United States
                       Securities And Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-QSB

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

              For the quarterly period ended September 30, 2005


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


             For the transition period from _________to _________

                         Commission file number 0-15676


                   DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
        (Exact name of small business issuer as specified in its charter)



           Delaware                                              62-1242599
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

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

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


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.
Yes  X  No ___

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes ___ No __X__
<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS



                  DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

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

                               September 30, 2005

<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $   407
   Receivables and deposits                                                      535
   Other assets                                                                  313
   Investment properties:
      Land                                                    $ 2,821
      Buildings and related personal property                   41,707
                                                                44,528
      Less accumulated depreciation                            (27,536)       16,992
                                                                            $ 18,247

Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                           $ 4
   Tenant security deposit liabilities                                           121
   Accrued property taxes                                                        381
   Other liabilities                                                             250
   Deferred tax liability (Note C)                                               301
   Due to affiliates (Note B)                                                 12,008
   Mortgage notes payable                                                     20,285

Partners' Deficit
   General partners                                            $ (302)
   Limited partners (1,011.5 units issued and
      outstanding)                                             (14,801)      (15,103)
                                                                            $ 18,247

                See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>

                  DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

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

<TABLE>
<CAPTION>


                                        Three Months Ended           Nine Months Ended
                                           September 30,               September 30,
                                        2005          2004           2005          2004
Revenues:
<S>                                    <C>           <C>           <C>            <C>
  Rental income                        $ 1,410       $ 1,307       $ 4,123        $ 3,636
  Other income                             177           135            553            484
      Total revenues                     1,587         1,442          4,676          4,120

Expenses:
  Operating                                743           807          2,269          2,255
  General and administrative                54            36            157            129
  Depreciation                             501           484          1,473          1,461
  Interest                                 643           538          1,853          1,572
  Property taxes                            90          (105)           282            101
  Deferred tax expense (Note C)             --            --            301             --

      Total expenses                     2,031         1,760          6,335          5,518

Net loss                               $ (444)       $ (318)       $ (1,659)     $ (1,398)

Net loss allocated to general
  partners (2%)                         $ (9)         $ (6)         $ (33)         $ (28)
Net loss allocated to limited
  partners (98%)                          (435)         (312)        (1,626)        (1,370)

                                       $ (444)       $ (318)       $ (1,659)     $ (1,398)

Net loss per limited partnership
  unit                                $(430.05)     $(308.45)     $(1,607.51)   $(1,354.42)

                See Accompanying Notes to Financial Statements
</TABLE>



<PAGE>




                  DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

            CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
                                   (Unaudited)
                        (in thousands, except unit data)
<TABLE>
<CAPTION>

                                       Limited
                                     Partnership     General      Limited
                                        Units        Partners    Partners      Total

<S>                                    <C>             <C>       <C>          <C>
Original capital contributions         1,013.0         $ 1       $ 20,240     $ 20,241

Partners' deficit at
   December 31, 2004                   1,011.5        $ (269)    $(13,175)    $(13,444)

Net loss for the nine months
   ended September 30, 2005                 --           (33)      (1,626)      (1,659)

Partners' deficit at
   September 30, 2005                  1,011.5        $ (302)    $(14,801)    $(15,103)

                See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>
                   DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

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

                                                                    Nine Months Ended
                                                                      September 30,
                                                                    2005         2004
Cash flows from operating activities:
<S>                                                                <C>          <C>
  Net loss                                                         $(1,659)     $(1,398)
  Adjustments to reconcile net loss to net cash provided by
   operating activities:
     Depreciation                                                    1,473        1,461
     Amortization of mortgage discounts and loan costs                  24           24
     Bad debt expense                                                   76           82
     Change in accounts:
      Receivables and deposits                                         (55)        (442)
      Other assets                                                     (64)        (105)
      Accounts payable                                                 (73)           8
      Tenant security deposit liabilities                               (2)         (12)
      Accrued property taxes                                           154           25
      Other liabilities                                                  6            1
      Deferred tax liability                                           301           --
      Due to affiliates                                                681          410
         Net cash provided by operating activities                     862           54

Cash flows used in investing activities:
  Property improvements and replacements                              (582)        (596)

Cash flows from financing activities:
  Payments on mortgage notes payable                                   (99)         (97)
  Advances from affiliates                                              --          521
  Payments on advances from affiliates                                  --           (2)
         Net cash (used in) provided by financing activities           (99)         422

Net increase (decrease) in cash and cash equivalents                   181         (120)
Cash and cash equivalents at beginning of period                       226          416

Cash and cash equivalents at end of period                          $ 407        $ 296

Supplemental disclosure of cash flow information:
  Cash paid for interest                                           $ 1,228      $ 1,223

Supplemental disclosure of non-cash information:
  Property improvements and replacements included in
   accounts payable                                                 $ --         $ 53

At  December  31, 2003  approximately  $235,000  of  property  improvements  and
replacements  were  included  in accounts  payable and are  included in property
improvements and replacements during the nine months ended September 30, 2004.

                See Accompanying Notes to Financial Statements
</TABLE>


<PAGE>

                  DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note A - Basis of Presentation

The  accompanying   unaudited  consolidated  financial  statements  of  Davidson
Diversified Real Estate III, L.P. (the  "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310(b)
of Regulation S-B.  Accordingly,  they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of Davidson Diversified  Properties,  Inc.
(the  "Managing  General  Partner"),   all  adjustments  (consisting  of  normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. Operating results for the three and nine month periods ended September
30, 2005 are not necessarily  indicative of the results that may be expected for
the year  ending  December  31,  2005.  For  further  information,  refer to the
consolidated   financial  statements  and  footnotes  thereto  included  in  the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 2004.
The  Managing  General  Partner  is  a  wholly  owned  subsidiary  of  Apartment
Investment  and  Management  Company  ("AIMCO"),  a publicly  traded real estate
investment trust.

Note B - Transactions with Affiliated Parties

The Partnership has no employees and depends on the Managing General Partner and
its  affiliates  for  the  management  and  administration  of  all  Partnership
activities.  The  Partnership  Agreement  provides  for (i) certain  payments to
affiliates for services and (ii)  reimbursement of certain expenses  incurred by
affiliates on behalf of the  Partnership.  The  following  payments were paid or
accrued to the Managing  General  Partner and affiliates  during the nine months
ended September 30, 2005 and 2004.

