This instrument was prepared by and after recording return to:

Thomas F. Berner, Esq.
Katten Muchin & Zavis
1133 Avenue of the Americas
Suite 2820
New York, NY 10036_6772




THE PRINCIPAL AMOUNT SECURED BY THIS MORTGAGE IS $32,000,000.
--------------------------------------------------------------------------------
                                       SPACE ABOVE THIS LINE FOR RECORDER'S USE.


                                                                  Loan No.99-086


              MORTGAGE CONSOLIDATION, ASSIGNMENT OF RENTS, SECURITY
                          AGREEMENT AND FIXTURE FILING

       THIS MORTGAGE CONSOLIDATION,  ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND
FIXTURE FILING  ("Mortgage") is made as of the ____ day of August,  1999, by 475
Fifth Avenue Limited Partnership,  a limited partnership  organized and existing
under the laws of the State of Delaware, whose address is 475 Fifth Avenue, 21st
Floor, New York, New York 10017  ("Borrower"),  to and for the benefit of HELLER
FINANCIAL,  INC.,  a  corporation  organized  and  existing  under  the  laws of
Delaware, whose address is 500 West Monroe Street, 30th Floor, Chicago, Illinois
60661,  Attention:  Heller  Express  Servicing  Department,  Re: Loan No. 99_086
(HELLER FINANCIAL,  INC. and its successors and assigns are hereinafter referred
to as "Lender").

                                    RECITALS

       A.  Borrower  has executed and  delivered  to Lender a  Consolidated  and
Restated  Promissory Note dated of even date herewith in the principal amount of
THIRTY-TWO  MILLION and No/100 Dollars  ($32,000,000.00)  (which note,  together
with all notes issued in substitution  or replacement  therefor and/or as any of
the foregoing  may be amended,  modified or  supplemented  from time to time, is
hereinafter  referred to as the  "Note"),  providing  for the payment of monthly
installments of principal and interest,  with the balance thereof, if not sooner
due or paid as set forth in the Note, due and payable on September 1, 2009 (said
date, or any earlier date on which the entire


<PAGE>


unpaid principal amount shall be paid or required to be paid in full, whether by
prepayment, acceleration or otherwise, is herein called the "Maturity Date")

       B. Lender wishes to secure (i) the prompt  payment of the Note,  together
with all interest  thereon in accordance  with the terms of the Note, as well as
the prompt payment of any additional  indebtedness accruing to Lender on account
of any future payments,  advances or expenditures made by Lender pursuant to the
Note or this Mortgage or any other agreement,  document,  or instrument securing
the payment of the indebtedness  evidenced by the Note (the Note, this Mortgage,
and any other documents evidencing or securing the indebtedness evidenced by the
Note or executed  in  connection  therewith,  and any  modifications,  renewals,
and/or extensions thereof, are hereinafter collectively referred to as the "Loan
Documents"),  and (ii)  the  prompt  performance  of each  and  every  covenant,
condition,  and  agreement  now or  hereafter  arising  contained  in  the  Loan
Documents of Borrower or any "Principal" (as defined in the Hazardous  Substance
Indemnification  Agreement  delivered in connection with this Mortgage ), as the
case may be. All payment  obligations of Borrower or any Principal,  as the case
may be, under the Loan Documents are hereinafter sometimes collectively referred
to as the "Indebtedness" and all other obligations of Borrower or any Principal,
as the  case  may  be,  under  the  Loan  Documents  are  hereinafter  sometimes
collectively referred to as the "Obligations".

       C. Borrower is the owner of the fee interest in the real estate described
in Exhibit A attached hereto (the "Land").

       D. Lender is the holder of (a) those certain  mortgages listed on Exhibit
B  attached  hereto  (collectively,   the  "Existing  Mortgages"),   encumbering
Borrower's  estate  in the  Property  (as  hereinafter  defined),  and  (b)  the
respective  bonds,  notes,  or  obligations  secured by the  Existing  Mortgages
(collectively, the "Existing Notes").

       E. The terms and  provisions of the Existing  Notes have been amended and
restated  in  their  entirety  pursuant  to the  Note to  constitute  one  joint
indebtedness in the original principal amount of the Note.

       F. Borrower and Lender have mutually agreed to  consolidate,  coordinate,
amend and restate the terms of the  Existing  Mortgages in their  entirety,  and
have mutually  agreed to  consolidate  and  coordinate the liens of the Existing
Mortgages so that such liens are made equal and coordinate in the policy.

       NOW, THEREFORE, TO SECURE TO LENDER the repayment of the Indebtedness and
the performance of the Obligations, Borrower has executed this Mortgage and does
hereby covenant and agree as follows:

       To induce  Lender to enter into this  Mortgage,  Borrower  represents  to
Lender that there is now validly due and owing on the Existing Notes and secured
by the Existing Mortgages,  without defense, offset or counterclaim of any kind,
the total sum of $32,000,000.00 (the "Loan Amount").

       The  Existing  Notes are  modified  to  provide  for  payment of the Loan
Amount,  together with interest thereon, in the manner set forth in, and subject
to the terms of, the Note , and Borrower

<PAGE>


hereby  agrees to repay the Loan Amount,  together  with  interest  thereon,  in
accordance with the terms of the Note.

       All of the terms and  conditions  of the  Existing  Mortgages  are hereby
modified and superseded by the terms and  conditions of this  Mortgage,  and the
Existing  Mortgages  are hereby  combined  and  consolidated  and made equal and
coordinate  in lien without  priority of the one over the other so that together
the Existing  Mortgages  shall hereafter  constitute in law but one mortgage,  a
single first lien on the Property  securing the Loan Amount,  and, to the extent
not already covered thereby,  such Existing Mortgages,  as so consolidated,  are
hereby  spread to cover,  and Borrower  does hereby  mortgage,  convey,  assign,
warrant,  transfer,  pledge  and  grant to  Lender a  security  interest  in the
following  described  property  and  all  proceeds  thereof  to  the  extent  of
Borrower's   interest   therein  (which   property  is   hereinafter   sometimes
collectively referred to as the "Property"):

              A. The Land;

              B. All  improvements  of every nature  whatsoever now or hereafter
       situated on the Land and owned by Borrower (the "Improvements"),  and all
       machinery,  equipment, mechanical systems and other personal property now
       or hereafter  owned by Borrower and used in connection with the operation
       of the Improvements;

              C. All  easements  and  appurtenances  now or hereafter in any way
       relating to the Land and/or Improvements or any part thereof;

              D. All agreements affecting the use, enjoyment or occupancy of the
       Land and/or  Improvements  now or hereafter  entered into (the "Leases"),
       including any and all  guaranties  of such Leases,  and the immediate and
       continuing  right to  collect  all rents,  income,  tax,  insurance,  and
       replacement  reserve  deposits,  receipts,  royalties,  profits,  issues,
       service   reimbursements,   fees,  accounts  receivables,   revenues  and
       prepayments  of any of the  same  (including  termination,  cancellation,
       option  and  similar  payments)  from  or  related  to  the  Land  and/or
       Improvements  from time to time  accruing  under the  Leases  and/or  the
       operation of the Land and/or  Improvements  (the  "Rents"),  reserving to
       Borrower, however, so long as no "Event of Default" (hereinafter defined)
       has  occurred  hereunder,  a  revocable  license to receive and apply the
       Rents in accordance with the terms and conditions of Paragraph 13 of this
       Mortgage;

              E. All claims, demands,  judgments,  insurance proceeds, awards of
       damages and  settlements  hereafter made resulting from the taking of the
       Land  and/or  the  Improvements  or any part  thereof  under the power of
       eminent  domain,  or for any damage  (whether  caused by such taking,  by
       casualty or  otherwise) to the Land and/or the  Improvements  or any part
       thereof;

              F.  To  the  extent  assignable,  all  now or  hereafter  existing
       management contracts and all permits, certificates, licenses, agreements,
       approvals, entitlements and authorizations, however characterized, issued
       or in any way furnished for the acquisition,  construction, operation and
       use of the Land, Improvements and/or Leases,  including building permits,
       environmental   certificates,   licenses,   certificates   of  operation,
       warranties and guaranties;

<PAGE>


              G. All of Borrower's rights in and to all trademarks,  tradenames,
       assumed names,  telephone numbers and listing rights and other rights and
       interests  in and to the names and marks used by Borrower  in  connection
       with the Land and/or  Improvements,  including all rights in the name 475
       Fifth Avenue, and all books and records and all other general intangibles
       relating to the operation of the Land and/or Improvements; and

              H. Any  monies  on  deposit  with or for the  benefit  of  Lender,
       including  deposits  for the  payment  of real  estate  taxes,  insurance
       premiums and any other reserves held by Lender or its agent.

       TO HAVE AND TO HOLD the  Property  and all parts  thereof,  with Power of
Sale, together with the rents, issues, profits and proceeds thereof, unto Lender
to its own proper use, benefit, and advantage forever,  subject, however, to the
terms, covenants, and conditions herein.

       Borrower covenants and agrees with Lender as follows:

1.     Payment of Indebtedness; Performance of Obligations.

       Borrower shall promptly pay when due the  Indebtedness and shall promptly
perform all Obligations.

2.     Taxes and Other Obligations.

       Subject to Paragraphs 3 and 5 hereafter,  as  applicable,  Borrower shall
pay,  when due, and before any  interest,  collection  fees or  penalties  shall
accrue,  all  taxes,  assessments,  fines,  impositions  and other  charges  and
obligations, including charges and obligations for any present or future repairs
or  improvements  made on the  Property,  or for any other  goods,  services  or
utilities  furnished  to the  Property,  which  may  become a lien on or  charge
against the Property prior to this  Mortgage,  subject,  however,  to Borrower's
right to contest  such lien or charge upon the  posting of  security  reasonably
satisfactory  to  Lender  so long as  such  contest  stays  the  enforcement  or
collection of such lien or charge.  Should  Borrower fail to make such payments,
Lender may, at its option and at Borrower's expense, pay the amounts due for the
account  of  Borrower  and  all  amounts  advanced  shall  be  included  in  the
Indebtedness.  Upon the request of Lender, Borrower shall immediately furnish to
Lender any notices of amounts due and  receipts  evidencing  payment as and when
due in each case, which come into Borrower's possession. Borrower shall promptly
notify Lender of any lien on all or any part of the Property and shall  promptly
discharge  any  unpermitted  lien or  encumbrance  as  required by the terms and
conditions of this Mortgage..

