FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                        Quarterly or Transitional Report



                      U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                 For the quarterly period ended September 30, 2000


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


                For the transition period from _________to _________

                         Commission file number 0-14578


                HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
       (Exact name of small business issuer as specified in its charter)



         Massachusetts                                      04-2825863
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)

                          55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29602
                      (Address of principal executive offices)

                                 (864) 239-1000
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___

<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS

a)

                  HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

                                  BALANCE SHEET
                                   (Unaudited)
                          (in thousands, except unit data)

                               September 30, 2000


<TABLE>
<CAPTION>

Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $  721
   Receivables and deposits                                                     255
   Other assets                                                                 152
   Investment property:
     Land                                                     $  621
     Buildings and related personal property                   9,810
                                                              10,431
     Less accumulated depreciation                            (5,171)         5,260
                                                                            $ 6,388
Liabilities and Partners' (Deficit) Capital
Liabilities
   Accounts payable                                                           $   4
   Tenant security deposit liabilities                                          124
   Accrued property taxes                                                       457
   Other liabilities                                                            143
   Mortgage note payable                                                      5,500

Partners' (Deficit) Capital
   General partner                                            $ (141)
   Limited partners (15,698 units issued and
     outstanding)                                                301            160
                                                                            $ 6,388
</TABLE>


                   See Accompanying Notes to Financial Statements

<PAGE>

b)

                  HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
                          (in thousands, except unit data)

<TABLE>
<CAPTION>

                                     Three Months Ended          Nine Months Ended
                                       September 30,               September 30,
                                     2000          1999          2000          1999
Revenues:                                       (Restated)                  (Restated)
<S>                                  <C>           <C>          <C>            <C>
  Rental income                      $  400        $ 389        $ 1,248       $ 1,190
  Other income                           46            21           141            99
       Total revenues                   446           410         1,389         1,289

Expenses:
  Operating                             173           165           467           441
  General and administrative             82            74           233           227
  Depreciation                          133           152           412           382
  Interest                               40            --            40            --
  Property taxes                         67            40           201           176
       Total expenses                   495           431         1,353         1,226

(Loss) income from continuing
  operations                            (49)          (21)           36            63
(Loss) income from
  discontinued operations                (4)          (59)           12          (158)
Impairment loss on
  discontinued operations                --        (2,387)           --        (2,387)

       Net (loss) income             $  (53)      $(2,467)       $   48      $ (2,482)

Net (loss) income allocated
  to general partner (2%)            $   (1)        $ (49)       $    1         $ (50)
Net (loss) income allocated
  to limited partners (98%)             (52)       (2,418)           47        (2,432)

                                     $  (53)     $ (2,467)       $   48      $ (2,482)
Per limited partnership unit:
(Loss) income from continuing
  operations                        $ (3.06)     $  (1.34)       $ 2.23        $ 3.95
(Loss) income from
  discontinued operations             (0.25)        (3.69)         0.76         (9.87)
Impairment loss on
  discontinued operations                --       (149.00)          --        (149.00)

                                    $ (3.31)     $(154.03)      $  2.99      $(154.92)
Distributions per limited
  partnership unit                 $ 337.88       $  1.53      $ 479.68      $   1.53
</TABLE>

                   See Accompanying Notes to Financial Statements

<PAGE>

c)

                  HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

                STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
                                   (Unaudited)
                          (in thousands, except unit data)


<TABLE>
<CAPTION>

                                     Limited
                                   Partnership    General      Limited
                                      Units       Partner      Partners      Total

<S>                                   <C>           <C>        <C>          <C>
Original capital contributions        15,698        $ --       $15,698      $15,698

Partners' (deficit) capital at
   December 31, 1999                  15,698       $ (110)     $ 7,784      $ 7,674

Distributions paid to partners            --          (32)      (7,530)      (7,562)

Net income for the nine months
   ended September 30, 2000               --            1           47           48

Partners' (deficit) capital
   at September 30, 2000              15,698       $ (141)      $ 301        $ 160
</TABLE>

                   See Accompanying Notes to Financial Statements

<PAGE>
d)

                  HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                   (in thousands)
<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                   September 30,
                                                                  2000        1999
Cash flows from operating activities:
<S>                                                               <C>        <C>
  Net income (loss)                                               $  48      $(2,482)
  Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
     Depreciation                                                   412          602
     Amortization of loan costs                                       1           --
     Impairment loss on discontinued operations                      --        2,387
     Change in accounts:
      Receivables and deposits                                      191          128
      Other assets                                                   (1)         (12)
      Accounts payable                                              (93)          19
      Tenant security deposit liabilities                             5           11
      Accrued property taxes                                        202          (99)
      Other liabilities                                              28           17

         Net cash provided by operating activities                  793          571

Cash flows used in investing activities:
  Property improvements and replacements                            (79)        (652)

Cash flows from financing activities:
  Loan costs paid                                                  (127)          --
  Proceeds from mortgage note payable                             5,500           --
  Distributions to partners                                      (7,562)        (425)

         Net cash used in financing activities                   (2,189)        (425)

Net decrease in cash and cash equivalents                        (1,475)        (506)
Cash and cash equivalents at beginning of period                  2,196        1,354

Cash and cash equivalents at end of period                       $  721        $ 848
</TABLE>

                   See Accompanying Notes to Financial Statements

<PAGE>
e)

                  HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


Note A - Basis of Presentation

The accompanying  unaudited financial statements of HCW Pension Real Estate Fund
Limited  Partnership (the  "Partnership" or "Registrant")  have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and  with the  instructions  to Form  10-QSB  and  Item  310(b)  of
Regulation  S-B.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  The general  partner of the  Partnership  is HCW General
Partner  Ltd.,  whose sole general  partner is IH, Inc. (the  "Managing  General
Partner").  In the opinion of the  Managing  General  Partner,  all  adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation have been included.  Operating results for the three and nine month
periods ended September 30, 2000, are not necessarily  indicative of the results
that may be expected for the fiscal year ending  December 31, 2000.  For further
information, refer to the financial statements and footnotes thereto included in
the  Partnership's  Annual  Report on Form  10-KSB  for the  fiscal  year  ended
December 31, 1999.

