EXHIBIT 4.5

                                   PROMISSORY NOTE


          $13,500,000.00                               New York, New York
                                                             March __, 1999

               FOR VALUE RECEIVED AERC OF NC, LLC, a Delaware limited
          liability company, as maker, having its principal place of
          business at  5025 Swetland Court, Cleveland, Ohio 44143
          ("Borrower"), hereby unconditionally promises to pay to the order
          of THE CHASE MANHATTAN BANK, a New York banking corporation, as
          payee, having an address at 380 Madison Avenue, 10th Floor, New
          York, New York 10017 ("Lender"), or at such other place as the
          holder hereof may from time to time designate in writing, the
          principal sum of THIRTEEN MILLION FIVE HUNDRED THOUSAND AND
          00/100 DOLLARS ($13,500,000.00) in lawful money of the United
          States of America with interest thereon to be computed from the
          date of this Note at the Applicable Interest Rate (defined
          below), and to be paid in installments as follows:

                               ARTICLE 1  PAYMENT TERMS

               (a)  A payment of interest only on the tenth day of April,
          1999;

               (b)  A payment of interest on the unpaid principal balance
          on the tenth day of May, 1999 and on the tenth day of each
          calendar month thereafter up to and including the tenth day of
          April, 2000; and

               (c)  A payment of $95,106.45 on the tenth day of May, 2000
          and on the tenth day of each calendar month thereafter up to and
          including the tenth day of March, 2009;

          each of the payments to be applied as follows:

                    (i)  first, to the payment of interest computed at the
                         Applicable Interest Rate; and

                    (ii) the balance toward the reduction of the principal
                         sum;

          and the balance of the principal sum and all interest thereon
          shall be due and payable on the tenth day of April, 2009 (the
          "Maturity Date").  Interest on the principal sum of this Note
          shall be calculated by multiplying the actual number of days
          elapsed in the applicable period by a daily rate based upon a
          three hundred sixty (360) day year.  The first interest accrual
          period hereunder shall commence on and include the date that
          principal is advanced hereunder and shall end on and include the

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          next ninth (9th) day of a calendar month, unless principal is
          advanced on the ninth (9th) day of a month, in which case the
          first interest accrual period shall consist of only such ninth
          (9th) day.  Each interest accrual period thereafter shall
          commence on the tenth (10th) day of each calendar month during
          the term of this Note and shall end on and include the ninth
          (9th) day of the next occurring calendar month.

                                 ARTICLE 2  INTEREST

               The term "Applicable Interest Rate" as used in the Security
          Instrument (defined below) and this Note shall mean an interest
          rate equal to seven and three eighths percent (7.375%) per annum.


                         ARTICLE 3  DEFAULT AND ACCELERATION

               (a)  The whole of the principal sum of this Note, (b)
          interest, default interest, late charges and other sums, as
          provided in this Note, the Security Instrument or the Other
          Security Documents (defined below), (c) all other monies agreed
          or provided to be paid by Borrower in this Note, the Security
          Instrument or the Other Security Documents, (d) all sums advanced
          pursuant to the Security Instrument to protect and preserve the
          Property (defined below) and the lien and the security interest
          created thereby, and (e) all sums advanced and costs and expenses
          incurred by Lender in connection with the Debt (defined below) or
          any part thereof, any renewal, extension, or change of or
          substitution for the Debt or any part thereof, or the acquisition
          or perfection of the security therefor, whether made or incurred
          at the request of Borrower or Lender (all the sums referred to in
          (a) through (e) above shall collectively be referred to as the
          "Debt") shall without notice become immediately due and payable
          at the option of Lender if any payment required in this Note is
          not paid on or prior to the date when due or on the happening of
          any other default, after the expiration of any applicable notice
          and grace periods, herein or under the terms of the Security
          Instrument or any of the Other Security Documents (collectively,
          an "Event of Default").


                             ARTICLE 4  DEFAULT INTEREST

               Borrower does hereby agree that upon the occurrence of an
          Event of Default, Lender shall be entitled to receive and
          Borrower shall pay interest on the entire unpaid principal sum at
          a rate equal to the lesser of (a) five percent (5%) plus the
          Applicable Interest Rate  and (b) the maximum interest rate which
          Borrower may by law pay (the "Default Rate").  The Default Rate
          shall be computed from the occurrence of the Event of Default
          until the earlier of the date upon which the Event of Default is
          cured or the date upon which the Debt is paid in full.  Interest

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          calculated at the Default Rate shall be added to the Debt, and
          shall be deemed secured by the Security Instrument.  This clause,
          however, shall not be construed as an agreement or privilege to
          extend the date of the payment of the Debt, nor as a waiver of
          any other right or remedy accruing to Lender by reason of the
          occurrence of any Event of Default.

                          ARTICLE 5  PREPAYMENT; DEFEASANCE

               (a)  The principal balance of this Note may not be prepaid
          in whole or in part prior to the Maturity Date except as
          expressly permitted pursuant to Section 5(l) hereof.

               (b)  Subject to compliance with and satisfaction of the
          terms and conditions of this Article 5 and provided that no Event
          of Default exists under this Note, Borrower may elect on any
          Monthly Payment Date (defined below) after the Lockout Period
          Expiration Date (defined below), to release (the "Release") the
          Property from the lien of the Security Instrument by delivering
          to Lender (a "Defeasance"), as security for the payment of all
          interest and principal due and to become due pursuant to this
          Note throughout the term hereof, Defeasance Collateral (defined
          below) sufficient to generate Scheduled Defeasance Payments
          (defined below).  "Monthly Payment Date" shall mean the tenth day
          of each calendar month prior to the Maturity Date.  "Lockout
          Period Expiration Date" shall mean the earlier to occur of (A)
          April 10, 2002, or (B) the second anniversary of the "startup
          day" within the meaning of Section 860G(a)(9) of the IRS Code
          (defined below) of a REMIC Trust (defined below).

               (c)  As a condition precedent to a Defeasance, and prior to
          any Release, Borrower shall have complied with all of the
          following:

               (i)   Borrower shall provide not less than sixty (60) days
                     prior written notice to Lender of the Monthly Payment
                     Date upon which it intends to effect a Defeasance
                     hereunder (the "Defeasance Date").

               (ii)  All accrued and unpaid interest and all other sums
                     due under this Note, the Security Instrument and the
                     Other Security Documents up to the Defeasance Date
                     shall be paid in full on or prior to the Defeasance
                     Date.

               (iii) Borrower shall have delivered to Lender all necessary
                     documents to reflect that the principal balance of
                     this Note has been defeased.  This Note shall
                     thereafter be secured by the Defeasance Collateral
                     delivered in connection with the Defeasance.  After
                     Defeasance, this Note cannot be prepaid in whole or
                     in part or be the subject of any further Defeasance.

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               (iv)  Borrower shall execute and deliver to Lender any and
                     all certificates, opinions, documents or instruments
                     required by Lender in connection with the Defeasance
                     and Release, including, without limitation, a pledge
                     and security agreement satisfactory to Lender
                     creating a first priority lien on the Defeasance
                     Collateral (a "Defeasance Security Agreement").

               (v)   Borrower shall have delivered to Lender an opinion of
                     Borrower's counsel in form and substance satisfactory
                     to Lender stating (A) that the Defeasance Collateral
                     and the proceeds thereof have been duly and validly
                     assigned and delivered to Lender and that Lender has
                     a valid, perfected, first priority lien and security
                     interest in the Defeasance Collateral delivered by
                     Borrower and the proceeds thereof, and (B) that if
                     the holder of this Note shall at the time of the
                     Release be a REMIC (defined below), (1) the
                     Defeasance Collateral has been validly assigned to
                     the REMIC Trust which holds this Note (the "REMIC
                     Trust"), (2) the Defeasance has been effected in
                     accordance with the requirements of Treasury
                     Regulation 1.860(g)-2(a)(8) (as such regulation may
                     be amended or substituted from time to time) and will
                     not be treated as an exchange pursuant to Section
                     1001 of the IRS Code and (3) the tax qualification
                     and status of the REMIC Trust as a REMIC will not be
                     adversely affected or impaired as a result of the
                     Defeasance.  The term "REMIC" shall mean a "real
                     estate mortgage investment conduit" within the
                     meaning of Section 860D of the IRS Code. "IRS Code"
                     shall mean the United States Internal Revenue Code of
                     1986, as amended, and the related Treasury Department
                     regulations, including temporary regulations.

               (vi)  Borrower shall have delivered to Lender written
                     confirmation from the Rating Agencies (defined in the
                     Security Instrument) that such Defeasance will not
                     result in a withdrawal, downgrade or qualification of
                     the then current ratings by the applicable Rating
                     Agencies of the Securities (defined in the Security
                     Instrument).  If required by the Rating Agencies,
                     Borrower shall, at Borrower's expense, also deliver
                     or cause to be delivered a non-consolidation opinion
                     with respect to the Defeasance Obligor (as defined
                     below) in form and substance satisfactory to Lender
                     and the Rating Agencies.

               (vii) Borrower shall have delivered to Lender a certificate
                     satisfactory to Lender given by Borrower's
                     independent certified public accountant (which
                     accountant shall be reasonably satisfactory to

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                     Lender) certifying that the Defeasance Collateral
                     shall generate monthly amounts equal to or greater
                     than the Scheduled Defeasance Payments required to be
                     paid under this Note through and including the
                     Maturity Date.

               (d)   In connection with any Defeasance hereunder, Borrower
          shall (unless otherwise agreed to in writing by Lender), at
          Borrower's expense, establish or designate a successor entity,
          which shall be a single purpose, bankruptcy remote entity
          approved by Lender, as such term is described in Section 4.2 of
          the Security Instrument (the "Defeasance Obligor") and Borrower
          shall transfer and assign all obligations, rights and duties
          under and to this Note together with the pledged Defeasance
          Collateral to such Defeasance Obligor.  Such Defeasance Obligor
          shall assume the obligations under this Note and any Defeasance
          Security Agreement, and Borrower shall be relieved of its
          obligations under such documents and, except with respect to any
          provisions of the Note, the Security Instrument or the Other
          Security Documents which by their terms expressly survive payment
          of the Debt in full, the Note, the Security Instrument or the
          Other Security Documents.

               (e)   Each of the obligations of the United States of
          America that is part of the Defeasance Collateral shall be duly
          endorsed by the holder thereof as directed by Lender or
          accompanied by a written instrument of transfer in form and
          substance wholly satisfactory to Lender (including, without
          limitation, such instruments as may be required by the depository
          institution holding such securities or by the issuer thereof, as
          the case may be, to effectuate book-entry transfers and pledges
          through the book-entry facilities of such institution) in order
          to perfect upon the delivery of the Defeasance Collateral a first
          priority security interest therein in favor of the Lender in
          conformity with all applicable state and federal laws governing
          the granting of such security interests.  Borrower shall
          authorize and direct that the payments received from such
          obligations shall be made directly to Lender or Lender's designee
          and applied to satisfy the obligations of Borrower or, if
          applicable, the Defeasance Obligor, under this Note.

               (f)   The Defeasance Collateral shall generate payments on
          or prior to, but as close as possible to, the Business Day
          (defined below) prior to each successive Monthly Payment Date
          after the date of the  Defeasance upon which payments are
          required under this Note and in amounts equal to or greater than
          the payments due on such dates (including, without limitation
          scheduled payments of principal, interest, servicing fees (if
          any) and any other regularly scheduled amounts due under this
          Note, the Security Instrument or the Other Security Documents on
          such dates) together with the outstanding principal amount of
          this Note which would be due on the Maturity Date (the "Scheduled

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          Defeasance Payments").  The term "Business Day" shall mean a day
          upon which commercial banks are not authorized or required by law
          to close in New York, New York.

               (g)   Notwithstanding any release of the Security
          Instrument granted pursuant to this Article 5 or any Defeasance
          hereunder, the Defeasance Obligor shall, and hereby agrees to be,
          bound by and obligated under Sections 3.1, 7.2, 7.4(a), 11.2,
          11.7 and 14.2 and Articles 13 and 15 of the Security Instrument;
          provided, however, that all references therein to "Property" or
          "Personal Property" shall be deemed to refer only to the
          Defeasance Collateral delivered to Lender.

               (h)   Any costs or expenses incurred or to be incurred in
          connection with the Defeasance and any revenue, documentary stamp
          or intangible taxes or any other tax or charge due in connection
          with the transfer of this Note, or otherwise required to
          accomplish the Defeasance shall be paid by Borrower
          simultaneously with the occurrence of any Defeasance.

               (i)   The term "Defeasance Collateral" as used herein shall
          mean non-callable and non-redeemable securities evidencing an
          obligation to timely pay principal and interest in a full and
          timely manner that are direct obligations of the United States of
          America for the payment of which its full faith and credit is
          pledged.

               (j)   Upon Borrower's compliance with all of the conditions
          to Defeasance and a Release set forth in Article 5(b) through
          (i), Lender shall release the Property from the lien of the
          Security Instrument and the Other Security Documents.  All costs
          and expenses of Lender incurred in connection with the Defeasance
          and Release, including, without limitation, Lender's counsel's
          reasonable fees and expenses, shall be paid by Borrower
          simultaneously with the delivery of the Release documentation.

               (k)   If a Default Prepayment (defined below) occurs,
          Borrower shall pay to Lender the entire Debt, including, without
          limitation, an amount (the "Default Consideration") equal to the
          greater of (i) the amount (if any) which, when added to the
          outstanding principal amount of the Note will be sufficient to
          purchase Defeasance Collateral providing the required Scheduled
          Defeasance Payments assuming Defeasance would be permitted
          hereunder, or (ii) one percent (1%) of the Default Prepayment.
          For purposes of this Note, the term "Default Prepayment" shall
          mean a prepayment of the principal amount of this Note made after
          the acceleration of the Maturity Date under any circumstances,
          including, without limitation, a prepayment occurring after an
          Event of Default or in connection with reinstatement of the
          Security Instrument provided by statute under foreclosure
          proceedings or exercise of a power of sale, any statutory right
          of redemption exercised by Borrower or any other party having a

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          statutory right to redeem or prevent foreclosure, any sale in
          foreclosure or under exercise of a power of sale or otherwise.

               (l)   Notwithstanding anything to the contrary herein,
          provided no Event of Default exists under this Note, the Security
          Instrument or the Other Security Documents, (i) Borrower may
          prepay the principal balance of this Note in whole during the
          three (3) months prior to the Maturity Date and no prepayment
          consideration shall be due in connection therewith, but Borrower
          shall be required to pay all other sums due hereunder together
          with all interest which would have accrued on the principal
          balance of this Note after the date of prepayment to the next
          Monthly Payment Date (the "Interest Shortfall Payment"), if such
          prepayment occurs on a date which is not a Monthly Payment Date;
          and (ii) if a complete or partial prepayment results from the
          application of insurance proceeds or condemnation awards pursuant
          to Sections 3.3, 3.6 or 4.3 of the Security Instrument, no
          prepayment consideration or Default Consideration shall be due in
          connection therewith, but Borrower shall be required to pay all
          other sums due hereunder, including, without limitation, the
          Interest Shortfall Payment, if applicable.

                                 ARTICLE 6  SECURITY

               This Note is secured by the Security Instrument and the
          Other Security Documents.  The term "Security Instrument" as used
          in this Note shall mean the Deed of Trust and Security Agreement
          dated the date hereof in the principal sum of $13,500,000.00
          given by Borrower to (or for the benefit of) Lender covering the
          fee estate of Borrower in certain premises located in Wake
          County, State of North Carolina and other property, as more
          particularly described therein (collectively, the "Property") and
          intended to be duly recorded in said County.  The term "Other
          Security Documents" as used in this Note shall mean all and any
          of the documents other than this Note or the Security Instrument
          now or hereafter executed by Borrower and/or others and by or in
          favor of Lender, which wholly or partially secure or guarantee
          payment of this Note.  Whenever used, the singular number shall
          include the plural, the plural number shall include the singular,
          and the words "Lender" and "Borrower" shall include their
          respective successors, assigns, heirs, executors and
          administrators.

               All of the terms, covenants and conditions contained in the
          Security Instrument and the Other Security Documents are hereby
          made part of this Note to the same extent and with the same force
          as if they were fully set forth herein.


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                              ARTICLE 7  SAVINGS CLAUSE

               This Note is subject to the express condition that at no
          time shall Borrower be obligated or required to pay interest on
          the principal balance due hereunder at a rate which could subject
          Lender to either civil or criminal liability as a result of being
          in excess of the maximum interest rate which Borrower is
          permitted by applicable law to contract or agree to pay.  If by
          the terms of this Note, Borrower is at any time required or
          obligated to pay interest on the principal balance due hereunder
          at a rate in excess of such maximum rate, the Applicable Interest
          Rate or the Default Rate, as the case may be, shall be deemed to
          be immediately reduced to such maximum rate and all previous
          payments in excess of the maximum rate shall be deemed to have
          been payments in reduction of principal and not on account of the
          interest due hereunder.  All sums paid or agreed to be paid to
          Lender for the use, forbearance, or detention of the Debt, shall,
          to the extent permitted by applicable law, be amortized,
          prorated, allocated, and spread throughout the full stated term
          of the Note until payment in full so that the rate or amount of
          interest on account of the Debt does not exceed the maximum
          lawful rate of interest from time to time in effect and
          applicable to the Debt for so long as the Debt is outstanding.

                                ARTICLE 8  LATE CHARGE

               If any sum payable under this Note is not paid on or prior
          to the date on which it is due, Borrower shall pay to Lender upon
          demand an amount equal to the lesser of five percent (5%) of the
          unpaid sum or the maximum amount permitted by applicable law to
          defray the expenses incurred by Lender in handling and processing
          the delinquent payment and to compensate Lender for the loss of
          the use of the delinquent payment and the amount shall be secured
          by the Security Instrument and the Other Security Documents.


                              ARTICLE 9  NO ORAL CHANGE

               This Note may not be modified, amended, waived, extended,
          changed, discharged or terminated orally or by any act or failure
          to act on the part of Borrower or Lender, but only by an
          agreement in writing signed by the party against whom enforcement
          of any modification, amendment, waiver, extension, change,
          discharge or termination is sought.


                       ARTICLE 10  JOINT AND SEVERAL LIABILITY

               If Borrower consists of more than one person or party, the
          obligations and liabilities of each person or party shall be
          joint and several.


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                                 ARTICLE 11  WAIVERS

               Borrower and all others who may become liable for the
          payment of all or any part of the Debt do hereby severally waive
          presentment and demand for payment, notice of dishonor, protest
          and notice of protest and non-payment and all other notices of
          any kind.  No release of any security for the Debt or extension
          of time for payment of this Note or any installment hereof, and
          no alteration, amendment or waiver of any provision of this Note,
          the Security Instrument or the Other Security Documents made by
          agreement between Lender or any other person or party shall
          release, modify, amend, waive, extend, change, discharge,
          terminate or affect the liability of Borrower, and any other
          person or entity who may become liable for the payment of all or
          any part of the Debt, under this Note, the Security Instrument or
          the Other Security Documents.  No notice to or demand on Borrower
          shall be deemed to be a waiver of the obligation of Borrower or
          of the right of Lender to take further action without further
          notice or demand as provided for in this Note, the Security
          Instrument or the Other Security Documents.  If Borrower is a
          partnership, the agreements contained herein shall remain in full
          force and effect, notwithstanding any changes in the individuals
          or entities comprising the partnership, and the term "Borrower,"
          as used herein, shall include any alternate or successor
          partnership, but any predecessor partnership and its partners
          shall not thereby be released from any liability.  If Borrower is
          a corporation, the agreements contained herein shall remain in
          full force and effect notwithstanding any changes in the
          shareholders comprising, or the officers and directors relating
          to, the corporation, and the term "Borrower" as used herein,
          shall include any alternate or successor corporation, but any
          predecessor corporation shall not be relieved of liability
          hereunder.  If Borrower is a limited liability company, the
          agreements herein contained shall remain in full force and
          effect, notwithstanding any changes in the individuals or
          entities comprising the limited liability company and the term
          "Borrower," as used herein, shall include any alternate or
          successor limited liability company, but any predecessor limited
          liability company and ts members shall not be released from any
          liability.  (Nothing in the foregoing sentence shall be construed
          as a consent to, or a waiver of, any prohibition or restriction
          on transfers of interests in such partnership, corporation or
          limited liability company which may be set forth in the Security
          Instrument or any Other Security Document.)

                                 ARTICLE 12  TRANSFER

               Upon the transfer of this Note, Borrower hereby waiving
          notice of any such transfer, Lender may deliver all the
          collateral mortgaged, granted, pledged or assigned pursuant to
          the Security Instrument and the Other Security Documents, or any
          part thereof, to the transferee who shall thereupon become vested

                                          9


          with all the rights herein or under applicable law given to
          Lender with respect thereto, and Lender shall thereafter forever
          be relieved and fully discharged from any liability or
          responsibility in the matter, but Lender shall retain all rights
          hereby given to it with respect to any liabilities and the
          collateral not so transferred.

                         ARTICLE 13  WAIVER OF TRIAL BY JURY

          BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
          THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
          COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
          DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS NOTE, THE
          APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE, THIS NOTE, THE
          SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS
          OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR
          AGENTS IN CONNECTION THEREWITH.


                               ARTICLE 14  EXCULPATION

               (a)   Except as otherwise provided herein, in the Security
          Instrument or in the Other Security Documents, Lender shall not
          enforce the liability and obligation of Borrower to perform and
          observe the obligations contained in this Note or the Security
          Instrument or any of the Other Security Documents by any action
          or proceeding wherein a money judgment shall be sought against
          Borrower, except that Lender may bring a foreclosure action,
          action for specific performance or other appropriate action or
          proceeding to enable Lender to enforce and realize upon this
          Note, the Security Instrument, the Other Security Documents, and
          the interest in the Property, the Rents (as defined in the
          Security Instrument) and any other collateral given to Lender
          created by this Note, the Security Instrument and the Other
          Security Documents; provided, however, that any judgment in any
          such action or proceeding shall be enforceable against Borrower
          only to the extent of Borrower's interest in the Property, in the
          Rents and in any other collateral given to Lender.  Lender, by
          accepting this Note and the Security Instrument, agrees that it
          shall not, except as otherwise provided in this Article 14, sue
          for, seek or demand any deficiency judgment against Borrower in
          any such action or proceeding, under or by reason of or under or
          in connection with this Note, the Other Security Documents or the
          Security Instrument.  The provisions of this Section shall not,
          however, (i) constitute a waiver, release or impairment of any
          obligation evidenced or secured by this Note, the Other Security
          Documents or the Security Instrument; (ii) impair the right of
          Lender to name Borrower as a party defendant in any action or
          suit for judicial foreclosure and sale under the Security
          Instrument; (iii) affect the validity or enforceability of any
          indemnity (including, without limitation, the Environmental
          Indemnity (as defined in the Security Instrument)), guaranty,

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          master lease or similar instrument made in connection with this
          Note, the Security Instrument, or the Other Security Documents;
          (iv) impair the right of Lender to obtain the appointment of a
          receiver; (v) impair the enforcement of the Assignment of Leases
          and Rents executed in connection herewith; (vi) impair the right
          of Lender to enforce the provisions of Section 13.2, of the
          Security Instrument; or (vii) impair the right of Lender to
          obtain a deficiency judgment or other judgment on the Note
          against Borrower if necessary to obtain any insurance proceeds or
          condemnation awards to which Lender would otherwise be entitled
          under this Security Instrument; provided however, Lender shall
          only enforce such judgment to the extent of the insurance
          proceeds and/or condemnation awards.

               (b)   Notwithstanding the provisions of this Article 14 to
          the contrary, Borrower shall be personally liable to Lender for
          the Losses (as defined in the Security Instrument) it incurs due
          to: (i) fraud or intentional misrepresentation by Borrower or any
          other person or entity in connection with the execution and the
          delivery of this Note, the Security Instrument or the Other
          Documents; (ii) Borrower's misapplication or misappropriation of
          Rents received by Borrower after the occurrence of an Event of
          Default; (iii) Borrower's misapplication or misappropriation of
          tenant security deposits or Rents collected in advance; (iv) the
          misapplication or the misappropriation of insurance proceeds or
          condemnation awards; (v) Borrower's failure to pay Taxes (as
          defined in the Security Instrument), Other Charges (as defined in
          the Security Instrument) (except to the extent that sums
          sufficient to pay such amounts have been deposited in escrow with
          Lender pursuant to the terms of the Security Instrument), charges
          for labor or materials or other charges that can create liens on
          the Property; (vi) Borrower's failure to return or to reimburse
          Lender for all Personal Property (as defined in the Security
          Instrument) taken from the Property by or on behalf of Borrower
          and not replaced with Personal Property of the same utility and
          of the same or greater value; (vii) any act of actual waste or
          arson by Borrower, any principal, affiliate, member or general
          partner thereof or by any Indemnitor (as defined in the Security
          Instrument) or Guarantor (as defined in the Security Instrument);
          (viii) any fees or commissions paid by Borrower to any principal,
          affiliate, member or general partner of Borrower, Indemnitor or
          Guarantor in violation of the terms of this Note, the Security
          Instrument or the Other Security Documents; or (ix) Borrower's
          failure to comply with the provisions of Sections 12.1 and 12.2
          of the Security Instrument.