Affiliates of the Managing  General  Partner  received 5% of gross receipts from
both of the  Partnership's  investment  properties as compensation for providing
property   management   services.   The  Partnership  paid  to  such  affiliates
approximately $230,000 and $199,000 for the nine months ended September 30, 2005
and 2004, respectively, which is included in operating expenses.

Affiliates of the Managing General Partner charged the Partnership reimbursement
of accountable  administrative  expenses amounting to approximately $169,000 and
$106,000 for the nine months ended  September  30, 2005 and 2004,  respectively,
which  is  included  in  general  and  administrative  expenses  and  investment
properties.   The  portion  of  these  reimbursements   included  in  investment
properties  for the  nine  months  ended  September  30,  2005 and 2004 are fees
related to  construction  management  services  provided by an  affiliate of the
Managing General Partner of approximately $59,000 and $13,000, respectively. The
construction  management  services fees are calculated  based on a percentage of
additions  to  investment  properties.  At  September  30,  2005,  approximately
$796,000 of reimbursements for services and associated  interest were accrued by
the  Partnership  and are  included  in due to  affiliates  on the  accompanying
consolidated balance sheet.

During the nine months ended  September  30, 2005,  no advances were made by the
Managing  General  Partner  to the  Partnership.  During the nine  months  ended
September  30,  2004,  the Managing  General  Partner  advanced the  Partnership
approximately  $521,000  for  redevelopment  costs and  operational  expenses at
Plainview Apartments and the Partnership. These advances were made in accordance
with the terms of the Partnership Agreement.  At September 30, 2005, the balance
of the advances,  including accrued interest, was approximately  $11,212,000 and
is included in due to affiliates on the accompanying consolidated balance sheet.
Interest  is charged at the prime rate plus 2% (8.75% at  September  30,  2005).
Interest  expense was  approximately  $564,000  and $385,000 for the nine months
ended  September 30, 2005 and 2004,  respectively.  During the nine months ended
September 30, 2004, the  Partnership  repaid advances of  approximately  $2,000.
There were no such payments during the nine months ended September 30, 2005.

The Partnership  insures Salem  Courthouse up to certain limits through coverage
provided by AIMCO which is  generally  self-insured  for a portion of losses and
liabilities  related  to  workers  compensation,   property  casualty,   general
liability and vehicle liability.  The Partnership insures Salem Courthouse above
the AIMCO limits  through  insurance  policies  obtained by AIMCO from  insurers
unaffiliated with the Managing General Partner. The Managing General Partner has
obtained insurance coverage for Plainview Apartments for 2005 and 2004 from both
AIMCO and a third  party.  During the nine months ended  September  30, 2005 and
2004,  the  Partnership  was charged by AIMCO and its  affiliates  approximately
$81,000 and $68,000  for  insurance  coverage  and fees  associated  with policy
claims administration.

Note C - Partnership Income Taxes

The state of Kentucky has recently enacted tax legislation,  effective for years
beginning on or after January 1, 2005,  concerning income taxes that will impact
the  Partnership.  One  of  the  provisions  of  the  legislation  requires  the
Partnership to be liable for any Kentucky income taxes that arise as a result of
one of the Partnership's properties,  Plainview Apartments, being located in the
state of Kentucky.  During the second quarter of 2005, the Partnership estimated
that a deferred tax liability  exists of  approximately  $301,000 as a result of
this tax legislation and accordingly recorded such liability at that time.

Note D - Subsequent Event

Subsequent to September 30, 2005, the  Partnership  entered into a sale contract
with a third party to sell Salem  Courthouse  Apartments for a purchase price of
approximately  $12,473,000.  The anticipated  closing date is November 30, 2005.
For the nine months ended  September 30, 2005 the property had total revenues of
approximately  $1,834,000 and net income of approximately  $41,000. The net book
value  of  Salem  Courthouse   Apartments  assets  at  September  30,  2005  was
approximately $4,351,000.

Note E - Contingencies

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of  interests  in certain  Managing  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition,  during the third quarter of 2001, a complaint  captioned Heller v.
Insignia  Financial  Group (the  "Heller  action")  was filed  against  the same
defendants  that are named in the  Nuanes  action.  On or about  August 6, 2001,
plaintiffs filed a first amended  complaint.  The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary  duty,  unfair  competition,  conversion,  unjust  enrichment,  and
judicial  dissolution.  On January 28, 2002, the trial court granted  defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes  action and the Heller  action.  On June 13, 2003,  the
court granted final approval of the settlement and entered  judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal")  seeking to vacate and/or reverse the order  approving the
settlement and entering judgment  thereto.  On May 4, 2004, the Objector filed a
second appeal  challenging  the court's use of a referee and its order requiring
Objector to pay those fees.

On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated  the trial  court's  order and  remanded  to the trial court for further
findings  on the basis that the "state of the record is  insufficient  to permit
meaningful  appellate  review".  With regard to the second appeal,  the Court of
Appeals  reversed the order requiring the Objector to pay referee fees. On April
26, 2005,  the Court of Appeals  lifted the stay of a pending  appeal related to
the Heller action and the trial court's order striking the  complaint.  On April
28, 2005, the Objector  filed a Petition for Review with the California  Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings.  On June 10, 2005, the California  Supreme Court
denied  Objector's  Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21,  2005.  The parties  intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's  remand order.  With respect to the related Heller appeal,  on
July 28, 2005,  the Court of Appeals  reversed the trial court's order  striking
the first amended complaint.

On August 18, 2005,  Objector and his counsel filed a motion to  disqualify  the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector  filed a motion
to  intervene  and on or about  October  19,  2005  filed  both a motion to take
discovery  relating to the adequacy of plaintiffs as derivative  representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.

The  Managing  General  Partner  does  not  anticipate  that  any  costs  to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.