<PAGE>


3.     Reserves for  Taxes/Replacement  Reserve/Tenant  Improvements and Leasing
       Reserve.

              (a) Borrower  shall pay to Lender,  at the time of and in addition
       to the monthly  installments  of principal  and/or interest due under the
       Note, a sum equal to 1/12 of the amount reasonably estimated by Lender to
       be sufficient to enable Lender to pay at least 30 days before they become
       due and payable, all taxes,  assessments and other similar charges levied
       against the Property as reasonably  determined  by Lender (the  "Property
       Tax  Reserve").  Provided  that Lender shall have a copy of the tax bill,
       and  sufficient  funds on  deposit  from  Borrower  to pay such tax bill,
       Lender  shall apply the sums in the  Property Tax Reserve to pay such tax
       items.  These sums may be commingled  with funds otherwise held by Lender
       on  account of real  estate tax  obligations,  and no  interest  shall be
       payable  thereon  nor shall  these sums be deemed to be held in trust for
       the  benefit  of  Borrower.  If such  amount on  deposit  with  Lender is
       insufficient to fully pay such tax items,  Borrower shall, within 10 days
       following notice at any time from Lender,  deposit such additional sum as
       may be required for the full payment of such tax items.  If the sums held
       in the  Property  Tax  Reserve  shall  exceed the  amounts due for taxes,
       Lender shall, in its reasonable discretion, return any excess to Borrower
       or credit such excess against future  payments to be made to the Property
       Tax Reserve.  Borrower  hereby grants Lender a security  interest in such
       funds and Borrower  shall execute any other  documents and take any other
       actions reasonably  necessary to provide Lender with a perfected security
       interest in such funds. Upon the Maturity Date, the moneys then remaining
       on deposit with Lender or its agent shall, at Lender's option, be applied
       against the  Indebtedness or returned to Borrower upon payment in full of
       the Indebtedness .

              (b) At the  time of  closing  of the  loan  evidenced  by the Loan
       Documents  ("Loan"),  Lender shall deposit $200,000.00 of the proceeds of
       the  Loan  into  a  replacement  reserve  ("Replacement   Reserve").  The
       Replacement  Reserve  shall bear  interest  for the benefit of  Borrower.
       Interest  will be paid on the  funds in the  Replacement  Reserve  at the
       "non-personal  money market rate" in effect as of the first  business day
       of each month at The Northern Trust Company or its  successors.  Interest
       on the Replacement Reserve shall be calculated using the actual number of
       days in a month and a 365 day year and will be paid into the  Replacement
       Reserve and  compounded on a monthly  basis.  The funds  contained in the
       Replacement  Reserve  shall be utilized  by  Borrower  solely for capital
       improvements  reasonably  approved  in advance by  Lender.  Lender  shall
       reimburse  Borrower,  or pay as directed by Borrower from the Replacement
       Reserve for the actual cost of such approved capital  improvements within
       10 business  days of  Borrower's  providing  Lender with paid receipts or
       invoices,   lien  waivers  and  other  documentation   deemed  reasonably
       necessary by Lender,  which shall occur no more than once per month. Upon
       the Maturity  Date,  the moneys then  remaining on deposit with Lender or
       its agent shall, at Lender's option,  be applied against the Indebtedness
       or  returned  to  Borrower  upon  payment  in full  of the  Indebtedness.
       Borrower  hereby  grants  Lender a security  interest in the  Replacement
       Reserve and Borrower shall execute any other documents and take any other
       actions reasonably  necessary to provide Lender with a perfected security
       interest in the  Replacement  Reserve.  If the balance of the Replacement
       Reserve falls below  $200,000.00,  then at the time of and in addition to
       the monthly installments of principal and/or interest due under the Note,
<PAGE>


       Borrower  shall pay to Lender  monthly  deposits of  $4,000.00  until the
       balance of the Replacement Reserve equals $200,000.00.

              (c) At the time of the closing of the Loan,  Lender shall  deposit
       $1,967,000  of the  proceeds  of the  Loan  into a  capital  improvements
       reserve ("Capital Improvements Reserve"). The Capital Improvement Reserve
       shall bear interest for the benefit of Borrower. Interest will be paid on
       the funds in the Capital  Improvement  Reserve at the "non-personal money
       market rate" in effect as of the first  business day of each month at The
       Northern  Trust  Company  or its  successors.  Interest  on  the  Capital
       Improvement  Reserve shall be calculated  using the actual number of days
       in a  month  and a 365  day  year  and  will be  paid  into  the  Capital
       Improvements  Reserve  and  compounded  on a  monthly  basis.  The  funds
       contained  in the  Capital  Improvements  Reserve  shall be  utilized  by
       Borrower  solely  for  capital   improvements   determined  in  the  sole
       discretion  of  Borrower.  Lender  shall  reimburse  Borrower,  or pay as
       directed by Borrower from the Capital Improvements Reserve for the actual
       cost of such capital  improvements  within 10 business days of Borrower's
       providing  Lender with paid receipts or invoices,  lien waivers and other
       documentation deemed reasonably necessary by Lender, which shall occur no
       more than  once per  month.  Upon the  Maturity  Date,  the  moneys  then
       remaining on deposit with Lender or its agent shall, at Lender's  option,
       be applied against the  Indebtedness or returned to Borrower upon payment
       in full of the  Indebtedness.  Borrower  hereby  grants Lender a security
       interest in the Capital  Improvements  Reserve and Borrower shall execute
       any other  documents and take any other actions  reasonably  necessary to
       provide  Lender  with  a  perfected  security  interest  in  the  Capital
       Improvements Reserve.

              (d) At the time of the closing of the Loan,  Lender shall  deposit
       $850,000.00  of the  proceeds  of the  Loan  into a  reserve  for  tenant
       improvements and leasing  commissions  relating to the sub-leasing of the
       space (consisting of approximately 15,667 square feet of space) currently
       leased to Europe Craft Imports,  Inc. (the "Europe Craft Space") ("TI and
       Leasing Reserve"). The TI and Leasing Reserve shall bear interest for the
       benefit  of  Borrower.  Interest  will be paid on the funds in the TI and
       Leasing Reserve at the  "non_personal  money market rate" in effect as of
       the first business day of each month at The Northern Trust Company or its
       successors.  Interest on the TI and Leasing  Reserve  shall be calculated
       using the actual number of days in a month and a 365 day year and will be
       paid into the TI and Leasing  Reserve and  compounded on a monthly basis.
       The funds  contained in the TI and Leasing  Reserve  shall be utilized by
       Borrower first solely for tenant improvements and leasing commissions for
       the Europe  Craft Space  customary in the market  place.  Once the Europe
       Craft Space has been completely sub-leased, any funds remaining in the TI
       and  Leasing  Reserve  will be used for tenant  improvements  and leasing
       commissions customary in the marketplace for other space in the Property.
       Lender shall reimburse Borrower,  or pay as directed by Borrower from the
       TI and Leasing  Reserve  for the actual cost of such tenant  improvements
       and leasing commissions  customary in the market place within 10 business
       days of Borrower's providing Lender with invoices or paid receipts,  lien
       waivers and other  documentation  deemed reasonably  necessary by Lender,
       which shall occur no more than once per month.  Upon the  Maturity  Date,
       the moneys then  remaining on deposit with Lender or its agent shall,  at
       Lender's  option,  be applied  against  the  Indebtedness  or returned to
       Borrower upon payment in full of the Indebtedness. Borrower hereby grants
<PAGE>


       Lender a security  interest  in the TI and Leasing  Reserve and  Borrower
       shall execute any other  documents and take any other actions  reasonably
       necessary to provide Lender with a perfected  security interest in the TI
       and Leasing Reserve.

              (e) With respect to any disbursement  pursuant to paragraphs 3(b),
       3(c) or 3(d),  above,  if (i) the time  required to  complete  work to be
       funded thereunder exceeds one month, (ii) the contractor  performing such
       work  requires  periodic  payments  pursuant  to the  terms of a  written
       contract,  and (iii)  the total  cost of such  work  exceeds  $50,000,  a
       request for  reimbursement or payment from the applicable  reserve may be
       made after  completion  of a portion  of the work  under  such  contract,
       provided  (u) such  contract  requires  payment upon  completion  of such
       portion of the work,  (v) the materials for which the request is made are
       on site at the Property and are properly  secured or have been  installed
       in  the  Property,   (w)  all  other  conditions  in  this  Mortgage  for
       disbursement  have been satisfied,  (x) funds remaining in the applicable
       reserve are, in Lender's reasonable judgment, sufficient to complete such
       work and the other work when  required (y) the cost of the portion of the
       work  completed  under  such  contract  exceeds  $5,000,   and  (z)  each
       contractor or subcontractor  receiving payments under such contract shall
       provide a waiver of lien with respect to amounts  which have been paid to
       that contractor or  subcontractor.  Borrower shall not make a request for
       disbursements  more  frequently  than monthly under this  subsection  and
       Lender shall not be obligated  to make any  disbursements  if an Event of
       Default then exists.

4.     Use of Property.

       Unless required by applicable  law,  Borrower shall not permit changes in
the use of any part of the  Property  from  the use  existing  at the time  this
Mortgage was executed,  which use Borrower represents and warrants is limited to
offices and retail and related uses. Borrower shall not initiate or acquiesce in
a change  in the  zoning  classification  of the  Property  or  grant  easements
burdening the Property (other than customary utility easements necessary for the
use of the Property) without Lender's prior written consent.

<PAGE>


5.     Insurance and Condemnation.

       Borrower shall keep the Improvements  insured, and shall maintain general
liability  coverage and such other coverages  requested by Lender, in amounts at
all times  reasonably  satisfactory  to Lender  provided  all such  policies  of
insurance  shall be issued by insurers  qualified under the laws of the state in
which the Land is located,  duly authorized and licensed to transact business in
such state and  reflecting a General  Policy Rating of A-(X) or better in Best's
Key Rating Guide.  Existing insurance carriers (so long as they are rated A-(X))
and amounts  approved by Lender as of the date hereof  shall be deemed  approved
hereafter.  Unless  Borrower  provides  Lender with  evidence  of the  insurance
coverage required by this Mortgage,  Lender may purchase insurance at Borrower's
expense to protect  Lender's  interests  in the  Property  and to  maintain  the
insurance  required by this Mortgage.  This insurance may, but need not, protect
Borrower's  interests.  The  coverage  purchased by Lender may not pay any claim
made by Borrower or any claim that is made against  Borrower in connection  with
the Property or any  required  insurance  policy.  Borrower may later cancel any
insurance  purchased by Lender,  but only after  providing  Lender with evidence
that  Borrower has obtained  insurance as required by this  Mortgage.  If Lender
purchases  insurance  for the Property or insurance  otherwise  required by this
Mortgage,  Borrower  will be  responsible  for  the  costs  of  that  insurance,
including  interest and other charges  imposed by Lender in connection  with the
placement of the  insurance,  until the effective  date of the  cancellation  or
expiration  of the  insurance.  The costs of the  insurance  may be added to the
Indebtedness.  The costs of the insurance may be more than the cost of insurance
Borrower is able to obtain on its own.

