is not in danger of being sold or forfeited, (3) Borrower deposits with
Lender  reserves  sufficient  to pay the contested  Imposition,  if requested by
Lender, and (4) Borrower furnishes whatever  additional  security is required in
the  proceedings  or is  reasonably  requested by Lender,  which may include the
delivery to Lender of the reserves  established by Borrower to pay the contested
Imposition.

   (e) Borrower shall  promptly  deliver to Lender a copy of all notices of, and
invoices  for,  Impositions,  and if  Borrower  pays  any  Imposition  directly,
Borrower shall promptly furnish to Lender receipts evidencing such payments.

   16. LIENS;  ENCUMBRANCES.  Borrower acknowledges that, to the extent provided
in Section 21, the grant, creation or existence of any mortgage,  deed of trust,
deed to secure debt,  security  interest or other lien or encumbrance (a "Lien")
on the Mortgaged Property (other than the lien of this Instrument) or on certain
ownership interests in Borrower, whether voluntary,  involuntary or by operation
of law,  and  whether  or not  such  Lien  has  priority  over  the lien of this
Instrument,  is a "Transfer" which  constitutes an Event of Default and subjects
Borrower to personal liability under the Note.

   17. PRESERVATION,  MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY. Borrower
(a)  shall  not  commit  waste or  permit  impairment  or  deterioration  of the
Mortgaged  Property,  (b) shall not abandon the  Mortgaged  Property,  (c) shall
restore or repair promptly,  in a good and workmanlike  manner, any damaged part
of the Mortgaged Property to the equivalent of its original  condition,  or such
other  condition  as Lender

                                       17

<PAGE>

may approve in writing, whether or not insurance proceeds or condemnation awards
are available to cover any costs of such  restoration or repair,  (d) shall keep
the Mortgaged  Property in good repair,  including the replacement of Personalty
and  Fixtures  with items of equal or better  function  and  quality,  (e) shall
provide for professional  management of the Mortgaged  Property by a residential
rental  property  manager  satisfactory  to Lender under a contract  approved by
Lender in writing,  and (f) shall give notice to Lender of and, unless otherwise
directed  in  writing  by  Lender,  shall  appear in and  defend  any  action or
proceeding  purporting to affect the Mortgaged  Property,  Lender's  security or
Lender's rights under this Instrument.  Borrower shall not (and shall not permit
any tenant or other person to) remove,  demolish or alter the Mortgaged Property
or any part of the Mortgaged  Property except in connection with the replacement
of tangible Personalty.

   18. ENVIRONMENTAL HAZARDS.

   (a)  Except  for  matters  covered by a written  program  of  operations  and
maintenance  approved  in  writing  by  Lender  (an "O&M  Program")  or  matters
described  in  Section  18(b),  Borrower  shall not  cause or permit  any of the
following:

       (1)  the  presence,  use,  generation,  release,  treatment,  processing,
            storage (including  storage in above ground and underground  storage
            tanks), handling, or disposal of any Hazardous Materials on or under
            the  Mortgaged  Property or any other  property of Borrower  that is
            adjacent to the Mortgaged Property;

       (2)  the  transportation  of any Hazardous  Materials to, from, or across
            the Mortgaged Property;

       (3)  any  occurrence or condition on the Mortgaged  Property or any other
            property of Borrower  that is  adjacent to the  Mortgaged  Property,
            which occurrence or condition is or may be in violation of Hazardous
            Materials Laws; or

       (4)  any   violation   of  or   noncompliance   with  the  terms  of  any
            Environmental  Permit with respect to the Mortgaged  Property or any
            property of Borrower that is adjacent to the Mortgaged Property.

The  matters  described  in  clauses  (1)  through  (4)  above are  referred  to
collectively in this Section 18 as "Prohibited Activities or Conditions".

   (b)  Prohibited  Activities  and  Conditions  shall not  include the safe and
lawful use and storage of  quantities  of (1)  pre-packaged  supplies,  cleaning
materials  and  petroleum  products   customarily  used  in  the  operation  and
maintenance  of  comparable  multifamily  properties,  (2)

                                       18
<PAGE>

cleaning materials, personal grooming items and other items sold in pre-packaged
containers  for  consumer use and used by tenants and  occupants of  residential
dwelling units in the Mortgaged Property; and (3) petroleum products used in the
operation  and  maintenance  of motor  vehicles from time to time located on the
Mortgaged  Property's  parking areas,  so long as all of the foregoing are used,
stored,  handled,  transported  and  disposed of in  compliance  with  Hazardous
Materials Laws.

   (c) Borrower shall take all commercially  reasonable  actions  (including the
inclusion of  appropriate  provisions in any Leases  executed  after the date of
this  Instrument) to prevent its employees,  agents,  and  contractors,  and all
tenants and other occupants from causing or permitting any Prohibited Activities
or  Conditions.  Borrower shall not lease or allow the sublease or use of all or
any  portion  of  the  Mortgaged   Property  to  any  tenant  or  subtenant  for
nonresidential  use by any user that,  in the ordinary  course of its  business,
would cause or permit any Prohibited Activity or Condition.

   (d)  If an O&M  Program  has  been  established  with  respect  to  Hazardous
Materials,  Borrower  shall  comply  in a timely  manner  with,  and  cause  all
employees,  agents, and contractors of Borrower and any other persons present on
the Mortgaged Property to comply with the O&M Program.  All costs of performance
of Borrower's  obligations under any O&M Program shall be paid by Borrower,  and
Lender's  out-of-pocket  costs  incurred in connection  with the  monitoring and
review of the O&M Program and Borrower's  performance  shall be paid by Borrower
upon demand by Lender.  Any such  out-of-pocket  costs of Lender which  Borrower
fails to pay promptly  shall become an additional  part of the  Indebtedness  as
provided in Section 12.

   (e) Borrower  represents  and warrants to Lender that,  except as  previously
disclosed by Borrower to Lender in writing:

       (1)  Borrower  has not at any time engaged in,  caused or  permitted  any
            Prohibited Activities or Conditions;

       (2)  to the best of Borrower's  knowledge  after  reasonable and diligent
            inquiry,  no  Prohibited  Activities  or  Conditions  exist  or have
            existed;

       (3)  except to the extent  previously  disclosed by Borrower to Lender in
            writing, the Mortgaged Property does not now contain any underground
            storage  tanks,  and,  to the  best of  Borrower's  knowledge  after
            reasonable  and diligent  inquiry,  the  Mortgaged  Property has not
            contained any underground  storage tanks in the past. If there is an
            underground  storage  tank  located on the  Property  which has been
            previously  disclosed  by Borrower  to Lender in writing,  that tank
            complies with all requirements of Hazardous Materials Laws;

                                       19

<PAGE>

       (4)  Borrower has complied with all Hazardous  Materials Laws,  including
            all requirements for  notification  regarding  releases of Hazardous
            Materials.   Without  limiting  the  generality  of  the  foregoing,
            Borrower  has obtained all  Environmental  Permits  required for the
            operation of the  Mortgaged  Property in accordance  with  Hazardous
            Materials Laws now in effect and all such Environmental  Permits are
            in full force and effect;

       (5)  no event has occurred  with respect to the  Mortgaged  Property that
            constitutes,  or with the  passing  of time or the  giving of notice
            would constitute,  noncompliance with the terms of any Environmental
            Permit;

       (6)  there are no actions,  suits,  claims or proceedings  pending or, to
            the best of  Borrower's  knowledge  after  reasonable  and  diligent
            inquiry,  threatened that involve the Mortgaged Property and allege,
            arise out of, or relate to any Prohibited Activity or Condition; and

       (7)  Borrower has not received any complaint,  order, notice of violation
            or other  communication from any Governmental  Authority with regard
            to air emissions,  water  discharges,  noise  emissions or Hazardous
            Materials,  or any other  environmental,  health  or safety  matters
            affecting the Mortgaged  Property or any other  property of Borrower
            that is adjacent to the Mortgaged Property.

The  representations  and  warranties  in this  Section  18 shall be  continuing
representations  and  warranties  that  shall be deemed  to be made by  Borrower
throughout  the term of the loan evidenced by the Note,  until the  Indebtedness
has been paid in full.