Certain  reclassifications  have been made to the 1999 information to conform to
the 2000 presentation.

Note B - Transfer of Control

Pursuant  to a series  of  transactions  which  closed  on  October  1, 1998 and
February 26, 1999,  Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment  Investment and Management Company  ("AIMCO"),  a publicly
traded real estate investment trust, with AIMCO being the surviving  corporation
(the "Insignia Merger").  As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this  transaction  has had or will have a  material  effect on the  affairs  and
operations of the Partnership.

Note C - Transactions with Affiliated Parties

The  Partnership  has no employees  and is  dependent  on the  Managing  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
Partnership  activities.  The  Partnership  Agreement  provides  for (i) certain
payments to affiliates for services and (ii)  reimbursement  of certain expenses
incurred by affiliates on behalf of the Partnership.  The following transactions
with the Managing General Partner and/or its affiliates were incurred during the
nine months ended September 30, 2000 and 1999:

                                                                  2000      1999
                                                                  (in thousands)

 Property management fees (included in operating expenses)        $ 70      $ 61
 Asset management fees (included in general and
   administrative expenses)                                        107       107
 Reimbursement for services of affiliates (included in
   general and administrative expenses)                             48        39

During the nine months  ended  September  30, 2000 and 1999,  affiliates  of the
Managing  General Partner were entitled to receive 5% of gross receipts from the
Registrant's  residential  property for providing property management  services.
The Registrant paid to such affiliates approximately $70,000 and $61,000 for the
nine months ended September 30, 2000 and 1999, respectively.

An affiliate of the Managing  General Partner  received  reimbursement  of asset
management  fees  amounting to  approximately  $107,000 for both the nine months
ended September 30, 2000 and 1999.

An  affiliate  of  the  Managing  General  Partner  received   reimbursement  of
accountable  administrative  expenses  amounting  to  approximately  $48,000 and
$39,000 for the nine months ended September 30, 2000 and 1999, respectively.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates  currently own 4,839 limited  partnership
units in the Partnership  representing 30.83% of the outstanding units. A number
of these  units were  acquired  pursuant  to tender  offers made by AIMCO or its
affiliates.  It is possible that AIMCO or its  affiliates  will make one or more
additional offers to acquire  additional  limited  partnership  interests in the
Partnership  for cash or in exchange for units in the operating  partnership  of
AIMCO. Under the Partnership  Agreement,  unitholders  holding a majority of the
Units are  entitled to take action with  respect to a variety of matters,  which
would  include  without   limitation,   voting  on  certain  amendments  to  the
Partnership  Agreement and voting to remove the Managing General  Partner.  When
voting on matters, AIMCO would in all likelihood vote the units it acquired in a
manner  favorable  to the interest of the Managing  General  Partner  because of
their affiliation with the Managing General Partner.

Note D - Discontinued Operation

Highland  Professional Tower was the last commercial  property in the commercial
segment of the  Partnership.  Due to the sale of this property in December 1999,
the  results  of this  property  have been  classified  as "(Loss)  income  from
discontinued  operations"  for the three and nine month periods ended  September
30, 2000 and 1999.  Revenues of this  property were  approximately  $233,000 and
$663,000  for the three and nine months  ended  September  30, 1999. A loss from
operations of the property was  approximately  $4,000 for the three months ended
September  30,  2000  and  approximately  $59,000  for the  three  months  ended
September 30, 1999.  Income from  operations of this property was  approximately
$12,000 for the nine  months  ended  September  30, 2000 and there was a loss of
approximately $158,000 for the nine months ended September 30, 1999.

Note E - Impairment Loss on Discontinued Operations

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Partnership  records impairment losses on long-lived assets
used in operations when events and circumstances  indicate that the assets might
be impaired and the  undiscounted  cash flows estimated to be generated by those
assets  are less than the  carrying  amounts of those  assets.  During the three
months ended  September 30, 1999, the  Partnership  determined that the Highland
Professional  Tower located in Kansas City,  Missouri,  with a carrying value of
approximately,  $4,637,000,  was  impaired  and its  value was  written  down by
approximately  $2,387,000.  The fair  value  was  based  upon  current  economic
conditions and projected future operational cash flows.

Note F - Distributions

During the nine months ended  September 30, 2000, the  Partnership  declared and
paid distributions of approximately $7,562,000  (approximately $7,530,000 to the
limited  partners  or  $479.68  per  limited  partnership  unit)  consisting  of
approximately  $1,622,000 of cash from operations  (approximately  $1,590,000 to
the limited  partners or $101.29 per limited  partnership  unit),  approximately
$1,073,000 to the limited partners from the sale of Highland  Professional Tower
($68.35 per limited  partnership  unit),  and  approximately  $4,867,000  to the
limited  partners  from the issuance of long term debt at Lewis Park  Apartments
($310.04 per limited  partnership unit). A distribution  payable from operations
of  approximately  $400,000  (approximately  $392,000 to the limited partners or
$24.97 per limited  partnership  unit) was recorded on December 31, 1998 and was
paid  on  January  20,  1999.  A  distribution   of  cash  from   operations  of
approximately  $25,000  (approximately  $24,000 to the limited partners or $1.53
per limited partnership unit) was paid on July 1, 1999.

