**AGREEMENT OF PURCHASE AND SALE**

THIS AGREEMENT OF PURCHASE AND SALE (this “Agreement”) ismade and entered into as of the 31st day of August, 2007 (the “EffectiveDate”), by and among BELVEDERE PROPERTIES, LLC, a Virginia limited liabilitycompany (“Seller”); ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation(“Purchaser”); and FIRST AMERICAN TITLE INSURANCE COMPANY, as escrow agent(“Escrow Agent”)

**PRELIMINARY STATEMENTS**

A.        Seller is theowner of that certain apartment project known as “The Belvedere” consisting of296 apartment units and all amenities which are a part thereof located at theintersection of Robious and Cranbeck Roads in Chesterfield County, Virginia onthat real property described in Exhibit A attached hereto and by thisreference made a part hereof, together with: (i) all easements, appurtenancesand hereditaments appertaining thereto and including all of Seller’s rights, ifany, in and to any alleys, ways, easements and rights of way abutting oradjoining said real property; (ii) all the buildings, improvements, structures,plants and appurtenances situated on said real property; (iii) all fixtures,furniture, equipment (including all maintenance equipment and all officeequipment located in the clubhouse building), appliances, signs, plumbing,machinery, personal property and facilities and supplies which are owned bySeller and which are attached to or appurtenant to or used in connection withsaid real property (specifically excluding property owned by residentialtenants), provided that Seller shall only quitclaim its right, title andinterest in and to the property identification sign located at the corner ofRobious Road and Belvedere Vista Lane; (iv) all plans, specifications,guarantees and warranties; and (v) all leases including the rents, issues andprofits thereof and all refundable security deposits or escrow deposits held bySeller thereunder (collectively, the “Property”);

B.         Sellerobtained a loan (the “Loan”) in the original principal amount of $26,525,100.00from Highland Mortgage Company (now Capmark Bank) (the “Lender”) and insured bythe United States Department of Housing and Urban Development (“HUD”) underSection 221(d)(4) of the National Housing Act;

C.        The Loan isevidenced and secured by the documents and instruments set forth on Schedule1 to this Agreement (collectively, the “Loan Documents”);

D.        Seller desiresto sell the Property and assign the Loan to Purchaser and Purchaser desires to purchasethe Property and assume the Loan from Seller, on and subject to the terms andconditions of this Agreement;

E.         Seller’saffiliate, River Forest Properties, LLC a Virginia limited liability company(“River Forest”), is the owner of that certain apartment project apartmentproject known as “River Forest” consisting of 240 apartment units and allamenities which are a part thereof located on the southern line of BrandersCreek Parkway in Chesterfield County, Virginia (the “River Forest Apartments”);

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F.         Seller’saffiliate, Princeton Properties, Inc., a Virginia corporation (“Princeton” and togetherwith River Forest, collectively “Seller Affiliate”) is the owner of that certainparcel of land located adjacent to the River Forest Apartments (the “RiverForest Expansion Parcel” and, together with the River Forest Apartments, collectively,the “Other Property”); and

G.        Pursuant tothat certain Agreement of Purchase and Sale (the “Other Agreement”), dated asof the same date as this Agreement, among Seller Affiliate and Purchaser,Seller Affiliate has agreed to sell to Purchaser, and Purchaser has agreed to purchasefrom Seller Affiliate, the Other Property.

THEREFORE, in consideration of Ten and No/100 Dollars($10.00) in hand paid, the mutual covenants herein contained, and other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereby covenant and agree as follows:

1.                 Agreement to Sell and to Purchase.

(a)               Seller agrees to sell and Purchaser agrees to purchase the Property uponthe terms and conditions hereinafter set forth.

(b)              Subject to Purchaser’s rights with respect to the Investigation Period(as hereinafter defined), Purchaser acknowledges and understands that Seller isselling the Property and the Purchaser is buying the Property in its “AS-IS,WHERE-IS, WITH ALL FAULTS” physical condition, including all existingenvironmental conditions, with no rights of set-off or reduction in thePurchase Price (as hereinafter defined) unless and except as expressly providedherein to the contrary, and except for the representations and warranties setforth in this Agreement and the closing documents executed in connection withthe consummation of the transactions contemplated by this Agreement, the saleof the Property by Seller to Purchaser shall be without representation orwarranty of any nature or kind with respect to the physical condition of theProperty, whether express, implied, statutory or otherwise, including withoutlimitation warranties of use, merchantability or fitness for a particularpurpose, and Seller does hereby disclaim and renounce any such representationsor warranties.

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2.                 Earnest Money. Purchaser shall deposit in escrow with the EscrowAgent within two (2) business days of the execution hereof, Eight HundredThousand Dollars ($800,000) (such deposit together with any interest that may beearned thereon prior to Closing, being hereinafter called the “InitialDeposit”). If Purchaser does not elect to terminate this Agreement during theInvestigation Period (as hereinafter defined), prior to the expiration of theInvestigation Period, Purchaser shall deliver to Escrow Agent an additionaldeposit in the amount of Four Hundred Thousand Dollars ($400,000) (the“Additional Deposit”). The Initial Deposit and the Additional Deposit aresometimes individually or collectively referred to as the “Earnest Money”. TheEarnest Money shall be deposited in an interest bearing account usingPurchaser’s tax identification number which shall be provided to Escrow AgentThe Earnest Money shall be applied against the cash portion of the purchaseprice at Closing (as hereinafter defined) or refunded in full to Purchaser ashereinafter provided in Paragraph 15. If Purchaser does not notify Seller priorto the expiration of the Investigation Period that Purchaser elects toterminate this Agreement, the Initial Deposit shall be non refundable for anyreason other than (i) a default by Seller, (ii) in the event any condition toPurchaser’s obligations under this Agreement is not satisfied as providedherein, or (iii) as otherwise specifically provided herein. If Purchaser doesnot notify Seller prior to the expiration of the Investigation Period thatPurchaser elects to terminate this Agreement and Purchaser fails to make theAdditional Deposit as required, Purchaser shall be in default of this Agreementand Seller shall have the right to terminate this Agreement and retain theInitial Deposit as provided in Paragraph 8.

3.                 Purchase Price. The purchase price for the Property (the“Purchase Price”) shall be Forty Four Million Two Hundred Thousand Dollars ($44,200,000),payable at Closing as follows:

(a)               Purchaser shall receive a credit against the Purchase Price in theamount of the outstanding principal balance of the Loan, all accrued and unpaidinterest on the Loan and all other fees, costs and expenses owing by Sellerunder the Loan Documents for periods prior to the Closing Date except for anyfees, costs and expenses to be paid by Purchaser in connection with theassumption of the Loan;

(b)              Purchaser shall receive a credit against the Purchase Price in the amountof the Earnest Money; and

(c)               The balance of the Purchase Price as adjusted by the closing prorationshereinafter provided at Paragraph 4 shall be paid in cash at Closing by wiretransfer of funds to Escrow Agent’s account for payment to Seller.

4.                 Closing Prorations. All items described below shall beprorated as of the date of Closing (the “Closing Date”) and, as hereinafterprovided, shall increase or decrease the cash portion of the Purchase Pricepayable pursuant to Paragraph 3(c) of this Agreement.