   (f) Borrower shall  promptly  notify Lender in writing upon the occurrence of
any of the following events:

       (1)  Borrower's discovery of any Prohibited Activity or Condition;

       (2)  Borrower's receipt of or knowledge of any complaint,  order,  notice
            of violation or other communication from any Governmental  Authority
            or other person with regard to present or future alleged  Prohibited
            Activities  or  Conditions  or any  other  environmental,  health or
            safety  matters  affecting  the  Mortgaged  Property  or  any  other
            property of Borrower that is adjacent to the Mortgaged Property; and

       (3)  any  representation  or warranty in this  Section 18 becomes  untrue
            after the date of this Agreement.


                                       20
<PAGE>

Any such notice given by Borrower shall not relieve  Borrower of, or result in a
waiver of, any  obligation  under this  Instrument,  the Note, or any other Loan
Document.

   (g) Borrower shall pay promptly the costs of any  environmental  inspections,
tests or audits  ("Environmental  Inspections") required by Lender in connection
with  any  foreclosure  or deed in lieu of  foreclosure,  or as a  condition  of
Lender's  consent  to any  Transfer  under  Section  21, or  required  by Lender
following a reasonable  determination  by Lender that  Prohibited  Activities or
Conditions may exist. Any such costs incurred by Lender  (including the fees and
out-of-pocket  costs of attorneys and technical  consultants whether incurred in
connection  with any  judicial or  administrative  process or  otherwise)  which
Borrower  fails  to  pay  promptly  shall  become  an  additional  part  of  the
Indebtedness  as  provided  in  Section  12. The  results  of all  Environmental
Inspections  made by Lender shall at all times remain the property of Lender and
Lender  shall have no  obligation  to disclose or  otherwise  make  available to
Borrower or any other party such  results or any other  information  obtained by
Lender in connection with its Environmental Inspections.  Lender hereby reserves
the right, and Borrower hereby expressly authorizes Lender, to make available to
any  party,  including  any  prospective  bidder  at a  foreclosure  sale of the
Mortgaged Property, the results of any Environmental  Inspections made by Lender
with respect to the Mortgaged  Property.  Borrower  consents to Lender notifying
any party  (either as part of a notice of sale or  otherwise)  of the results of
any of Lender's  Environmental  Inspections.  Borrower  acknowledges that Lender
cannot control or otherwise  assure the  truthfulness or accuracy of the results
of any of its Environmental  Inspections and that the release of such results to
prospective  bidders at a foreclosure sale of the Mortgaged  Property may have a
material and adverse  effect upon the amount which a party may bid at such sale.
Borrower  agrees that Lender shall have no liability  whatsoever  as a result of
delivering  the  results of any of its  Environmental  Inspections  to any third
party, and Borrower hereby releases and forever  discharges  Lender from any and
all claims,  damages,  or causes of action,  arising out of,  connected  with or
incidental  to the  results of, the  delivery  of any of Lender's  Environmental
Inspections.

   (h) If any investigation, site monitoring, containment, clean-up, restoration
or other  remedial  work  ("Remedial  Work") is  necessary  to  comply  with any
Hazardous  Materials  Law or order  of any  Governmental  Authority  that has or
acquires  jurisdiction  over the  Mortgaged  Property or the use,  operation  or
improvement  of the  Mortgaged  Property  under  any  Hazardous  Materials  Law,
Borrower  shall,  by the  earlier of (1) the  applicable  deadline  required  by
Hazardous  Materials Law or (2) 30 days after notice from Lender  demanding such
action, begin performing the Remedial Work, and thereafter  diligently prosecute
it to completion,  and shall in any event complete the work by the time required
by applicable  Hazardous  Materials  Law. If Borrower fails to begin on a timely
basis or diligently  prosecute any required  Remedial  Work,  Lender may, at its
option,  cause the Remedial Work to be completed,  in which case Borrower  shall
reimburse Lender on demand for the cost of doing so. Any  reimbursement due from
Borrower to Lender shall become part of the  Indebtedness as provided in Section
12.

                                       21

<PAGE>

   (i) Borrower shall cooperate with any inquiry by any  Governmental  Authority
and shall comply with any  governmental  or judicial order which arises from any
alleged Prohibited Activity or Condition.

   (j) Borrower shall indemnify,  hold harmless and defend (i) Lender,  (ii) any
prior owner or holder of the Note, (iii) the Loan Servicer,  (iv) any prior Loan
Servicer, (v) the officers,  directors,  shareholders,  partners,  employees and
trustees of any of the  foregoing,  and (vi) the heirs,  legal  representatives,
successors   and   assigns  of  each  of  the   foregoing   (collectively,   the
"Indemnitees") from and against all proceedings,  claims, damages, penalties and
costs  (whether  initiated  or sought by  Governmental  Authorities  or  private
parties),  including  fees and out of pocket  expenses of  attorneys  and expert
witnesses,  investigatory  fees,  and  remediation  costs,  whether  incurred in
connection  with any judicial or  administrative  process or otherwise,  arising
directly or indirectly from any of the following:

       (1)  any breach of any  representation  or  warranty  of Borrower in this
            Section 18;

       (2)  any failure by Borrower to perform any of its obligations under this
            Section 18;

       (3)  the  existence or alleged  existence of any  Prohibited  Activity or
            Condition;

       (4)  the presence or alleged presence of Hazardous  Materials on or under
            the Mortgaged  Property or any property of Borrower that is adjacent
            to the Mortgaged Property; and

       (5)  the actual or alleged violation of any Hazardous Materials Law.

   (k) Counsel  selected by Borrower to defend  Indemnitees  shall be subject to
the approval of those Indemnitees.  However,  any Indemnitee may elect to defend
any claim or legal or administrative proceeding at the Borrower's expense.

   (l)  Borrower  shall  not,   without  the  prior  written  consent  of  those
Indemnitees  who are  named as  parties  to a claim  or legal or  administrative
proceeding (a "Claim"),  settle or compromise  the Claim if the  settlement  (1)
results in the entry of any judgment  that does not include as an  unconditional
term the delivery by the claimant or plaintiff to Lender of a written release of
those  Indemnitees,  satisfactory  in form and  substance to Lender;  or (2) may
materially  and  adversely  affect  Lender,  as  determined  by  Lender  in  its
discretion.

   (m) Borrower's  obligation to indemnify the Indemnitees  shall not be limited
or  impaired  by any of the  following,  or by any  failure of  Borrower  or any
guarantor to receive notice of or consideration for any of the following:

                                       22
<PAGE>

       (1)  any amendment or modification of any Loan Document;

       (2)  any  extensions  of  time  for  performance  required  by  any  Loan
            Document;

       (3)  any  provision  in any  of  the  Loan  Documents  limiting  Lender's
            recourse to property  securing  the  Indebtedness,  or limiting  the
            personal liability of Borrower or any other party for payment of all
            or any part of the Indebtedness;

       (4)  the accuracy or inaccuracy  of any  representations  and  warranties
            made by Borrower under this Instrument or any other Loan Document;

       (5)  the  release  of  Borrower  or any  other  person,  by  Lender or by
            operation of law, from  performance of any obligation under any Loan
            Document;

       (6)  the release or  substitution in whole or in part of any security for
            the Indebtedness; and

       (7)  Lender's failure to properly  perfect any lien or security  interest
            given as security for the Indebtedness.

   (n) Borrower shall, at its own cost and expense, do all of the following:

       (1)  pay or satisfy any  judgment  or decree that may be entered  against
            any  Indemnitee  or  Indemnitees  in  any  legal  or  administrative
            proceeding  incident to any matters  against which  Indemnitees  are
            entitled to be indemnified under this Section 18;

       (2)  reimburse   Indemnitees   for  any  expenses  paid  or  incurred  in
            connection with any matters  against which  Indemnitees are entitled
            to be indemnified under this Section 18; and

       (3)  reimburse  Indemnitees for any and all expenses,  including fees and
            out of pocket  expenses of attorneys and expert  witnesses,  paid or
            incurred in connection  with the enforcement by Indemnitees of their
            rights under this Section 18, or in monitoring and  participating in
            any legal or administrative proceeding.

   (o) In any  circumstances  in which  the  indemnity  under  this  Section  18
applies,  Lender may employ its own legal counsel and  consultants to prosecute,
defend or negotiate any claim or legal or administrative  proceeding and Lender,
with the prior  written  consent of Borrower  (which

                                       23

<PAGE>
shall not be  unreasonably  withheld,  delayed  or  conditioned)  may  settle or
compromise  any action or legal or  administrative  proceeding.  Borrower  shall
reimburse  Lender  upon  demand for all costs and  expenses  incurred by Lender,
including all costs of settlements  entered into in good faith, and the fees and
out of pocket expenses of such attorneys and consultants.