Note G - Financing

On August 30,  2000,  the  Partnership  financed  Lewis Park  Apartments  with a
mortgage of $5,500,000.  The interest rate on the mortgage is 8.08% with monthly
payments of approximately $46,000 that matures on September 1, 2020. Capitalized
loan costs incurred for the financing were approximately $127,000.

Note H - Segment Information

Description  of the types of products  and  services  from which the  reportable
segment derives its revenues:

The Partnership had two reportable segments: residential property and commercial
property.  The  Partnership's  residential  property  segment  consists  of  one
apartment complex in Carbondale, Illinois. The Partnership rents apartment units
to tenants for terms that are typically  twelve months or less.  The  commercial
property segment  consisted of a professional  office building located in Kansas
City,  Missouri.  On December  30, 1999,  the  commercial  property  held by the
Partnership was sold to an unrelated party. Therefore, the commercial segment is
reflected as discontinued  operations (see "Note D - Discontinued Operation" for
further discussion).

Measurement of segment profit or loss:

The  Partnership  evaluates  performance  based on segment  profit (loss) before
depreciation. The accounting policies of the reportable segments are the same as
those of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999.

Factors management used to identify the enterprise's reportable segment:

The  Partnership's  reportable  segments  consist of investment  properties that
offer different products and services.  The reportable segments are each managed
separately  as they  provide  services  with  different  types of  products  and
customers.

Segment  information  for the three and nine months ended September 30, 2000 and
1999 is shown in the tables below (in  thousands).  The "Other" column  includes
Partnership administration related items and income and expense not allocated to
the reportable segments.

<TABLE>
<CAPTION>

      Three Months Ended
      September 30, 2000        Residential     Commercial       Other       Totals
                                                   (discontinued)
<S>                                <C>             <C>             <C>         <C>
Rental income                      $  400          $   --          $ --        $ 400
Other income                           45              --             1           46
Interest expense                       40              --            --           40
Depreciation                          133              --            --          133
General and administrative
  expense                              --              --            82           82
Loss from discontinued
  operations                           --              (4)           --           (4)
Segment profit (loss)                  32              (4)          (81)         (53)


      Nine Months Ended
     September 30, 2000         Residential      Commercial       Other       Totals
                                               (discontinued)
Rental income                     $ 1,248           $  --           $ --     $ 1,248
Other income                          127              --             14         141
Interest expense                       40              --             --          40
Depreciation                          412              --             --         412
General and administrative
  expense                              --              --            233         233
Income from discontinued
  operations                           --              12             --          12
Segment profit (loss)                 255              12           (219)         48
Total assets                        6,215              --            173       6,388
Capital expenditures for
  investment property                  79              --             --          79


      Three Months Ended
     September 30, 1999         Residential      Commercial       Other       Totals
                                               (discontinued)
Rental income                      $  389            $ --           $ --        $ 389
Other income                           18              --              3           21
Depreciation                          152              --             --          152
General and administrative
  expense                              --              --             74           74
Impairment loss on
  discontinued operations              --          (2,387)            --       (2,387)
Loss from discontinued
  operations                           --             (59)            --          (59)
Segment profit (loss)                  50          (2,446)           (71)      (2,467)


        Nine Months Ended
     September 30, 1999         Residential      Commercial       Other        Totals
                                               (discontinued)
Rental income                     $ 1,190           $   --          $ --      $ 1,190
Other income                           80               --            19           99
Depreciation                          382               --            --          382
General and administrative
  expense                              --               --           227          227
Impairment loss on
  discontinued operations              --          (2,387)            --       (2,387)
Loss from discontinued
  operations                           --             (158)           --         (158)
Segment profit (loss)                 271           (2,545)         (208)      (2,482)
Total assets                        6,103            2,541           540        9,184
Capital expenditures for
  investment property                 632               20            --          652
</TABLE>

<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained  in this  Form  10-QSB  and the  other  filings  with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the  Registrant's  business and results of  operations,  including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operation.  Accordingly,  actual  results  could  differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.

The Partnership's  investment property consists of one apartment complex located
in Carbondale,  Illinois. The average occupancy of the property was 79% for both
the nine months ended September 30, 2000 and 1999.

Results of Operations

The Partnership realized net income of approximately $48,000 for the nine months
ended September 30, 2000 compared to a net loss of approximately  $2,482,000 for
the nine months ended September 30, 1999. The Partnership realized a net loss of
approximately  $53,000 during the three months ended September 30, 2000 compared
to a net loss of  approximately  $2,467,000 for the three months ended September
30,  1999.  The increase in net income for the nine month period and decrease in
net loss for the three month period ended September 30, 2000,  respectively,  is
primarily attributable to the impairment loss realized at Highlands Professional
Tower, as discussed below,  during the three months ended September 30, 1999 and
the  sale  of  the  Partnership's  last  commercial  property,   also  Highlands
Professional Tower, in December 1999, as discussed below.

Excluding the results of  discontinued  operations  and the  impairment  loss on
discontinued  operations,  the Partnership had income from continuing operations
of approximately  $36,000 for the nine months ended September 30, 2000, compared
to  approximately  $63,000 for the nine months ended September 30, 1999. For the
three  months  ended   September  30,  2000,  the  Partnership  had  a  loss  of
approximately  $49,000 from  continuing  operations and a loss of  approximately
$21,000 for the  comparable  period in 1999. The decrease in income for the nine
month period and increase in loss for the three month period ended September 30,
2000,  respectively,  from continuing operations is primarily due to an increase
in total expenses partially offset by an increase in total revenues.

