<PAGE>





                  PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
                              FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997



                                Table of Contents
                                                                       Page



Independent Auditors' Report                                           F-34

Balance Sheets as of December 31, 1999 and 1998                        F-35

Statements of Operations for the Years Ended December 31,
  1999, 1998 and 1997                                                  F-37

Statements of Changes in Partners' Equity for the
  Years Ended December 31, 1999, 1998 and 1997                         F-38

Statements of Cash Flows for the Years Ended December 31,
  1999, 1998 and 1997

Notes to Financial Statements                                          F-38




                                      F-33

<PAGE>


                          INDEPENDENT AUDITORS' REPORT




The Partners
Portland Lofts Associates Limited Partnership
Boston, Massachusetts

We have audited the  accompanying  balance sheets of Portland  Lofts  Associates
Limited  Partnership (the Partnership) as of December 31, 1999 and 1998, and the
related statements of operations, changes in partners' equity and cash flows for
each of the years in the  three-year  period  ended  December  31,  1999.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Portland  Lofts  Associates
Limited  Partnership  as of December  31, 1999 and 1998,  and the results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  December  31,  1999 in  conformity  with  generally  accepted  accounting
principles.


Lefkowitz, Garfinkel, Champi & DeRienzo P.C.


Providence, Rhode Island
February 4, 2000


                                      F-34


<PAGE>




                  PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
                                 BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                     ASSETS

                                                                                   1999                  1998
                                                                            -------------------    ------------------

<S>                                                                               <C>                   <C>
Investment in real estate:
    Land                                                                          $    899,526          $    899,526
    Buildings and improvements                                                      10,684,704            10,684,704
    Furniture and equipment                                                             84,051                84,051
                                                                            -------------------    ------------------
                                                                                    11,668,281            11,668,281
    Less accumulated depreciation                                                    2,719,446             2,446,972
                                                                            -------------------    ------------------

                                                                                     8,948,835             9,221,309

Cash                                                                                    64,160                13,716
Cash, security deposits                                                                 15,880                     -
Rent receivable                                                                         18,796                 8,663
Prepaid expenses                                                                        21,908                25,742
Replacement reserve                                                                     53,220                21,960
Deferred costs, less accumulated amortization
    (1999, $43,751; 1998, $30,309)                                                      69,611                81,583
                                                                            -------------------    ------------------

                                                                                 $   9,192,410         $   9,372,973
                                                                            ===================    ==================


                                          LIABILITIES AND PARTNERS' EQUITY

Liabilities:
    Notes payable:
       Mortgage                                                                  $   5,385,199         $   5,463,137
       General partner                                                                 273,530               298,152
    Accounts payable and accrued expenses                                               73,317                40,399
    Accrued interest                                                                    49,113                49,923
    Security deposits                                                                   27,365                32,775
                                                                            -------------------    ------------------

                  Total liabilities                                                  5,808,524             5,884,386

Commitments (Note 5)

Partners' equity                                                                     3,383,886             3,488,587
                                                                            -------------------    ------------------

                                                                                 $   9,192,410         $   9,372,973
                                                                            ===================    ==================

</TABLE>







      The accompanying notes are an integral part of these financial statements.

                                      F-35

<PAGE>



                  PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                              1999                     1998                    1997
                                                       --------------------     -------------------     --------------------

<S>                                                         <C>                    <C>                       <C>
Revenue:
     Rental income                                          $   1,290,607           $   1,211,437            $   1,092,135
     Interest and other income                                     37,137                  27,038                   41,061
                                                       --------------------     -------------------     --------------------

       Total revenue                                            1,327,744               1,238,475                1,133,196
                                                       --------------------     -------------------     --------------------

Expenses:
     Operating and administrative                                 109,553                  83,510                  154,526
     Management fees                                               67,576                  65,902                   63,289
     Repairs and maintenance                                      169,759                 152,375                  154,355
     Utilities                                                     59,109                  54,242                   54,917
     Real estate taxes                                             40,980                  40,186                   37,888
     Insurance                                                     24,263                  22,813                   23,407
     Depreciation and amortization                                285,916                 286,396                  282,981
                                                       --------------------     -------------------     --------------------

       Total expenses                                             757,156                 705,424                  771,363
                                                       --------------------     -------------------     --------------------

Income from operations                                            570,588                 533,051                  361,833

Interest expense                                                  519,289                 528,603                  537,298
                                                       --------------------     -------------------     --------------------

Net income (loss)                                             $    51,299             $     4,448             $   (175,465)
                                                       ====================     ===================     ====================



</TABLE>


      The accompanying notes are an integral part of these financial statements.