   (p) The  provisions  of this  Section 18 shall be in  addition to any and all
other obligations and liabilities that Borrower may have under applicable law or
under  other  Loan  Documents,   and  each  Indemnitee   shall  be  entitled  to
indemnification  under this Section 18 without  regard to whether Lender or that
Indemnitee has exercised any rights against the Mortgaged  Property or any other
security,  pursued any rights against any guarantor, or pursued any other rights
available  under the Loan Documents or applicable  law. If Borrower  consists of
more than one person or entity,  the  obligation of those persons or entities to
indemnify the Indemnitees under this Section 18 shall be joint and several.  The
obligation of Borrower to indemnify the Indemnitees  under this Section 18 shall
survive  any  repayment  or  discharge  of  the  Indebtedness,  any  foreclosure
proceeding,  any  foreclosure  sale,  any  delivery  of  any  deed  in  lieu  of
foreclosure, and any release of record of the lien of this Instrument.

   19. PROPERTY AND LIABILITY INSURANCE.

   (a) Borrower  shall keep the  Improvements  insured at all times against such
hazards as Lender may from time to time require,  which  insurance shall include
but not be limited to coverage  against loss by fire and allied perils,  general
boiler and machinery coverage, and business income coverage.  Lender's insurance
requirements   may  change  from  time  to  time  throughout  the  term  of  the
Indebtedness.  If Lender so requires, such insurance shall also include sinkhole
insurance,  mine  subsidence  insurance,   earthquake  insurance,  and,  if  the
Mortgaged  Property  does not  conform  to  applicable  zoning or land use laws,
building ordinance or law coverage.  If any of the Improvements is located in an
area identified by the Federal Emergency  Management Agency (or any successor to
that agency) as an area having special flood hazards,  and if flood insurance is
available in that area, Borrower shall insure such Improvements  against loss by
flood.

   (b) All premiums on insurance  policies required under Section 19(a) shall be
paid in the manner  provided  in  Section 7,  unless  Lender has  designated  in
writing  another  method of payment.  All such policies  shall also be in a form
approved by Lender.  All policies of property  damage  insurance shall include a
non-contributing,  non-reporting  mortgage  clause  in favor  of,  and in a form
approved by, Lender.  Lender shall have the right to hold the original  policies
or  duplicate  original  policies of all  insurance  required by Section  19(a).
Borrower  shall  promptly  deliver  to  Lender a copy of all  renewal  and other
notices  received by Borrower  with respect to the policies and all receipts for
paid  premiums.  At least  30 days  prior to the  expiration  date of a  policy,
Borrower  shall  deliver to Lender the original  (or a duplicate  original) of a
renewal policy in form satisfactory to Lender.

                                       24
<PAGE>

   (c)  Borrower  shall  maintain  at all  times  commercial  general  liability
insurance,  workers' compensation insurance and such other liability, errors and
omissions  and  fidelity  insurance  coverages  as Lender  may from time to time
require.

   (d) All  insurance  policies and renewals of insurance  policies  required by
this Section 19 shall be in such amounts and for such periods as Lender may from
time to time require, and shall be issued by insurance companies satisfactory to
Lender.

   (e)  Borrower  shall  comply with all  insurance  requirements  and shall not
permit any  condition to exist on the Mortgaged  Property that would  invalidate
any part of any insurance  coverage that this  Instrument  requires  Borrower to
maintain.

   (f) In the event of loss, Borrower shall give immediate written notice to the
insurance carrier and to Lender.  Borrower hereby authorizes and appoints Lender
as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise
any  claims  under  policies  of  property  damage  insurance,  to appear in and
prosecute any action arising from such property damage  insurance  policies,  to
collect and receive the  proceeds of property  damage  insurance,  and to deduct
from  such  proceeds  Lender's  expenses  incurred  in the  collection  of  such
proceeds.  This power of attorney is coupled with an interest  and  therefore is
irrevocable.  However, nothing contained in this Section 19 shall require Lender
to incur any expense or take any action.  Lender  may, at Lender's  option,  (1)
hold the balance of such proceeds to be used to reimburse  Borrower for the cost
of restoring  and  repairing  the  Mortgaged  Property to the  equivalent of its
original condition or to a condition approved by Lender (the "Restoration "), or
(2) apply the  balance of such  proceeds  to the  payment  of the  Indebtedness,
whether or not then due.  To the extent  Lender  determines  to apply  insurance
proceeds  to  Restoration,  Lender  shall  do so  in  accordance  with  Lender's
then-current  policies relating to the restoration of casualty damage on similar
multifamily properties.

   (g) Lender shall not exercise its option to apply  insurance  proceeds to the
payment of the  Indebtedness if all of the following  conditions are met: (1) no
Event of Default (or any event  which,  with the giving of notice or the passage
of time,  or both,  would  constitute  an Event of Default)  has occurred and is
continuing;  (2)  Lender  determines,  in its  discretion,  that  there  will be
sufficient  funds to complete the  Restoration;  (3) Lender  determines,  in its
discretion,  that the rental income from the Mortgaged Property after completion
of the  Restoration  will be sufficient  to meet all  operating  costs and other
expenses,   Imposition  Deposits,   deposits  to  reserves  and  loan  repayment
obligations  relating to the Mortgaged Property;  and (4) Lender determines,  in
its discretion, that the Restoration will be completed before the earlier of (A)
one year before the maturity  date of the Note or (B) one year after the date of
the loss or casualty.

   (h) If the  Mortgaged  Property  is sold  at a  foreclosure  sale  or  Lender
acquires title to the Mortgaged Property,  Lender shall automatically succeed to
all rights of Borrower in and to

                                       25
<PAGE>

any  insurance  policies  and  unearned  insurance  premiums  and  in and to the
proceeds  resulting from any damage to the Mortgaged Property prior to such sale
or acquisition.

   20. CONDEMNATION.

   (a)  Borrower  shall  promptly  notify  Lender of any  action  or  proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof,  of
all or any  part of the  Mortgaged  Property,  whether  direct  or  indirect  (a
"Condemnation").  Borrower shall appear in and prosecute or defend any action or
proceeding  relating to any Condemnation  unless otherwise directed by Lender in
writing.  Borrower  authorizes  and  appoints  Lender  as  attorney-in-fact  for
Borrower to commence,  appear in and prosecute,  in Lender's or Borrower's name,
any  action  or  proceeding  relating  to  any  Condemnation  and to  settle  or
compromise any claim in connection with any Condemnation. This power of attorney
is coupled  with an interest  and  therefore is  irrevocable.  However,  nothing
contained in this Section 20 shall  require  Lender to incur any expense or take
any action. Borrower hereby transfers and assigns to Lender all right, title and
interest  of  Borrower  in and to any award or payment  with  respect to (i) any
Condemnation, or any conveyance in lieu of Condemnation,  and (ii) any damage to
the Mortgaged  Property caused by governmental  action that does not result in a
Condemnation.

   (b) Lender may apply such awards or proceeds, after the deduction of Lender's
expenses incurred in the collection of such amounts,  at Lender's option, to the
restoration  or  repair  of the  Mortgaged  Property  or to the  payment  of the
Indebtedness,  with the balance,  if any, to Borrower.  Unless Lender  otherwise
agrees in writing, any application of any awards or proceeds to the Indebtedness
shall not extend or postpone the due date of any monthly  installments  referred
to in the Note,  Section 7 of this  Instrument or any Collateral  Agreement,  or
change the amount of such installments.  Borrower agrees to execute such further
evidence of assignment of any awards or proceeds as Lender may require.

   21. TRANSFERS OF THE MORTGAGED  PROPERTY OR INTERESTS IN BORROWER.  [RIGHT TO
UNLIMITED TRANSFERS -- WITH LENDER APPROVAL].