Total revenues increased for the three and nine months ended September 30, 2000,
due to an increase in rental and other income. Rental income increased due to an
increase in average rental rates at Lewis Park Apartments partially offset by an
increase in concessions.  Other income  increased due to an increase in interest
income as a result of higher average cash balances in interest  bearing accounts
and an increase in  application  fees,  lease  cancellation  fees, and auxillary
services at Lewis Park Apartments.

Total expenses  increased for the three and nine months ended September 30, 2000
primarily due to an increase in operating,  interest, and property tax expenses.
Operating  expenses  increased  primarily  due to an increase in  administrative
expense at Lewis  Park  Apartments.  Administrative  expenses  increased  due to
credit  collection  and eviction  costs and payroll  bonuses.  Interest  expense
increased due to the issuance of a mortgage note payable during August 2000. The
increase in property tax expense is a result of the timing of receipt of the tax
bills for the year which affected the estimated  accruals  recorded for property
tax expense.  Depreciation  expense for the nine months ended September 30, 2000
increased due to capital  improvements  completed  during the past twelve months
that are now being depreciated.

Included in general and  administrative  expense at both  September 30, 2000 and
1999 are management reimbursements to the Managing General Partner allowed under
the Partnership Agreement. In addition,  costs associated with the quarterly and
annual  communications  with  investors and  regulatory  agencies and the annual
audit required by the Partnership Agreement are also included.

Highland  Professional Tower was the last commercial  property in the commercial
segment of the  Partnership.  Due to the sale of this property in December 1999,
the  results  of this  property  have been  classified  as "(Loss)  income  from
discontinued  operations"  for the three and nine month periods ended  September
30, 2000 and 1999.  Revenues of this  property were  approximately  $233,000 and
$663,000  for the three and nine months  ended  September  30, 1999. A loss from
operations of the property was  approximately  $4,000 for the three months ended
September 30, 2000 and there was a loss of  approximately  $59,000 for the three
months ended  September  30, 1999.  Income from  operations of this property was
approximately $12,000 for the nine months ended September 30, 2000 and there was
a loss of approximately $158,000 for the nine months ended September 30, 1999.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Partnership  records impairment losses on long-lived assets
used in operations when events and circumstances  indicate that the assets might
be impaired and the  undiscounted  cash flows estimated to be generated by those
assets  are less than the  carrying  amounts of those  assets.  During the three
months ended  September 30, 1999, the  Partnership  determined that the Highland
Professional  Tower located in Kansas City,  Missouri,  with a carrying value of
approximately,  $4,637,000,  was  impaired  and its  value was  written  down by
approximately  $2,387,000.  The fair  value  was  based  upon  current  economic
conditions and projected future operational cash flows.

As part of the ongoing  business plan of the  Partnership,  the Managing General
Partner  monitors the rental market  environment of its  investment  property to
assess the feasibility of increasing rents,  maintaining or increasing occupancy
levels and protecting the Registrant from increases in expenses. As part of this
plan, the Managing  General Partner attempts to protect the Partnership from the
burden of  inflation-related  increases  in  expenses  by  increasing  rents and
maintaining a high overall  occupancy  level.  However,  due to changing  market
conditions  which  can  result  in the  use of  rental  concessions  and  rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At  September  30,  2000,  the  Partnership  had cash and  cash  equivalents  of
approximately  $721,000 as compared to  approximately  $848,000 at September 30,
1999.  Cash and cash  equivalents  decreased  approximately  $1,475,000 from the
Partnership's  year ended December 31, 1999, due to approximately  $2,189,000 of
cash used in  financing  activities  and  approximately  $79,000 of cash used in
investing  activities,  partially  offset  by  approximately  $793,000  of  cash
provided by operating activities. Cash used in financing activities consisted of
distributions  paid to the  partners  and, to a lesser  extent,  loan costs paid
partially offset by proceeds from the financing of Lewis Park  Apartments.  Cash
used  in   investing   activities   consisted  of  property   improvements   and
replacements.  The  Partnership  invests its working  capital  reserves in money
market accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership and to comply with Federal,  state,
and local legal and regulatory  requirements.  Capital  improvements planned for
the Partnership's property are detailed below.

Lewis Park Apartments

During the nine months ended  September  30,  2000,  the  Partnership  completed
approximately  $79,000 of budgeted and unbudgeted capital  improvements at Lewis
Park,  consisting  primarily  of cabinet  replacements,  air  conditioning  unit
replacements,  and carpet and vinyl replacement.  These improvements were funded
from operating cash flow. The Partnership has evaluated the capital  improvement
needs of the property for the year 2000.  The amount  budgeted is  approximately
$81,000,  consisting  primarily of air  conditioning,  cabinet,  appliance,  and
flooring replacements. Additional improvements may be considered and will depend
on the physical  condition of the property as well as  replacement  reserves and
anticipated cash flow generated by the property.

The additional  capital  expenditures will be incurred only if cash is available
from operations or from Partnership  reserves.  To the extent that such budgeted
capital improvements are completed,  the Partnership's  distributable cash flow,
if any, may be adversely affected at least in the short term.

The Partnership's  current assets are thought to be sufficient for any near-term
needs  (exclusive  of capital  improvements)  of the  Partnership.  The mortgage
indebtedness  of $5,500,000,  which was financed on August 30, 2000,  matures on
September 1, 2020. The Managing  General  Partner will attempt to refinance such
indebtedness  and/or  sell the  property  prior to such  maturity  date.  If the
property cannot be refinanced or sold for a sufficient  amount,  the Partnership
will risk losing such property through foreclosure.

