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, 2001


[ ] 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 0-14457


                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                          (A Maryland Limited Partnership)
         (Exact name of small business issuer as specified in its charter)



           Maryland                                             52-1394972
(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  Securities  Exchange  Act of 1934  during the  preceding  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___



                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS

a)

                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                         Statement of Financial Position
                                   (Unaudited)
                                   (in thousands)

                               September 30, 2001



ASSETS
   Cash and cash equivalents                                          $ 272
   Accounts receivable                                                  149
                                                                      $ 421
LIABILITIES AND PARTNERS' (DEFICIT) EQUITY
Liabilities
   Administrative and reporting fee payable to
      General Partner (Note 3)                                        $ 184
   Accrued expenses                                                      33
                                                                        217

Partners' (deficit) equity
   General Partner -- The National Housing
      Partnership (NHP)                                                 (93)
   Original Limited Partner -- 1133 Fifteenth
      Street Three Associates                                           (97)
   Other Limited Partners -- 11,480 investment units                    394
                                                                        204
                                                                      $ 421


                   See Accompanying Notes to Financial Statements

<PAGE>


b)

                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                            Statements of Operations
                                   (Unaudited)
                        (in thousands, except per unit data)

<TABLE>
<CAPTION>


                                       Three Months Ended         Nine Months Ended
                                          September 30,             September 30,
                                       2001          2000          2001         2000
Revenues:
<S>                                     <C>           <C>          <C>          <C>
  Interest income                      $   4         $   6        $   17       $   18

costs and expenses:
  Administrative and reporting
    fees to General Partner                4             2            11           29
  Other operating expenses                20            40            61           70
                                          24            42            72           99

Net loss                              $  (20)       $  (36)       $  (55)      $  (81)

Allocation of net loss:
  General Partner - NHP               $   --        $   (1)       $   --       $   (1)
  Original Limited Partner --
  1133 Fifteenth Street Three
  Associates                              --            (1)           --           (1)
  Other Limited Partners                 (20)          (34)          (55)         (79)
                                      $  (20)       $  (36)       $  (55)      $  (81)
Net Loss Per Other Limited
  Partnership Interest                $(1.74)       $(2.96)       $(4.79)      $(6.88)


                   See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>


c)

                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                     Statement of Partners' (Deficit) Equity
                                   (Unaudited)
                                   (in thousands)

<TABLE>
<CAPTION>


                                 The National       1133
                                    Housing      Fifteenth       Other
                                  Partnership   Street Three    Limited
                                     (NHP)       Associates    Partners      Total

(Deficit) equity at
<S>         <C> <C>                  <C>           <C>           <C>         <C>
   December 31, 2000                 $ (93)        $ (97)        $ 449       $  259

Net loss for the nine months
   ended September 30, 2001             --             --          (55)         (55)

(Deficit) equity at
   September 30, 2001                $ (93)        $ (97)        $ 394       $  204

Percentage interest at
   September 30, 2001                    1%            1%           98%        100%
                                        (A)           (B)           (C)


(A)   General Partner
(B)   Original Limited Partner
(C)   Consists of 11,480 investment units



                   See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>


d)

                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                            Statements of Cash Flows
                                   (Unaudited)
                                   (in thousands)


<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                   September 30,
                                                                  2001        2000
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>          <C>
   Interest received                                              $  17        $ 12
   Operating expenses paid                                          (73)        (58)
   Net cash used in operating activities                            (56)        (46)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Withholding taxes paid for limited partners                     (138)        (11)
   Principal payments on loans or notes payable                      (2)         --
   Net cash used in financing activities                           (140)        (11)

NET DECREASE IN CASH AND CASH EQUIVALENTS                          (196)        (57)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                      468         540

CASH AND CASH EQUIVALENTS, END OF PERIOD                         $  272       $ 483

RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING
   ACTIVITIES:
     Net loss                                                    $  (55)      $ (81)

     Adjustments to reconcile net loss to net cash used in
      operating activities:
      Increase in administrative and reporting fees
        payable                                                      11          38
      Decrease in accrued expenses                                  (12)         (3)

          Total adjustments                                          (1)         24

     Net cash used in operating activities                       $ (56)       $ (46)



                   See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>





e)
                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                        (A Maryland Limited Partnership)
                          Notes to Financial Statements
                                   (Unaudited)


(1)   ACCOUNTING POLICIES

Organization

National  Housing   Partnership  Realty  Fund  III  (the  "Partnership"  or  the
"Registrant")  is a limited  partnership  organized  under the Maryland  Revised
Uniform Limited  Partnership Act on May 10, 1985. The Partnership was formed for
the purpose of raising  capital by  offering  and  selling  limited  partnership
interests and then investing in Local Limited Partnerships, each of which either
owns and operates an existing  rental  housing  project or has acquired  limited
partnership  interests in partnerships which own and operate one or two existing
rental housing  projects.  All such rental housing  projects are financed and/or
operated  with one or more forms of rental  assistance  or financial  assistance
from the U.S.  Department of Housing and Urban Development  ("HUD"). On June 30,
1985, the  Partnership  began raising  capital and acquiring  interests in Local
Limited Partnerships.

The National Housing  Partnership,  a District of Columbia  limited  partnership
("NHP" or the  "General  Partner"),  was  authorized  to raise  capital  for the
Partnership by offering and selling to additional limited partners not more than
11,500  interest at a price of $1,000 per  interest.  During  1985,  the sale of
interests was terminated after the sale of 11,500 interests.

On June 3,  1997,  Apartment  Investment  and  Management  Company,  a  Maryland
corporation  ("AIMCO" and,  together with its  subsidiaries and other controlled
entities, the "AIMCO Group"), acquired all of the issued and outstanding capital
stock of NHP Partners,  Inc., a Delaware  corporation ("NHP Partners"),  and the
AIMCO Group  acquired  all of the  outstanding  interests  in NHP  Partners  Two
Limited  Partnership,  a Delaware limited  partnership ("NHP Partners Two"). NHP
Partners owns all of the outstanding  capital stock of the National  Corporation
for Housing Partnerships,  a District of Columbia corporation ("NCHP"), which is
the general partner of The National Housing Partnership,  a District of Columbia
limited  partnership ("NHP" or the "General  Partner").  Together,  NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Registrant. As a result of these transactions,  the AIMCO
Group has  acquired  control  of the  general  partner  of the  Registrant  and,
therefore, may be deemed to have acquired control of the Registrant.

The Original  Limited Partner of the Partnership is 1133 Fifteenth  Street Three
Associates,  whose  limited  partners were key employees of NCHP at the time the
Partnership was formed and whose general partner is NHP.

Basis of Presentation

The accompanying  unaudited interim financial statements reflect all adjustments
which are, in the opinion of management,  necessary for a fair  presentation  of
the  financial  condition  and results of  operations  for the  interim  periods
presented. All such adjustments are of a normal and recurring nature.

While the General Partner  believes that the disclosures  presented are adequate
to make the  information  not  misleading,  it is suggested that these financial
statements  be read in  conjunction  with the  financial  statements  and  notes
included in the  Partnership's  Annual  Report filed on Form 10-KSB for the year
ended December 31, 2000.


<PAGE>






(2)   INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

At September 30, 2001, the Partnership owns a 94.5% limited partnership interest
(98% with respect to  allocation  of losses) in one Local  Limited  Partnership,
Edmond Estates  Limited  Partnership.  The  Partnership  also owns a 99% limited
partnership interest in Meadowood Townhouses III Limited Partnership. This Local
Limited  Partnership  owns a 99% limited  partnership  interest in an  operating
limited  partnership  which  holds  title to one rental  housing  property.  The
Partnership's  effective  interest  in this  operating  limited  partnership  is
98.01%. This property was sold subsequent to September 30, 2001 (see Note 5).

Since the Partnership does not exercise control over the activities of the Local
Limited  Partnerships  in  accordance  with  the  partnership  agreements,   the
Partnership's  investments are accounted for using the equity method.  Thus, the
investments  are  carried  at cost  plus the  Partnership's  share of the  Local
Limited  Partnerships' profits less the Partnership's share of the Local Limited
Partnerships'  losses  and  distributions.  However,  since the  Partnership  is
neither  legally liable for the  obligations of the Local Limited  Partnerships,
nor  otherwise  committed  to provide  additional  support to them,  it does not
recognize  losses once its investment,  reduced for its share of losses and cash
distributions,   reaches  zero  in  each  of  the   individual   Local   Limited
Partnerships.  As a result,  the  Partnership  did not  recognize  approximately
$50,000 of its allocated share of profits and $147,000 of its allocated share of
losses from two and nine Local Limited Partnerships during the nine months ended
September  30,  2001 and 2000,  respectively.  As of  September  30,  2001,  the
Partnership had not recognized  approximately  $5,709,000 of its allocated share
of cumulative losses from the Local Limited Partnerships in which its investment
is zero.

Advances made by the  Partnership to the individual  Local Limited  Partnerships
are  considered   part  of  the   Partnership's   investment  in  Local  Limited
Partnerships.  When advances are made,  they are charged to operations as a loss
on investment in the Local Limited  Partnership  using  previously  unrecognized
cumulative  losses. As discussed above, due to the cumulative losses incurred by
the Local Limited  Partnerships,  the aggregate  balance of  investments  in and
advances to the  remaining two Local  Limited  Partnerships  has been reduced to
zero at September 30, 2001. To the extent these advances are repaid by the Local
Limited  Partnerships  in  the  future,  the  repayments  will  be  credited  as
distributions  and repayments  received in excess of investment in Local Limited
Partnerships.  These advances are carried as a payable to the Partnership by the
Local Limited Partnerships and at September 30, 2001 is approximately $35,000.

During the nine months ended September 30, 2001 the Partnership  advanced one of
the Local Limited Partnerships  approximately $8,000 to cover partnership entity
expenses. As noted above, this amount has been included in operating expense for
the nine months ended September 30, 2001. During the nine months ended September
30, 2000, the General Partner advanced  approximately $5,000 to one of the Local
Limited Partnerships to fund partnership entity expenses. During the nine months
ended  September  30, 2001,  the Local  Limited  Partnership  repaid the General
Partner for this advance.  The balance owed to the General  Partner by the Local
Limited Partnerships at September 30, 2001 is approximately $81,000. Interest is
charged at prime plus 2% or 8.00% at September 30, 2001.

The  following  are combined  statements  of  operations  for the three and nine
months ended  September  30, 2001 and 2000,  respectively,  of the Local Limited
Partnerships in which the Partnership has invested.

                        COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                      Three Months Ended         Nine Months Ended
                                         September 30,             September 30,
                                      2001          2000         2001         2000
                                        (in thousands)             (in thousands)

<S>                                  <C>            <C>         <C>         <C>
Rental income                        $  454         $ 448       $ 1,389     $ 1,586
Other income                             21            17            62          47
   Total income                         475           465         1,451       1,633

Operating expenses                      226           297           761       1,061
Interest, taxes, and insurance          145           139           426         522
Depreciation                             72            61           213         199
   Total expense                        443           497         1,400       1,782

Net income (loss)                     $  32        $ (32)       $    51     $  (149)

National Housing Partnership
  Realty Fund III share of
  income (losses)                     $  32        $ (32)       $    50     $  (147)
</TABLE>


(3)   TRANSACTIONS WITH THE GENERAL PARTNER

During the nine month periods ended September 30, 2001 and 2000, the Partnership
accrued  administrative  and reporting fees to the General Partner in the amount
of approximately $11,000 and $29,000, respectively, for services provided to the
Partnership.  The  Partnership  did not make any payments to the General Partner
for these  fees  during  either of the  respective  periods.  The amount due the
General  Partner by the Partnership  for  administrative  and reporting fees was
approximately $184,000 at September 30, 2001.

The  advances  and accrued  administrative  and  reporting  fees  payable to the
General  Partner  will be paid as cash flow permits or from  proceeds  generated
from the sale or refinancing of one or more of the underlying  properties of the
Local Limited Partnerships.


<PAGE>



(4)   SEGMENT INFORMATION

The  Partnership  has only one  reportable  segment.  Moreover,  due to the very
nature of the  Partnership's  operations,  the  General  Partner  believes  that
segment-based disclosures will not result in a more meaningful presentation than
the financial statements as currently presented.

(5)   SUBSEQUENT EVENT - SALE OF INVESTMENT PROPERTY

On October 17,  2001,  Meadowoods  Associates  III,  Ltd.,  sold its  investment
property,  Windsor Valley  Apartments  III, to an  unaffiliated  third party for
$7,150,000.  After paying closing costs, the net proceeds were used to repay the
mortgage encumbering the property.  Of the funds remaining 80% was used to pay a
portion of the note payable and accrued  interest  thereon to the original owner
of the property. The other 20% will be used to pay accrued expenses of the Local
Limited Partnership and advances from the Partnership and General Partner.

(6)   LEGAL PROCEEDINGS

In October 1997,  NHP received a subpoena from the Inspector  General  ("IG") of
the United States Department of Housing and Urban Development ("HUD") requesting
documents  relating  to any  agreement  whereby  NHP  or  any of its  affiliates
provides  or has  provided  compensation  to  owners  (or their  affiliates)  of
HUD-assisted properties in connection with management of a HUD-assisted property
(the "Transactions").  Documents were produced which may have been responsive to
the HUD subpoena and submitted to the HUD Inspector General in 1998.

In July 1999, NHP received a grand jury subpoena  requesting  documents relating
to the same  subject  matter as the HUD IG  subpoenas  and NHP's  operation of a
group  purchasing  program  created  by NHP,  known as Buyers  Access.  To date,
neither the HUD IG nor the grand jury has  initiated  any action  against NHP or
Apartment Investment and Management Company ("AIMCO"),  the ultimate controlling
entity of NHP or, to NHP's or  AIMCO's  knowledge,  any owner of a HUD  property
managed  by NHP.  AIMCO  believes  that NHP's  operations  and  programs  are in
compliance,  in all  material  respects,  with all laws,  rules and  regulations
relating  to  HUD-assisted  or  HUD-insured   properties.   NHP  and  AIMCO  are
cooperating with  investigations and do not believe that the investigations will
result in a material adverse impact on their  operations.  However,  as with any
similar  investigation,  there can be no assurance that these will not result in
material fines, penalties or other costs.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.


<PAGE>




ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

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
operations.  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.

LIQUIDITY AND CAPITAL RESOURCES

All of the Local  Limited  Partnerships  in which the  Partnership  has invested
carry notes payable due to the original owner of each Property. All of the notes
reached  final  maturity  during  1999.  These  notes  were  secured by both the
Partnership's  and  the  General  Partner's   interests  in  the  Local  Limited
Partnerships.  Meadowood Townhouses III, Woodmark,  Kimberly Associates,  Edmond
Estates, Galion, Indian Valley I, Indian Valley II, Indian Valley III and Newton
Hill Limited  Partnerships  all had notes which were executed by the  respective
Limited  Partnerships with the seller as part of the acquisition of the property
by the Limited Partnership.  The notes were nonrecourse and were subordinated to
the  respective  mortgage  notes on each property for as long as HUD insured the
mortgage  notes.  Any payments due from project income were payable from surplus
cash,  as  defined  by  the  HUD  Regulatory  Agreement.   Neither  the  Limited
Partnership  nor any partner  thereof,  present or future,  assumed any personal
liability for the payment of the notes.  The notes were due in November 1999 for
Meadowood  Townhouses  III  and in  December  1999  for  the  remaining  Limited
Partnerships.  During  the year  ended  December  31,  2000,  the  note  holders
foreclosed on the Partnership's  interest in Woodmark,  Galion, Indian Valley I,
Indian Valley II, Indian Valley III, Newton Hill, and Kimberly Associates.  With
the loss of the Partnership's interest to the note holders, the Partnership will
not receive any future benefits from these Local Limited Partnership and taxable
income generated prior to the foreclosures  were allocated to the  Partnership's
investors  without   receiving  any  distributable   cash  during  the  year  of
foreclosure. The specific impact of the tax consequences was dependent upon each
specific partner's individual tax situation. During October 2001, the investment
property of  Meadowood  Townhouses  III was sold to an  unrelated  third  party.
Regarding Edmond Estates Limited  Partnership,  interest continues to be accrued
under the original terms of the note  agreement.  The note is in default and the
Limited Partnership interest is subject to foreclosure.  The investment property
of Edmond  Estates is currently  being  marketed  for sale,  but there can be no
assurance  that  the  property  will  sell  or,  if it is  sold,  that  the sale
transaction  will generate  sufficient  proceeds to pay the accrued interest and
principal of the note. The financial  statements do not include any  adjustments
which might result from the outcome of this uncertainty.

On October 17,  2001,  Meadowoods  Associates  III,  Ltd.,  sold its  investment
property,  Windsor Valley  Apartments  III, to an  unaffiliated  third party for
$7,150,000.  After paying closing costs, the net proceeds were used to repay the
mortgage encumbering the property.  Of the funds remaining 80% was used to pay a
portion of the note payable and accrued  interest  thereon to the original owner
of the property. The other 20% will be used to pay accrued expenses of the Local
Limited Partnership and advances from the Partnership and General Partner.


<PAGE>



The  Partnership's  liquidity  based on cash and cash  equivalents  decreased to
approximately  $272,000 at  September  30,  2001,  as compared to  approximately
$468,000  at  December  31,  2000.  The  decrease  was  due  to the  payment  of
withholding  taxes to the  taxing  authorities  paid on  behalf  of the  limited
investors and the  Partnership's  operating  expenses more than  offsetting  the
interest received by the Partnership.  The Partnership's  existing cash plus any
distributions from the underlying  operations of the Local Limited  Partnerships
is expected to adequately  fund the operations of the Partnership in the current
year.  However,  there can be no  assurance  that future  distributions  will be
adequate to fund the operations beyond the current year.

Advances made by the  Partnership to the individual  Local Limited  Partnerships
are  considered   part  of  the   Partnership's   investment  in  Local  Limited
Partnerships.  When advances are made,  they are charged to operations as a loss
on investment in the Local Limited  Partnership  using  previously  unrecognized
cumulative  losses. As discussed below, due to the cumulative losses incurred by
the Local Limited  Partnerships,  the aggregate  balance of  investments  in and
advances to the  remaining two Local  Limited  Partnerships  has been reduced to
zero at September 30, 2001. To the extent these advances are repaid by the Local
Limited  Partnerships  in  the  future,  the  repayments  will  be  credited  as
distributions  and repayments  received in excess of investment in Local Limited
Partnerships.  These advances are carried as a payable to the Partnership by the
Local Limited Partnerships and at September 30, 2001 is approximately $35,000.

During the nine months ended September 30, 2001 the Partnership  advanced one of
the Local Limited Partnerships  approximately $8,000 to cover Partnership entity
expenses. As noted above, this amount has been included in operating expense for
the nine months ended September 30, 2001. During the nine months ended September
30, 2000, the General Partner advanced  approximately $5,000 to one of the Local
Limited Partnerships to fund partnership entity expenses. During the nine months
ended  September  30, 2001,  the Local  Limited  Partnership  repaid the General
Partner for this advance.  The balance owed to the General  Partner by the Local
Limited Partnerships at September 30, 2001 is approximately $81,000. Interest is
charged at prime plus 2% or 8.00% at September 30, 2001.

Distributions   received   from  Local   Limited   Partnerships   represent  the
Partnership's  proportionate share of the excess cash available for distribution
from the Local Limited Partnerships. As a result of the use of the equity method
of  accounting  for the  Partnership's  investments,  as of September  30, 2001,
investments in the remaining two Local Limited  Partnerships had been reduced to
zero. For these investments,  cash distributions received are recorded in income
as distributions received in excess of investment in Local Limited Partnerships.
For those investments not reduced to zero,  distributions  received are recorded
as  distributions   from  Local  Limited   Partnerships.   There  were  no  cash
distributions  during the nine months  ended  September  30, 2001 and 2000.  The
receipt of  distributions  in future  quarters and years is  dependent  upon the
operations of the  underlying  properties of the Local Limited  Partnerships  to
generate  sufficient  cash for  distribution  in accordance  with applicable HUD
regulations.

The properties in which the Local Limited Partnerships have invested receive one
or more forms of assistance from the Federal Government.  As a result, the Local
Limited  Partnerships'  ability to transfer  funds either to the  Partnership or
among  themselves  in the  form of cash  distributions,  loans  or  advances  is
generally   restricted   by  these   government   assistance   programs.   These
restrictions,   however,   are  not   expected  to  impact  the  Local   Limited
Partnerships' ability to meet its cash obligations.


<PAGE>



RESULTS OF OPERATIONS

The  Partnership  retains an  investment  as a limited  partner in Local Limited
Partnerships  which  operate  two  rental  housing  properties.   Subsequent  to
September 30, 2001, one rental housing  property was sold to an unrelated  third
party.  In  prior  years,   results  of  operations  of  the  Partnership   were
significantly  impacted  by the  Partnership's  share of the losses of the Local
Limited  Partnerships.  These losses included  depreciation and accrued deferred
acquisition  note  interest  expense  which are non-cash in nature.  Because the
investments in and advances to Local Limited  Partnerships  have been reduced to
zero,  the   Partnership's   share  of  the  operations  of  the  Local  Limited
Partnerships is no longer being recorded.