   (a) The occurrence of any of the following  events shall  constitute an Event
of Default under this Instrument:

       (1)  a  Transfer  of all or any  part of the  Mortgaged  Property  or any
            interest in the Mortgaged Property;

       (2)  if Borrower is a limited partnership,  a Transfer of (A) any general
            partnership  interest,  or  (B)  limited  partnership  interests  in
            Borrower that would cause the Initial Owners of Borrower to own less
            than 51% of all limited partnership interests in Borrower;

                                       26
<PAGE>

       (3)  if Borrower is a general  partnership or a joint venture, a Transfer
            of any general partnership or joint venture interest in Borrower;

       (4)  if Borrower is a limited  liability  company,  a Transfer of (A) any
            membership interest in Borrower which would cause the Initial Owners
            to own less than 51% of all the membership interests in Borrower, or
            (B) any membership or other interest of a manager in Borrower;

       (5)  if Borrower is a  corporation,  (A) the Transfer of any voting stock
            in Borrower  which  would cause the Initial  Owners to own less than
            51%  of  any  class  of  voting  stock  in  Borrower  or  (B) if the
            outstanding  voting  stock  in  Borrower  is  held  by 100  or  more
            shareholders,  one or more transfers by a single transferor within a
            12-month period affecting an aggregate of 5% or more of that stock;

       (6)  if Borrower is a trust, (A) a Transfer of any beneficial interest in
            Borrower  which would cause the Initial  Owners to own less than 51%
            of all the beneficial interests in Borrower,  or (B) the termination
            or  revocation  of the trust,  or (C) the  removal,  appointment  or
            substitution of a trustee of Borrower; and

       (7)  a Transfer of any interest in a Controlling  Entity  which,  if such
            Controlling  Entity  were  Borrower,  would  result  in an  Event of
            Default under any of Sections 21(a)(1) through (6) above.

Lender  shall not be  required  to  demonstrate  any  actual  impairment  of its
security  or any  increased  risk of  default  in order to  exercise  any of its
remedies with respect to an Event of Default under this Section 21.

   (b) The  occurrence  of any of the following  events shall not  constitute an
Event of Default under this Instrument, notwithstanding any provision of Section
21(a) to the contrary:

       (1)  a Transfer to which Lender has consented;

       (2)  a Transfer  that occurs by devise,  descent,  or by operation of law
            upon the death of a natural person;

       (3)  the grant of a leasehold interest in an individual dwelling unit for
            a term of two years or less not containing an option to purchase;

                                       27
<PAGE>

       (4)  a Transfer of obsolete or worn out  Personalty  or Fixtures that are
            contemporaneously  replaced by items of equal or better function and
            quality,  which  are  free  of  liens,   encumbrances  and  security
            interests  other  than  those  created  by  the  Loan  Documents  or
            consented to by Lender;

       (5)  the grant of an easement, if before the grant Lender determines that
            the easement  will not  materially  affect the operation or value of
            the  Mortgaged  Property  or  Lender's  interest  in  the  Mortgaged
            Property,  and Borrower pays to Lender,  upon demand,  all costs and
            expenses incurred by Lender in connection with reviewing  Borrower's
            request; and

       (6)  the  creation  of a  mechanic's,  materialman's,  or  judgment  lien
            against  the  Mortgaged  Property  which is  released  of  record or
            otherwise  remedied to Lender's  satisfaction  within 30 days of the
            date of creation.

   (c) Lender shall  consent,  without any  adjustment  to the rate at which the
Indebtedness  secured by this Instrument bears interest or to any other economic
terms of the  Indebtedness,  to a Transfer  that would  otherwise  violate  this
Section  21 if,  prior  to the  Transfer,  Borrower  has  satisfied  each of the
following requirements:

       (1)  the  submission to Lender of all  information  required by Lender to
            make the determination required by this Section 21(c);

       (2)  the absence of any Event of Default;

       (3)  the transferee meets all of the eligibility,  credit, management and
            other  standards  (including  but not limited to any standards  with
            respect to previous  relationships between Lender and the transferee
            and the  organization  of the  transferee)  customarily  applied  by
            Lender  at the time of the  proposed  Transfer  to the  approval  of
            borrowers in connection  with the origination or purchase of similar
            mortgages on multifamily properties;

       (4)  the Mortgaged Property, at the time of the proposed Transfer,  meets
            all  standards as to its  physical  condition  that are  customarily
            applied  by  Lender  at the  time of the  proposed  Transfer  to the
            approval  of  properties  in  connection  with  the  origination  or
            purchase of similar mortgages on multifamily properties;

       (5)  in the  case  of a  Transfer  of all or any  part  of the  Mortgaged
            Property,  (A) the  execution  by the  transferee  of an  assumption
            agreement that is acceptable to Lender and that, among other things,
            requires the  transferee to perform all  obligations of Borrower set
            forth in the Note, this

                                       28

<PAGE>

            Instrument  and any other Loan  Documents,  and may require that the
            transferee  comply with any  provisions  of this  Instrument  or any
            other Loan Document which previously may have been waived by Lender,
            and (B) if a guaranty has been  executed and delivered in connection
            with the Note,  this  Instrument or any of the other Loan Documents,
            the transferee causes one or more individuals or entities acceptable
            to Lender to execute  and  deliver  to Lender a  guaranty  in a form
            acceptable to Lender;

       (6)  in the case of a Transfer of any interest in a  Controlling  Entity,
            if a guaranty has been executed and delivered in connection with the
            Note,  this  Instrument  or any of the  other  Loan  Documents,  the
            Borrower  causes one or more  individuals or entities  acceptable to
            Lender  to  execute  and  deliver  to  Lender a  guaranty  in a form
            acceptable to Lender; and

       (7)  Lender's receipt of all of the following:

            (A) a review fee in the amount of $2,000;

            (B) a transfer  fee in an amount  equal to one  percent  (1%) of the
                unpaid principal balance of the Indebtedness  immediately before
                the applicable Transfer; and

            (C) the amount of Lender's out-of-pocket costs (including reasonable
                attorneys' fees) incurred in reviewing the Transfer request.

   22.  EVENTS OF DEFAULT.  The  occurrence  of any one or more of the following
shall constitute an Event of Default under this Instrument:

   (a) any failure by Borrower to pay or deposit when due any amount required by
the Note, this Instrument or any other Loan Document;

   (b) any failure by Borrower to maintain the  insurance  coverage  required by
Section 19;

   (c) any failure by Borrower to comply with the provisions of Section 33;

   (d) fraud or material misrepresentation or material omission by Borrower, any
of its  officers,  directors,  trustees,  general  partners  or  managers or any
guarantor  in  connection  with  (A)  the  application  for or  creation  of the
Indebtedness,  (B) any  financial  statement,  rent  roll,  or other  report  or
information  provided to Lender during the term of the Indebtedness,  or (C) any
request for  Lender's  consent to any proposed  action,  including a request for
disbursement of funds under any Collateral Agreement;

                                       29

<PAGE>

   (e) any Event of Default under Section 21;

   (f) the commencement of a forfeiture  action or proceeding,  whether civil or
criminal,  which, in Lender's reasonable judgment,  could result in a forfeiture
of the  Mortgaged  Property or otherwise  materially  impair the lien created by
this Instrument or Lender's interest in the Mortgaged Property;

   (g) any  failure by Borrower  to perform  any of its  obligations  under this
Instrument  (other than those  specified in Sections  22(a) through (f)), as and
when  required,  which  continues  for a period of 30 days after  notice of such
failure by Lender to  Borrower.  However,  no such notice or grace  period shall
apply in the case of any such failure which could, in Lender's judgment,  absent
immediate exercise by Lender of a right or remedy under this Instrument,  result
in harm to  Lender,  impairment  of the  Note or this  Instrument  or any  other
security given under any other Loan Document;

   (h) any failure by Borrower  to perform  any of its  obligations  as and when
required  under any Loan Document  other than this  Instrument  which  continues
beyond the applicable cure period, if any, specified in that Loan Document;

   (i) any exercise by the holder of any debt instrument  secured by a mortgage,
deed of trust or deed to secure  debt on the  Mortgaged  Property  of a right to
declare all amounts due under that debt instrument  immediately due and payable;
and

   (j) Borrower  voluntarily  files for bankruptcy  protection  under the United
States  Bankruptcy Code or voluntarily  becomes  subject to any  reorganization,
receivership,  insolvency proceeding or other similar proceeding pursuant to any
other  federal  or  state  law  affecting  debtor  and  creditor  rights,  or an
involuntary  case is  commenced  against  Borrower by any  creditor  (other than
Lender) of  Borrower  pursuant  to the United  States  Bankruptcy  Code or other
federal or state law affecting  debtor and creditor  rights and is not dismissed
or discharged within 60 days after filing.

   23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument is
distinct  from all other rights or remedies  under this  Instrument or any other
Loan  Document or afforded by applicable  law, and each shall be cumulative  and
may be exercised concurrently, independently, or successively, in any order.