(a)               Taxes. All state, county and municipal ad valorem and otherproperty taxes and similar charges with respect to the Property for the year inwhich the Closing is consummated will be prorated based on the current year’s taxbill or, if such bill has not been issued as of the Closing Date, then taxes shallbe prorated at Closing based on the prior year’s tax bill and said amount oftaxes prorated shall be adjusted between the parties upon receipt of the taxbill for the year in which the Closing is consummated. Seller shall pay at or priorto Closing all special assessments and charges against the Property which areeither due or declared prior to the Closing Date. Any refund or creditattributable to the overpayment of taxes and assessments payable for the year inwhich Closing occurs, less any attorneys’ fees or costs payable in with respectof such taxes and assessments shall be allocated between Seller and Purchaserbased upon their respective periods of ownership.

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(b)              Income. All rental and other income from the Property, includingbut not limited to prepaid rent, late charges, and other charges to tenants,shall be prorated based on rents actually collected. All unpaid rent relatingto periods prior to the Closing Date shall be paid to Seller as and whenreceived by Purchaser after Closing and shall not be prorated at Closing;provided, that any rent received after Closing shall be applied first to thecurrent rent due, then to past due rents accrued after Closing and then to pastdue rent accrued prior to Closing. Purchaser shall include all such unpaid rentin its normal billing and shall use commercially reasonable, good faith effortsto collect such unpaid rent after the Closing Date. Purchaser may not waive anydelinquent rents nor modify a Lease so as to reduce or otherwise affect amountsowed thereunder for any period in which Seller is entitled to receive a shareof charges or amounts without first obtaining Seller’s written consent, whichconsent may be given or withheld in Seller’s sole and absolute discretion. IfPurchaser fails to collect any unpaid rents accrued prior to Closing withinninety (90) days after Closing, Seller shall have the right to independentlypursue collection of amounts to which Seller is entitled; provided, that Sellershall be expressly prohibited from bringing any action to evict any tenant fromits leased premises at the Property.

(c)               Deposits and Escrows.

(1)              Seller shall, at no expense to Purchaser, transfer to Purchaser bycredit against the Purchase Price at Closing all refundable security depositsand other escrow deposits relating to the Property, including such deposits andfees as to leases that are in default but have not been terminated as of theClosing Date, and all interest charges required by law to be accrued thereon.

(2)              All real estate tax escrows, insurance escrows and other escrowsmaintained by Lender under the Loan Documents shall be transferred toPurchaser, and Seller shall be given credit for the amount of such funds andany unearned mortgage insurance premiums at Closing.

(d)              Utilities. Utilities not payable by tenants of the Property shalleither be (i) prorated as of Closing, or (ii) transferred into Purchaser’s nameas of Closing, with Seller to be responsible for payment of all charges accruedprior to such transfer and Purchaser to be responsible for payment of allcharges accruing after such transfer.

(e)               Service Contracts and Equipment Leases. A list of all servicecontracts and equipment leases relating to the operation and management of theProperty is attached hereto as Exhibit B as a part hereof (the“Contracts”). Except as noted in Exhibit B, Purchaser shall not beobligated to assume responsibility for or to pay any sums due at Closingattributable to the Contracts unless Purchaser elects during the InvestigationPeriod by written notice to Seller to assume such Contracts at Closing, ineither of which events, such Contracts shall be assigned to and assumed byPurchaser at Closing. Seller agrees, at Seller’s expense, to cancel allContracts which are not to be assumed by Purchaser as of the Closing Date. Allprepayments made or payments due under any of the Contracts to be assigned toPurchaser shall be prorated as of the Closing Date.

(f)                Adjustments. In the event that accurate prorations and otheradjustments cannot be made at Closing because current bills are not obtainable(as, for example, in the case of utility bills), the parties shall prorate onthe best available information, subject to adjustment upon receipt of the finalbill. Seller shall attempt to have utility meters read on the Closing Date soas to accurately determine the proration of current utility bills. Adjustmentsshall be made after Closing if any closing prorations are based on inaccurateinformation.

5.                 Title.

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(a)               At Closing, Seller shall convey to Purchaser, good and marketable, feesimple title to the Property by special warranty deed (the “Deed”) in formconsistent with standard Virginia practice (and otherwise approved by Sellerand Purchaser), subject only to the Permitted Encumbrances (defined below) andany other matters of record as of the date of Purchaser’s examinations of titleto the extent applicable to the Property and any matters which could bediscovered by a survey of the Property other than such matters to whichPurchaser has objected and which Seller has agreed or is obligated to correctas provided herein. Purchaser agrees to accept title to the Property subject tothe Permitted Encumbrances and such additional matters as may be approved byPurchaser, in its sole and absolute discretion, prior to Closing.

(b)              During the Investigation Period, Purchaser shall, at its cost, obtain(i) an owner’s title insurance commitment (the “Title Commitment”) in the fullamount of the Purchase Price to be issued by the Escrow Agent (the “Title Insurer”),insuring the title to the Property, and (ii) a current survey (referencesherein to the plat of survey shall be deemed to refer to such plat) of theProperty (the “Survey”). It shall be a condition to Purchaser’s obligationshereunder that Seller shall have delivered all documents required to bedelivered by Seller hereunder which are required by the Title Insurer to issuean owner’s title insurance policy pursuant to the Title Commitment (the “TitlePolicy”).

(c)               During the Investigation Period, Purchaser shall review title to theProperty as disclosed by the Title Commitment and the Survey, and satisfyitself as to the availability from the Title Insurer of the Title Policy andall requested endorsement to such Title Policy. Purchaser shall notify Sellerof any objections to matters disclosed by the Title Commitment and the Surveywithin five (5) days after receipt of the Title Commitment and the Survey.

(d)              Seller shall have no obligation to remove or cure title objections, exceptfor (1) liens of an ascertainable amount (but expressly excluding the liensevidenced by the Loan Documents), which liens Seller shall cause to be releasedat the Closing or affirmatively insured over by the Title Company, and (2) anyexceptions or encumbrances to title which are created by Seller after the date ofthis Agreement without Purchaser’s consent. In addition, Seller shall providethe Title Insurer with a customary ALTA statements, personal undertakings orowner’s affidavit (an “Owner’s Affidavit”), in form and substance reasonablyacceptable to Seller, which will permit the Title Insurer to remove thestandard “mechanics lien” and “GAP” exceptions from the Title Policy.

(e)               For purposes of this Agreement, the following terms shall have thefollowing meanings:

(1)              “Permitted Exceptions” shall mean: (i) any exception arising out of anact of Purchaser or its representatives, agents, employees or independentcontractors; (ii) zoning and subdivision ordinances and regulations; (iii) thespecific exceptions in the Title Commitment that the Title Insurer has notagreed to insure over or remove from the Title Commitment as of the end of theInvestigation Period and that Seller is not required to remove as providedherein; (iv) items shown on the Survey which have not been removed (or whichSeller has not agreed to remove) as of time end of the Investigation Period;(v) real estate taxes not yet due and payable; and (vi) the Loan Documents.