               (c)   Notwithstanding the foregoing, the agreement of
          Lender not to pursue recourse liability as set forth in
          Subsection (a) above SHALL BECOME NULL AND VOID and shall be of
          no further force and effect in the event of Borrower's default
          under Sections 3.11 (after ten (10) days written notice) or 4.2
          or Article 8 of the Security Instrument, or in the event of

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          Principal's (as defined in the Security Instrument) default under
          Section 4.2 of the Security Instrument; provided, however, that
          with respect to Borrower's default under Section 3.11 of the
          Security Instrument only, upon Borrower's cure of said default,
          Lender's agreement not to pursue recourse liability shall be
          reinstated, provided further, however, that Borrower shall be
          liable to Lender for the losses it realizes due to Borrower's
          failure to deliver the statements required pursuant to the terms
          of Section 3.11 of the Security Instrument from the date of said
          failure up to and including the date of said cure.

               (d)   Nothing herein shall be deemed to be a waiver of any
          right which Lender may have under Section 506(a), 506(b), 1111(b)
          or any other provision of the U.S. Bankruptcy Code to file a
          claim for the full amount of the indebtedness secured by the
          Security Instrument or to require that all collateral shall
          continue to secure all of the indebtedness owing to Lender in
          accordance with this Note, the Security Instrument and the Other
          Security Documents.


                                ARTICLE 15  AUTHORITY

               Borrower (and the undersigned representative of Borrower, if
          any) represents that Borrower has full power, authority and legal
          right to execute and deliver this Note, the Security Instrument
          and the Other Security Documents and that this Note, the Security
          Instrument and the Other Security Documents constitute valid and
          binding obligations of Borrower.

                              ARTICLE 16  APPLICABLE LAW

               This Note shall be deemed to be a contract entered into
          pursuant to the laws of the State of New York and shall in all
          respects be governed, construed, applied and enforced in
          accordance with the laws of the State of New York.

                             ARTICLE 17   JURISDICTION

               With respect to any claim or action arising hereunder or
          under the Security Instrument or the Other Security Documents,
          Borrower (a) irrevocably submits to the nonexclusive jurisdiction
          of the courts of the State of New York and the United States
          District Court located in the Borough of Manhattan in New York,
          New York, and appellate courts from any thereof, and (b)
          irrevocably waives any objection which it may have at any time to
          the laying on venue of any suit, action or proceeding arising out
          of or relating to this Note brought in any such court,
          irrevocably waives any claim that any such suit, action or
          proceeding brought in any such court has been brought in an
          inconvenient forum.  Nothing in this Note will be deemed to
          preclude Lender from bringing an action or proceeding with

                                          12


          respect hereto in any other jurisdiction.

                               ARTICLE 18  COUNSEL FEES

               In the event that it should become necessary to employ
          counsel to collect the Debt or to protect or foreclose the
          security therefor, Borrower also agrees to pay all reasonable
          fees and expenses of Lender, including, without limitation,
          reasonable attorney's fees for the services of such counsel
          whether or not suit be brought.

                                 ARTICLE 19  NOTICES

               All notices required or permitted hereunder shall be given
          and become effective as provided in the Security Instrument.


                              ARTICLE 20  MISCELLANEOUS

               (a)   Wherever pursuant to this Note (i) Lender exercises
          any right given to it to approve or disapprove, (ii) any
          arrangement or term is to be satisfactory to Lender, or (iii) any
          other decision or determination is to be made by Lender, the
          decision of Lender to approve or disapprove, all decisions that
          arrangements or terms are satisfactory or not satisfactory and
          all other decisions and determinations made by Lender, shall be
          in the sole and absolute discretion of Lender, except as may be
          otherwise expressly and specifically provided herein.

               (b)   Wherever pursuant to this Note it is provided that
          Borrower pay any costs and expenses, such costs and expenses
          shall include, but not be limited to, reasonable legal fees and
          disbursements of Lender, whether with respect to retained firms,
          the reimbursement for the expenses of in-house staff, or
          otherwise.

                               ARTICLE 21  DEFINITIONS

               The terms set forth below are defined in the following
          Sections of this Note:

               (a)   Applicable Interest Rate:  Article 2;

               (b)   Borrower:  Preamble, Articles 6 and 11;

               (c)   Business Day:  Article 5, Section 5(f);

               (d)   Debt:  Article 3;

               (e)   Default Consideration:  Article 5, Section 5(l);


                                          13


               (f)   Default Prepayment:  Article 5, Section 5(l);

               (g)   Default Rate:  Article 4;

               (h)   Defeasance:  Article 5, Section 5(b);

               (i)   Defeasance Collateral: Article 5, Section 5(i);

               (j)   Defeasance Date:  Article 5, Subsection 5(c)(i);

               (k)   Defeasance Obligor:  Article 5, Section 5(d);
               (l)   Defeasance Security Agreement:  Article 5, Subsection
                     5(c)(iv);

               (m)   Event of Default:  Article 3;

               (n)   Interest Shortfall Payment:  Article 5, Section 5(l);

               (o)   Lender:  Preamble and Article 6;

               (p)   Lockout Period Expiration Date:  Article 5, Section
                     5(b);

               (q)   Maturity Date:  Article 1, Section 1(b);

               (r)   Monthly Payment Date  Article 5, Section 5(b);

               (s)   Other Security Documents:  Article 6;

               (t)   Property:  Article 6;

               (u)   Release:  Article 5, Section 5(b);

               (v)   REMIC Trust:  Article 5, Subsection 5(c)(v);

               (w)   Scheduled Defeasance Payments:  Article 5, Section
                     5(f); and

               (x)   Security Instrument:  Article 6.


                                          14


               IN WITNESS WHEREOF, Borrower has duly executed this Note the
          day and year first above written.


                                             AERC OF NC, LLC,
                                             a Delaware limited
                                             liability company  (SEAL)


                                             By:                 (SEAL)
                                                  Gregory L. Golz
                                                  Vice President


                                          15


               IN WITNESS WHEREOF, Borrower has duly executed this Note the
          day and year first above written.


          Signed, sealed and delivered in the presence of:


                                        AERC MORGAN PLACE, INC.,
                                        a Delaware corporation



                                        By: Gregory L. Golz
                                             Vice President
          Unofficial Witness

                                                            (SEAL)

          Notary Public

          My Commission Expires:



          [NOTARIAL SEAL]



                                          16


          STATE OF _____________

          COUNTY OF ___________

               I, _____________________, Notary Public for said County and
          State, certify that Gregory L. Golz personally came before me
          this day and acknowledged that he is the Vice President of AERC
          OF NC, LLC, a Delaware limited liability company, and that by
          authority duly given and as an act of the aforesaid limited
          liability company, the foregoing instrument was signed in its
          name by its Vice President.

               Witness my hand and official seal this _____ day of March,
          1999.



                                             Notary Public

          (Official Seal)

                         My commission expires: ______________, _____.




                                          17

          STATE OF       )
                         )  ss.:
          COUNTY OF      )

               On March ___, 1999, before me, a notary public, duly
          commissioned, qualified and acting, personally appeared Gregory
          L. Golz, personally known to me (or proved to me on the basis of
          satisfactory evidence) to be the person whose name is subscribed
          to the within instrument and acknowledged to me that he executed
          the same in his authorized capacity, and that by his signature on
          the instrument the person, or the entity upon behalf of which the
          person acted, executed the instrument.

               IN WITNESS WHEREOF, I hereunto set my hand and official
          seal.

                                             Notary Public

          My Commission Expires:

          ___________________________


                                          18






                 _____________________________________, as mortgagor
                                        (Borrower)


                                          to


                        THE CHASE MANHATTAN BANK, as mortgagee
                                        (Lender)


                         ___________________________________

                                     MORTGAGE AND
                                  SECURITY AGREEMENT
                         ___________________________________


          Dated:

          Location:

          Section:
          Block:
          Lot:
          County:

          PREPARED BY AND UPON
          RECORDATION RETURN TO:

          Messrs. Thacher Proffitt & Wood
          Two World Trade Center
          New York, New York  10048

          Attention:

          File No.:

          Title No.:



                                          19


               THIS MORTGAGE AND SECURITY AGREEMENT (the "Security
          Instrument") is made as of the ____ day of ________, 1999, by
                                   , a                        , having its
          principal place of business at                          as
          mortgagor ("Borrower") to THE CHASE MANHATTAN BANK, a New York
          banking corporation, having an address at 380 Madison Avenue,
          10th Floor, New York, New York 10017 as mortgagee ("Lender").

                                      RECITALS:

               Borrower by its promissory note of even date herewith given
          to Lender is indebted to Lender in the principal sum of
                      AND 00/100 DOLLARS ($______________) in lawful money
          of the United States of America (the note together with all
          extensions, renewals, modifications, substitutions and amendments
          thereof shall collectively be referred to as the "Note"), with
          interest from the date thereof at the rates set forth in the
          Note, principal and interest to be payable in accordance with the
          terms and conditions provided in the Note.

               Borrower desires to secure the payment of the Debt (as
          defined in Article 2) and the performance of all of its
          obligations under the Note and the Other Obligations (as defined
          in Article 2).

                            Article 1 - GRANTS OF SECURITY

               Section 1.1    Property Mortgaged.  Borrower does hereby
          irrevocably mortgage, grant, bargain, sell, pledge, assign,
          warrant, transfer and convey to Lender, and grant a security
          interest to Lender in, the following property, rights, interests
          and estates now owned, or hereafter acquired by Borrower
          (collectively, the "Property"):

               (a)   Land.  The real property described in Exhibit A
          attached hereto and made a part hereof (the "Land");

               (b)   Additional Land.  All additional lands, estates and
          development rights hereafter acquired by Borrower for use in
          connection with the Land and the development of the Land and all
          additional lands and estates therein which may, from time to
          time, by supplemental mortgage or otherwise be expressly made
          subject to the lien of this Security Instrument;

               (c)   Improvements.  The buildings, structures, fixtures,
          additions, enlargements, extensions, modifications, repairs,
          replacements and improvements now or hereafter erected or located
          on the Land (the "Improvements");

               (d)   Easements.  All easements, rights-of-way or use,
          rights, strips and gores of land, streets, ways, alleys,
          passages, sewer rights, water, water courses, water rights and

                                          20


          powers, air rights and development rights, and all estates,
          rights, titles, interests, privileges, liberties, servitudes,
          tenements, hereditaments and appurtenances of any nature
          whatsoever, in any way now or hereafter belonging, relating or
          pertaining to the Land and the Improvements and the reversion and
          reversions, remainder and remainders, and all land lying in the
          bed of any street, road or avenue, opened or proposed, in front
          of or adjoining the Land, to the center line thereof and all the
          estates, rights, titles, interests, dower and rights of dower,
          curtesy and rights of curtesy, property, possession, claim and
          demand whatsoever, both at law and in equity, of Borrower of, in
          and to the Land and the Improvements and every part and parcel
          thereof, with the appurtenances thereto;

               (e)   Fixtures and Personal Property.  All machinery,
          equipment, fixtures (including, but not limited to, all heating,
          air conditioning, plumbing, lighting, communications and elevator
          fixtures) and other property of every kind and nature whatsoever
          owned by Borrower, or in which Borrower has or shall have an
          interest, now or hereafter located upon the Land and the
          Improvements, or appurtenant thereto, and usable in connection
          with the present or future operation and occupancy of the Land
          and the Improvements and all building equipment, materials and
          supplies of any nature whatsoever owned by Borrower, or in which
          Borrower has or shall have an interest, now or hereafter located
          upon the Land and the Improvements, or appurtenant thereto, or
          usable in connection with the present or future operation and
          occupancy of the Land and the Improvements (collectively, the
          "Personal Property"), and the right, title and interest of
          Borrower in and to any of the Personal Property which may be
          subject to any security interests, as defined in the Uniform
          Commercial Code, as adopted and enacted by the state or states
          where any of the Property is located (the "Uniform Commercial
          Code"), superior in lien to the lien of this Security Instrument
          and all proceeds and products of the above;

               (f)   Leases and Rents.  All leases, subleases and other
          agreements affecting the use, enjoyment or occupancy of the Land
          and/or the Improvements heretofore or hereafter entered into and
          all extensions, amendments and modifications thereto, whether
          before or after the filing by or against Borrower of any petition
          for relief under 11 U.S.C. '101 et seq., as the same may be
          amended from time to time (the "Bankruptcy Code") (the "Leases")
          and all right, title and interest of Borrower, its successors and
          assigns therein and thereunder, including, without limitation,
          any guaranties of the lessees' obligations thereunder, cash or
          securities deposited thereunder to secure the performance by the
          lessees of their obligations thereunder and all rents, additional
          rents, revenues, issues and profits (including all oil and gas or
          other mineral royalties and bonuses) from the Land and the
          Improvements whether paid or accruing before or after the filing
          by or against Borrower of any petition for relief under the

                                          21


          Bankruptcy Code (the "Rents") and all proceeds from the sale or
          other disposition of the Leases and the right to receive and
          apply the Rents to the payment of the Debt;

               (g)   Condemnation Awards.  All awards or payments,
          including interest thereon, which may heretofore and hereafter be
          made with respect to the Property, whether from the exercise of
          the right of eminent domain (including but not limited to any
          transfer made in lieu of or in anticipation of the exercise of
          the right), or for a change of grade, or for any other injury to
          or decrease in the value of the Property;

               (h)   Insurance Proceeds.  All proceeds of and any unearned
          premiums on any insurance policies covering the Property,
          including, without limitation, the right to receive and apply the
          proceeds of any insurance, judgments, or settlements made in lieu
          thereof, for damage to the Property;

               (i)   Tax Certiorari.  All refunds, rebates or credits in
          connection with a reduction in real estate taxes and assessments
          charged against the Property as a result of tax certiorari or any
          applications or proceedings for reduction;

               (j)   Conversion.  All proceeds of the conversion,
          voluntary or involuntary, of any of the foregoing including,
          without limitation, proceeds of insurance and condemnation
          awards, into cash or liquidation claims;

               (k)   Rights.  The right, in the name and on behalf of
          Borrower, to appear in and defend any action or proceeding
          brought with respect to the Property and to commence any action
          or proceeding to protect the interest of Lender in the Property;

               (l)   Agreements.  All agreements, contracts, certificates,
          instruments, franchises, permits, licenses, plans, specifications
          and other documents, now or hereafter entered into, and all
          rights therein and thereto, respecting or pertaining to the use,
          occupation, construction, management or operation of the Land and
          any part thereof and any Improvements or respecting any business
          or activity conducted on the Land and any part thereof and all
          right, title and interest of Borrower therein and thereunder,
          including, without limitation, the right, upon the happening of
          any default hereunder, to receive and collect any sums payable to
          Borrower thereunder;

               (m)   Intangibles.  All trade names, trademarks,
          servicemarks, logos, copyrights, goodwill, books and records and
          all other general intangibles relating to or used in connection
          with the operation of the Property;

               (n)   Accounts.  All reserves, escrows and deposit accounts
          maintained by Borrower with respect to the Property including,

                                          22


          without limitation, any lockbox account and cash management
          account, and all complete securities, investments, property and
          financial assets held therein from time to time and all proceeds,
          products, distributions or dividends or substitutions thereon and
          thereof; and

               (o)   Other Rights.  Any and all other rights of Borrower
          in and to the items set forth in Subsections (a) through (n)
          above.

               Section 1.2    Assignment of Leases and Rents.  Borrower
          hereby absolutely and unconditionally assigns to Lender
          Borrower's right, title and interest in and to all current and
          future Leases and Rents; it being intended by Borrower that this
          assignment constitutes a present, absolute assignment and not an
          assignment for additional security only.  Nevertheless, subject
          to the terms of this Section 1.2 and Section 11.1(h), Lender
          grants to Borrower a revocable license to collect and receive the
          Rents.  Borrower shall hold the Rents, or a portion thereof
          sufficient to discharge all current sums due on the Debt, for use
          in the payment of such sums.

               Section 1.3    Security Agreement.  This Security Instrument
          is both a real property mortgage and a "security agreement"
          within the meaning of the Uniform Commercial Code.  The Property
          includes both real and personal property and all other rights and
          interests, whether tangible or intangible in nature, of Borrower
          in the Property.  By executing and delivering this Security
          Instrument, Borrower hereby grants to Lender, as security for the
          Obligations (defined in Section 2.3), a security interest in the
          Personal Property to the full extent that the Personal Property
          may be subject to the Uniform Commercial Code.

               Section 1.4    Pledge of Monies Held.  Borrower hereby
          pledges to Lender any and all monies now or hereafter held by
          Lender, including, without limitation, any sums deposited in the
          Escrow Fund (as defined in Section 3.5), Net Proceeds (as defined
          in Section 4.3) and condemnation awards or payments described in
          Section 3.6, as additional security for the Obligations until
          expended or applied as provided in this Security Instrument.

                                 CONDITIONS TO GRANT

               TO HAVE AND TO HOLD the above granted and described Property
          unto and to the use and benefit of Lender, and the successors and
          assigns of Lender, forever;

               PROVIDED, HOWEVER, these presents are upon the express
          condition that, if Borrower shall well and truly pay to Lender
          the Debt at the time and in the manner provided in the Note and
          this Security Instrument, shall well and truly perform the Other
          Obligations as set forth in this Security Instrument and shall

                                          23


          well and truly abide by and comply with each and every covenant
          and condition set forth herein and in the Note, these presents
          and the estate hereby granted shall cease, terminate and be void.


                       Article 2 - DEBT AND OBLIGATIONS SECURED

               Section 2.1    Debt.  This Security Instrument and the
          grants, assignments and transfers made in Article 1 are given for
          the purpose of securing the following, in such order of priority
          as Lender may determine in its sole discretion (the "Debt"):

               (a)   the payment of the indebtedness evidenced by the Note
          in lawful money of the United States of America;

               (b)   the payment of interest, default interest, late
          charges and other sums, as provided in the Note, this Security
          Instrument or the Other Security Documents (defined below);

               (c)   the payment of the Default Consideration (as defined
          in the Note), if any;

               (d)   the payment of all other moneys agreed or provided to
          be paid by Borrower in the Note, this Security Instrument or the
          Other Security Documents;

               (e)   the payment of all sums advanced pursuant to this
          Security Instrument to protect and preserve the Property and the
          lien and the security interest created hereby; and

               (f)   the payment of all sums advanced and costs and
          expenses incurred by Lender in connection with the Debt or any
          part thereof, any renewal, extension, or change of or
          substitution for the Debt or any part thereof, or the acquisition
          or perfection of the security therefor, whether made or incurred
          at the request of Borrower or Lender.

               Section 2.2    Other Obligations.  This Security Instrument
          and the grants, assignments and transfers made in Article 1 are
          also given for the purpose of securing the following (the "Other
          Obligations"):

               (a)   the performance of all other obligations of Borrower
          contained herein;

               (b)   the performance of each obligation of Borrower
          contained in any other agreement given by Borrower to Lender
          which is for the purpose of further securing the obligations
          secured hereby, and any amendments, modifications and changes
          thereto; and

               (c)   the performance of each obligation of Borrower

                                          24


          contained in any renewal, extension, amendment, modification,
          consolidation, change of, or substitution or replacement for, all
          or any part of the Note, this Security Instrument or the Other
          Security Documents.

               Section 2.3    Debt and Other Obligations.  Borrower's
          obligations for the payment of the Debt and the performance of
          the Other Obligations shall be referred to collectively below as
          the "Obligations."

               Section 2.4    Payments.  Unless payments are made in the
          required amount in immediately available funds at the place where
          the Note is payable, remittances in payment of all or any part of
          the Debt shall not, regardless of any receipt or credit issued
          therefor, constitute payment until the required amount is
          actually received by Lender in funds immediately available at the
          place where the Note is payable (or any other place as Lender, in
          Lender's sole discretion, may have established by delivery of
          written notice thereof to Borrower) and shall be made and
          accepted subject to the condition that any check or draft may be
          handled for collection in accordance with the practice of the
          collecting bank or banks.  Acceptance by Lender of any payment in
          an amount less than the amount then due shall be deemed an
          acceptance on account only, and the failure to pay the entire
          amount then due shall be and continue to be an Event of Default
          (defined below).


                            Article 3 - BORROWER COVENANTS

          Borrower covenants and agrees that:

               Section 3.1    Payment of Debt.  Borrower will pay the Debt
          at the time and in the manner provided in the Note and in this
          Security Instrument.

               Section 3.2    Incorporation by Reference.  All the
          covenants, conditions and agreements contained in (a) the Note
          and (b) all and any of the documents other than the Note or this
          Security Instrument now or hereafter executed by Borrower and/or
          others and by or in favor of Lender, which wholly or partially
          secure or guaranty payment of the Note (the "Other Security
          Documents"), are hereby made a part of this Security Instrument
          to the same extent and with the same force as if fully set forth
          herein.

               Section 3.3    Insurance.