   24. FORBEARANCE.

   (a) Lender may (but shall not be obligated to) agree with Borrower, from time
to time,  and without  giving  notice to, or obtaining the consent of, or having
any effect upon the  obligations of, any guarantor or other third party obligor,
to take any of the following actions:

                                       30
<PAGE>

extend the time for payment of all or any part of the  Indebtedness;  reduce the
payments  due under  this  Instrument,  the Note,  or any other  Loan  Document;
release anyone liable for the payment of any amounts under this Instrument,  the
Note, or any other Loan Document; accept a renewal of the Note; modify the terms
and time of payment of the Indebtedness;  join in any extension or subordination
agreement;  release any Mortgaged Property;  take or release other or additional
security;  modify the rate of interest or period of  amortization of the Note or
change  the  amount of the  monthly  installments  payable  under the Note;  and
otherwise modify this Instrument, the Note, or any other Loan Document.

   (b) Any  forbearance  by Lender in  exercising  any right or remedy under the
Note,  this  Instrument,  or any other Loan  Document or  otherwise  afforded by
applicable  law,  shall not be a waiver of or preclude the exercise of any right
or  remedy.  The  acceptance  by  Lender  of  payment  of all or any part of the
Indebtedness  after the due date of such payment,  or in an amount which is less
than the required  payment,  shall not be a waiver of Lender's  right to require
prompt payment when due of all other payments on account of the  Indebtedness or
to exercise any remedies for any failure to make prompt payment.  Enforcement by
Lender of any security for the Indebtedness  shall not constitute an election by
Lender of remedies so as to preclude the  exercise of any other right  available
to Lender.  Lender's  receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

   25. LOAN CHARGES.  If any  applicable  law limiting the amount of interest or
other charges permitted to be collected from Borrower is interpreted so that any
charge  provided for in any Loan  Document,  whether  considered  separately  or
together with other charges  levied in connection  with any other Loan Document,
violates  that law,  and  Borrower is entitled to the benefit of that law,  that
charge is hereby reduced to the extent  necessary to eliminate  that  violation.
The  amounts,  if any,  previously  paid to Lender  in  excess of the  permitted
amounts shall be applied by Lender to reduce the principal of the  Indebtedness.
For the purpose of determining whether any applicable law limiting the amount of
interest or other  charges  permitted  to be  collected  from  Borrower has been
violated,  all Indebtedness  which  constitutes  interest,  as well as all other
charges levied in connection with the Indebtedness  which  constitute  interest,
shall be deemed to be  allocated  and spread  over the stated  term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be  effected  in such a manner  that the rate of interest so computed is uniform
throughout the stated term of the Note.

   26.  WAIVER OF STATUTE OF  LIMITATIONS.  Borrower  hereby waives the right to
assert any statute of  limitations  as a bar to the  enforcement  of the lien of
this Instrument or to any action brought to enforce any Loan Document.

   27.  WAIVER  OF  MARSHALLING.  Notwithstanding  the  existence  of any  other
security  interests  in the  Mortgaged  Property  held by Lender or by any other
party, Lender shall have the right to determine the order in which any or all of
the  Mortgaged  Property  shall be subjected  to the  remedies  provided in this
Instrument,  the Note, any other Loan Document or

                                       31

<PAGE>
applicable  law. Lender shall have the right to determine the order in which any
or all portions of the  Indebtedness  are satisfied  from the proceeds  realized
upon the  exercise of such  remedies.  Borrower  and any party who now or in the
future acquires a security interest in the Mortgaged Property and who has actual
or constructive  notice of this  Instrument  waives any and all right to require
the  marshalling  of assets or to require that any of the Mortgaged  Property be
sold in the inverse order of alienation or that any of the Mortgaged Property be
sold in parcels or as an entirety in connection  with the exercise of any of the
remedies permitted by applicable law or provided in this Instrument.

   28. FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver, at
its sole cost and expense,  all further acts, deeds,  conveyances,  assignments,
estoppel certificates,  financing statements, transfers and assurances as Lender
may require from time to time in order to better  assure,  grant,  and convey to
Lender the rights intended to be granted,  now or in the future, to Lender under
this Instrument and the Loan Documents.

   29.  ESTOPPEL  CERTIFICATE.  Within  10 days  after a  request  from  Lender,
Borrower shall deliver to Lender a written statement, signed and acknowledged by
Borrower,  certifying to Lender or any person  designated  by Lender,  as of the
date of such  statement,  (i) that the Loan Documents are unmodified and in full
force and effect (or, if there have been modifications,  that the Loan Documents
are in full force and effect as modified and setting forth such  modifications);
(ii) the unpaid principal  balance of the Note; (iii) the date to which interest
under the Note has been paid; (iv) that Borrower is not in default in paying the
Indebtedness  or in  performing  or observing any of the covenants or agreements
contained  in this  Instrument  or any of the other Loan  Documents  (or, if the
Borrower is in default,  describing  such  default in  reasonable  detail);  (v)
whether or not there are then existing any setoffs or defenses known to Borrower
against  the  enforcement  of any  right or  remedy  of  Lender  under  the Loan
Documents; and (vi) any additional facts requested by Lender.

   30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

   (a) This  Instrument,  and any Loan Document which does not itself  expressly
identify  the law that is to apply to it,  shall be  governed by the laws of the
jurisdiction in which the Land is located (the "Property Jurisdiction").

   (b) Borrower agrees that any controversy  arising under or in relation to the
Note, this Instrument, or any other Loan Document shall be litigated exclusively
in the Property Jurisdiction.  The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over
all  controversies  which shall  arise  under or in  relation  to the Note,  any
security for the Indebtedness,  or any other Loan Document. Borrower irrevocably
consents  to  service,  jurisdiction,  and  venue  of such  courts  for any such
litigation and waives any other venue to which it might be entitled by virtue of
domicile, habitual residence or otherwise.

                                       32

<PAGE>

   31. NOTICE.

   (a) All  notices,  demands  and  other  communications  ("notice")  under  or
concerning this Instrument  shall be in writing.  Each notice shall be addressed
to the intended recipient at its address set forth in this Instrument, and shall
be deemed  given on the  earliest  to occur of (1) the date  when the  notice is
received  by the  addressee;  (2) the first  Business  Day  after the  notice is
delivered to a recognized overnight courier service,  with arrangements made for
payment of charges for next Business Day delivery; or (3) the third Business Day
after the notice is  deposited in the United  States mail with postage  prepaid,
certified mail, return receipt  requested.  As used in this Section 31, the term
"Business Day" means any day other than a Saturday, a Sunday or any other day on
which Lender is not open for business.

   (b) Any party to this  Instrument  may  change the  address to which  notices
intended  for it are to be directed by means of notice  given to the other party
in accordance with this Section 31. Each party agrees that it will not refuse or
reject  delivery of any notice given in accordance with this Section 31, that it
will  acknowledge,  in writing,  the  receipt of any notice upon  request by the
other  party and that any notice  rejected  or refused by it shall be deemed for
purposes of this Section 31 to have been received by the rejecting  party on the
date so refused or rejected,  as conclusively  established by the records of the
U.S. Postal Service or the courier service.

   (c) Any  notice  under the Note and any other  Loan  Document  which does not
specify  how  notices  are to be given  shall be given in  accordance  with this
Section 31.

   32. SALE OF NOTE;  CHANGE IN SERVICER.  The Note or a partial interest in the
Note  (together with this  Instrument and the other Loan  Documents) may be sold
one or more  times  without  prior  notice to  Borrower.  A sale may result in a
change of the Loan  Servicer.  There also may be one or more changes of the Loan
Servicer  unrelated  to a sale of the  Note.  If there  is a change  of the Loan
Servicer, Borrower will be given notice of the change.

   33. SINGLE ASSET BORROWER.  Until the Indebtedness is paid in full,  Borrower
(a) shall not  acquire any real or personal  property  other than the  Mortgaged
Property and personal  property  related to the operation and maintenance of the
Mortgaged Property; (b) shall not operate any business other than the management
and operation of the Mortgaged  Property;  and (c) shall not maintain its assets
in a way difficult to segregate and identify.

   34.  SUCCESSORS AND ASSIGNS BOUND. This Instrument shall bind, and the rights
granted by this Instrument shall inure to, the respective successors and assigns
of Lender and Borrower. However, a Transfer not permitted by Section 21 shall be
an Event of Default.

                                       33

<PAGE>

   35. JOINT AND SEVERAL LIABILITY. If more than one person or entity signs this
Instrument as Borrower,  the  obligations  of such persons and entities shall be
joint and several.

   36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

   (a) The  relationship  between  Lender and  Borrower  shall be solely that of
creditor and debtor,  respectively,  and nothing  contained  in this  Instrument
shall create any other relationship between Lender and Borrower.