The  Partnership  had a net loss of  approximately  $20,000  and $55,000 for the
three and nine  months  ended  September  30,  2001,  compared  to a net loss of
approximately  $36,000 and $81,000 for the three and nine months ended September
30, 2000. The decrease in net loss for the three and nine months ended September
30,  2001,  was due to a decrease in  operating  expenses for both periods and a
decrease in  administrative  and reporting  fees for the nine month period ended
September 30, 2001. The Partnership did not recognize  approximately  $50,000 of
its allocated share of profits from the Local Limited  Partnerships for the nine
months ended  September 30, 2001,  as the  Partnership's  net carrying  basis in
these  Partnerships had been previously reduced to zero, and as of September 30,
2001,  the  Partnership  had  not  recognized  approximately  $5,709,000  of its
allocated share of cumulative losses from the two Local Limited Partnerships.


<PAGE>


                           PART II - OTHER INFORMATION



ITEM 1.     LEGAL PROCEEDINGS

In October 1997,  NHP received a subpoena from the Inspector  General  ("IG") of
the United States Department of Housing and Urban Development ("HUD") requesting
documents  relating  to any  agreement  whereby  NHP  or  any of its  affiliates
provides  or has  provided  compensation  to  owners  (or their  affiliates)  of
HUD-assisted properties in connection with management of a HUD-assisted property
(the "Transactions").  Documents were produced which may have been responsive to
the HUD subpoena and submitted to the HUD Inspector General in 1998.

In July 1999, NHP received a grand jury subpoena  requesting  documents relating
to the same  subject  matter as the HUD IG  subpoenas  and NHP's  operation of a
group  purchasing  program  created  by NHP,  known as Buyers  Access.  To date,
neither the HUD IG nor the grand jury has  initiated  any action  against NHP or
Apartment Investment and Management Company ("AIMCO"),  the ultimate controlling
entity of NHP or, to NHP's or  AIMCO's  knowledge,  any owner of a HUD  property
managed  by NHP.  AIMCO  believes  that NHP's  operations  and  programs  are in
compliance,  in all  material  respects,  with all laws,  rules and  regulations
relating  to  HUD-assisted  or  HUD-insured   properties.   NHP  and  AIMCO  are
cooperating with  investigations and do not believe that the investigations will
result in a material adverse impact on their  operations.  However,  as with any
similar  investigation,  there can be no assurance that these will not result in
material fines, penalties or other costs.



<PAGE>



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  Exhibit  10.1  Contract of Sale between Registrant and
                                 CPDC,   Inc.,   a   Maryland    Corporation,
                                 effective  October 17, 2001,  regarding  the
                                 sale of Windsor Valley III.

                  Exhibit 10.2   First Amendment to Purchase and Sale Contract.

                  Exhibit 10.3   Second Amendment to Purchase and Sale Contract.

            b)    Reports on Form 8-K:

                  None filed during the quarter ended September 30, 2001.


<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.



                                    NATIONAL HOUSING PARTNERSHIP REALTY FUND III
                                   (Registrant)


                                    By:   The National Housing Partnership,
                                          Its sole General Partner


                                    By:   National Corporation for Housing
                                          Partnerships, its sole General Partner


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


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


                                    Date: November 8, 2001

<PAGE>

                                                                    Exhibit 10.1


                           PURCHASE AND SALE CONTRACT
                              (WINDSOR VALLEY III)
                                     BETWEEN
                         MEADOWOOD ASSOCIATES III, LTD.,
                         a Maryland limited partnership
                                    AS SELLER
                                       AND
                                   CPDC, INC.,
                             a Maryland corporation
                                  AS PURCHASER
                                TABLE OF CONTENTS

ARTICLES
ARTICLE 1 DEFINED TERMS . . . . . . .  . . . . . . . . . . . . . . . 2
ARTICLE 2 PURCHASE AND SALE OF PROPERTY . .. . . . . . . . . . . . . 9
ARTICLE 3 PURCHASE PRICE, DEPOSIT AND ESCROW PROVISIONS 10
ARTICLE 4 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5 FEASIBILITY PERIOD . . . . . . . . .  . . . . . . . . . . 14
ARTICLE 6 TITLE AND SURVEY . . . . . . . . . .  . . . . . . . . . . 17
ARTICLE 7 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 8 REPRESENTATIONS, WARRANTIES AND COVENANTS  . . . . . . .  26
ARTICLE 9 CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . 32
ARTICLE 10 BROKERAGE . . . . . . . . . . . . . . . . . . .  . . . . 35
ARTICLE 11 POSSESSION . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 12 DEFAULTS AND REMEDIES . . . . . . . . . . . .. . . . . . 36
ARTICLE 13 RISK OF LOSS OR CASUALTY . . . . . . . . . . . . . . . . 37
ARTICLE 14 LEAD-BASED PAINT DISCLOSURE . . . . . . . .. . . . . . . 38
ARTICLE 15 EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 16 MISCELLANEOUS . . . . . . .. . . . . . . . . . . . . . . 38
ARTICLE 17 OPERATION OF THE PROPERTY .. . . . . . . . . . . . . . . 44

EXHIBITS
A LEGAL DESCRIPTION OF LAND
B FORM OF DEED
C LIST OF EXCLUDED PERMITS
D LIST OF EXCLUDED FIXTURES AND TANGIBLE PERSONAL PROPERTY
E LIST OF REQUIRED SELLER CONSENTS
F FORM OF ESCROW AGREEMENT
G FORM OF BILL OF SALE
H FORM OF GENERAL ASSIGNMENT
I LIST OF PENDING LITIGATION
J FORM OF LEAD-BASED PAINT DISCLOSURE
K FORM OF LETTER OF CREDIT
RIDERS
1 STATE SPECIFIC RIDER
225171.04-Los

<PAGE>


                           PURCHASE AND SALE CONTRACT
                              (WINDSOR VALLEY III)



THIS PURCHASE AND SALE CONTRACT (this "Purchase Contract")
is entered into as of the 12th day of March, 2001 (the "Effective Date"), by and
between ELDERLY  HOUSING  ASSOCIATES  LIMITED  PARTNERSHIP,  a Maryland  limited
partnership,  having  a  principal  address  at  c/o  Apartment  Investment  and
Management  Company,  Tower Two, 2000 South  Colorado  Boulevard,  Suite 2-1000,
Denver,  Colorado  80222  ("Seller"),  and CPDC,  INC., a Maryland  corporation,
having  a  principal  address  at 5513  Connecticut  Avenue,  N.W.,  Suite  250,
Washington, DC 20015 ("Purchaser").
NOW, THEREFORE WITNESSETH: That for and in consideration of
mutual covenants and agreements herein after set forth, Seller and Purchaser
hereby agree as follows:
RECITALS
R-1. Seller holds legal title to the real estate described in Exhibit A attached
hereto and made a part hereof. R-2. Purchaser desires to purchase and Seller has
agreed to sell such land, improvements and certain associated property,  defined
below as the  "Property," on the terms and conditions set forth in this Purchase
Contract (which terms and conditions  shall control in the event of any conflict
with these Recitals),  such that on the "Closing Date" (as hereinafter  defined)
the  Property  will be  conveyed  by the  "Deed"  (as  hereinafter  defined)  to
Purchaser.
R-3. Purchaser has agreed to pay to Seller the "Purchase Price" (as hereinafter
defined) for the Property, and Seller has agreed to sell the Property to
Purchaser on the terms and conditions set forth in this Purchase Contract.
R-4. Purchaser intends to make investigations regarding the Property and
Purchaser's intended use of the Property, as Purchaser deems necessary and
desirable.
2 225171.04-Los Angeles S2A
ARTICLE 1
DEFINED TERMS
1.1  Definitions.  Unless otherwise  defined herein,  terms with initial capital
letters in this  Purchase  Contract  shall have the  meanings  set forth in this
ARTICLE 1 below.
1.1.1  "Additional  Deposit" shall have the meaning  ascribed thereto in Section
3.1.1 hereof.  1.1.2 "Assumed  Indebtedness" means all indebtedness  (including,
principal  and  accrued  and  unpaid  interest)  outstanding  under the Note and
secured by the  Mortgage as of the Closing Date  assumed by  Purchaser,  if any.
1.1.3 "Broker" shall have the meaning ascribed thereto in Section 10.1 hereof.
1.1.4  "Business  Day" means any day other than a Saturday  or Sunday or Federal
holiday or legal holiday in the State in which the Land is located.
1.1.5  "Closing"  means the  consummation  of the  purchase and sale and related
transactions contemplated by this Purchase Contract in accordance with the terms
and conditions of this Purchase Contract.
1.1.6  "Closing Date" means the date on which date the Closing of the conveyance
of the  Property is required to be held under the terms and  conditions  of this
Purchase  Contract and on which date full payment of the Purchase  Price for the
Property shall have been paid to and received by Seller in immediately available
United States funds.
1.1.7 "Consultants" shall have the meaning ascribed thereto in
Section 5.1 hereof.
1.1.8 "Deed" means a deed in the form of Exhibit B attached
hereto.
1.1.9 "Delinquent Rent" shall have the meaning ascribed thereto in Section 7.1.5
hereof.
3 225171.04-Los Angeles S2A
1.1.10  "Deposit"  shall have the  meaning  ascribed  thereto  in Section  3.1.1
hereof.  1.1.11  "Designated  Representative"  shall have the  meaning  ascribed
thereto in Section 8.1.4 hereof.
1.1.12  "Effective  Date" shall have the meaning  ascribed  thereto in the first
paragraph of this Purchase  Contract.  1.1.13 "Escrow Agreement" means an escrow
agreement  with Title Insurer in the form of Exhibit F attached  hereto.  1.1.14
"Excluded Permits" means those Permits,  which, under applicable law or by their
terms,  are  nontransferable,  and such other  Permits as may be  designated  as
Excluded  Permits on Exhibit C, if any,  attached  hereto.  1.1.15  "Feasibility
Period" shall have the meaning ascribed thereto in Section 5.1 hereof.
1.1.16 "Financing Contingency Period" shall have the meaning ascribed thereto in
Section 4.1 hereof.  1.1.17 "Fixtures and Tangible Personal  Property" means all
fixtures, furniture,  furnishings,  fittings, equipment,  machinery,  apparatus,
appliances and other articles of tangible  personal  property now located on the
Land or in
the Improvements as of the Effective Date (or hereafter acquired by Seller prior
to the Closing Date) and used or usable in connection with any present or future
occupation  or  operation  of all or any part of the  Property,  but only to the
extent transferable. The term "Fixtures and Tangible Personal Property" does not
include  (i)  equipment  leased  by  Seller  and the  interest  of Seller in any
equipment  provided to the  Property for use, but not owned or leased by Seller,
or (ii)  property  owned or leased by any Tenant and  guest,  employee  or other
person  furnishing  goods or services to the  Property,  or (iii)  property  and
equipment  owned by Seller,  which in the  ordinary  course of  business  of the
Property is not used  exclusively  for the business,  operation or management of
the Property,  or (iv) the property and equipment,  if any, expressly identified
in Exhibit D attached  hereto.  1.1.18 "HAP Contract" means any existing Housing
Assistance  Payments  Contract  (as may have  been  amended  from  time to time)
applicable to 4  225171.04-Los  Angeles S2A the Property,  by and between Seller
(or its predecessor-in-interest) and the United States of America acting through
its Secretary of HUD.
1.1.19 "HUD" means The United States Department of Housing
and Urban Development.
1.1.20 "HUD Loan Documents" mean the Note, the Mortgage, the
Regulatory Agreement and all other ancillary security documents.
1.1.21 "HUD Preliminary Approval" means HUD's preliminary
approval of the TPA Application, the conveyance of the Property to Purchaser and
the  assumption of the HUD Loan  Documents by Purchaser.  1.1.22  "Improvements"
mean all buildings and improvements located on the Land taken "as is".
1.1.23  "Initial  Deposit"  shall have the meaning  ascribed  thereto in Section
3.1.1 hereof.  1.1.24 "Land" means all of those certain tracts of land described
on Exhibit A attached  hereto,  and all  rights,  privileges  and  appurtenances
pertaining thereto.
1.1.25 "Lease(s)" means all rights and interests of Seller in and to all leases,
subleases  and other  occupancy  agreements,  whether  or not of  record,  which
provide for the use or  occupancy of space or  facilities  on or relating to the
Property  and which are in force as of the  Effective  Date for the  Property or
thereafter as permitted in ARTICLE 17 hereof.
1.1.26  "Letter of Credit"  shall have the meaning  ascribed  thereto in Section
3.1.1  hereof.  1.1.27  "Like Kind  Exchange"  shall have the  meaning  ascribed
thereto in Section 16.18 hereof.
1.1.28 "Like Kind Exchange  Property" shall have the meaning ascribed thereto in
Section 16.18 hereof.
5 225171.04-Los Angeles S2A
1.1.29 "Management  Contract" means that certain Housing  Management  Agreement,
dated as of January 1, 1987 (as amended,  supplemented and/or restated),  by and
between Seller and Manager.
1.1.30  "Manager"  means  NHP  Management   Company,   a  District  of  Columbia
corporation (formerly known as NCHP Property Management, Inc.). 1.1.31 "Material
Adverse  Effect" means a material  adverse effect on the financial  condition or
results of operation of the Property.  1.1.32  "Material  damage" shall have the
meaning ascribed thereto in Section 13.1 hereof.
1.1.33  "Materials"  shall have the  meaning  ascribed  thereto  in Section  5.5
hereof. 1.1.34 "Miscellaneous Property Assets" mean all contract rights, leases,
concessions, warranties, plans, drawings and other items of intangible
personal  property  relating to the  ownership  or operation of the Property and
owned by Seller, but only to the extent  transferable,  excluding,  however, (i)
receivables,  (ii) Property Contracts,  (iii) Leases, (iv) Permits, (v) Fixtures
and Tangible Personal Property,  (vi) cash or other funds, whether in petty cash
or house  "banks," or on deposit in bank  accounts  or in transit  for  deposit,
(vii) refunds,  rebates or other claims, or any interest thereon, for periods or
events occurring prior to the Closing Date, (viii) utility and similar deposits,
or (ix) insurance or other prepaid items, (x) any capital replacement, repair or
other  reserves  held by  Seller,  or any  other  party on  behalf of or for the
benefit of Seller, with respect to the Property, (xi) Seller's proprietary books
and  records,  (xii)  escrows  held by  Mortgagee  for real  property  taxes and
insurance  premiums,  (xiii) HAP Contract  subsidy  payments through the Closing
Date,  or (xiv) the  Management  Contract,  except  to the  extent  that  Seller
receives a credit on the closing statement for any such item in which event such
item shall be transferred to Purchaser if transferable.
1.1.35 "Mortgage" means that certain Deed of Trust, dated as of
November 1, 1972, by and among Seller, Robert E. Voelkel, Jr. and Edward J.
Murn, as Trustees, and Mortgagee, as confirmed by that certain Confirmatory Deed
of Trust, dated as of November 7, 1972, by and among Seller, Robert E. Voelkel,
Jr. and Edward J. Murn, as Trustees, and Mortgagee.
6 225171.04-Los Angeles S2A
1.1.36 "Mortgagee" means Mercantile Mortgage Corporation, a
Maryland corporation.
1.1.37 "Note" means that certain Note, dated as of November 1,
1972, made by Seller in favor of Mortgagee in the original  principal  amount of
Four Million Seventy Two Thousand Six Hundred Dollars ($4,072,600.00),  which is
secured by the  Mortgage and  endorsed  for  insurance  by the  Secretary of HUD
pursuant to Section 236 of the National Housing Act.
1.1.38 "Notice" shall have the meaning ascribed thereto in Section
16.6 hereof.
1.1.39 "Official Records" means the Land Records of Harford
County, Maryland.
1.1.40   "Permits"  mean  all  licenses  and  permits  granted  by  governmental
authorities  having  jurisdiction over the Property owned by Seller and required
in order to own and operate the Property.  1.1.41  "Permitted  Exceptions" shall
have the meaning ascribed thereto in Section 6.2 hereof.
1.1.42  "Property"  means  the Land and  Improvements  and all  rights of Seller
relating to the Land and the  Improvements,  including without  limitation,  any
rights, title and interest of Seller, if any, in and to (i) any strips and gores
adjacent  to the Land and any land  lying  in the bed of any  street,  road,  or
avenue opened or proposed,  in front of or adjoining the Land, to the centerline
thereof;  (ii) any unpaid award for any taking by  condemnation or any damage to
the Property by reason of a change of grade of any street or highway;  (iii) all
of the easements,  rights, privileges, and appurtenances belonging or in any way
appertaining  to the Land and  Improvements,  together  with  all  Fixtures  and
Tangible Personal  Property,  all Property  Contracts and Leases,  Permits other
than  Excluded  Permits and the  Miscellaneous  Property  Assets owned by Seller
which are located on the Property and used in its operation.
1.1.43 "Property Contracts" mean all purchase orders,  maintenance,  service, or
utility  contracts and similar  contracts,  excluding  Leases and the Management
Contract,  which  relate  to  the  ownership,  maintenance,  construction  or  7
225171.04-Los  Angeles S2A repair and/or operation of the Property and which are
not cancellable on ninety (90) days' or shorter Notice without penalty, but only
to the extent  transferable.  1.1.44  "Proration  Period" shall have the meaning
ascribed thereto in Section 7.1.4 hereof.
1.1.45 "Purchase  Contract" means this Purchase and Sale Contract by and between
Seller and Purchaser.  1.1.46  "Purchase  Price" shall have the meaning ascribed
thereto in Section 3.1 hereof.
1.1.47  "Purchaser"  shall  have  the  meaning  ascribed  thereto  in the  first
paragraph of this Purchase Contract. 1.1.48 "Purchaser's Objection Letter" shall
have the meaning ascribed thereto in Section 6.2 hereof.
1.1.49  "Regulatory  Agreement"  means that  certain  Regulatory  Agreement  For
Limited  Distribution  Mortgagors Under Section 236 of the National Housing Act,
As  Amended,  dated as of  November  1,  1972,  by and  between  Seller  and the
Secretary of HUD, and recorded in Book 911, Page 458 of the Official Records, as
amended by that certain Regulatory Agreement For Limited Distribution Mortgagors
Under Section 236 of the National Housing Act, As Amended,  dated as of November
1, 1972,  by and between  Seller and the  Secretary of HUD, and recorded in Book
1287,  Page  0702  of the  Official  Records.  1.1.50  "Release  and  Assumption
Agreement" shall have the meaning ascribed thereto in Section 7.2.1.12 hereof.
1.1.51  "Rent(s)"  shall have the  meaning  ascribed  thereto  in Section  7.1.3
hereof.  1.1.52  "Seller" shall have the meaning  ascribed  thereto in the first
paragraph of this Purchase Contract.
1.1.53  "Seller's  Approvals" shall have the meaning ascribed thereto in Section
2.2 hereof.
8 225171.04-Los Angeles S2A
1.1.54  "Seller's  knowledge" shall have the meaning ascribed thereto in Section
8.1.4 hereof. 1.1.55 "Seller's Response" shall have the meaning ascribed thereto
in Section 6.2 hereof.
1.1.56 "Seller's  Termination Notice" shall have the meaning ascribed thereto in
Section 2.2 hereof.  1.1.57 "Survey" shall have the meaning  ascribed thereto in
Section 6.1 hereof.
1.1.58 "Surviving Obligations" mean (a) the obligations of
Purchaser under Sections 5.3, 7.1.4,  7.1.5, 7.1.6 and 10.1, (b) the obligations
of Seller under Sections 7.1.4, 7.1.5, 7.1.6 and 10.1 and (c) the obligations of
the parties under Section 8, to the extent such  obligations  survive Closing or
termination of the Purchase Contract as provided in said Sections.
1.1.59 "Tenant" means any person or entity entitled to occupy any portion of the
Property  under a Lease.  1.1.60  "Title  Commitment"  shall  have  the  meaning
ascribed thereto in Section 6.1 hereof.
1.1.61 "Title Documents" shall have the meaning ascribed thereto
in Section 6.1 hereof.
1.1.62 "Title Insurer" means Fidelity National Title Insurance
Company.
1.1.63  "TPA  Application"  shall have the meaning  ascribed  thereto in Section
4.2.1 hereof.  1.1.64  "Underlying  Documents"  shall have the meaning  ascribed
thereto in Section 6.1 hereof.
9 225171.04-Los Angeles S2A
ARTICLE 2
PURCHASE AND SALE OF PROPERTY
2.1  Agreement  to  Purchase  and Sell.  Seller  agrees to sell and  convey  the
Property to Purchaser and Purchaser agrees to purchase the Property from Seller,
in accordance with the terms and conditions set forth in this Purchase Contract.
2.2  Consent of Seller's  Partners.  Notwithstanding  anything  to the  contrary
contained herein,  Seller's  obligations  hereunder are contingent upon Seller's
receipt of any and all required  consents and approvals to the  consummation  of
the  transactions  contemplated  hereby from the  following  (collectively,  the
"Seller's Approvals"):  (a) Seller's partners, as required by law or by Seller's
partnership agreement,  as amended,  governing Seller, which consents are listed
on Exhibit E attached hereto; and (b) all holders of installment  obligations or
other indebtedness of Seller or an upper tier investor in Seller  (collectively,
"Indebtedness Holders"),  which consent shall include, (i) in the event that the
net  Purchase  Price  proceeds to be paid to Seller at Closing are less than the
outstanding balance of such obligations or other indebtedness,  approval of such
holder to a discounted  payoff of such  obligation or other  indebtedness  in an
amount  satisfactory  to Seller  in its sole  discretion  and (ii) an  agreement
(either  therein or  pursuant  to a separate  document)  that such  Indebtedness
Holders  shall not  receive  more  than  eighty  percent  (80%) of the total net
Purchase  Price  proceeds  upon  the  Closing.  Seller  shall  use  commercially
reasonable  efforts to obtain the Seller's  Approvals and deliver  copies of the
same  to  Purchaser  and  Title  Insurer  on or  before  the  last  day  of  the
"Feasibility  Period" (as hereinafter  defined).  If the "Title  Commitment" (as
hereinafter  defined) is updated to add any new title  exception  as a result of
Title  Insurer's  review of such  Seller's  Approvals  (or lack  thereof),  then
Purchaser  shall have the right to review and object to any new  exception for a
period of five (5) Business Days following Purchaser's receipt of such update in
accordance  with the terms of Section 6.2 hereof.  If Seller is unable to obtain
the Seller's  Approvals  (and deliver  copies of the same to Purchaser and Title
Insurer) on or before the last day of the Feasibility  Period, then Seller shall
have the right to terminate this Purchase Contract by providing written "Notice"
(as  hereinafter  defined) of  termination  to  Purchaser on or before 6:00 p.m.
(California  time)  on  the  last  day  of  the  Feasibility  Period  ("Seller's
Termination  Notice").  If Seller timely provides Seller's Termination Notice to
Purchaser  pursuant to the preceding  sentence,  then (i) this Purchase Contract
shall terminate and be of no further force and effect,  except for the Surviving
Obligations,  (ii) Title Insurer shall promptly return the Deposit to Purchaser,
and (iii) Seller shall  reimburse  Purchaser  for its  reasonable  out-of-pocket
costs and expenses (including,  without limitation,  reasonable attorneys' fees,
charges  and  disbursements)   actually  incurred  in  connection  with  the  10
225171.04-Los  Angeles S2A negotiation of this Purchase Contract and Purchaser's
related due diligence efforts in an amount up to and limited to Fifteen Thousand
Dollars ($15,000.00).
ARTICLE 3
PURCHASE PRICE, DEPOSIT AND ESCROW PROVISIONS