               (a)   Borrower shall obtain and maintain, or cause to be
          maintained, insurance for Borrower and the Property providing at
          least the following coverages:


                                          25


               (i)   comprehensive all risk insurance on the Improvements
                     and the Personal Property, in each case (A) in an
                     amount equal to 100% of the "Full Replacement Cost,"
                     which for purposes of this Security Instrument shall
                     mean actual replacement value (exclusive of costs of
                     excavations, foundations, underground utilities and
                     footings) with a waiver of depreciation, but the
                     amount shall in no event be less than the outstanding
                     principal balance of the Note; (B) containing an
                     agreed amount endorsement with respect to the
                     Improvements and Personal Property waiving all
                     co-insurance provisions; (C) providing for no
                     deductible in excess of $10,000; and (D) providing
                     coverage for contingent liability from Operation of
                     Building Laws, Demolition Costs and Increased Cost of
                     Construction Endorsements together with an "Ordinance
                     or Law Coverage" or "Enforcement" endorsement if any
                     of the Improvements or the use of the Property shall
                     at any time constitute legal non-conforming
                     structures or uses.  The Full Replacement Cost shall
                     be redetermined from time to time (but not more
                     frequently than once in any twelve (12) calendar
                     months) at the reasonable request of Lender by an
                     appraiser or contractor designated and paid by
                     Borrower and approved by Lender, or by an engineer or
                     appraiser in the regular employ of the insurer.
                     After the first appraisal, additional appraisals may
                     be based on construction cost indices customarily
                     employed in the trade.  No omission on the part of
                     Lender to request any such ascertainment shall
                     relieve Borrower of any of its obligations under this
                     Subsection;

               (ii)  commercial general liability insurance against claims
                     for personal injury, bodily injury, death or property
                     damage occurring upon, in or about the Property, such
                     insurance (A) to be on the so-called "occurrence"
                     form with a general aggregate limit of not less than
                     $2,000,000, or $6,000,000 if the Improvements contain
                     elevators, and a per occurrence limit of not less
                     than $2,000,000; (B) to continue at not less than the
                     aforesaid limit until required to be changed by
                     Lender in writing by reason of changed economic
                     conditions making such protection inadequate; and (C)
                     to cover at least the following hazards: (1) premises
                     and operations; (2) products and completed operations
                     on an "if any" basis; (3) independent contractors;
                     (4) blanket contractual liability for all written and
                     oral contracts; and (5) contractual liability
                     covering the indemnities contained in Article 13
                     hereof to the extent the same is available;


                                          26


               (iii) loss of rents insurance (A) with loss payable to
                     Lender; (B) covering all risks required to be covered
                     by the insurance provided for in Subsection
                     3.3(a)(i); (C) in an amount equal to 100% of the
                     projected gross income from the Property for a period
                     of eighteen (18) months; and (D) containing an
                     extended period of indemnity endorsement which
                     provides that after the physical loss to the
                     Improvements and the Personal Property has been
                     repaired, the continued loss of income will be
                     insured until such income returns to the same level
                     it was prior to the loss, or the expiration of
                     eighteen (18) months from the date of the loss,
                     whichever first occurs, and notwithstanding that the
                     policy may expire prior to the end of such period.
                     The amount of such loss of rents insurance shall be
                     determined prior to the date hereof and at least once
                     each year thereafter based on Borrower's reasonable
                     estimate of the gross income from the Property for
                     the succeeding eighteen-month period.  All insurance
                     proceeds payable to Lender pursuant to this
                     Subsection shall be held by Lender and shall be
                     applied to the obligations secured hereunder from
                     time to time due and payable hereunder and under the
                     Note and the Other Security Documents, and any excess
                     insurance proceeds remaining after such application
                     which are not required for application against future
                     obligations hereunder or under the Note and the Other
                     Security Documents shall, provided no Event of
                     Default shall exist, be disbursed to Borrower on a
                     monthly basis; provided further, however, that
                     nothing herein contained shall be deemed to relieve
                     Borrower of its obligations to pay the obligations
                     secured hereunder on the respective dates of payment
                     provided for in the Note except to the extent such
                     amounts are actually paid out of the proceeds of such
                     loss of rents insurance;

               (iv)  at all times during which structural construction,
                     repairs or alterations are being made with respect to
                     the Improvements (A) owner's contingent or protective
                     liability insurance covering claims not covered by or
                     under the terms or provisions of the above mentioned
                     commercial general liability insurance policy; and
                     (B) the insurance provided for in Subsection
                     3.3(a)(i) written in a so-called builder's risk
                     completed value form (1) on a non-reporting basis,
                     (2) against all risks insured against pursuant to
                     Subsection 3.3(a)(i), (3) including permission to
                     occupy the Property, and (4) with an agreed amount
                     endorsement waiving co-insurance provisions;


                                          27


               (v)   workers' compensation, subject to the statutory
                     limits of the state in which the Property is located,
                     and employer's liability insurance with a limit of at
                     least $1,000,000 per accident and per disease per
                     employee, and $1,000,000 for disease aggregate in
                     respect of any work or operations on or about the
                     Property, or in connection with the Property or its
                     operation (if applicable);

               (vi)  comprehensive boiler and machinery insurance, if
                     applicable, in amounts as shall be reasonably
                     required by Lender;

               (vii) if any portion of the Improvements is at any time
                     located in an area identified by the Secretary of
                     Housing and Urban Development or any successor
                     thereto as an area having special flood hazards
                     pursuant to the National Flood Insurance Act of 1968,
                     the Flood Disaster Protection Act of 1973 or the
                     National Flood Insurance Reform Act of 1994, as each
                     may be amended, or any successor law (the "Flood
                     Insurance Acts"), flood hazard insurance in an amount
                     equal to the lesser of (A) the principal balance of
                     the Note, and (B) the maximum limit of coverage
                     available for the Property under the Flood Insurance
                     Acts;

               (viii)earthquake, sinkhole and mine subsidence insurance, if
                     required in amounts, form and substance reasonably
                     satisfactory to Lender, provided that the insurance
                     pursuant to this Subsection (viii) shall be on terms
                     consistent with the all risk insurance policy
                     required under Section 3.3(a)(i); and

               (ix)  such other insurance and in such amounts as Lender
                     from time to time may reasonably request against such
                     other insurable hazards which at the time are
                     commonly insured against for property similar to the
                     Property located in or around the region in which the
                     Property is located.

               (b)   All insurance provided for in Subsection 3.3(a)
          hereof shall be obtained under valid and enforceable policies
          (the "Policies" or in the singular, the "Policy"), in such forms
          and, from time to time after the date hereof, in such amounts as
          may be reasonably satisfactory to Lender, issued by financially
          sound and responsible insurance companies authorized to do
          business in the state in which the Property is located and
          reasonably approved by Lender.  The insurance companies must have
          a general policy rating of A or better and a financial class of
          VIII or better by A.M. Best Company, Inc., and if there are any
          Securities (defined in Section 19.1 below) issued which have been

                                          28


          assigned a rating by a credit rating agency approved by Lender (a
          "Rating Agency"), the insurance company shall have a claims
          paying ability rating of AAA@ (or its equivalent) or better by at
          least two (2) of the Rating Agencies rating the Securities (one
          of which will be Standard & Poor's Rating Group if they are
          rating the Securities and one of which shall be Moody's Investors
          Service, Inc. if they are rating the Securities), or if only one
          Rating Agency is rating the Securities, then by such Rating
          Agency approved by Lender, or in the event such insurance company
          is not so rated, said insurance company shall be acceptable to
          Lender in all respects (each such insurer shall be referred to
          below as a "Qualified Insurer").  Not less than thirty (30) days
          prior to the expiration dates of the Policies theretofore
          furnished to Lender pursuant to Subsection 3.3(a), Borrower shall
          deliver certified copies of the Policies marked "premium paid" or
          accompanied by evidence satisfactory to Lender of payment of the
          premiums due thereunder (the "Insurance Premiums"), provided,
          however, that in the case of renewal Policies, Borrower may
          furnish Lender with binders therefor to be followed by the
          original Policies when issued.

               (c)   Borrower shall not obtain (i) any umbrella or blanket
          liability or casualty Policy unless, in each case, such Policy is
          approved in advance in writing by Lender and Lender's interest is
          included therein as provided in this Security Instrument and such
          Policy is issued by a Qualified Insurer, or (ii) separate
          insurance concurrent in form or contributing in the event of loss
          with that required in Subsection 3.3(a) to be furnished by, or
          which may be reasonably required to be furnished by, Borrower.
          In the event Borrower obtains separate insurance or an umbrella
          or a blanket Policy, Borrower shall notify Lender of the same and
          shall cause certified copies of each Policy to be delivered as
          required in Subsection 3.3(a).  Any blanket insurance Policy
          shall specifically allocate to the Property the amount of
          coverage from time to time reasonably required hereunder and
          shall otherwise provide the same protection as would a separate
          Policy insuring only the Property in compliance with the
          provisions of Subsection 3.3(a). Lender acknowledges that it has
          approved Borrower's blanket insurance Policy in effect as of the
          date hereof.  Notwithstanding Lender's approval of any umbrella
          or blanket liability or casualty Policy hereunder, Lender
          reserves the right, in its reasonable discretion, to require
          Borrower to obtain a separate Policy in compliance with this
          Section 3.3.

               (d)   All Policies of insurance provided for or
          contemplated by Subsection 3.3(a), except for the Policy
          referenced in Subsection 3.3(a)(v), shall name Lender and
          Borrower as the insured or additional insured, as their
          respective interests may appear, and in the case of property
          damage, boiler and machinery, and flood insurance, shall contain
          a so-called New York standard non-contributing mortgagee clause

                                          29


          in favor of Lender providing that the loss thereunder shall be
          payable to Lender.

               (e)   All Policies of insurance provided for in Subsection
          3.3(a) shall contain clauses or endorsements to the effect that:

               (i)   no act or negligence of Borrower, or anyone acting
                     for Borrower, or of any tenant under any Lease or
                     other occupant, or failure to comply with the
                     provisions of any Policy which might otherwise result
                     in a forfeiture of the insurance or any part thereof,
                     shall in any way affect the validity or
                     enforceability of the insurance insofar as Lender is
                     concerned;

               (ii)  the Policy shall not be materially changed (other
                     than to increase the coverage provided thereby) or
                     cancelled without at least 30 days' written notice to
                     Lender and any other party named therein as an
                     insured; and

               (iii) each Policy shall provide that the issuers thereof
                     shall give written notice to Lender if the Policy has
                     not been renewed thirty (30) days prior to its
                     expiration; and

               (iv)  Lender shall not be liable for any Insurance Premiums
                     thereon or subject to any assessments thereunder.

               (f)   Borrower shall furnish to Lender, on or before thirty
          (30) days after the close of each of Borrower's fiscal years, a
          statement certified by Borrower or a duly authorized officer of
          Borrower of the amounts of insurance maintained in compliance
          herewith, of the risks covered by such insurance and of the
          insurance company or companies which carry such insurance and, if
          reasonably requested by Lender, verification of the adequacy of
          such insurance by an independent insurance broker or appraiser
          acceptable to Lender.

               (g)   If at any time Lender is not in receipt of written
          evidence that all insurance required hereunder is in full force
          and effect, Lender shall have the right, without prior notice to
          Borrower to take such action as Lender deems necessary to protect
          its interest in the Property, including, without limitation, the
          obtaining of such insurance coverage as Lender in its sole
          discretion deems appropriate, provided, however, that Lender
          agrees to give Borrower notice after undertaking such action, and
          all expenses incurred by Lender in connection with such action or
          in obtaining such insurance and keeping it in effect shall be
          paid by Borrower to Lender upon demand and until paid shall be
          secured by this Security Instrument and shall bear interest in
          accordance with Article 4 of the Note.

                                          30


               (h)   If the Property shall be damaged or destroyed, in
          whole or in part, by fire or other casualty, Borrower shall give
          prompt notice of such damage to Lender and shall promptly
          commence and diligently prosecute the completion of the repair
          and restoration of the Property as nearly as possible to the
          condition the Property was in immediately prior to such fire or
          other casualty, with such alterations as may be reasonably
          approved by Lender (the "Casualty Restoration") and otherwise in
          accordance with Section 4.3 of this Security Instrument.
          Borrower shall pay all costs of such Restoration whether or not
          such costs are covered by insurance.

               Section 3.4    Payment of Taxes, etc.

               (a)   Borrower shall promptly pay all taxes, assessments,
          water rates, sewer rents, governmental impositions, and other
          charges, including without limitation vault charges and license
          fees for the use of vaults, chutes and similar areas adjoining
          the Land,  now or hereafter levied or assessed or imposed against
          the Property or any part thereof (the "Taxes"), all ground rents,
          maintenance charges and similar charges, now or hereafter levied
          or assessed or imposed against the Property or any part thereof
          (the "Other Charges"), and all charges for utility services
          provided to the Property as same become due and payable.
          Borrower will deliver to Lender, promptly upon Lender's
          reasonable request, evidence reasonably satisfactory to Lender
          that the Taxes, Other Charges and utility service charges have
          been so paid or are not then delinquent.  Borrower shall not
          suffer and shall promptly cause to be paid and discharged any
          lien or charge whatsoever which may be or become a lien or charge
          against the Property.  Except to the extent sums sufficient to
          pay all Taxes and Other Charges have been deposited with Lender
          in accordance with the terms of this Security Instrument,
          Borrower shall furnish to Lender paid receipts for the payment of
          the Taxes and Other Charges prior to the date the same shall
          become delinquent.

               (b)   After prior written notice to Lender, Borrower, at
          its own expense, may contest by appropriate legal proceeding,
          promptly initiated and conducted in good faith and with due
          diligence, the amount or validity or application in whole or in
          part of any of the Taxes, provided that (i) no Event of Default
          has occurred and is continuing under the Note, this Security
          Instrument or any of the Other Security Documents, (ii) Borrower
          is permitted to do so under the provisions of any other mortgage,
          deed of trust or deed to secure debt affecting the Property,
          (iii) such proceeding shall suspend the collection of the Taxes
          from Borrower and from the Property or Borrower shall have paid
          all of the Taxes under protest, (iv) such proceeding shall be
          permitted under and be conducted in accordance with the
          provisions of any other instrument to which Borrower is subject
          and shall not constitute a default thereunder, (v) neither the

                                          31

          Property nor any part thereof or interest therein will be in
          danger of being sold, forfeited, terminated, cancelled or lost,
          (vi) Borrower shall have deposited with Lender adequate reserves
          for the payment of the Taxes, together with all interest and
          penalties thereon, unless Borrower has paid all of the Taxes
          under protest, and (vii) Borrower shall have furnished the
          security as may be required in the proceeding, or as may be
          reasonably requested by Lender to insure the payment of any
          contested Taxes, together with all interest and penalties
          thereon.

               Section 3.5    Escrow Fund.  In addition to the initial
          deposits with respect to Taxes and, if applicable, Insurance
          Premiums made by Borrower to Lender on the date hereof to be held
          by Lender in escrow, Borrower shall pay to Lender on the [MERRILL
          LOANS ONLY -- first] [CHASE LOANS ONLY -- tenth] day of each
          calendar month (a) one-twelfth of an amount which would be
          sufficient to pay the Taxes payable, or estimated by Lender to be
          payable, during the next ensuing twelve (12) months and (b) at
          the option of Lender, if the liability or casualty Policy
          maintained by Borrower covering the Property shall not constitute
          a reasonably approved blanket or umbrella Policy pursuant to
          Subsection 3.3(c) hereof, or Lender shall require Borrower to
          obtain a separate Policy pursuant to Subsection 3.3(c) hereof,
          one-twelfth of an amount which would be sufficient to pay the
          Insurance Premiums due for the renewal of the coverage afforded
          by the Policies upon the expiration thereof (the amounts in (a)
          and (b) above shall be called the "Escrow Fund").  In the event
          Lender shall elect to collect payments in escrow for Insurance
          Premiums, Borrower shall pay to Lender an initial deposit to be
          determined by Lender, in its reasonable discretion, to increase
          the amounts in the Escrow Fund to an amount which, together with
          anticipated monthly escrow payments, shall be sufficient to pay
          all Insurance Premiums and Taxes as they become due. Borrower
          agrees to notify Lender immediately of any changes to the
          amounts, schedules and instructions for payment of any Taxes and
          Insurance Premiums of which it has or obtains knowledge and
          authorizes Lender or its agent to obtain the bills for Taxes
          directly from the appropriate taxing authority.  The Escrow Fund
          and the payments of interest or principal or both, payable
          pursuant to the Note shall be added together and shall be paid as
          an aggregate sum by Borrower to Lender.  Lender will apply the
          Escrow Fund to payments of Taxes and Insurance Premiums required
          to be made by Borrower pursuant to Sections 3.3 and 3.4 hereof.
          If the amount of the Escrow Fund shall exceed the amounts due for
          Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4
          hereof, Lender shall, in its discretion, return any excess to
          Borrower or credit such excess against future payments to be made
          to the Escrow Fund.  In allocating such excess, Lender may deal
          with the person shown on the records of Lender to be the owner of
          the Property.  If the Escrow Fund is not sufficient to pay the
          items set forth in (a) and (b) above, Borrower shall promptly pay

                                          32


          to Lender, upon demand, an amount which Lender shall estimate as
          sufficient to make up the deficiency.  The Escrow Fund shall not
          constitute a trust fund and may be commingled with other monies
          held by Lender.  No earnings or interest on the Escrow Fund shall
          be payable to orrower.

               Section 3.6    Condemnation.  Borrower shall promptly give
          Lender notice of the actual or threatened commencement of any
          condemnation or eminent domain proceeding and shall deliver to
          Lender copies of any and all papers served in connection with
          such proceedings.  Notwithstanding any taking by any public or
          quasi-public authority through eminent domain or otherwise
          (including but not limited to any transfer made in lieu of or in
          anticipation of the exercise of such taking), and whether or not
          any Award (defined below) is made available to Borrower for
          Restoration in accordance with Section 4.3, Borrower shall
          continue to pay the Debt at the time and in the manner provided
          for its payment in the Note and in this Security Instrument and
          the Debt shall not be reduced until any award or payment therefor
          (an "Award") shall have been actually received and applied by
          Lender, after the deduction of expenses of collection, to the
          reduction or discharge of the Debt.  Lender shall not be limited
          to the interest paid on the award by the condemning authority but
          shall be entitled to receive out of the award interest at the
          rate or rates provided herein or in the Note.  Borrower shall
          cause the award or payment made in any condemnation or eminent
          domain proceeding, which is payable to Borrower, to be paid
          directly to Lender.  Lender may apply any award or payment to the
          reduction or discharge of the Debt whether or not then due and
          payable.  If there is a complete taking of the Property by any
          condemning authority, then Lender shall, after the application of
          an Award to the payment of all sums then due under the Note, this
          Security Instrument and the Other Security Documents, promptly
          deliver all remaining proceeds of the Award to Borrower.  If
          there is a partial taking of the Property by any condemning
          authority, then (i) Borrower shall, subject to Force Majeure,
          promptly proceed to restore, repair, replace or rebuild the
          portion of the Property that was not taken by such condemning
          authority in a workmanlike manner (to the extent practicable) to
          a condition that is substantially equal in value and character to
          the condition and value of the Property prior to such
          condemnation or eminent domain proceeding (the "Condemnation
          Restoration; the Condemnation Restoration and the Casualty
          Restoration collectively hereinafter referred to as the
          "Restoration") and (ii) Lender will apply the Award to such
          Condemnation Restoration in accordance with the disbursement
          procedures set forth in Section 4.3 of this Security Instrument.
          If the Property is sold, through foreclosure or otherwise, prior
          to the receipt by Lender of the award or payment, Lender shall
          have the right, whether or not a deficiency judgment on the Note
          shall have been sought, recovered or denied, to receive the award
          or payment, or a portion thereof sufficient to pay the Debt.

                                          33


               Section 3.7    Leases and Rents.

               (a)   Borrower may enter into a proposed Lease (including
          the renewal or extension of an existing Lease ("a Renewal
          Lease")) without the prior written consent of Lender, provided
          such proposed Lease or Renewal Lease (i) provides for rental
          rates and terms comparable to existing local market rates and
          terms (taking into account the type and quality of the tenant) as
          of the date such Lease is executed by Borrower (unless, in the
          case of a Renewal Lease, the rent payable during such renewal, or
          a formula or other method to compute such rent, is provided for
          in the original Lease), (ii) is an arms-length transaction with a
          bona fide, independent third party tenant, (iii) does not have a
          materially adverse effect on the value of the Property taken as a
          whole, (iv) the terms of such Lease provide that such Lease is
          subject and subordinate to the Security Instrument and the lessee
          thereunder agrees to attorn to Lender, and (v) is written on the
          standard form of residential lease currently used by Borrower at
          the Property, which lease has been previously approved by Lender.
          All proposed Leases which do not satisfy the requirements set
          forth in this Subsection 3.7(a) shall be subject to the prior
          approval of Lender and its counsel, at Borrower's expense.
          Notwithstanding  the foregoing, Lender agrees that Borrower shall
          have the right from time to time, without the consent of Lender,
          to make non-material modifications to its standard form of
          residential lease so long as such modified lease does not (i)
          materially and adversely affect the value of Property and (ii)
          affect the subordination of said lease to any mortgage, deed of
          trust, deed to secure debt or other similar security instrument
          affecting the Property.

               (b)   Borrower (i) shall observe and perform all the
          obligations imposed upon the lessor under the Leases and shall
          not do or permit to be done anything to impair the value of any
          of the Leases as security for the Debt; (ii) upon request of
          Lender, shall promptly send copies to Lender of all notices of
          default which Borrower shall send or receive thereunder; (iii)
          shall enforce all of the material terms, covenants and conditions
          contained in the Leases upon the part of the tenant thereunder to
          be observed or performed; (iv) shall not collect any of the Rents
          more than one (1) month in advance (except security deposits
          shall not be deemed Rents collected in advance); (v) shall not
          execute any other assignment of the lessor's interest in any of
          the Leases or the Rents; and (vi) upon request of Lender, shall
          not consent to any assignment of or subletting under any Leases
          not in accordance with their terms, without the prior written
          consent of Lender.

               (c)   Borrower may, without the consent of Lender, amend,
          modify or waive the provisions of any Lease or terminate, reduce
          rents under, accept a surrender of space under, or shorten the
          term of, any Lease (including any guaranty, letter of credit or

                                          34


          other credit support with respect thereto) provided that such
          action (taking into account, in the case of a termination,
          reduction in rent, surrender of space or shortening of term, the
          planned alternative use of the affected space) does not have a
          materially adverse effect on the value of the Property taken as a
          whole, and provided that such Lease, as amended, modified or
          waived, is otherwise in compliance with the requirements of this
          Security Instrument and any lease subordination agreement binding
          upon Lender with respect to such Lease.  A termination of a Lease
          with a tenant who is in default beyond applicable notice and
          grace periods shall not be considered an action which has a
          materially adverse effect on the value of the Property taken as a
          whole.  Any amendment, modification, waiver, termination, rent
          reduction, space surrender or term shortening which does not
          satisfy the requirements set forth in this Subsection shall be
          subject to the prior approval of Lender and its counsel, at
          Borrower's expense.  Upon Lender's reasonable request, Borrower
          shall promptly deliver to Lender copies of all Leases,
          amendments, modifications and waivers which are entered into
          pursuant to this Subsection together with Borrower's
          certification that it has satisfied all of the conditions of this
          Subsection.

               (d)   Reserved.

               (e)   Upon the occurrence of an Event of Default, to the
          extent permitted by law, Borrower shall promptly deposit with
          Lender any and all monies representing security deposits under
          the Leases, whether or not Borrower actually received such monies
          (the "Security Deposits").  Lender shall hold the Security
          Deposits in accordance with the terms of the respective Lease,
          and shall only release the Security Deposits in order to return a
          tenant's Security Deposit to such tenant if such tenant is
          entitled to the return of the Security Deposit under the terms of
          the Lease and is not otherwise in default under the Lease.  To
          the extent required by Applicable Laws (defined below), Lender
          shall hold the Security Deposits in an interest bearing account
          selected by Lender in its sole discretion.  In the event Lender
          is not permitted by law to hold the Security Deposits, Borrower
          shall deposit the Security Deposits into an account with a
          federally insured institution as approved by Lender.

               Section 3.8    Maintenance and Use of Property.  Borrower
          shall cause the Property to be maintained in a good and safe
          condition and repair.  The Improvements and the Personal Property
          shall not be removed, demolished or materially altered (except
          for normal replacement of the Personal Property) without the
          consent of Lender.  Borrower shall promptly repair, replace or
          rebuild any part of the Property which may be destroyed by any
          casualty, or become damaged, worn or dilapidated or which may be
          affected by any proceeding of the character referred to in

                                          35


          Section 3.6 hereof and shall complete and pay for any structure
          at any time in the process of construction or repair on the Land.
          Borrower shall not initiate, join in, acquiesce in, or consent to
          any change in any private restrictive covenant, zoning law or
          other public or private restriction, limiting or defining the
          uses which may be made of the Property or any part thereof
          without the consent of Lender, which consent will not be
          unreasonably withheld, conditioned or delayed.  If under
          applicable zoning provisions the use of all or any portion of the
          Property is or shall become a nonconforming use, Borrower will
          not cause or permit the nonconforming use to be discontinued or
          the nonconforming Improvement to be abandoned without the express
          written consent of Lender.

               Section 3.9    Waste.  Borrower shall not commit or suffer
          any waste of the Property or make any change in the use of the
          Property which will in any way materially increase the risk of
          fire or other hazard arising out of the operation of the
          Property, or take any action that might invalidate or give cause
          for cancellation of any Policy, or do or permit to be done
          thereon anything that may in any way impair the value of the
          Property or the security of this Security Instrument.  Borrower
          will not, without the prior written consent of Lender, permit any
          drilling or exploration for or extraction, removal, or production
          of any minerals from the surface or the subsurface of the Land,
          regardless of the depth thereof or the method of mining or
          extraction thereof.

               Section 3.10   Compliance With Laws.

               (a)   Borrower shall promptly comply with all existing and
          future federal, state and local laws, orders, ordinances,
          governmental rules and regulations or court orders affecting the
          Property, or the use thereof ("Applicable Laws").

               (b)   Borrower shall from time to time, upon Lender's
          reasonable request, provide Lender with evidence reasonably
          satisfactory to Lender that the Property complies with all
          Applicable Laws or is exempt from compliance with Applicable
          Laws.

               (c)   Notwithstanding any provisions set forth herein or in
          any document regarding Lender's approval of alterations of the
          Property, Borrower shall not alter the Property in any manner
          which would materially increase Borrower's responsibilities for
          compliance with Applicable Laws without the prior written
          approval of Lender.  Lender's approval of the plans,
          specifications, or working drawings for alterations of the
          Property shall create no responsibility or liability on behalf of
          Lender for their completeness, design, sufficiency or their
          compliance with Applicable Laws.  The foregoing shall apply to
          tenant improvements constructed by Borrower or by any of its

                                          36



          tenants.  Lender may condition any such approval upon receipt of
          a certificate of compliance with Applicable Laws from an
          independent architect, engineer, or other person acceptable to
          Lender.

               (d)   Borrower shall give prompt notice to Lender of the
          receipt by Borrower of any notice related to a violation of any
          Applicable Laws and of the commencement of any proceedings or
          investigations which relate to compliance with Applicable Laws.