   (b) No creditor of any party to this  Instrument and no other person shall be
a third party beneficiary of this Instrument or any other Loan Document. Without
limiting the  generality  of the  preceding  sentence,  (1) any  arrangement  (a
"Servicing  Arrangement")  between  the  Lender and any Loan  Servicer  for loss
sharing  or  interim   advancement  of  funds  shall  constitute  a  contractual
obligation  of such Loan  Servicer  that is  independent  of the  obligation  of
Borrower for the payment of the Indebtedness,  (2) Borrower shall not be a third
party beneficiary of any Servicing  Arrangement,  and (3) no payment by the Loan
Servicer  under  any  Servicing  Arrangement  will  reduce  the  amount  of  the
Indebtedness.

   37.  SEVERABILITY;  AMENDMENTS.  The  invalidity or  unenforceability  of any
provision of this Instrument shall not affect the validity or  enforceability of
any other  provision,  and all other  provisions  shall remain in full force and
effect.  This Instrument  contains the entire  agreement among the parties as to
the  rights  granted  and  the  obligations  assumed  in this  Instrument.  This
Instrument  may not be amended  or  modified  except by a writing  signed by the
party against whom enforcement is sought;  provided,  however, that in the event
of a Transfer,  any or some or all of the  Modifications to Instrument set forth
in Exhibit B (if any) may be  modified  or  rendered  void by Lender at Lender's
option by notice to Borrower/transferee.

   38.  CONSTRUCTION.  The  captions  and  headings  of  the  sections  of  this
Instrument are for convenience  only and shall be disregarded in construing this
Instrument.  Any  reference  in this  Instrument  to an "Exhibit" or a "Section"
shall,  unless  otherwise  explicitly  provided,   be  construed  as  referring,
respectively,  to an Exhibit attached to this Instrument or to a Section of this
Instrument.  All  Exhibits  attached to or referred  to in this  Instrument  are
incorporated by reference into this Instrument. Any reference in this Instrument
to a statute or  regulation  shall be  construed as referring to that statute or
regulation as amended from time to time.  Use of the singular in this  Agreement
includes the plural and use of the plural includes the singular. As used in this
Instrument, the term "including" means "including, but not limited to."

   39. LOAN SERVICING. All actions regarding the servicing of the loan evidenced
by the Note,  including the  collection  of payments,  the giving and receipt of
notice,  inspections of the Property,  inspections of books and records, and the
granting of consents and  approvals,  may be taken by the Loan  Servicer  unless
Borrower  receives  notice to the  contrary.  If Borrower

                                       34

<PAGE>

receives  conflicting notices regarding the identity of the Loan Servicer or any
other subject, any such notice from Lender shall govern.

   40.  DISCLOSURE  OF  INFORMATION.  Lender may furnish  information  regarding
Borrower  or the  Mortgaged  Property  to  third  parties  with an  existing  or
prospective  interest in the servicing,  enforcement,  evaluation,  performance,
purchase or  securitization  of the  Indebtedness,  including but not limited to
trustees,   master   servicers,   special   servicers,   rating  agencies,   and
organizations  maintaining  databases on the  underwriting  and  performance  of
multifamily  mortgage loans.  Borrower  irrevocably waives any and all rights it
may have under  applicable  law to prohibit such  disclosure,  including but not
limited to any right of privacy.

   41. NO CHANGE IN FACTS OR  CIRCUMSTANCES.  All information in the application
for the loan submitted to Lender (the "Loan  Application")  and in all financial
statements,  rent rolls, reports,  certificates and other documents submitted in
connection  with the Loan  Application are complete and accurate in all material
respects.  There has been no material adverse change in any fact or circumstance
that would make any such information incomplete or inaccurate.

   42.  SUBROGATION.  If,  and to the  extent  that,  the  proceeds  of the loan
evidenced by the Note are used to pay,  satisfy or discharge  any  obligation of
Borrower  for the payment of money that is secured by a  pre-existing  mortgage,
deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"),
such loan proceeds shall be deemed to have been advanced by Lender at Borrower's
request, and Lender shall automatically, and without further action on its part,
be subrogated to the rights,  including lien priority, of the owner or holder of
the  obligation  secured  by the Prior  Lien,  whether  or not the Prior Lien is
released.

   43. ACCELERATION;  REMEDIES.  At any time during the existence of an Event of
Default,  Lender,  at  Lender's  option,  may  declare  the  Indebtedness  to be
immediately due and payable  without further demand,  and may request Trustee to
exercise the power of sale and Lender may exercise any other remedies  permitted
by applicable law or provided in this  Instrument or in any other Loan Document.
Borrower  acknowledges  that the power of sale granted in this Instrument may be
exercised by Trustee without prior judicial  hearing.  Borrower has the right to
bring an action to assert the  non-existence of an Event of Default or any other
defense of  Borrower  to  acceleration  and sale.  Lender  shall be  entitled to
collect all costs and expenses  incurred in pursuing  such  remedies,  including
attorneys' fees, costs of documentary evidence, abstracts and title reports.

   If Lender  invokes the power of sale,  Lender or Trustee shall mail copies of
the notice of sale to Borrower and to other persons prescribed by applicable law
in the  manner  provided  by  applicable  law.  Trustee  may sell the  Mortgaged
Property at the time and place and under the terms  designated  in the notice of
sale in one or more parcels and in such order as Trustee may determine.  Trustee
may postpone  sale of all or any parcel of the  Mortgaged  Property to any later

                                       35

<PAGE>

time on the same  date by  public  announcement  at the  time  and  place of any
previously  scheduled  sale.  Lender  or  Lender's  designee  may  purchase  the
Mortgaged Property at any sale.

   Trustee shall deliver to the purchaser at the sale,  within a reasonable time
after the sale,  a deed  conveying  the  Mortgaged  Property so sold without any
covenant or warranty,  express or implied.  The recitals in Trustee's deed shall
be prima  facie  evidence  of the  truth of the  statements  contained  in those
recitals.  Trustee shall apply the proceeds of the sale in the following  order:
(a) to all  costs and  expenses  of the sale,  including  Trustee's  fees in the
amount allowed by applicable  law,  attorneys' fees and costs of title evidence;
(b) to the  Indebtedness  in such  order  as  Lender,  in  Lender's  discretion,
directs;  and (c) the excess,  if any, to the person or persons legally entitled
to it.

   Lender shall have the right on one or more occasions to institute one or more
actions or proceedings at law or in equity to enforce the rights and remedies of
Lender under this Instrument.

   Trustee  hereby lets the Mortgaged  Property to Borrower until a sale is held
under the foregoing  provisions or until the  occurrence of an Event of Default,
upon the following terms and conditions:  Borrower,  and all persons claiming or
possessing  the  Mortgaged  Property or any part  thereof  by,  through or under
Borrower,  shall  pay rent  therefore  during  said term at the rate of one cent
(1(cent)) per month,  payable monthly upon demand, and shall surrender immediate
peaceable  possession of the  Mortgaged  Property and any and every part thereof
sold under the foregoing  power of sale to the  purchaser at such sale,  without
notice  or  demand  therefore,  and  shall  and  will at once,  without  notice,
surrender  possession  of the  Mortgaged  Property and every part thereof in the
event Lender shall take charge and enter the  Mortgaged  Property as provided in
this Instrument.

   44. RELEASE. Upon payment of the Indebtedness,  Lender shall release the lien
of this  Instrument.  Borrower shall pay Lender's  reasonable  costs incurred in
releasing this Instrument.

   45.  FINANCING   STATEMENT.   As  provided  in  Section  2,  this  Instrument
constitutes  a financing  statement  with  respect to any part of the  Mortgaged
Property which is or may become a Fixture and for the purposes of such financing
statement:  (a) the Debtor  shall be  Borrower  and the  Secured  Party shall be
Lender;  (b) the  addresses of Borrower as Debtor and of Lender as Secured Party
are as specified above in the first paragraph of this  Instrument;  (c) the name
of the record owner is Borrower; (d) the types or items of collateral consist of
any part of the Mortgaged Property which is or may become a Fixture; and (e) the
social security number or the federal employer identification number of Borrower
as Debtor is 48-6291172.

   46. APPOINTMENT OF RECEIVER. Section 3(b) and Section 4(d) are amended by (i)
deleting the following phrase,  each time it appears:  "Lender entering upon and
taking and

                                       36
<PAGE>

maintaining control of the Mortgaged Property," and (ii) inserting the following
new  phrase in its place:  "Lender  entering  upon and  taking  and  maintaining
control or possession of the Mortgaged Property or any equivalent action."