                                      F-36

<PAGE>


                 PORTLAND LOSTS ASSOCIATES LIMITED PARTNERSHIP
                   STATEMENTS OF CHANGES IN PARTNERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>


                                                                 Historic
                                                               Preservation              East Bank
                                                                Properties                 Angel                   Total
                                                               1989 Limited                Joint                 Partners'
                                                               Partnership                Venture                 Equity
                                                          ---------------------    --------------------    --------------------

<S>                                                            <C>                     <C>                     <C>
Balance, December 31,1996                                      $    2,924,499          $    1,047,105          $    3,971,604

Distributions                                                        (156,000)                      -                (156,000)

Net loss                                                             (173,710)                 (1,755)               (175,465)
                                                          ---------------------    --------------------    --------------------

Balance, December 31,1997
                                                                    2,594,789               1,045,350               3,640,139

Distributions                                                        (156,000)                      -                (156,000)

Net income                                                              4,404                      44                   4,448
                                                          ---------------------    --------------------    --------------------

Balance, December 31, 1998
                                                                    2,443,193               1,045,394               3,488,587

Distributions                                                        (156,000)                      -                (156,000)

Net income                                                             50,786                     513                  51,299
                                                          ---------------------    --------------------    --------------------

Balance, December 31, 1999                                     $    2,337,979          $    1,045,907          $    3,383,886
                                                          =====================    ====================    ====================

</TABLE>


      The accompanying notes are an integral part of these financial statements.

                                      F-37

<PAGE>




                  PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>

                                                                    1999                    1998                    1997
                                                             --------------------    --------------------    --------------------

<S>                                                                <C>                     <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                             $     51,299            $      4,448             $  (175,465)
     Adjustments to reconcile net income (loss) to
         net cash provided by operating activities:
       Depreciation and amortization                                    285,916                 286,396                 282,981
       Increase in rent receivable                                      (10,133)                 (3,657)                 (2,165)
       Decrease (increase) in prepaid expenses                            3,834                  (5,953)                  4,684
       Increase in deferred costs                                        (1,470)                      -                  (9,152)
       Increase (decrease) in accounts payable and
         accrued expenses                                                32,918                 (46,532)                  3,347
       Decrease in accrued interest                                        (810)                   (742)                (10,067)
       Increase (decrease) in security deposits, net                    (21,290)                 16,765                   7,605
                                                             --------------------    --------------------    --------------------

     Net cash provided by operating activities                          340,264                 250,725                 101,768
                                                             --------------------    --------------------    --------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of tenant improvements                                          -                       -                  (3,000)
     Decrease (increase) in replacement reserve                         (31,260)                 10,827                 128,933
                                                             --------------------    --------------------    --------------------

     Net cash provided by (used in) investing activities                (31,260)                 10,827                 125,933
                                                             --------------------    --------------------    --------------------

     Principal payments on mortgage and general
       partner notes payable                                           (102,560)                (94,056)                (89,107)
     Distributions                                                     (156,000)               (156,000)               (156,000)
                                                             --------------------    --------------------    --------------------

     Cash used in financing activities                                 (258,560)               (250,056)               (245,107)
                                                             --------------------    --------------------    --------------------

NET INCREASE (DECREASE) IN CASH                                          50,444                  11,496                 (17,406)

CASH, BEGINNING OF YEAR                                                  13,716                   2,220                  19,626
                                                             --------------------    --------------------    --------------------

CASH, END OF YEAR                                                   $    64,160             $    13,716             $     2,220
                                                             ====================    ====================    ====================

SUPPLEMENTAL CASH FLOW INFORMATION:

     Cash paid for interest                                        $    520,099            $    529,345            $    547,365
                                                             ====================    ====================    ====================


</TABLE>


      The accompanying notes are an integral part of these financial statements.

                                      F-38
<PAGE>



1.      Organization and Description of Business

        Portland Lofts  Associates  Limited  Partnership  (the  Partnership),  a
        Delaware limited  partnership,  was formed on August 8, 1989 to acquire,
        rehabilitate  and operate  three  buildings  and the  related  land (the
        Property)  containing  89  residential  apartment  units and 29,250 net
        rentable square feet of commercial space,  located at 555 Northwest Park
        Avenue, Portland, Oregon.

        The  general  partners  of the  Partnership  are East Bank  Angel  Joint
        Venture  (EBAJV),  an  Oregon  general  partnership  (also  known as the
        developer),   and   Historic   Preservation   Properties   1989  Limited
        Partnership  (HPP'89), a Delaware limited partnership whose sole general
        partner is Boston Historic Partners Limited  Partnership.  EBAJV,  whose
        venturers are Pacific Star Corporation and Joseph Angel (Angel), is also
        the only limited partner (see Note 5).

        At December 31, 1999 the  Partnership  had leased 89% (unaudited) of the
        residential apartment units and 100% (unaudited) of the commercial space
        for a combined occupancy of 92% (unaudited).