               (e)   After prior written notice to Lender, Borrower, at
          its own expense, may contest by appropriate legal proceeding,
          promptly initiated and conducted in good faith and with due
          diligence, the Applicable Laws affecting the Property, provided
          that (i) no Event of Default has occurred and is continuing under
          the Note, this Security Instrument or any of the Other Security
          Documents; (ii) Borrower is permitted to do so under the
          provisions of any other mortgage, deed of trust or deed to secure
          debt affecting the Property; (iii) such proceeding shall be
          permitted under and be conducted in accordance with the
          provisions of any other instrument to which Borrower or the
          Property is subject and shall not constitute a default
          thereunder; (iv) neither the Property, any part thereof or
          interest therein, any of the tenants or occupants thereof, nor
          Borrower shall be affected in any material adverse way as a
          result of such proceeding; (v) non-compliance with the Applicable
          Laws shall not impose civil or criminal liability on Lender or
          with respect to Borrower or the Property, to the extent that such
          non-compliance or liability shall not have a material adverse
          effect on (A) Borrower's ability to fully perform all of its
          obligations under the Note, this Security Instrument or the Other
          Security Documents or (B) the value, operation or net operating
          income of the Property; (vi) Borrower shall have furnished the
          security as may be required in the proceeding or by Lender in its
          reasonable discretion to ensure compliance by Borrower with the
          Applicable Laws; and (vii) Borrower shall have furnished to
          Lender all other items reasonably requested by Lender.

               Section 3.11   Books and Records.

               (a)   Borrower and any Guarantors (defined in Subsection
          10.1(e)) and Indemnitor(s) (defined in Section 13.4), if any,
          shall keep adequate books and records of account in accordance
          with generally accepted accounting principles ("GAAP"), or in
          accordance with other methods acceptable to Lender in its
          reasonable discretion, consistently applied and furnish to
          Lender:

               (i)   monthly certified rent rolls signed and dated by
                     Borrower in the form previously furnished to Lender,
                     detailing the names of all tenants of the
                     Improvements, the portion of Improvements occupied by

                                          37


                     each tenant, the base rent and any other charges
                     payable under each Lease and the term of each Lease,
                     including the expiration date, the extent to which
                     any tenant is in default under any Lease, and any
                     other information as is reasonably required by
                     Lender, within twenty (20) days after the end of each
                     calendar month;

               (ii)  quarterly operating statements of the Property,
                     prepared and certified by Borrower in the form
                     reasonably required by Lender, detailing the revenues
                     received, the expenses incurred and the net operating
                     income before and after debt service (principal and
                     interest) and major capital improvements for that
                     quarter and containing appropriate year to date
                     information, within forty-five (45) days after the
                     end of each fiscal quarter;

               (iii) an annual operating statement of the Property
                     detailing the total revenues received, total expenses
                     incurred, total cost of all capital improvements,
                     total debt service and total cash flow, to be
                     prepared and certified by Borrower in the form
                     reasonably required by Lender, or if reasonably
                     required by Lender, an audited annual operating
                     statement prepared and certified by an independent
                     certified public accountant reasonably acceptable to
                     Lender, within ninety (90) days after the close of
                     each fiscal year of Borrower;

               (iv)  an annual balance sheet and profit and loss statement
                     of Borrower, any Guarantors and any Indemnitor(s) in
                     the form reasonably required by Lender, prepared and
                     certified by the respective Borrower, Guarantors
                     and/or Indemnitor(s), or if reasonably required by
                     Lender, audited financial statements prepared by an
                     independent certified public accountant reasonably
                     acceptable to Lender, within ninety (90) days after
                     the close of each fiscal year of Borrower, Guarantors
                     and Indemnitor(s), as the case may be; and

               (v)   an annual operating budget presented on a monthly
                     basis consistent with the annual operating statement
                     described above for the Property, including cash flow
                     projections for the upcoming year, and all proposed
                     capital replacements and improvements at least
                     fifteen (15) days prior to the start of each fiscal
                     year.

               (b)   Upon reasonable request from Lender, Borrower, any
          Guarantor and any Indemnitor shall furnish in a timely manner to
          Lender:

                                          38


               (i)   a property management report for the Property,
                     showing the number of inquiries made and/or rental
                     applications received from tenants or prospective
                     tenants and deposits received from tenants and any
                     other information requested by Lender, in reasonable
                     detail and certified by Borrower (or an officer,
                     general partner, member or principal of Borrower if
                     Borrower is not an individual) under penalty of
                     perjury to be true and complete, to the best of its
                     knowledge, but no more frequently than quarterly; and

               (ii)  an accounting of all security deposits held in
                     connection with any Lease of any part of the
                     Property, including the name and identification
                     number of the accounts in which such security
                     deposits are held, the name and address of the
                     financial institutions in which such security
                     deposits are held and the name of the person to
                     contact at such financial institution, along with any
                     authority or release necessary for Lender to obtain
                     information regarding such accounts directly from
                     such financial institutions.

               (c)   Borrower, any Guarantor and any Indemnitor shall
          furnish Lender with such other additional financial or management
          information (including State and Federal tax returns) as may,
          from time to time, be reasonably required by Lender in form and
          substance reasonably satisfactory to Lender.

               (d)   Borrower, any Guarantor and any Indemnitor shall
          furnish to Lender and its agents convenient facilities (located
          at the Property or Borrower's corporate offices) for the
          examination and audit of any such books and records.

               (e)   Any reports, statements or other information required
          to be delivered under this Security Instrument shall be delivered
          in paper form and in the event that Lender requires financial
          statements in connection with subsection (f) below because the
          Loan together with any Affiliated Loans (defined below) equal or
          exceed 20% of the aggregate principal amount of all mortgage
          loans included in a securitization, Borrower shall deliver such
          reports, statements and other information (i) on a diskette, and
          (ii) if reasonably requested by Lender and within the
          capabilities of Borrower's data systems without change or
          modification thereto, in electronic form and prepared using
          Microsoft Word for Windows or WordPerfect for Windows files
          (which files may be prepared using a spreadsheet program, such as
          Microsoft Excel for Windows, and saved as word processing files).

               (f)   If requested by Lender, Borrower shall provide
          Lender, promptly upon request, with the following financial
          statements if, at the time a preliminary or final prospectus is

                                          39


          being prepared for a securitization, it is expected that the
          principal amount of the Loan together with any Affiliated Loans
          at the time of securitization may, or if the principal amount of
          the Loan together with any Affiliated Loans at any time during
          which the Loan and any Affiliated Loans are included in a
          securitization does, equal or exceed 20% of the aggregate
          principal amount of all mortgage loans included or expected to be
          included, as applicable, in the securitization:

               (i)   A balance sheet with respect to the Property for the
                     two most recent fiscal years, meeting the
                     requirements of Section 210.3-01 of Regulation S-X of
                     the Securities Act of 1933, as amended and statements
                     of income and statements of cash flows with respect
                     to the Property for the three most recent fiscal
                     years, meeting the requirements of Section 210.3-02
                     of Regulation S-X, and, to the extent that such
                     balance sheet is more than 135 days old as of the
                     date of the document in which such financial
                     statements are included, interim financial statements
                     of the Property meeting the requirements of Section
                     210.3-01 and 210.3-02 of Regulation S-X (all of such
                     financial statements, collectively, the "Standard
                     Statements"); provided, however, that with respect to
                     a Property (other than properties that are hotels,
                     nursing homes, or other properties that would be
                     deemed to constitute a business and not real estate
                     under Regulation S-X or other legal requirements, if
                     any) that has been acquired by Borrower from an
                     unaffiliated third party (such Property, "Acquired
                     Property"), as to which the other conditions set
                     forth in Section 210.3-14 of Regulation S-X for
                     provision of financial statements in accordance with
                     such Section have been met, in lieu of the Standard
                     Statements otherwise required by this section,
                     Borrower shall instead provide the financial
                     statements required by such Section 210.3-14 of
                     Regulation S-X ("Acquired Property Statements").

               (ii)  Not later than 30 days after the end of each fiscal
                     quarter following the date hereof, a balance sheet of
                     the Property as of the end of such fiscal quarter,
                     meeting the requirements of Section 210.3-01 of
                     Regulation S-X, and statements of income and
                     statements of cash flows of the Property for the
                     period commencing following the last day of the most
                     recent fiscal year and ending on the date of such
                     balance sheet and for the corresponding period of the
                     most recent fiscal year, meeting the requirements of
                     Section 210.3-02 of Regulation S-X (provided, that if
                     for such corresponding period of the most recent
                     fiscal year Acquired Property Statements were

                                          40


                     permitted to be provided hereunder pursuant to
                     subsection (i) above, Borrower shall instead provide
                     Acquired Property Statements for such corresponding
                     period).

               (iii) Not later than 75 days after the end of each fiscal
                     year following the date hereof, a balance sheet of
                     the Property as of the end of such fiscal year,
                     meeting the requirements of Section 210.3-01 of
                     Regulation S-X, and statements of income and
                     statements of cash flows of the Property for such
                     fiscal year, meeting the requirements of Section
                     210.3-02 of Regulation S-X.

               (iv)  Within ten business days after notice from the Lender
                     in connection with the securitization of this Loan,
                     such additional financial statements, such that, as
                     of the date (each an "Offering Document Date") of
                     each Disclosure Document, Borrower shall have
                     provided Lender with all financial statements as
                     described in subsection (f)(i) above; provided that
                     the fiscal year and interim periods for which such
                     financial statements shall be provided shall be
                     determined as of such Offering Document Date.

               (g)   If requested by Lender, Borrower shall provide
          Lender, promptly upon request, with summaries of the financial
          statements referred to in Section 3.11(f) hereof if, at the time
          a Disclosure Document is being prepared for a securitization, it
          is expected that the principal amount of the Loan and any
          Affiliated Loans at the time of securitization may, or if the
          principal amount of the Loan and any Affiliated Loans at any time
          during which the Loan and any Affiliated Loans are included in a
          securitization does, equal or exceed 10% (but less than 20%) of
          the aggregate principal amount of all mortgage loans included or
          expected to be included, as applicable, in a securitization.
          Such summaries shall meet the requirements for "summarized
          financial information," as defined in Section 210.1-02(bb) of
          Regulation S-X, or such other requirements as may be determined
          to be necessary or appropriate by Lender.

               (h)   All financial statements provided by Borrower
          hereunder pursuant to Section 3.11(f) and (g) hereof shall be
          prepared in accordance with GAAP, and shall meet the requirements
          of Regulation S-X and other applicable legal requirements, if
          any.  All financial statements referred to in Subsections
          3.11(f)(i) and 3.11(f)(iii) above shall be audited by independent
          accountants of Borrower reasonably acceptable to Lender in
          accordance with Regulation S-X and all other applicable legal
          requirements, shall be accompanied by the manually executed
          report of the independent accountants thereon, which report shall
          meet the requirements of Regulation S-X and all other applicable

                                          41


          legal requirements, if any, and shall be further accompanied by a
          manually executed written consent of the independent accountants,
          in form and substance acceptable to Lender, to the inclusion of
          such financial statements in any Disclosure Document and any
          Exchange Act Filing and to the use of the name of such
          independent accountants and the reference to such independent
          accountants as "experts" in any Disclosure Document which is
          intended to be registered with the Securities and Exchange
          Commission and Exchange Act Filing (as defined below), all of
          which shall be provided at the same time as the related financial
          statements are required to be provided.  Lender agrees that
          unless Lender notifies Borrower otherwise, Price Waterhouse
          Coopers and any other big "A5" accounting firm is an acceptable
          independent accountant.  All financial statements (audited or
          unaudited) provided by Borrower under this Section 3.11 shall be
          certified by the chief financial officer or administrative member
          of Borrower, which certification shall state that such financial
          statements meet the requirements set forth in the first sentence
          of this Section 3.11(h).

               (i)   If requested by Lender, Borrower shall provide
          Lender, promptly upon request, with any other or additional
          financial statements, or financial, statistical or operating
          information, as Lender shall determine to be required pursuant to
          Regulation S-X or any amendment, modification or replacement
          thereto or other legal requirements in connection with any
          Disclosure Document or any filing under or pursuant to the
          Securities and Exchange Act of 1934, as amended, in connection
          with or relating to a securitization (hereinafter an "Exchange
          Act Filing") or as shall otherwise be reasonably requested by the
          Lender.

               (j)   In the event Lender determines, in connection with a
          securitization, that the financial statements required in order
          to comply with Regulation S-X or other legal requirements are
          other than as provided herein, then notwithstanding the
          provisions of Section 3.11(f), (g) and (h) hereof, Lender may
          request, and Borrower shall promptly provide, such combination of
          Acquired Property Statement and/or Standard Statements or such
          other financial statements as Lender reasonably determines to be
          necessary or appropriate for such compliance.

               (k)   The term "Affiliated Loan" shall be a Loan by Lender
          to a parent or subsidiary of, or such other entity affiliated to,
          Borrower, Indemnitor or Guarantor.

               Section 3.12   Payment For Labor and Materials.  Subject to
          Borrower's right to discharge liens as permitted under Subsection
          10.1(h) hereof, Borrower will promptly pay when due all bills and
          costs for labor, materials, and specifically fabricated materials
          incurred in connection with the Property and never permit to
          exist in respect of the Property or any part thereof any lien or

                                          42


          security interest, even though inferior to the liens and the
          security interests hereof, and in any event never permit to be
          created or exist in respect of the Property or any part thereof
          any other or additional lien or security interest other than the
          liens or security interests hereof, except for the Permitted
          Exceptions (defined below).

               Section 3.13   Performance of Other Agreements.  Borrower
          shall observe and perform each and every material term to be
          observed or performed by Borrower pursuant to the terms of any
          agreement or recorded instrument affecting or pertaining to the
          Property, or given by Borrower to Lender for the purpose of
          further securing an Obligation and any amendments, modifications
          or changes thereto.

               Section 3.14   Change of Name, Identity or Structure.
          Except as may be permitted under Article 8 hereof, Borrower will
          not change Borrower's name, identity (including its trade name or
          names) or corporate, partnership or other structure without
          notifying Lender of such change in writing at least thirty (30)
          days prior to the effective date of such change and, in the case
          of a change in Borrower's structure, without first obtaining the
          prior written consent of Lender.

               Section 3.15   Existence.  Borrower will continuously
          maintain (a) its existence and shall not dissolve or permit its
          dissolution, (b) its rights to do business in the state where the
          Property is located and (c) its franchises and trade names, if
          any.

               Section 3.16   Non-Consolidation Opinion.   Borrower has
          complied and will comply with each of the assumptions made with
          respect to it in that certain substantive non-consolidation
          opinion letter, dated the date hereof, delivered by Borrower's
          counsel in connection with the Loan and any subsequent
          non-consolidation opinion delivered in accordance with the terms
          and conditions of this Security Instrument or the Cooperation
          Letter (the "Non-Consolidation Opinion"), including, but not
          limited to, any exhibits attached thereto.  Borrower has caused
          and shall cause each entity other than the Borrower with respect
          to which an assumption is made in the Non-Consolidation Opinion,
          including, but not limited to, any exhibits attached thereto, to
          comply with each of the assumptions made with respect to it in
          the Non-Consolidation Opinion, including, but not limited to, any
          exhibits attached thereto.


                            Article 4 - SPECIAL COVENANTS

          Borrower covenants and agrees that:

               Section 4.1    Property Use.  The Property shall be used

                                          43


          only for a multifamily apartment complex and incidental uses
          thereto, and for no other use without the prior written consent
          of Lender, which consent may be withheld in Lender's sole and
          absolute discretion.

               Section 4.2    Single Purpose Entity.  It has not and shall
          not:

               (a)   engage in any business or activity other than the
          ownership, operation and maintenance of the Property, and
          activities incidental thereto,[PA ONLY: except with respect to
          prior activities under that certain [management agreement];

               (b)   acquire or own any material assets other than (i) the
          Property, and (ii) such incidental Personal Property as may be
          necessary for the operation of the Property;

               (c)   merge into or consolidate with any person or entity
          or dissolve, terminate or liquidate in whole or in part, transfer
          or otherwise dispose of all or substantially all of its assets or
          change its legal structure, without in each case Lender's
          consent;

               (d)   fail to observe its organizational formalities or
          preserve its existence as an entity duly organized, validly
          existing and in good standing (if applicable) under the laws of
          the jurisdiction of its organization or formation, and
          qualification to do business in the state where the Property is
          located, if applicable, or without the prior written consent of
          Lender, amend, modify, terminate or fail to comply with the
          provisions of Borrower's Partnership Agreement, Articles or
          Certificate of Incorporation, Articles of Organization or similar
          organizational documents, as the case may be;

               (e)   own any subsidiary or make any investment in, any
          person or entity without the consent of Lender;

               (f)   commingle its assets with the assets of any of its
          members, general partners, affiliates, principals or of any other
          person or entity, participate in a cash management system with
          any other entity or person or fail to use its own separate
          stationery, invoices and checks;

               (g)   incur any debt, secured or unsecured, direct or
          contingent (including guaranteeing any obligation), other than
          the Debt, except for trade payables in the ordinary course of its
          business of owning and operating the Property, provided that such
          debt (i) is paid within sixty (60) days of the date it is
          incurred, (ii) does not exceed four percent (4%) of the then
          outstanding principal balance due under the Note and (iii) is not
          evidenced by a note;


                                          44


               (h)   become insolvent and fail to pay its debts and
          liabilities (including, as applicable, shared personnel and
          overhead expenses) from its assets as the same shall become due;

               (i)   fail to maintain its records, books of account and
          bank accounts separate and apart from those of the members,
          general partners, principals and affiliates of Borrower, the
          affiliates of a member, general partner or principal of Borrower,
          and any other person or entity.  Notwithstanding anything to the
          contrary contained herein, Borrower's financial position, results
          of operations and cash flows may be included in the consolidated
          financial statements of Associated Estates Realty Corporation
          ("AERC")  in accordance with GAAP, provided, however, that any
          such consolidated financial statements shall contain a note
          indicating that Borrower and its affiliates are separate legal
          entities and maintain records, books of account and bank accounts
          separate and apart from any other person or entity;

               (j)   enter into any contract or agreement with any member,
          general partner, principal or affiliate of Borrower, Guarantor or
          Indemnitor, or any member, general partner, principal or
          affiliate thereof, except upon terms and conditions that are
          intrinsically fair and substantially similar to those that would
          be available on an arms-length basis with third parties other
          than any member, general partner, principal or affiliate of
          Borrower, Guarantor or Indemnitor, or any member, general
          partner, principal or affiliate thereof;

               (k)   seek the dissolution or winding up in whole, or in
          part, of Borrower;

               (l)   fail to correct any known misunderstandings regarding
          the separate identity of Borrower;

               (m)   guarantee or become obligated for the debts of any
          other entity or person or hold itself out to be responsible for
          the debts of another person;

               (n)   make any loans or advances to any third party,
          including any member, general partner, principal or affiliate of
          Borrower or any member, general partner, principal or affiliate
          thereof, and shall not acquire obligations or securities of any
          member, general partner, principal or affiliate of Borrower or
          any member, general partner, or affiliate thereof;

               (o)   fail to file its own tax returns (except that Lender
          acknowledges that Borrower and its affiliates shall have the
          right to file consolidated or combined federal, state and city
          tax returns which shall provide that Borrower and its affiliates
          are separate legal entities and pay their respective
          proportionate shares of the taxes shown on such returns);


                                          45


               (p)   fail either to hold itself out to the public as a
          legal entity separate and distinct from any other entity or
          person or to conduct its business solely in its own name in order
          not (i) to mislead others as to the identity with which such
          other party is transacting business, or (ii) to suggest that
          Borrower is responsible for the debts of any third party
          (including any member, general partner, principal or affiliate of
          Borrower or any member, general partner, principal or affiliate
          thereof);

               (q)   fail to maintain adequate capital for the normal
          obligations reasonably foreseeable in a business of its size and
          character and in light of its contemplated business operations;

               (r)   file or consent to the filing of any petition, either
          voluntary or involuntary, to take advantage of any applicable
          insolvency, bankruptcy, liquidation or reorganization statute, or
          make an assignment for the benefit of creditors;

               (s)   share any common logo with or hold itself out as or
          be considered as a department or division of (i) any general
          partner, principal, member or affiliate of Borrower, (ii) any
          affiliate of a general partner, principal or member of Borrower,
          or (iii) any other person or entity;

               (t)   fail to allocate fairly and reasonably any overhead
          expenses that are shared with an affiliate, including paying for
          office space and services performed by any employee of an
          affiliate;

               (u)   pledge its assets for the benefit of any other person
          or entity, other than with respect to the Loan;

               (v)   fail to maintain a sufficient number of employees in
          light of its contemplated business operations;

               (w)   violate or cause to be violated the assumptions made
          with respect to Borrower and its principals in that certain
          opinion letter pertaining to substantive consolidation (the
          "Non-Consolidation Opinion") delivered by Baker & Hostetler LLP
          to Lender and the Rating Agencies;

               (x)   fail at any time to have at least one independent
          director that is not and has not been for at least five (5)
          years: (a) a stockholder, director, officer, employee, partner,
          attorney or counsel of Borrower or any affiliate thereof; (b) a
          customer, supplier or other person who derives any revenues from
          its activities with Borrower or any affiliate thereof; (c) a
          person or other entity controlling or under common control with
          any such stockholder, partner, customer, supplier or other
          person; or (d) a member of the immediate family of any such
          stockholder, director, officer, employee, partner, customer,

                                          46


          supplier or other person. (As used herein, the term "control"
          means the possession, directly or indirectly, of the power to
          direct or cause the direction of management, policies or
          activities of a person or entity, whether through ownership of
          voting securities, by contract or otherwise; or

               (y)   permit its board of directors to take any action
          which, under the terms of any certificate of incorporation, by-
          laws or any voting trust agreement with respect to any common
          stock, requires the vote of Borrower's board of directors unless
          at the time of such action there shall be at least one member who
          is an independent director.

               Section 4.3    Restoration.  The following provisions shall
          apply in connection with the Restoration of the Property:

               (a)   If the Net Proceeds (defined below) shall be less
          than $150,000 and the costs of completing the Restoration shall
          be less than $150,000, the Net Proceeds will be disbursed by
          Lender to Borrower upon receipt, provided that all of the
          conditions set forth in Subsection 4.3(b)(i) are met and Borrower
          delivers to Lender a written undertaking to expeditiously
          commence and to satisfactorily complete with due diligence,
          subject to Force Majeure (defined below), the Restoration in
          accordance with the terms of this Security Instrument.  The term
          "Force Majeure", as used herein, shall mean the failure of
          Borrower to perform any obligation hereunder by reason of any act
          of God, enemy or hostile government action, civil commotion,
          insurrection, sabotage, strikes or lockouts, fire or other
          casualty.

               (b)   If the Net Proceeds are equal to or greater than
          $150,000 or the costs of completing the Restoration is equal to
          or greater than $150,000, Lender shall make the Net Proceeds
          available for the Restoration in accordance with the provisions
          of this Section 4.3(b).  The term "Net Proceeds" for the purposes
          of this Section shall mean: (i) the net amount of all insurance
          proceeds received by Lender pursuant to Sections 3.3(a)(i), (iv),
          (vi), (vii), (viii) and, as applicable, (ix) of this Security
          Instrument as a result of such damage or destruction, after
          deduction of its reasonable costs and expenses (including, but
          not limited to, reasonable counsel fees), if any, in collecting
          same (Insurance Proceeds") or (ii) the net amount of the Award,
          after deduction of its reasonable costs and expenses (including,
          but not limited to, reasonable counsel fees), if any, in
          collecting same ("Condemnation Proceeds"), whichever the case may
          be.