(2)              “Leases” shall mean the leases which are listed on the rent rollattached hereto as Exhibit C, together with such additional leases or modificationsas may be added and excluding any leases which may be terminated in the ordinarycourse of Seller’s business between the date of this Agreement and the date ofClosing and the rights of tenants under such leases, as occupancy tenants only,and without any right of first refusal or purchase options.

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(3)              “Permitted Encumbrances” shall mean a collective reference to the Leasesand Permitted Exceptions.

6.                 Access. Upon reasonable prior notice, Seller shall providePurchaser and its agents, servants, employees and assigns reasonable access,during Seller’s normal business hours, to all documentation, agreements, books,records, and other information in the possession of Seller pertaining to the ownership,use, rental or operations of the Property, including but not limited to,financial records, tax assessments, bills and leases, and Purchaser shall havethe right to make copies of such non-confidential documents as Purchaser shallreasonably specify at Purchaser’s sole expense. Furthermore, Seller herebygrants to Purchaser and its agents, servants, employees, assigns andindependent contractors reasonable access to enter upon the Property, uponforty-eight (48) hours advance notice and at reasonable times during Seller’snormal business hours, for the purpose of inspecting the condition of theProperty, surveying the Property and undertaking any physical inspections thatPurchaser deems appropriate under this Agreement; provided, however, that suchinspections shall be coordinated with Seller and Purchaser shall minimize anydisruptions to the operation of the Property and the occupancy of the Propertyby tenants. Purchaser shall be responsible for all costs incurred by Purchaserin connection with its inspections and evaluation of the Property, shall repairany damage caused by Purchaser and its agents and shall indemnify and holdSeller harmless from and against any and all claims, demands, actions, losses,costs, damages, liabilities and expenses (including without limitationreasonable attorneys’ fees) incurred or sustained by Seller by reason of orarising from the exercise by Purchaser of the rights and privileges granted inthis Paragraph 6, but only to the extent incurred or sustained as a result ofdamage to the Property and injury to persons. The foregoing indemnityobligations shall expressly survive Closing or any termination of thisAgreement.

7.                 Investigation Period.

(a)               For the period beginning with the Effective Date and extending through 5:00p.mon the thirtieth (30th) day following the Effective Date (the "InvestigationPeriod"), Purchaser shall have the right to terminate this Agreement as providedin Paragraph 15 if Purchaser determines, in its sole and absolute discretion,not to purchase the Property. If no notice of termination is given by Purchaserprior to the expiration of the Investigation Period, Purchaser and Seller shallproceed toward Closing in accordance with the other terms of this Agreement,including Purchaser's delivery of the Additional Deposit in accordance withParagraph 2.

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(b)              Seller shall cooperate with Purchaser in connection with its evaluationof the Property Seller has provided Purchaser on or before the Effective Datewith copies of the documents and instruments set forth in Schedule  2 (collectively,the “Property Information”) to the extent in Seller’s possession or control. Inaddition to the Property Information and the Loan Documents, Seller shallprovide Purchaser with copies of such other reports, studies, leases (otherthan copies of each individual tenant lease) and other documents in Seller’spossession or control related to the Property as Purchaser shall reasonablyrequest. Purchaser shall have no obligation to pay Seller for any of suchreports, studies or other documents provided by Seller to Purchaser, all ofwhich shall be provided at no cost to Purchaser. Purchaser agrees that it willpreserve the confidentiality of all such documents provided by Seller; that itwill not divulge the existence or contents of any such documents to anypersons, except to its attorneys, advisors, consultants, lenders and othersemployed by Purchaser to assist it in the purchase of the Property, each ofwhom shall likewise observe and preserve such confidentiality, subject to anyobligation on the part of such person to disclose or deliver such informationpursuant to court order or as required pursuant to applicable laws. Theforegoing confidentiality obligations shall survive any termination of thisAgreement but shall terminate at Closing in the event Closing occurs hereunder.

(c)               In the event that this Agreement is terminated without completion of thetransaction contemplated herein, Purchaser shall return to Seller all documentsprovided to Purchaser pursuant to this Agreement, and shall additionallyprovide to Seller copies of all third party studies or reports obtained byPurchaser pertaining to the Property during the course of its investigationsand inspections, it being understood that Seller shall have no right to rely onany such reports without the consent of the person or persons preparing suchstudies and reports. The foregoing obligations shall survive any termination ofthis Agreement, but shall terminate at Closing in the event that Closing occurshereunder.

8.                 Purchaser’s Default; Liquidated Damages. If, prior to Closing,Purchaser defaults in performing its obligations under this Agreement, Seller’ssole remedy for such default shall be to give the Escrow Agent and Purchaserprompt written notice of such default and the Escrow Agent shall, after givingthe parties five (5) working days’ notice thereof (if Purchaser fails to curesuch default within that time), pay over to Seller the Earnest Money as fulland complete liquidated damages hereunder. Thereafter, Purchaser shall have no furtherobligations hereunder to Seller or any others, including but not limited to theEscrow Agent, brokers, realtors and agents. Notwithstanding the foregoing, inthe event of a dispute regarding Seller’s right to payment of the EarnestMoney, Escrow Agent continues to hold the Earnest Money subject to the provisionsof Paragraph 28.

9.                 Closing; Closing Deliveries and Closing Conditions. Theconsummation of the transaction described herein (“Closing”) will be held atthe offices of the Title Insurer or such other location mutually agreed upon byPurchaser and Seller on the later of (i) ten (10) days after Purchaser’sreceipt of written approval by the Lender and HUD of the transfer of theProperty to Purchaser and the assumption of the Loan by Purchaser, or (ii)fifteen (15) days after the expiration of the Investigation Period (the“Closing Date”). At Closing, Purchaser shall pay to Seller the outstandingbalance of the Purchase Price provided for in Paragraph 3(c) hereof, the EscrowAgent shall pay to Seller the Earnest Money, and Seller shall give Purchaserpossession and occupancy of the Property subject only to the PermittedEncumbrances. Any eminent domain awards, proceeds from sale under threat orexercise of the power of eminent domain and insurance proceeds which are to bepaid or are payable to Purchaser pursuant to Paragraph 11 hereof, shall be paidor assigned to Purchaser at Closing.

Seller agreesthat Purchaser is permitted to download lease, tenant and other propertyinformation from Seller's on-site computers within seven (7) business days ofClosing, after which time Seller and its agents shall have the right to enterupon the Property to remove any of Seller's confidential information not relatedto the operation of the Property, to remove Seller's management software, and todisconnect or terminate any links to Seller's server and/or database from suchon-site computers. The terms of the immediately preceding sentence shall surviveClosing.

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Furthermore, Seller shall, at Seller’s sole cost andexpense, transfer or deliver to Purchaser at Closing (or at such other timehereinafter set forth) the deposits, escrows, affidavits, certificates,instruments and other matters hereinafter described, each instrument to beexecuted on behalf of Seller by its duly authorized officer and to be in formto be approved by counsel for Seller and Purchaser

(a)               The Deed;

(b)              An assignment and assumption agreement, in form and substance acceptableto Seller and Purchaser, pursuant to which Seller shall transfer to Purchaser(i) all rights in, to and under the Leases, (ii) any unexpired warranties andguaranties in effect with respect to such portions of the Property, (iii) the Contractswhich are to be assigned by each such party to Purchaser as provided herein, and(vi) all prorated items and adjustments described in Paragraph 4 above whichare to be paid, transferred, applied or credited to Purchaser at or as ofClosing, as applicable. Such assignment and assumption agreements shall also beexecuted by Purchaser at Closing to effect Purchaser’s assumption of allapplicable obligations.