       In case of loss or damage by fire or other casualty,  Borrower shall give
immediate  written notice thereof to the insurance  carrier(s) and to Lender. In
the event a casualty  loss or damage does not exceed  $1,000,000,  Borrower  may
settle  and adjust any claim  without  the  consent of Lender and agree with the
insurance  company  or  companies  on the  amount to be paid upon the loss,  and
Borrower is hereby  authorized  to collect  and  receipt for any such  insurance
proceeds,  provided  Borrower  delivers  to  Lender  a  written  undertaking  to
expeditiously commence and satisfactorily complete the restoration of the damage
caused by such  casualty  in  compliance  with all  applicable  laws,  rules and
regulations.  In the event a casualty  loss or damage  does  exceed  $1,000,000,
Lender is authorized  and empowered to make or file proofs of loss or damage and
to settle and adjust any claim under  insurance  policies  which insure  against
such  risks,  or to direct  Borrower,  in writing,  to agree with the  insurance
carrier(s)  on the amount to be paid in regard to such loss and the Net Proceeds
(defined  below) are hereby  assigned  to and shall be paid to Lender as further
security for the payment of the Indebtedness and performance of the Obligations,
subject to the second paragraph hereafter.

       Borrower  shall  immediately  notify  Lender of any action or  proceeding
relating to any condemnation or other taking, whether direct or indirect, of the
Property,  or part thereof,  and Borrower shall appear in and prosecute any such
action or proceeding  unless otherwise  directed by Lender in writing.  Borrower
shall diligently prosecute any such proceeding, collect any award or payment for
damages and  thereafter  diligently  prosecute any required  restoration  of the
Property in compliance with all applicable laws, rules and regulations.  Lender,
at Lender's option,  may participate with Borrower,  to commence,  appear in and
prosecute any action or proceeding  relating to any condemnation or other taking
of the Property,  whether  direct or indirect,  and to settle or compromise  any
claim in connection with such condemnation or other taking,  provided such claim
is for an  amount  equal to or  greater  than  $1,000,000.00.  The Net  Proceeds
(defined  below)  of  any  award,  payment  or  claim  for  damages,  direct  or
consequential,  in connection with any condemnation or other

<PAGE>


taking in excess of $1,000,000.00,  whether direct or indirect, of the Property,
or part thereof, or for conveyances in lieu of condemnation, are hereby assigned
to and  shall be paid to Lender  as  further  security  for the  payment  of the
Indebtedness  and  performance  of the  Obligations,  subject  to the  following
paragraph.

       Anything above the contrary notwithstanding, provided no Event of Default
then exists  hereunder,  the net insurance  proceeds  and/or net proceeds of any
condemnation award (in each case after deduction only of Borrower's and Lender's
reasonable  costs  and  expenses,  if any,  in  collecting  the  same,  the "Net
Proceeds")  payable  to  Lender  hereunder  shall  be  made  available  for  the
restoration  or repair of the  Property,  either  by means of  reimbursement  to
Borrower  or  payment  as  directed  by  Borrower  for the  actual  cost of such
restoration  or repair of the  Property  within 10 business  days of  Borrower's
providing  Lender  with  paid  receipts  or  invoices,  lien  waivers  and other
documentation  deemed reasonably necessary by Lender, if, in Lender's reasonable
discretion (a) restoration or repair and the continued operation of the Property
is economically feasible, (b) the value of Lender's security after completion of
the  repairs  or  restoration  is  not  materially  reduced,  (c)  the  loss  or
condemnation,  as  applicable,  does  not  occur  in the  six (6)  month  period
preceding the stated Maturity Date and Lender's independent consultant certifies
that the  restoration of the Property can be completed at least 90 days prior to
the  Maturity  Date,  and (d)  Borrower  deposits  cash with Lender in an amount
determined  by a contractor  reasonably  acceptable  to the parties,  reasonably
necessary,  in  addition  to the Net  Proceeds,  to pay in full  the cost of the
restoration or repair.  Notwithstanding  the foregoing,  it shall be a condition
precedent to any  disbursement  of Net Proceeds  held by Lender  hereunder  that
Lender shall have reasonably  approved (x) all plans and  specifications for any
proposed  repair  or  restoration,  (y) the  construction  schedule  and (z) the
architect's and general  contractor's  contract for all restoration that exceeds
$1,000,000.00  in the aggregate.  With respect to restoration or repair projects
in  excess  of  $1,000,000,  Lender  may  establish  other  conditions  it deems
reasonably  necessary  to  assure  the  work is  fully  completed  in a good and
workmanlike  manner  free of all liens or claims by reason  thereof.  Borrower's
deposits made pursuant to this  paragraph  shall be used before the Net Proceeds
held by Lender for such  restoration  or repair.  If the Net  Proceeds  are made
available for restoration or repair, such work shall be completed by Borrower in
a diligent  fashion,  and in  compliance  with all  applicable  laws,  rules and
regulations.  At Lender's  option,  the Net Proceeds  shall also be disbursed by
Lender  pursuant to a construction  escrow  reasonably  acceptable to Lender and
Borrower. If following the final payments for the completion of such restoration
or repair there are any Net Proceeds  remaining,  such proceeds shall be paid to
Borrower,  provided that such restoration and repair is completed  substantially
in accordance  with the  previously  approved  plans,  as determined in Lender's
reasonable  discretion.  If an  Event  of  Default  then  exists,  or any of the
conditions set forth in  subparagraphs  (a) through (d) of this Paragraph 5 have
not been met or  satisfied,  the Net  Proceeds  held by Lender  may be  applied,
without  any  prepayment  penalty  or fee or any Yield  Maintenance  Amount,  as
defined in the Note, to the  Indebtedness,  whether or not then due and payable,
with any excess paid to  Borrower.  All  covenants  hereof shall be construed as
affording  to  Lender  rights  additional  to and not  exclusive  of the  rights
conferred under the provisions of Sections 254, 271 and 272 of the New York Real
Property  Law or any  other  applicable  law of any other  state.  If there is a
conflict  between any  provisions of this Mortgage and the

<PAGE>


provisions  of Section 254 of the New York Real Property  Law,  Borrower  agrees
that the applicable provision of this Mortgage shall control.

       Until such time as any part or all of the Net Proceeds held by Lender are
disbursed as provided hereinabove,  such Net Proceeds shall be held by Lender in
an interest  bearing account for the benefit of Borrower.  Interest will be paid
on such Net Proceeds at the "non-personal money market rate" in effect as of the
first  business  day  of  each  month  at  The  Northern  Trust  Company  or its
successors.  Interest on such Net Proceeds shall be calculated  using the actual
number  of days in a month  and a 365 day year  and will be paid to the  account
holding such Net Proceeds and compounded on a monthly basis.

6.     Preservation and Maintenance of Property.

       Borrower (a) shall not commit waste or permit impairment or deterioration
of the  Property;  (b) shall not abandon  the  Property;  (c) shall,  subject to
Paragraphs  3 and 5 above,  as  applicable,  and to the extent  Rents,  Property
revenue and  casualty  and/or  condemnation  proceeds  are  available,  keep the
Property  in  good  repair  and  restore  or  repair  promptly,  in a  good  and
workmanlike  manner,  all or any part of the Property to the  equivalent  of its
original condition,  ordinary wear and tear excepted, or such other condition as
Lender may reasonably approve in writing, and upon any damage or loss thereto in
accordance  with the  terms of  Paragraph  5; (d)  shall  comply  with all laws,
ordinances,  regulations and requirements of any governmental body applicable to
the Property; (e) shall provide for management of the Property by Borrower or by
a property manager  reasonably  satisfactory to Lender pursuant to a contract in
form and substance reasonably  satisfactory to Lender; and (f) shall give notice
in writing to Lender of and, unless  otherwise  directed in writing by Lender if
the Lender  determines  that the  Property  may be  adversely  affected  by such
appearance,  appear in and defend any action or proceeding  purporting to affect
the Property, the security granted by the Loan Documents or the rights or powers
of  Lender.  Neither  Borrower  nor any  tenant or other  person  shall  remove,
demolish  or alter any  Improvement  or any  fixture,  equipment,  machinery  or
appliance in or on the Land and owned or leased by Borrower except when incident
to the replacement of fixtures,  equipment,  machinery and appliances with items
of like kind,  without the prior written consent of Lender,  which consent shall
not be unreasonably withheld or delayed.

<PAGE>


7.     Protection of Lender's Security.

       If Borrower  fails to pay the  Indebtedness  or perform  the  Obligations
after the expiration of any applicable  notice or cure period,  or if any action
or proceeding  is commenced  which  materially  affects the Property or Lender's
interest  therein and Borrower  fails to promptly take  appropriate  action,  as
reasonably  determined by Lender, then Lender, at Lender's option, may make such
appearances,  disburse such sums and take such action as Lender deems necessary,
in its  reasonable  discretion,  to protect the  Property  or Lender's  interest
therein,  including  lawful  entry upon the Property to make repairs and perform
environmental tests and studies. Lender shall give Borrower reasonable notice of
all such appearances,  disbursements  and actions,  which may be before or after
any such  appearance,  disbursement  or  action,  as  appropriate.  Any  amounts
disbursed by Lender pursuant to this Paragraph 7 (including attorneys' costs and
expenses),  shall bear interest  thereon at the "Default  Rate"  (defined in the
Note) from the date of  disbursement,  shall become  additional  Indebtedness of
Borrower  secured by the Loan  Documents and shall be due and payable on demand.
Nothing  contained in this Paragraph 7 shall require Lender to incur any expense
or take any action hereunder.  With respect to the foregoing,  reference is made
to Section  291-f of the New York Real  Property  Law and the  benefits  of such
Section 291-f shall apply hereto.

8.     Inspection.

       Lender  and  its  agents  and  designees  may  make or  cause  to be made
reasonable  lawful entries upon and inspections of the Property  (subject to the
rights of tenants),  including for performing any environmental  inspections and
testing of the Property,  and  inspections  of Borrower's  books,  records,  and
contracts at all reasonable times upon reasonable advance notice. Borrower shall
cooperate  with  Lender and its agents and  designees  with  respect to all such
inspections,  including any related to the sale or potential  sale of all or any
portion of the Loan by Lender and any securitization or potential securitization
involving the Loan.

9.     Books and Records.

       Borrower  shall  keep and  maintain  at all times at  Borrower's  address
stated above, or such other place as Lender may approve in writing, complete and
accurate books of accounts and records adequate to reflect correctly the results
of the operation of the Property and copies of all written contracts, Leases and
other instruments affecting the Property.