AIMCO  Properties  L.P.  and NHP  Management  Company,  both  affiliates  of the
Managing  General  Partner,  are  defendants  in a  lawsuit  alleging  that they
willfully  violated  the Fair Labor  Standards  Act  ("FLSA")  by failing to pay
maintenance  workers  overtime for all hours worked in excess of forty per week.
The  complaint,  filed in the United States  District  Court for the District of
Columbia,  attempts  to bring a  collective  action  under the FLSA and seeks to
certify state subclasses in California,  Maryland, and the District of Columbia.
Specifically,  the  plaintiffs  contend  that  AIMCO  Properties  L.P.  and  NHP
Management Company failed to compensate  maintenance  workers for time that they
were  required  to be  "on-call".  Additionally,  the  complaint  alleges  AIMCO
Properties  L.P. and NHP  Management  Company  failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally  certified the collective action
on both the on-call and overtime issues,  which allows the plaintiffs to provide
notice of the  collective  action to all  non-exempt  maintenance  workers  from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action,  and AIMCO Properties,  L.P. and NHP Management
Company will have the  opportunity to move to decertify the  collective  action.
Because the court denied  plaintiffs'  motion to certify  state  subclasses,  on
September  26,  2005,  the  plaintiffs  filed  a  class  action  with  the  same
allegations in the Superior Court of California (Contra Costa County).  Although
the outcome of any  litigation is  uncertain,  AIMCO  Properties,  L.P. does not
believe that the ultimate  outcome  will have a material  adverse  effect on its
consolidated  financial  condition  or results  of  operations.  Similarly,  the
Managing  General Partner does not believe that the ultimate outcome will have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.

The  Partnership  is unaware  of any other  pending  or  outstanding  litigation
matters  involving  it or its  investment  properties  that are not of a routine
nature arising in the ordinary course of business.

Environmental

Various  Federal,  state and local laws subject  property owners or operators to
liability for management,  and the costs of removal or  remediation,  of certain
hazardous  substances  present on a property.  Such laws often impose  liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the  hazardous  substances.  The  presence of, or the
failure to manage or remedy properly,  hazardous substances may adversely affect
occupancy at affected  apartment  communities and the ability to sell or finance
affected properties.  In addition to the costs associated with investigation and
remediation  actions  brought by government  agencies,  and  potential  fines or
penalties  imposed by such  agencies in  connection  therewith,  the presence of
hazardous  substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose  liability for the cost of removal,  remediation or disposal of hazardous
substances  through a  licensed  disposal  or  treatment  facility.  Anyone  who
arranges for the disposal or treatment of hazardous  substances  is  potentially
liable  under such laws.  These laws often impose  liability  whether or not the
person arranging for the disposal ever owned or operated the disposal  facility.
In connection  with the ownership,  operation and management of its  properties,
the Partnership  could  potentially be liable for  environmental  liabilities or
costs associated with its properties.

Mold

The Partnership is aware of lawsuits  against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial  monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims  arising from the  presence of mold and for  personal  injury
claims related to mold exposure. Affiliates of the Managing General Partner have
implemented a national  policy and  procedures to prevent or eliminate mold from
its properties  and the Managing  General  Partner  believes that these measures
will  minimize  the  effects  that mold could have on  residents.  To date,  the
Partnership  has not  incurred  any material  costs or  liabilities  relating to
claims of mold exposure. During 2003, the Partnership completed a rehabilitation
project at Plainview Apartments which cost approximately $5,300,000. Part of the
rehabilitation  project was to address mold abatement  conditions  with the rest
relating to general updating of the property.  Because the law regarding mold is
unsettled  and  subject  to change  the  Managing  General  Partner  can make no
assurance  that  liabilities  resulting from the presence of or exposure to mold
will  not have a  material  adverse  effect  on the  Partnership's  consolidated
financial condition or results of operations.

SEC Investigation

The  Central  Regional  Office of the  United  States  Securities  and  Exchange
Commission (the "SEC")  continues its formal  investigation  relating to certain
matters.  Although  the staff of the SEC is not limited in the areas that it may
investigate,  AIMCO believes the areas of  investigation  have included  AIMCO's
miscalculated   monthly  net  rental  income  figures  in  third  quarter  2003,
forecasted  guidance,  accounts  payable,  rent  concessions,   vendor  rebates,
capitalization of payroll and certain other costs, tax credit transactions,  and
tender offers for limited  partnership  interests.  AIMCO is cooperating  fully.
AIMCO is not able to predict when the investigation will be resolved. AIMCO does
not believe that the ultimate outcome will have a material adverse effect on its
consolidated  financial  condition  or results  of  operations.  Similarly,  the
Managing  General Partner does not believe that the ultimate outcome will have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.


<PAGE>



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

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including,  without limitation:  national and local
economic  conditions;  the terms of  governmental  regulations  that  affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates;  financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest;  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such markets;  litigation,  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   and  possible   environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  files  from  time to time  with the  Securities  and
Exchange Commission.

The Partnership's  investment properties consist of two apartment complexes. The
following  table sets forth the average  occupancy of these  properties  for the
nine months ended September 30, 2005 and 2004:

                                                 Average Occupancy
                                                 2005        2004
         Salem Courthouse
            Indianapolis, Indiana                 92%         86%

         Plainview Apartments
            Louisville, Kentucky                  95%         87%

The  Managing  General  Partner  attributes  the  increase in occupancy at Salem
Courthouse  to  property  management  raising  the  qualifying   conditions  for
prospective tenants in order to attract a more stable tenant population.

The Managing  General Partner  attributes the increase in occupancy at Plainview
Apartments to a redevelopment  project which was completed in December 2003 that
made  the  property  more  competitive  in the  local  market  and to  increased
employment opportunities in the local market.

The  Partnership's  financial  results depend upon a number of factors including
the  ability to attract  and  maintain  tenants  at the  investment  properties,
interest  rates on mortgage  loans,  costs  incurred  to operate the  investment
properties,  general  economic  conditions  and weather.  As part of the ongoing
business plan of the  Partnership,  the Managing  General  Partner  monitors the
rental market environment of its investment properties to assess the feasibility
of increasing rents,  maintaining or increasing  occupancy levels and protecting
the Partnership  from increases in expenses.  As part of this plan, the Managing
General  Partner  attempts  to  protect  the  Partnership  from  the  burden  of
inflation-related  increases in expenses by increasing  rents and  maintaining a
high overall  occupancy  level.  However,  the Managing  General Partner may use
rental  concessions  and  rental  rate  reductions  to offset  softening  market
conditions, accordingly, there is no guarantee that the Managing General Partner
will be able to  sustain  such a plan.  Further,  a number of  factors  that are
outside the control of the  Partnership  such as the local economic  climate and
weather can adversely or positively affect the Partnership's financial results.