2.      Basis of Presentation and Significant Accounting Policies

        Basis of accounting

        The Partnership's financial statements are prepared on the accrual basis
        of  accounting  in  accordance   with  generally   accepted   accounting
        principles.

        Use of estimates

        The  preparation  of financial  statements in conformity  with generally
        accepted accounting principles requires management to make estimates and
        assumptions  that affect the reported  amounts of assets and liabilities
        and disclosure of contingent  assets and  liabilities at the date of the
        financial  statements  and the reported  amounts of revenue and expenses
        during the  reporting  period.  Actual  results  could differ from those
        estimates.

        Investment in real estate and depreciation

        Investment  in real  estate  is held  for  lease  and  stated  at  cost.
        Depreciation  is  computed  on a  straight-line  basis over 40 years for
        buildings and improvements, and over 5 to 7 years for personal property.

        Depreciation  expense for the years ended  December 31,  1999,  1998 and
        1997 totaled $272,474, $273,444 and $272,094, respectively.

        Cash, cash equivalents and concentration of credit risk

        The Partnership  considers all highly liquid investments with a maturity
        of three  months  or less when  purchased  to be cash  equivalents.  The
        Partnership had no cash equivalents at December 31, 1999 and 1998.

        At  December  31,  1999 and 1998,  the  Partnership  had $40,863 and $0,
        respectively,  of cash on deposit in banks in excess of amounts  insured
        by the Federal Deposit Insurance Corporation.


                                      F-39


<PAGE>




                  PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


2.      Basis of Presentation and Significant Accounting Policies (Continued)

        Deferred costs

       Costs  to lease  residential  apartment  units  are  generally  expensed;
       however,  leasing costs  associated with commercial space are capitalized
       and  amortized  on a  straight-line  basis over the related  lease terms.
       Amortization  of  costs  associated  with  leasing  for the  years  ended
       December  31,  1999,  1998 and 1997  totaled  $3,968,  $3,478 and $1,413,
       respectively.

       Direct costs  attributable  to obtaining  financing are  capitalized and
       amortized on a  straight-line  basis over the terms of the related debt.
       For  each  of  the  years  ended  December  31,  1999,  1998  and  1997,
       amortization of financing costs totaled $9,474.

       Revenue  recognition

       Rental revenue from  commercial  leases is recorded by  recognizing  the
       aggregate minimum rentals to be received over the terms of each lease in
       equal monthly  installments over the related lease terms.  Rental income
       recorded prior to actual cash collections  under the terms of the leases
       is included in rent  receivable  ($11,163  and $4,988 as of December 31,
       1999  and  1998,   respectively).   Approximately   two-thirds   of  all
       residential apartment units are rented under month-to-month arrangements
       and rent is recorded when due.

       Income taxes

       No provision (benefit) for income taxes is reflected in the accompanying
       financial statements since income or loss of the Partnership is required
       to be reported in the tax returns of the respective partners.

3.     Mortgage and Notes Payable

       On June 20, 1996, the Partnership issued a promissory  mortgage note to a
       bank in the amount of  $5,625,000  and a promissory  note to Angel in the
       amount of $340,000.  The mortgage  note bears  interest at 9%;  amortizes
       over a 25-year  schedule;  requires  monthly  payments of  principal  and
       interest  of  $47,205;  and  matures on July 1,  2006,  at which time all
       unpaid principal and interest is due. The mortgage note is secured by the
       property, rents and assignment of leases.

       The Angel Note bears interest at 11%; amortizes over a 10-year schedule;
       requires  monthly  principal  and  interest  payments  in the  amount of
       $4,684; and matures January 1, 2007.

       At December 31, 1999,  aggregate  annual  maturities  under the mortgage
       note  payable and note  payable to general  partner for each of the next
       five years are as follows:

         Year Ending          Mortgage      Note Payable to
         December 31,       Note Payable    General Partner          Total
         ------------       ------------    ----------------     ---------------

             2000           $   85,249      $    27,471           $   112,720
             2001               93,246           30,650               123,896
             2002              101,994           34,197               136,191
             2003              111,561           38,154               149,715
             2004              122,026           42,570               164,596





                                      F-40

<PAGE>



6.       Partners' Equity

        Profits, losses and tax credits shall be distributed to the partners, as
        defined in the Partnership Agreement,  as follows: 99% to HPP'89, .9% to
        EBAJV and .1% to EBAJV as a limited partner.  However, if cash flows are
        distributed to the partners in accordance  with (b) and (c) below,  then
        profits,  losses and tax credits shall be distributed in accordance with
        those same formulas.