During the nine months ended  September 30, 2000, the  Partnership  declared and
paid distributions of approximately $7,562,000  (approximately $7,530,000 to the
limited  partners  or  $479.68  per  limited  partnership  unit)  consisting  of
approximately  $1,622,000 of cash from operations  (approximately  $1,590,000 to
the limited  partners or $101.29 per limited  partnership  unit),  approximately
$1,073,000 to the limited partners from the sale of Highland  Professional Tower
($68.35 per limited  partnership  unit),  and  approximately  $4,867,000  to the
limited  partners  from the issuance of long term debt at Lewis Park  Apartments
($310.04 per limited  partnership unit). A distribution  payable from operations
of  approximately  $400,000  (approximately  $392,000 to the limited partners or
$24.97 per limited  partnership  unit) was recorded on December 31, 1998 and was
paid  on  January  20,  1999.  A  distribution   of  cash  from   operations  of
approximately  $25,000  (approximately  $24,000 to the limited partners or $1.53
per  limited  partnership  unit)  was paid on July 1,  1999.  The  Partnership's
distribution  policy is reviewed on an annual basis.  Future cash  distributions
will  depend  on  the  levels  of  net  cash  generated  from  operations,   the
availability  of cash reserves,  and the timing of debt  maturity,  refinancing,
and/or property sale. There can be no assurance,  however,  that the Partnership
will  generate   sufficient   funds  from  operations   after  required  capital
improvements  to permit  additional  distributions  to its  partners  during the
remainder of 2000 or subsequent periods.


<PAGE>


                           PART II - OTHER INFORMATION


ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  Exhibit 10.4,  Multifamily Note date August 28, 2000 from GMAC
                  Commercial Mortgage Corporation, a California Corporation.

                  Exhibit 27, Financial Data Schedule, is filed as an exhibit to
                  this report.

            b)    Reports on Form 8-K filed during the quarter  ended  September
                  30, 2000:

                  None.



<PAGE>


                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.



                                HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP


                                By:   HCW General Partner, Ltd.,
                                      the General Partner


                                By:   IH, Inc.,
                                      the Managing General Partner


                                By:   /s/Patrick J. Foye
                                      Patrick J. Foye
                                      Executive Vice President


                                By:   /s/Martha L. Long
                                      Martha L. Long
                                      Senior Vice President
                                      and Controller


                                Date:

<PAGE>
                                                                    Exhibit 10.4

                                                        FHLMC Loan No. 002724626

                                MULTIFAMILY NOTE
                                  (MULTISTATE)


US $5,500,000.00                           As of this _____day of August, 2000


      FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more  than  one)  promises  to pay to the  order  of  GMAC  COMMERCIAL  MORTGAGE
CORPORATION,  a California  corporation,  the principal sum of Five Million Five
Hundred  Thousand and 00/100  Dollars (US  $5,500,000.00),  with interest on the
unpaid principal  balance at the annual rate of Eight and eight hundreds percent
(8.08%).

1. Defined  Terms.  As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness"  means the principal of, interest
on,  or any  other  amounts  due at any time  under,  this  Note,  the  Security
Instrument  or any other Loan  Document,  including  prepayment  premiums,  late
charges,  default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security  Instrument.  "Event of Default" and
other  capitalized  terms  used but not  defined  in this  Note  shall  have the
meanings given to such terms in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at 200
Witmer Road,  P.O.  Box 809,  Horsham,  Pennsylvania  19044,  Attn:  Servicing -
Account  Manager,  or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.

3. Payment of Principal  and Interest.  Principal and interest  shall be paid as
follows:

(a) Unless  disbursement of principal is made by Lender to Borrower on the first
day of the month,  interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made  shall be  payable  simultaneously  with  the  execution  of this  Note.
Interest  under  this Note  shall be  computed  on the  basis of a 360-day  year
consisting of twelve 30-day months.

(b)  Consecutive  monthly  installments  of principal and interest,  each in the
amount of  _________________  (US  $_________________),  shall be payable on the
first day of each month  beginning on October 1, 2000,  until the entire  unpaid
principal  balance  evidenced by this Note is fully paid.  Any accrued  interest
remaining  past due for 30 days or more shall be added to and become part of the
unpaid principal  balance and shall bear interest at the rate or rates specified
in this Note,  and any  reference  below to  "accrued  interest"  shall refer to
accrued interest which has not become part of the unpaid principal balance.  Any
remaining  principal and interest  shall be due and payable on September 1, 2020
or on any  earlier  date on which  the  unpaid  principal  balance  of this Note
becomes due and payable, by acceleration or otherwise (the "Maturity Date"). The
unpaid principal balance shall continue to bear interest after the Maturity Date
at the Default Rate set forth in this Note until and including the date on which
it is paid in full.

(c) Any regularly  scheduled monthly  installment of principal and interest that
is  received  by Lender  before  the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.

4.  Application of Payments.  If at any time Lender  receives,  from Borrower or
otherwise,  any amount  applicable  to the  Indebtedness  which is less than all
amounts due and payable at such time,  Lender may apply that  payment to amounts
then due and  payable in any manner and in any order  determined  by Lender,  in
Lender's  discretion.  Borrower  agrees that neither  Lender's  acceptance  of a
payment  from  Borrower in an amount that is less than all amounts  then due and
payable nor Lender's  application of such payment shall  constitute or be deemed
to  constitute  either  a  waiver  of  the  unpaid  amounts  or  an  accord  and
satisfaction.

5. Security.  The Indebtedness is secured,  among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security  Instrument"),  and reference is made to the Security  Instrument
for other rights of Lender as to collateral for the Indebtedness.