3.1 Purchase Price. The total purchase price ("Purchase Price") for the Property
shall be Seven Million One Hundred Fifty Thousand Dollars ($7,150,000.00), which
shall be paid by Purchaser, as follows: 3.1.1 Deposit; Escrow Agreement. 3.1.1.1
On or before  the last day of the  Feasibility  Period  (as such  period  may be
extended in  accordance  with Section 5.6 hereof),  Purchaser  shall  deliver to
Title Insurer,  as escrow agent, a deposit in the sum of one percent (1%) of the
Purchase  Price  (together  with all  interest  accrued  thereon,  the  "Initial
Deposit"),  in cash,  by wire  transfer or certified  check or by delivery of an
irrevocable and  unconditional  standby letter of credit,  substantially  in the
form of Exhibit K attached hereto, issued in favor of Title Insurer and expiring
no  sooner  than one (1) year  after the last day of the  Financing  Contingency
Period (the "Letter of Credit"). 3.1.1.2 On or before August 15, 2001, Purchaser
shall deliver to Title Insurer,  as escrow agent,  an additional  deposit in the
sum of threeforths of one percent  (0.75%) of the Purchase Price  (together with
all interest accrued thereon,  the "Additional  Deposit").  The Initial Deposit,
the  Additional  Deposit and any other  additional  deposits  made by  Purchaser
pursuant to the terms of this Purchase  Contract,  shall hereinafter be referred
to collectively as the "Deposit."  3.1.1.3 Purchaser and Seller each approve the
form of Escrow  Agreement  attached  as Exhibit F, which shall be executed on or
before the last day of the Feasibility Period (as such period may be extended in
accordance with Section 5.6 hereof).  3.1.2 Investment of Deposit. Title Insurer
shall hold the  Deposit and make  delivery of the Deposit to the party  entitled
thereto  under the terms  hereof.  Title  Insurer shall invest the Deposit in an
interest-bearing  bank account or 11 225171.04-Los Angeles S2A money market fund
or such investment as Seller and Purchaser shall jointly agree, in writing, with
such agreement  being provided to Title Insurer in writing.  3.1.3  Treatment of
Deposit if Closing  Occurs.  If the sale of the  Property  is closed by the date
fixed therefor (or any extension date provided for by the mutual written consent
of the parties hereto,  given or withheld in their respective sole  discretion),
monies held as the Deposit shall be applied to the Purchase Price on the Closing
Date and the balance of the Purchase Price less the Assumed  Indebtedness  shall
be paid at Closing to Seller in immediately available United States funds. 3.1.4
Treatment of Deposit if Closing  Does Not Occur.  If the sale of the Property is
not closed by the date fixed  therefor  (or any such  extension  date)  owing to
failure  of  performance  by Seller  that is not caused by or  attributable  to,
directly or indirectly, any act or failure to act of Purchaser,  Purchaser shall
be entitled to the remedies  set forth in ARTICLE 12 hereof.  If the sale of the
Property is not closed by the date fixed therefor (or any such  extension  date)
owing to failure of performance by Purchaser or failure of performance by Seller
that is caused by or attributable to, directly or indirectly, any act or failure
to act of  Purchaser,  the Deposit  shall be forfeited by Purchaser  and the sum
thereof  shall  go to  Seller  forthwith  as  liquidated  damages  for the  lost
opportunity costs and transaction expenses incurred by Seller, as more fully set
forth in ARTICLE 12 hereof. 3.1.5 Letter of Credit.  Notwithstanding anything to
the contrary contained herein, in the event that the Deposit is delivered in the
form of a Letter of Credit in accordance with the terms of Section 3.1.1 hereof,
the parties hereto further agree as follows: 3.1.5.1 Title Insurer shall draw on
the Letter of Credit on the Business Day immediately preceding any date on which
Title Insurer is required to disburse all or any portion of the Deposit pursuant
to the terms of this  Purchase  Contract.  3.1.5.2 The amount of any draw on the
Letter of Credit  shall equal the portion of the Deposit  required to be paid to
Seller in accordance with the terms of this Purchase  Contract and shall be held
in escrow pending  disbursement  by Title  Insurer.  3.1.5.3 Title Insurer shall
draw on the  entire  stated  amount of the  Letter of Credit on the third  (3rd)
Business Day prior to the stated  expiration 12  225171.04-Los  Angeles S2A date
thereof,  unless on or before such date,  Purchaser  delivers  to Title  Insurer
either (a) an  extension  of the Letter of Credit to a date not earlier than the
Closing Date or (b) an amount of cash equal to the entire  stated  amount of the
Letter of  Credit.  3.1.5.4  In the  event the  Deposit  shall be  forfeited  by
Purchaser to Seller pursuant to the terms of this Purchase  Contract,  Purchaser
shall pay to Seller the amount of interest that would have otherwise  accrued on
the Deposit had cash in the amount of the Letter of Credit been  deposited  into
an account  paying  interest on such amount at a rate equal to the then  current
interest  rate  payable  on  United  States  Treasury  Bills  with the  shortest
maturities  then  available.  Purchaser  shall pay such  interest  amounts  with
proceeds derived from funds outside of escrow.  3.1.5.5  Purchaser  acknowledges
and agrees that any obligation of Purchaser  under this Purchase  Contract which
is secured by the Letter of Credit is a recourse  obligation  to the extent that
proceeds from the Letter of Credit are not available to satisfy such obligation.
3.1.5.6  At any time on or before  the  third  (3rd)  Business  Day prior to the
Closing  Date,  Purchaser may deliver to Title Insurer cash, by wire transfer or
certified check,  equal to the entire stated amount of the Letter of Credit,  to
be held by Title  Insurer in accordance  with the terms hereof,  and, upon Title
Insurer's  receipt of such cash, Title Insurer shall return the Letter of Credit
to  Purchaser.  3.1.5.7  In the event  that the  Deposit  is to be  returned  to
Purchaser  under the terms of this Purchase  Contract or the Letter of Credit is
replaced by cash in an amount equal to the entire stated amount of the Letter of
Credit in  accordance  with Section  3.1.5.6  hereof,  then Title  Insurer shall
return the Letter of Credit to Purchaser.  ARTICLE 4 FINANCING  4.1  Purchaser's
Responsibility   To  Obtain   Funds  For   Closing.   Purchaser   assumes   full
responsibility  to obtain the funds  required for  settlement  at Closing.  Such
funds  (including  the right to assume  the HUD Loan  Documents,  if any,  under
Section  4.2.1  hereof) shall be secured by Purchaser on or before June 15, 2001
(the "Financing  Contingency Period"). 13 225171.04-Los Angeles S2A 4.2 HUD Loan
Documents.  4.2.1 Purchase Subject To HUD Loan Documents. In the event Purchaser
intends to assume the HUD Loan  Documents and the Assumed  Indebtedness,  Seller
and Purchaser  shall  cooperate in  preparation  and submission of a Transfer of
Physical Assets  Application  (the "TPA  Application")  to HUD requesting  HUD's
Preliminary Approval in accordance with the terms of this Purchase Contract, and
each shall cooperate fully in providing information  reasonably requested by HUD
in connection  with its  consideration  thereof.  The TPA  Application  shall be
completed  and  submitted  to HUD on or before  the last day of the  Feasibility
Period. The cost of the TPA Application (including,  without limitation, the TPA
Application  fees and the cost of  receiving  HUD's  approval  thereof)  and any
physical  inspection report required thereby shall be borne by Purchaser.  4.2.2
Purchase Free of HUD Loan  Documents.  In the event Purchaser does not intend to
assume the HUD Loan Documents and the Assumed  Indebtedness,  not later than ten
(10) days after the last day of the Feasibility Period, Seller shall give Notice
to HUD of its intent to prepay the Note as  required by and in  accordance  with
Section  219(b)(3) of the  Departments of Veteran  Affairs and Housing and Urban
Development,  and Independent Agencies  Appropriations Act, 1999, if applicable.
It is specifically  agreed that Seller shall not be obligated to prepay the Note
until the Closing Date and then only from the proceeds of the Purchase Price. If
the aforesaid Section 219(b)(3) is applicable, Purchaser agrees that it will not
increase the rent charges for any dwelling unit on the Property during the sixty
(60) day  period  beginning  upon such  prepayment  of the  Note.  4.3 Costs and
Expenses.  All costs and expenses  incurred in connection  with any financing of
the acquisition of the Property by Purchaser  pursuant to this Purchase Contract
shall be solely the  responsibility  of Purchaser.  4.4 Purchaser's  Termination
Right.  In the event that  Purchaser is unable to secure the funds  required for
settlement  at Closing on or before  the last day of the  Financing  Contingency
Period,  Purchaser  shall have the right to terminate this Purchase  Contract by
delivering  written  Notice to Seller and Title  Insurer on or before  5:00 p.m.
Eastern time on the last day of the Financing  Contingency Period (in which case
(a) this  Purchase  Contract  shall  terminate  and be of no  further  force and
effect,  except  for the  Surviving  Obligations  and (b)  Title  Insurer  shall
promptly return the Deposit to Purchaser).  If Purchaser fails to provide Seller
with  written  Notice  of  cancellation  prior to the last day of the  Financing
Contingency  Period in 14 225171.04-Los  Angeles S2A strict  accordance with the
notice   provisions  of  this  Purchase   Contract,   the  Deposit  will  become
non-refundable,  this Purchase  Contract  shall remain in full force and effect,
and Purchaser's  obligation to purchase the Property shall be non-contingent and
unconditional except only for satisfaction of the conditions expressly stated in
ARTICLE 9 hereof. ARTICLE 5 FEASIBILITY PERIOD 5.1 Due Diligence. Subject to the
terms of Section 5.3 hereof,  for  forty-five  (45) days following the Effective
Date and as may be extended  pursuant  to Section  5.6 hereof (the  "Feasibility
Period"),  Purchaser,  and  its  agents,  contractors,   engineers,   surveyors,
attorneys, and employees (collectively, "Consultants") shall have the right from
time to time to enter onto the  Property to do the  following:  5.1.1 To conduct
and make any and all customary studies, tests, examinations and inspections,  or
investigations  of or concerning  the Property  (including  without  limitation,
engineering  and  feasibility  studies,  environmental  site  assessments,  risk
assessments or  inspections  for the presence of lead based paint and lead based
paint  hazards,  evaluation of drainage and flood plain,  soil tests for bearing
capacity and percolation and surveys, including topographical surveys). 5.1.2 To
confirm any and all matters  which  Purchaser may  reasonably  desire to confirm
with respect to the Property.  5.1.3 To ascertain and confirm the suitability of
the Property for Purchaser's  intended use of the Property.  5.1.4 To review all
"Materials"   (as   hereinafter   defined)   other  than  Seller's   proprietary
information. 5.2 Purchaser's Termination Right. Should the results of any of the
matters referred to in Section 5.1 hereof appear unsatisfactory to Purchaser for
any reason,  then  Purchaser  shall have the right to  terminate  this  Purchase
Contract by giving  written Notice to that effect to Seller and Title Insurer on
or before 5:00 p.m.  Eastern time on the date of expiration  of the  Feasibility
Period,  which Notice shall specify in detail the reasons for such  termination.
If Purchaser exercises such right to terminate,  then (a) this Purchase Contract
shall terminate and be of no further force and effect,  except for the Surviving
Obligations  and  (b)  Title  Insurer  shall  promptly  return  the  Deposit  to
Purchaser.  If Purchaser  fails to provide Seller 15  225171.04-Los  Angeles S2A
with written  Notice of  cancellation  prior to the last day of the  Feasibility
Period  in  strict  accordance  with  the  notice  provisions  of this  Purchase
Contract,  the Deposit will become  non-refundable except as otherwise expressly
contemplated  hereby,  this  Purchase  Contract  shall  remain in full force and
effect,   and   Purchaser's   obligation  to  purchase  the  Property  shall  be
non-contingent and unconditional  except only for satisfaction of the conditions
expressly  stated  in  this  ARTICLE  5 and  in  ARTICLES  4 and 9  hereof.  5.3
Purchaser's Indemnification of Seller. Purchaser shall indemnify and hold Seller
harmless for any actions taken by Purchaser and its Consultants on the Property.
Purchaser shall indemnify,  defend (with attorneys  selected by Seller) and hold
Seller harmless from any and all claims,  damages, costs and liability which may
arise due to such entries,  surveys, tests,  investigations and the like. In the
event any such  claim,  damage,  cost or  liability  arises,  Seller  shall give
Purchaser  prompt  notice of such  matters;  provided,  however,  that  Seller's
failure  to  deliver  any  such  notice  shall  not  affect  Seller's  right  to
indemnification  under  this  Purchase  Contract.  Seller  shall have the right,
without  limitation,   to  disapprove  any  and  all  entries,  surveys,  tests,
investigations and the like that, in Seller's reasonable judgment,  could result
in any injury to the Property or breach of any  agreement,  or expose  Seller to
any  liability,  costs,  liens or  violations  of  applicable  law, or otherwise
adversely  affect the Property or Seller's  interest  therein.  Purchaser  shall
exercise  commercially  reasonable efforts to minimize disruption to the Tenants
in connection with Purchaser's or its Consultants'  activities  pursuant to this
ARTICLE  5. No  consent  by  Seller  to any such  activity  shall be  deemed  to
constitute  a waiver by Seller or  assumption  of  liability  or risk by Seller.
Purchaser  hereby agrees to restore the Property to the same condition  existing
immediately prior to Purchaser's exercise of its rights pursuant to this ARTICLE
5 at Purchaser's  sole cost and expense.  Purchaser  shall  maintain  commercial
general  liability  insurance with broad form  contractual  and personal  injury
liability  endorsements  with respect to Purchaser's  activities on the Property
pursuant to this ARTICLE 5, in amounts  (including  deductible amount of no more
than Ten Thousand Dollars  ($10,000.00) per occurrence and in the aggregate) and
with such  insurance  carriers as shall be approved by Seller and naming  Seller
and its affiliates as additional named insureds, with endorsements acceptable to
Seller,  including a waiver of  defenses of the insurer  based on the actions or
inaction of Purchaser (which  insurance must be reasonably  approved by Seller).
Such  liability  insurance  shall be on an  occurrence  basis and shall  provide
combined   single  limit  coverage  of  not  less  than  Three  Million  Dollars
($3,000,000.00)  (per occurrence and in the aggregate) for bodily injury,  death
and property damage,  by water or otherwise.  The provisions of this Section 5.3
shall  survive  the  Closing  or  termination  of  this  Purchase  Contract.  16
225171.04-Los Angeles S2A 5.4 No Liens Created By Purchaser. Purchaser shall not
permit any mechanic's or materialman's liens or any other liens to attach to the
Property  by  reason  of the  performance  of any  work or the  purchase  of any
materials  by  Purchaser  or any other party in  connection  with any studies or
tests  conducted by or for  Purchaser.  Purchaser  shall give Notice to Seller a
reasonable  time  prior  to entry  onto the  Property,  shall  deliver  proof of
insurance  coverage  required  above to Seller and shall permit Seller to have a
representative  present during all investigations and inspections conducted with
respect  to the  Property.  Purchaser  shall  take all  reasonable  actions  and
implement  all  protections  necessary  to  ensure  that  all  actions  taken in
connection  with the  investigations  and  inspections of the Property,  and all
equipment, materials and substances generated, used or brought onto the Property
pose no material threat to the safety of persons or the environment and cause no
damage  to the  Property  or other  property  of Seller  or other  persons.  All
information  made  available  by Seller to  Purchaser  in  accordance  with this
Purchase  Contract or obtained by Purchaser in the course of its  investigations
shall be treated as  confidential  information  by Purchaser,  and, prior to the
purchase of the Property by Purchaser,  Purchaser  shall use its best efforts to
prevent its Consultants, agents and employees from divulging such information to
any  unrelated  third parties  except as  reasonably  necessary to third parties
engaged by Purchaser for the limited purpose of analyzing and investigating such
information for the purpose of consummating the transaction contemplated by this
Purchase  Contract,   including   Purchaser's   attorneys  and  representatives,
prospective  lenders and  engineers.  5.5  Delivery of  Materials.  Seller shall
deliver to Purchaser  within ten (10) days from the Effective Date copies of all
income  and  expense  statements,  year end  financial  and  monthly  and annual
operating statements for the past three (3) calendar years (to the extent Seller
has  possession  or control of same),  copies of the Leases (in effect as of the
Effective Date), management, leasing, repair and service contracts,  engineering
studies, all guaranties and warranties covering any of the Fixtures and Tangible
Personal  Property or  Improvements,  Tenant files and  correspondence  and aged
receivable reports,  surveys, plats, site plans, building plans,  specifications
and architectural drawings, all certificates of occupancy, permits and licenses,
all bills for real estate,  personal  property and any other taxes affecting the
Property for the past tax year, notices of any special  assessments  against the
Property, notices of any material zoning, building, fire, safety,  environmental
or other violations not heretofore cured, the Note, the Mortgage, the Regulatory
Agreement,  HAP  Contracts and other  materials  (the  "Materials")  in Seller's
possession  or  control   relating  to  the  Property  (other  than  proprietary
information  of Seller).  If the sale of the  Property is not closed by the date
fixed 17  225171.04-Los  Angeles  S2A  therefor or if the  Purchase  Contract is
terminated for any reason,  Purchaser  shall,  within five (5) days,  return all
such Materials to Seller.  5.6 Extension of Feasibility  Period. The Feasibility
Period shall  automatically be extended for an additional ten (10) Business Days
in the event that (a) Seller  has  solicited  consents  and  approvals  from its
partners,  as  required by the  partnership  agreement,  as  amended,  governing
Seller,  and (b) on or before  the last day of the  Feasibility  Period,  Seller
cannot determine  whether it has the requisite  number of consents  required for
the consummation of the transactions  contemplated hereby.  Seller shall deliver
to  Purchaser  Notice  of such  extension  not  later  than  the last day of the
Feasibility Period. ARTICLE 6 TITLE AND SURVEY 6.1 Title Documents and Costs. On
or before the fortieth (40th) day after the Effective Date,  Purchaser shall, at
its sole cost and expense, cause Title Insurer to issue and deliver to Purchaser
and  Seller (a) a current  preliminary  title  report  for a  standard  coverage
owner's  policy  of title  insurance  for the  Land,  the  Improvements  and the
fixtures  located  thereon  (the  "Title  Commitment")  and  (b)  copies  of all
documents  referenced  as  exceptions  therein  (collectively,  the  "Underlying
Documents").  On or before the  fortieth  (40th) day after the  Effective  Date,
Purchaser may, at its sole cost and expense, obtain a current as-built survey of
the Land certified to Purchaser,  Seller and Title Insurer (the "Survey"). On or
before  the  Closing  or the  earlier  termination  of this  Purchase  Contract,
Purchaser  agrees to make  payment in full of the costs of  obtaining  the Title
Commitment and the Survey.  The Title Commitment,  the Underlying  Documents and
the Survey shall be  collectively  referred to herein as the "Title  Documents."
6.2  Purchaser's  Review of Title.  Purchaser  shall have until the tenth (10th)
Business  Day  after its  receipt  of the Title  Documents  to notify  Seller in
writing of any objection  which  Purchaser  may have to any matters  reported or
shown in the Title  Documents  or any updates  thereof  ("Purchaser's  Objection
Letter") (provided,  however, that if any such updates are received by Purchaser
(including,  without limitation,  any updates regarding the Seller's Approvals),
then  Purchaser  shall  have an  additional  five (5)  Business  Days  following
Purchaser's  receipt  of such  update  and  copies of all  documents  referenced
therein to notify  Seller of  objections to items shown on any such update which
were not disclosed on the previously delivered Title Documents).  In addition to
the Leases,  matters  reported 18  225171.04-Los  Angeles S2A in or shown by the
Title Documents (or any updates thereof) and not timely objected to by Purchaser
as provided above shall be deemed to be "Permitted Exceptions."  Notwithstanding
anything to the contrary  contained herein, in the event that Purchaser fails to
obtain the Survey on or before the fortieth (40th) day after the Effective Date,
any and all exceptions  identified on the Title Commitment or any update thereof
relating to the Survey shall be deemed to be Permitted Exceptions.  Seller shall
have no  obligation  to cure or correct  any matter  objected  to by  Purchaser.
However, on or before the fifth (5th) Business Day following Seller's receipt of
Purchaser's  Objection Letter, Seller may elect, by delivering written Notice of
such election to Purchaser and Title Insurer  ("Seller's  Response")  whether to
cause  Title  Insurer  to remove  or  insure  over any  matters  objected  to in
Purchaser's  Objection  Letter.  If Seller  fails to deliver  Seller's  Response
within the time frame set forth  above,  it shall be deemed to be an election by
Seller not to cause Title  Insurer to so remove or insure over such  objections.
If Seller  elects  not to cause  Title  Insurer  to so remove  or  insure,  then
Purchaser  must elect,  by delivering  written Notice of such election to Seller
and Title  Insurer  on or before  the  earlier  to occur of (a) the fifth  (5th)
Business Day  following  Purchaser's  receipt of Seller's  Response or (b) if no
Seller's  Response is  received  by  Purchaser,  the fifth  (5th)  Business  Day
following the date on which Seller shall have been deemed to have responded,  as
provided  above,  to: (i) terminate this Purchase  Contract (in which case Title
Insurer shall return the Deposit to  Purchaser,  the parties shall equally share
the  cancellation  charges of Title  Insurer,  if any,  and neither  party shall
thereafter have any rights or obligations to the other hereunder, other than the
Surviving  Obligations);  or (ii)  proceed to a timely  Closing  whereupon  such
objected to exceptions or matters shall be deemed to be Permitted Exceptions. In
the event that  Purchaser  fails to make such election on a timely  basis,  then
Purchaser  shall be deemed to have  elected to  proceed  to a timely  Closing in
accordance  with the preceding  clause (ii).  6.3 Condition of Title at Closing.
Upon the Closing, Seller shall sell, transfer and convey to Purchaser fee simple
title to the Land and the Improvements by a duly executed and acknowledged Deed,
subject only to the Permitted Exceptions. 19 225171.04-Los Angeles S2A ARTICLE 7
CLOSING 7.1 Dates,  Places of Closing,  Prorations,  Delinquent Rent and Closing
Costs.  7.1.1  Closing  Date.  The  Closing  shall occur on the date that is the
earlier  of  (a)  the  closing   date  issued  by  the   Community   Development
Administration of the State of Maryland in connection with any bond financing to
be obtained by Purchaser with respect to the  transactions  contemplated in this
Purchase  Contract,  and (b)  November  1,  2001 (or on such  other  date as the
parties hereto may agree).  The Closing shall occur through an escrow with Title
Insurer,  whereby  Seller,  Purchaser and their attorneys need not be physically