   47. FURTHER ASSURANCES FOR TRUSTEE. Borrower shall execute,  acknowledge, and
deliver,  at its sole cost and expense,  all further acts,  deeds,  conveyances,
assignments,   estoppel  certificates,   financing  statements,   transfers  and
assurances  as Trustee may require from time to time in order to better  assure,
grant,  and convey to Trustee the rights  intended to be granted,  now or in the
future, to Trustee under this Instrument.

   48. SUCCESSOR TRUSTEE. Lender, at Lender's option, with or without cause, may
from  time  to time  remove  Trustee  and  appoint  a  successor  trustee  by an
instrument  recorded in the city or county in which this Instrument is recorded.
Without  conveyance  of the  Mortgaged  Property,  the  successor  trustee shall
succeed to all the title,  power and duties  conferred  upon the Trustee in this
Instrument  and by  applicable  law. For purposes of this  Instrument,  the term
"Trustee" means the person  identified as Trustee in the first paragraph of this
Instrument  and any  successor  trustee  appointed  by Lender  pursuant  to this
Section or otherwise appointed as permitted by law.


   49.  WAIVER OF TRIAL BY JURY.  BORROWER  AND LENDER  EACH (A)  COVENANTS  AND
AGREES  NOT TO ELECT A TRIAL BY JURY WITH  RESPECT TO ANY ISSUE  ARISING  OUT OF
THIS INSTRUMENT OR THE  RELATIONSHIP  BETWEEN THE PARTIES AS BORROWER AND LENDER
THAT IS  TRIABLE  OF RIGHT BY A JURY AND (B)  WAIVES  ANY RIGHT TO TRIAL BY JURY
WITH  RESPECT TO SUCH ISSUE TO THE EXTENT  THAT ANY SUCH RIGHT  EXISTS NOW OR IN
THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS  SEPARATELY  GIVEN BY EACH
PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

 [The remainder of this page intentionally left blank; signature pages follow.]

                                       37

<PAGE>
   ATTACHED EXHIBITS. The following Exhibits are attached to this Instrument:

      [X]  Exhibit A      Description of the Land (required).

      [X]  Exhibit B      Modifications to Instrument

   IN WITNESS WHEREOF,  Borrower has signed and delivered this Instrument or has
caused  this  Instrument  to be  signed  and  delivered  by its duly  authorized
representative.

                                Secured Investment Resources Fund, L.P. III
                                a Missouri limited partnership

                                By:  Nichols Resources, Ltd.
                                     a Missouri corporation
                                Its: General Partner


                                     By: /s/ David L. Johnson
                                             David L. Johnson, Vice President


STATE OF MISSOURI                   )
                                    ) ss.
COUNTY OF CLAY                      )

   On this 22nd day of  February,  2001,  before me,  Grace E.  Bales,  a Notary
Public of said State, duly commissioned and sworn,  personally appeared David L.
Johnson,  Vice  President of Nichols  Resources,  Ltd., a Missouri  corporation,
General  Partner of Secured  Investment  Resources  Fund,  L.P.  III, a Missouri
limited  partnership,  personally known to me to be the person that executed the
within  instrument on behalf of the limited  partnership and  acknowledged to me
that such limited partnership executed the same.

   In Witness Whereof,  I have hereunto set my hand and affixed my official seal
the day and year in this certificate first above written.

                                /s/ Grace E. Bales
                                Notary Public
[NOTARY SEAL]
                                My Commission Expires: Aug. 24, 2002

                                       38
<PAGE>
                                    EXHIBIT A

                            [DESCRIPTION OF THE LAND]

Lots 1 and 2 and  Tracts A and C,  CANDLEWYCK,  a  subdivision  in Kansas  City,
Platte County, Missouri, according to the recorded plat thereof.


                                      A-1

<PAGE>
                                    EXHIBIT B

                           MODIFICATIONS TO INSTRUMENT


The following modifications are made to the text of the Instrument that precedes
this Exhibit:

1.   Borrower  covenants  and  agrees  that  as  long  as  the  Indebtedness  is
     outstanding, (i) David L. Johnson must own at least fifty-one percent (51%)
     of MJS Associates, Inc., and (ii) MJS Associates, Inc. shall have a minimum
     net  worth  of  One  Million  Five  Hundred  Thousand  and  No/100  Dollars
     ($1,500,000.00)  (the  "Guarantor  Requirements").  Failure to maintain the
     Guarantor  Requirements  shall be an additional Event of Default under this
     Instrument.

2.   The second sentence in paragraph 4(f) shall be modified to read as follows:

     Borrower  shall not modify the terms of, or extend or terminate,  any Lease
     for  non-residential  use  (including any Lease in existence on the date of
     this Instrument) without the prior written consent of Lender, which consent
     shall not be unreasonably withheld or delayed.

3.   Section 7 of this Instrument is modified to add the following subsection:

     (f)  Notwithstanding  the  provisions of Subsection  7(a),  Lender will not
          require  Borrower  to  deposit  with  Lender  amounts   sufficient  to
          accumulate with Lender the entire sum required to pay the:

          [ ] fire, hazard or other insurance premiums,
          [ ] Taxes,
          [X] water and sewer charges,
          [X] ground rents,
          [X] assessments or other.

          Borrower  must  provide  Lender  with  proof  of  payment  of all such
          Impositions for which Lender is not collecting  Imposition Deposits on
          or  before  the date  such  Impositions  are due or on the  date  this
          Instrument  requires  such  Impositions  to be paid. In the event that
          Borrower  does  not  timely  pay any of the  Impositions,  or fails to
          provide  Lender  with proof of such  payment,  or at any other time in
          Lender's  discretion,  Lender may  require  Borrower  to deposit  with
          Lender the Imposition Deposits as provided in Subsection 7(a).


                                       B-1

<PAGE>

4.   Section 21 (b) of the Instrument is supplemented and modified by adding the
     following provision:

     (7)  A Transfer of the  Mortgaged  Property to a single  asset  entity (the
          "Preapproved Entity") under the following conditions:

          (A)  Borrower shall provide Lender with 45 days advance written notice
               of the proposed transfer.

          (B)  The Preapproved Entity shall be a limited liability company whose
               managing  member must be Maxus Realty Trust,  Inc.  ("Maxus") and
               whose sole member  shall be Maxus or an entity to which Maxus has
               contributed or otherwise  transferred  all or  substantially  all
               (which  shall be not less  than 95%) of its  assets  and of which
               Maxus owns directly or  indirectly,  a controlling  interest (the
               "Maxus Controlled Entity").

          (C)  The management of Maxus and any Maxus  Controlled  Entity must be
               experienced in the ownership and  management of property  similar
               to the Mortgaged Property, as determined by Lender.

          (D)  Immediately  after the  transfer,  David L.  Johnson  must be and
               remain an executive officer and trustee of Maxus.

          (E)  The  loan-to-value  ratio with respect to the Mortgaged  Property
               (calculated  as a  percentage),  as determined by Lender does not
               exceed eighty (80%) after taking into consideration any principal
               paydown  made in  connection  with Maxus or any Maxus  Controlled
               Entity.  Such loan to value ratio shall be determined in Lender's
               sole  discretion  based upon Lender's  then current  underwriting
               standards and based upon Lender's internal valuations.

          (F)  At least  forty-five  (45) days prior to such Transfer,  Borrower
               must provide  Lender with all of the material  provisions of such
               Transfer including, without limitation, the proposed date of such
               Transfer,  the name and address of Maxus or any applicable  Maxus
               Controlled Entity,  pro forma financial  statements for Maxus and
               any Maxus  Controlled  Entity,  any offering  prospectus of Maxus
               issued  within  five years of the date of the  Transfer,  and the
               purchase price which is specified for the Mortgaged Property.

          (G)  The sole  member of the  Preapproved  Entity  shall be Maxus or a
               Maxus Controlled Entity.

                                      B-2
<PAGE>

          (H)  Lender has  reviewed  and  approved  the  documents  transferring
               Borrower's  interest in the Mortgaged Property to the Preapproved
               Entity.

          (I)  Lender has  reviewed  and  approved  the  documents  creating and
               governing the Preapproved  Entity,  including Maxus and any Maxus
               Controlled Entity.

          (J)  The Preapproved  Entity  executes  Lender's  standard  Assumption
               Agreement  which requires the  Preapproved  Entity to perform all
               obligations  of Borrower set forth in the Note,  this  Instrument
               and in any other Loan Document.