               (i)   The Net Proceeds shall be made available to Borrower
          for the Restoration provided that each of the following
          conditions are met:


                                          47


               (A)   no Event of Default shall have occurred and be
          continuing under the Note, this Security Instrument or any of the
          Other Security Documents;

               (B)   (1) in the event the Net Proceeds are Insurance
          Proceeds, not more than fifty percent (50%) of the total floor
          area of the Improvements has been damaged, destroyed or rendered
          unusable as a result of such fire or other casualty or (2) in the
          event the Net Proceeds are Condemnation Proceeds, not more than
          ten percent (10%) of the land constituting the Property has been
          taken, such land is located along the perimeter or periphery of
          the Property, no portion of the Improvements is located on such
          land and such taking does not materially impair access to the
          Property;

               (C)   Leases demising in the aggregate at least 50% of the
          total rentable space in the Property which has been demised under
          executed and delivered Leases in effect as of the date of the
          occurrence of such fire or other casualty shall remain in full
          force and effect during and after the completion of the
          Restoration;

               (D)   Borrower shall commence the Restoration as soon as
          reasonably practicable (but in no event later than thirty (30)
          days after such damage or destruction occurs) and shall
          diligently, subject to Force Majeure, pursue the same to
          satisfactory completion;

               (E)   Lender shall be reasonably satisfied that any
          operating deficits which will be incurred with respect to the
          Property as a result of the occurrence of any such fire or other
          casualty will be covered out of (1) the Net Proceeds, (2) the
          insurance coverage referred to in Subsection 3.3(a)(iii), or (3)
          by other funds of Borrower;

               (F)   Lender shall be reasonably satisfied that, upon the
          completion of the Restoration, the gross cash flow and the net
          cash flow of the Property will be restored to a level sufficient
          to cover all carrying costs and operating expenses of the
          Property, including, without limitation, debt service on the Note
          at a coverage ratio (after deducting all required reserves as
          required by Lender from net operating income) of at least 1.25 to
          1.0, which coverage ratio shall be determined by Lender in its
          reasonable discretion on the basis of the Applicable Interest
          Rate (as defined in the Note);

               (G)   Lender shall be reasonably satisfied that, subject to
          Force Majeure, the Restoration will be substantially completed on
          or before the earliest to occur of (1) six (6) months prior to
          the Maturity Date (as defined in the Note), (2) six (6) months
          after the occurrence of such fire or other casualty, or (3) such
          time as may be required under applicable zoning law, ordinance,

                                          48


          rule or regulation in order to repair and restore the Property to
          the condition it was in immediately prior to such fire or other
          casualty;

               (H)   Borrower shall execute and deliver to Lender a
          completion guaranty in form and substance reasonably satisfactory
          to Lender and its counsel pursuant to the provisions of which
          Borrower shall guaranty to Lender the lien-free completion by
          Borrower of the Restoration in accordance with the provisions of
          this Subsection 4.3(b);

               (I)   the Property and the use thereof after the
          Restoration will be in compliance with and permitted under all
          applicable zoning laws, ordinances, rules and regulations; and

               (J)   the Restoration shall be done and completed by
          Borrower in an expeditious and diligent fashion, subject to Force
          Majeure, and in compliance with all applicable governmental laws,
          rules and regulations (including, without limitation, all
          applicable Environmental Laws (defined below).

               (ii)  The Net Proceeds shall be held by Lender and, until
                     disbursed in accordance with the provisions of this
                     Subsection 4.3(b), shall constitute additional
                     security for the Obligations. The Net Proceeds shall
                     be disbursed by Lender to, or as directed by,
                     Borrower from time to time during the course of the
                     Restoration, upon receipt of evidence reasonably
                     satisfactory to Lender that (A) all materials
                     installed and work and labor performed (except to the
                     extent that they are to be paid for out of the
                     requested disbursement) in connection with the
                     Restoration have been paid for in full, and (B) there
                     exist no notices of pendency, stop orders, mechanic's
                     or materialman's liens or notices of intention to
                     file same, or any other liens or encumbrances of any
                     nature whatsoever on the Property arising out of the
                     Restoration which have not either been fully bonded
                     to the reasonable satisfaction of Lender and
                     discharged of record or in the alternative fully
                     insured to the reasonable satisfaction of Lender by
                     the title company insuring the lien of this Security
                     Instrument.

               (iii) All plans and specifications required in connection
                     with the Restoration shall be subject to prior review
                     and acceptance in all reasonable respects by Lender
                     and by an independent consulting engineer reasonably
                     selected by Lender (the "Casualty Consultant").
                     Lender shall have the use of the plans and
                     specifications and all permits, licenses and
                     approvals required or obtained in connection with the

                                          49


                     Restoration.  The identity of the contractors,
                     subcontractors and materialmen engaged in the
                     Restoration, as well as the contracts under which
                     they have been engaged, shall be subject to prior
                     review and acceptance by Lender and the Casualty
                     Consultant.  All costs and expenses incurred by
                     Lender in connection with making the Net Proceeds
                     available for the Restoration including, without
                     limitation, reasonable counsel fees and disbursements
                     and the Casualty Consultant's fees, shall be paid by
                     Borrower.

               (iv)  In no event shall Lender be obligated to make
                     disbursements of the Net Proceeds in excess of an
                     amount equal to the costs actually incurred from time
                     to time for work in place as part of the Restoration,
                     as certified by the Casualty Consultant, minus the
                     Casualty Retainage.  The term "Casualty Retainage" as
                     used in this Subsection 4.3(b) shall mean an amount
                     equal to 10% of the costs actually incurred for work
                     in place as part of the Restoration, as certified by
                     the Casualty Consultant, until such time as the
                     Casualty Consultant certifies to Lender that Net
                     Proceeds representing 50% of the required Restoration
                     have been disbursed.  There shall be no Casualty
                     Retainage with respect to costs actually incurred by
                     Borrower for work in place in completing the last 50%
                     of the required Restoration.  The Casualty Retainage
                     shall in no event, and notwithstanding anything to
                     the contrary set forth above in this Subsection
                     4.3(b), be less than the amount actually held back by
                     Borrower from contractors, subcontractors and
                     materialmen engaged in the Restoration.  The Casualty
                     Retainage shall not be released until the Casualty
                     Consultant certifies to Lender that the Restoration
                     has been completed in accordance with the provisions
                     of this Subsection 4.3(b) and that all approvals
                     necessary for the re-occupancy and use of the
                     Property have been obtained from all appropriate
                     governmental and quasi-governmental authorities, and
                     Lender receives evidence reasonably satisfactory to
                     Lender that the costs of the Restoration have been
                     paid in full or will be paid in full out of the
                     Casualty Retainage, provided, however, that Lender
                     will release the portion of the Casualty Retainage
                     being held with respect to any contractor,
                     subcontractor or materialman engaged in the
                     Restoration as of the date upon which the Casualty
                     Consultant certifies to Lender that the contractor,
                     subcontractor or materialman has satisfactorily
                     completed all work and has supplied all materials in
                     accordance with the provisions of the contractor's,

                                          50


                     subcontractor's or materialman's contract, and the
                     contractor, subcontractor or materialman delivers the
                     lien waivers and evidence of payment in full of all
                     sums due to the contractor, subcontractor or
                     materialman as may be reasonably requested by Lender
                     or by the titl company insuring the lien of this
                     Security Instrument.  If required by Lender, the
                     release of any such portion of the Casualty Retainage
                     shall be approved by the surety company, if any,
                     which has issued a payment or performance bond with
                     respect to the contractor, subcontractor or
                     materialman.

               (v)   Lender shall not be obligated to make disbursements
                     of the Net Proceeds more frequently than once every
                     calendar month.

               (vi)  If at any time the Net Proceeds or the undisbursed
                     balance thereof shall not, in the reasonable opinion
                     of Lender, be sufficient to pay in full the balance
                     of the costs which are reasonably estimated by the
                     Casualty Consultant to be incurred in connection with
                     the completion of the Restoration, Borrower shall
                     deposit the deficiency (the "Net Proceeds
                     Deficiency") with Lender before any further
                     disbursement of the Net Proceeds shall be made.  The
                     Net Proceeds Deficiency deposited with Lender shall
                     be held by Lender and shall be disbursed for costs
                     actually incurred in connection with the Restoration
                     on the same conditions applicable to the disbursement
                     of the Net Proceeds, and until so disbursed pursuant
                     to this Subsection 4.3(b) shall constitute additional
                     security for the Obligations.

               (vii) The excess, if any, of the Net Proceeds and the
                     remaining balance, if any, of the Net Proceeds
                     Deficiency deposited with Lender after the Casualty
                     Consultant certifies to Lender that the Restoration
                     has been completed in accordance with the provisions
                     of this Subsection 4.3(b), and the receipt by Lender
                     of evidence reasonably satisfactory to Lender that
                     all costs incurred in connection with the Restoration
                     have been paid in full, shall be remitted by Lender
                     to Borrower, provided no Event of Default shall have
                     occurred and shall be continuing under the Note, this
                     Security Instrument or any of the Other Security
                     Documents.

               (c)   All Net Proceeds not required (i) to be made
          available for the Restoration or (ii) to be returned to Borrower
          as excess Net Proceeds pursuant to Subsection 4.3(b)(vii) may be
          retained and applied by Lender toward the payment of the Debt

                                          51


          whether or not then due and payable in such order, priority and
          proportions as Lender in its reasonable discretion shall deem
          proper or, at the reasonable discretion of Lender, the same may
          be paid, either in whole or in part, to Borrower for such
          purposes as Lender shall designate, in its reasonable discretion.
          If Lender shall receive and retain Net Proceeds, the lien of this
          Security Instrument shall be reduced only by the amount thereof
          received and retained by Lender and actually applied by Lender in
          reduction of the Debt.

               Section 4.4    ERISA.  (a)  Borrower shall not engage in any
          transaction which would cause any obligation, or action taken or
          to be taken, hereunder (or the exercise by Lender of any of its
          rights under the Note, this Security Instrument and the Other
          Security Documents) to be a non-exempt (under a statutory or
          administrative class exemption) prohibited transaction under the
          Employee Retirement Income Security Act of 1974, as amended
          ("ERISA").

               (b)   Borrower further covenants and agrees to deliver to
          Lender such certifications (subject to Article 15 hereof) or
          other evidence from time to time throughout the term of the
          Security Instrument, as requested by Lender in its sole
          discretion, that (i) Borrower is not an "employee benefit plan"
          as defined in Section 3(3) of ERISA, which is subject to Title I
          of ERISA, or a "governmental plan" within the meaning of Section
          3(3) of ERISA; (ii) Borrower is not subject to state statutes
          regulating investments and fiduciary obligations with respect to
          governmental plans; and (iii) one or more of the following
          circumstances is true:

               (A)   Equity interests in Borrower are publicly offered
          securities, within the meaning of 29 C.F.R. SS 2510.3-101(b)(2);

               (B)   Less than 25 percent of each outstanding class of
          equity interests in Borrower are held by "benefit plan investors"
          within the meaning of 29 C.F.R. SS 2510.3-101(f)(2); or

               (C)   Borrower qualifies as an "operating company" or a
          "real estate operating company" within the meaning of 29 C.F.R.
          SS 2510.3-101(c) or (e) or an investment company registered under
          The Investment Company Act of 1940.


                      Article 5 - REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants to Lender that:

               Section 5.1    Warranty of Title.  Borrower has good title
          to the Property and has the right to mortgage, grant, bargain,
          sell, pledge, assign, warrant, transfer and convey the same and
          that Borrower possesses an unencumbered fee simple absolute

                                          52


          estate in the Land and the Improvements and that it owns the
          Property free and clear of all liens, encumbrances and charges
          whatsoever except for those exceptions shown in the title
          insurance policy insuring the lien of this Security Instrument
          (the "Permitted Exceptions").  Borrower shall forever warrant,
          defend and preserve the title and the validity and priority of
          the lien of this Security Instrument and shall forever warrant
          and defend the same to Lender against the claims of all persons
          whomsoever.

               Section 5.2    Legal Status And Authority. Borrower (a) is
          duly organized, validly existing and in good standing under the
          laws of its state of organization or incorporation; (b  is duly
          qualified to transact business and is in good standing in the
          state where the Property is located; and (c) has all necessary
          approvals, governmental and otherwise, and full power and
          authority to own, operate and lease the Property.  Borrower (and
          the undersigned representative of Borrower, if any) has full
          power, authority and legal right to execute this Security
          Instrument, and to mortgage, grant, bargain, sell, pledge,
          assign, warrant, transfer and convey the Property pursuant to the
          terms hereof and to keep and observe all of the terms of this
          Security Instrument on Borrower's part to be performed.

               Section 5.3    Validity of Documents.  (a) The execution,
          delivery and performance of the Note, this Security Instrument
          and the Other Security Documents and the borrowing evidenced by
          the Note (i) are within the power and authority of Borrower; (ii)
          have been authorized by all requisite organizational action;
          (iii) have received all necessary approvals and consents,
          corporate, governmental or otherwise; (iv) will not violate,
          conflict with, result in a breach of or constitute (with notice
          or lapse of time, or both) a material default under any provision
          of law, any order or judgment of any court or governmental
          authority, the articles of incorporation, by-laws, partnership or
          trust agreement, articles of organization, operating agreement,
          or other governing instrument of Borrower, or any indenture,
          agreement or other instrument to which Borrower is a party or by
          which it or any of its assets or the Property is or may be bound
          or affected; (v) will not result in the creation or imposition of
          any lien, charge or encumbrance whatsoever upon any of its
          assets, except the lien and security interest created hereby; and
          (vi) will not require any authorization or license from, or any
          filing with, any governmental or other body (except for (1) the
          recordation of this Security Instrument in appropriate land
          records in the State where the Property is located, (2) Uniform
          Commercial Code filings relating to the security interest created
          hereby, and (3) any required filings with the Securities and
          Exchange Commission, provided, however, that Borrower covenants
          to Lender that any such filings will be made in a timely manner);
          and (b) the Note, this Security Instrument and the Other Security

                                          53

          Documents constitute the legal, valid and binding obligations of
          Borrower.

               Section 5.4    Litigation.  Except as previously disclosed
          in writing to Lender, there is no action, suit or proceeding,
          judicial, administrative or otherwise (including any condemnation
          or similar proceeding), pending or, to the best of Borrower's
          knowledge, threatened or contemplated against, or affecting,
          Borrower, a Guarantor, if any, an Indemnitor, if any, or the
          Property.

               Section 5.5    Status of Property.

               (a)   No portion of the Improvements is located in an area
          identified by the Secretary of Housing and Urban Development or
          any successor thereto as an area having special flood hazards
          pursuant to the Flood Insurance Acts or, if any portion of the
          Improvements is located within such area, Borrower has obtained
          and will maintain the insurance prescribed in Section 3.3 hereof.

               (b)   Except as previously disclosed in writing to Lender,
          Borrower has obtained all necessary certificates, licenses and
          other approvals, governmental and otherwise, necessary for the
          operation of the Property and the conduct of its business and all
          required zoning, building code, land use, environmental and other
          similar permits or approvals, all of which are in full force and
          effect as of the date hereof and not subject to revocation,
          suspension, forfeiture or modification.

               (c)   Except as previously disclosed in writing to Lender,
          the Property and the present and contemplated use and occupancy
          thereof are in full compliance with all applicable zoning
          ordinances, building codes, land use and Environmental Laws
          (hereinafter defined) and other similar laws.

               (d)   The Property is served by all utilities required for
          the current or contemplated use thereof.  All utility service is
          provided by public utilities and the Property has accepted or is
          equipped to accept such utility service.

               (e)   All public roads and streets necessary for service of
          and access to the Property for the current or contemplated use
          thereof have been completed, are serviceable and all-weather and
          are physically and legally open for use by the public.

               (f)   The Property is served by public water and sewer
          systems.

               (g)   The Property is free from damage caused by fire or
          other casualty.

               (h)   All costs and expenses of any and all labor,

                                          54


          materials, supplies and equipment used in the construction of the
          Improvements have been paid in full.

               (i)   Except for trade payables permitted pursuant to the
          terms hereof, Borrower has paid in full for, and is the owner of,
          all furnishings, fixtures and equipment (other than tenants'
          property) used in connection with the operation of the Property,
          free and clear of any and all security interests, liens or
          encumbrances, except the lien and security interest created
          hereby.

               (j)   All liquid and solid waste disposal, septic and sewer
          systems located on the Property are in a good and safe condition
          and repair and in compliance with all Applicable Laws.

               (k)   All the Improvements materially lie within the
          boundaries of the Land.

               Section 5.6    No Foreign Person.  Borrower is not a
          "foreign person" within the meaning of Section 1445(f)(3) of the
          Internal Revenue Code of 1986, as amended and the related
          Treasury Department regulations, including temporary regulations.

               Section 5.7    Separate Tax Lot.  The Property is assessed
          for real estate tax purposes as one or more wholly independent
          tax lot or lots, separate from any adjoining land or improvements
          not constituting a part of such lot or lots, and no other land or
          improvements is assessed and taxed together with the Property or
          any portion thereof.

               Section 5.8    Leases. Except as previously disclosed in
          writing to Lender, whether in the rent roll for the Property
          delivered to and approved by Lender or otherwise, (a) Borrower is
          the sole owner of the entire lessor's interest in the Leases; (b)
          the Leases are valid and enforceable and in full force and
          effect; (c) all of the Leases are arms-length agreements with
          bona fide, independent third parties; (d) no party under any
          Lease is in default; (e) all Rents due have been paid in full;
          (f) the terms of all alterations, modifications and amendments to
          the Leases are reflected in the certified occupancy statement
          delivered to and approved by Lender; (g) none of the Rents
          reserved in the Leases have been assigned or otherwise pledged or
          hypothecated; (h) none of the Rents have been collected for more
          than one (1) month in advance (except a security deposit shall
          not be deemed rent collected in advance); (i) the premises
          demised under the Leases have been completed and the tenants
          under the Leases have accepted the same and have taken possession
          of the same on a rent-paying basis; (j) there exist no offsets or
          defenses to the payment of any portion of the Rents; (k) Borrower
          has received no notice from any tenant challenging the validity
          or enforceability of any Lease; (l) there are no agreements with
          the tenants under the Leases other than expressly set forth in

                                          55


          each Lease; (m) the Leases are valid and enforceable against
          Borrower and the tenants set forth therein; (n) no Lease contains
          an option to purchase, right of first refusal to purchase, or any
          other similar provision; (o) no person or entity has any
          possessory interest in, or right to occupy, the Property except
          under and pursuant to a Lease; (p) each Lease is subordinate to
          this Security Instrument, either pursuant to its terms or a
          recordable subordination agreement; (q) no Lease has the benefit
          of a non-disturbance agreement that would be considered
          unacceptable to prudent institutional lenders, (r) all security
          deposits relating to the Leases reflected on the certified rent
          roll or other certification delivered to Lender have been
          collected by Borrower; and (s) no brokerage commissions or
          finders fees are due and payable regarding any Lease.

               Section 5.9    Solvency.  Borrower (a) has not entered into
          the transaction or executed the Note, this Security Instrument or
          any Other Security Document with the actual intent to hinder,
          delay or defraud any creditor and (b) has received reasonably
          equivalent value in exchange for its obligations under such
          documents.  Giving effect to the Loan, the fair saleable value of
          Borrower's assets exceeds and will, immediately following the
          making of the Loan, exceed Borrower's total liabilities,
          including, without limitation, subordinated, unliquidated,
          disputed and contingent liabilities.  The fair saleable value of
          Borrower's assets is and will, immediately following the making
          of the Loan, be greater than Borrower's probable liabilities,
          including the maximum amount of its contingent liabilities on its
          debts as such debts become absolute and matured.  Borrower's
          assets do not and, immediately following the making of the Loan
          will not, constitute unreasonably small capital to carry out its
          business as conducted or as proposed to be conducted.  Borrower
          does not intend to, and does not believe that it will, incur debt
          and liabilities (including contingent liabilities and other
          commitments) beyond its ability to pay such debt and liabilities
          as they mature (taking into account the timing and amounts of
          cash to be received by Borrower and the amounts to be payable on
          or in respect of obligations of Borrower).  Except as expressly
          disclosed to Lender in writing, no petition in bankruptcy has
          been filed against Borrower, any Indemnitor, any Guarantor, any
          principal or any related entity thereof, or any principal,
          general partner or member thereof, in the last seven (7) years,
          and neither Borrower, any Indemnitor, any Guarantor, any
          principal nor any related entity thereof, nor any principal,
          general partner or member thereof, in the last seven (7) years
          has ever made an assignment for the benefit of creditors or taken
          advantage of any insolvency act for the benefit of debtors.

               Section 5.10   Business Purposes.  The loan evidenced by the
          Note secured by the Security Instrument and the Other Security
          Documents (the "Loan") is solely for the business purpose of
          Borrower, and is not for personal, family, household, or

                                          56


          agricultural purposes.

               Section 5.11   Taxes.  Borrower, any Guarantor and any
          Indemnitor have filed all federal, state, county, municipal, and
          city income and other tax returns required to have been filed by
          them and have paid all taxes and related liabilities which have
          become due pursuant to such returns or pursuant to any
          assessments received by them.  Neither Borrower, any Guarantor
          nor any Indemnitor knows of any basis for any additional
          assessment in respect of any such taxes and related liabilities
          for prior years.

               Section 5.12   Mailing Address.  Borrower's mailing address,
          as set forth in the opening paragraph hereof or as changed in
          accordance with the provisions hereof, is true and correct.

               Section 5.13   No Change in Facts or Circumstances.  All
          information in the application for the Loan submitted to Lender
          (the "Loan Application") and in all financial statements, rent
          rolls, reports, certificates and other documents submitted in
          connection with the Loan Application or in satisfaction of the
          terms thereof, are accurate, complete and correct in all material
          respects.  There has been no adverse change in any condition,
          fact, circumstance or event that would make any such information
          inaccurate, incomplete or otherwise misleading.

               Section 5.14   Disclosure.  Borrower has disclosed to Lender
          all material facts and has not failed to disclose any material
          fact that could cause any representation or warranty made herein
          to be materially misleading.

               Section 5.15   Third Party Representations.  Each of the
          representations and the warranties made by each Guarantor and
          Indemnitor herein or in any Other Security Document(s) is true
          and correct in all material respects.

               Section 5.16   Illegal Activity.  No portion of the Property
          has been or will be purchased, improved, equipped or furnished
          with proceeds of any illegal activity and to the best of
          Borrower's knowledge, there are no illegal activities or
          activities relating to any controlled substance at the Property.

               Section 5.17   Contracts.  All contracts, agreements,
          consents, waivers, documents and writings of every kind or
          character at any time to which Borrower is a party to be
          delivered to Lender pursuant to any of the provisions of this
          Security Instrument are valid and enforceable against Borrower
          and, to the best knowledge of Borrower, are enforceable against
          all other parties thereto, and, to Borrower's actual knowledge,
          in all respects are what they purport to be and, to the best
          knowledge of Borrower, to the extent that any such writing shall
          impose any obligation or duty on the party thereto or constitute

                                          57


          a waiver of any rights which any such party might otherwise have,
          said writing shall be valid and enforceable against said party in
          accordance with its terms, except as such enforcement may be
          limited by applicable bankruptcy, insolvency, reorganization or
          similar laws affecting the rights of creditors generally.

               Section 5.18   Non-Consolidation Opinion Assumptions.  All
          of the assumptions made in the Non-Consolidation Opinion,
          including, but not limited to, any exhibits attached thereto, are
          true and correct.

               Section 5.19   ERISA.  (a)  As  of  the  date  hereof  and
          throughout the term of the Loan, (i) Borrower is not and will not
          be an "employee benefit plan" as defined in Section 3(3) of
          ERISA, which is subject to Title I of ERISA, and (ii) the assets
          of Borrower do not and will not constitute "plan assets" of one
          or more such plans for purposes of Title I of ERISA; and

               (b)   As of the date hereof and throughout the term of the
          Loan (i) Borrower is not and will not be a "governmental plan"
          within the meaning of Section 3(32) of ERISA and (ii)
          transactions by or with Borrower are not and will not be subject
          to state statutes applicable to Borrower regulating investments
          of and fiduciary obligations with respect to governmental plans.

               Section 5.20   Federal Reserve Regulations.  No part of the
          proceeds of the Loan will be used for the purpose of purchasing
          or acquiring any "margin stock" within the meaning of Regulation
          U of the Board of Governors of the Federal Reserve System or for
          any other purpose which would be inconsistent with such
          Regulation U or any other Regulations of such Board of Governors,
          or for any purposes prohibited by Legal Requirements or by the
          terms and conditions of this Security Instrument, the Note or the
          Other Security Documents.

               Section 5.21   Forfeiture.  There has not been and shall
          never be committed by Borrower or any other person in occupancy
          of or involved with the operation or use of the Property any act
          or omission affording the federal government or any state or
          local government the right of forfeiture as against the Property
          or any part thereof or any monies paid in performance of
          Borrower's obligations under the Note, this Security Instrument
          or the Other Security Documents. Borrower hereby covenants and
          agrees not to commit, permit or suffer to exist any act or
          omission affording such right of forfeiture.