present at the Closing and may deliver  documents  by  overnight  air courier or
other means.  7.1.2  INTENTIONALLY  DELETED.  7.1.3  Prorations.  All normal and
customarily  proratable  items,  including,  without  limitation,   "Rents"  (as
hereinafter  defined),   operating  expenses,  personal  property  taxes,  other
operating  expenses and fees,  shall be prorated as of the Closing Date,  Seller
being charged or credited,  as appropriate,  for all of same attributable to the
period through and including the Closing Date (and credited for any amounts paid
by Seller  attributable  to the period  after the  Closing  Date,  if assumed by
Purchaser) and Purchaser being responsible for, and credited or charged,  as the
case may be, for all of same  attributable to the period after the Closing Date.
All deposits (and any interest  accrued  thereon,  if any) required under Tenant
leases not applied prior to the Closing Date, if any,  shall be  transferred  by
Seller to  Purchaser  at the  Closing.  Purchaser  shall  assume at Closing  the
obligation  to pay any  accrued but unpaid  tenant  improvement  allowances  and
leasing  commissions under Leases executed prior to the Effective Date, together
with any payments due parties under the Property Contracts assumed by Purchaser,
provided all of the foregoing have been prorated.  Any real estate ad valorem or
similar taxes for the Property,  or any  installment of  assessments  payable in
installments which installment is payable in the calendar year of Closing, shall
be  prorated  to the date of  Closing,  based upon  actual  days  involved.  The
proration of real property taxes or installments  of assessments  shall be based
upon the  assessed  valuation  and tax rate  figures  for the year in which  the
Closing occurs to the extent the same are available; provided, that in the event
that actual  figures  (whether for the assessed value of the Property or for the
tax rate) for the year of Closing are not  available  at the Closing  Date,  the
proration  shall be made using  figures  from the 20  225171.04-Los  Angeles S2A
preceding  year.  The  proration  shall be adjusted as provided in Section 7.1.4
hereof.  Seller  shall  pay  any  certified,   confirmed  and  ratified  special
assessment  liens that exist on the Property as of the Closing Date. Any special
assessment  liens on the Property  that are pending as of the Closing Date shall
be assumed and paid by Purchaser.  If the improvement giving rise to the special
assessment  lien has been  substantially  completed as of the Closing Date, then
any pending lien or special  assessment on the Property  shall,  for purposes of
the  application  of this  paragraph,  be  considered  certified,  confirmed and
ratified.  For  purposes  of this  Section  7.1.3 and  Sections  7.1.4 and 7.1.5
hereof,  the terms "Rent" and "Rents" shall include,  without  limitation,  base
rents,  additional rents,  percentage rents and common area maintenance charges.
The provisions of this Section 7.1.3 shall apply during the  "Proration  Period"
(as hereinafter defined).  7.1.4 Post-Closing  Adjustments.  If any of the items
subject to  proration  hereunder  cannot be prorated at the Closing  because the
information necessary to compute such proration is unavailable, or if any errors
or omissions in computing prorations at the Closing are discovered subsequent to
the Closing, then such item shall be reapportioned and such errors and omissions
corrected  as soon as  practicable  after the Closing  Date and the proper party
reimbursed,  which  obligation  shall  survive  the  Closing  for a period  (the
"Proration  Period")  from the Closing Date until one (1) year after the Closing
Date.  Neither party hereto shall have the right to require a recomputation of a
Closing proration or a correction of an error or omission in a Closing proration
unless  within the Proration  Period one of the parties  hereto (i) has obtained
the previously unavailable  information or has discovered the error or omission,
and (ii) has given Notice thereof to the other party together with a copy of its
good faith  recomputation  of the  proration  and  copies of all  substantiating
information  used in such  recomputation.  The  failure of a party to obtain any
previously unavailable information or discover an error or omission with respect
to an item subject to proration hereunder and to give Notice thereof as provided
above within the Proration Period shall be deemed a waiver of its right to cause
a  recomputation  or a correction  of an error or omission  with respect to such
item after the Closing Date.  7.1.5  Delinquent Rent. If on the Closing Date any
Tenant is in arrears in any Rent payment under any Tenant lease (the "Delinquent
Rent"),  any  Delinquent  Rent received by Purchaser and Seller from such Tenant
after the  Closing  shall be applied to amounts  due and  payable by such Tenant
during the following  periods in the following order of priority:  (i) first, to
the period of time after the Closing  Date;  and (ii)  second,  to the period of
time before the Closing Date. If Delinquent Rent or any portion thereof received
by Purchaser after the 21 225171.04-Los  Angeles S2A Closing are due and payable
to  Seller  by  reason  of  this   allocation,   the  appropriate  sum,  less  a
proportionate  share of any  reasonable  attorneys'  fees and costs and expenses
expended in connection  with the collection  thereof,  shall be promptly paid to
Seller.  Any monies  received by Seller  after  Closing  shall be  forwarded  to
Purchaser  for  disbursement  in accordance  with the order of payment  provided
herein above.  After the Closing,  Seller shall continue to have the right,  but
not the  obligation,  in its own  name,  to  demand  payment  of and to  collect
Delinquent Rent owed to Seller by any Tenant, which right shall include, without
limitation,  the right to  continue  or commence  legal  actions or  proceedings
against any Tenant  (provided,  that Seller shall not commence any legal actions
or  proceedings  against any Tenant which  continues as a Tenant at the Property
after  Closing  without  the  prior  consent  of  Purchaser,  which  will not be
unreasonably withheld or delayed), and the delivery of the General Assignment as
described in Section  7.2.1.3  hereof shall not constitute a waiver by Seller of
such right. Purchaser agrees to cooperate with Seller at no cost or liability to
Purchaser in  connection  with all efforts by Seller to collect such  Delinquent
Rent and to take all steps,  whether before or after the Closing Date, as may be
necessary  to carry  out the  intention  of the  foregoing,  including,  without
limitation,  the  delivery  to  Seller,  within  seven (7) days  after a written
request, of any relevant books and records (including,  without limitation, rent
statements,  receipted bills and copies of Tenant checks used in payment of such
rent),  the  execution  of any and all  consents  or  other  documents,  and the
undertaking  of  any  act  reasonably  necessary  for  the  collection  of  such
Delinquent Rent by Seller;  provided,  however,  that Purchaser's  obligation to
cooperate with Seller pursuant to this sentence shall not obligate  Purchaser to
terminate any Tenant lease with an existing  Tenant or evict any existing Tenant
from the Property.  The  provisions of this Section 7.1.5 shall apply during the
Proration  Period.  7.1.6  Closing  Costs.  Purchaser  shall pay the cost of all
transfer,  sales,  use,  and excise  taxes and  recording  costs,  to the extent
applicable,  with  respect to the  Closing.  Seller and  Purchaser  shall  share
equally in the costs of the escrow fees of Title  Insurer,  but not any other of
Title  Insurer's  fees and charges.  All closing costs and fees other than those
expressly  allocated in this Purchase Contract shall be paid by Purchaser and/or
Seller in accordance  with the custom of the city and state in which the Land is
located.  The provisions of this Section 7.1.6 shall survive the Closing.  7.1.7
Escrows. 7.1.7.1 In the event Purchaser assumes the Assumed Indebtedness and the
HUD Loan Documents,  the escrows held by Mortgagee 22 225171.04-Los  Angeles S2A
(including,  without  limitation,  escrows for real property taxes and insurance
premiums,  but excluding the residual receipts,  capital  replacement and repair
reserves)  are to be  transferred  to Purchaser at Closing,  and Seller shall be
reimbursed  by  Purchaser  in full for the  amount  of such  escrows  which  are
transferred  to  Purchaser on the Closing  Date,  in cash,  by wire  transfer or
certified  check.  7.1.7.2 The funds contained in any residual  receipts reserve
(as  defined  by HUD or any other  applicable  state or local  agency)  shall be
transferred  to Seller at  Closing  unless  HUD shall  require  such funds to be
transferred to Purchaser,  in which event the residual  receipts reserve will be
transferred  to Purchaser at Closing,  in either case without  adjustment of the
Purchase Price. 7.1.7.3 The funds contained in any capital replacement or repair
reserve (as defined by HUD or any other  applicable state or local agency) shall
be  transferred  to Purchaser  at Closing,  without  adjustment  of the Purchase
Price;  provided,  however,  that in the event that HUD Preliminary  Approval is
conditioned  on HUD or any  other  applicable  state or local  agency  otherwise
requires or requests  that any capital  improvements  or repairs be performed at
the Property (or any portion  thereof)  prior to the transfer of the Property to
Purchaser,  Seller shall have the right, but not the obligation, to use (without
adjustment to the Purchase Price) the funds in such capital  replacement  and/or
repair reserves,  as necessary,  for such capital  improvement or repair. To the
extent that any funds remain in the capital  replacement  and/or repair reserves
after the capital  improvements  or repairs are made at the Property as required
by HUD or any  other  applicable  state or local  agency,  such  funds  shall be
transferred to Purchaser at Closing,  without  adjustment to the Purchase Price.
7.2 Items To Be Delivered Prior To or At Closing. 7.2.1 Deliveries By Seller. At
Closing,  Seller shall deliver to Purchaser,  each of the  following  items,  as
applicable:  7.2.1.1 Deed. The Deed to Purchaser.  The acceptance of the Deed at
Closing,  shall be deemed to be full  performance  of, and  discharge  of, every
agreement and  obligation  on Seller's part to be performed  under this Purchase
Contract,  except for those that this Purchase  Contract  specifically  provides
shall survive  Closing.  23  225171.04-Los  Angeles S2A 7.2.1.2 Bill of Sale and
Assignment  of Leases.  A Bill of Sale without  recourse or warranty in the form
attached as Exhibit G covering all Property  Contracts,  Leases,  Permits (other
than Excluded  Permits) and Fixtures and Tangible  Personal Property required to
be  transferred  to Purchaser  with respect to such  Property.  Purchaser  shall
countersign  the same so as to effect an  assumption  by  Purchaser,  including,
without  limitation,   of  Seller's  obligations  thereunder.   7.2.1.3  General
Assignment.  A General  Assignment  (to the extent  assignable  and in force and
effect) without recourse or warranty in the form attached as Exhibit H of all of
Seller's right, title and interest in and to the Miscellaneous  Property Assets,
subject to any required consents.  Purchaser shall countersign the same so as to
effect an assumption by Purchaser,  including,  without limitation,  of Seller's
obligations thereunder.  7.2.1.4 Closing Statement. A closing statement executed
by Seller. 7.2.1.5 Seller/Vendor  Affidavit.  A seller/vendor's  affidavit or at
Seller's  option an indemnity,  as applicable,  in the customary form reasonably
acceptable to Seller to enable Title  Insurer to delete the standard  exceptions
to the title  insurance  policy to be issued  pursuant  to the Title  Commitment
(other than matters  constituting any Permitted Exceptions and matters which are
to be completed or performed  post-Closing).  7.2.1.6 Non-Foreign  Affidavit.  A
certification  of Seller's  non-foreign  status  pursuant to Section 1445 of the
Internal  Revenue Code of 1986,  as amended.  7.2.1.7  Delivery.  Except for the
items expressly listed herein to be delivered at Closing,  delivery of any other
required  items shall be deemed made by Seller to  Purchaser,  if Seller  leaves
such  documents  at the Property in their  customary  place of storage or in the
custody of Purchaser's representatives. 7.2.1.8 Leases, Property Contracts, Etc.
To the extent in Seller's  possession or control,  original copies of the Leases
and Property  Contracts,  lease files, keys to the property,  Seller's books and
records  (other  than  proprietary  information)  regarding  the  Property,  and
original copies of 24 225171.04-Los  Angeles S2A the tenant  estoppels,  letters
executed by Seller and, upon the request of  Purchaser,  its  management  agent,
addressed to all Tenants  notifying  the Tenants of the sale and transfer of the
Property to Purchaser. 7.2.1.9 Due Formation and Authority. Proof that Seller is
duly and validly  organized  and presently  existing in good standing  under the
laws of the State of its respective formation and that the individuals executing
the documents on behalf of Seller are duly authorized.  7.2.1.10  Termination of
Property Contracts.  Written termination of each Property Contract that will not
be assigned to, and assumed by,  Purchaser.  7.2.1.11  Termination of Management
Contract.  Proof that the Management  Contract has been  terminated and is of no
further force or effect. 7.2.1.12 Release and Assumption Agreement. In the event
the HUD Loan Documents are to be assumed by Purchaser,  a Release and Assumption
Agreement and ancillary documents ("Release and Assumption  Agreement") relating
to the HUD Loan  Documents  prepared by Seller in a form approved by HUD,  which
Purchaser  shall  countersign  so as to effect an  assumption  by  Purchaser  of
Seller's  obligations  thereunder.  7.2.1.13 Other.  Such other documents as are
reasonably  necessary to consummate  the  transactions  herein  contemplated  in
accordance  with the  terms  of this  Purchase  Contract.  7.2.2  Deliveries  By
Purchaser.  At  Closing,  Purchaser  shall  deliver  to the Title  Company  (for
disbursement to Seller upon the Closing) the following items with respect to the
Property  being  conveyed at such  Closing:  7.2.2.1  Purchase  Price.  The full
Purchase Price as required by ARTICLE 3 hereof plus or minus the  adjustments or
prorations required by this Purchase Contract. If at Closing there are any liens
or  encumbrances  on the Property  that Seller is obligated or elects to pay and
discharge,  Seller may use any portion of the Purchase Price for the Property(s)
to satisfy the same, provided that Seller shall have delivered to Title Insurer,
on such Closing  instruments  in recordable  form  sufficient to satisfy such 25
225171.04-Los  Angeles  S2A liens and  encumbrances  of  record  (or,  as to any
mortgages,  deeds to secure debt or deeds of trust,  appropriate payoff letters,
acceptable to Title Insurer), together with the cost of recording or filing such
instruments.  Purchaser,  if request is made within a  reasonable  time prior to
Closing,  agrees to provide at Closing separate certified or cashier's checks as
requested, aggregating not more than the amount of the balance of the portion of
Purchase   Price,   to  facilitate  the   satisfaction  of  any  such  liens  or
encumbrances.  The  existence  of any such  liens or  encumbrances  shall not be
deemed   objections   to  title  if  Seller  shall  comply  with  the  foregoing
requirements.  7.2.2.2  Closing  Statement.  A  closing  statement  executed  by
Purchaser.  7.2.2.3  Bill of Sale and  Assignment  of  Leases.  A  countersigned
counterpart  of the Bill of Sale in the form  attached  as  Exhibit  G.  7.2.2.4
General Assignment. A countersigned counterpart of the General Assignment in the
form  attached  as  Exhibit H.  7.2.2.5  Release  and  Assumption  Agreement.  A
countersigned  counterpart  of the Release  and  Assumption  Agreement.  7.2.2.6
Other.  Such other  documents  as are  reasonably  necessary to  consummate  the
transactions  herein  contemplated in accordance with the terms of this Purchase
Contract.  7.2.2.7 Mortgagee Statement.  In the event the HUD Loan Documents are
to be assumed by Purchaser,  a statement  from Mortgagee as to the amount of the
Assumed  Indebtedness.  ARTICLE 8 REPRESENTATIONS,  WARRANTIES AND COVENANTS 8.1
Representations  and  Warranties  of Seller.  8.1.1 For the  purpose of inducing
Purchaser to enter into this Purchase  Contract and to  consummate  the sale and
purchase of the Property in accordance herewith,  Seller represents and warrants
to Purchaser the following as of the Effective  Date and as of the Closing Date:
26 225171.04-Los  Angeles S2A 8.1.1.1 Due  Organization.  Seller is lawfully and
duly  organized  and in  good  standing  under  the  laws  of the  State  of its
respective  formation.  Subject to consents and approvals required from Seller's
partners and HUD (as  described in ARTICLE 9 hereof),  on or before the last day
of the  Financing  Contingency  Period,  Seller  (a)  shall  have the  power and
authority  (i) to sell and convey the Property and (ii) to execute the documents
to be executed by Seller and (b) will have taken as  applicable,  all corporate,
partnership, limited liability company or equivalent entity actions required for
the execution and delivery of this Purchase Contract and the consummation of the
transactions  contemplated  by this Purchase  Contract.  The compliance  with or
fulfillment of the terms and conditions hereof will not conflict with, or result
in a breach of, the terms,  conditions or provisions of, or constitute a default
under,  any  contract or agreement to which Seller is a party or by which Seller
is otherwise bound. 8.1.1.2 Title. Seller holds title to the Property, including
all real property  contained  therein required to be sold to Purchaser,  subject
only to the Permitted Exceptions (provided, however, that if this representation
is or becomes untrue,  Purchaser's remedies shall be limited to the remedies set
forth in Section 6.2 hereof and Seller shall have no other liability as a result
thereof, either before or after Closing).  8.1.1.3 Tenants. There are no adverse
or other parties in possession of the Property, except for occupants, guests and
Tenants under the Leases (provided,  however,  that if this representation is or
becomes untrue,  Purchaser's remedies shall be limited to the remedies set forth
in Section 6.2 hereof).  8.1.1.4  Authority.  Seller has all necessary right and
authority to convey and assign to Purchaser all contract  rights and  warranties
required to be conveyed and assigned to Purchaser  hereunder subject to consents
and approvals required from Seller's partners and HUD (as described in ARTICLE 9
hereof).  8.1.1.5  INTENTIONALLY  DELETED.   8.1.1.6  Litigation.   To  Seller's
knowledge,  there  are  no  actions,  proceedings,  litigation  or  governmental
investigations or condemnation  actions either pending or threatened against the
Property,  as applicable,  except as set forth in Exhibit I attached hereto.  27
225171.04-Los  Angeles S2A 8.1.1.7 Mechanic's Liens.  Seller has no knowledge of
any claims for labor  performed,  materials  furnished  or services  rendered in
connection  with  constructing,  improving or repairing any of the Property,  as
applicable,  caused by Seller and which remain  unpaid beyond the date for which
payment was due and in respect of which liens may or could be filed  against any
of the  Property,  as  applicable,  except for  repairs,  materials  or services
furnished  in the ordinary  course of business  (for which Seller shall make the
necessary  arrangements  with Title Insurer such that these matters shall not be
title exceptions in the Title  Commitment as of Closing).  8.1.1.8 Rent Roll. To
the best of Seller's  knowledge,  the rent roll to be  delivered  or  previously
delivered, as the case may be, to Purchaser is true, complete and correct in all
material  respects  and  contains  all  of  the  Leases  and  tenancies  of  the
Improvements  as of the Effective  Date,  which leases have not been modified or
amended except as indicated on the rent roll (such rent roll to be updated as of
Closing  so as to be true,  complete  and  correct  in all  material  respects).
8.1.1.9 Leases. To the best of Seller's knowledge, the Leases to be delivered or
previously  delivered,  as the case may be, to Purchaser  are true,  correct and
complete  copies of all Leases  (including  all  modifications  thereof) and all
other  documents or  instruments  which create  possessory  rights in all or any
portion  of the  Improvements.  8.1.1.10  Violations.  To the  best of  Seller's
knowledge,  Seller  has not  received  any notice of any  violation,  or alleged
violation,   of  any  laws,   regulations  or  any  other  requirements  of  any
governmental  agency or authority  having  jurisdiction  over the  Property,  to
include,  without limitation,  notice of the violation, or alleged violation, of
any  environmental  protection  laws or  regulations.  8.1.1.11  Commissions  on
Leases.  To the best of Seller's  knowledge,  all  commissions  due on Leases or
renewals  of  Leases  have been  paid in full as of the  Effective  Date and all
tenant  buildout and other  obligations  due Tenants  under the Leases have been
paid in full or otherwise satisfied.  8.1.1.12 Default Under HUD Loan Documents.
In the event Purchaser assumes the HUD Loan Documents,  Seller is not in default
under  the HUD  Loan  Documents  nor has any  event  or  condition  occurred  28
225171.04-Los  Angeles  S2A  which,  with the  passage  of time or the giving of
notice,  constitutes  a default  thereunder,  in each case which  default  could
reasonably be expected to have a Material  Adverse Effect.  8.1.2 AS-IS.  Except
for the  representations  and  warranties  expressly  set forth in Section 8.1.1
hereof,  the Property is expressly  purchased  and sold "AS IS," "WHERE IS," and
"WITH ALL  FAULTS." The Purchase  Price and the terms and  conditions  set forth
herein are the result of arm's-length  bargaining between entities familiar with
transactions of this kind, and said price, terms and conditions reflect the fact
that  Purchaser  shall  have  the  benefit  of,  and is  not  relying  upon  any
information  provided  by Seller or Broker  or  statements,  representations  or
warranties,  express or implied,  made by or enforceable directly against Seller
or Broker,  including,  without  limitation,  any  relating  to the value of the
Property,  the physical or environmental  condition of the Property,  any state,
federal,  county or local law,  ordinance,  order or permit; or the suitability,
compliance or lack of compliance  of the Property  with any  regulation,  or any
other  attribute  or matter  of or  relating  to the  Property  (other  than any
covenants  of  title  contained  in the  Deed  conveying  the  Property  and the
representations set forth above).  Purchaser  represents and warrants that as of
the date hereof and as of the Closing  Date,  it has and shall have reviewed and
conducted  such  independent  analyses,  studies,  reports,  investigations  and
inspections as it deems  appropriate in connection with the Property.  If Seller
provides or has provided any documents,  summaries,  opinions or work product of
consultants,  surveyors,  architects,  engineers, title companies,  governmental
authorities  or any  other  person  or  entity  with  respect  to the  Property,
including,  without limitation,  the offering prepared by Broker,  Purchaser and
Seller agree that Seller has done so or shall do so only for the  convenience of
both  parties,  Purchaser  shall not rely  thereon and the reliance by Purchaser
upon any such documents, summaries, opinions or work product shall not create or
give rise to any liability of or against Seller, Seller's partners or affiliates
or  any  of  their  respective  partners,  officers,  directors,   participants,
employees,  contractors,   attorneys,  consultants,   representatives,   agents,
successors, assigns or predecessors-in-interest.  Purchaser shall rely only upon
any title insurance obtained by Purchaser with respect to title to the Property.