          (K)  At the  time of the  Transfer,  no Event of  Default  shall  have
               occurred  and no event or  condition  shall have  occurred and be
               continuing  that,  with the  giving of notice or the  passage  of
               time, or both, would become an Event of Default.

          (L)  Borrower  pays to Lender upon  demand by Lender,  the cost of all
               title searches, title insurance and recording costs, and all fees
               and out of pocket costs of Lender's legal counsel  related to the
               Transfer and at the time it requests Lender's  consent,  Borrower
               pays a review fee in the amount of $2,000 (which fee shall not be
               refundable).

          (M)  Immediately after the Transfer,  Borrower provides Lender with i)
               a title endorsement to Lender's mortgagee's title policy insuring
               the  lien of the  Security  Instrument  changing  the name of the
               Borrower and evidencing that there are no intervening  liens from
               the date of the title policy until the Transfer;  ii) a certified
               copy of the recorded assumption  agreement;  and iii) a certified
               copy of the recorded transfer deed.

          (N)  Each   Guarantor  (if   applicable)   reaffirms  in  writing  its
               respective  obligations  under any Guaranty and  acknowledges and
               confirms  that the Guaranty  remains in full force and effect and
               that  each   Guarantor   guarantees  the   Preapproved   Entity's
               obligations  under the Note,  this  Instrument and the other Loan
               Documents.

               The  modifications  set forth in this Section  21(b)(7)  shall be
               null and void in the event  title to the  Mortgaged  Property  is
               vested  in an  entity  other  than  the  Borrower  at the time of
               execution of this Instrument.

5.   The following subparagraph (d) shall be added to Section 21 of the Security
     Instrument:

     (d) Provided that Borrower has  transferred the Property to the Preapproved
     Entity  pursuant  to Section  21(b)(7)  of this  Instrument,  Lender  shall
     consent to the substitution

                                      B-3
<PAGE>

     (the  "Substitution")  of the  Mortgaged  Property for another  multifamily
     apartment  rental  property  (the  "Substituted  Property")  owned  by  the
     Preapproved Entity,  which shall not result in an adjustment to the rate at
     which the Indebtedness  secured by this Instrument bears interest  provided
     that  the   Preapproved   Entity  has  satisfied   each  of  the  following
     requirements:

          (1)  not  less  than   sixty   (60)  days   prior  to  the   requested
               Substitution,  the  Preapproved  Entity  shall  deliver to Lender
               written notice of the requested Substitution, which shall include
               a  detailed  description  of the  Substituted  Property  and  the
               non-refundable  review fee in the amount set forth in  subsection
               21(d)(l0) below;

          (2)  there  shall not be more than one  Substitution  in any  12-month
               period, and not more than 2 Substitutions  during the term of the
               loan evidenced by the Note;

          (3)  there  shall  exist  no  Event  of  Default  uncured  within  any
               applicable grace period;

          (4)  the loan to value ratio with respect to the Substituted  Property
               at the time of the proposed  Substitution is not greater than the
               lesser of (i) the loan to value ratio of the  Mortgaged  Property
               which exists as of the date hereof, or (ii) the then current loan
               to value ratio of the Mortgaged  Property at the time of any such
               Substitution based on an MAI appraisal  (prepared by an appraiser
               acceptable to Lender and paid for by the  Preapproved  Entity) at
               the time of any such  Substitution.  (As  used  herein,  "loan to
               value  ratio"  means the ratio of (A) the  outstanding  principal
               balance  of the  Indebtedness,  and,  if  applicable,  any  other
               indebtedness  secured by a lien on the Mortgaged  Property to (B)
               the value of the Substituted  Property or the Mortgaged Property,
               as  applicable,  as determined by Lender in its sole  discretion,
               expressed as a percentage);

          (5)  the debt service  coverage ratio with respect to the  Substituted
               Property for the last twelve full months  preceding  the proposed
               Substitution is not less than the greater of (i) the debt service
               coverage ratio for the Mortgaged  Property which exists as of the
               date hereof, or (ii) the then current debt service coverage ratio
               for the Mortgaged  Property at the time of any such Substitution.
               (As used herein, the term "debt service coverage ratio" means the
               ratio of (A) the annual net operating income from the Substituted
               Property's or the Mortgaged Property's operations, as applicable,
               during the  preceding  twelve month period which is available for
               repayment  of debt,  after  deducting  reasonable  and  customary
               operating  expenses,  to (B) the annual  principal  and  interest
               payable  under  the  Note and with  respect

                                      B-4

<PAGE>

               to any indebtedness  secured by a lien on the Mortgaged Property,
               as determined by Lender in its sole discretion);

          (6)  the appraised value of the Substituted Property shall be equal to
               or greater  than the  greater of (i) the  appraised  value of the
               Mortgaged  Property which exists as of the date of the closing of
               the loan  evidenced by the Note, or (ii) the  appraised  value of
               the Mortgaged  Property at the time of the Substitution  based on
               the MAI appraisal  described in  Subsection  21(d)(4)  above,  as
               determined by Lender in its sole discretion;

          (7)  no Substitution shall be permitted prior to the date which is one
               year from the date of this Instrument nor after the date which is
               one year prior to the stated maturity of the  Indebtedness as set
               forth in the Note;

          (8)  Lender  shall  have  received  an  environmental  report  on  the
               Substituted  Property which is acceptable to Lender,  in Lender's
               sole discretion,  and shows that no Phase II environmental report
               is required;

          (9)  Lender  shall  have  received  an   engineering   report  on  the
               Substituted  Property which is acceptable to Lender,  in Lender's
               sole discretion;

          (10) Lender  shall have  received a review fee equal to the greater of
               $10,000  or ten  (10)  basis  points  multiplied  by  the  unpaid
               principal  balance of the Note, and the Preapproved  Entity shall
               pay  to  Lender  the  amount  of  Lender's   out-of-pocket  costs
               (including,  without limitation,  reasonable  attorneys' fees and
               the costs of engineering  reports,  appraisals and  environmental
               reports)  incurred  in  reviewing  the  Substitution  request and
               implementing the Substitution;

          (11) Lender shall have  received a  application  fee equal to ten (10)
               basis points  multiplied by the unpaid  principal  balance of the
               Note,

          (12) Lender  shall have  received a new  currently  dated  mortgagee's
               title insurance  policy in the form and containing the exceptions
               acceptable  to  Lender  according  to  its  standards  for  title
               insurance  policies  in place  at the  time of the  Substitution,
               insuring  the first  lien  mortgage  secured  by the  Substituted
               Property;

          (13) Lender  shall  have  received  a  currently  dated  survey of the
               Substituted Property, acceptable to Lender in accordance with its
               standards  and  requirements  for surveys in place at the time of
               the substitution;

          (14) the physical  condition,  location,  market condition,  and other
               aspects  of the  Substituted  Property,  shall  be  substantially
               comparable to the  Mortgaged

                                      B-5
<PAGE>

               Property  as  determined  by  Lender  in its  sole  and  absolute
               discretion [in addition to local market  factors and  conditions,
               market  condition  shall also  include,  but not be  limited  to,
               Lender's portfolio concentrations in such market];

          (15) if the Substitution is approved, (i) the Preapproved entity shall
               have  executed  and  delivered  to  Lender  for   recordation  an
               amendment to this Instrument in form and substance  acceptable to
               Lender in its  discretion,  or an entirely new Instrument in form
               and substance acceptable to Lender,  substituting the Substituted
               Property for the  Mortgaged  Property;  and (ii) the  Preapproved
               Entity  shall  have  executed  and  delivered   such   additional
               documentation,   including   without   limitation   new   Uniform
               Commercial  Code Financing  Statements,  as Lender may reasonably
               require  to grant  Lender a  perfected  first  lien and  security
               interest in the Substituted  Property and to otherwise  implement
               the Substitution in accordance with this Section;

          (16) upon  completion  of  the  Substitution,  at the  expense  of the
               Preapproved  Entity, the Mortgaged Property will be released from
               the lien of this Instrument; provided that any document effecting
               such  release or  satisfaction  must  expressly  provide that the
               Indebtedness  has not been paid in full and that the recording of
               the  release  or  satisfaction  is not  intended  to  create  any
               presumption to the contrary;

          (17) The  modifications  set forth in this Section 21(d) shall be null
               and void in the event title to the  Mortgaged  Property is vested
               in any other party other than the Preapproved Entity.


                                      B-6