Results of Operations

The Partnership  recognized a net loss of approximately  $444,000 and $1,659,000
for the three and nine months ended September 30, 2005 compared to a net loss of
approximately  $318,000  and  $1,398,000  for the  three and nine  months  ended
September  30, 2004.  The increase in the net loss for the three and nine months
ended  September  30,  2005 is due to an increase  in total  expenses  partially
offset by an increase in total revenues.  Total revenues  increased for both the
three and nine  months  ended  September  30,  2005 due to an increase in rental
income and other income. Rental income increased due to an increase in occupancy
and average  rental rates at both  properties and a decrease in bad debt expense
at Salem  Courthouse  Apartments.  Other income  increased due to an increase in
utility reimbursements, lease cancellation fees, and cleaning and damage fees at
Plainview  Apartments  partially  offset  by a  decrease  in  late  fees,  lease
cancellation fees, and legal fees at Salem Courthouse Apartments.

Total  expenses  increased  for the nine months ended  September 30, 2005 due to
increases in  operating,  general and  administrative,  depreciation,  interest,
deferred tax and property tax expenses.  Operating  expense  increased due to an
increase in property expense and property  management fees partially offset by a
decrease in maintenance  expense.  Property expense increased due to an increase
in utility  expense and  salaries and related  employee  benefits at both of the
Partnership's  investment  properties.  Property  management fees increased as a
result of the increase in rental income,  predominately at Plainview Apartments,
on which such fee is based.  Maintenance  expense decreased due to a decrease in
contract  repairs expense at both of the  Partnership's  investment  properties.
Depreciation  expense  increased due to property  improvements  and replacements
placed  into  service  during  the  past  twelve  months  which  are  now  being
depreciated.  Interest  expense  increased  due to an increase  in the  variable
interest rate charged on the mortgage  encumbering  Salem Courthouse  Apartments
and increase in the prime rate, which is charged on the advances from affiliates
of the  Managing  General  Partner.  Property tax expense  increased  due to the
successful  appeal of the reassessed value of Salem Courthouse during 2004 which
resulted in tax refunds for prior years being  recognized  during 2004 due to an
adjustment in the reassessment of Salem Courthouse Apartments during 2004.

Total  expenses  increased for the three months ended  September 30, 2005 due to
increases in general and administrative, depreciation, interest and property tax
expenses,  as  discussed  above and below  partially  offset  by a  decrease  in
operating  expense.  Operating  expense  decreased  as a result of a decrease in
maintenance  expense  partially  offset by  increases  in  property  expense  as
discussed above.

The state of Kentucky has recently enacted tax legislation,  effective for years
beginning on or after January 1, 2005,  concerning income taxes that will impact
the  Partnership.  One  of  the  provisions  of  the  legislation  requires  the
Partnership to be liable for any Kentucky income taxes that arise as a result of
one of the Partnership's properties,  Plainview Apartments, being located in the
state of Kentucky.  During the second quarter of 2005, the Partnership estimated
that at a deferred tax liability exists of approximately $301,000 as a result of
this tax legislation and accordingly recorded such liability at that time.

General  and  administrative  expenses  increased  for the three and nine months
ended  September 30, 2005 due to an increase in  reimbursements  to the Managing
General Partner as allowed under the Partnership  Agreement and costs associated
with the annual audit of the Partnership. In addition, costs associated with the
quarterly and annual  communications  with investors and regulatory agencies and
the annual audit required by the Partnership Agreement are also included.

Liquidity and Capital Resources

At  September  30,  2005,  the  Partnership  had cash and  cash  equivalents  of
approximately $407,000 compared to approximately $296,000 at September 30, 2004.
The  increase  in cash and  cash  equivalents  of  approximately  $181,000  from
December 31, 2004 is due to approximately $862,000 of cash provided by operating
activities  partially offset by approximately  $582,000 and $99,000 of cash used
in investing  and  financing  activities,  respectively.  Cash used in investing
activities  consisted of property  improvements and  replacements.  Cash used in
financing  activities  consisted  of  principal  payments  made on the  mortgage
encumbering  Salem Courthouse  Apartments.  The Partnership  invests its working
capital in interest bearing accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures  required at the  properties  to  adequately  maintain the physical
assets and other  operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Managing General Partner
monitors  developments  in the  area of legal  and  regulatory  compliance.  For
example,  the  Sarbanes-Oxley  Act  of  2002  mandates  or  suggests  additional
compliance  measures  with  regard to  governance,  disclosure,  audit and other
areas.  In light of these changes,  the  Partnership  expects that it will incur
higher expenses related to compliance.  Capital improvements planned for both of
the Partnership's properties are detailed below.

Plainview  Apartments:  During the nine months ended  September  30,  2005,  the
Partnership  completed   approximately   $122,000  in  capital  expenditures  at
Plainview Apartments consisting of floor covering and water heater replacements,
furniture  and  fixture  upgrades,   and  swimming  pool   improvements.   These
expenditures  were funded from operating cash flow.  The  Partnership  regularly
evaluates the capital  improvement needs of the property.  While the Partnership
has no material commitments for property improvements and replacements,  certain
routine  capital   expenditures  are  anticipated   during  2005.  Such  capital
expenditures  will depend on the  physical  condition of the property as well as
anticipated cash flow generated by the property.

Salem  Courthouse  Apartments:  During the nine months ended September 30, 2005,
the  Partnership  completed  approximately  $460,000 of capital  improvements at
Salem  Courthouse  Apartments,   consisting  primarily  of  floor  covering  and
appliance replacements,  exterior upgrades,  plumbing fixtures, air conditioning
units, interior painting of common areas,  maintenance equipment, and structural
and electrical improvements.  These improvements were funded from operating cash
flow. The Partnership  regularly  evaluates the capital improvement needs of the
property.  While  the  Partnership  has no  material  commitments  for  property
improvements  and  replacements,   certain  routine  capital   expenditures  are
anticipated  during 2005. Such capital  expenditures will depend on the physical
condition  of the  property as well as  anticipated  cash flow  generated by the
property.