Purchaser  acknowledges and agrees that no  representation  has been made and no
responsibility  is  assumed  by  Seller  with  respect  to  current  and  future
applicable  zoning  or  building  code  requirements  or the  compliance  of the
Property with any other laws,  rules,  ordinances or regulations,  the financial
earning  capacity  or  expense  history of the  Property,  the  continuation  of
contracts,  continued  occupancy  levels  of the 29  225171.04-Los  Angeles  S2A
Property,  or any part  thereof,  or the  continued  occupancy by Tenants of any
Leases or, without limiting any of the foregoing, occupancy at Closing. Prior to
Closing,  Seller shall have the right,  but not the  obligation,  to enforce its
rights  against any and all  Property  occupants,  guests or Tenants.  Except as
otherwise  set forth  herein,  Purchaser  agrees that the  departure or removal,
prior to Closing,  of any of such guests,  occupants or Tenants shall not be the
basis for,  nor shall it give rise to, any claim on the part of  Purchaser,  nor
shall it affect the obligations of Purchaser under this Purchase Contract in any
manner  whatsoever;  and Purchaser  shall close title and accept delivery of the
Deed with or without such  Tenants in  possession  and without any  allowance or
reduction in the Purchase Price under this Purchase  Contract.  Purchaser hereby
releases  Seller  from  any and  all  claims  and  liabilities  relating  to the
foregoing matters. 8.1.3 Waiver of Breach. In the event that Seller breaches any
representation  contained in Section 8.1.1 hereof and Purchaser had knowledge of
such breach,  Purchaser shall be deemed to have waived any right of recovery and
Seller shall not have any  liability in  connection  therewith.  8.1.4  Seller's
Knowledge.  Representations and warranties above made to the knowledge of Seller
shall not be deemed to imply any duty of inquiry.  For purposes of this Purchase
Contract,  the term  "Seller's  knowledge"  shall mean and refer to only  actual
knowledge of the "Designated  Representative" (as hereinafter defined) of Seller
and shall  not be  construed  to refer to the  knowledge  of any other  partner,
officer, director, agent, employee or representative of Seller, or any affiliate
of  Seller,  or to  impose  upon  such  Designated  Representative  any  duty to
investigate  the matter to which such actual  knowledge  or the absence  thereof
pertains,  or to  impose  upon such  Designated  Representative  any  individual
personal liability.  As used herein, the term "Designated  Representative" shall
refer  to  Debbie   Hindman,   the  on-site   manager  at  the   Property.   8.2
Representations  and Warranties of Purchaser.  8.2.1 For the purpose of inducing
Seller to enter  into this  Purchase  Contract  and to  consummate  the sale and
purchase of the  Property  in  accordance  herewith,  Purchaser  represents  and
warrants to Seller the following as of the Effective  Date and as of the Closing
Date:  8.2.2  Purchaser  and Its  Business.  With respect to  Purchaser  and its
business,   Purchaser   represents  and  warrants,   in  particular,   that:  30
225171.04-Los  Angeles S2A 8.2.2.1 Due Organization.  Purchaser is a corporation
duly  organized,  validly  existing  and in  good  standing  under  the  laws of
Maryland.  Purchaser  is  sophisticated  and  experienced  in  the  acquisition,
ownership,  and  operation  of  multi-family  housing  projects  similar  to the
Property,  and has full  knowledge of all  applicable  federal,  state and local
laws,  rules,  regulations,  and  ordinances  in connection  therewith.  8.2.2.2
Authority.  Purchaser,  acting  through any of its or their duly  empowered  and
authorized officers,  joint venturers,  partners,  managers, or members, has all
necessary  power and authority to own and use its properties and to transact the
business in which it is engaged,  and has full power and authority to enter into
this Purchase  Contract,  to execute and deliver the  documents and  instruments
required of Purchaser herein, and to perform its obligations  hereunder;  and no
consent of any of Purchaser's officers, joint venturers,  partners, managers, or
members are required to so empower or authorize  Purchaser.  8.2.2.3 Litigation.
No pending or, to the knowledge of Purchaser, threatened litigation exists which
if determined  adversely  would restrain the  consummation  of the  transactions
contemplated  by this  Purchase  Contract or would declare  illegal,  invalid or
non-binding any of Purchaser's  obligations or covenants to Seller.  8.2.2.4 Due
Execution.  Purchaser is duly authorized to execute and deliver,  acting through
its duly empowered and authorized officers, joint venturers, partners, managers,
and members,  respectively, and perform this Purchase Contract and all documents
and instruments and transactions  contemplated  hereby or incidental hereto, and
such  execution,  delivery and performance by Purchaser does not (i) violate any
of the provisions of their respective articles of incorporation or organization,
operating  agreements,  partnership  agreements  or  bylaws,  (ii)  violate  any
provision of any law, governmental rule or regulation currently in effect, (iii)
violate any judgment,  decree, writ, injunction,  award,  determination or order
currently in effect that names or is  specifically  directed at Purchaser or its
property, and (iv) require the consent,  approval, order or authorization of, or
any filing with or notice to, any court or other governmental authority. 8.2.2.5
Joinder. The joinder of no person or entity other than Purchaser is necessary to
consummate  the  transactions  to be performed 31  225171.04-Los  Angeles S2A by
Purchaser and  Purchaser  has all necessary  right and authority to perform such
acts as are required and contemplated by this Purchase Contract.  8.2.3 Brokers.
Purchaser  has not  dealt  with any  broker,  finder  or any  other  person,  in
connection  with the  purchase  of or the  negotiation  of the  purchase  of the
Property that might give rise to any claim for commission against Seller or lien
or claim against the Property. 8.2.4 Participation In Federal/State Programs. In
the event Purchaser  intends to assume the HUD Loan Documents or a HAP Contract,
neither  Purchaser nor any affiliate of Purchaser has been debarred,  suspended,
or voluntarily excluded from participation in any Federal program or any program
of a State government or agency,  or has been the subject of a limited denial of
participation  issued  pursuant  to 24 CFR Part 24,  Subpart  G, or been  denied
approval for  participation in a HUD or HUD project pursuant to 24 CFR Part 200,
subpart  H, at any time  during the ten (10)  years  preceding  the date of this
Purchase Contract. 8.2.5 Approvals. In the event Purchaser intends to assume the
HUD Loan Documents or a HAP Contract,  no approval of Purchaser or any affiliate
of Purchaser (as such term is defined in 24 CFR ss.  200.215) for  participation
in a HUD  project  pursuant to 24 CFR Part 200,  Subpart H has been  delayed for
more than  thirty  (30) days  after  submission  of HUD  previous  participation
clearance,  nor  have  any of them  been  denied  preliminary  approval  (or not
received preliminary  approval within ninety (90) days of application  therefor)
as transferee under a TPA Application requiring full or modified review, in each
case within the twelve (12) calendar months  preceding the date of this Purchase
Contract.  8.2.6  Assumption.  Purchaser  does not intend to assume the HUD Loan
Documents on the Closing  Date.  ARTICLE 9  CONDITIONS  PRECEDENT TO CLOSING 9.1
Purchaser's  Conditions To Closing.  Purchaser's  obligation to close under this
Purchase  Contract shall be subject to and  conditioned  upon the fulfillment in
all material  respects of each and all of the  following  conditions  precedent:
9.1.1  Deliveries.  All of the  documents  required to be delivered by Seller to
Purchaser at the Closing  pursuant to the terms and  conditions  hereof shall 32
225171.04-Los Angeles S2A have been delivered and shall be in form and substance
reasonably  satisfactory  to  Purchaser.   9.1.2  Seller's  Representations  and
Warranties.  Each of the  representations  and  warranties  of Seller  contained
herein  shall be true in all  material  respects as of the Closing  Date.  9.1.3
Seller's  Due  Performance.  Seller  shall have  complied  with,  fulfilled  and
performed, in each case in all material respects,  each of the covenants,  terms
and conditions to be complied with,  fulfilled or performed by Seller hereunder.
9.1.4 Title. Title to the Property is in the condition required by this Purchase
Contract.  9.1.5 HUD Preliminary  Approval.  If the HUD Loan Documents are to be
assumed by Purchaser at Closing,  HUD shall have issued HUD Preliminary Approval
and shall have  consented to the  assignment of any  applicable  HAP Contract to
Purchaser, all on terms and conditions reasonably acceptable to Purchaser. 9.1.6
Consent of Federal or State Authorities.  Consent or approvals of any federal or
state authorities  (other than HUD or local agencies involved in the issuance of
tax-exempt bonds) having jurisdiction over the Property, to the extent required.
Notwithstanding  anything  to the  contrary,  there are no other  conditions  on
Purchaser's  obligation  to Close  except  as  expressly  set forth  above.  9.2
Seller's  Conditions  To Closing.  Without  limiting any of the rights of Seller
elsewhere provided for in this Purchase Contract,  Seller's  obligation to close
with respect to conveyance of the Property under this Purchase Contract shall be
subject to and conditioned upon the fulfillment of each and all of the following
conditions   precedent:   9.2.1  Purchaser's   Representations  and  Warranties.
Purchaser's  representations  and warranties set forth in this Purchase Contract
shall have been true and correct in all material  respects when made,  and shall
be true and correct in 33 225171.04-Los Angeles S2A all material respects on the
Closing Date and as of the  Effective  Date as though such  representations  and
warranties  were  made at and as of such date and time.  9.2.2  Purchaser's  Due
Performance.  Purchaser  shall  have  fully  performed  and  complied  with  all
covenants,  conditions,  and other  obligations in this Purchase  Contract to be
performed  or  complied  with by it at or prior to  Closing  including,  without
limitation, payment in full of the Purchase Price. 9.2.3 Litigation. There shall
not be  pending  or,  to the  knowledge  of  either  Purchaser  or  Seller,  any
litigation or  threatened  litigation  which,  if  determined  adversely,  would
restrain  the  consummation  of any of the  transactions  contemplated  by  this
Purchase Contract or declare illegal, invalid or nonbinding any of the covenants
or obligations of Purchaser. 9.2.4 Seller's Approvals. Subject to the provisions
of Section 2.2 hereof, Seller shall have received the Seller's Approvals.  9.2.5
HUD Preliminary  Approval. In the event the HUD Loan Documents are to be assumed
by Purchaser at Closing,  HUD shall have issued HUD  Preliminary  Approval,  the
release  of  Seller  from  the HUD  Loan  Documents  and the  assignment  of any
applicable  HAP Contract to Purchaser,  all on terms and  conditions  reasonably
acceptable to Seller. 9.2.6 Consent of Federal or State Authorities.  Consent or
approvals of any federal or state authorities  (other than HUD or local agencies
involved in the  issuance of  tax-exempt  bonds)  having  jurisdiction  over the
Property,  to the extent required.  9.3 HUD Preliminary Approval and Consent. In
the  event   Purchaser   intends  to  assume  the  HUD  Loan   Documents,   then
notwithstanding  any provision of this Purchase  Contract to the contrary,  this
Purchase  Contract and the  obligations  of Seller and  Purchaser  hereunder are
expressly  conditioned  upon HUD  Preliminary  Approval,  and HUD consent to the
assignment of any HAP Contract to Purchaser,  on terms and conditions reasonably
acceptable  to each of Seller and  Purchaser.  9.3.1  Transfer  and  Possession.
Notwithstanding  any provision of this Purchase Contract to the contrary,  prior
to such  approval  (a) no transfer of any  interest in the  Property  under this
Purchase  Contract  shall be effective,  (b) Pur- 34  225171.04-Los  Angeles S2A
chaser  will  not  take  possession  of the  Property  nor  assume  benefits  of
ownership,  and (c)  Purchaser  shall  have no right  upon any  breach by Seller
hereunder  to pursue  remedies  (except for return of the Deposit in  accordance
with this Section 9.3),  directly or indirectly,  against Seller or the Property
including from any assets, rents, issues or profits thereof, or to effect a lien
upon the Property or the assets, rents, issues or profits thereof. 9.3.2 Timing;
Extensions.  Notwithstanding  any  provision  of this  Purchase  Contract to the
contrary,  either party hereto shall have the right to terminate  this  Purchase
Contract  and  its  obligations  hereunder  if:  (a)  HUD  fails  to  grant  HUD
Preliminary Approval not later than sixty (60) days after submission thereof; or
(b) any conditions to the granting of such HUD Preliminary Approval imposed upon
either party are inconsistent with the terms and conditions  hereof, and are, in
the  reasonable  discretion  of  such  party,  unacceptable.  9.3.3  Failure  of
Conditions To Closing.  Notwithstanding  any provision of this Purchase Contract
to the  contrary,  from  and  after  the  last  day of the  Feasibility  Period,
Purchaser  shall not be  entitled to a return of the Deposit in the event that a
condition set forth in Section 9.1.5 (HUD Preliminary Approval),  9.1.6 (Consent
of Federal or State  Authorities),  9.2.5 (HUD Preliminary  Approval),  or 9.2.6
(Consent of Federal or State Authorities) is not satisfied;  provided,  however,
that if HUD is willing to grant HUD  Preliminary  Approval and such  approval is
conditioned on Seller or Purchaser  making  immediate  capital  improvements  or
repairs to the  Property,  then either  Seller  (subject to the terms of Section
7.1.7.3 hereof) or Purchaser may elect to make such improvements  and/or repairs
before the Closing  Date.  If neither  Seller nor  Purchaser  elect to make such
improvements  and/or  repairs,  then  Seller or  Purchaser  may, in its sole and
absolute  discretion,  terminate  this  Purchase  Contract  and its  obligations
hereunder.  In the  event  that  Seller  or  Purchaser  exercises  its  right to
terminate  this  Purchase  Contract  pursuant  to the  terms of the  immediately
preceding sentence, then (x) this Purchase Contract shall terminate and be of no
further  force and  effect,  except  for the  Surviving  Obligations,  (y) Title
Insurer shall  promptly  return the Deposit to  Purchaser,  and (z) Seller shall
reimburse  Purchaser  for  its  reasonable   out-of-pocket  costs  and  expenses
(including,   without  limitation,   reasonable  attorneys'  fees,  charges  and
disbursements)  actually  incurred in connection  with the  negotiation  of this
Purchase Contract and Purchaser's  related due diligence efforts in an amount up
to and limited to Fifteen Thousand Dollars  ($15,000.00).  In the event that HUD
disapproves the TPA Application,  this Purchase  Contract shall terminate except
for the Surviving Obligations. 35 225171.04-Los Angeles S2A ARTICLE 10 BROKERAGE
10.1 Broker.  Seller represents and warrants to Purchaser that it has dealt only
with  Insignia/ESG  and  Marcus  and  Millichap   (collectively,   "Broker")  in
connection with this Purchase Contract. Seller and Purchaser each represents and
warrants to the other that other than Broker,  it has not dealt with or utilized
the  services  of any  other  real  estate  broker,  sales  person  or finder in
connection with this Purchase  Contract,  and each party agrees to indemnify the
other party from and against all claims for brokerage  commissions  and finder's
fees arising from or attributable  to the acts of omissions of the  indemnifying
party.  The  provisions  of this  Section  10.1  shall  survive  the  Closing or
termination of this Purchase  Contract.  10.2 Commissions.  Seller agrees to pay
Broker a commission according to the terms of a separate agreement. Broker shall
not be deemed a party or third party beneficiary of this Purchase Contract. 10.3
Responsibilities.  Broker  assumes no  responsibility  for the  condition of the
Property or  representation  for the  performance  of this Purchase  Contract by
Seller or Purchaser.  ARTICLE 11 POSSESSION 11.1  Possession.  Possession of the
Property  subject to the Permitted  Exceptions and the Leases shall be delivered
to Purchaser at the Closing.  ARTICLE 12 DEFAULTS AND REMEDIES  12.1  Liquidated
Damages. In the event Purchaser  terminates this Purchase Contract following the
Financing  Contingency  Period for any reason other than  Seller's  inability to
convey  title as  required  by this  Purchase  Contract,  or  material  defaults
hereunder on or prior to the Closing Date that are not cured by the Closing Date
and  consummation of the Closing does not occur by reason of such termination or
material  default  by  Purchaser,  Seller and  Purchaser  agree that it would be
impractical  and  extremely  difficult to estimate the damages  which Seller may
suffer.   Therefore,   Seller  and  Purchaser  hereby  agree  that,  except  for
Purchaser's  obligations  to Seller  under  Section 5.3 hereof,  the  reasonable
estimate of the total net  detriment  that Seller would suffer in the event that
Purchaser  terminates  this 36  225171.04-Los  Angeles S2A Purchase  Contract or
materially  defaults  hereunder on or prior to the Closing Date is and shall be,
and Seller's  sole remedy  (whether at law or in equity)  shall be, the right to
receive  from  Title  Insurer  and retain the full  amount of the  Deposit.  The
payment and performance of the above as liquidated  damages is not intended as a
forfeiture or penalty  within the meaning of  applicable  law and is intended to
settle all issues and questions  about the amount of damages  suffered by Seller
in the applicable  event,  except only for damages under  Purchaser's  Surviving
Obligations,  irrespective  of the time when the inquiry  about such damages may
take place. Upon any such failure by Purchaser hereunder, this Purchase Contract
shall be  terminated,  and  neither  party  shall  have any  further  rights  or
obligations hereunder,  each to the other, except for Purchaser's obligations to
Seller  under  Purchaser's  Surviving  Obligations,  and the  right of Seller to
collect such liquidated damages to the extent not theretofore paid by Purchaser.
Notwithstanding the foregoing,  upon the occurrence of an event of default other
than the failure of Purchaser to close in a timely basis in accordance with this
Purchase  Contract,  Seller will provide  Purchaser  with Notice  specifying the
default and Purchaser shall have five (5) Business Days from its receipt of such
Notice to cure such default.  ---------  ---------- INITIALS FOR SELLER INITIALS
FOR PURCHASER 12.2 Default By Seller. Provided that Purchaser has not terminated
this Purchase  Contract and is not otherwise in material default  hereunder,  if
the Closing does not occur as a result of Seller's  material default  hereunder,
Purchaser's sole remedy shall be either: (a) to elect to terminate this Purchase
Contract  and receive  reimbursement  of the  Deposit;  or (b) to seek  specific
performance of this Purchase Contract.  ARTICLE 13 RISK OF LOSS OR CASUALTY 13.1
Risk of Loss or  Casualty.  The risk of loss of damage to the Property by reason
of any insured or uninsured casualty during the period through and including the
Closing Date shall be borne by Seller.  Seller  covenants and agrees to maintain
all of its  existing  insurance  coverage  upon the  Property  in full force and
effect until the Closing Date,  without material  modification  thereto.  In the
event of any "material damage" (as hereinafter defined) to or destruction of the
Property or any portion thereof,  Purchaser may, at its option,  by Notice given
to Seller  within ten (10) days after  Purchaser  is notified  of such  material
damage or destruction:  (i) unilaterally terminate this Purchase Contract except
the Surviving  Obligations  shall 37  225171.04-Los  Angeles S2A survive and the
Deposit shall be immediately  returned to Purchaser;  or (ii) proceed under this
Purchase Contract with no reduction in the Purchase Price, receive any insurance
proceeds  due Seller as a result of such damage or  destruction  (including  any
rent loss  insurance  applicable to the period from and after the Closing Date),
together  with the  amount of any  deductible  with  respect  to such  insurance
proceeds,  and assume responsibility for repair of the Property. If the Property
is not materially damaged,  then Purchaser shall not have the right to terminate
this Purchase  Contract,  but all insurance  proceeds  (including  any rent loss
insurance  applicable to the period from and after the Closing  Date),  together
with the amount of any deductible with respect to such insurance proceeds, shall
be paid or assigned to Purchaser and Purchaser shall assume  responsibility  for
such repair.  For purposes of this  paragraph,  "material  damage" means damages
reasonably   exceeding  the  greater  of  (a)  Two  Hundred   Thousand   Dollars
($200,000.00)  or (b) ten  percent  (10%) of the  Purchase  Price to repair,  as
determined by an  independent  insurance  claims  adjuster doing business in the
county in which the Land is located,  which claims  adjuster shall be reasonably
satisfactory  to Seller and Purchaser.  ARTICLE 14 LEAD-BASED  PAINT  DISCLOSURE
14.1  Lead-Based  Paint  Disclosure.  Seller and  Purchaser  hereby  acknowledge
completion  of the Lead Based Paint  Disclosure  form  attached as Exhibit J and
delivery of such executed form to Purchaser prior to the Effective Date. ARTICLE
15 EMINENT DOMAIN 15.1 Eminent Domain.  In the event that at the time of Closing
all or any part of the  Property is (or has  previously  been)  acquired,  or is
about to be acquired,  by authority of any governmental  agency (or in the event
that at such  time  there is any  notice  of any such  acquisition  or intent to
acquire by any such  governmental  agency),  Purchaser  shall have the right, at
Purchaser's  option,  to terminate this Purchase  Contract (except the Surviving
Obligations  shall survive) by giving written Notice within fifteen (15) days of
Purchaser's  receipt from Seller of the occurrence of such event and recover the
Deposit  hereunder,  or to settle in accordance  with the terms of this Purchase
Contract  for the full  Purchase  Price  and  receive  the full  benefit  of any
condemnation  award. It is expressly agreed between the parties hereto that this
paragraph  shall in no way apply to customary  dedications  for public  purposes
that may be necessary  for the  development  of the Property.  38  225171.04-Los
Angeles S2A ARTICLE 16 MISCELLANEOUS  16.1 Exhibits and Riders. All Exhibits and
Riders annexed hereto are a part of this Purchase Contract for all purposes.  In
the event any Riders are annexed hereto and there are any conflicts  between the
terms of this  Purchase  Contract and the Riders,  the terms of the Riders shall
supercede and control.  The following  Rider is annexed hereto and  incorporated
herein as part of this Purchase Contract:  Rider 1 (State Specific Rider).  16.2
Assignability.  Subject to Section 16.18 hereof,  this Purchase  Contract is not
assignable  by any party  hereto  without  first  obtaining  the  prior  written
approval of the non-assigning  party;  provided,  however,  that Purchaser shall
have the right, power and authority to assign this Purchase  Contract,  in whole
but not in part,  without Seller's consent,  to any affiliate of Purchaser or to
any tax credit limited  partnership of which the general partner is an affiliate
of Purchaser. Upon any assignment of this Purchase Contract, Purchaser shall not
be relieved of any obligation or liability hereunder.  16.3 Binding Effect. This
Purchase  Contract  shall be binding upon and inure to the benefit of Seller and
Purchaser, and their respective heirs, personal representatives,  successors and
permitted assigns. 16.4 Captions. The captions,  headings, and arrangements used
in this Purchase Contract are for convenience only and do not in any way affect,