<PAGE>


10.    Financial Statements.

       Borrower  shall  furnish to Lender,  within 45 days after the end of each
fiscal  quarter of the  operation  of the  business of Borrower and at any other
time upon five (5) business days of Lender's  written request  (provided  Lender
shall not make such  request  more than two (2) times in any  twelve  (12) month
period), a balance sheet and a statement of income and expenses of the Property,
each  in  reasonable  detail,  prepared  in  accordance  with  sound  accounting
principles customarily used in the real estate industry and consistently applied
and  certified as true and complete by Borrower or its general  partner or chief
financial  officer.  Borrower shall also furnish to Lender, and shall cause each
Principal to furnish to Lender, within 60 days after the end of each fiscal year
of Borrower, a balance sheet, a statement of income and expenses and a statement
of cash flows,  each in reasonable  detail,  prepared in  accordance  with sound
accounting  principles   customarily  used  in  the  real  estate  industry  and
consistently  applied  and  certified  as true and  complete  by Borrower or its
general partner or chief financial  officer and each Principal,  as the case may
be.  Borrower shall  furnish,  together with the foregoing  quarterly  financial
statements and at any other time upon five (5) business days of Lender's written
request  (provided Lender shall not make such request more than two (2) times in
any twelve (12) month  period),  (a) a rent roll for the  Property,  showing the
name of each  tenant,  and for  each  tenant,  the  space  occupied,  the  lease
expiration  date,  the rent  payable,  the rent paid to date,  and the  security
deposit  being  held for such  tenant,  (b) a leasing  activity  report  for the
Property during such fiscal quarter, (c) a capital expenditure report indicating
the type and amount of each capital expenditure made during such fiscal quarter,
and (d) any other  information  that Lender may reasonably  require,  all of the
foregoing  shall be  certified  as true and  complete by Borrower or its general
partner or chief  financial  officer.  In  addition,  Borrower  shall cause each
Principal to provide to Lender a draft copy of his/her/its  financial statements
prepared in accordance with sound accounting  principles  consistently  applied,
certified by such  Principal to be a true and  complete  copy of such  financial
statements and in form reasonably  satisfactory to Lender, within 60 days of the
end of each  calendar year with a final  version of such  Principal's  financial
statements to be provided  within 90 days of the end of such calendar  year. All
of the  information  required  by  Lender  in  this  paragraph  must  be in form
acceptable to Lender in its reasonable  discretion.  If Borrower fails to timely
furnish  Lender with any of the financial  information  and reports set forth in
this  paragraph  within the required time periods,  Lender shall have the right,
acting  in its sole  discretion,  to hire a  certified  public  accounting  firm
acceptable  to Lender,  to prepare  such  financial  information  and reports in
accordance with generally accepted accounting  principles,  on an audited basis.
The costs and  expenses  of such  accounting  firm shall be paid by  Borrower on
demand and, to the extent advanced by Lender become  additional  Indebtedness of
Borrower  secured by the Loan  Documents,  with  interest  thereon from the date
advanced  by Lender at the Default  Rate.  Additionally,  if  Borrower  fails to
timely  furnish  Lender with any of the  financial  information  and reports set
forth in this  paragraph  within the  required  time  periods,  Lender  shall be
entitled  to  receive  a  late  charge  equal  to  $500.00  for  each  financial
information  and/or  report not so  furnished  to Lender  (the  "Financial  Late
Charge").  The Financial Late Charge shall be due and payable by Borrower within
five (5)  business  days after  receipt by  Borrower of an invoice for same from
Lender and until paid,  the  Financial  Late Charge  shall bear  interest at the
Default Rate, and shall be deemed additional Indebtedness of Borrower secured by
the Loan Documents.

<PAGE>


11.    Hazardous Materials.

       Borrower covenants and agrees that it (a) shall not use, generate, store,
or allow to be generated, stored or used, any "Hazardous Materials" (hereinafter
defined) on the Property,  except in the ordinary course of Borrower's  business
and in accordance with all "Environmental Laws" (hereinafter defined), (b) shall
at all times  maintain  the  Property  in full  compliance  with all  applicable
Environmental  Laws,  including  timely  remediating  the  Property  if and when
required,  and  (c)  shall  reasonably  cause  compliance  by  all  tenants  and
sub-tenants on the Property with Borrower's  covenants and agreements  contained
in this Paragraph 11.  Notwithstanding  the foregoing,  Lender acknowledges that
Borrower has informed it in writing of certain currently existing  conditions on
or about the Property.

       Upon obtaining  knowledge thereof,  Borrower shall promptly notify Lender
in  writing of (i) any  investigation,  claim or other  proceeding  by any party
caused or threatened in connection with any Hazardous Materials on the Property,
or the failure or alleged  failure of the Property to comply with any applicable
Environmental  Laws, or (ii) Borrower's  discovery of any condition on or in the
vicinity of the  Property  that could cause the  Property to fail to comply with
applicable Environmental Laws.

       The term "Environmental  Laws" shall include any federal,  state or local
laws or regulations relating to health, safety or protection of the environment.
The term "Hazardous Materials" shall include Hazardous Substances, as defined by
the  Comprehensive  Environmental  Response,  Compensation and Liability Act, 42
U.S.C.  ss.9601 et seq., any petroleum or petroleum products  (excluding a small
quantity of gasoline and oil used in  maintenance  equipment  on the  Property),
asbestos or asbestos  containing  material,  or any other hazardous  substances,
hazardous wastes or hazardous materials as defined by other Environmental Laws.

12.    Representations and Covenants.

              (a) If  Borrower  is a  corporation,  it  represents  that it is a
       corporation duly organized,  existing and in good standing under the laws
       of its  state of  incorporation,  that it is duly  qualified  and in good
       standing under the laws of the state where the Land is located,  and that
       the execution and delivery of the Loan  Documents and the  performance of
       the obligations  thereunder are within Borrower's  corporate powers, have
       been duly  authorized by all necessary  action of its board of directors,
       and do not  contravene  the terms of its  articles  of  incorporation  or
       by-laws.

              (b) If Borrower is a general or limited  partnership  or a limited
       liability  company,  it represents that it is duly formed,  organized and
       existing  in the  state  of its  formation,  that it is  qualified  to do
       business under the laws of the state where the Land is located,  and that
       the execution and delivery of the Loan  Documents and the  performance of
       the  obligations  thereunder  do  not  conflict  with  any  provision  of
       Borrower's  partnership agreement or operating agreement,  as applicable,
       and all other certificates and agreements  governing  Borrower,  and have
       been duly authorized by all necessary action of its partners or members.

<PAGE>


              (c) Borrower represents that, to the best of Borrower's knowledge,
       (i) the execution and delivery of the Loan Documents,  the payment of the
       Indebtedness,  and the  performance of the Obligations do not violate any
       law or conflict  with any  agreement or court order by which  Borrower is
       bound,  (ii) no consent or approval of any governmental  authority or any
       third  party  is  required  for the  execution  or  delivery  of the Loan
       Documents,  the payment of the  Indebtedness,  and the performance of the
       Obligations,   and  (iii)  the  Loan  Documents  are  valid  and  binding
       agreements, enforceable in accordance with their terms.

              (d) Borrower  represents  that (i) it is lawfully  seized with fee
       simple  title in the  estate  hereby  conveyed;  (ii) it has the right to
       mortgage,  convey,  assign  and grant a first  security  interest  in the
       Property;  (iii) the Property is unencumbered,  and Borrower will warrant
       and defend title to the Property against all claims and demands,  subject
       to  encumbrances  (including  the  Existing  Mortgages),   easements  and
       restrictions  listed in a schedule of exceptions to coverage in the title
       insurance  policy  accepted by Lender insuring  Lender's  interest in the
       Property; and (iv) it has no operations,  assets or activities other than
       the Property.

              (e)  Borrower  represents  and  covenants  that  to  the  best  of
       Borrower's  knowledge after due investigation (i) all material  licenses,
       permits, approvals, franchises, and certificates,  including certificates
       of completion  and occupancy  permits,  required by law or regulation for
       the  ownership  and  operation of the Property have been obtained and are
       and shall remain in full force and effect; and (ii) the use and occupancy
       of the Property is and shall remain in compliance with all laws.

              (f) Borrower  represents that to the best of Borrower's  knowledge
       all of the  improvements  on the Land lie wholly within the boundaries of
       and building line  restrictions  relating to the Land and no improvements
       located on  adjoining  lands  encroach  upon the Land so as to affect the
       value or  marketability  of the Property,  except those which are insured
       against  by the  title  insurance  policy  accepted  by  Lender  insuring
       Lender's interest in the Property.

              (g) None of Borrower, any Principal,  or to the best of Borrower's
       knowledge  after  due  investigation,  any  other  holder  of a direct or
       indirect  legal or  beneficial  interest in Borrower is or will be, held,
       directly   or   indirectly,   by  a   "foreign   corporation,"   "foreign
       partnership,"   "foreign  trust,"  "foreign  estate,"  "foreign  person,"
       "affiliate" of a "foreign person" or a "United States  intermediary" of a
       "foreign  person"  within the meaning of IRC Sections  897 and 1445,  the
       Foreign  Investments in Real Property Tax Act of 1980, the  International
       Foreign   Investment  Survey  Act  of  1976,  the  Agricultural   Foreign
       Investment  Disclosure Act of 1978, the regulations  promulgated pursuant
       to such acts or any amendments to such acts.

              (h) None of Borrower or any Principal is insolvent,  and there has
       been no (i)  assignment  made for the benefit of the  creditors of any of
       them,  (ii)  appointment  of a  receiver  for  any of  them  or  for  the
       properties of any of them, or (iii) any  bankruptcy,  reorganization,  or
       liquidation proceeding instituted by or against any of them.

<PAGE>


              (i)   There   has  been  no   material   adverse   change  in  the
       representations  made or information  heretofore supplied by or on behalf
       of Borrower or any Principal in connection  with the Loan as to Borrower,
       any Principal, or the Property.

              (j)  Except as  previously  disclosed  in the title  report on the
       Property  delivered to Lender in  connection  with the Loan,  there is no
       litigation,    arbitration,   or   other   proceeding   or   governmental
       investigation pending or, to Borrower's knowledge,  threatened against or
       relating to Borrower, any Principal, or the Property.

              (k) The  proceeds  evidenced  by the Note will be used by Borrower
       solely and exclusively for proper business  purposes and will not be used
       for the purchase or carrying of registered  equity  securities within the
       purview and operation of any regulation  issued by the Board of Governors
       of the Federal Reserve System or for the purpose of releasing or retiring
       any indebtedness which was originally incurred for any such purpose.