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

The  Partnership's  assets are thought to be sufficient for any near-term  needs
(exclusive of capital improvements) of the Partnership. The mortgage encumbering
Salem Courthouse  Apartments of approximately  $4,949,000 has a maturity date of
September  15,  2007 at which  time a  balloon  payment  totaling  approximately
$4,688,000 is due. At that time, the Managing  General Partner has the option to
extend  the  maturity  of  this  loan  for  another  five  years.  The  mortgage
indebtedness  encumbering  Plainview  Apartments  of  approximately  $15,336,000
requires a balloon payment of  approximately  $15,336,000 due November 15, 2010.
The Managing General Partner will attempt to refinance such indebtedness  and/or
sell the properties prior to maturity. If the properties cannot be refinanced or
sold for a sufficient  amount,  the Partnership  will risk losing the properties
through  foreclosure.  Subsequent to September 30, 2005, the Partnership entered
into a sale contract with a third party to sell Salem  Courthouse for a purchase
price of approximately $12,473,000. The anticipated closing date is November 30,
2005.  For the nine  months  ended  September  30, 2005 the  property  had total
revenues of approximately  $1,834,000 and net income of  approximately  $41,000.
The net book value of Salem Courthouse  Apartments  assets at September 30, 2005
was approximately $4,351,000.

There  were no  distributions  to the  partners  during  the nine  months  ended
September 30, 2005 and 2004. Future cash distributions will depend on the levels
of net cash generated from operations,  the timing of debt maturities,  property
sales and/or refinancings.  The Partnership's cash available for distribution is
reviewed on a monthly basis.  In light of the amounts accrued and payable to the
Managing  General Partner at September 30, 2005,  there can be no assurance that
the Partnership will generate  sufficient  funds from operations,  after capital
expenditures,  to  permit  any  distributions  to its  partners  during  2005 or
subsequent periods.

Other

In addition to its indirect  ownership of the managing  general partner interest
in the Partnership,  AIMCO and its affiliates  owned 440.50 limited  partnership
units (the "Units") in the  Partnership  representing  43.55% of the outstanding
Units at September 30, 2005. A number of these Units were  acquired  pursuant to
tender offers made by AIMCO or its affiliates.  It is possible that AIMCO or its
affiliates will acquire  additional  Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private  purchases or tender offers.  Pursuant to the Partnership
Agreement,  unitholders  holding a majority  of the Units are  entitled  to take
action with  respect to a variety of matters that  include,  but are not limited
to,  voting on certain  amendments  to the  Partnership  Agreement and voting to
remove the Managing General  Partner.  As a result of its ownership of 43.55% of
the outstanding  Units,  AIMCO and its affiliates are in a position to influence
all such voting decisions with respect to the Partnership. Although the Managing
General  Partner  owes  fiduciary   duties  to  the  limited   partners  of  the
Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as
its sole stockholder.  As a result,  the duties of the Managing General Partner,
as managing  general  partner,  to the Partnership and its limited  partners may
come into conflict with the duties of the Managing  General  Partner to AIMCO as
its sole stockholder.

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the Partnership
to  make  estimates  and  assumptions.  The  Partnership  believes  that  of its
significant  accounting  policies,  the following may involve a higher degree of
judgment and complexity.

Impairment of Long-Lived Assets

Investment  properties  are  recorded at cost,  less  accumulated  depreciation,
unless  considered  impaired.  If  events  or  circumstances  indicate  that the
carrying  amount of a property may be  impaired,  the  Partnership  will make an
assessment of its  recoverability  by estimating  the  undiscounted  future cash
flows,  excluding  interest  charges,  of the property.  If the carrying  amount
exceeds the aggregate  future cash flows,  the  Partnership  would  recognize an
impairment  loss to the extent the carrying amount exceeds the fair value of the
property.

Real  property  investments  are  subject  to varying  degrees of risk.  Several
factors  may  adversely  affect  the  economic  performance  and  value  of  the
Partnership's investment properties.  These factors include, but are not limited
to,  changes  in the  national,  regional  and  local  economic  climate;  local
conditions,  such as an oversupply of multifamily  properties;  competition from
other available  multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response  to heavy  competition  from other  similar  complexes  in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line  basis over the term of the lease.  The Partnership  evaluates all
accounts  receivable  from  residents and  establishes  an allowance,  after the
application of security deposits,  for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.

ITEM 3.     CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of the principal executive officer and principal financial officer
of the Managing  General  Partner,  who are the equivalent of the  Partnership's
principal executive officer and principal financial officer,  respectively,  has
evaluated  the  effectiveness  of  the  Partnership's  disclosure  controls  and
procedures (as such term is defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report.  Based on such  evaluation,  the principal
executive  officer  and  principal  financial  officer of the  Managing  General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal  financial officer,  respectively,  have concluded that, as of the
end of such period,  the  Partnership's  disclosure  controls and procedures are
effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fiscal quarter to which this report relates that have  materially  affected,  or
are reasonably likely to materially affect,  the Partnership's  internal control
over financial reporting.



<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of  interests  in certain  Managing  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition,  during the third quarter of 2001, a complaint  captioned Heller v.
Insignia  Financial  Group (the  "Heller  action")  was filed  against  the same
defendants  that are named in the  Nuanes  action.  On or about  August 6, 2001,
plaintiffs filed a first amended  complaint.  The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary  duty,  unfair  competition,  conversion,  unjust  enrichment,  and
judicial  dissolution.  On January 28, 2002, the trial court granted  defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes  action and the Heller  action.  On June 13, 2003,  the
court granted final approval of the settlement and entered  judgment in both the
Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an
appeal (the "Appeal")  seeking to vacate and/or reverse the order  approving the
settlement and entering judgment  thereto.  On May 4, 2004, the Objector filed a
second appeal  challenging  the court's use of a referee and its order requiring
Objector to pay those fees.

On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated  the trial  court's  order and  remanded  to the trial court for further
findings  on the basis that the "state of the record is  insufficient  to permit
meaningful  appellate  review".  With regard to the second appeal,  the Court of
Appeals  reversed the order requiring the Objector to pay referee fees. On April
26, 2005,  the Court of Appeals  lifted the stay of a pending  appeal related to
the Heller action and the trial court's order striking the  complaint.  On April
28, 2005, the Objector  filed a Petition for Review with the California  Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings.  On June 10, 2005, the California  Supreme Court
denied  Objector's  Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21,  2005.  The parties  intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's  remand order.  With respect to the related Heller appeal,  on
July 28, 2005, the Court of Appeal reversed the trial court's order striking the
first amended complaint.

On August 18, 2005,  Objector and his counsel filed a motion to  disqualify  the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector  filed a motion
to  intervene  and on or about  October  19,  2005  filed  both a motion to take
discovery  relating to the adequacy of plaintiffs as derivative  representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.

The  Managing  General  Partner  does  not  anticipate  that  any  costs  to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.