limit,  amplify,  or modify the terms and  provisions  hereof.  16.5  Number and
Gender of Words.  Whenever  herein the singular  number is used,  the same shall
include the plural where appropriate, and words of any gender shall include each
other gender where appropriate. 16.6 Notices. All notices, demands, requests and
other  communications  required  pursuant  to the  provisions  of this  Purchase
Contract  ("Notice")  shall be in  writing  and  shall be  deemed  to have  been
properly given or served for all purposes (i) if sent by Federal  Express or any
other nationally recognized overnight carrier for next Business Day delivery, on
the first Business Day following deposit of such Notice with such carrier,  (ii)
if  personally  delivered,  on the  actual  date of  delivery,  (iii) if sent by
telecopy  (and  followed  with  the  delivery  of a hard  copy),  on the date 39
225171.04-Los  Angeles S2A  received by  telecopy,  or (iv) if sent by certified
mail, return receipt requested postage prepaid,  on the fifth (5th) Business Day
following the date of mailing addressed as follows:  If To Seller: c/o Apartment
Investment and Management  Company 18350 Mt. Langley Avenue,  Suite 220 Fountain
Valley,  California 92708  Attention:  Mr. Peter K. Kompaniez  Telephone:  (714)
593-1733  Telecopy:   (714)  593-1703  And  To:  c/o  Apartment  Investment  and
Management  Company  2000 South  Colorado  Boulevard,  Tower Two,  Suite  2-1000
Denver,  Colorado 80222 Attention:  Mr. Harry Alcock  Telephone:  (303) 759-8600
Telecopy:  (303) 691-5662 With A Copy To: Skadden,  Arps, Slate,  Meagher & Flom
LLP 300 South Grand Avenue, 34th Floor Los Angeles,  California 90071 Attention:
Meryl K. Chae, Esq.  Telephone:  (213) 687-5000  Telecopy:  (213) 687-5600 If To
Purchaser:  CPDC, Inc. 5513 Connecticut Avenue,  N.W., Suite 250 Washington,  DC
20015 Attention:  Mr. Kimmel Cameron Telephone:  (202) 885-9561 Telecopy:  (202)
895-8805 With A Copy To: Krooth and Altman 1850 M Street,  Suite 400 Washington,
DC 20036 Attention:  Patrick Clancy,  Esq.  Telephone:  (202) 293-8239 Telecopy:
(202) 872-0145 40  225171.04-Los  Angeles S2A Any of the parties may designate a
change of address by Notice in writing to the other  parties.  Whenever  in this
Purchase  Contract the giving of Notice by mail or  otherwise  is required,  the
giving of such Notice may be waived in writing by the person or persons entitled
to receive such Notice.  16.7 Governing Law And Venue.  The laws of the State in
which the Land is situated shall govern the validity, construction, enforcement,
and interpretation of this Purchase Contract,  unless otherwise specified herein
except for the  conflict of law  provisions  thereof.  All claims,  disputes and
other matters in question arising out of or relating to this Purchase  Contract,
or the breach thereof,  shall be decided by proceedings instituted and litigated
in a court for the  district  in which  the Land is  situated,  and the  parties
hereto  expressly  consent to the venue and  jurisdiction  of such  court.  16.8
Entirety And Amendments;  Survival.  This Purchase  Contract embodies the entire
Purchase  Contract  between  the  parties  and  supersedes  all  prior  purchase
contracts  and  understandings,  if any,  relating to the  Property,  and may be
amended or supplemented  only by an instrument in writing  executed by the party
against whom  enforcement  is sought.  All terms and provisions of this Purchase
Contract  shall be merged  into the  Closing  documents  and  shall not  survive
Closing,  unless expressly set forth to the contrary in this Purchase  Contract.
16.9  Severability.  If any  provision of this  Purchase  Contract is held to be
illegal,  invalid, or unenforceable under present or future laws, such provision
shall be fully severable.  The Purchase Contract shall be construed and enforced
as if such illegal,  invalid,  or unenforceable  provision had never comprised a
part of this Purchase  Contract;  and the remaining  provisions of this Purchase
Contract  shall remain in full force and effect and shall not be affected by the
illegal,  invalid,  or  unenforceable  provision or by its  severance  from this
Purchase Contract. In lieu of such illegal, invalid, or unenforceable provision,
there  shall  be  added  automatically  as a part of this  Purchase  Contract  a
provision  as  similar  in  terms to such  illegal,  invalid,  or  unenforceable
provision  as  may  be  possible  to  make  such  provision  legal,  valid,  and
enforceable. 16.10 Multiple Counterparts. This Purchase Contract may be executed
in a number of identical counterparts. If so executed, each of such counterparts
is to be deemed an original for all purposes  and all such  counterparts  shall,
collectively, constitute one Purchase Contract. In making proof of this Purchase
Contract, it shall not be necessary to produce or account for more than one such
counterparts.  41  225171.04-Los  Angeles S2A 16.11 Further Acts. In addition to
the acts and deeds  recited  herein and  contemplated  and  performed,  executed
and/or delivered by Seller and Purchaser, Seller and Purchaser agree to perform,
execute and/or deliver or cause to be performed,  executed and/or  delivered any
and all such further acts,  deeds, and assurances as may be necessary to, and to
use their  respective best efforts to consummate the  transactions  contemplated
hereby.  16.12  Construction.  No provision of this Purchase  Contract  shall be
construed  in favor  of,  or  against,  any  particular  party by  reason of any
presumption  with  respect  to the  drafting  of this  Purchase  Contract;  both
parties,  being  represented  by  counsel,  having  fully  participated  in  the
negotiation  of this  instrument.  16.13  Confidentiality.  Purchaser  shall not
disclose the terms and conditions  contained in this Purchase Contract and shall
keep  the  same  confidential;   provided,  however,  that  notwithstanding  the
foregoing,  Purchaser  may disclose the terms and  conditions  of this  Purchase
Contract (i) as required by law, (ii) to undertake  its due diligence  hereunder
and to consummate the transactions contemplated by this Purchase Contract or any
financing  relating  thereto,  or  (iii) to  Purchaser's  or  Seller's  lenders,
attorneys and accountants. Neither party hereto shall make any public statements
or  announcements,  or issue any press  releases,  relating to the  transactions
contemplated hereby without the prior approval of the other party hereto (unless
such  statement,  announcement,  or press release is required by any  applicable
securities  law or any rule or  regulation  of the New York Stock  Exchange,  in
which case such prior approval is not  required).  Any  information  provided by
Seller  to  Purchaser  under  the  terms  of  this  Purchase   Contract  is  for
informational purposes only. In providing such information to Purchaser,  Seller
makes no representation  or warranty,  express,  written,  oral,  statutory,  or
implied,  and all such  representations  and  warranties  are  hereby  expressly
excluded.  Purchaser  shall not in any way be entitled to rely upon the accuracy
of such  information.  Such information is also confidential and Purchaser shall
be prohibited from making such information  public to any other person or entity
other than its agents and legal  representatives and HUD, without Seller's prior
written  authorization,  which  may  be  granted  or  denied  in  Seller's  sole
discretion.  16.14 Time of The Essence.  It is  expressly  agreed by the parties
hereto that time is of the essence with respect to this Purchase Contract. 16.15
Cumulative  Remedies  And  Waiver.  No remedy  herein  conferred  or reserved is
intended  to be  exclusive  of any other  available  remedy or  remedies  herein
conferred or referred,  but each and every such remedy  shall be  cumulative  42
225171.04-Los  Angeles S2A and shall be in addition to every other  remedy given
under this  Purchase  Contract.  No delay or omission  to exercise  any right or
power accruing upon any default,  omission,  or failure of performance hereunder
shall impair any right or power or shall be  construed  to be a waiver  thereof,
but any such right and power may be exercised  from time to time and as often as
may be deemed expedient. No waiver, amendment,  release, or modification of this
Purchase Contract shall be established by conduct, custom, or course of dealing.
16.16 Litigation Expenses. In the event either party hereto commences litigation
against the other to enforce its rights hereunder,  the prevailing party in such
litigation  shall be  entitled to recover  from the other  party its  reasonable
attorneys' fees and expenses incidental to such litigation.  16.17 Time Periods.
Should the last day of a time  period  fall on a weekend or legal  holiday,  the
next Business Day  thereafter  shall be  considered  the end of the time period.
16.18 Exchange. At Seller's sole cost and expense, Seller may structure the sale
of the Property to Purchaser as a Like Kind  Exchange  under Section 1031 of the
Internal  Revenue Code of 1986, as amended,  whereby Seller will acquire certain
property (the "Like Kind Exchange Property") in conjunction with the sale of the
Property  (the  "Like  Kind  Exchange").  Purchaser  shall  cooperate  fully and
promptly  with  Seller's  conduct of the Like Kind  Exchange,  provided that all
costs and expenses  generated in connection with the Like Kind Exchange shall be
borne solely by Seller,  and Purchaser shall not be required to take title to or
contract  for the  purchase  of any other  property.  If Seller uses a qualified
intermediary  to  effectuate  the  exchange,  any  assignment  of the  rights or
obligations of Seller hereunder shall not relieve,  release or absolve Seller of
its  obligations to Purchaser.  In no event shall the Closing Date be delayed by
the Like Kind Exchange.  Seller shall indemnify and hold harmless Purchaser from
and  against  any and all  liability  arising  from  and  out of the  Like  Kind
Exchange.  16.19 No Personal  Liability  of  Officers,  Trustees or Directors of
Seller's General Partners. Purchaser acknowledges that this Purchase Contract is
entered into by Seller which is a limited partnership, and Purchaser agrees that
no  individual  officer,  trustee,  director  or  representative  of the general
partners  of Seller  shall  have any  personal  liability  under  this  Purchase
Contract  or  any  document   executed  in  connection  with  the   transactions
contemplated by this Purchase  Contract.  43 225171.04-Los  Angeles S2A 16.20 No
Exclusive  Negotiations.  Seller shall have the right,  at all times, to solicit
backup  offers  and  enter  into   discussions,   negotiations,   or  any  other
communications  concerning  or  related  to the  sale of the  Property  with any
thirdparty; provided, however, that such communications are subject to the terms
of this Purchase Contract,  and that Seller shall not enter into any contract or
binding  agreement  with a  third-party  for  the  sale of the  Property.  16.21
Headings.  The Section headings of this Purchase Contract are for convenience of
reference only and shall not be deemed to modify,  explain,  restrict,  alter or
affect  the  meaning  or  interpretation  of any  provision  hereof.  ARTICLE 17
OPERATION OF THE PROPERTY 17.1 Property Contracts;  Leases. During the period of
time from the  Effective  Date to the Closing  Date,  in the ordinary  course of
business  Seller  may enter  into new  Property  Contracts,  new  Leases,  renew
existing  Leases or modify,  terminate or accept the  surrender or forfeiture of
any of the Leases, modify any Property Contracts, or institute and prosecute any
available  remedies for default  under any Lease  without  first  obtaining  the
written consent of Purchaser; provided, however, Seller agrees that any such new
Property  Contracts or new or renewed  Leases  entered into after the  Effective
Date by  Seller,  shall  not  have a term in  excess  of one  (1)  year  without
Purchaser's prior written consent, such consent not to be unreasonably withheld,
conditioned  or delayed by Purchaser.  If Seller shall enter into a new Property
Contract  or a new  Lease,  or shall  renew,  modify,  terminate  or accept  the
surrender of any Lease, or modify any Property Contract during such time period,
Seller shall  provide  Purchaser  with written  Notice of such event and a true,
correct and  complete  copy of any new Lease or new  Property  Contract,  or any
modification  of any Lease or Property  Contract  within two (2)  Business  Days
after executing  same. 17.2 Ordinary Course of Business.  Except as specifically
set forth in this  ARTICLE  17,  Seller  shall  operate the  Property  after the
Effective  Date in the ordinary  course of business,  and except as necessary in
Seller's  sole  discretion  to address any life or safety issue at the Property,
Seller will not make any material  alterations  to the Property or remove any of
the Fixtures and Tangible Personal Property without the prior written consent of
Purchaser which consent shall not be unreasonably  withheld,  denied or delayed.
44 225171.04-Los  Angeles S2A Remainder of this page left  intentionally  blank.
225171.04-Los  Angeles S2A NOW WHEREFORE,  the parties hereto have executed this
Purchase  Contract  under  seal as of the date  first set forth  above.  SELLER:
MEADOWOOD  ASSOCIATES III, LTD., a Maryland limited partnership By: THE NATIONAL
HOUSING  PARTNERSHIP,  a District of Columbia limited  partnership,  its general
partner  By:  NATIONAL  CORPORATION  FOR  HOUSING  PARTNERSHIPS,  a District  of
Columbia corporation,  its general partner By: ____________________ Harry Alcock
Executive Vice  President  PURCHASER:  CPDC,  INC., a Maryland  corporation  By:
--------------------------------   Name:   Its:   Purchaser's   Tax  ID  Number:
_____________ A-1 225171.04-Los  Angeles S2A EXHIBIT A LEGAL DESCRIPTION OF LAND
See  attached.  B-1  225171.04-Los  Angeles S2A  EXHIBIT B FORM OF DEED  SPECIAL
WARRANTY  DEED  This  Special  Warranty  Deed is  made  this  __________  day of
__________,  2001, by and between  MEADOWOOD  ASSOCIATES  III,  LTD., a Maryland
limited  partnership,  the party of the first part,  and CPDC,  INC., a Maryland
corporation,  the  party  of  the  second  part:  W I T N E S S E T H:  that  in
consideration of the sum of $[state actual  consideration],  receipt of which is
hereby  acknowledged,  and which the party of the first part certifies under the
penalties of perjury as the actual  consideration paid or to be paid,  including
the amount of any mortgage or deed of trust  outstanding,  the said party of the
first part does grant and convey,  subject to the permitted exceptions listed on
Schedule 1 attached hereto and incorporated herein, unto the party of the second
part in fee  simple,  as, all that  property  situate,  lying,  and being in the
County  of  Harford,  State of  Maryland,  and more  particularly  described  as
follows:  See Exhibit A attached  hereto.  Subject to  covenants,  easements and
restrictions  of  record.  TO HAVE  AND TO HOLD  said  land and  premises  above
described or mentioned and hereby intended to be granted and conveyed,  together
with the buildings and improvements  thereupon  erected,  made or being, and all
and every title,  right,  privileges,  appurtenances  and  advantages  thereunto
belonging, or in anywise appertaining, unto and for the proper use only, benefit
and behoof  forever of said party of the  second  part in fee  simple.  AND said
party of the first part does hereby  covenant to warrant  specially the property
hereby granted and conveyed and to execute such further  assurances of said land
as may be requisite.  B-2 225171.04-Los  Angeles S2A IN WITNESS WHEREOF the said
party of the first part has hereunto set its hands and seals on the day and year
first hereinabove  written.  PARTY OF THE FIRST PART:  MEADOWOOD ASSOCIATES III,
LTD., a Maryland  limited  partnership By: THE NATIONAL HOUSING  PARTNERSHIP,  a
District of Columbia  limited  partnership,  its  general  partner By:  NATIONAL
CORPORATION FOR HOUSING PARTNERSHIPS,  a District of Columbia  corporation,  its
general partner By:  ____________________  Name: Its: B-3 225171.04-Los  Angeles
S2A State of  ________________  ) ) County of ______________ ) ss: On this _____
day of  __________,  2001,  before me, Notary Public of said  jurisdiction,  the
undersigned officer, personally appeared __________,  personally known to me (or
proven to me on the basis of  satisfactory  evidence) to be the person(s)  whose
name(s) is/are  subscribed to the within  instrument and acknowledged  before me
that  he/she  executed  the same in  his/her  authorized  capacity,  and that by
his/her  signature  on the  instrument,  the  entities  upon behalf of which the
person acted executed the instrument. In Witness Whereof, I have hereunto set my
hand and official seal.  -------------------------------- My Commission Expires:
__________  Notary Public This  instrument was prepared under the supervision of
the  undersigned,  an attorney  duly  admitted  to practice  before the Court of
Appeals of Maryland.  -------------------------------  - [Signature  of Maryland
attorney]  Title  Insurer:   Fidelity   National  Title  Insurance  Company  700
Louisiana, Suite 2600 Houston, Texas 77002 C-1 225171.04-Los Angeles S2A EXHIBIT
C LIST OF EXCLUDED PERMITS None. D-1 225171.04-Los Angeles S2A EXHIBIT D LIST OF
EXCLUDED FIXTURES AND TANGIBLE PERSONAL PROPERTY None. E-1 225171.04-Los Angeles
S2A EXHIBIT E LIST OF REQUIRED  SELLER CONSENTS 1. Consent of partners of Seller
to  the  extent  required  pursuant  to  Seller's  partnership  documents.   F-1
225171.04-Los  Angeles  S2A  EXHIBIT  F FORM OF  ESCROW  AGREEMENT  THIS  ESCROW
AGREEMENT ("Escrow Agreement") is made and entered into as of March _____, 2001,
by and among  MEADOWOOD  ASSOCIATES  III, LTD., a Maryland  limited  partnership
("Seller"),  COMMUNITY  PRESERVATION  AND  DEVELOPMENT  CORPORATION,  a Maryland
corporation  ("Purchaser"),   and  FIDELITY  NATIONAL  TITLE  INSURANCE  COMPANY
("Escrow Agent"). WITNESSETH:  WHEREAS, Purchaser and Seller are parties to that
certain Purchase and Sale Contract (the "Purchase Contract"),  dated as of March
12, 2001. All capitalized terms used but not otherwise defined herein shall have
the meanings ascribed thereto in the Purchase  Contract.  WHEREAS,  the Purchase
Contract requires that Purchaser provide a deposit in the amount of [Seventy One
Thousand Five Hundred  Dollars  ($71,500.00)][Fifty  Three  Thousand Six Hundred
Twenty  Five  Dollars  ($53,625.00)]  in cash to be held  pursuant  to an escrow
agreement approved by Purchaser and Seller.  AGREEMENT: NOW, THEREFORE, for good
and  valuable  consideration,  the receipt and  sufficiency  of which are hereby
acknowledged,  the parties hereto hereby agree as follows:  1.  Establishment of
Escrow.  Escrow Agent hereby acknowledges  receipt of [Seventy One Thousand Five
Hundred  Dollars  ($71,500.00)][Fifty  Three  Thousand  Six Hundred  Twenty Five
Dollars  ($53,625.00)]  pursuant  to  Section  3.1.1  of the  Purchase  Contract
(together with any and all other Deposit  amounts  received by Escrow Agent from
time to time, the "Escrow Fund"), to be deposited, held, invested, and disbursed
for the benefit of Seller and  Purchaser  and their  respective  successors  and
assigns,  as provided  herein and as provided in the Purchase  Contract.  In the
event of any  inconsistency  between the terms of the Purchase  Contract and the
terms of this Escrow Agreement, the terms of the Purchase Contract shall govern.
F-2  225171.04-Los  Angeles S2A 2. Investment of Escrow Fund. All funds received
by Escrow Agent shall be held in insured  accounts  and  invested in  accordance
with the terms of the Purchase  Contract.  Seller shall not be responsible  for,
nor shall Seller bear the risk of loss of, the Escrow Fund, and Seller shall not
be responsible  for the rate of return thereon.  3.  Application of Escrow Fund;
Termination  of Escrow  Agreement.  Escrow Agent shall hold and  distribute  the
Escrow Fund in  accordance  with the terms of the  Purchase  Contract.  When all
monies  held by  Escrow  Agent  have  been  finally  distributed  in  accordance
herewith, this Escrow Agreement shall terminate. 4. Liability. Escrow Agent will
be obligated to perform only the duties that are  expressly  set forth herein or
required of Escrow  Agent under the terms of the Purchase  Contract.  In case of
conflicting  demands upon Escrow Agent, it may (i) refuse to comply therewith as
long as such disagreement continues and make no delivery or other disposition of
any funds or property  then held (and Escrow Agent shall not be or become liable
in any way for such  failure  of  refusal  to comply  with such  conflicting  or
adverse claims or demands,  except for its failure to exercise due care, willful
breach and willful misconduct), (ii) continue to so refrain and so refuse to act
until all differences  have been adjusted by agreement and Escrow Agent has been
notified  thereof in writing signed  jointly by Seller and  Purchaser,  or (iii)
interplead   the  portion  of  Escrow  Fund  in  dispute  with  a  court  having
jurisdiction under the Purchase Contract. 5. No Obligation to Take Legal Action.
Escrow  Agent  shall not be under  any  obligation  to take any legal  action in
connection with this Escrow Agreement or for its  enforcement,  or to appear in,
prosecute, or defend any action or legal proceeding which, in its opinion, would
or might  involve it in any costs,  expense,  loss or  liability,  unless and as
often  as  required  by it,  it is  furnished  with  satisfactory  security  and
indemnity against all such costs, expenses, losses, or liabilities. 6. Status of
Escrow  Agent.  Escrow  Agent is to be  considered  and regarded as a depository
only, and shall not be responsible or liable (except for its failure to exercise
due  care,  willful  breach  or  willful  misconduct)  for  the  sufficiency  or
correctness  as to form,  manner of  execution,  or validity  of any  instrument
deposited pursuant to this Escrow Agreement, nor as to the identity,  authority,
or rights of any person  executing the same.  Escrow  Agent's  duties  hereunder
shall be limited to the  safekeeping and investment of money,  instruments,  and
securities F-3 225171.04-Los  Angeles S2A received by it as Escrow Agent and for
their  disbursement in accordance with the written escrow  instructions given it
in accordance with the Escrow  Agreement and the Purchase  Contract.  7. Written
Instructions  of  Parties.  Notwithstanding  any  contrary  provision  contained
herein,  Escrow Agent shall, at all times, have full right and authority and the
duty and  obligation  to pay over and disburse the principal and interest of the
Escrow Fund in accordance with the joint written  instructions  signed by Seller
and  Purchaser.   8.  Notices.   Any  required  or  permitted  notice  or  other
communication  under  this  Escrow  Agreement  ("Notice")  shall  be  given  and
addressed  in  accordance  with the terms of the  Purchase  Contract;  provided,
however,  that any  Notice to be given to Escrow  Agent  shall be  addressed  as
follows:  Fidelity  National Title Insurance  Company 700 Louisiana,  Suite 2600
Houston,  Texas  77002  Telephone:   (713)  220-5256  Telecopy:  (713)  228-9180
Attention: Ms. Lolly Avant Any party may change the address to which Notices are
to be  addressed  by giving the other  parties  Notice in the manner  herein set
forth.  9.  Fee.  Escrow  Agent  shall  receive  a fee of Five  Hundred  Dollars
($500.00)  for  its  services  hereunder  and be  paid  or  reimbursed  for  all
reasonable expenses, disbursements and advances, including reasonable attorney's
fees, incurred or paid in connection with carrying out its duties hereunder,  in
accordance  with the terms of the  Purchase  Contract.  Non-payment  of such fee
shall not  entitle  Escrow  Agent to refuse or fail to act as  required  by this
Escrow  Agreement.  10.  Titles and Section  Headings.  Titles of  sections  and
subsections  contained in this Escrow  Agreement are inserted for convenience of
reference  only, and neither form a part of this Escrow  Agreement nor are to be
used in its  construction  or  interpretation.  11.  Counterparts.  This  Escrow
Agreement may be executed in any number of counterparts,  each of which shall be