               Section 5.22 Investment Company Act.  Borrower is not (a) an
          "investment company" or a company "controlled" by an "investment
          company," within the meaning of the Investment Company Act of
          1940, as amended; (b) a "holding company" or a "subsidiary
          company" of a "holding company" or an "affiliate" of either a
          "holding company" or a "subsidiary company" within the meaning of

                                          58


          the Public Utility Holding Company Act of 1935, as amended; or
          (c) subject to any other federal or state law or regulation which
          purports to restrict or regulate its ability to borrow money.


                        Article 6 - OBLIGATIONS AND RELIANCES

               Section 6.1    Relationship of Borrower and Lender.  The
          relationship between Borrower and Lender is solely that of debtor
          and creditor, and Lender has no fiduciary or other special
          relationship with Borrower, and no term or condition of any of
          the Note, this Security Instrument and the Other Security
          Documents shall be construed so as to deem the relationship
          between Borrower and Lender to be other than that of debtor and
          creditor.

               Section 6.2    No Reliance on Lender.  The members, general
          partners, principals, shareholders, and (if Borrower is a trust)
          beneficial owners of Borrower are experienced in the ownership
          and operation of properties similar to the Property, and Borrower
          and Lender are relying solely upon such expertise and business
          plan in connection with the ownership and operation of the
          Property.  Borrower is not relying on Lender's expertise,
          business acumen or advice in connection with the Property.

               Section 6.3    No Lender Obligations.

               (a) Notwithstanding the provisions of Subsections 1.1(f) and
          (l) or Section 1.2, Lender is not undertaking the performance of
          (i) any obligations under the Leases; or (ii) any obligations
          with respect to such agreements, contracts, certificates,
          instruments, franchises, permits, trademarks, licenses and other
          documents.

               (b)   By accepting or approving anything required to be
          observed, performed or fulfilled or to be given to Lender
          pursuant to this Security Instrument, the Note or the Other
          Security Documents, including without limitation, any officer's
          certificate, balance sheet, statement of profit and loss or other
          financial statement, survey, appraisal, or insurance policy,
          Lender shall not be deemed to have warranted, consented to, or
          affirmed the sufficiency, the legality or effectiveness of same,
          and such acceptance or approval thereof shall not constitute any
          warranty or affirmation with respect thereto by Lender.

               Section 6.4    Reliance.  Borrower recognizes and
          acknowledges that in accepting the Note, this Security Instrument
          and the Other Security Documents, Lender is expressly and
          primarily relying on the truth and accuracy of the warranties and
          representations set forth in Article 5 and Article 12 without any
          obligation to investigate the Property and notwithstanding any
          investigation of the Property by Lender; that such reliance

                                          59


          existed on the part of Lender prior to the date hereof; that the
          warranties and representations are a material inducement to
          Lender in accepting the Note, this Security Instrument and the
          Other Security Documents; and that Lender would not be willing to
          make the Loan and accept this Security Instrument in the absence
          of the warranties and representations as set forth in Article 5
          and Article 12.


                            Article 7 - FURTHER ASSURANCES

               Section 7.1    Recording of Security Instrument, etc.
          Borrower forthwith upon the execution and delivery of this
          Security Instrument and thereafter, from time to time, will cause
          this Security Instrument and any of the Other Security Documents
          creating a lien or security interest or evidencing the lien
          hereof upon the Property and each instrument of further assurance
          to be filed, registered or recorded in such manner and in such
          places as may be required by any present or future law in order
          to publish notice of and fully to protect and perfect the lien or
          security interest hereof upon, and the interest of Lender in, the
          Property.  Borrower will pay all taxes, filing, registration or
          recording fees, and all expenses incident to the preparation,
          execution, acknowledgment and/or recording of the Note, this
          Security Instrument, the Other Security Documents, any note or
          mortgage supplemental hereto, any security instrument with
          respect to the Property and any instrument of further assurance,
          and any modification or amendment of the foregoing documents, and
          all federal, state, county and municipal taxes, duties, imposts,
          assessments and charges arising out of or in connection with the
          execution and delivery of this Security Instrument, any mortgage
          supplemental hereto, any security instrument with respect to the
          Property or any instrument of further assurance, and any
          modification or amendment of the foregoing documents, except
          where prohibited by law so to do.

               Section 7.2    Further Acts, etc.  Borrower will, at the
          cost of Borrower, and without expense to Lender, do, execute,
          acknowledge and deliver all and every such further acts, deeds,
          conveyances, mortgages, assignments, notices of assignments,
          transfers and assurances as Lender shall, from time to time,
          require, for the better assuring, conveying, assigning,
          transferring, and confirming unto Lender the Property and rights
          hereby mortgaged, granted, bargained, sold, conveyed, confirmed,
          pledged, assigned, warranted and transferred or intended now or
          hereafter so to be, or which Borrower may be or may hereafter
          become bound to convey or assign to Lender, or for carrying out
          the intention or facilitating the performance of the terms of
          this Security Instrument or for filing, registering or recording
          this Security Instrument, or for complying with all Applicable
          Laws.  Borrower, on demand, will execute and deliver and hereby
          authorizes Lender, following twenty (20) days' notice to

                                          60

          Borrower, to execute in the name of Borrower or without the
          signature of Borrower to the extent Lender may lawfully do so,
          one or more financing statements, chattel mortgages or other
          instruments, to evidence more effectively the security interest
          of Lender in the Property.  Borrower grants to Lender an
          irrevocable power of attorney coupled with an interest for the
          purpose of exercising and perfecting any and all rights and
          remedies available to Lender at law and in equity, including
          without limitation such rights and remedies available to Lender
          pursuant to this Section 7.2.

               Section 7.3    Changes in Tax, Debt Credit and Documentary
          Stamp Laws.

               (a)   If any law is enacted or adopted or amended after the
          date of this Security Instrument which deducts the Debt from the
          value of the Property for the purpose of taxation or which
          imposes a tax, either directly or indirectly, on the Debt or
          Lender's interest in the Property, Borrower will pay the tax,
          with interest and penalties thereon, if any.  If Lender is
          advised by counsel chosen by it that the payment of tax by
          Borrower would be unlawful or taxable to Lender or unenforceable
          or provide the basis for a defense of usury, then Lender shall
          have the option, exercisable by written notice of not less than
          ninety (90) days to declare the Debt immediately due and payable.

               (b)   Borrower will not claim or demand or be entitled to
          any credit or credits on account of the Debt for any part of the
          Taxes or Other Charges assessed against the Property, or any part
          thereof, and no deduction shall otherwise be made or claimed from
          the assessed value of the Property, or any part thereof, for real
          estate tax purposes by reason of this Security Instrument or the
          Debt.  If such claim, credit or deduction shall be required by
          law, Lender shall have the option, exercisable by written notice
          of not less than ninety (90) days, to declare the Debt
          immediately due and payable.

               (c)   If at any time the United States of America, any
          State thereof or any subdivision of any such State shall require
          revenue or other stamps to be affixed to the Note, this Security
          Instrument, or any of the Other Security Documents or impose any
          other tax or charge on the same, Borrower will pay for the same,
          with interest and penalties thereon, if any.

               Section 7.4    Estoppel Certificates.

               (a)   After request by Lender, Borrower, within ten (10)
          days, shall furnish Lender or any proposed assignee with a
          statement, duly acknowledged and certified, setting forth (i) the
          amount of the original principal amount of the Note, (ii) the
          unpaid principal amount of the Note, (iii) the rate of interest
          of the Note, (iv) the terms of payment and maturity date of the

                                          61

          Note, (v) the date installments of interest and/or principal were
          last paid, (vi) that, except as provided in such statement and to
          the best of Borrower's knowledge, there are no defaults or events
          which with the passage of time or the giving of notice or both,
          would constitute an event of default under the Note or the
          Security Instrument, (vii) that the Note and this Security
          Instrument are valid, legal and binding obligations and have not
          been modified or if modified, giving particulars of such
          modification, (viii) whether any offsets or defenses exist
          against the obligations secured hereby and, if any are alleged to
          exist, a detailed description thereof, (ix) that all Leases are
          in full force and effect, (x) the date to which the Rents
          thereunder have been paid pursuant to the Leases, (xi) whether or
          not, to the best knowledge of Borrower, any of the lessees under
          the Leases are in default under the Leases, and, if any of the
          lessees are in default, setting forth the specific nature of all
          such defaults, (xii) the amount of security deposits held by
          Borrower under each Lease and that such amounts are consistent
          with the amounts required under each Lease, and (xiii) as to any
          other matters reasonably requested by Lender and reasonably
          related to the Leases, the obligations secured hereby, the
          Property or this Security Instrument.

               (b)   With respect to commercial Leases, Borrower shall use
          its best efforts to deliver to Lender, promptly upon request,
          duly executed estoppel certificates from any one or more lessees
          as required by Lender attesting to such facts regarding the Lease
          as Lender may require, including but not limited to attestations
          that each Lease covered thereby is in full force and effect with
          no defaults thereunder on the part of any party, that none of the
          Rents have been paid more than one month in advance, and that the
          lessee claims no defense or offset against the full and timely
          performance of its obligations under the Lease, provided,
          however, that if any of the foregoing is not true, then the
          estoppel certificates shall so state.

               (c)   Upon any transfer or proposed transfer contemplated
          by Section 19.1 hereof, at Lender's request, Borrower, any
          Guarantors and any Indemnitor(s) shall provide an estoppel
          certificate to the Investor (defined in Section 19.1) or any
          prospective Investor in such form, substance and detail as
          Lender, such Investor or prospective Investor may require.

               Section 7.5    Flood Insurance.  After Lender's request,
          Borrower shall deliver evidence satisfactory to Lender that no
          portion of the Improvements is situated in a federally designated
          "special flood hazard area" or if it is, that Borrower has
          obtained insurance meeting the requirements of Section
          3.3(a)(vii).

               Section 7.6    Replacement Documents. Upon receipt of an
          affidavit of an officer of Lender as to the loss, theft,

                                          62


          destruction or mutilation of the Note or any Other Security
          Document which is not of public record, and, in the case of any
          such mutilation, upon surrender and cancellation of such Note or
          Other Security Document, Borrower will issue, in lieu thereof, a
          replacement Note or Other Security Document, dated the date of
          such lost, stolen, destroyed or mutilated Note or Other Security
          Document in the same principal amount thereof and otherwise of
          like tenor.


                         Article 8 - DUE ON SALE/ENCUMBRANCE

               Section 8.1    No Sale/Encumbrance.  Borrower agrees that
          Borrower shall not, without the prior written consent of Lender,
          sell, convey, mortgage, grant, bargain, encumber, pledge, assign,
          or otherwise transfer the Property or any part thereof or permit
          the Property or any part thereof to be sold, conveyed, mortgaged,
          granted, bargained, encumbered, pledged, assigned, or otherwise
          transferred, except that Borrower may lease space in the
          Improvements to tenants in accordance with the provisions of
          Section 3.7.  Lender agrees that it shall not unreasonably
          withhold or delay any consent as may be required from Lender
          under this Section 8.1 with respect to utility easements with
          utility providers, governmental entities or such other parties,
          provided that any such utility easement does not have a material
          adverse affect on the use or value of the Property and does not
          impair the lien of this Security Instrument.

               Section 8.2    Sale/Encumbrance Defined.  A sale,
          conveyance, mortgage, grant, bargain, encumbrance, pledge,
          assignment, or transfer of the Property within the meaning of
          this Article 8 shall be deemed to include, but not limited to,
          (a) an installment sales agreement wherein Borrower agrees to
          sell the Property or any part thereof for a price to be paid in
          installments; (b) 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 any Leases or any Rents; (c)
          if Borrower, any Guarantor, any Indemnitor, or any managing agent
          affiliated with any of the foregoing (the "Affiliated Manager")
          or any general or limited partner or member of Borrower, any
          Guarantor, any Indemnitor or any Affiliated Manager is a
          corporation, the voluntary or involuntary sale, conveyance,
          transfer or pledge of such corporation's stock (or the stock of
          any corporation directly or indirectly controlling such
          corporation by operation of law or otherwise) or the creation or
          issuance of new stock by which an aggregate of more than 10% of
          such corporation's stock shall be vested in a party or parties
          who are not now stockholders; (d) if Borrower, any Guarantor, any
          Indemnitor or any Affiliated Manager or any general or limited
          partner or member of Borrower, any Guarantor or any Indemnitor or

                                          63

          any Affiliated Manager 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
          or any profits or proceeds relating to such partnership interest
          or the voluntary or involuntary sale, conveyance, transfer or
          pledge of limited partnership interests (or the limited
          partnership interests of any limited partnership directly or
          indirectly controlling such limited partnership by operation of
          law or otherwise) or the creation or issance of new limited
          partnership interests, by which an aggregate of more than 10% of
          such limited partnership interests are held by parties who are
          not currently limited partners; and (e) if Borrower, any
          Guarantor, any Indemnitor or any Affiliated Manager or any
          general or limited partner or member of Borrower, any Guarantor
          or any Indemnitor or any Affiliated Manager is a limited
          liability company, the change, removal or resignation of a
          managing member or the transfer of the membership interest of any
          managing member or any profits or proceeds relating to such
          membership interest or the voluntary or involuntary sale,
          conveyance, transfer or pledge of membership interests (or the
          membership interests of any limited liability company directly or
          indirectly controlling such limited liability company by
          operation of law or otherwise) or the creation or issuance of new
          membership interests, by which an aggregate of more than 10% of
          such membership interests are held by parties who are not
          currently members; and (f) the removal  or the resignation of the
          managing agent (including, without limitation, the Affiliated
          Manager) other than in accordance with that certain Conditional
          Assignment of Management Agreement dated the date hereof between
          Borrower and Lender.  Notwithstanding the foregoing, the
          following transfer shall not be deemed to be a sale, conveyance,
          mortgage, grant, bargain, encumbrance, pledge, assignment, or
          transfer within the meaning of this Article 8:

               (a)   transfer by devise or descent or by operation of law
          upon the death of a member, partner or stockholder of Borrower,
          any Guarantor or any Indemnitor or any general partner or member
          thereof;

               (b)   provided that no Event of Default has occurred and is
          continuing under the Note, this Security Instrument or the Other
          Security Documents, transfers of non-managing membership, limited
          partnership or shareholder interests, as applicable, in Borrower
          or Affiliated Manager (other than AERC to the extent that AERC is
          a Publicly Traded Entity (defined  below)) (the "Permitted
          Transfers") up to 49%, respectively, in the aggregate; provided,
          however, that (i) Lender must receive sixty (60) days prior
          written notice of any transfer pursuant to this Section, (ii)
          AERC must continue to hold after the Permitted Transfer at least
          a 51% direct or indirect beneficial interest in Borrower or
          Affiliated Manager (as the case may be), (iii) such transfers

                                          64

          shall not result in a change in control of Borrower or Affiliated
          Manager (other than AERC to the extent that AERC is a Publicly
          Traded Entity) (as the case may be) or in the day-to-day
          operations of the Property, (iv) Lender shall have received
          evidence satisfactory to it (which shall include a
          non-consolidation opinion acceptable to Lender) that after such
          transfer Borrower shall be in compliance with the terms hereof,
          including without limitation, Section 4.2, and (v) Lender shall
          have received payment of all fees and expenses set forth in
          Section 8.3 (notwithstanding anything to the contrary contained
          in Section 8.1 or this Subsection 8.2 (b), in the event that (A)
          Borrower requests Lender's consent to a transfer of shareholder
          interests in the Affiliated Manager in excess of 49%, (B) the
          Affiliated Manager is a corporation which is not publically
          traded on a nationally recognized exchange or shall no longer
          continue to be a corporation which is publically traded on a
          nationally recognized exchange as a result of such transfer, and
          (C) if Securities are then rated by the Rating Agencies, Borrower
          shall deliver to Lender written confirmation from the Rating
          Agencies that the transfer shall not result in a downgrade,
          withdrawal or qualification of the then current ratings by the
          applicable Rating Agencies of the Securities and otherwise in
          form and substance reasonably satisfactory to Lender, Lender's
          consent with respect to such requested transfer shall not be
          unreasonably withheld [;] [and];

               (c)   in the event the Affiliated Manager is a corporation
          publicly traded on a nationally-recognized exchange (a Publicly
          Traded Entity) and provided that the Affiliated Manager shall
          continue to be publicly traded on a nationally-recognized
          exchange after any such trade, transfers of shareholder interests
          in the Affiliated Manager [; and] [.]

               (d)   [WITH RESPECT TO COUNTRY CLUB ONLY: (d) a transfer of
          all of the shares of the Borrower by Associated Estates
          Management Company, its sole shareholder, to Associated Estates
          Realty Corporation provided Lender receives at least sixty (60)
          days prior written notice of the transfer.]

               Section 8.3    Lender's Rights.  Lender reserves the right
          to condition the consent required hereunder upon a modification
          of the terms hereof and on assumption of the Note, this Security
          Instrument and the Other Security Documents as so modified by the
          proposed transferee, payment of a transfer fee of not less than
          one percent (1%) of the principal balance of the Note (the
          "Transfer Fee"), a $4,000 processing fee, and all of Lender's
          expenses incurred in connection with such transfer, the approval
          by a Rating Agency of the proposed transferee, the proposed
          transferee's continued compliance with the covenants set forth in
          this Security Instrument, including, without limitation, the
          covenants in Section 4.2 hereof, or such other conditions as
          Lender shall determine in its sole discretion to be in the

                                          65


          interest of Lender.  Notwithstanding the preceding sentence, (i)
          no Transfer Fee shall be payable in connection  with any
          Permitted Transfer and (ii) in the event of any transfer of
          shareholder interests in Borrower other than a Permitted
          Transfer, the Transfer Fee equal to seventy-five hundredths of a
          percent (0.75%) of the principal balance of the Note.  All of
          Lender's expenses incurred and the $4,000 processing fee shall be
          payable by Borrower whether or not Lender consents to the
          transfer.  Lender shall not be required to demonstrate any actual
          impairment of its security or any increased risk of default
          hereunder in order to declare the Debt immediately due and
          payable upon Borrower's sale, conveyance, mortgage, grant,
          bargain, encumbrance, pledge, assignment, or transfer of the
          Property without Lender's consent.  This provision shall apply to
          every sale, conveyance, mortgage, grant, bargain, encumbrance,
          pledge, assignment, or transfer of the Property regardless of
          whether voluntary or not, or whether or not Lender has consented
          to any previous sale, conveyance, mortgage, grant, bargain,
          encumbrance, pledge, assignment, or transfer of the Property.


                                Article 9 - PREPAYMENT

               Section 9.1    Prepayment.  The Debt may not be prepaid in
          whole or in part except in strict accordance with the express
          terms and conditions of the Note.


                                 Article 10 - DEFAULT

               Section 10.1   Events of Default.  The occurrence of any one
          or more of the following events shall constitute an "Event of
          Default":

               (a)   if any portion of the Debt is not paid on or prior to
          [MERRILL LOANS ONLY -- the fifth (5th) day after the same is due]
          [CHASE LOANS ONLY -- the date the same is due];

               (b)   if any of the Taxes or Other Charges is not paid when
          the same is due and payable except to the extent sums sufficient
          to pay such Taxes and Other Charges have been deposited with
          Lender in accordance with the terms of this Security Instrument;

               (c)   if the Policies are not kept in full force and
          effect, or if the Policies are not delivered to Lender upon
          request;

               (d)   if Borrower or principal, as applicable, violates or
          does not comply with any of the provisions of Section 4.2 or
          Article 8, including, but not limited to, if Borrower or any
          principal shall fail to comply with the provisions of its
          operating agreement, articles or certificate of incorporation,

                                          66


          partnership agreement or any other governing documents;

               (e)   if any representation or warranty of Borrower, any
          Indemnitor or any person guaranteeing payment of the Debt or any
          portion thereof or performance by Borrower of any of the terms of
          this Security Instrument (a "Guarantor"), or any member, general
          partner, principal or beneficial owner of any of the foregoing,
          made herein or in the Environmental Indemnity (defined below) or
          in any guaranty, or in any certificate, report, financial
          statement or other instrument or document furnished to Lender
          shall have been false or misleading in any material respect when
          made;

               (f)   if (i) Borrower or any managing member or general
          partner of Borrower, or any Guarantor or Indemnitor shall
          commence any case, proceeding or other action (A) under any
          existing or future law of any jurisdiction, domestic or foreign,
          relating to bankruptcy, insolvency, reorganization,
          conservatorship or relief of debtors, seeking to have an order
          for relief entered with respect to it, or seeking to adjudicate
          it a bankrupt or insolvent, or seeking reorganization,
          arrangement, adjustment, winding-up, liquidation, dissolution,
          composition or other relief with respect to it or its debts, or
          (B) seeking appointment of a receiver, trustee, custodian,
          conservator or other similar official for it or for all or any
          substantial part of its assets, or the Borrower or any managing
          member or general partner of Borrower, or any Guarantor or
          Indemnitor shall make a general assignment for the benefit of its
          creditors; or (ii) there shall be commenced against Borrower or
          any managing member or general partner of Borrower, or any
          Guarantor or Indemnitor any case, proceeding or other action of a
          nature referred to in clause (i) above which (A) results in the
          entry of an order for relief or any such adjudication or
          appointment or (B) remains undismissed, undischarged or unbonded
          for a period of sixty (60) days; or (iii) there shall be
          commenced against the Borrower or any managing member or general
          partner of Borrower, or any Guarantor or Indemnitor any case,
          proceeding or other action seeking issuance of a warrant of
          attachment, execution, distraint or similar process against all
          or any substantial part of its assets which results in the entry
          of any order for any such relief which shall not have been
          vacated, discharged, or stayed or bonded pending appeal within
          sixty (60) days from the entry thereof; or (iv) the Borrower or
          any managing member or general partner of Borrower, or any
          Guarantor or Indemnitor shall take any action in furtherance of,
          or indicating its consent to, approval of, or acquiescence in,
          any of the acts set forth in clause (i), (ii), or (iii) above; or
          (v) the Borrower or any managing member or general partner of
          Borrower, or any Guarantor or Indemnitor shall generally not, or
          shall be unable to, or shall admit in writing its inability to,
          pay its debts as they become due;


                                          67


               (g)   if Borrower shall be in default beyond applicable
          notice and grace periods under any other mortgage, deed of trust,
          deed to secure debt or other security agreement covering any part
          of the Property whether it be superior or junior in lien to this
          Security Instrument;

               (h)   if the Property becomes subject to any mechanic's,
          materialman's or other lien other than a lien for local real
          estate taxes and assessments not then due and payable and the
          lien shall remain undischarged of record (by payment, bonding or
          otherwise) for a period of thirty (30) days;

               (i)   if any federal tax lien is filed against Borrower,
          any member or general partner of Borrower, any Guarantor, any
          Indemnitor or the Property and same is not discharged of record
          within thirty (30) days after same is filed;

               (j)   if Borrower shall fail to deliver to Lender, within
          fifteen (15) days after request by Lender, the estoppel
          certificates required pursuant to the terms of Subsection 7.4(a)
          and (c);

               (k)   if any default occurs under any guaranty or indemnity
          executed in connection herewith (including, without limitation,
          the Cooperation Letter (defined in Section 19.2) the Indemnity
          Agreement (defined in Section 13.4), and the Environmental
          Indemnity (defined in Section 13.4) and such default continues
          after the expiration of applicable grace periods, if any;

               (l)   if any of the assumptions contained in the
          Non-Consolidation Opinion, including, but not limited to, any
          exhibits attached thereto, were not true and correct as of the
          date of such Non-Consolidation Opinion or thereafter became
          untrue or incorrect in any material respect; or

               (m)   if for more than ten (10) days after written notice
          from Lender, Borrower shall continue to be in default under any
          term, covenant or condition of the Note, this Security Instrument
          or the Other Security Documents (including, without limitation,
          the Cooperation Letter) not set forth in Subsections 10.1(a)
          through (l) above, then, in the case of any default which can be
          cured by the payment of a sum of money or for thirty (30) days
          after written notice from Lender in the case of any other
          default, provided that if such default cannot reasonably be cured
          within such thirty (30) day period and Borrower shall have
          commenced to cure such default within such thirty (30) day period
          and thereafter diligently and expeditiously proceeds to cure the
          same, such thirty (30) day period shall be extended for so long
          as it shall require Borrower in the exercise of due diligence to
          cure such default, it being agreed that no such extension shall
          be for a period in excess of sixty (60) days.