              (l) Borrower  represents and covenants that all Leases of space in
       the Property existing as of the date hereof are in writing.

              (m)  Borrower  covenants  that,  after  closing,  Lender  shall be
       allowed to advertise  in the various news or financial  media that Lender
       has provided the Loan to Borrower.

              (n) Borrower  represents  and covenants  that it does not have and
       will not incur any other  indebtedness  other than (i) the  Indebtedness,
       (ii) trade payables incurred in the ordinary course of business and (iii)
       an unsecured lien of working credit,  on terms  reasonably  acceptable to
       Lender, in an amount not to exceed $1,280,000.

              (o)  Borrower  has  made  an   assessment  of  the  microchip  and
       computer-based  systems and the  software  used in its business and based
       upon such  assessment  believes  that it will be Year 2000  Compliant  by
       January 1, 2000. "Year 2000 Compliant" means that all software,  embedded
       microchips and other processing capabilities utilized by, and material to
       the business  operations or financial  condition of, Borrower are able to
       interpret,  store, transmit, receive and manipulate data on and involving
       all calendar  dates  correctly  and without  causing any abnormal  ending
       scenarios in relation to dates in and after the calendar year 2000.  From
       time to time, at the request of Lender,  Borrower shall provide to Lender
       such updated  information as is requested regarding its efforts to become
       Year 2000 Compliant.

13.    Leases of the Property/Absolute Assignment,  License to Receive and Apply
       Rents.

       The parties  intend that this Mortgage  grants a present,  absolute,  and
unconditional  assignment of the Rents and shall,  immediately  upon  execution,
give  Lender the right to collect  the Rents and to apply them in payment of the
principal,  interest and all other sums payable under the Loan  Documents.  Such
assignment and grant shall continue in effect until the  Indebtedness is paid in
full and all  Obligations  are fully  satisfied.  Subject to the  provisions set
forth  herein  and  provided  there is no Event of  Default,  Lender  grants  to
Borrower a revocable license to enforce

<PAGE>


the Leases and  collect the Rents as they become due  (excluding,  however,  any
Lease termination, cancellation, option or similar payments, (unless Borrower is
simultaneously  entering into a lease for the space surrendered with a tenant of
equal or  greater  creditworthiness  and upon terms and  conditions  at least as
favorable to the  Borrower as the  terminated  Lease,  or unless such Lease is a
Minor Lease,  as defined below) which Borrower agrees shall be held in trust and
turned over to Lender for credit to principal under the Loan, without payment of
any prepayment penalty, fee or Yield Maintenance Amount) and Borrower shall hold
the same,  in trust,  to be applied  first to the  payment  of all  impositions,
levies,  taxes,  assessments  and other  charges upon the  Property  (subject to
Paragraph  3 above),  second  to  maintenance  of  insurance  policies  upon the
Property  required  hereby,  third  to  the  expenses  of  Property  operations,
including maintenance and repairs required hereby (subject to Paragraphs 3 and 5
above),  fourth to the payment of that portion of the Indebtedness  then due and
payable, and fifth, the balance, if any, to or as directed by Borrower. Borrower
shall  deliver  such  Rents  to  Lender  as are  necessary  for the  payment  of
principal, interest and other sums payable under the Loan Documents as such sums
become due.

       Borrower shall comply with and observe Borrower's obligations as landlord
under all Leases.  After the date hereof,  Borrower shall not,  without Lender's
prior  written  consent,  which consent  shall not be  unreasonably  withheld or
delayed,  execute or materially modify or amend any commercial Lease, other than
self storage leases or leases of less than 15,000 rentable square feet (a "Minor
Lease").  Other than with respect to Minor Leases,  Borrower shall not,  without
Lender's prior written consent, which consent shall not be unreasonably withheld
or delayed,  cancel or terminate any Lease or accept a surrender  thereof unless
Borrower is simultaneously  entering into a lease for the space surrendered with
a tenant of equal  creditworthiness  and upon terms and  conditions  at least as
favorable to the  Borrower as the Lease  terminated.  All Leases and  amendments
thereto  shall be on the form of lease  previously  approved by Lender with such
changes as are  reasonably  required by tenants and  approved  by  Borrower,  as
landlord,  exercising  prudent leasing  standards.  The current form of Lease is
acceptable to Lender.  All commercial  Leases,  including  self storage  leases,
executed  or renewed  after the date  hereof  shall  provide  for  rental  rates
comparable   to  existing   local   market  rates  and  shall  be  arm's  length
transactions. Borrower shall not be authorized to enter into any ground lease of
the Property without Lender's prior written approval.  If Lender consents to any
new Lease or the renewal of any existing  Lease,  at Lender's  written  request,
Borrower  shall  cause  the  tenant   thereunder  to  execute  a  subordination,
non-disturbance  and  attornment  agreement  in form  and  substance  reasonably
satisfactory  to Lender  contemporaneously  with the  execution  of such  Lease.
Borrower, at Lender's written request, shall furnish Lender with executed copies
of all  Leases.  All  Leases  other  than  for  space in the  Property  shall be
terminable  on not less than 90 days'  notice,  unless  approved  in  writing by
Lender prior to Borrower's  execution thereof. Any requested consent or approval
of Lender hereunder shall be deemed approved if not denied in writing within ten
(10) business days after the date on which Lender  receives such request and all
information  reasonably  necessary to consider  such  request,  provided that if
Lender has not requested such information within ten (10) days after the date on
which Lender  receives  such request,  such consent or approval  shall be deemed
approved.

       Until Lender takes title to or  possession  or control of the Property by
foreclosure,  mortgagee in possession or otherwise, this Mortgage shall not make
Lender responsible for the control, care, management,  or repair of the Property
or any  personal  property  or for the  carrying  out of any of the terms of the
Leases.  Until Lender takes title to or possession or control of the

<PAGE>


Property by foreclosure,  mortgagee in possession or otherwise,  Borrower hereby
acknowledges and agrees: (i) Borrower is and will remain liable under the Leases
to the same extent as though this  Mortgage  had not been made;  and (ii) Lender
has not by this Mortgage  assumed any of the  obligations  of Borrower under the
Leases,  except as to such  obligations  which  arise  after such time as Lender
shall  have  taken  title  to or  possession  or  control  of  the  Property  by
foreclosure,  mortgagee in possession or otherwise.  Until Lender takes title to
or possession or control of the Property by foreclosure, mortgagee in possession
or otherwise,  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 Property,  except to the extent any such injury or damage is caused
by Lender's gross negligence or willful misconduct.  Until Lender takes title to
or possession or control of the Property by foreclosure, mortgagee in possession
or otherwise, this Mortgage shall not be deemed to impose upon Lender any of the
obligations or duties of the landlord or Borrower provided in any Lease.

14.    Estoppel Certificate.

       Borrower shall,  within 10 days after Lender's written  request,  furnish
Lender  with a written  statement,  duly  acknowledged,  setting  forth the sums
secured by the Loan  Documents and any right of set-off,  counterclaim  or other
defense which exists against such sums and the Obligations.

15.    Transfers of the Property or Beneficial Interest in Borrower; Assumption.

       (a) Except as permitted  in  Paragraphs  15(b) and 15(c) below,  Borrower
agrees that Borrower  shall not,  without the prior  written  consent of Lender,
sell or transfer the Property or any part thereof or any interest therein;

       (b) a sale  or  transfer  of the  Property  within  the  meaning  of this
Paragraph  15 shall be deemed to include,  (i) an  installment  sales  agreement
wherein  Borrower agrees to sell the Property or any part thereof for a price to
be  paid in  installments;  (ii)  an  agreement  by  Borrower  leasing  all or a
substantial  part of the  Property  for other than actual  occupancy  by a space
tenant thereunder or a sale,  assignment or other transfer of, or the grant of a
security  interest  in,  Borrower's  right,  title and interest in and to all or
substantially all of the Leases or Rents;  (iii) if Borrower,  or if any general
partner or managing  member of  Borrower  is a  corporation,  the  voluntary  or
involuntary  sale,  conveyance,  transfer  or  pledge  of more  than 49% of such
corporation's  stock (or the stock of any  corporation  directly  or  indirectly
controlling  such  corporation by operation of law or otherwise)  whether in one
transfer or a series of  transfers  or the  creation or issuance of new stock by
which an aggregate of more than 49% of such corporation's  stock shall be vested
in a party or parties who are not now stockholders  whether in one transfer or a
series of transfers;  (iv) if Borrower or any general partner or managing member
of Borrower is a limited or general  partnership or joint  venture,  the change,
removal or resignation of a general partner or managing partner, or the transfer
or pledge of the partnership interest of any general partner or managing partner
of such  partnership  or any  profits or proceeds  relating to such  partnership
interest  or the  transfer  of more  than 49% in the  aggregate  of any  limited
partnership interests in such partnership whether in one transfer or a series of
transfers; (v) if Borrower or any general partner or managing member of Borrower
is a limited  liability  company,

<PAGE>


the change, removal or resignation of the managing member of such company or any
profits or proceeds relating to such membership interest or the transfer of more
than 49% in the aggregate of any membership interests in such company whether in
one  transfer  or a series of  transfers;  and (vi)  without  limitation  to the
foregoing,  except as  permitted in (iii) (iv) and (v) above,  any  voluntary or
involuntary sale,  transfer,  conveyance or pledge by any person or entity which
directly or indirectly  controls  Borrower (by operation of law or otherwise) of
its direct or indirect controlling interest in Borrower.