(c)               A bill of sale from Seller, in form and substance acceptable to Sellerand Purchaser conveying, with a warranty of title but without warranties as tothe condition thereof, all personal property, equipment, signage and fixtures ownedby it and located at or used in connection with the Property, other thanproperty owned by tenants under the Leases, subject only to the applicablePermitted Encumbrances and conveying, without warranty of title, all of Seller’sright, title and interest to the name “Belvedere Apartments”, provided thatSeller shall only quitclaim its right, title and interest in and to theproperty identification sign located at the corner of Robious Road andBelvedere Vista Lane.

(d)              An updated rent roll for the Property, dated not more than three (3)days prior to the Closing Date, certified by Seller to be true, accurate andcomplete as of such date.

(e)               The Owner’s Affidavit.

(f)                All documents required from Seller by the Lender or by HUD for thetransfer to Purchaser of the Property subject to the Loan Documents inaccordance with applicable HUD regulations and requirements and the LoanDocuments. Purchaser shall also execute all documents required from Purchaserby the Lender or by HUD in accordance with applicable HUD regulations andrequirements and the Loan Documents.

(g)               Originals or copies (if originals are unavailable) of all plans,specifications, manuals, warranties, and guarantees in Seller’s possessionrelating to the Property.

(h)               An affidavit stating that all representations and warranties of Sellerset forth in this Agreement remain true and correct, executed and sworn onbehalf of Seller on and as of the Closing Date.

(i)                 All deposits and escrows provided for in Paragraph 4(c) of thisAgreement

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(j)                Certificates of non-foreign status, information required for Purchaser’scompliance with I099S regulations, and such affidavits and certificationsrequited from or typically provided by sellers for real estate transactions inthe Commonwealth of Virginia from Seller.

(k)              All other documents reasonably necessary or appropriate to complete thetransaction contemplated by this Agreement

(l)                 Evidence that any property management agreement for the Property hasbeen terminated by Seller at no cost, liability or expense to Purchaser.

            9A.      Conditions to Closing.

(a)               Purchaser’s obligation under this Agreement to acquire the Property issubject to the fulfillment at or prior to the Closing Date of the followingconditions:

(1)              Seller shall have performed in all material respects its agreementscontained in this Agreement required to be performed on or prior to the ClosingDate.

(2)              The Title Insurer is in a position to and will issue to Purchaser the MkPolicy subject only to the Permitted Exceptions.

(3)              Each and every representation and warranty made by Seller in this Agreementshall be true and correct in every material respect both as of the date whenmade and as of the Closing Date.

(4)              All other conditions to Purchaser’s obligation to close set forth inother provisions of this Agreement have been satisfied, including withoutlimitation those set forth in Section 21 of this Agreement

If any condition specified in this Section 9A. (a) is nottimely satisfied or waived by Purchaser, Purchaser shall have the right toterminate this Agreement, in which event, unless such condition has not beensatisfied by reason of a default by Purchaser of its obligations hereunder, theEarnest Money (or so much thereof as has been deposited) shall be returned toPurchaser and no party shall have any further rights, duties, obligations or liabilitiesunder this Agreement except as specifically set forth herein; provided, thattermination of this Agreement shall not be Purchaser’s sole remedy if Sellerdefaults; it being specifically understood and agreed that nothing in thisSection 9A. (a) shall relieve Seller from liability for any breach of thisAgreement and that the provisions of Section 15(b) of this Agreement shallgovern and control in the event of a default by Seller hereunder.

(b)              Seller’s obligation under this Agreement to sell the Property is subjectto thefulfillment at or prior to the Closing Date of the following conditions:

(1)              Purchaser shall have performed in all material respects its agreementscontained in this Agreement required to be performed on or prior to the ClosingDate.

(2)              HUD and Lender shall have consented to the sale of the Property toPurchaser and consented to the assumption of the Loan by Purchaser.

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If any condition specified in this Section 9A.(b) is nottimely satisfied or waived by Seller, Seller shall have the right to terminatethis Agreement, in which event, unless such condition has not been satisfied byreason of default by Seller of its obligations hereunder, the Earnest Moneyshall be paid to Seller and no party shall have any further rights, duties,obligations or liabilities under this Agreement except as specifically setforth herein.

10.             Other Costs. Seller agrees to pay at Closing the Virginiagrantor’s tax required for recordation of the Deed, all costs incurred by Sellerin connection with the Transfer Approval Application (as defined herein) andone-half (1/2) of any escrow fee for the Closing. Purchaser agrees to pay atClosing the Virginia grantee’s tax, the costs and premium for the TitleCommitment and the Title Policy, including any endorsements to the TitlePolicy, the cost of any updated survey obtained by Purchaser, all costsassociated with the transfer and assumption of the Loan and the Loan Documents(other than the costs to be paid by Seller as provided herein) including anyassumption fee required to be paid to Lender pursuant to the Loan Documents)and one-half (1/2) of any escrow fee for the Closing. Subject to Paragraph 30,each party shall pay its own attorney’s fees, regardless of whether Closing occursand all other costs incurred by such party in connection with the transactionscontemplated by this Agreement.

11.             Damage or Condemnation.

(a)               Seller represents that to its knowledge there are no condemnation oreminent domain proceedings pending or threatened against or affecting theProperty or any portion thereof. Risk of loss to the Property (i) resultingfrom any such proceeding which is commenced prior to Closing, and (ii) due toany cause, including but not limited to fire, other casualty and acts of God,shall remain on Seller until Closing.

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(b)              Prior to Closing, if all or part of the Property shall be destroyed ordamaged by casualty, and there is more than $2,000,000 damage, destruction orloss, Seller shall so notify Purchaser, and Purchaser may elect either to (i)terminate this Agreement as provided in Paragraph 15 hereof or (ii) notterminate this Agreement and proceed to Closing as provided in Paragraphs 9 and15 hereof. If Purchaser elects to close pursuant to (ii) above, then at ClosingSeller shall assign, transfer and set over to Purchaser, subject to all rightsof the Lender and/or HUD therein under the Loan Documents, all of such Seller’sright, title and interest in and to any insurance proceeds (including paymentof any deductible) and claims that have been or may thereafter be made for anysuch damage. If the damage or loss from casualty is less than $2,000,000, thenSeller shall assign, transfer and convey to Purchaser all of such Seller’sright, title and interest in and to all condemnation and insurance awardsarising therefrom, subject to all rights of the Lender and/or HUD therein underthe Loan Documents. Seller shall be responsible to obtain any consent requiredby the insurer in connection with any such assignment and Purchaser’sobligation to close shall be conditioned upon such consent as well as Lender’sand HUD’s agreement to make such insurance proceeds or condemnation awardsavailable to Purchaser for restoration of the Property. If this Agreement isnot terminated as a result of any such casualty, Seller shall be entitled to utilizesuch insurance or condemnation awards (to the extent permitted by the Lenderand/or HUD therein under the Loan Documents) to commence repair of such damageprior to Closing with the unexpended proceeds to be transferred to Purchaser atClosing, and in either event this Agreement shall be closed pursuant to theterms hereof. Seller shall be responsible to obtain any consent required by theinsurer in connection with any such assignment and Purchaser’s obligation toclose shall be conditioned upon such consent as well as Lender’s and HUD’sagreement to make such insurance proceeds or condemnation awards available toPurchaser for restoration of the Property. Seller shall be responsible forpayment of any deductible under the applicable insurance policy and if Sellerdoes not provide Purchaser with written evidence that any such deductible hasbeen paid prior to the Closing, then Purchaser shall receive a credit againstthe Purchase Price in the amount of any such unpaid deductible.