                                          68


                           Article 11 - RIGHTS AND REMEDIES

               Section 11.1   Remedies.  Upon the occurrence of any Event
          of Default, Borrower agrees that Lender may take such action,
          without notice or demand, as it deems advisable to protect and
          enforce its rights against Borrower and in and to the Property,
          including, but not limited to, the following actions, each of
          which may be pursued concurrently or otherwise, at such time and
          in such order as Lender may determine, in its sole discretion,
          without impairing or otherwise affecting the other rights and
          remedies of Lender:

               (a)   declare the entire unpaid Debt to be immediately due
          and payable;

               (b)   institute proceedings, judicial or otherwise, for the
          complete foreclosure of this Security Instrument under any
          applicable provision of law in which case the Property or any
          interest therein may be sold for cash or upon credit in one or
          more parcels or in several interests or portions and in any order
          or manner;

               (c)   with or without entry, to the extent permitted and
          pursuant to the procedures provided by applicable law, institute
          proceedings for the partial foreclosure of this Security
          Instrument for the portion of the Debt then due and payable,
          subject to the continuing lien and security interest of this
          Security Instrument for the balance of the Debt not then due,
          unimpaired and without loss of priority;

               (d)   sell for cash or upon credit the Property or any part
          thereof and all estate, claim, demand, right, title and interest
          of Borrower therein and rights of redemption thereof, pursuant to
          power of sale or otherwise, at one or more sales, in one or more
          parcels, at such time and place, upon such terms and after such
          notice thereof as may be required or permitted by law;

               (e)   subject to the provisions of Article 15, institute an
          action, suit or proceeding in equity for the specific performance
          of any covenant, condition or agreement contained herein, in the
          Note or in the Other Security Documents;

               (f)   subject to the provisions of Article 15, recover
          judgment on the Note either before, during or after any
          proceedings for the enforcement of this Security Instrument or
          the Other Security Documents;

               (g)   apply for the appointment of a receiver, trustee,
          liquidator or conservator of the Property, without notice and
          without regard for the adequacy of the security for the Debt and
          without regard for the solvency of Borrower, any Guarantor,
          Indemnitor or of any person, firm or other entity liable for the

                                          69

          payment of the Debt;

               (h)   subject to any applicable law, the license granted to
          Borrower under Section 1.2 shall automatically be revoked and
          Lender may enter into or upon the Property, either personally or
          by its agents, nominees or attorneys and dispossess Borrower and
          its agents and servants therefrom, without liability for
          trespass, damages or otherwise and exclude Borrower and its
          agents or servants wholly therefrom, and take possession of all
          books, records and accounts relating thereto and Borrower agrees
          to surrender possession of the Property and of such books,
          records and accounts to Lender upon demand, and thereupon Lender
          may (i) use, operate, manage, control, insure, maintain, repair,
          restore and otherwise deal with all and every part of the
          Property and conduct the business thereat; (ii)  complete any
          construction on the Property in such manner and form as Lender
          deems advisable; (iii) make alterations, additions, renewals,
          replacements and improvements to or on the Property; (iv)
          exercise all rights and powers of Borrower with respect to the
          Property, whether in the name of Borrower or otherwise,
          including, without limitation, the right to make, cancel, enforce
          or modify Leases, obtain and evict tenants, and demand, sue for,
          collect and receive all Rents of the Property and every part
          thereof; (v) require Borrower to pay monthly in advance to
          Lender, or any receiver appointed to collect the Rents, the fair
          and reasonable rental value for the use and occupation of such
          part of the Property as may be occupied by Borrower; (vi) require
          Borrower to vacate and surrender possession of the Property to
          Lender or to such receiver and, in default thereof, Borrower may
          be evicted by summary proceedings or otherwise; and (vii) apply
          the receipts from the Property to the payment of the Debt, in
          such order, priority and proportions as Lender shall deem
          appropriate in its sole discretion after deducting therefrom all
          expenses (including reasonable attorneys' fees) incurred in
          connection with the aforesaid operations and all amounts necessry
          to pay the Taxes, Other Charges, Insurance Premiums and other
          expenses in connection with the Property, as well as just and
          reasonable compensation for the services of Lender, its counsel,
          agents and employees;

               (i)   exercise any and all rights and remedies granted to a
          secured party upon default under the Uniform Commercial Code,
          including, without limiting the generality of the foregoing: (i)
          the right to take possession of the Personal Property or any part
          thereof, and to take such other measures as Lender may deem
          necessary for the care, protection and preservation of the
          Personal Property, and (ii) request Borrower at its expense to
          assemble the Personal Property and make it available to Lender at
          a convenient place acceptable to Lender.  Any notice of sale,
          disposition or other intended action by Lender with respect to
          the Personal Property sent to Borrower in accordance with the
          provisions hereof at least five (5) days prior to such action,

                                          70


           shall constitute commercially reasonable notice to Borrower;

               (j)   apply any sums then deposited in the Escrow Fund and
          any other sums held in escrow or otherwise by Lender in
          accordance with the terms of this Security Instrument or any
          Other Security Document to the payment of the following items in
          any order in its sole discretion:

               (i)   Taxes and Other Charges;

               (ii)  Insurance Premiums;

               (iii) interest on the unpaid principal balance of the Note;

               (iv)  amortization of the unpaid principal balance of the
                     Note; or

               (v)   all other sums payable pursuant to the Note, this
                     Security Instrument and the Other Security Documents,
                     including without limitation advances made by Lender
                     pursuant to the terms of this Security Instrument;

               (k)   surrender the Policies maintained pursuant to Article
          3 hereof, collect the unearned Insurance Premiums and apply such
          sums as a credit on the Debt in such priority and proportion as
          Lender in its discretion shall deem proper, and in connection
          therewith, Borrower hereby appoints Lender as agent and attorney-
          in-fact (which is coupled with an interest and is therefore
          irrevocable) for Borrower to collect such Insurance Premiums;

               (l)   apply the undisbursed balance of any Net Proceeds
          Deficiency deposit, together with interest thereon, to the
          payment of the Debt in such order, priority and proportions as
          Lender shall deem to be appropriate in its discretion;

               (m)   in conjunction with or pursuant to the exercise by
          Lender of its rights under this Section 11.1 to institute
          proceedings, judicial or otherwise, for the full or partial
          foreclosure of this Security Instrument, terminate any agreement
          with respect to the management of the Property; or

               (n)   pursue such other remedies as Lender may have under
          applicable law.

               In the event of a sale, by foreclosure, power of sale, or
          otherwise, of less than all of the Property, this Security
          Instrument shall continue as a lien and security interest on the
          remaining portion of the Property unimpaired and without loss of
          priority.  Notwithstanding the provisions of this Section 11.1 to
          the contrary, if any Event of Default as described in clause (i)
          or (ii) of Subsection 10.1(f) shall occur, the entire unpaid Debt
          shall be automatically due and payable, without any further

                                          71


          notice, demand or other action by Lender.

               Section 11.2   Application of Proceeds.  The purchase money,
          proceeds and avails of any disposition of the Property, or any
          part thereof, or any other sums collected by Lender pursuant to
          the Note, this Security Instrument or the Other Security
          Documents, may be applied by Lender to the payment of the Debt in
          such priority and proportions as Lender in its discretion shall
          deem proper.

               Section 11.3   Right to Cure Defaults.  Upon the occurrence
          of any Event of Default or if Borrower fails to make any payment
          or to do any act as herein provided, Lender may, but without any
          obligation to do so and without notice to or demand on Borrower
          and without releasing Borrower from any obligation hereunder,
          make or do the same in such manner and to such extent as Lender
          may deem necessary to protect the security hereof.  Lender is
          authorized to enter upon the Property for such purposes, or
          appear in, defend, or bring any action or proceeding to protect
          its interest in the Property or to foreclose this Security
          Instrument or collect the Debt.  The cost and expense of any cure
          hereunder (including reasonable attorneys' fees to the extent
          permitted by law), with interest as provided in this Section
          11.3, shall constitute a portion of the Debt and shall be due and
          payable to Lender upon demand.  All such costs and expenses
          incurred by Lender in remedying such Event of Default or such
          failed payment or act or in appearing in, defending, or bringing
          any such action or proceeding shall bear interest at the Default
          Rate (as defined in the Note), for the period after notice from
          Lender that such cost or expense was incurred to the date of
          payment to Lender.  All such costs and expenses incurred by
          Lender together with interest thereon calculated at the Default
          Rate shall be deemed to constitute a portion of the Debt and be
          secured by this Security Instrument and the Other Security
          Documents and shall be immediately due and payable upon demand by
          Lender therefor.

               Section 11.4   Actions and Proceedings.  Lender has the
          right to appear in and defend any action or proceeding brought
          with respect to the Property, and after the occurrence and during
          the continuance of an Event of Default, to bring any action or
          proceeding, in the name and on behalf of Borrower, which Lender,
          in its discretion, decides should be brought to protect its
          interest in the Property.

               Section 11.5   Recovery of Sums Required To Be Paid.  Lender
          shall have the right from time to time to take action to recover
          any sum or sums which constitute a part of the Debt as the same
          become due, without regard to whether or not the balance of the
          Debt shall be due, and without prejudice to the right of Lender
          thereafter to bring an action of foreclosure, or any other
          action, for a default or defaults by Borrower existing at the

                                          72


          time such earlier action was commenced.

               Section 11.6   Examination of Books and Records. Lender, its
          agents, accountants and attorneys shall have the right, upon
          prior written notice to Borrower (unless an Event of Default
          exists, in which case no notice shall be required), to examine
          and audit, during reasonable business hours, the records, books,
          management and other papers of Borrower and its affiliates or of
          any Guarantor or Indemnitor which pertain to their financial
          condition or the income, expenses and operation of the Property,
          at the Property or at any office regularly maintained by
          Borrower, its affiliates or any Guarantor or Indemnitor where the
          books and records are located.  Lender and its agents shall have
          the right to make copies and extracts from the foregoing records
          and other papers.

               Section 11.7   Other Rights, etc.  (a) The failure of Lender
          to insist upon strict performance of any term hereof shall not be
          deemed to be a waiver of any term of this Security Instrument.
          Borrower shall not be relieved of Borrower's obligations
          hereunder by reason of (i) the failure of Lender to comply with
          any request of Borrower, any Guarantor or any Indemnitor to take
          any action to foreclose this Security Instrument or otherwise
          enforce any of the provisions hereof or of the Note or the Other
          Security Documents, (ii) the release, regardless of
          consideration, of the whole or any part of the Property, or of
          any person liable for the Debt or any portion thereof, or (iii)
          any agreement or stipulation by Lender extending the time of
          payment or otherwise modifying or supplementing the terms of the
          Note, this Security Instrument or the Other Security Documents.

               (b)   It is agreed that the risk of loss or damage to the
          Property is on Borrower, and Lender shall have no liability
          whatsoever for decline in value of the Property, for failure to
          maintain the Policies, or for failure to determine whether
          insurance in force is adequate as to the amount of risks insured.
          Possession by Lender shall not be deemed an election of judicial
          relief, if any such possession is requested or obtained, with
          respect to any Property or collateral not in Lender's possession.

               (c)   Lender may resort for the payment of the Debt to any
          other security held by Lender in such order and manner as Lender,
          in its discretion, may elect.  Lender may take action to recover
          the Debt, or any portion thereof, or to enforce any covenant
          hereof without prejudice to the right of Lender thereafter to
          foreclose this Security Instrument.  The rights of Lender under
          this Security Instrument shall be separate, distinct and
          cumulative and none shall be given effect to the exclusion of the
          others.  No act of Lender shall be construed as an election to
          proceed under any one provision herein to the exclusion of any
          other provision.  Lender shall not be limited exclusively to the
          rights and remedies herein stated but shall be entitled to every

                                          73



          right and remedy now or hereafter afforded at law or in equity.

               Section 11.8   Right to Release Any Portion of the Property.
          Lender may release any portion of the Property for such
          consideration as Lender may require without, as to the remainder
          of the Property, in any way impairing or affecting the lien or
          priority of this Security Instrument, or improving the position
          of any subordinate lienholder with respect thereto, except to the
          extent that the obligations hereunder shall have been reduced by
          the actual monetary consideration, if any, received by Lender for
          such release, and may accept by assignment, pledge or otherwise
          any other property in place thereof as Lender may require without
          being accountable for so doing to any other lienholder.  This
          Security Instrument shall continue as a lien and security
          interest in the remaining portion of the Property.

               Section 11.9   Violation of Laws.  If the Property is not in
          compliance with Applicable Laws, Lender may impose additional
          requirements upon Borrower in connection herewith including,
          without limitation, monetary reserves or financial equivalents.

               Section 11.10  Right of Entry.  Lender and its agents shall
          have the right to enter and inspect the Property at all
          reasonable times.

               Section 11.11  Subrogation.  If any or all of the proceeds
          of the Note have been used to extinguish, extend or renew any
          indebtedness heretofore existing against the Property, then, to
          the extent of the funds so used, Lender shall be subrogated to
          all of the rights, claims, liens, titles, and interests existing
          against the Property heretofore held by, or in favor of, the
          holder of such indebtedness and such former rights, claims,
          liens, titles, and interests, if any, are not waived but rather
          are continued in full force and effect in favor of Lender and are
          merged with the lien and security interest created herein as
          cumulative security for the repayment of the Debt, the
          performance and discharge of Borrower's obligations hereunder,
          under the Note and the Other Security Documents and the
          performance and discharge of the Other Obligations.


                          Article 12 - ENVIRONMENTAL MATTERS

               Section 12.1   Environmental Representations and Warranties.
          Borrower represents and warrants, based upon an environmental
          site assessment of the Property and information that Borrower
          knows or should reasonably have known, that:  (a) there are no
          Hazardous Materials (defined below) or underground storage tanks
          in, on, or under the Property, except those that are both (i) in
          compliance with Environmental Laws (defined below) and with
          permits issued pursuant thereto (if such permits are required),
          and (ii) either (A) in amounts not in excess of that necessary to

                                          74


          operate the Property or (B) fully disclosed to and approved by
          Lender in writing pursuant to the written reports resulting from
          the environmental site assessments of the Property delivered to
          Lender (the "Environmental Report"); (b) there are no past,
          present or threatened Releases (defined below) of Hazardous
          Materials in violation of any Environmental Law and which would
          require remediation by a governmental authority in, on, under or
          from the Property except as described in the Environmental
          Report; (c) there is no threat of any Release of Hazardous
          Materials migrating to the Property except as described in the
          Environmental Report; (d) there is no past or present non-
          compliance with Environmental Laws, or with permits issued
          pursuant thereto, in connection with the Property except as
          described in the Environmental Report; (e) Borrower does not know
          of, and has not received, any written or oral notice or other
          communication from any person or entity (including but not
          limited to a governmental entity) relating to Hazardous Materials
          in, on, under or from the Property; and (f) Borrower has
          truthfully and fully provided to Lender, in writing, any and all
          information relating to environmental conditions in, on, under or
          from the Property known to Borrower or contained in Borrower's
          files and records, including but not limited to any reports
          relating to Hazardous Materials in, on, under or migrating to or
          from the Property and/or to the environmental condition of the
          Property.  "Environmental Law" means any present and future
          federal, state and local laws, statutes, ordinances, rules,
          regulations, standards, policies and other government directives
          or requirements, as well as common law, that apply to Borrower or
          the Property and relate to Hazardous Materials, including,
          without limitation, the Comprehensive Environmental Response,
          Compensation and Liability Act and the Resource Conservation and
          Recovery Act.  "Hazardous Materials" shall mean petroleum and
          petroleum products and compounds containing them, including
          gasoline, diesel fuel and oil; explosives; flammable materials;
          radioactive materials; polychlorinated biphenyls ("PCBs") and
          compounds containing them; lead and lead-based paint; asbestos or
          asbestos-containing materials in any form that is or could become
          friable; underground or above-ground storage tanks, whether empty
          or containing any substance; any substance the presence of which
          on the Property is prohibited by any federal, state or local
          authority; any substance that requires special handling; and any
          other material or substance now or in the future defined as a
          "hazardous substance," "hazardous material," "hazardous
          waste,""toxic substance," "toxic pollutant," "contaminant,"
          "pollutant" or other words of similar import within the meaning
          of any Environmental Law.  "Release" of any Hazardous Materials
          includes but is not limited to any release, deposit, discharge,
          emission, leaking, spilling, seeping, migrating, injecting,
          pumping, pouring, emptying, escaping, dumping, disposing or other
          movement of Hazardous Materials.

               Section 12.2   Environmental Covenants. Borrower covenants

                                          75


          and agrees that so long as Borrower owns, manages, is in
          possession of, or otherwise controls the operation of the
          Property: (a) all uses and operations on or of the Property,
          whether by Borrower or any other person or entity, shall be in
          compliance with all Environmental Laws and permits issued
          pursuant thereto; (b) there shall be no Releases of Hazardous
          Materials in, on, under or from the Property; (c) there shall be
          no Hazardous Materials in, on, or under the Property, except
          those that are both (i) in compliance with all Environmental Laws
          and with permits issued pursuant thereto, if and to the extent
          required, and (ii) (A) in amounts not in excess of that necessary
          to operate the Property or (B) fully disclosed to and approved by
          Lender in writing; (d) Borrower shall keep the Property free and
          clear of all liens and other encumbrances imposed pursuant to any
          Environmental Law, whether due to any act or omission of Borrower
          or any other person or entity (the "Environmental Liens"); (e)
          Borrower shall, at its sole cost and expense, fully and
          expeditiously cooperate in all activities pursuant to Section
          12.3 below, including but not limited to providing all relevant
          information and making knowledgeable persons available for
          interviews; (f) Borrower shall, at its sole cost and expense,
          perform any environmental site assessment or other investigation
          of environmental conditions in connection with the Property,
          pursuant to any reasonable written request of Lender, upon
          Lender's reasonable belief that the Property is not in full
          compliance with all Environmental Laws, and share with Lender the
          reports and other results thereof, and Lender and other
          Indemnified Parties (as defined in the Environmental Indemnity)
          shall be entitled to rely on such reports and other results
          thereof; (g) Borrower shall, at its sole cost and expense, comply
          with all reasonable written requests of Lender to (i) reasonably
          effectuate remediation of any Hazardous Materials in, on, under
          or from the Property; and (ii) cmply with any Environmental Law;
          (h) Borrower shall not allow any tenant or other user of the
          Property to violate any Environmental Law; and (i) Borrower shall
          immediately notify Lender in writing after it has become aware of
          (A) any presence or Release or threatened Releases of Hazardous
          Materials in, on, under, from or migrating towards the Property;
          (B) any non-compliance with any Environmental Laws related in any
          way to the Property; (C) any actual or potential Environmental
          Lien; (D) any required or proposed remediation of environmental
          conditions relating to the Property; and (E) any written or oral
          notice or other communication of which Borrower becomes aware
          from any source whatsoever (including but not limited to a
          governmental entity) relating in any way to Hazardous Materials.

               Section 12.3   Lender's Rights.  Lender and any other person
          or entity designated by Lender, including but not limited to any
          representative of a governmental entity, and any environmental
          consultant, and any receiver appointed by any court of competent
          jurisdiction, shall have the right, but not the obligation, to
          enter upon the Property at all reasonable times to assess any and

                                          76



          all aspects of the environmental condition of the Property and
          its use, including but not limited to conducting any
          environmental assessment or audit (the scope of which shall be
          determined in Lender's sole and absolute discretion) and taking
          samples of soil, groundwater or other water, air, or building
          materials, and conducting other invasive testing.  Borrower shall
          cooperate with and provide access to Lender and any such person
          or entity designated by Lender.


                            Article 13 - INDEMNIFICATIONS

               Section 13.1   General Indemnification. Borrower shall, at
          its sole cost and expense, protect, defend, indemnify, release
          and hold harmless the Indemnified Parties from and against any
          and all Losses (defined below) imposed upon or incurred by or
          asserted against any Indemnified Parties and directly or
          indirectly arising out of or in any way relating to any one or
          more of the following: (a) any accident, injury to or death of
          persons or loss of or damage to property occurring in, on or
          about the Property or any part thereof or on the adjoining
          sidewalks, curbs, adjacent property or adjacent parking areas,
          streets or ways; (b) any use, nonuse or condition in, on or about
          the Property or any part thereof or on the adjoining sidewalks,
          curbs, adjacent property or adjacent parking areas, streets or
          ways; (c) performance of any labor or services or the furnishing
          of any materials or other property in respect of the Property or
          any part thereof; (d) any failure of the Property to be in
          compliance with any Applicable Laws; (e) any and all claims and
          demands whatsoever which may be asserted against Lender by reason
          of any alleged obligations or undertakings on its part to perform
          or discharge any of the terms, covenants, or agreements contained
          in any Lease; or (f) the payment of any commission, charge or
          brokerage fee to anyone which may be payable in connection with
          the funding of the Loan evidenced by the Note and secured by this
          Security Instrument, provided, however, that Borrower shall not
          be obligated to protect, defend, indemnify, release and hold
          harmless Lender from any commission, charge or brokerage fee
          claimed solely through Lender.  Any amounts payable to Lender by
          reason of the application of this Section 13.1 shall become
          immediately due and payable and shall bear interest at the
          Default Rate from the date loss or damage is sustained by Lender
          until paid.

               The term "Losses" shall mean any and all claims, suits,
          liabilities (including, without limitation, strict liabilities),
          actions, proceedings, obligations, debts, damages, losses, costs,
          expenses, fines, penalties, charges, fees, expenses, judgments,
          awards, amounts paid in settlement of whatever kind or nature
          (including but not limited to attorneys' fees and other costs of
          defense).


                                          77


               Section 13.2   Mortgage and/or Intangible Tax.  Borrower
          shall, at its sole cost and expense, protect, defend, indemnify,
          release and hold harmless the Indemnified Parties from and
          against any and all Losses imposed upon or incurred by or
          asserted against any Indemnified Parties and directly or
          indirectly arising out of or in any way relating to any tax on
          the making and/or recording of this Security Instrument, the Note
          or any of the Other Security Documents.

               Section 13.3   Duty to Defend; Attorneys' Fees and Other
          Fees and Expenses.  Upon written request by any Indemnified
          Party, Borrower shall defend such Indemnified Party (if requested
          by any Indemnified Party, in the name of the Indemnified Party)
          by attorneys and other professionals approved by the Indemnified
          Parties.  Notwithstanding the foregoing, any Indemnified Parties
          may, in their sole and absolute discretion, engage their own
          attorneys and other professionals to defend or assist them, and,
          at the option of Indemnified Parties, their attorneys shall act
          as co-counsel in connection with the resolution of any claim or
          proceeding, provided, however, that upon an Event of Default, the
          attorneys of Indemnified Parties shall control the resolution of
          any claim or proceeding.  Upon demand, Borrower shall pay or, in
          the sole and absolute discretion of the Indemnified Parties,
          reimburse, the Indemnified Parties for the payment of reasonable
          fees and disbursements of attorneys, engineers, environmental
          consultants, laboratories and other professionals in connection
          therewith.

               Section 13.4   Environmental Indemnity.  Simultaneously with
          this Security Instrument, Borrower and other persons or entities
          defined therein have executed and delivered that certain
          environmental indemnity agreement dated the date hereof
          (collectively, the "Indemnitors") to Lender (the "Environmental
          Indemnity"). AERC shall not be deemed an Indemnitor (as defined
          hereunder) by virtue of the Cooperation Letter or that certain
          Indemnity Agreement dated as of the date hereof made by Borrower
          and AERC in favor of Lender (the "Indemnity Agreement").


                                 Article 14 - WAIVERS

               Section 14.1   Waiver of Counterclaim.  Borrower hereby
          waives the right to assert a counterclaim, other than a mandatory
          or compulsory counterclaim, in any action or proceeding brought
          against it by Lender arising out of or in any way connected with
          this Security Instrument, the Note, any of the Other Security
          Documents, or the Obligations.

               Section 14.2   Marshalling and Other Matters.  Borrower
          hereby waives, to the extent permitted by law, the benefit of all
          appraisement, valuation, stay, extension, reinstatement and
          redemption laws now or hereafter in force and all rights of

                                          78


          marshalling in the event of any sale hereunder of the Property or
          any part thereof or any interest therein.  Further, Borrower
          hereby expressly waives any and all rights of redemption from
          sale under any order or decree of foreclosure of this Security
          Instrument on behalf of Borrower, and on behalf of each and every
          person acquiring any interest in or title to the Property
          subsequent to the date of this Security Instrument and on behalf
          of all persons to the extent permitted by Applicable Laws.

               Section 14.3   Waiver of Notice.  Borrower shall not be
          entitled to any notices of any nature whatsoever from Lender
          except (a) with respect to matters for which this Security
          Instrument specifically and expressly provides for the giving of
          notice by Lender to Borrower, and (b) with respect to matters for
          which Lender is required by Applicable Laws to give notice, and
          Borrower hereby expressly waives the right to receive any notice
          from Lender with respect to any matter for which this Security
          Instrument does not specifically and expressly provide for the
          giving of notice by Lender to Borrower.