deemed  an  original,  but all of  which  shall  constitute  one  and  the  same
instrument. F-4 225171.04-Los Angeles S2A 12. Non-Waiver. No waiver by any party
of any breach of any term or condition of this Escrow Agreement shall operate as
a waiver of any other  breach of such term or  condition or of any other term or
condition.  No failure to enforce such  provision  shall  operate as a waiver of
such provision or of any other  provision  hereof,  or constitute or be deemed a
waiver or release of any other  party for  anything  arising  out of,  connected
with,  or based upon this Escrow  Agreement.  13.  Binding  Effect.  This Escrow
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their respective transferees, successors, and assigns. The parties recognize
and  acknowledge  that the powers and authority  granted Escrow Agent herein are
each  irrevocable  and  coupled  with an  interest.  Escrow  Agent shall have no
liability  to Seller for any  mistakes  in judgment  in the  performance  of any
function hereunder,  except for failure to exercise due care, willful breach and
willful  misconduct.  14.  Nonlimitation of Liability.  Nothing contained herein
shall in any way limit the  liabilities,  obligations and remedies of Seller and
Purchaser as set forth in the Purchase Contract.  15. Governing Law. This Escrow
Agreement  shall be governed by and construed in accordance with the laws of the
State of  Maryland.  16. Time of Essence.  Time is of the essence of this Escrow
Agreement. 17. Entire Agreement;  Modification.  This Escrow Agreement (together
with the Purchase Contract)  supersedes all prior agreements and constitutes the
entire  agreement  with  respect  to the  subject  matter  hereof.  This  Escrow
Agreement  may not be altered or modified  without  the  written  consent of all
parties.  Remainder of this page left  intentionally  blank.  F-5  225171.04-Los
Angeles  S2A IN WITNESS  WHEREOF,  each of the  parties  hereto have caused this
Escrow Agreement to be executed on its behalf by duly authorized persons, all as
of the day and year first above written. SELLER: MEADOWOOD ASSOCIATES III, LTD.,
a Maryland limited partnership By: THE NATIONAL HOUSING PARTNERSHIP,  a District
of Columbia limited  partnership,  its general partner By: NATIONAL  CORPORATION
FOR  HOUSING  PARTNERSHIPS,  a District  of  Columbia  corporation,  its general
partner By:  ____________________  Name: Its: PURCHASER:  CPDC, INC., a Maryland
corporation By:  --------------------------------  Name: Its: F-6  225171.04-Los
Angeles  S2A  ESCROW  AGENT:  FIDELITY  NATIONAL  TITLE  INSURANCE  COMPANY  By:
--------------------------------  Lolly Avant Vice  President G-1  225171.04-Los
Angeles S2A EXHIBIT G FORM OF BILL OF SALE This Bill of Sale  ("Assignment")  is
executed by  MEADOWOOD  ASSOCIATES  III,  LTD., a Maryland  limited  partnership
("Seller"),  in favor of COMMUNITY PRESERVATION AND DEVELOPMENT  CORPORATION,  a
Maryland corporation ("Purchaser"). Seller and Purchaser, have entered into that
certain Purchase and Sale Contract and dated as of March 12, 2001 (the "Purchase
Contract"),  in which  Seller  has  agreed to sell and  Purchaser  has agreed to
purchase  the real  property  described  in Exhibit A attached  thereto  and the
improvements  located thereon  (collectively,  the  "Project").  All capitalized
terms used but not  otherwise  defined  herein shall have the meanings  ascribed
thereto in the Purchase Contract.  Pursuant to the Purchase Contract, Seller has
agreed to assign,  without  recourse or warranty,  to Purchaser  all of Seller's
right,  title and interest,  if any, in and to the  "Property"  (as  hereinafter
defined). NOW THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are hereby  acknowledged,  Seller and  Purchaser  agree as
follows:  1. As used  herein,  the term  "Property"  shall  mean  the  following
property  to the extent  said  property is owned by Seller and used in, held for
use in  connection  with,  or necessary  for the  operation  of the Project:  a.
Property  Contracts.  All of Seller's  rights and  interests  in and to purchase
orders,  maintenance,  service  or  utility  contracts  and  similar  contracts,
excluding Leases,  which relate to the ownership,  maintenance,  construction or
repair and/or operation of the Project, but only to the extent transferable.  b.
Leases.  All of Seller's rights and interests in and to leases,  subleases,  and
other occupancy  agreements,  whether or not of record, which provide for use or
occupancy of space or facilities on or relating to the Project. c. Permits.  All
of Seller's  rights and  interests in and to all licenses or permits  granted by
governmental  authorities having jurisdiction over the Project in respect of the
matter to which the  applicable  license  or permit  applies  G-2  225171.04-Los
Angeles  S2A and  owned by  Seller  and used in or  relating  to the  ownership,
occupancy  or  operation of the  Project.  d.  Fixtures  and  Tangible  Personal
Property. All of Sellers rights and interests in and to all fixtures, furniture,
furnishings,  fittings, equipment,  machinery,  apparatus,  appliances and other
articles  of  tangible  personal  property  now located on the Project or in the
improvements  thereon  and  used  in  connection  with  any  present  or  future
occupation  or  operation  of all or any  part of the  Project,  but only to the
extent transferable. The term "Property" shall not include any of the foregoing:
(i) to the extent the same are  excluded or  reserved to Seller  pursuant to the
Purchase  Contract to which Seller and  Purchaser  are parties;  and (ii) to the
extent that the sale or  transfer  thereof  requires  consent or approval of any
third party, which consent or approval is not obtained by Seller. Nothing herein
shall create a transfer or assignment of intellectual property or similar assets
of Seller. 2. Assignment.  Seller hereby assigns,  sells and transfers,  without
recourse or warranty, to Purchaser all of Seller's right, title and interest, if
any,  in and to the  Property,  subject to any  rights of  consent  as  provided
therein. 3. Assumption.  Purchaser expressly agrees to assume and hereby assumes
all  liabilities  and  obligations of Seller in connection with the Property and
agrees to perform all of the covenants  and  obligations  of Seller  thereunder.
Purchaser further agrees to indemnify,  defend and hold Seller harmless from and
against any and all cost,  loss,  harm or damage  which may arise in  connection
with  the  Property.  4.  Counterparts.  This  Assignment  may  be  executed  in
counterparts,  each of which  shall be  deemed  an  original,  and both of which
together shall  constitute one and the same  instrument.  5. Attorneys' Fees. If
any action or  proceeding  is  commenced  by either  party to enforce its rights
under this  Assignment,  the prevailing party in such action or proceeding shall
be entitled to recover all reasonable costs and expenses incurred in such action
or proceeding,  including  reasonable  attorneys' fees and costs, in addition to
any other relief awarded by the court. 6. Applicable Law. This Assignment  shall
be  governed  by and  interpreted  in  accordance  with the laws of the State of
Maryland, without reference G-3 225171.04-Los Angeles S2A to the conflict of law
provisions  thereof.  7. Titles and  Section  Headings.  Titles of sections  and
subsections  contained  in this  Assignment  are  inserted  for  convenience  of
reference  only, and neither form a part of this Assignment or are to be used in
its construction or interpretation.  8. Binding Effect. This Assignment shall be
binding upon and inure to the benefit of the parties hereto and their respective
transferees,  successors, and assigns. 9. Entire Agreement;  Modification.  This
Assignment  supersedes all prior agreements and constitutes the entire agreement
with  respect to the subject  matter  hereof.  It may not be altered or modified
without  the  written  consent  of all  parties.  WITH  RESPECT  TO ALL  MATTERS
TRANSFERRED,  WHETHER TANGIBLE OR INTANGIBLE, PERSONAL OR REAL, SELLER EXPRESSLY
DISCLAIMS  A  WARRANTY  OF  MERCHANTABILITY  AND  WARRANTY  FOR  FITNESS  FOR  A
PARTICULAR  USE OR ANY OTHER  WARRANTY  EXPRESSED  OR IMPLIED  THAT MAY ARISE BY
OPERATION OF LAW OR UNDER THE UNIFORM COMMERCIAL CODE FOR THE STATE IN WHICH THE
PROJECT  IS  LOCATED.  Remainder  of this page  left  intentionally  blank.  G-4
225171.04-Los  Angeles S2A WITNESS the signatures and seals of the  undersigned.
Dated:  March _____, 2001.  SELLER:  MEADOWOOD  ASSOCIATES III, LTD., a Maryland
limited partnership By: THE NATIONAL HOUSING PARTNERSHIP, a District of Columbia
limited  partnership,  its general partner By: NATIONAL  CORPORATION FOR HOUSING
PARTNERSHIPS,  a District  of  Columbia  corporation,  its  general  partner By:
____________________  Name: Its: PURCHASER:  CPDC, INC., a Maryland  corporation
By:  --------------------------------  Name: Its: H-1 225171.04-Los  Angeles S2A
EXHIBIT H GENERAL ASSIGNMENT This General Assignment  ("Assignment") is executed
by MEADOWOOD ASSOCIATES III, LTD., a Maryland limited partnership ("Seller"), in
favor of CPDC, INC., a Maryland corporation ("Purchaser"). Seller and Purchaser,
have entered into that certain  Purchase and Sale Contract and dated as of March
12,  2001 (the  "Purchase  Contract"),  in which  Seller  has agreed to sell and
Purchaser  has  agreed to  purchase  the real  property  described  in Exhibit A
attached  thereto  and  the  improvements  located  thereon  collectively,   the
"Project").  All capitalized  terms used but not otherwise  defined herein shall
have the meanings  ascribed  thereto in the Purchase  Contract.  Pursuant to the
Purchase Contract, Seller has agreed to assign, without recourse or warranty, to
Purchaser  all of  Seller's  right,  title and  interest,  if any, in and to the
"Miscellaneous  Property Assets" (as hereinafter  defined).  NOW THEREFORE,  for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows: 1. As used herein, the term
"Miscellaneous   Property  Assets"  shall  mean  all  contract  rights,  leases,
concessions, warranties, plans, drawings, and other items of intangible personal
property  relating to ownership or operation of the Project and owned by Seller.
The term "Miscellaneous Property Assets" shall not include any of the foregoing:
(i) to the extent the same are  excluded or  reserved to Seller  pursuant to the
Purchase  Contract to which Seller and  Purchaser  are parties;  and (ii) to the
extent that the sale or  transfer  thereof  requires  consent or approval of any
third party, which consent or approval is not obtained by Seller. Nothing herein
shall create a transfer or assignment of intellectual property or similar assets
of Seller. 2. Assignment.  Seller hereby assigns,  sells and transfers,  without
recourse or warranty, to Purchaser all of Seller's right, title and interest, if
any,  in and to the  Miscellaneous  Property  Assets,  subject  to any rights of
consent as  provided  therein.  H-2  225171.04-Los  Angeles  S2A 3.  Assumption.
Purchaser  expressly  agrees to assume and hereby  assumes all  liabilities  and
obligations of Seller in connection with the  Miscellaneous  Property Assets and
agrees to perform all of the covenants  and  obligations  of Seller  thereunder.
Purchaser further agrees to indemnify,  defend and hold Seller harmless from and
against any and all cost,  loss,  harm or damage  which may arise in  connection
with the Miscellaneous Property Assets,  pertaining to acts arising on and after
the date hereof.  Seller further agrees to indemnify,  defend and hold Purchaser
harmless from and against any and all cost, loss, harm or damage which may arise
in connection with the Miscellaneous Property Assets, pertaining to acts arising
before the date hereof.  4.  Counterparts.  This  Assignment  may be executed in
counterparts,  each of which  shall be  deemed  an  original,  and both of which
together shall  constitute one and the same  instrument.  5. Attorneys' Fees. If
any action or  proceeding  is  commenced  by either  party to enforce its rights
under this  Assignment,  the prevailing party in such action or proceeding shall
be entitled to recover all reasonable costs and expenses incurred in such action
or proceeding,  including  reasonable  attorneys' fees and costs, in addition to
any other relief awarded by the court. 6. Applicable Law. This Assignment  shall
be  governed  by and  interpreted  in  accordance  with the laws of the State of
Maryland, without reference to the conflict of law provisions thereof. 7. Titles
and Section  Headings.  Titles of sections  and  subsections  contained  in this
Assignment are inserted for  convenience  of reference  only, and neither form a
part of this Assignment or are to be used in its construction or interpretation.
8.  Binding  Effect.  This  Assignment  shall be  binding  upon and inure to the
benefit of the parties hereto and their respective transferees,  successors, and
assigns. 9. Entire Agreement; Modification. This Assignment supersedes all prior
agreements  and  constitutes  the entire  agreement  with respect to the subject
matter hereof.  It may not be altered or modified without the written consent of
all  parties.  H-3  225171.04-Los  Angeles  S2A  WITH  RESPECT  TO  ALL  MATTERS
TRANSFERRED,  WHETHER TANGIBLE OR INTANGIBLE, PERSONAL OR REAL, SELLER EXPRESSLY
DISCLAIMS  A  WARRANTY  OF  MERCHANTABILITY  AND  WARRANTY  FOR  FITNESS  FOR  A
PARTICULAR  USE OR ANY OTHER  WARRANTY  EXPRESSED  OR IMPLIED  THAT MAY ARISE BY
OPERATION OF LAW OR UNDER THE UNIFORM COMMERCIAL CODE FOR THE STATE IN WHICH THE
PROJECT  IS  LOCATED.  Remainder  of this page  left  intentionally  blank.  H-4
225171.04-Los  Angeles S2A WITNESS the signatures and seals of the  undersigned.
Dated:  March _____, 2001.  SELLER:  MEADOWOOD  ASSOCIATES III, LTD., a Maryland
limited partnership By: THE NATIONAL HOUSING PARTNERSHIP, a District of Columbia
limited  partnership,  its general partner By: NATIONAL  CORPORATION FOR HOUSING
PARTNERSHIPS,  a District  of  Columbia  corporation,  its  general  partner By:
____________________  Name: Its: PURCHASER:  CPDC, INC., a Maryland  corporation
By:  --------------------------------  Name: Its: I-1 225171.04-Los  Angeles S2A
EXHIBIT I LIST OF PENDING  LITIGATION  1. The  holder of a deferred  acquisition
note ("DAN") has  threatened  to file a  foreclosure  suit against the Property.
However, as of March 6, 2001, no such suit has been initiated. J-1 225171.04-Los
Angeles  S2A  EXHIBIT J  LEAD-BASED  PAINT  DISCLOSURE  Every  purchaser  of any
interest in residential property on which a residential dwelling was built prior
to 1978 is  notified  that  such  property  may  present  exposure  to lead from
lead-based  paint  that may place  young  children  at risk of  developing  lead
poisoning.  Lead poisoning in young children may produce permanent  neurological
damage,   including  learning   disabilities,   reduced  intelligence  quotient,
behavioral problems, and impaired memory. Lead poisoning also poses a particular
risk to pregnant women.  The seller of any interest in residential real property
is required to provide the purchaser  with any  information  on leadbased  paint
hazards from risk  assessments  or  inspections  in the seller's  possession and
notify the purchaser of any known lead-based paint hazards. A risk assessment or
inspection  for  possible  lead-based  paint  hazards  is  recommended  prior to
purchase.  1.  Except as set forth in Exhibit A attached  hereto,  Seller has no
knowledge of the presence of lead-based paint and/or lead-based paint hazards in
the housing  located on the Land. To the best of Seller's  knowledge,  except as
set  forth in  Exhibit  B  attached  hereto,  there are no  records  or  reports
available to Seller  pertaining  to  lead-based  paint and/or  lead-based  paint
hazards in the housing  located on the Land.  2.  Purchaser  affirms that it has
received from Seller the pamphlet Protect your Family from Lead in Your Home. 3.
Purchaser  affirms  that it has  received  the  opportunity  to  conduct  a risk
assessment or inspection for the presence of lead-based paint and/or  lead-based
paint  hazards  required  by 24 CFR ss.  35.90(a).  Remainder  of this page left
intentionally  blank. J-2 225171.04-Los  Angeles S2A Seller and Purchaser hereby
certify that, to the best of their knowledge,  their respective  statements made
above are accurate.  Dated: March _____, 2001. SELLER: MEADOWOOD ASSOCIATES III,
LTD., a Maryland  limited  partnership By: THE NATIONAL HOUSING  PARTNERSHIP,  a
District of Columbia  limited  partnership,  its  general  partner By:  NATIONAL
CORPORATION FOR HOUSING PARTNERSHIPS,  a District of Columbia  corporation,  its
general partner By:  ____________________  Name: Its:  PURCHASER:  CPDC, INC., a
Maryland  corporation  By:   --------------------------------   Name:  Its:  K-1
225171.04-Los  Angeles S2A  EXHIBIT K FORM OF LETTER OF CREDIT  LETTER OF CREDIT
NO. _____ IRREVOCABLE  STANDBY LETTER OF CREDIT  _______________,  2001 Fidelity
National Title  Insurance  Company Bank of America  Center 700 Louisiana,  Suite
2600 Houston,  TX 77002 Attention:  Mrs. Jodie Tanner, Vice President Ladies and
Gentlemen: 1. By order and for the account of _____ (the "Purchaser"), we hereby
establish  in  favor  of  Fidelity   National  Title   Insurance   Company  (the
"Beneficiary"),  our  irrevocable  standby  letter of  credit  (the  "Letter  of
Credit")  whereby the  Beneficiary  is authorized to draw on _____ (the "Bank"),
referring  to Letter of Credit No.  _____,  an  aggregate  amount not  exceeding
$[INSERT AMOUNT OF DEPOSIT] (such amount being referred to herein as the "Stated
Amount"), in order to support the obligation of the Purchaser under that certain
Purchase and Sale Contract,  dated as of _____,  2001, by and between  Purchaser
and  [INSERT  SELLER]  (the  "Purchase  Contract").  This  Letter  of  Credit is
effective as of _____, 2001 and expires at 5:00 P.M.,  Central Standard Time, on
[INSERT DATE NO EARLIER THAN ONE YEAR AFTER THE EFFECTIVE DATE OF THIS LETTER OF
CREDIT]  (the  "Expiration  Date").  2. Funds  under  this  Letter of Credit are
available  to  the  Beneficiary  against  its  draft  accompanied  by a  drawing
certificate  presented  to us at any time on or  after  the  date  hereof.  Such
drawing  certificate  and  draft  shall be in the  form of  Annex A and  Annex B
attached hereto, respectively, and shall have all blanks appropriately filled in
and shall be signed by the  Beneficiary's  authorized  officer,  without inquiry
into the  accuracy of the  Beneficiary's  signed  statement  and  regardless  of
whether the Purchaser disputes the content of such statement. 3. We hereby agree
that a  drawing  under  this  Letter of  Credit  will be duly K-2  225171.04-Los
Angeles  S2A  honored  by us upon  the  Beneficiary's  delivery  of the  drawing
certificate  specified in Section 2 hereof.  We will pay any drawing  under this
Letter of Credit with our own funds.  Payment  under this Letter of Credit shall
be made to the Beneficiary by wire transfer per instructions of the Beneficiary.
4. Upon payment as provided in Section 3 of the full Stated Amount,  we shall be
fully discharged of our obligation  under this Letter of Credit.  5. This Letter
of Credit shall automatically  terminate upon the earliest of (a) the payment by
us pursuant to a drawing hereunder, (b) the Expiration Date, or (c) such time as
the Purchaser  would be entitled to a return of the Letter of Credit pursuant to
the terms of the Purchase  Contract,  as notified by the Beneficiary to the Bank
by delivery of written notice.  The  Beneficiary  shall surrender this Letter of
Credit to us for  cancellation  no later  than  three (3)  business  days  after
termination  of this  Letter of Credit as  provided  for  herein.  6.  Except as
otherwise may be provided herein, the laws of the State of Missouri shall govern
this Letter of Credit,  including,  without  limitation,  the Uniform Commercial
Code as in effect in the State of Missouri.  Communications with respect to this
Letter of Credit  shall be in writing  and shall be  delivered  to us at [INSERT
BANK'S  ADDRESS],  specifically  referring  therein to this  Letter of Credit by
number, and to the Beneficiary.  7. This Letter of Credit sets forth in full our
undertaking,  and such  undertaking  shall not in any way be modified,  amended,
amplified  or limited by  reference  to any  document,  instrument  or agreement
referred to herein,  except  only the  certificate  referred to herein.  8. THIS
LETTER OF CREDIT IS NON-NEGOTIABLE,  NON-TRANSFERABLE  AND NON-ASSIGNABLE.  Very
truly yours,  ------------------------------  By: Its: K-3 225171.04-Los Angeles
S2A ANNEX A DRAWING  CERTIFICATE  [Name and Address of L/C Bank] Re: Your Letter
of Credit No.  _____  Irrevocable  Standby in favor of Fidelity  National  Title
Insurance  Company  The  undersigned,  a duly  authorized  officer  of  Fidelity
National Title Insurance Company,  as the beneficiary (the "Beneficiary") of the
above-referenced letter of credit (the "Letter of Credit"), certifies as follows
to  _____:  1. All  terms  defined  in the  Letter  of  Credit  are used in this
certificate  with the same  respective  meanings.  2. The  Beneficiary  presents
herewith  its draft in the form of Annex B to the Letter of Credit  drawn on you
in the amount of $_____ (the  "Drawing  Amount").  Such  amount was  computed in
accordance  with the terms and conditions of the Purchase  Contract and does not
exceed the Stated Amount.  3. The  Beneficiary is required to draw on the Letter
of Credit pursuant to the terms of the Purchase Contract. 4. Upon payment of the
accompanying  draft,  the  Letter  of  Credit  will  be  surrendered  to you for
cancellation  within three (3) business days of such draft.  5. The  Beneficiary
requests that payment be made to Account No. _____ at _____. Dated: _____, _____
FIDELITY  NATIONAL TITLE INSURANCE  COMPANY By: Name:  Title: K-4  225171.04-Los
Angeles S2A ANNEX B FORM OF DRAFT --------------------- Date Pay to the order of
Fidelity National Title Insurance Company the amount of _____ drawn on _____, as
issuer of its  Irrevocable  Standby  Letter of Credit No.  _____,  dated October
_____,  2001.  FIDELITY  NATIONAL TITLE INSURANCE  COMPANY By: Name: Title: R1-1
225171.04-Los  Angeles S2A RIDER 1 STATE  SPECIFIC  RIDER THIS RIDER TO PURCHASE
AND SALE CONTRACT  (this "Rider") is attached to and made a part of the Purchase
and Sale  Contract,  dated  March 12,  2001 (the  "Purchase  Contract"),  by and
between  MEADOWOOD   ASSOCIATES  III,  LTD.,  a  Maryland  limited   partnership
("Seller"), and CPDC, INC., a Maryland corporation ("Purchaser").  Any provision
of this Rider that conflicts with the Purchase Contract shall supercede and take
precedence over those terms in the Purchase Contract. All capitalized terms used
but not otherwise defined herein shall have the meanings ascribed thereto in the
Purchase  Contract.  1. At Closing,  Seller and  Purchaser  shall  complete  and
deliver the appropriate tax, affidavit,  recordation,  intake sheet and transfer
forms  required  by the State of  Maryland  and the  County in which the Land is
located,  copies  of  which  are  attached  hereto  as  Schedule  1, and pay all
applicable  transfer and recording taxes and fees. Seller shall receive a credit
at Closing for all such transfer and recording taxes and fees to the extent paid
by Seller. 2.  Notwithstanding  anything to the contrary contained herein,  this
Purchase Contract is subject to and conditioned upon the rights of parties which
have rights under the Maryland  Assisted  Housing  Preservation  Act (Art.  83B,
Section 9-101 et. seq. (as codified)). Remainder of this page left intentionally
blank.  R1-2  225171.04-Los  Angeles S2A IN WITNESS WHEREOF,  the parties hereto
have  executed  and  delivered  this  Rider as of this 12th day of March,  2001.
SELLER:  MEADOWOOD  ASSOCIATES III, LTD., a Maryland limited partnership By: THE
NATIONAL HOUSING PARTNERSHIP,  a District of Columbia limited  partnership,  its
general partner By: NATIONAL CORPORATION FOR HOUSING PARTNERSHIPS, a District of
Columbia corporation,  its general partner By:  --------------------  Name: Its:
PURCHASER:       CPDC,      INC.,      a      Maryland      corporation      By:
-------------------------------- Name: Its:


<PAGE>

                                                                    Exhibit 10.2


                               FIRST AMENDMENT TO
                           PURCHASE AND SALE CONTRACT
                              (Windsor Valley III)


      THIS FIRST AMENDMENT TO PURCHASE AND SALE CONTRACT (this "Amendment"),  is
made and entered into as of April 26, 2001, by and between MEADOWOOD  ASSOCIATES
III, LTD., a Maryland limited partnership ("Seller"), and CPDC, INC., a Maryland
corporation ("Purchaser").

                                    RECITALS:

      A. Seller and Purchaser  have entered into that certain  Purchase and Sale
Contract, dated as of March 12, 2001 (the "Purchase Contract").  All capitalized
terms used but not  otherwise  defined  herein shall have the meanings  ascribed
thereto in the Purchase Contract.

      B.    The parties hereto now desire to amend the Purchase Contract as
provided herein.

                                   AGREEMENT:

      NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

      1. Delivery of Initial Deposit.  Notwithstanding  anything to the contrary
contained in the  Purchase  Contract  (including,  without  limitation,  Section
3.1.1.1  thereof),  the Initial Deposit shall be delivered by Purchaser to Title
Insurer, as escrow agent, on or before May 4, 2001.

      2.  Feasibility  Period;  Purchaser's  Review of Title.  Purchaser  hereby
acknowledges  and agrees that (a) it and its Consultants have had an opportunity
to conduct all  necessary  diligence  matters  referred to in Section 5.1 of the
Purchase  Contract,  (b) it has had an opportunity to review the Title Documents
in  accordance  with  Section  6.2 of the  Purchase  Contract  and (c) it has no
further rights to terminate the Purchase  Contract  pursuant to either  Sections
5.2 and 6.2 of the Purchase Contract.

      3.  Delivery  of  Seller's  Approvals.  Notwithstanding  anything  to  the
contrary  contained in the Purchase  Contract  (including,  without  limitation,
Section 2.2 thereof), Seller shall use commercially reasonable efforts to obtain
the Seller's Approvals on or before May 11, 2001.

      4.    Miscellaneous.

            a.   Effect of Amendment.  In the event of any inconsistency between
                 -------------------
the terms of the Purchase Contract and the terms of this Amendment, the terms of
this Amendment shall prevail.

            b. Ratification.  Except as otherwise expressly modified hereby, the
               ------------
Purchase Contract shall remain in full force and effect, and all of the terms
and provisions of the Purchase Contract, as herein modified, are hereby ratified
and reaffirmed.

            c.  Counterparts.   This  Amendment  may  be  executed  in  as  many
counterparts  as may be deemed  necessary and  convenient,  and by the different
parties hereto on separate counterparts,  each of which, when so executed, shall
be deemed an original,  but all such  counterparts  shall constitute one and the
same instrument.  Additionally,  the parties hereby covenant and agree that, for
purposes of facilitating the execution of this Amendment,  a facsimile signature
shall be deemed to be an original  signature and a telecopy  delivery (i.e., the
transmission  by any party of its  signature  on an original or any copy of this
Amendment  via  telecopy or fax  machine)  shall be deemed to be the delivery of
such party's original signature.

                  Remainder of this page left blank intentionally.


<PAGE>


      IN WITNESS  WHEREOF,  the parties hereto have duly executed this Amendment
as of the day and year first above written.

                        SELLER:

                         MEADOWOOD ASSOCIATES III, LTD.,
                         a Maryland limited partnership

                      By: THE NATIONAL HOUSING PARTNERSHIP,
                              a District of Columbia limited partnership,
                               its general partner

                            By: NATIONAL CORPORATION
                                    FOR HOUSING PARTNERSHIPS,
                                    a District of Columbia corporation,
                                    its general partner



                                    By:   ___________________________
                                          Harry Alcock
                                          Executive Vice President

                        PURCHASER:

                        CPDC, INC.,
                        a Maryland corporation



                         By: ___________________________
                              Leslie A. Steen
                              President


<PAGE>
                                                                    Exhibit 10.3

                               SECOND AMENDMENT TO
                           PURCHASE AND SALE CONTRACT
                              (Windsor Valley III)


      THIS SECOND AMENDMENT TO PURCHASE AND SALE CONTRACT (this "Amendment"), is
made and entered into as of May 30, 2001,  by and between  MEADOWOOD  ASSOCIATES
III, LTD., a Maryland limited partnership ("Seller"), and CPDC, INC., a Maryland
corporation ("Purchaser").

                                    RECITALS:

      A. Seller and Purchaser  have entered into that certain  Purchase and Sale
Contract,  dated as of March 12,  2001,  which  amended  by that  certain  First
Amendment  To  Purchase  and Sale  Contract,  dated as of April 26,  2001 (as so
amended, the "Purchase Contract").  All capitalized terms used but not otherwise
defined  herein  shall  have  the  meanings  ascribed  thereto  in the  Purchase
Contract.

      B.    The parties hereto now desire to amend the Purchase Contract as
provided herein.

                                   AGREEMENT:

      NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

      1.   Financing Contingency Period. Section 4.1 of the Purchase Contract is
hereby deleted, in its entirety, and the following new paragraph is inserted in
lieu thereof:

                  "4.1 Purchaser's  Responsibility  To Obtain Funds For Closing.
            Purchaser  assumes full  responsibility to obtain the funds required
            for settlement at Closing. Such funds (including the right to assume
            the HUD Loan Documents, if any, under Section 4.2.1 hereof) shall be
            secured by  Purchaser  on or before  June 29,  2001 (the  "Financing
            Contingency Period")."

      2.    Miscellaneous.

            a.  Effect of Amendment.  In the event of any inconsistency between
the terms of the Purchase Contract and the terms of this Amendment, the terms of
this Amendment shall prevail.

b.   Ratification.  Except as otherwise  expressly modified hereby, the Purchase
     Contract  shall  remain in full force and effect,  and all of the terms and
     provisions  of the  Purchase  Contract,  as  herein  modified,  are  hereby
     ratified and reaffirmed.

            c.  Counterparts.   This  Amendment  may  be  executed  in  as  many
counterparts  as may be deemed  necessary and  convenient,  and by the different
parties hereto on separate counterparts,  each of which, when so executed, shall
be deemed an original,  but all such  counterparts  shall constitute one and the
same instrument.  Additionally,  the parties hereby covenant and agree that, for
purposes of facilitating the execution of this Amendment,  a facsimile signature
shall be deemed to be an original  signature and a telecopy  delivery (i.e., the
transmission  by any party of its  signature  on an original or any copy of this
Amendment  via  telecopy or fax  machine)  shall be deemed to be the delivery of
such party's original signature.

                  Remainder of this page left blank intentionally.


<PAGE>


      IN WITNESS  WHEREOF,  the parties hereto have duly executed this Amendment
as of the day and year first above written.

                        SELLER:

                         MEADOWOOD ASSOCIATES III, LTD.,
                         a Maryland limited partnership

                      By: THE NATIONAL HOUSING PARTNERSHIP,
                              a District of Columbia limited partnership,
                               its general partner

                            By: NATIONAL CORPORATION
                                    FOR HOUSING PARTNERSHIPS,
                                    a District of Columbia corporation,
                                    its general partner



                                    By:   ___________________________
                                          Harry Alcock
                                          Executive Vice President

                        PURCHASER:

                        CPDC, INC.,
                        a Maryland corporation



                         By: ___________________________
                              Leslie A. Steen
                              President