(c)               Prior to Closing, if all or any part of the Property materiallyaffecting the use or operation thereof shall be taken under the power ofeminent domain or other proceeding, Seller shall so notify Purchaser, andPurchaser may elect either to (i) terminate this Agreement as provided inParagraph 15 hereof, or (ii) not terminate this Agreement and proceed toClosing as provided in Paragraphs 9 and 15 hereof. If there is a taking of aportion of the Property which does not, in Purchaser’s sole discretion,materially affect the use or operation thereof, Purchaser shall be required to proceedto Closing. If Purchaser elects to close as provided above, then at ClosingSeller shall assign, transfer and set over to Purchaser, subject to all rightsof the Lender and/or HUD therein under the Loan Documents, all of such Seller’sright, title and interest in and to any eminent domain awards.

12.             Representations and Warranties. As a material inducement toPurchaser’s entering into this Agreement, Seller hereby represents, warrantsand covenants that the following matters are true as of the date of thisAgreement, which shall survive Closing and remain in effect for a period one(1) year thereafter:

(a)               Laws. Seller has received no notice from any applicablegovernmental authorities of any alleged violations by or at the Property of anyapplicable city, county, state and United State laws, ordinances, codes, rulesand regulations.

(b)              Contracts. On or prior to the Effective Date, Seller shall providePurchaser with copies of all of the Contracts, which copies shall be true,complete and correct in all material respects. The Contracts are the onlyContracts in effect regarding the Property.

(c)               No Defaults. Seller is in compliance with the Loan Documents, theLeases and the Contracts. Seller has not received any notice of default underthe Loan Documents which has not been cured or waived by Lender.

(d)              Conflicts. Except for the required consents of the Lender andHUD, neither the execution of this Agreement by Seller nor the Closing of thetransactions contemplated hereby by Seller will (i) conflict with, or result ina breach of the terms, conditions or provisions of, or constitute a defaultunder, any agreement or instrument to which Seller is a party, or by which it maybe bound or (ii) result in the creation of any material lien, charge orencumbrance upon the Property, except as permitted hereby in respect of theLoan Documents.

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(e)               Leases. No tenant leases, other than the Leases listed in therent roll attached as Exhibit C, affect the Property. To Seller’sknowledge, all information contained in Exhibit C is true, correct andcomplete in all material respects as of the date hereof.  All Leases are insubstantially the form attached hereto as part of Exhibit D except foraddenda which provide for rent credits to managers of the Property, employees ofSeller or Seller’s management company involved in the leasing or maintenance ofthe Property and police officers who provide limited off-duty services inconnection with their residency, all of which is reflected in the attached rentroll. Purchaser agrees that Seller shall have the right to extend such rentcredits to any such managers and employees who will not become managers oremployees of Purchaser for a period through the end of the second full monthafter Closing.

(f)                Status of the Leases. To the knowledge of Seller all of the Leaseare, as of the date of this Agreement, valid and in full force and effect, andfree of any known claims for reduction, deduction, or set-off against rent, orany other claims against Seller or any managing agent of Seller, unless andexcept as otherwise indicted in the rent roll attached hereto as Exhibit C.No rents or Leases have been assigned, pledged or, otherwise encumbered bySeller except as additional collateral for the Loan Seller has received nopayments of rent under the Leases more than thirty-one days prior to the duedates thereof.

(g)               Commissions. There are no broker’s or agent’s commissions or feesowed with respect to the Leases.

(h)               Litigation. Seller knows of no litigation or governmental orother proceeding or investigation pending or threatened against or relating tothe Property or Seller, including without limitation condemnation or eminentdomain proceedings.

(i)                 Property Information. All operating statements and, to Seller’sknowledge, other Property information provided or to be provided by Seller toPurchaser are or shall be correct and complete in all material respects andsuch operating statements present fairly the results of operations of theProperty for the periods indicated.

(j)                Authority of Seller. Seller is a limited liability company, dulyorganized and validly existing under the laws of the Commonwealth Of Virginia.Seller has full power and authority to enter into this Agreement and to sellthe Property in accordance with the terms and conditions hereof.

(k)              Environmental Conditions. To Seller’s knowledge, (i) the Propertydoes not contain any “Hazardous Materials” (as defined below) in violation ofapplicable “Environmental Laws” (as defined below), and (ii) the Property isnot subject to federal, state or local regulations or liability because of thepresence of stored, leaked, spilled or disposed petroleum products, wastematerials or debris, underground storage tanks, “PCB’s” or PCB items (asdefined in 40 C.F.R. § 761.3), “asbestos” (as defined in 40 C.F.R. § 763.63),or the past or present accumulation, treatment, storage, disposal, spillage orleakage of any Hazardous Materials. As used in this Paragraph 12(k), the term“Hazardous Materials” shall mean any hazardous wastes, hazardous substances,hazardous materials, toxic substances, hazardous air pollutants or toxicpollutants, as those terms are defined in Environmental Laws; the term“Environmental Laws” shall -mean the Resource Conservation and Recovery Act (42U.S.C.A. §§ 6901 et seq.) and the Comprehensive Environmental Response,Compensation and Liability Act of 1980 (42 U.S.C.A. §§ 9601 et seq.) any amendmentsthereto and any regulations promulgated pursuant thereto.

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(l)                 Loan Documents. To Seller’s knowledge, the copies of the LoanDocuments provided by Seller to Purchaser are true, correct and complete.Purchaser acknowledges that the listing of the Loan Documents as set forth on Schedule1 may not include documents relating to the construction of theimprovements which Seller represents are no longer of any force or effect.

(m)             Condemnation. Seller has received no notices of any condemnationor eminent domain proceedings pending or threatened against the Property or anypart thereof.

13.             Operation of the Property. Between the date hereof and Closing

(a)               Seller will not enter into any contract (other than new Leases) thatwill be an obligation affecting the Property subsequent to the Closing Dateexcept for contacts entered into in the ordinary course of business that areterminable without cause and without payment of a penalty on not more than 30days’ notice.

(b)              Seller will not remove any personal property from the Property except asmay be required for necessary repair or replacement, and in the event of suchreplacement, the replacement shall be of materially equal or better quality andquantity as existed as of the time of its removal.