       (c)  Anything  herein  to the  contrary  notwithstanding,  the  following
transfers shall be permitted:

       (i)    a Family Member  Transfer.  The transfer of any direct or indirect
              interest in any partner of Borrower may without the prior  consent
              of Lender,  be made  provided  that such  transfer  shall be to an
              Immediate  Family  Member or shall be a  transfer  of any  limited
              partnership interest in a limited partner of Borrower by a limited
              partner thereof;  provided that any such transfer shall not result
              in a  termination  of Borrower or a change in the  management  and
              control  of  Borrower.  For  purposes  hereof,  "Immediate  Family
              Member"   shall  mean  with  respect  to  any   individual,   such
              individual's  parents,  a current or former  spouse,  siblings  or
              children or any trust for the benefit of, or other  entity  wholly
              owned by, such individual or such individual's parents, current or
              former spouse, siblings or children; or

       (ii)   a Special Transfer. For purposes hereof,  "Special Transfer" shall
              mean  a sale  or  transfer  of the  Property  to a  transferee  (a
              "Permitted  Transferee")  which shall assume in writing all of the
              obligations of Borrower under the Loan and provided that:

                     (1) no Event of Default  or event  which with the giving of
              notice or the passage of time would constitute an Event of Default
              shall have occurred and remain uncured;

                     (2) the  Permitted  Transferee  and  Principal  shall  be a
              reputable entity or person of good character,  creditworthy,  with
              sufficient financial worth considering the obligations assumed and
              undertaken, as reasonably determined by Lender;

                     (3) the Permitted Transferee and its property manager shall
              have  sufficient  experience in the  ownership  and  management of
              properties  similar to the Property  satisfactory to Lender in its
              reasonable discretion and Lender shall be provided with reasonable
              evidence  thereof (and reserves the right to approve the Permitted
              Transferee  without  approving  the  substitution  of the property
              manager, if any);

                     (4) Lender shall have received evidence in writing from any
              applicable  rating  agencies  to the  effect  that such a sale and
              assumption  of

<PAGE>


              the Loan by such  purchaser  will not  result in a  qualification,
              withdrawal or downgrade of the ratings in effect immediately prior
              to such  sale for any  securities  issued in  connection  with any
              securitization of the Loan which are then outstanding;

                     (5)  the  Permitted  Transferee  shall  have  executed  and
              delivered to Lender an assumption  agreement in form and substance
              reasonably   acceptable  to  Lender,   evidencing  such  Permitted
              Transferee's  agreement  to abide and be bound by the terms of the
              Note,  this Mortgage and the other Loan  Documents,  together with
              such legal  opinions and title  insurance  endorsements  as may be
              reasonably requested by Lender;

                     (6) Lender shall have received  payment of a transferee fee
              in an  amount  equal  to one  percent  (1.0%)  of the  outstanding
              principal balance of the Indebtedness; and

                     (7)  Lender  shall have  received  payment of all costs and
              expenses  incurred by Lender in  connection  with such  assumption
              (including reasonable attorney's fees and costs),

              provided further,  however, that the right to effectuate a Special
              Transfer  shall only be  available  in  connection  with the first
              three (3) sales or  transfers of the  Property  subsequent  to the
              closing of the Loan; or

       (iii)  an Affiliate Transfer.  For purposes hereof,  "Affiliate Transfer"
              shall mean a sale or transfer of the Property to a transferee  (an
              "Affiliate  Transferee")  which shall assume in writing all of the
              obligations  of  Borrower  under  the  Loan  with  no  release  of
              Principals and provided that:

                     (1) no Event of Default  or event  which with the giving of
              notice or the passage of time would constitute an Event of Default
              shall have occurred and remain uncured;

                     (2) the Affiliate Transferee shall be a reputable entity or
              person of good character,  creditworthy, with sufficient financial
              worth  considering  the  obligations  assumed and  undertaken,  as
              reasonably determined by Lender;

                     (3)  such   Affiliate   Transferee   is  either  a  limited
              partnership  or  limited  liability  company  of which  Robert  F.
              Gossett,   Jr.  is  the  general   partner  or  managing   member,
              respectively,   or  some  other  entity   directly  or  indirectly
              controlled by Robert F. Gossett, Jr.;

                     (4) Lender shall have received evidence in writing from any
              applicable  rating  agencies  to the  effect  that such a sale and
              assumption  of the Loan by such  purchaser  will not  result  in a
              qualification,  withdrawal  or

<PAGE>


              downgrade of the ratings in effect  immediately prior to such sale
              for any securities issued in connection with any securitization of
              the Loan which are then outstanding;

                     (5)  the  Affiliate  Transferee  shall  have  executed  and
              delivered to Lender an assumption  agreement in form and substance
              reasonably   acceptable  to  Lender,   evidencing  such  Affiliate
              Transferee's  agreement  to abide and be bound by the terms of the
              Note,  this Mortgage and the other Loan  Documents,  together with
              such legal  opinions and title  insurance  endorsements  as may be
              reasonably requested by Lender; and

                     (6)  Lender  shall have  received  payment of all costs and
              expenses  incurred by Lender in  connection  with such  assumption
              (including reasonable attorney's fees and costs).

              provided  further,  however,  that  the  right  to  effectuate  an
              Affiliate  Transfer shall only be available in connection with the
              first three such transfers subsequent to the closing of the Loan.

16.    No Additional Liens.

       Borrower  covenants  not to execute  any  mortgage,  security  agreement,
assignment  of leases and rents or other  agreement  granting a lien (except the
liens  granted to Lender or permitted by the Loan  Documents)  or, except as set
forth in  Paragraph 2 above,  take or fail to take any other  action which would
result in a lien  against  the  Property  or the  interest  of  Borrower  in the
Property without the prior written consent of Lender, provided, however, that in
the case of an involuntary lien, Borrower shall have 10 days after prior written
notice from Lender to remove, bond over or otherwise satisfy such lien.

17.    Single Asset Entity.

       Borrower shall not hold or acquire, directly or indirectly, any ownership
interest  (legal or equitable) in any real or personal  property  other than the
Property,  or become a  shareholder  of or member or partner in any entity  that
acquires or holds any property  other than the Property,  until such time as the
Indebtedness has been fully repaid and all Obligations are satisfied. Borrower's
articles of  incorporation,  partnership  agreement or operating  agreement,  as
applicable,  limit its purpose to the acquisition,  operation and disposition of
the Property,  and such purposes shall not be amended  without the prior written
consent of Lender. Borrower covenants:

              (a) To maintain its assets,  accounts,  books, records,  financial
       statements,  stationery,  invoices,  and  checks  separate  from  and not
       commingled with any of those of any other person or entity;

              (b) To  conduct  its own  business  in its own  name,  pay its own
       liabilities out of its own funds,  pay the salaries of its own employees,
       allocate  fairly and  reasonably  any

<PAGE>


       overhead  for shared  employees  and office  space,  and to  maintain  an
       arm's-length relationship with its affiliates;

              (c) To hold  itself out as a separate  entity,  correct  any known
       misunderstanding  regarding  its  separate  identity,  maintain  adequate
       capital in light of its contemplated business operations, and observe all
       organizational formalities;

              (d) Not to amend its  organizational  documents  without  Lender's
       approval;

              (e) Not to  guarantee  or  become  obligated  for the debts of any
       other  entity  or person or hold out its  credit  as being  available  to
       satisfy the obligations of others, including not acquiring obligations or
       securities of its partners, members or shareholders; and

              (f) Not to pledge its assets for the  benefit of any other  entity
       or person or make any loans or advances to any person or entity.

18.    Borrower and Lien Not Released.

       Without  affecting  the  liability of Borrower or any other person liable
for the payment of the Indebtedness, and without affecting the lien or charge of
this Mortgage as security for the payment of the Indebtedness,  Lender may, from
time to time and without notice to any junior lien holder or holder of any right
or other interest in and to the Property:  (a) release any person so liable, (b)
waive or modify any  provision of this  Mortgage or the other Loan  Documents or
grant other indulgences,  (c) release all or any part of the Property,  (d) take
additional  security for any obligation  herein  mentioned,  (e) subordinate the
lien or charge of this Mortgage, (f) consent to the granting of any easement, or
(g) consent to any map, plat or plan of the Property.

19.    Uniform Commercial Code Security Agreement.

       This  Mortgage  shall  constitute  a security  agreement  pursuant to the
Uniform  Commercial  Code for any of the items  specified  herein as part of the
Property  which,  under  applicable  law, may be subject to a security  interest
pursuant to the Uniform  Commercial  Code,  and Borrower  hereby grants Lender a
security  interest in said items.  Any  reproduction  of this Mortgage or of any
other  security  agreement  or  financing  statement  shall be  sufficient  as a
financing  statement.  In  addition,  Borrower  agrees to execute and deliver to
Lender any financing statements, as well as extensions,  renewals and amendments
thereof,  and  reproductions of this Mortgage in such form as Lender may require
to perfect a security  interest with respect to said items.  Borrower  shall pay
all costs of filing such  financing  statements  and any  extensions,  renewals,
amendments and releases thereof, and shall pay all reasonable costs and expenses
of any record searches for financing  statements Lender may reasonably  require.
Lender shall have the remedies of a secured  party under the Uniform  Commercial
Code.

20.    Events of Default; Acceleration of Indebtedness; Remedies.

       The  occurrence  of  any  one  or  more  of the  following  events  shall
constitute an "Event of Default" under this Mortgage:

<PAGE>


              (a) failure of  Borrower  to pay,  within 10 days of the due date,
       any of the Indebtedness,  including any payment due under the Note or any
       other Loan Documents; or

              (b) failure of Borrower to strictly comply with Paragraphs 11, 15,
       16 and 17 of this Mortgage; or

              (c) a petition  under any Chapter of Title 11 of the United States
       Code or any similar law or regulation is filed by or against  Borrower or
       any Principal (and in the case of an involuntary  petition in bankruptcy,
       such  petition  is not  discharged  within 90 days of its  filing),  or a
       custodian,  receiver or trustee for any of the Property is appointed,  or
       Borrower  or any  Principal  makes  an  assignment  for  the  benefit  of
       creditors,  or any of them are adjudged insolvent by any state or federal
       court of competent jurisdiction,  or an attachment or execution is levied
       against any of the Property not discharged within 90 days; or

              (d) the  occurrence of an "Event of Default"  under and as defined
       in any other Loan Document; or

              (e)  Borrower  is in  default  in  the  payment  of  any  material
       indebtedness  (other than the  Indebtedness) and such default is declared
       and is not cured  within  the time,  if any,  specified  therefor  in any
       agreement governing the same; or

              (f) any  statement,  report or  certificate  made or  delivered to
       Lender by Borrower or any Principal is not  materially  true and complete
       when made; or

              (g) failure of Borrower,  within 30 days after written  notice and
       demand from  Lender,  to satisfy  each and every  Obligation,  other than
       those set forth in the subparagraphs  above;  provided,  however, if such
       failure to satisfy such  Obligation  cannot by its nature be cured within
       30 days,  and if Borrower  commences to cure such failure  promptly after
       written  notice  thereof  and  thereafter  diligently  pursues the curing
       thereof (and then in all events  cures such failure  within 60 days after
       the  original  notice  thereof  unless  further  extended  as  reasonably
       determined by Lender)  Borrower shall not be in default  hereunder during
       such period of diligent curing.

       Upon the  occurrence  of an Event of Default,  the  Indebtedness,  at the
option of the Lender, shall become immediately due and payable without notice to
Borrower,  and  Lender  shall be  entitled  to all of the  rights  and  remedies
provided in the Loan Documents or at law or in equity.  Each remedy  provided in
the Loan  Documents is distinct and  cumulative  to all other rights or remedies
under the Loan  Documents  or  afforded by law or equity,  and may be  exercised
concurrently, independently, or successively, in any order whatsoever.