        Cash flows from  operations  shall be  distributed  to the partners,  as
        defined in the Partnership Agreement, as follows:

           a. 100 percent to the payment of accrued  interest on, and then the
              unpaid  principal balance of, any outstanding loans made to the
              Partnership by HPP'89.

           b. Thereafter,   100  percent  to  HPP'89   until  HPP'89  has
              received distributions of cash flow in such year in an amount
              equal to an 8 percent cumulative,  noncompounded  return on its
              weighted average HPP'89 invested capital for such year.

           c. The remaining  balance,  if any, prior to call/put date (discussed
              below),  50% to  HPP'89,  49.9% to EBAJV and .1% to EBAJV as
              limited partner, and after the call/put date, 75% to HPP'89,
              24.9% to EBAJV and .1% to EBAJV as limited partner.

       The Partnership  Agreement  provides  HPP'89 with certain put rights,  as
       defined in the agreement,  to require the Developer to purchase  HPP'89's
       interest in the  Partnership.  On July 1, 1997,  HPP'89 and the Developer
       entered  into an  agreement  under  which the parties  acknowledged  that
       HPP'89's  put right  commenced  July 1,  1997 and  HPP'89  agreed  not to
       exercise  its  put  right  until  July  1,  2000   provided  it  receives
       distributions  of no less than $30,000 per quarter.  Under the put right,
       the  Developer is required to pay HPP'89 the excess of  $5,750,000,  plus
       $25,467 for each month commencing July 1, 1997 through the month in which
       the closing of the sale of HPP'89's  interest is consummated  pursuant to
       the put right,  less the amount  previously  distributed  to HPP'89.  The
       Developer,  provided  it  has  met  certain  conditions  defined  in  the
       agreement,  shall  have the  right to  locate a third  party to  purchase
       HPP'89's  interest  on  behalf  of the  Developer.  Cash from the sale or
       refinancing of the Property shall be distributed to repay any outstanding
       loans and related  interest and then to the  partners,  as defined in the
       Partnership Agreement.

6.     Transactions with Related Parties and Commitments

       Interest  expense for the years ended  December 31, 1999,  1998 and 1997
       totaled $31,354, $33,931 and $36,241, respectively, related to the Angel
       Note.  At December  31, 1999 and 1998,  $8,724 and $8,949 is included in
       accrued interest.

       In November 1996, the Partnership  entered into an agreement to pay EBAJV
       a monthly fee of $2,400 for partnership  management  services provided to
       the Partnership.  Partnership management fees totaled $28,800 for each of
       the years ended December 31, 1999, 1998 and 1997.

       The  Partnership  has  a  month-to-month  management  agreement  with  an
       unrelated  party to manage  the  property  for a fee equal to 3% of gross
       receipts as defined in the agreement. Management fees for the years ended
       December 31, 1999,  1998 and 1997 totaled  $38,776,  $37,102 and $34,489.
       The unrelated  party also  receives  leasing  commissions  equal to 5% of
       amounts due under commercial leases.



                                              F-41

<PAGE>



6.      Minimum Future Rentals under Operating Leases

        The Partnership rents space to commercial tenants under operating leases
        of  varying  terms  expiring  through  2004.  Approximately  36%  of all
        residential  apartment  units are  rented to  tenants  under  short-term
        operating   leases  and  the  remaining   rented  under   month-to-month
        arrangements.  As of December 31, 1999, the Partnership had entered into
        twelve  commercial leases covering 71% (unaudited) of the building's net
        rentable  commercial space with the remaining  commercial  tenants under
        month-to-month  leases.  The  Partnership's  largest  commercial  tenant
        occupancies   23%  of  the  commercial   space  at  December  31,  1999,
        representing only 5.8% of the total square feet of the property.

       At December 31, 1999, minimum future rentals,  excluding reimbursement of
       real estate taxes and certain  operating  expenses,  to be received under
       noncancellable  commercial  leases for each of the next five years are as
       follows:
                     Year Ending December 31,                Amount
                     --------------------------          ---------------

                            2000                         $    176,707
                            2001                              115,689
                            2002                               78,744
                            2003                               53,180
                            2004                               44,317

        The above amounts do not include additional rentals that will become due
        as a result of escalation provisions in the commercial leases.

        In most cases, management expects that in the normal course of business,
        commercial  leases  will be  renewed  or  replaced  by other  leases and
        month-to-month  arrangements with residential  tenants will be continued
        or replaced by short-term operating leases.

7.      Fair Value of Financial Instruments

        The carrying amounts of cash, cash security  deposits,  rent receivable,
        prepaid  expenses,  replacement  reserve,  accounts  payable and accrued
        expenses,  accrued  interest and security  deposits at December 31, 1999
        and 1998  approximate  their fair values due to their short  maturities.
        The fair values of the  Partnership's  mortgage note payable and general
        partner  note payable at December  31, 1999 and 1998  approximate  their
        carrying  amounts  based on interest  rates  currently  available to the
        Partnership   for  similar   financing   arrangements.   All   financial
        instruments are held for non-trading purposes.



                                              F-42