(c)               Seller will maintain casualty insurance of a level and type consistentwith the insurance maintained by Seller prior to the execution of thisAgreement with respect to the Property;

(d)              Seller shall not do anything, nor authorize anything to be done, whichwould adversely affect the condition of title as shown on the Title Commitmentwithout the prior consent of Purchaser which consent shall not be unreasonablywithheld, conditioned or delayed.

(e)               Seller will maintain and operate the Property in accordance with firstclass apartment management practices for the Richmond, Virginia area.

(f)                Seller agrees that no new leases will be entered into with any new orexisting tenants unless such leases (i) have a lease term (including renewals andextensions) of no longer than one year, (ii) provide for rent at ratesconsistent with the rents reflected in the current rent roll and (iii) arepursuant to the form of lease attached hereto as part of Exhibit D.

(g)               Seller shall make all payments due on the Loan or as otherwise requiredpursuant to the Loan Documents, pay all operating expenses through the ClosingDate and otherwise duly observe and perform its obligations under the Loan Documents,the Leases and the Contracts. Upon request, Seller shall keep Purchaserreasonably informed as to the status of leasing prior to the Closing Date andshall deliver to Purchaser copies of all new Leases.

(h)               Seller shall restore all units that become vacant at least five (5) daysprior to the Closing to “rent-ready” condition in accordance with Seller’scustomary practice and procedure for the Property. Purchaser and Seller shallinspect each of such vacant units prior to the Closing to confirm that they arein rent ready” condition. To the extent any of such units is not in “rentready” condition as of the date of Closing, Purchaser shall be entitled to acredit in the amount of the costs, as Purchaser and Seller agree, actingreasonably, are necessary in order to pay for the cost of restoring such vacantunits to “rent ready” condition.

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(i)                 At Closing, Seller shall cause any property management agreement for theProperty to be terminated, at no cost, liability or expense to Purchaser.

14.             Commission. Each of Seller and Purchaser represents to the otherthat there are no amounts due any realtor, broker, agent, finder or otherperson in connection with this transaction other than Cushman & Wakefield.Seller shall be responsible for any commission which may be due and payable toCushman & Wakefield pursuant to separate agreement between Seller andCushman & Wakefield. Each of Seller and Purchaser covenants that it willindemnify and hold the other harmless from and against any and all liabilitiesand expenses in connection with any claim or claims of any other realtor,broker, agent, finder or other person arising out of its participation in thistransaction, including, without limitation, attorneys’ fees.

15.             Termination; Specific Performance.

(a)               If Purchaser elects to terminate this Agreement pursuant to Paragraph 5,Paragraph 7, Paragraph 11 or Paragraph 21 hereof, then, in any such event, theEscrow Agent forthwith shall return the Earnest Money in full to Purchaser andthe parties hereto shall have no further obligations or liabilities hereunderexcept for the obligations of the parties which specifically survive thetermination of this Agreement. In addition, if Purchaser does not elect to terminatethis Agreement pursuant to Paragraph 7, but Purchaser does elect to terminatethe Other Agreement pursuant to the corresponding Paragraph 7 of such OtherAgreement (an “Other Agreement Termination Notice”), then Seller shall have theone-time right, to be exercised within five (5) business days followingPurchaser’s deliver of such Other Agreement Termination Notice, to terminatethis Agreement by written notice to Purchaser and, in such event, the EscrowAgent forthwith shall return the Earnest Money in full to Purchaser and the partieshereto shall have no further obligations or liabilities hereunder except forthe obligations of the parties which specifically survive the termination ofthis Agreement.

(b)              If Seller defaults in the performance of any of its obligationshereunder, then, in such event, Purchaser shall have the right to exercise anyone of the following remedies, as its sole and exclusive remedies: (a) toterminate this Agreement, after having given five (5) days written notice to Sellerand Escrow Agent (and Seller has failed to cure such breach or default within thatperiod of time), whereupon the Earnest Money shall immediately berefunded/returned to Purchaser and neither Seller nor Purchaser shall have anyfurther rights or duties under this Agreement, except for the indemnities ofthe parties which specifically survive the termination of this Agreement; or(b) seek to enforce specific performance of this Agreement (with the costs andexpenses of any such action being paid to the prevailing party by the nonprevailing party). Notwithstanding the foregoing to the contrary, in the eventspecific performance is not reasonably available because of any affirmative actor acts of Seller or any act or acts of any person or entity affiliated with Sellerwho colludes with Seller’ so as to render specific performance not reasonablyavailable, then Purchaser shall have the right to terminate this Agreement,whereupon it shall become entitled to receive (or seek, as the case may be) (i)the immediate return of the Earnest Money and (ii) actual direct (but notindirect or consequential) damages against Seller.

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16.             Assignment. Purchaser may, without Seller’s consent, assign thisAgreement and all of its rights hereunder to a single-purpose entity to beformed by Purchaser in compliance with applicable HUD requirements, which entityshall acquire title to the Property at Closing and of which entity Purchaser oran affiliate of Purchaser shall be a principal. Otherwise, Purchaser shall haveno right to assign this Agreement and its rights hereunder to any other entityor individual unless approved by Seller in its sole discretion. Notwithstandingany of the foregoing, however, in the event of any assignment of this Agreementby Purchaser, whether with or without the written consent of Seller, Purchasershall remain jointly and severally liable with such assignee for allobligations and liabilities hereunder subject, in all events, to the provisionsof Paragraph 8.

17.             Waiver. The failure of either party to exercise any righthereunder, or to insist upon strict compliance by the other party, shall not constitutea waiver of that party’s right to demand strict compliance with the terms andconditions of this Agreement.

18.             Notices. Any notices, requests, or other communications requiredor permitted to be given hereunder shall be in writing and shall be either (i)delivered by hand, (ii) mailed by United States certified or registered mail,return receipt requested, postage prepaid, (iii) sent by overnight deliveryservice (e.g., Federal Express, Airborne, etc.), or (iv) sent by facsimile(with the original being sent by one of the other permitted means or by regularUnited States mail) and addressed to each party at the applicable address setforth herein. Any such notice, request, or other communication shall beconsidered given or delivered, as the case may be, on the date of hand delivery(if delivered by hand), on the third (3rd) day following deposit in the UnitedStates mail (if sent by United States registered mail), on the next businessday following deposit with an overnight delivery service with instructions todeliver on the next day or on the next business day (if sent by overnightdelivery service), or on the day sent by facsimile (if sent by facsimile, providedthe original is sent by one of the other permitted means as provided herein inthis paragraph or by regular United States mail). However, the time period withinwhich a response to any notice or request must be given, if any, shall commenceto run from the date of actual receipt of such notice, request, or othercommunication by the addressee thereof. Rejection or other refusal to accept orinability to deliver because of a changed address of which no notice was givenshall be deemed to be receipt of the notice, request, or other communication.By giving at least ten (10) days prior written notice thereof, any party heretomay, from time to time and at any time, change its mailing address hereunder.