               Section 14.4   Waiver of Statute of Limitations.  Borrower
          hereby expressly waives and releases to the fullest extent
          permitted by law, the pleading of any statute of limitations as a
          defense to payment of the Debt or performance of its Other
          Obligations.

               Section 14.5   Sole Discretion of Lender.  Wherever pursuant
          to this Security Instrument (a) Lender exercises any right given
          to it to approve or disapprove, (b) any arrangement or term is to
          be satisfactory to Lender, or (c) any other decision or
          determination is to be made by Lender, the decision of Lender to
          approve or disapprove, all decisions that arrangements or terms
          are satisfactory or not satisfactory and all other decisions and
          determinations made by Lender, shall be in the sole and absolute
          discretion of Lender, except as may be otherwise expressly and
          specifically provided herein.

               SECTION 14.6   WAIVER OF TRIAL BY JURY.  BORROWER HEREBY
          WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO
          TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER
          IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY
          TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN
          EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE
          OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS
          OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.


                                          79


                               Article 15 - EXCULPATION

               Section 15.1   Exculpation. The provisions of Article 14 of
          the Note are hereby incorporated by reference to the fullest
          extent as if the text of such Article were set forth in its
          entirety herein.
                                 Article 16 - NOTICES

               Section 16.1   Notices. All notices or other written
          communications hereunder shall be deemed to have been properly
          given (i) upon delivery, if delivered in person or by facsimile
          transmission with receipt acknowledged by the recipient thereof
          and confirmed by telephone by sender, (ii) one (1) Business Day
          (defined below) after having been deposited for overnight
          delivery with any reputable overnight courier service, or (iii)
          three (3) Business Days after having been deposited in any post
          office or mail depository regularly maintained by the U.S. Postal
          Service and sent by registered or certified mail, postage
          prepaid, return receipt requested, addressed as follows:

           If to Borrower:


                              Attention:
                              Facsimile No.:

           With a copy to:


                              Attention:
                              Facsimile No.:

          If to Lender:       The Chase Manhattan Bank
                              c/o Chase Commercial Mortgage Banking Corp.
                              Servicing Department
                              380 Madison Avenue
                              10th Floor
                              New York, New York  10017
                              Attention: Ms. Janice Smith
                              Facsimile No.: (212) 622-3553

                              and

                              The Chase Manhattan Bank
                              Legal Department
                              270 Park Avenue
                              39th Floor
                              New York, New York  10017
                              Attention: Ronald A. Wilcox, Esq.
                              Facsimile No.: (212) 270-2934



                                          80





          With a copy to:     Thacher Proffitt & Wood
                              Two World Trade Center
                              New York, New York  10048
                              Attention: Joseph Philip Forte, Esq.
                              Facsimile No.: (212) 912-7751

          or addressed as such party may from time to time designate by
          written notice to the other parties.

               Either party by notice to the other may designate additional
          or different addresses for subsequent notices or communications.

               For purposes of this Subsection, "Business Day" shall mean a
          day on which commercial banks are not authorized or required by
          law to close in New York, New York.

                       Article 17 - SUBMISSION TO JURISDICTION

               Section 17.1  Submission to Jurisdiction.  With respect to
          any claim or action arising hereunder or under the Note or the
          Other Security Documents, Borrower (a) irrevocably submits to the
          nonexclusive jurisdiction of the courts of the State of New York
          and the United States District Court located in the Borough of
          Manhattan in New York, New York, and appellate courts from any
          thereof, (b) irrevocably waives any objection which it may have
          at any time to the laying on venue of any suit, action or
          proceeding arising out of or relating to this Security Instrument
          brought in any such court, and (c) irrevocably waives any claim
          that any such suit, action or proceeding brought in any such
          court has been brought in an inconvenient forum.  Nothing in this
          Security Instrument will be deemed to preclude Lender from
          bringing an action or proceeding with respect hereto in any other
          jurisdiction.

                             Article 18 - APPLICABLE LAW

               Section 18.1   CHOICE OF LAW.  THIS SECURITY INSTRUMENT
          SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE
          LAWS OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE
          GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE
          LAWS OF THE STATE OF NEW YORK, PROVIDED HOWEVER, THAT WITH
          RESPECT TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF
          THE LIEN OF THIS SECURITY INSTRUMENT, AND THE DETERMINATION OF
          DEFICIENCY JUDGMENTS, THE LAWS OF THE STATE WHERE THE PROPERTY IS
          LOCATED SHALL APPLY.

               Section 18.2   Provisions Subject to Applicable Law.  All
          rights, powers and remedies provided in this Security Instrument
          may be exercised only to the extent that the exercise thereof
          does not violate any applicable provisions of law and are
          intended to be limited to the extent necessary so that they will
          not render this Security Instrument invalid, unenforceable or not

                                          81



          entitled to be recorded, registered or filed under the provisions
          of any Applicable Law.  If any term of this Security Instrument
          or any application thereof shall be invalid or unenforceable, the
          remainder of this Security Instrument and any other application
          of the term shall not be affected thereby.


                            Article 19 - SECONDARY MARKET

               Section 19.1   Transfer of Loan.  Lender may, at any time,
          sell, transfer or assign the Note, this Security Instrument and
          the Other Security Documents, and any or all servicing rights
          with respect thereto, or grant participations therein (the
          "Participations") or issue mortgage pass-through certificates or
          other securities evidencing a beneficial interest in a rated or
          unrated public offering or private placement (the "Securities").
          Lender may forward to each purchaser, transferee, assignee,
          servicer, participant, or investor in such Participations and/or
          Securities (collectively, the "Investor") or any Rating Agency
          rating such Participations and/or Securities and each prospective
          Investor, and any organization maintaining databases on the
          underwriting and performance of commercial mortgage loans, all
          documents and information which Lender now has or may hereafter
          acquire relating to the Debt and to Borrower, any Guarantor, any
          Indemnitor(s) and the Property, whether furnished by Borrower,
          any Guarantor, any Indemnitor(s) or otherwise, as Lender
          determines necessary or desirable.  Borrower irrevocably waives
          any and all rights it may have under Applicable Laws to prohibit
          such disclosure, including but not limited to any right of
          privacy.

               Section 19.2   Cooperation.  Borrower, any Guarantor and any
          Indemnitor agree to cooperate with Lender in connection with any
          transfer made or any Securities created pursuant to this Section
          19, including, without limitation, complying with all of the
          terms and conditions of that certain Letter, dated the date
          hereof, from Lender to Borrower and _________________ (the
          "Cooperation Letter").

                                  Article 20 - COSTS

               Section 20.1   Performance at Borrower's Expense.  Borrower
          acknowledges and confirms that Lender shall impose certain
          administrative processing and/or commitment fees in connection
          with (a) the extension, renewal, modification, amendment and
          termination of the Loan, (b) the release or substitution of
          collateral therefor, (c) obtaining certain consents, waivers and
          approvals with respect to the Property, or (d) the review of any
          Lease or proposed Lease or the preparation or review of any
          subordination, non-disturbance agreement (the occurrence of any
          of the above shall be called an "Event").  Borrower further
          acknowledges and confirms that it shall be responsible for the

                                          82


          payment of all costs of reappraisal of the Property or any part
          thereof, whether required by law, regulation, Lender or any
          governmental or quasi-governmental authority.  Borrower hereby
          acknowledges and agrees to pay, immediately, with or without
          demand, all such fees (as the same may be increased or decreased
          from time to time), and any additional fees of a similar type or
          nature which may be imposed by Lender from time to time, upon the
          occurrence of any Event or otherwise.  Wherever it is provided
          for herein that Borrower pay any costs and expenses, such costs
          and expenses shall include, but not be limited to, all legal fees
          and disbursements of Lender, whether with respect to retained
          firms, the reimbursement for the expenses of in-house staff or
          otherwise.

               Section 20.2   Legal Fees for Enforcement.  (a) Borrower
          shall pay all reasonable legal fees incurred by Lender in
          connection with (i) the preparation of the Note, this Security
          Instrument and the Other Security Documents and (ii) the items
          set forth in Section 20.1  above, and (b) Borrower shall pay to
          Lender on demand any and all expenses, including legal expenses
          and attorneys' fees, incurred or paid by Lender in protecting its
          interest in the Property or in collecting any amount payable
          hereunder or in enforcing its rights hereunder with respect to
          the Property (including commencing any foreclosure action),
          whether or not any legal proceeding is commenced hereunder or
          thereunder, together with interest thereon at the Default Rate
          from the date paid or incurred by Lender until such expenses are
          paid by Borrower.


                               Article 21 - DEFINITIONS

               Section 21.1   General Definitions.  Unless the context
          clearly indicates a contrary intent or unless otherwise
          specifically provided herein, words used in this Security
          Instrument may be used interchangeably in singular or plural form
          and the word "Borrower" shall mean "each Borrower and any
          subsequent owner or owners of the Property or any part thereof or
          any interest therein," the word "Lender" shall mean "Lender and
          any subsequent holder of the Note," the word "Note" shall mean
          "the Note and any other evidence of indebtedness secured by this
          Security Instrument," the word "person" shall include an
          individual, corporation, partnership, limited liability company,
          trust, unincorporated association, government, governmental
          authority, and any other entity, the word "Property" shall
          include any portion of the Property and any interest therein, and
          the phrases "attorneys' fees" and "counsel fees" shall include
          any and all attorneys', paralegal and law clerk fees and
          disbursements, including, but not limited to, fees and
          disbursements at the pre-trial, trial and appellate levels
          incurred or paid by Lender in protecting its interest in the
          Property, the Leases and the Rents and enforcing its rights

                                          83


          hereunder.

               Section 21.2   Headings, etc.  The headings and captions of
          various Articles and Sections of this Security Instrument are for
          convenience of reference only and are not to be construed as
          defining or limiting, in any way, the scope or intent of the
          provisions hereof.


                        Article 22 - MISCELLANEOUS PROVISIONS

               Section 22.1   No Oral Change.  This Security Instrument,
          and any provisions hereof, may not be modified, amended, waived,
          extended, changed, discharged or terminated orally or by any act
          or failure to act on the part of Borrower or Lender, but only by
          an agreement in writing signed by the party against whom
          enforcement of any modification, amendment, waiver, extension,
          change, discharge or termination is sought.

               Section 22.2   Liability.  If Borrower consists of more than
          one person, the obligations and liabilities of each such person
          hereunder shall be joint and several.  This Security Instrument
          shall be binding upon and inure to the benefit of Borrower and
          Lender and their respective successors and assigns forever.

               Section 22.3   Inapplicable Provisions.  If any term,
          covenant or condition of the Note or this Security Instrument is
          held to be invalid, illegal or unenforceable in any respect, the
          Note and this Security Instrument shall be construed without such
          provision.

               Section 22.4   Duplicate Originals; Counterparts.  This
          Security Instrument may be executed in any number of duplicate
          originals and each duplicate original shall be deemed to be an
          original.  This Security Instrument may be executed in several
          counterparts, each of which counterparts shall be deemed an
          original instrument and all of which together shall constitute a
          single Security Instrument.  The failure of any party hereto to
          execute this Security Instrument, or any counterpart hereof,
          shall not relieve the other signatories from their obligations
          hereunder.

               Section 22.5   Number and Gender.  Whenever the context may
          require, any pronouns used herein shall include the corresponding
          masculine, feminine or neuter forms, and the singular form of
          nouns and pronouns shall include the plural and vice versa.


                   Article 23 - SPECIAL [NAME OF STATE] PROVISIONS




                                          84


                            [NO FURTHER TEXT ON THIS PAGE]

                                          85



               IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been
          executed by Borrower the day and year first above written.


          [BORROWER]



          Name:
          Title:



                                          86






                                   ACKNOWLEDGEMENTS

                                   (to be attached)


                                          87


                                      EXHIBIT A

                                (Description of Land)

          ALL of that certain lot, piece or parcel of land, with the
          buildings and improvements thereon, situate, lying and being

                                          88


                                  TABLE OF CONTENTS
     <TABLE>
     <S>         <C>                 <C>                               <C>
                                                                        Page
     Article I   Grants of Security                                        2
                 Section 1.1         Property Mortgaged                    2
                 Section 1.2         Assignment of Leases and Rents        5
                 Section 1.3         Security Agreement                    5
                 Section 1.4         Pledge of Monies Held

     Article 2   Debt and Obligations Secured                              5
                 Section 2.1         Debt                                  5
                 Section 2.2         Other Obligations                     6
                 Section 2.3         Debt and Other Obligations            6
                 Section 2.4         Payments                              6

     Article 3   Borrower Covenants                                        7
                 Section 3.1         Payment of Debt                       7
                 Section 3.2         Incorporation by Reference            7
                 Section 3.3         Insurance                             7
                 Section 3.4         Payment of Taxes, etc                 11
                 Section 3.5         Escrow Fund                           12
                 Section 3.6         Condemnation                          13
                 Section 3.7         Leases and Rents                      13
                 Section 3.8         Maintenance and Use of Property       15
                 Section 3.9         Waste                                 15
                 Section 3.10        Compliance with Laws                  16
                 Section 3.11        Books and Records                     17
                 Section 3.12        Payment for Labor and Materials       21
                 Section 3.13        Performance of Other Agreements       21
                 Section 3.14        Change of Name, Identity or           21
                                       Structure
                 Section 3.15        Existence                             21
     Article 4   Special Covenants                                         22
                 Section 4.1         Property Use                          22
                 Section 4.2         Single Purpose Entity                 22
                 Section 4.3         Restoration                           25
     Article 5   Representations and Warranties                            30
                 Section 5.1         Warranty of Title                     30
                 Section 5.2         Legal Status and Authority            30
                 Section 5.3         Validity of Documents                 30
                 Section 5.4         Litigation                            31
                 Section 5.5         Status of Property                    31
                 Section 5.6         No Foreign Person                     32
                 Section 5.7         Separate Tax Lot                      32
                 Section 5.8         Leases                                32
                 Section 5.9         Solvency                              32
                 Section 5.10        Business Purposes                     33
                 Section 5.11        Taxes                                 33
                 Section 5.12        Mailing Address                       33
                 Section 5.13        No Change in Facts or Circumstances   33
                 Section 5.14        Disclosure                            33
                 Section 5.15        Third Party Representations           34
                 Section 5.16        Illegal Activity                      34
                 Section 5.17        Contracts                             34
     Article 6   Obligations and Reliances                                 35
                 Section 6.1         Relationship of Borrower and Lender   35
                 Section 6.2         No Reliance on Lender                 35
                 Section 6.3         No Lender Obligations                 35
                 Section 6.4         Reliance                              35
     Article 7   Further Assurances                                        36
                 Section 7.1         Recording of Security Instrument,     36
                                      etc.
                 Section 7.2         Further Acts, etc.                    36
                 Section 7.3         Changes in Tax, Debt Credit and       37
                                      Documentary Stamp Laws
                 Section 7.4         Estoppel Certificates                 37
                 Section 7.5         Flood Insurance                       38
                 Section 7.6         Replacement Documents                 38
     Article 8   Due on Sale/Encumbrance                                   38
                 Section 8.1         No Sale/Encumbrance                   38
                 Section 8.2         Sale/Encumbrance Defined              38
                 Section 8.3         Lender's Rights                       40
     Article 9   Prepayment                                                40
                 Section 9.1         Prepayment                            40
     Article 10  Default                                                   41
                 Section 10.1        Events of Default                     41
     Article 11  Rights and Remedies                                       43
                 Section 11.1        Remedies                              43
                 Section 11.2        Application of Proceeds               45
                 Section 11.3        Right to Cure Defaults                45
                 Section 11.4        Actions and Proceedings               46
                 Section 11.5        Recovery of Sums Required to Be       46
                                      Paid
                 Section 11.6        Examination of Books and Records      46
                 Section 11.7        Other Rights, etc.                    46
                 Section 11.8        Right to Release any Portion of the   47
                                      Property
                 Section 11.9        Violation of Laws                     47
                 Section 11.10       Right of Entry                        47
                 Section 11.11       Subrogation                           47
     Article 12  Environmental Matters                                     48
                 Section 12.1        Environmental Representations and     48
                                       Warranties
                 Section 12.2        Environmental Covenants               48
                 Section 12.3        Lender's Rights                       49
     Article 13  Indemnifications                                          49
                 Section 13.1        General Indemnification               49
                 Section 13.2        Mortgage and/or Intangible Tax        50
                 Section 13.3        Duty to Defend; Attorneys' Fees and   50
                                      Other Fees and Expenses
                 Section 13.4        Environmental Indemnity               50
     Article 14  Waivers                                                   51
                 Section 14.1        Waiver of Counterclaim                51
                 Section 14.2        Marshaling and Other Matters          51
                 Section 14.3        Waiver of Notice                      51
                 Section 14.4        Waiver of Statute of Limitations      51
                 Section 14.5        Sole Discretion of Lender             51
                 Section 14.6        Waiver of Trial by Jury               51
     Article 15  Exculpation                                               52
                 Section 15.1        Exculpation                           52
     Article 16  Notices                                                   52
                 Section 16.1        Notices                               52
     Article 17  Submission to Jurisdiction                                53
                 Section 17.1        Submission to Jurisdiction            53
     Article 18  Applicable Law                                            53
                 Section 18.1        Choice of Law                         53
                 Section 18.2        Provisions Subject to Applicable      54
                                     Law
     Article 19  Secondary Market                                          54
                 Section 19.1        Transfer of Loan                      54
                 Section 19.2        Cooperation                           54
     Article 20  Costs                                                     54
                 Section 20.1        Performance at Borrower's Expense     54
                 Section 20.2        Legal Fees for Enforcement            55
     Article 21  Definitions                                               55
                 Section 21.1        General Definitions                   55
                 Section 21.2        Headings, Etc.                        55
     Article 22  Miscellaneous Provisions                                  56
                 Section 22.1        No Oral Change                        56
                 Section 22.2        Liability                             56
                 Section 22.3        Inapplicable Provisions               56
                 Section 22.4        Duplicate Originals; Counter          56
                 Section 22.5        Number and Gender                     56
     Article 23  Special (Name of State) Provisions                        56
                 Definitions                                               v
     </TABLE>


                                          91


                                     Definitions

     The terms set forth below are defined in the following Sections of this
     Security Instrument:



     (a)  Applicable Laws:  Article 3, Subsection 3.10(a);
     (b)  Attorneys' Fees/Counsel Fees:  Article 21, Section 21.1;
     (c)  Bankruptcy Code:  Article 1, Subsection 1.1(f);
     (d)  Borrower:  Preamble and Article 21, Section 21.1;
     (e)  Business Day:  Article 16, Section 16.1;
     (f)  Casualty Consultant:  Article 4, Subsection 4.3(b)(iii);
     (g)  Casualty Retainage:  Article 4, Subsection 4.3(b)(iv);
     (h)  Debt:  Article 2, Section ?;
     (i)  Environmental Indemnity:  Article 13, Section 13.4;
     (j)  Environmental Law:  Article 12, Section 12.1;
     (k)  Environmental Liens:  Article 12, Subsection 12.2(d);
     (l)  Environmental Report: Article 12, Subsection 12.1(a)
     (m)  Escrow Fund:  Article 3, Section 3.5;
     (n)  Event:  Article 20, Section 20.1;
     (o)  Event of Default:  Article 10, Section 10.1;
     (p)  Flood Insurance Acts:  Article 3, Subsection 3.3(a)(vii);
     (q)  Full Replacement Cost:  Article 3, Subsection 3.3(a)(i)(A);
     (r)  GAAP:  Article 3, Subsection 3.11(a);
     (s)  Guarantor:  Article 10, Subsection 10.1(e);
     (t)  Hazardous Materials:  Article 12, Section 12.1;
     (u)  Improvements:  Article 1, Subsection 1.1(c);
     (v)  Indemnitor(s):  Article 13, Subsection 13.4(o);
     (w)  Insurance Premiums:  Article 3, Subsection 3.3(b);
     (x)  Investor:  Article 19, Section 19.1;
     (y)  Land:  Article 1, Subsection 1.1(a);
     (z)  Leases:  Article 1, Subsection 1.1(f);
     (aa) Lender:  Preamble and Article 21, Section 21.1;
     (bb) Loan:  Article 5, Subsection 5.12;
     (cc) Loan Application:  Article 5, Section 5.10;
     (dd) Losses:  Article 13, Section 13.1;
     (ee) Major Lease: Article 3, Subsection 3.7(d);
     (ff) Net Proceeds:  Article 4, Subsection 4.3(b);
     (gg) Net Proceeds Deficiency:  Article 4, Subsection 4.3(b)(vi);
     (hh) Note:  Recitals and Article 21, Section 21.1;
     (ii) Obligations:  Article 2, Section 2.3;
     (jj) Other Charges:  Article 3, Subsection 3.4(a);
     (kk) Other Obligations:  Article 2, Section 2.2;
     (ll) Other Security Documents:  Article 3, Section 3.2;
     (mm) Participations:  Article 19, Section 19.1;
     (nn) Permitted Exceptions:  Article 5, Section 5.1;
     (oo) Person:  Article 21, Section 21.1;
     (pp) Personal Property:  Article 1, Subsection 1.1(e);
     (qq) Policies/Policy:  Article 3, Subsection 3.3(b);
     (rr) Property:  Article 1, Section 1.1 and Article 21, Section 21.1;
     (ss) Qualified Insurer:  Article 3, Subsection 3.3(b);
     (tt) Rating Agency:  Article 3, Subsection 3.3(b);
     (uu) Release:  Article 12, Section 12.1;
     (vv) Renewal Lease: Article 3, Subsection 3.7(c);
     (ww) Rents:  Article 1, Subsection 1.1(f);
     (xx) Restoration:  Article 3, Subsection 3.3(h);
     (yy) Securities:  Article 19, Section 19.1;

                                          92


     (zz)  Security Instrument:  Preamble;
     (aaa) Taxes:  Article 3, Subsection 3.4(a);
     (bbb) Uniform Commercial Code:  Article 1, Subsection 1.1(e)


                                          93



  <TABLE>
  <CAPTION>
                    Property/Loan Amount                      Borrower Name              Type of Entity
   ------------------------------------------       -----------------------------  ------------------------
   <S>  <C>                                         <C>                            <C>
   1.   20th & Campbell/$10,700,000                 AERC Campbell, Inc.            Delaware corporation
   2.   Central Park Place/$7,200,000               AERC Central Park Place, LLC   Delaware LLC
   3.   Chestnut Ridge/$15,920,000                  Associated Estates Realty      Ohio corporation
                                                     Corporation of Pennsylvania
                                                     Inc.
   4.   Clinton Place/$9,500,000                    AERC Clinton Place, LLC        Delaware LLC
   5.   Country Club/$12,150,000                    AERC Country Club, Inc.        Delaware corporation
   6.   Fleetwood/$4,917,000                        AERC Fleetwood, L.P.           Delaware ltd. ptship.
   7.   Gables at White River/$9,030,000            AERC White River, LLC          Delaware LLC
   8.   Hampton Point/$18,500,000                   AERC Hampton Point, Inc.       Delaware corporation
   9.   Heathermoor/$9,608,000                      AERC Heathermoor, Inc.         Delaware corporation
   10.  KTC Properties/$19,710,000                  AERC KTC Properties, Inc.      Delaware corporation
   11.  The Oaks at Hampton/$29,200,000             AERC Oaks Hampton, LLC         Delaware LLC
   12.  Pendleton Lake East/$7,575,000              AERC Pendleton, Inc.           Delaware corporation
   13.  Perimeter Lakes/$6,400,000                  AERC Perimeter Lakes, Inc.     Delaware corporation
   14.  Remington Place/$6,950,000                  AERC Remington Place, Inc.     Delaware corporation
   15.  Residence at Christopher Wren/$10,565,000   AERC Christopher Wren, Inc.    Delaware corporation
   16.  Residence at Turnberry/$9,050,000           AERC Turnberry, Inc.           Delaware corporation
   17.  Saw Mill Village/$12,500,000                AERC Saw Mill Village, Inc.    Delaware corporation
   18.  Spring Valley/$12,000,000                   AERC Spring Valley, LLC        Delaware LLC
   19.  Summer Ridge/$9,900,000                     AERC Summer Ridge, LLC         Delaware LLC
   20.  Waterstone/$17,125,000                      AERC Waterstone, LLC           Delaware LLC
</TABLE>
















                                                     94