AIMCO  Properties  L.P.  and NHP  Management  Company,  both  affiliates  of the
Managing  General  Partner,  are  defendants  in a  lawsuit  alleging  that they
willfully  violated  the Fair Labor  Standards  Act  ("FLSA")  by failing to pay
maintenance  workers  overtime for all hours worked in excess of forty per week.
The  complaint,  filed in the United States  District  Court for the District of
Columbia,  attempts  to bring a  collective  action  under the FLSA and seeks to
certify state subclasses in California,  Maryland, and the District of Columbia.
Specifically,  the  plaintiffs  contend  that  AIMCO  Properties  L.P.  and  NHP
Management Company failed to compensate  maintenance  workers for time that they
were  required  to be  "on-call".  Additionally,  the  complaint  alleges  AIMCO
Properties  L.P. and NHP  Management  Company  failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally  certified the collective action
on both the on-call and overtime issues,  which allows the plaintiffs to provide
notice of the  collective  action to all  non-exempt  maintenance  workers  from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action,  and AIMCO Properties,  L.P. and NHP Management
Company will have the  opportunity to move to decertify the  collective  action.
Because the court denied  plaintiffs'  motion to certify  state  subclasses,  on
September  26,  2005,  the  plaintiffs  filed  a  class  action  with  the  same
allegations in the Superior Court of California (Contra Costa County).  Although
the outcome of any  litigation is  uncertain,  AIMCO  Properties,  L.P. does not
believe that the ultimate  outcome  will have a material  adverse  effect on its
consolidated  financial  condition  or results  of  operations.  Similarly,  the
Managing  General Partner does not believe that the ultimate outcome will have a
material adverse effect on the Partnership's consolidated financial condition or
results of operations.

ITEM 5.     OTHER INFORMATION

            None.

ITEM 6      EXHIBITS

            See Exhibit Index.



<PAGE>


                                   SIGNATURES



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



                                    DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.


                                    By:   Davidson Diversified Properties, Inc.,
                                          Managing General Partner


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


                                    By:   /s/Stephen B. Waters
                                          Stephen B. Waters
                                          Vice President


                                    Date: November 14, 2005



<PAGE>


                   DAVIDSON DIVERSIFIED REAL ESTATE III, LP
                                  EXHIBIT INDEX


Exhibit Number    Description of Exhibit

      3           Partnership  Agreement  dated  July 8, 1985 and  amended as of
                  October 9, 1985 is  incorporated  by reference to Exhibit A to
                  the  Prospectus  of the  Registrant  dated October 28, 1985 as
                  filed with the  Commission  pursuant to Rule 424(b)  under the
                  Act.

      3A          Second  Amendment  dated  April  1,  1986  to the  Partnership
                  Agreement  dated  July 8, 1985 as  amended  October 9, 1985 is
                  incorporated  by reference  to Exhibit 3A to the  Registrant's
                  Annual Report on Form 10-K for the fiscal year ended  December
                  31, 1986.

      4           Certificate  of Limited  Partnership  dated June 28, 1985 is
                  incorporated  by reference to Exhibit 4 to the  Registrant's
                  Registration   Statement  on  form  S-11  (Registration  No.
                  2-99257).

      10D         Contract  for  Sale  of  Real  Estate  for  Salem   Courthouse
                  Apartments  dated  September  25,  1985  between  Salem-Oxford
                  Associates, an Indiana limited partnership and Tennessee Trust
                  Company,  Trustee,  is  incorporated  by  reference to Exhibit
                  10(a) to the  Registrant's  Current  Report  on Form 8-K dated
                  December 2, 1985.

      10E         First  Amendment  to Contract  for Sale of Real  Estate  dated
                  October 29,  1985  between  Salem  Courthouse  Associates,  an
                  Indiana  limited  partnership  and Tennessee  Trust Company is
                  incorporated by reference to Exhibit 10(b) to the Registrant's
                  Current Report on Form 8-K dated December 2, 1985.

      10F         Assignment of Contract for Sale of Real Estate dated  November
                  20, 1985  between  Tennessee  Trust  Company,  Trustee and the
                  Registrant  is  incorporated  by reference to Exhibit 19(c) to
                  the Registrant's  Current Report on Form 8-K dated December 2,
                  1985.

      10L         Contract  for Sale of Real  Estate  for  Plainview  Apartments
                  dated  November 11, 1985  between  NTS-Plainview  Partners,  a
                  Kentucky  limited  partnership and Tennessee Trust Company,  a
                  Tennessee corporation, is incorporated by reference to Exhibit
                  10(a) to the Registrant's Current Report on Form 8-K dated May
                  6, 1986.

      10M         Assignment  of Contract  for Sale of Real Estate  dated May 2,
                  1986 between Tennessee Trust Company, a Tennessee  corporation
                  and the  Registrant  is  incorporated  by reference to Exhibit
                  10(b) to the Registrant's Current Report on Form 8-K dated May
                  6, 1986.

      10N         Amendment  and  Reinstatement  of  Contract  for  Sale of Real
                  Estate dated April 15, 1986 between NTS-Plainview Partners and
                  Tennessee  Trust  Company  is  incorporated  by  reference  to
                  Exhibit 10(c) to the  Registrant's  Current Report on Form 8-K
                  dated May 6, 1986.

      10AA        Amended, Restated and Substituted Mortgage Note dated November
                  15, 1995,  executed by Plainview  Apartments,  L.P. payable to
                  NTS-Plainview  Associates  is  incorporated  by  reference  to
                  Exhibit 10AA to the Registrant's  Annual Report on Form 10-KSB
                  for the year ended December 31, 1995.

      10BB        Assignment of Leases,  Rents, and Profits dated November 15,
                  1995, executed by Plainview  Apartments,  L.P. to Nationwide
                  Life  Insurance  Co. and West Coast  Life  Insurance  Co. is
                  incorporated   by   reference   to   Exhibit   10BB  to  the
                  Registrant's  Annual  Report  on Form  10-KSB  for the  year
                  ended December 31, 1995.

      10CC        a)  Multifamily  Note dated  October  15, 2003  between  Salem
                  Courthouse,  L.P., a South Carolina  Limited  Partnership  and
                  GMAC  Commercial  Mortgage  Corporation,  is  incorporated  by
                  reference  to Form 8-K  dated  October  15,  2003 and filed on
                  November 12, 2003.