6.  Acceleration.  If an Event of Default has  occurred and is  continuing,  the
entire unpaid principal  balance,  any accrued interest,  the prepayment premium
payable under  Paragraph  10, if any, and all other  amounts  payable under this
Note and any other Loan  Document  shall at once become due and payable,  at the
option of Lender, without any prior notice to Borrower. Lender may exercise this
option to accelerate regardless of any prior forbearance.

7. Late  Charge.  If any  monthly  amount  payable  under this Note or under the
Security  Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due, Borrower shall pay to Lender, immediately
and without  demand by Lender,  a late charge equal to five percent (5%) of such
amount.  Borrower  acknowledges  that its failure to make timely  payments  will
cause Lender to incur  additional  expenses in servicing and processing the loan
evidenced  by this Note (the  "Loan"),  and that it is extremely  difficult  and
impractical to determine  those  additional  expenses.  Borrower agrees that the
late charge payable pursuant to this Paragraph  represents a fair and reasonable
estimate,  taking into  account all  circumstances  existing on the date of this
Note,  of the  additional  expenses  Lender  will  incur by  reason of such late
payment.  The late  charge is  payable in  addition  to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.

8. Default Rate. So long as (a) any monthly  installment under this Note remains
past due for 30 days or more, or (b) any other Event of Default has occurred and
is  continuing,  interest  under this Note shall accrue on the unpaid  principal
balance from the earlier of the due date of the first unpaid monthly installment
or the occurrence of such other Event of Default, as applicable,  at a rate (the
"Default Rate") equal to the lesser of 4 percentage points above the rate stated
in the first  paragraph of this Note or the maximum  interest  rate which may be
collected from Borrower under  applicable law. If the unpaid  principal  balance
and all accrued  interest are not paid in full on the Maturity  Date, the unpaid
principal balance and all accrued interest shall bear interest from the Maturity
Date at the Default Rate.  Borrower also  acknowledges  that its failure to make
timely payments will cause Lender to incur additional  expenses in servicing and
processing the Loan, that,  during the time that any monthly  installment  under
this Note is  delinquent  for more than 30 days,  Lender  will incur  additional
costs and  expenses  arising  from its loss of the use of the money due and from
the adverse impact on Lender's ability to meet its other obligations and to take
advantage of other investment opportunities,  and that it is extremely difficult
and impractical to determine those additional costs and expenses.  Borrower also
acknowledges that, during the time that any monthly  installment under this Note
is  delinquent  for more than 30 days or any other Event of Default has occurred
and is  continuing,  Lender's risk of nonpayment of this Note will be materially
increased  and Lender is entitled to be  compensated  for such  increased  risk.
Borrower  agrees that the  increase in the rate of interest  payable  under this
Note to the Default Rate represents a fair and reasonable estimate,  taking into
account all  circumstances  existing on the date of this Note, of the additional
costs and  expenses  Lender  will incur by reason of the  Borrower's  delinquent
payment and the  additional  compensation  Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.

9.    Limits on Personal Liability.

(a) Except as otherwise  provided in this  Paragraph 9,  Borrower  shall have no
personal  liability  under this Note, the Security  Instrument or any other Loan
Document for the repayment of the  Indebtedness  or for the  performance  of any
other  obligations  of Borrower  under the Loan  Documents,  and  Lender's  only
recourse for the  satisfaction of the  Indebtedness  and the performance of such
obligations  shall be Lender's  exercise of its rights and remedies with respect
to the Mortgaged  Property and any other  collateral  held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair  Lender's  enforcement  of  its  rights  against  any  guarantor  of  the
Indebtedness or any guarantor of any obligations of Borrower.

(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note,  plus any other amounts for which Borrower has personal  liability
under this Paragraph 9.

(c) In addition to Borrower's  personal liability under Paragraph 9(b), Borrower
shall be personally  liable to Lender for the repayment of a further  portion of
the  Indebtedness  equal to any loss or damage suffered by Lender as a result of
(1) failure of  Borrower to pay to Lender upon demand  after an Event of Default
all  Rents to which  Lender  is  entitled  under  Section  3(a) of the  Security
Instrument  and the amount of all security  deposits  collected by Borrower from
tenants  then in  residence;  (2)  failure of  Borrower  to apply all  insurance
proceeds and condemnation  proceeds as required by the Security  Instrument;  or
(3)  failure of Borrower to comply  with  Section  14(d) or (e) of the  Security
Instrument relating to the delivery of books and records, statements,  schedules
and reports.

(d) For purposes of determining  Borrower's  personal  liability under Paragraph
9(b) and Paragraph  9(c), all payments made by Borrower or any guarantor of this
Note with respect to the  Indebtedness  and all amounts  received by Lender from
the  enforcement  of its rights under the Security  Instrument  shall be applied
first to the  portion of the  Indebtedness  for which  Borrower  has no personal
liability.

(e) Borrower shall become  personally  liable to Lender for the repayment of all
of the  Indebtedness  upon the  occurrence  of any of the  following  Events  of
Default: (1) Borrower's acquisition of any property or operation of any business
not  permitted  by  Section  33 of  the  Security  Instrument;  (2)  a  Transfer
(including,  but not  limited  to,  a lien or  encumbrance)  that is an Event of
Default  under  Section  21 of the  Security  Instrument,  other than a Transfer
consisting  solely of the  involuntary  removal or  involuntary  withdrawal of a
general  partner in a limited  partnership  or a manager in a limited  liability
company; or (3) fraud or written material  misrepresentation  by Borrower or any
officer,  director,  partner,  member or employee of Borrower in connection with
the  application  for or  creation  of the  Indebtedness  or any request for any
action or consent by Lender.