If to Purchaser:

Associated Estates RealtyCorporation 1 AEC Parkway Richmond Heights, Ohio 44143 Attention: Martin A. Fishman Fax:  (216) 797-8719

With a copy to:Greenberg Traurig LLP77 West Wacker Drive, Suite 2500Chicago, Illinois 60601 Attention: Michael T. Fishman Fax: (312) 456-8435

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If to Seller:

Bogese, L.C.

113 South 12th Street

Richmond, Virginia 23219

Attention: Michael Bogese, Jr.

Fax: (804) 644-4086

With a copy to:

Troutman Sanders LLP

1001 Haxall Point

Richmond, Virginia 23219

Attention:  Edward B. Kidd

Fax: (804) 698-6000

If toEscrow Agent:

FirstAmerican Title Insurance Company

30 N.LaSalle Street, Suite 300 

Chicago,Illinois 60602 

Attention:Jim McIntosh 

Fax: (312) 553-0480

19.             Survival. All of Seller’s and Purchaser’s covenants, agreements,representations and warranties contained in Paragraphs 4, 6, 7, 12, 14, 20 and21 of this Agreement shall survive Closing and not merge into the Deed or anyother documents delivered hereunder. All other covenants, agreements,representations and warranties contained in this Agreement shall terminate uponClosing.

20.             Indemnification. Seller hereby agrees to indemnify and holdharmless Purchaser and its successors and assigns from and against any and allclaims, costs, penalties, damages, losses, liabilities and expenses (includingreasonable attorneys’ fees) arising before or after Closing (i) as a result ofany property damage or injuries to persons, including death, caused by anyoccurrence as to the Property prior to Closing, or (ii) as a direct andproximate consequence of any breach by Seller of any of its representations,warranties or obligations set forth herein or in any other document orinstrument delivered by Seller pursuant hereto. Purchaser agrees to indemnifyand hold harmless Seller and its successors and assigns from and against anyand all claims, costs, penalties, damages, losses, liabilities and expenses(including reasonable attorneys’ fees) arising (i) after Closing as a result ofany property damage or injuries to persons, including death, caused by anyoccurrence as to the Property after Closing or (ii) before or after Closing asa direct and proximate consequence of any breach by Purchaser of any ofits obligations set forth herein or in any other document or instrumentdelivered by Purchaser pursuant hereto.

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21.             Approval of Transfers by HUD and Lender.

(a)               Purchaser’s obligation to purchase the Property and proceed to theClosing is further subject to the condition precedent that the Lender and HUDshall have approved the sale of the Property to Purchaser and consented to theassumption of the Loan by Purchaser (i) without modification of the LoanDocuments, (ii) without any requirement that would result in a materialincrease in any replacement reserves or mortgage escrow accounts, and (iii)without any obligation to fund additional repairs or capital expenditures whichexceed a normal expense to Purchaser and are materially different from orsubstantively in excess of those, if any, identified by Purchaser in connectionwith its due diligence examination of the Property. Seller shall cause Lenderto deliver to Purchaser no more than ten (10) days prior to Closing Lender’swritten confirmation of the amount of outstanding principal, interest and anyother amounts and deposits accrued and payable under the Loan Documentstogether with written confirmation that the Loan is in full force and effectand that to its knowledge Seller is not in default of any of the provisions ofthe Loan Documents. No transfer of any interest in the Property under thisAgreement shall be effective prior to such HUD approval. Purchaser will nottake possession of the Property nor assume any benefits of Property ownershipprior to such approval by HUD.

(b)              Purchaser shall submit an application for approval of the transfer andassumption to HUD (the “Transfer Approval Application”), using commerciallyreasonable efforts to insure that the Transfer Approval Application is completeand in material compliance with all applicable requirements, within two (2)business days after (i) approval of the draft Transfer Approval Application bySeller as provided herein and (ii) Seller’s delivery of any documents requiredto be provided by Seller and Lender as part of the Transfer ApprovalApplications (after completion of any corrections required to conform to theapplicable requirements after Purchaser’s review thereof) and shall diligentlypursue in good faith approval of the Transfer Approval Application atPurchaser’s sole expense (except as otherwise expressly provided in Section 21(a)and 22(d) of this Agreement and except for legal and other accounting feesincurred by Seller in providing the information and documentation Seller isrequired to provide in connection with the Transfer Approval Application).Purchaser shall promptly forward to HUD and the Lender such documents requiredto correct any deficiencies in the Transfer Approval Application as may beidentified by HUD or the Lender. Seller shall cooperate with Purchaser inconnection with such applications including providing all information anddocuments within Seller’s possession or control as maybe reasonably required ona timely basis. Purchaser shall provide Seller with (i) an itemization of anyinformation or documents required from Seller for the Transfer Approval Applicationwithin ten (10) days after the Effective Date and (ii) a copy of its proposedTransfer Approval Application within ten (10) days after the expiation of theInvestigation Period and prior to its submittal to HUD and the Lender. If,notwithstanding Purchaser’s diligent and good faith efforts, the TransferApproval Application is not approved within one hundred eighty (180) days aftersubmittal of the Transfer Approval Application, either party may terminate thisAgreement by written notice to the other party and the Escrow Agent, in whichevent the Earnest Money will be refunded to Purchaser.

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(c)               In connection with Purchaser’s assumption of the Loan, Purchaser andSeller acknowledge that there are certain escrow deposits (i.e. tax, insurance,MIP, replacement reserves, etc.) being held by the Lender or HUD in connectionwith the Property. Purchaser and Seller acknowledge and agree that, at Closing,all such escrows shall be transferred to Purchaser with the Property, but thatSeller shall be entitled to a credit for the amounts held in such escrowdeposits, subject to the other provisions of this Agreement regarding prorationof real estate taxes and other expenses. Seller shall also be entitled to a creditfor any prepaid MIP. 

(d)              Within 45 working days after the Closing Date, Seller at its sole costand expense, shall furnish to HUD audited financial statements for the Propertycovering the period from the date of Seller’s last audited report to the ClosingDate in accordance with HUD’s final approval. process requirements.

(e)               Purchaser acknowledges that HUD requires completion of the previousparticipation” requirement as part of the Transfer Approval Application andtherefore agrees to initiate any applications, submittals and/or registrationsrequired to satisfy the previous participation” requirements of the TransferApproval Application in sufficient time to permit the timely preparation andsubmittal of the Transfer Approval Application pursuant to the terms andtimelines set forth in this Agreement.

22.             Miscellaneous. The section headings and captions contained hereinare for reference purposes only and shall not in any way affect the meaning andinterpretation of the terms of this Agreement All questions with respect to theconstruction of this Agreement and the rights and liabilities of the partieshereto shall be determined in accordance with the applicable provisions of thelaws of the Commonwealth of Virginia. This Agreement may be executed in anynumber of duplicate originals or counterparts, all of which shall constitute asingle agreement. Any duplicate original on which the signatures of bothparties shall appear shall be deemed an original of this Agreement. Any numberof counterparts on which the signatures of both parties shall appear shallconstitute a duplicate original. This Agreement constitutes the entireagreement of the parties regarding the Property, and there are no outstanding agreementsbetween the parties hereto other than those set out in this Agreement. ThisAgreement may not be modified, changed or amended except by a writteninstrument executed by all of the parties hereto. In the absence of a specificprovision to the contrary, the party upon whom an obligation is imposedhereunder shall perform the obligation at its expense. As used herein thesingular shall include the plural, the plural the singular and the use of anygender shall be applicable to all genders. Time shall be of the essence as to allmatters provided for in this Agreement

23.             Binding Effect. This Agreement shall be fully binding on andenforceable against, all parties hereto and their respective heirs,administrators, successors and permitted assigns.