      10CC        b) Guaranty dated October 15, 2003 by AIMCO  Properties,  L.P.
                  for the benefit of GMAC Commercial  Mortgage  Corporation,  is
                  incorporated  by reference to Form 8-K dated  October 15, 2003
                  and filed on November 12, 2003.

      10CC        c) Completion/Repair  and Security Agreement dated October 15,
                  2003 between Salem Courthouse,  L.P., a South Carolina Limited
                  Partnership  and  GMAC  Commercial  Mortgage  Corporation,  is
                  incorporated  by reference to Form 8-K dated  October 15, 2003
                  and filed on November 12, 2003.

      10CC        d) Replacement  Reserve and Security  Agreement  dated October
                  15, 2003 between  Salem  Courthouse,  L.P.,  a South  Carolina
                  Limited Partnership and GMAC Commercial Mortgage  Corporation,
                  is  incorporated  by reference  to Form 8-K dated  October 15,
                  2003 and filed on November 12, 2003.

      10CC        e)  Assignment of Security  Instrument  dated October 15, 2003
                  between GMAC Commercial  Mortgage  Corporation and Fannie Mae,
                  is  incorporated  by reference  to Form 8-K dated  October 15,
                  2003 and filed on November 12, 2003.

      10CC        f) Ninth Reaffirmation and Joinder Agreement dated October 15,
                  2003 between AIMCO Properties,  L.P., GMAC Commercial Mortgage
                  Corporation,  Salem  Courthouse,  L.P.,  and  Fannie  Mae,  is
                  incorporated  by reference to Form 8-K dated  October 15, 2003
                  and filed on November 12, 2003.

      10DD a)     Purchase  and Sale  Contract  dated  August 16, 2005 between
                  Salem Courthouse, L.P. and Prime Quest Management, LLC.

      10DD b)     First   Amendment  to  Purchase  and  Sale  Contract   dated
                  September 23, 2005 between Salem Courthouse,  L.P. and Prime
                  Quest Management, LLC.

      10DD c)     Reinstatement  and Second  Amendment  to  Purchase  and Sale
                  Contract  dated October 11, 2005 between  Salem  Courthouse,
                  L.P. and Prime Quest Management, LLC.

      31.1        Certification  of  equivalent  of  Chief  Executive  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

      31.2        Certification  of  equivalent  of  Chief  Financial  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

      32.1        Certification of the equivalent of the Chief Executive Officer
                  and Chief  Financial  Officer  Pursuant  to 18 U.S.C.  Section
                  1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.

      99A         Agreement of Limited  Partnership  for Davidson III GP Limited
                  Partnership between Davidson Diversified Properties,  Inc. and
                  Davidson Diversified Real Estate III entered into on September
                  15, 1993.

      99B         Agreement of Limited  Partnership for Salem  Courthouse L.P.
                  between  Davidson  III GP Limited  Partnership  and Davidson
                  Diversified  Real Estate III, L.P. entered into on September
                  15, 1993.


<PAGE>



Exhibit 31.1


                                  CERTIFICATION


I, Martha L. Long, certify that:


1.    I  have  reviewed  this  quarterly  report  on  Form  10-QSB  of  Davidson
      Diversified Real Estate III, L.P.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.

Date:  November 14, 2005

                                    /s/Martha L. Long
                                    Martha L. Long
                                    Senior   Vice    President   of   Davidson
                                    Diversified  Properties,  Inc., equivalent
                                    of  the  chief  executive  officer  of the
                                   Partnership


<PAGE>



Exhibit 31.2


                                  CERTIFICATION


I, Stephen B. Waters, certify that:


1.    I  have  reviewed  this  quarterly  report  on  Form  10-QSB  of  Davidson
      Diversified Real Estate III, L.P.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.

Date:  November 14, 2005

                                    /s/Stephen B. Waters
                                    Stephen B. Waters
                                    Vice President of Davidson Diversified
                                    Properties, Inc., equivalent of the chief
                                    financial officer of the Partnership



<PAGE>



Exhibit 32.1


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002



In connection with the Quarterly  Report on Form 10-QSB of Davidson  Diversified
Real Estate III,  L.P.  (the  "Partnership"),  for the  quarterly  period  ended
September 30, 2005 as filed with the Securities  and Exchange  Commission on the
date hereof  (the  "Report"),  Martha L. Long,  as the  equivalent  of the Chief
Executive  Officer of the Partnership,  and Stephen B. Waters, as the equivalent
of the Chief  Financial  Officer  of the  Partnership,  each  hereby  certifies,
pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/Martha L. Long
                                    Name:  Martha L. Long
                                    Date:  November 14, 2005


                                           /s/Stephen B. Waters
                                    Name:  Stephen B. Waters
                                    Date:  November 14, 2005


This  certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley  Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
<PAGE>

                                                                   Exhibit 10DDa

                           PURCHASE AND SALE CONTRACT

                                     BETWEEN



                             SALEM COURTHOUSE, L.P.,

                      a South Carolina limited partnership





                                    AS SELLER




                                       AND




                          PRIME QUEST MANAGEMENT, LLC,

                      an Illinois limited liability company



                                  AS PURCHASER


                           SALEM COURTHOUSE APARTMENTS



<PAGE>


8358\735\926279. 6SALEM -iii- COURTHOUSE, INDIANA -iii-





SALEM COURTHOUSE, INDIANA          -i-

8358\735\926279.6

ARTICLE I      DEFINED TERMS.................................................1

ARTICLE II     PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT...................7

      2.1   Purchase and Sale................................................7

      2.2   Purchase Price and Deposit.......................................7

      2.3   Escrow Provisions Regarding Deposit..............................8

ARTICLE III    FEASIBILITY PERIOD............................................9

      3.1   Feasibility Period...............................................9

      3.2   Expiration of Feasibility Period................................10

      3.3   Conduct of Investigation........................................10

      3.4   Purchaser Indemnification.......................................11

      3.5   Property Materials..............................................11

      3.6   Property Contracts..............................................12

ARTICLE IV     TITLE........................................................13

      4.1   Title Documents.................................................13

      4.2   Survey..........................................................13

      4.3   Objection and Response Process..................................14

      4.4   Permitted Exceptions............................................14

      4.5   Existing Deed of Trust..........................................15

      4.6   Purchaser Financing.............................................15

ARTICLE V      CLOSING......................................................16

      5.1   Closing Date....................................................16

      5.2   Seller Closing Deliveries.......................................16

      5.3   Purchaser Closing Deliveries....................................17

      5.4   Closing Prorations and Adjustments..............................18

      5.5   Post Closing Adjustments........................................21

ARTICLE VI     REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER.......22