(f) In addition to any personal  liability for the Indebtedness,  Borrower shall
be  personally  liable to Lender for (1) the  performance  of all of  Borrower's
obligations   under  Section  18  of  the  Security   Instrument   (relating  to
environmental  matters);  (2) the costs of any audit under  Section 14(d) of the
Security  Instrument;  and (3) any  costs  and  expenses  incurred  by Lender in
connection  with the  collection of any amount for which  Borrower is personally
liable under this  Paragraph  9,  including  fees and out of pocket  expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's  books and records to determine the amount for which  Borrower has
personal liability.

(g) To the extent that Borrower has personal  liability  under this Paragraph 9,
Lender may exercise its rights  against  Borrower  personally  without regard to
whether  Lender has exercised any rights  against the Mortgaged  Property or any
other  security,  or pursued any rights  against any  guarantor,  or pursued any
other rights available to Lender under this Note, the Security  Instrument,  any
other Loan  Document or  applicable  law. For purposes of this  Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or  permitted by the  Security  Instrument  prior to the
occurrence  of an  Event of  Default  or (2)  Borrower  was  unable  to apply as
required  or  permitted  by the  Security  Instrument  because of a  bankruptcy,
receivership, or similar judicial proceeding.

10.   Voluntary and Involuntary Prepayments.

(a) A prepayment premium shall be payable in connection with any prepayment made
under this Note as provided below:

(1) Borrower may voluntarily  prepay all of the unpaid principal balance of this
Note on the last  Business Day of a calendar  month if Borrower has given Lender
at least 30 days prior  notice of its  intention to make such  prepayment.  Such
prepayment  shall be made by paying (A) the amount of principal  being  prepaid,
(B) all  accrued  interest,  (C) all other  sums due  Lender at the time of such
prepayment,  and (D) the prepayment premium  calculated  pursuant to Schedule A.
For all purposes including the accrual of interest,  any prepayment  received by
Lender on any day other than the last  calendar day of the month shall be deemed
to have been  received on the last  calendar day of such month.  For purposes of
this Note, a "Business  Day" means any day other than a Saturday,  Sunday or any
other day on which Lender is not open for business.  Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.

(2) Upon  Lender's  exercise  of any  right of  acceleration  under  this  Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this  Note  outstanding  at the  time of the  acceleration,  (A) all  accrued
interest  and  all  other  sums  due  Lender,  and (B)  the  prepayment  premium
calculated pursuant to Schedule A.

(3) Any  application  by  Lender  of any  collateral  or other  security  to the
repayment of any portion of the unpaid  principal  balance of this Note prior to
the  Maturity  Date and in the absence of  acceleration  shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.  The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment  premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.

(b)  Notwithstanding  the provisions of Paragraph  10(a), no prepayment  premium
shall be payable with respect to (A) any  prepayment  made no more than 180 days
before the Maturity  Date,  or (B) any  prepayment  occurring as a result of the
application of any insurance  proceeds or condemnation  award under the Security
Instrument.

(c)   Schedule A is hereby incorporated by reference into this Note.

(d) Any  permitted  or  required  prepayment  of less than the unpaid  principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly  installments or change the amount of such  installments,  unless Lender
agrees otherwise in writing.

(e) Borrower  recognizes that any prepayment of the unpaid principal  balance of
this Note,  whether  voluntary or  involuntary  or  resulting  from a default by
Borrower,  will result in Lender's incurring loss, including  reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments  to third  parties.  Borrower  agrees to pay to Lender  upon  demand
damages  for the  detriment  caused by any  prepayment,  and  agrees  that it is
extremely  difficult  and  impractical  to ascertain the extent of such damages.
Borrower  therefore  acknowledges  and agrees that the  formula for  calculating
prepayment  premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.

(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the  consideration  for the Loan,  and  acknowledges
that the terms of this Note are in other  respects more favorable to Borrower as
a  result  of the  Borrower's  voluntary  agreement  to the  prepayment  premium
provisions.

11. Costs and  Expenses.  Borrower  shall pay all expenses and costs,  including
fees and  out-of-pocket  expenses of attorneys and expert witnesses and costs of
investigation,  incurred by Lender as a result of any default under this Note or
in  connection  with  efforts to collect  any amount due under this Note,  or to
enforce  the  provisions  of any of the other Loan  Documents,  including  those
incurred in post-judgment  collection  efforts and in any bankruptcy  proceeding
(including  any action  for relief  from the  automatic  stay of any  bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.

12.  Forbearance.  Any  forbearance  by Lender in exercising any right or remedy
under  this  Note,  the  Security  Instrument,  or any other  Loan  Document  or
otherwise  afforded by applicable  law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy.  The  acceptance by Lender of any
payment after the due date of such  payment,  or in an amount which is less than
the required payment,  shall not be a waiver of Lender's right to require prompt
payment  when due of all other  payments or to exercise any right or remedy with
respect to any  failure to make  prompt  payment.  Enforcement  by Lender of any
security for  Borrower's  obligations  under this Note shall not  constitute  an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.

13.  Waivers.  Presentment,  demand,  notice  of  dishonor,  protest,  notice of
acceleration,  notice of intent to demand or  accelerate  payment  or  maturity,
presentment  for  payment,  notice  of  nonpayment,   grace,  and  diligence  in
collecting  the  Indebtedness  are  waived by  Borrower  and all  endorsers  and
guarantors of this Note and all other third party obligors.