24.             Entire Agreement. This Agreement contains the entire agreementbetween the parties relating to the Property and supersedes all prior andcontemporaneous negotiations, understandings and agreements, written or oral,between the parties. This Agreement shall not be amended or modified, and nowaiver of any provision hereof shall be effective, unless set forth in awritten instrument authorized and executed with the same formality as thisAgreement

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25.             Severability. The provisions of this Agreement are severable, andif any term, clause, or provision of this Agreement or the application thereofto any person or circumstances is to any extent adjudicated and declared to beillegal, invalid, or unenforceable under present or future laws in effectduring the term hereof, it is the intention of the parties hereto that theremainder of this Agreement, and the application of such term, clause orprovision to persons or circumstances other than those to which it is held illegal,invalid or unenforceable, shall not be affected thereby.

26.             Days. If the final day of any period of time set out in anyprovision of this Agreement or any action, is required to be performed, or ifany notice, consent or other communication is to be given on a Saturday; Sundayor holiday recognized by the Commonwealth of Virginia or the State of Ohio forits employees, then in such case, such period shall be deemed extended to thenext day which is not a Saturday, Sunday or holiday recognized by theCommonwealth of Virginia or the State of Ohio. All references to any specifiednumber of days contained herein shall be deemed to refer to calendar daysunless a reference to business days is expressly provided.

27.             Presumptions. No presumption shall be created in favor of oragainst any of the parties to this Agreement with respect to the interpretationof any term or provision of this Agreement due to the fact that this Agreementwas prepared by or on behalf of one of the parties hereto.

28.             Escrow Agent.

(a)               Escrow Agent joins in this Agreement to agree to accept and hold theInitial Deposit and the Additional Deposit in accordance with the terms of thisAgreement

(b)              Purchaser and Seller agree that in performing any of its duties underthis Agreement, Escrow Agent shall not be liable for any loss, costs or damagewhich it may incur as a result of serving as Escrow Agent hereunder, except forany loss, costs or damage arising out of the willful misconduct of EscrowAgent. Accordingly, Escrow Agent shall not incur any liability with respect toany action taken or omitted to be taken in good faith upon reliance upon anydocument, including any written notice of instruction provided for in thisAgreement,, not only as to its due execution and validity and effectiveness ofits provisions, but also to the truth and accuracy of any information containedtherein, which Escrow Agent shall in good faith believe to be genuine, to havebeen signed or presented by a proper person or persons and to conform with theprovisions of this Agreement.

(c)               In the event of a dispute between any of the parties hereto, sufficientin the discretion of Escrow Agent to justify its doing so, Escrow Agent shallbe entitled to tender unto the registry or custody of any court of competentjurisdiction all money held by it under the terms of this Agreement, togetherwith such legal pleadings as it deems appropriate and thereupon be dischargedfrom further responsibility under this Agreement.

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29.             Tax Deferred Exchange. Purchaser and Seller each acknowledge thatthe other may desire that this transaction be a part of a tax-deferredtransaction under the Internal Revenue Code. Purchaser and Seller agree tocooperate with each other in order to permit this transaction to qualify fortax deferral under the Internal Revenue Code provided that such cooperationshall not prejudice any of the rights of Purchaser or Seller under thisAgreement. Purchaser and Seller each specifically agrees that the rights ofeither party to this Agreement may be assigned to a Qualified Intermediary inconnection with any such exchange without the consent of the other party. Thecooperating party shall not be required to (i) incur any additional cost orexpense in connection with any such exchange, including, without limitation,attorneys’ fees, (ii) enter into any agreement other than an agreement which isfully non-recourse to such party or (iii) take title to any property as a partof any such transaction; and the exchanging party shall indemnify and hold thecooperating party harmless with respect to all costs, expenses, losses orliabilities of any nature arising out of any such transaction including, withoutlimitation, attorneys’ fees.

30.             Attorneys’ Fees. In the event of any action or proceeding broughtby either party against the other under this Agreement, the prevailing partyshall be entitled to recover all costs and expenses including its attorneys’fees in such action or proceeding in such amount as the court may adjudgereasonable. The prevailing party shall be determined by the court based upon anassessment of which party’s major arguments made or positions taken in theproceedings could fairly be said to have prevailed over the other party’s majorarguments or positions on major disputed issues in the court’s decision. If theparty which shall have commenced or instituted the actions, suit or proceedingshall dismiss or discontinue it without the concurrence of the other party,such other party shall be deemed the prevailing party.

31.             Other Agreement. Unless Purchaser elects to terminate the OtherAgreement pursuant to an Other Agreement Termination Notice and Seller does nottimely elect to terminate this Agreement pursuant to the requirements ofParagraph 15 of this Agreement, Seller’s obligation to sell the Property andproceed to the Closing is conditioned upon the concurrent closing of thetransactions contemplated by the Other Agreement and a default by Purchaser inconnection with closing under the Other Agreement shall be a default byPurchaser under this Agreement; provided, that if the closing of thetransactions contemplated by the Other Agreement do not occur by reason of (i) adefault by Seller Affiliate under the Other Agreement, (ii) the failure of anycondition precedent to Purchaser’s obligation to proceed to the closing of thetransactions contemplated by the Other Agreement, or (iii) termination of theOther Agreement in accordance with the terms thereof as a result of a casualtyor condemnation, then the condition for concurrent closings shall be waived andSeller shall be obligated to proceed with the Closing of the transactionscontemplated by this Agreement.

[SIGNATURES ONFOLLOWING PAGES]

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IN WITNESS WHEREOF, the parties have caused thisinstrument to be executed for and in their respective names by their dulyauthorized officials and agree to be bound hereby as of the day and year firstabove stated.

SELLER:

BELVEDERE PROPERTIES, LLC

By:       /s/ Michael J. Bogese, Jr.                     

Name:  Michael J. Bogese                               

Title:     Manager                                              

PURCHASER:

ASSOCIATED ESTATES REALTY

CORPORATION

By:                                                                  

Name: Martin A. Fishman

Title: Vice President

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:       /s/ James. W. McIntosh                       

Name:  James W. McIntosh                             

Title:     V.P.                                                    

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IN WITNESS WHEREOF, the parties have caused thisinstrument to be executed for and in their respective names by their dulyauthorized officials and agree to be bound hereby as of the day and year firstabove stated.

SELLER:

BELVEDERE PROPERTIES, LLC

By:                                                                  

Name:                                                             

Title:                                                                

PURCHASER:

ASSOCIATED ESTATES REALTY

CORPORATION

By:       /s/ Martin A. Fishman                          

Name: Martin A. Fishman

Title: Vice President

ESCROW AGENT:

FIRST AMERICAN TITLE INSURANCE COMPANY

By:                                                                  

Name:                                                             

Title:                                                                

                                                                             

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