<PAGE>


21.    Entry; Foreclosure; Remedies.

       Upon the occurrence of an Event of Default, (a) Borrower,  upon demand of
Lender,  shall forthwith  surrender to Lender the actual  possession,  or to the
extent permitted by law, Lender itself,  or by such officers or agents as it may
appoint,  may enter and take possession of all or any part of the Property,  and
may exclude Borrower and its agents and employees wholly therefrom, and may have
joint access with  Borrower to the books,  papers and accounts of Borrower;  and
(b) if Borrower  shall for any reason fail to  surrender or deliver the Property
or any part thereof after such demand by Lender, Lender may obtain a judgment or
decree  conferring on Lender the right to immediate  possession or requiring the
delivery to Lender of the Property,  and Borrower  specifically  consents to the
entry of such  judgment or decree.  Upon every such  entering  upon or taking of
possession,  Lender  may hold,  store,  use,  operate,  manage and  control  the
Property and conduct the business  thereof.  Lender shall have no liability  for
any loss, damage,  injury, cost or expense resulting from any action or omission
by it or its representatives which was taken or omitted in good faith.

       When the  Indebtedness  or any part thereof shall become due,  whether by
acceleration  or otherwise,  Lender may,  either with or without entry or taking
possession as herein  provided or otherwise,  proceed by suit or suits at law or
in equity  or by any  other  appropriate  proceeding  or  remedy to (a)  enforce
payment  of the Note or the  performance  of any term,  covenant,  condition  or
agreement of Borrower  under any of the Loan  Documents,  (b) foreclose the lien
hereof for the Indebtedness or part thereof and sell the Property as an entirety
or  otherwise,  as Lender may  determine,  and/or (c) pursue any other  right or
remedy  available to it under or by the law and  decisions of the State in which
the  Property  is  located.  The  failure  to join any  tenant or tenants of the
Property as a party  defendant in any  foreclosure  action or the failure of any
such order or judgment to  foreclose  their  rights shall not be asserted by the
Borrower  as  a  defense  in  any  civil  action   instituted   to  collect  the
Indebtedness,  or any  part  thereof,  any  statute  or rule of law at any  time
existing to the contrary notwithstanding.

       Upon any foreclosure  sale,  Lender may bid for and purchase the Property
and shall be entitled to apply all or any part of the  Indebtedness  as a credit
to the purchase price.

       Upon the occurrence of an Event of Default,  then, without further notice
to or the consent of  Borrower,  Lender shall be entitled to exercise all of the
rights and remedies  contained in this Mortgage or in any other Loan Document or
otherwise  available  at law or in equity  including  the right to do any one or
more of the following:

              (a) To lawfully  enter  upon,  take  possession  of and manage the
       Property for the purpose of collecting the Rents;

              (b) To require  Borrower to hold all Rents  collected in trust for
       the benefit of Lender;

              (c)  Dispossess  by  the  usual  summary  proceedings  any  Tenant
       defaulting in the payment of Rent to Borrower;

              (d) Lease the Property or any part thereof;

<PAGE>


              (e) Repair, restore, and improve the Property;

              (f)  Apply  the  Rent  after  payment  of  Property   expenses  as
       determined by Lender to Borrower's indebtedness under the Loan Documents;
       and

              (g)  Apply to any court of  competent  jurisdiction  for  specific
       performance of this Mortgage,  an injunction against the violation hereof
       and/or the appointment of a receiver.

       In any action to foreclose the lien or liens of this Mortgage,  including
a partial  foreclosure,  no defense,  counterclaim  (other  than a mandatory  or
compulsory  counterclaim),  or setoff shall be  available to the Borrower  other
than one which (i) asserts that all moneys owed have been paid,  (ii) denies the
existence or sufficiency of the facts upon which the action is grounded or (iii)
raises an issue  concerning  the priority of liens or the statute of limitations
or  other  bar to an  action  based on the  passage  of  time.  If any  defense,
counterclaim  (other than a mandatory  or  compulsory  counterclaim)  or setoff,
other than one  permitted by the  preceding  sentence,  is timely raised in such
foreclosure  action, such defense,  counterclaim,  or setoff shall be dismissed;
provided,  however,  that if such defense,  counterclaim or setoff is based on a
claim  which  could be tried in an action for money  damages,  such claim may be
brought in a separate  action which shall not  thereafter be  consolidated  with
such foreclosure  action. The bringing of such separate action for money damages
shall not be deemed to afford any grounds for  staying the  foreclosure  action.
Any assignee of this Mortgage and the Note shall take the same free and clear of
all offsets,  counterclaims,  or defenses  which are unrelated to such documents
which the Borrower may have against any assignor of this  Mortgage and the Note,
other than one permitted by the first  sentence of this  paragraph,  and no such
unrelated  offset,  counterclaim,  or defense shall be interposed or asserted by
the Borrower  against any such assignee in any action or  proceeding  brought by
any such assignee upon this Mortgage or the Note and any such right to interpose
or assert any such offset, counterclaim, or defense against such assignee in any
such  action or  proceeding  is hereby  expressly  waived  by the  Borrower.  In
addition,  the Borrower  shall not make,  nor be entitled to make, any claim for
money  damages  against the Lender  based upon any claim or  assertion  that the
Lender has unreasonably withheld or delayed the Lender's consent and/or approval
with respect to any provisions contained in the Note, this Mortgage or any other
document which provides, in effect, that the Lender's consent and/or approval is
required and shall not be unreasonably withheld or delayed,  except that nothing
herein shall prevent a claim for direct monetary  damages in the event Lender or
its agents have been grossly  negligent or guilty of  fraudulent or illegal acts
or willful misconduct. The Borrower's sole remedy in such event shall be limited
to an action or  proceeding to enforce any such  provision  pursuant to specific
performance,  injunction,  or declaratory  judgment (except in the event of such
gross negligence or willful misconduct.)

       Any sale of the  Property  or any part  thereof or any  interest  therein
under or by virtue of this Mortgage, whether pursuant to foreclosure or power of
sale or otherwise, shall forever be a perpetual bar against the Borrower's right
to reacquire the Property.

         If the unpaid principal amount of and the premium, if any, and interest
on the Note at the time outstanding  shall have become due and payable and shall
not have been paid when due after any  applicable  notice and cure  period,  the
Lender may sell,  assign,  transfer and deliver the whole

<PAGE>


or, from time to time,  any part of the  Property,  or any  interest in any part
thereof,  at any  private  sale or at public  auction,  with or without  demand,
advertisement  or  notice,  for  cash,  on credit  or for  other  property,  for
immediate or future delivery,  and for such price or prices and on such terms as
the Lender in its sole discretion may determine, or as may be required by law or
permitted  herein.  The  Lender is hereby  granted a power of sale with  respect
thereto.

22.    Expenditures and Expenses.

       In any civil  action to foreclose  the lien hereof or  otherwise  enforce
Lender's rights, there shall be allowed and included as additional  Indebtedness
in  the  order  or  judgment  for  foreclosure  and  sale  or  other  order  all
expenditures  and  expenses  which  may be paid or  incurred  by or on behalf of
Lender,  including  attorneys' fees, costs and expenses,  receiver's fees, costs
and expenses,  appraiser's  fees,  engineers' fees,  outlays for documentary and
expert evidence, stenographers' charges, publication costs, and costs (which may
be estimates  as to items to be expended  after entry of said order or judgment)
of procuring all such abstracts of title, title searches and examination,  title
insurance policies,  Torrens'  Certificates and similar data and assurances with
respect to the title as Lender may deem reasonably necessary either to prosecute
such  civil  action  or to  evidence  to  bidders  at any sale  which may be had
pursuant to such order or judgment  the true  condition  of the title to, or the
value  of,  the  Property  (said   expenditures  and  expenses  are  hereinafter
collectively  referred  to as the  "Reimbursable  Expenses").  All  Reimbursable
Expenses,  and such costs, expenses and fees as may be incurred by Lender at any
time or times  hereafter  in the  protection  of the  Property,  in  maintaining
required insurance, in enforcing the Obligations,  and/or the maintenance of the
lien  established  by any of the  Loan  Documents,  including  accountants'  and
attorneys'  fees,  costs and expenses in any advice,  litigation,  or proceeding
affecting  the Loan  Documents or the  Property,  whether  instituted by Lender,
Borrower or any other party, or in preparation  for the  commencement or defense
of any  action  or  proceeding  or  threatened  action or  proceeding,  shall be
immediately due and payable to Lender by Borrower,  with interest thereon at the
Default Rate after the  expiration of any  applicable  notice and cure period as
provided  herein and as set forth in the Note,  and shall be secured by the Loan
Documents.  In  addition,  Borrower  shall  be  liable  for the  payment  of all
commissions and brokerage fees relating to the Loan.

23.    Application of Proceeds of Foreclosure Sale.

       The proceeds of any foreclosure sale of the Property shall be distributed
and applied in the order of priority  set forth in the Note with the excess,  if
any, being applied to any parties entitled thereto as their rights may appear.

24.    Appointment of Receiver or Mortgagee in Possession.

       If an Event of Default is continuing or if Lender shall have  accelerated
the Indebtedness, Lender, upon application to a court of competent jurisdiction,
shall be entitled  as a matter of strict  right,  without  further  notice,  and
without regard to the occupancy or value of any security for the Indebtedness or
the  insolvency  of any party bound for its  payment,  to the  appointment  of a
receiver or the  appointment of Lender to take  possession of and to operate the
Property,  and to collect  and apply the rents,  issues,  profits  and  revenues
thereof.

<PAGE>


25.    Forbearance by Lender Not a Waiver.

       Any  forbearance by Lender in exercising any right or remedy under any of
the Loan  Documents,  or otherwise  afforded by applicable  law,  shall not be a
waiver of or preclude the exercise of any right or remedy.  Lender's  acceptance
of payment of any sum secured by any of the Loan Documents after the due date of
such payment shall not be a waiver of Lender's  right to either  require  prompt
payment  when due of all other  sums so  secured  or to  declare  a default  for
failure to make prompt  payment.  The procurement of insurance or the payment of
taxes or other  liens or  charges  by Lender  shall not be a waiver of  Lender's
right to accelerate the maturity of the Indebtedness, nor shall Lender's receipt
of any awards,  proceeds or damages under  Paragraph 5 hereof operate to cure or
waive  Borrower's  default  in  payment  of  sums  secured  by any  of the  Loan
Documents.  With respect to all Loan Documents,  only waivers made in writing by
Lender shall be effective against Lender.

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 created by any of the Loan Documents or to
any action brought to enforce the Note or any other obligation secured by any of
the Loan Documents.