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

15.  Commercial  Purpose.  Borrower  represents  that the  Indebtedness is being
incurred  by  Borrower  solely for the  purpose  of  carrying  on a business  or
commercial enterprise, and not for personal, family or household purposes.

16.  Counting  of  Days.  Except  where  otherwise  specifically  provided,  any
reference in this Note to a period of "days" means  calendar  days, not Business
Days.

17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.

18.  Captions.  The captions of the paragraphs of this Note are for  convenience
only and shall be disregarded in construing this Note.

19. Notices. All notices, demands and other communications required or permitted
to be given by  Lender  to  Borrower  pursuant  to this  Note  shall be given in
accordance with Section 31 of the Security Instrument.

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

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

      ATTACHED SCHEDULES.  The following Schedules are attached to this Note:

             X       Schedule A    Prepayment Premium (required)

             X       Schedule B    Modifications to Multifamily Note

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

                                HCW PENSION REAL ESTATE FUND LIMITED
                                PARTNERSHIP, a Massachusetts limited partnership

                                By:   HCW General Partner, Limited Partnership
                                      a Texas limited partnership,
                                      its general partner

                                By:   IH, Inc.,
                                      a Delaware corporation,
                                      its general partner

                                By:___________________________
                                      Patti K. Fielding:
                                      Senior Vice President

                                   04-2825863
                                   Borrower's Social Security/Employer ID Number

<PAGE>



PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE  CORPORATION,  WITHOUT  RECOURSE,
THIS ____DAY OF AUGUST, 2000.

GMAC COMMERCIAL MORTGAGE CORPORATION, a
   California corporation



By:_________________________________
   Donald W. Marshall
   Vice President


<PAGE>




                                   SCHEDULE A

                               PREPAYMENT PREMIUM


      Any prepayment  premium  payable under  Paragraph 10 of this Note shall be
computed as follows:

(a) If the prepayment is made between the date of this Note and the date that is
180 months after the first day of the first calendar month following the date of
this Note (the "Yield Maintenance Period"),  the prepayment premium shall be the
greater of:

(i)   1.0% of the unpaid principal balance of this Note; or

(ii)  the product obtained by multiplying:

(A)   the amount of principal being prepaid,

                        by

(B) the excess (if any) of the Monthly  Note Rate over the Assumed  Reinvestment
Rate,

                        by

(C)   the Present Value Factor.

          For purposes of  subparagraph  (ii), the following  definitions  shall
          apply:

          Monthly Note Rate:  one-twelfth  (1/12) of the annual interest rate of
          the Note, expressed as a decimal calculated to five digits.

          Prepayment  Date: in the case of a voluntary  prepayment,  the date on
          which the  prepayment  is made;  in any other case,  the date on which
          Lender accelerates the unpaid principal balance of the Note.

          Assumed Reinvestment Rate:  one-twelfth (1/12) of the yield rate as of
          the  date  5  Business  Days  before  the  Prepayment   Date,  on  the
          _________________%  U.S. Treasury Security due  _________________,  as
          reported in The Wall Street Journal, expressed as a decimal calculated
          to five  digits.  In the  event  that no  yield  is  published  on the
          applicable  date  for the  Treasury  Security  used to  determine  the
          Assumed Reinvestment Rate, Lender, in its discretion, shall select the
          non-callable  Treasury  Security  maturing  in the  same  year  as the
          Treasury  Security  specified above with the lowest yield published in
          The Wall Street Journal as of the applicable  date. If the publication
          of such yield rates in The Wall Street Journal is discontinued for any
          reason, Lender shall select a security with a comparable rate and term
          to the Treasury  Security used to determine  the Assumed  Reinvestment
          Rate.  The  selection  of  an  alternate  security  pursuant  to  this
          Paragraph shall be made in Lender's discretion.

<PAGE>


            Present Value Factor: the factor that discounts to present value the
            costs  resulting  to Lender from the  difference  in interest  rates
            during the months remaining in the Yield Maintenance  Period,  using
            the Assumed  Reinvestment  Rate as the discount  rate,  with monthly
            compounding, expressed numerically as follows:

                                    [OBJECT OMITTED]

            n = number of months remaining in Yield Maintenance Period

            ARR = Assumed Reinvestment Rate

(b) If the  prepayment  is made after the  expiration  of the Yield  Maintenance
Period but more than 180 days before the Maturity Date,  the prepayment  premium
shall be 1.0% of the unpaid principal balance of this Note.



<PAGE>




                                   SCHEDULE B

                        MODIFICATIONS TO MULTIFAMILY NOTE

1. The first  sentence  of  Paragraph 8 of the Note  ("Default  Rate") is hereby
deleted and replaced with the following:

            So long as (a) any monthly  installment under this Note remains past
            due for more than thirty (30) days or (b) any other event of Default
            has  occurred  and is  continuing,  interest  under  this Note shall
            accrue on the unpaid  principal  balance from the earlier of the due
            date of the first unpaid  monthly  installment  or the occurrence of
            such other Event of Default, as applicable,  at a rate (the "Default
            Rate")  equal to the lesser of (1) the maximum  interest  rate which
            may be  collected  from  Borrower  under  applicable  law or (2) the
            greater of (i) three  percent (3%) above the  Interest  Rate or (ii)
            four percent  (4.0%) above the  then-prevailing  Prime Rate. As used
            herein,  the term  "Prime  Rate"  shall  mean  the rate of  interest
            announced by The Wall Street Journal from time to time as the "Prime
            Rate".

2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):

(4)            failure  by  Borrower  to pay the  amount  of the water and sewer
               charges, taxes, fire, hazard or other insurance premiums,  ground
               rents,  assessments or other charges in accordance with the terms
               of the Security Instrument.