27.    Waiver of Homestead and Redemption.

       Borrower hereby waives all right of homestead  exemption in the Property.
Borrower  hereby  waives all right of  redemption  on behalf of Borrower  and on
behalf of all other  persons  acquiring  any  interest or title in the  Property
subsequent to the date of this Mortgage,  except decree or judgment creditors of
Borrower.

28.    Jury Trial Waiver.

       BORROWER AND LENDER BY ITS ACCEPTANCE OF THIS MORTGAGE HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON, OR
ARISING OUT OF THIS MORTGAGE AND THE OTHER LOAN  DOCUMENTS.  BORROWER AND LENDER
ACKNOWLEDGE  THAT THIS WAIVER IS A MATERIAL  INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP,  THAT EACH OF THEM HAS RELIED ON THIS WAIVER IN ENTERING INTO THIS
MORTGAGE  AND THE OTHER LOAN  DOCUMENTS  AND THAT EACH OF THEM WILL  CONTINUE TO
RELY ON THIS  WAIVER IN THEIR  RELATED  FUTURE  DEALINGS.  BORROWER  AND  LENDER
REPRESENT  AND  WARRANT  THAT EACH HAS HAD THE  OPPORTUNITY  TO REVIEW THIS JURY
WAIVER WITH ITS LEGAL COUNSEL,  AND THAT EACH KNOWINGLY AND  VOLUNTARILY  WAIVES
ITS JURY TRIAL RIGHTS.

29.    Notice.

       Except  for any  notice  required  under  applicable  law to be  given in
another  manner,  (a) any notice to Borrower  provided for in the Loan Documents
shall be given by sending such notice by Federal  Express or any other overnight
carrier  addressed  to Borrower at  Borrower's  address  stated

<PAGE>


above or at such other  address as Borrower may designate by notice to Lender as
provided herein,  and (b) any notice to Lender shall be given by Federal Express
or any other overnight carrier to Lender's address stated above or to such other
address as Lender may  designate by notice to Borrower as provided  herein.  Any
notice  provided for in the Loan Documents shall be deemed to have been given to
Borrower  or Lender on the first  business  day  following  such  sending in the
manner designated herein.

30.    Successors  and  Assigns  Bound;  Joint and  Several  Liability;  Agents;
       Captions.

       The covenants and agreements  contained in the Loan Documents shall bind,
and the rights thereunder shall inure to, the respective  successors and assigns
of Lender and Borrower,  subject to the  provisions  of Paragraph 15 hereof.  In
exercising  any rights under the Loan  Documents or taking any actions  provided
for  therein,  Lender  may act  through  its  employees,  agents or  independent
contractors as authorized by Lender. The captions and headings of the paragraphs
of this Mortgage are for convenience only and are not to be used to interpret or
define the provisions hereof.

31.    Governing Law; Severability.

       This  Mortgage  shall be governed by, and shall be construed and enforced
in accordance with, the internal laws of the State of Illinois without regard to
conflicts of law principles, provided, however, that to the extent the mandatory
provisions of the laws of another jurisdiction relating to (i) the perfection or
the effect of perfection or non-perfection  of the security  interests in any of
the  Property,  (ii) the lien,  encumbrance  or other  interest in the  Property
granted  or  conveyed  by  this  Mortgage,  or  (iii)  the  availability  of and
procedures  relating to any remedy  hereunder  or related to this  Mortgage  are
required to be governed by such other jurisdiction's laws, such other laws shall
be deemed to govern and control. The invalidity,  illegality or unenforceability
of any  provision of this  Mortgage and the Loan  Documents  shall not affect or
impair the  validity,  legality or  unenforceability  of the  remainder  of this
Mortgage and the other Loan  Documents,  and to this end, the provisions of this
Mortgage and the other Loan Documents are declared to be severable.

32.    Release.

       Upon payment of all sums secured by this  Mortgage,  Lender shall release
this  Mortgage.  Borrower  shall  pay  Lender's  reasonable  costs  incurred  in
releasing this Mortgage and any financing statements related hereto.

33.    Terms.

       As used in the Loan Documents,  (i) "business day" means a day when banks
are not required or authorized to be closed in Chicago,  Illinois;  and (ii) the
words "include" and "including" shall mean "including but not limited to" unless
specifically  set forth to the contrary.  All capitalized  terms used herein and
not otherwise  defined shall have the same meanings ascribed to them in the Note
and/or the other Loan Documents.

<PAGE>


34.    Loss of Note.

       Upon notice from Lender of the loss,  theft,  or  destruction of the Note
and upon receipt of indemnity from Lender  reasonably  satisfactory to Borrower,
or in the case of mutilation of the Note,  upon surrender of the mutilated Note,
Borrower  shall make and deliver a new note of like tenor in lieu of the then to
be superseded Note.

35.    Exculpation.

       This Mortgage and other Loan Documents and all of Borrower's  obligations
hereunder and  thereunder  are subject to the  provisions of Paragraph 10 of the
Note entitled  Exculpation and which are incorporated herein and therein by this
reference.

36.    Disclosure of Information.

       Lender  shall have the right (but shall be under no  obligation)  to make
available to any  necessary  and  appropriate  party for the purpose of granting
participations  in or selling,  transferring,  assigning or conveying all or any
part of the  Loan  (including  any  governmental  agency  or  authority  and any
prospective  bidder  at any  foreclosure  sale  of the  Property)  any  and  all
information  which Lender may have with  respect to the  Property and  Borrower,
whether provided by Borrower,  any Principal or any third party or obtained as a
result of any environmental assessments.  Borrower agrees that Lender shall have
no liability  whatsoever as a result of delivering  any such  information to any
third party,  and Borrower,  on behalf of itself and its successors and assigns,
hereby  releases  and  discharges  Lender  from any and all  liability,  claims,
damages,  or causes of action,  arising out of,  connected with or incidental to
the delivery of any such information to any third party.

37.    Sale of Loan; Securitization.

       Lender, at any time and without the consent of Borrower or any Principal,
may grant  participations  in or sell,  transfer,  assign  and convey all or any
portion of its right,  title and interest in and to the Loan,  this Mortgage and
the other Loan Documents,  any guaranties  given in connection with the Loan and
any  collateral  given to secure the Loan. In addition,  at any time and without
the  consent of  Borrower  or any  Principal,  Lender may  securitize  the Loan.
Borrower covenants to reasonably  cooperate with Lender's efforts in the sale or
rating and  securitization  of the Loan; such  cooperation  includes  Borrower's
obligation to (a) make  non-material  modifications  of the Loan Documents (such
modifications  shall not increase the amount of the  Indebtedness),  (b) provide
additional  information regarding Borrower's financial  statements,  (c) deliver
updated  information  regarding  Borrower and the Property,  (d) review Lender's
securitization  offering  materials  to the  extent  such  materials  relate  to
Borrower,  the Property or the Loan and (e) reasonably  respond to any inquiries
of Lender or other party relating  thereto;  provided such  cooperation does not
require  Borrower to incur any cost or expense,  or Lender has advanced funds to
cover such costs and  expenses.  Borrower  agrees to  represent  and warrant the
absence  of  misstatements  and/or  omissions  in the  information  relating  to
Borrower,  the Property and the Loan that is contained in the offering materials
and which has been  furnished to or approved by Borrower.  Borrower shall not be
liable  for  Lender's  post-closing  costs  incurred  pursuant  to any  sale  or
securitization of the Loan by Lender.

<PAGE>


38.    Exhibits and Riders.

       The  following   Exhibits  and  Riders  (which  may  contain   additional
representations,  warranties,  and  covenants) are attached to this Mortgage and
hereby made a part of this Mortgage: Exhibit A (legal description for Land).

39.    Lien Law.

       Pursuant to Section 13 of the New York Lien Law,  Borrower  shall receive
the advances secured hereby and shall hold the right to receive such advances as
a trust  fund to be  applied  first for the  purpose  of paying  the cost of any
improvement  and shall apply such  advances  first to the payment of the cost of
any such  improvement on the Property  before using any part of the total of the
same for any other  purpose.  Borrower will  indemnify and hold Lender  harmless
against any loss or liability, cost or expense,  including,  without limitation,
any  judgments,  attorney's  fees,  costs of appeal  bonds and  printing  costs,
arising out of or relating to any proceeding instituted by any claimant alleging
a  violation  by  Borrower  of  any  applicable  lien  law  including,   without
limitation, any section of Article 3-A of the New York Lien law.

40.    Property Improvements.

       The Property is not principally improved or to be improved by one or more
structures  containing in the aggregate not more than six  residential  dwelling
units, each dwelling unit having its own separate cooking facilities.

41.    Consolidation.

       This  Mortgage is intended  to amend and  restate in their  entirety  the
provisions  of the Existing  Mortgages,  but the  execution and delivery of this
Mortgage  shall not in any way be deemed to create a new principal  indebtedness
or impair the liens of the Existing Mortgages.  Borrower and Lender certify that
(a) this  Mortgage  secures the  principal  indebtedness  that is secured by the
Existing  Mortgages and secures no further or other  principal  indebtedness  or
obligation and (b) the maximum aggregate  principal amount secured hereby at the
execution  hereof,  or which under any  contingency may be secured hereby at any
time, is $32,000,000.


<PAGE>


       IN WITNESS WHEREOF, Borrower has executed this Mortgage or has caused the
same to be executed by its representatives thereunto duly authorized.

                                      BORROWER:

                                      475 Fifth  Avenue Limited  Partnership,
                                      a  Delaware limited partnership

                                      By:  475 Fifth-GP, Inc.,  a Delaware
                                           corporation, its sole general partner

                                           By: _________________________________
                                           Name: _______________________________
                                           Its: ________________________________





STATE OF ____________      )
                           ) SS
COUNTY OF __________       )

       I, ____________________________,  a Notary Public in and for said County,
in the  State  aforesaid,  DO  HEREBY  CERTIFY,  that  ___________________,  the
__________ president of 475 Fifth_GP,  Inc., a Delaware corporation  ("Corporate
G.P.")  and the  general  partner in 475 Fifth  Avenue  Limited  Partnership,  a
Delaware  limited  partnership,  who is  personally  known  to me to be the same
person whose name is subscribed  to the foregoing  instrument as such officer in
such Corporate G.P., appeared before me this day in person and acknowledged that
(he/she)  signed and  delivered  the said  instrument  as (his/her) own free and
voluntary act, as the free and voluntary act of Corporate  G.P., and as the free
and voluntary act of said limited partnership, for the uses and purposes therein
set forth.

       GIVEN under my hand and Notarial  Seal this ____ day of  _______________,
1999.


                                                  ------------------------
                                                      Notary Public

My Commission Expires:

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




<PAGE>


                                    EXHIBIT A

                                LEGAL DESCRIPTION