      6.1   Seller's Representations........................................22

      6.2   AS-IS...........................................................23

      6.3   Survival of Seller's Representations............................24

      6.4   Definition of Seller's Knowledge................................25

      6.5   Representations And Warranties Of Purchaser.....................25

ARTICLE VII    OPERATION OF THE PROPERTY....................................26

      7.1   Leases and Property Contracts...................................26

      7.2   General Operation of Property...................................27

      7.3   Liens...........................................................27

ARTICLE VIII   CONDITIONS PRECEDENT TO CLOSING..............................28

      8.1   Purchaser's Conditions to Closing...............................28

      8.2   Seller's Conditions to Closing..................................28

ARTICLE IX     BROKERAGE....................................................29

      9.1   Indemnity.......................................................29

      9.2   Broker Commission...............................................29

      9.3   Broker Signature Page...........................................29

ARTICLE X      DEFAULTS AND REMEDIES........................................30

      10.1  Purchaser Default...............................................30

      10.2  Seller Default..................................................30

ARTICLE XI     RISK OF LOSS OR CASUALTY.....................................31

      11.1  Major Damage....................................................31

      11.2  Minor Damage....................................................32

      11.3  Repairs.........................................................32

ARTICLE XII    EMINENT DOMAIN...............................................32

      12.1  Eminent Domain..................................................32

ARTICLE XIII   MISCELLANEOUS................................................32

      13.1  Binding Effect of Contract......................................32

      13.2  Exhibits And Schedules..........................................33

      13.3  Assignability...................................................33

      13.4  Binding Effect..................................................33

      13.5  Captions........................................................33

      13.6  Number And Gender Of Words......................................33

      13.7  Notices.........................................................33

      13.8  Governing Law And Venue.........................................35

      13.9  Entire Agreement................................................35

      13.10 Amendments......................................................35

      13.11 Severability....................................................35

      13.12 Multiple Counterparts/Facsimile Signatures......................36

      13.13 Construction....................................................36

      13.14 Confidentiality.................................................36

      13.15 Time Of The Essence.............................................36

      13.16 Waiver..........................................................36

      13.17 Attorneys Fees..................................................36

      13.18 Time Periods....................................................36

      13.19 1031 Exchange...................................................36

      13.20 No Personal Liability of Officers, Trustees or Directors of
            Seller's Partners...............................................37

      13.21 No Exclusive Negotiations.......................................37

      13.22 ADA Disclosure..................................................37

      13.23 No Recording....................................................38

      13.24 Relationship of Parties.........................................38

      13.25 Dispute Resolution..............................................38

      13.26 AIMCO Marks.....................................................38

      13.27 Non-Solicitation of Employees...................................39

      13.28 Survival........................................................39

      13.29 Multiple Purchasers.............................................39

      13.30 Related Contracts...............................................39

ARTICLE XIV    LEAD-BASED PAINT DISCLOSURE..................................40

      14.1  Disclosure......................................................40



<PAGE>






                           PURCHASE AND SALE CONTRACT

      THIS PURCHASE AND SALE CONTRACT  (this  "Contract")  is entered into as of
the 16th day of  August,  2005 (the  "Effective  Date"),  by and  between  SALEM
COURTHOUSE,  L.P., a South Carolina  limited  partnership,  having an address at
4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237 ("Seller"),
and PRIME QUEST MANAGEMENT, LLC, an Illinois limited liability company, having a
principal address at 2824 W. Coyle, Chicago, Illinois 60645 ("Purchaser").

      NOW,  THEREFORE,  in  consideration  of mutual covenants set forth herein,
Seller and Purchaser hereby agree as follows:

                                    RECITALS

      A.....Seller  owns the real estate located in Marion County,  Indiana,  as
more particularly described in Exhibit A attached hereto and made a part hereof,
and the improvements thereon, commonly known as Salem Courthouse Apartments.

      B.....Purchaser  desires to  purchase,  and Seller  desires to sell,  such
land,  improvements and certain associated property, on the terms and conditions
set forth below.

                                   ARTICLE I
                                  DEFINED TERMS

1.1  Unless  otherwise  defined  herein,   any  term  with  its  initial  letter
capitalized in this Contract shall have the meaning set forth in this ARTICLE 1.

1.1.1 "ADA" shall have the meaning set forth in Section 13.22.

1.1.2 "Additional Deposit" shall have the meaning set forth in Section 2.2.2.

1.1.3 "AIMCO" means Apartment Investment and Management Company.

1.1.4 "AIMCO  Marks" means all words,  phrases,  slogans,  materials,  software,
proprietary systems, trade secrets, proprietary information and lists, and other
intellectual property owned or used by Seller, the Property Manager, or AIMCO in
the marketing,  operation or use of the Property (or in the marketing, operation
or use of any other properties managed by the Property Manager or owned by AIMCO
or an affiliate of either Property Manager or AIMCO).

1.1.5 "Broker" shall have the meaning set forth in Section 9.1.

1.1.6  "Business  Day" means any day other than a Saturday  or Sunday or Federal
holiday or legal holiday in the States of Colorado, Texas, Illinois or Indiana.

1.1.7  "Closing"  means the  consummation  of the  purchase and sale and related
transactions  contemplated  by this  Contract in  accordance  with the terms and
conditions of this Contract.

1.1.8  "Closing Date" means the date on which date the Closing of the conveyance
of the Property is required to be held pursuant to Section 5.1.

1.1.9 "Code" shall have the meaning set forth in Section 2.3.6.

1.1.10......[intentionally deleted]

1.1.11......"Consultants" shall have the meaning set forth in Section 3.1.

1.1.12......"Damage Notice" shall have the meaning set forth in Section 11.1.

1.1.13......"Deed" shall have the meaning set forth in Section 5.2.1.

1.1.14......"Deed of Trust" shall have the meaning set forth in Section 4.5.

1.1.15......"Deposit"  means, to the extent actually deposited by Purchaser with
Escrow Agent, the Initial Deposit and the Additional Deposit.

1.1.16......"Escrow Agent" shall have the meaning set forth in Section 2.2.1.

1.1.17......"Excluded  Permits" means those Permits which, under applicable law,
are  nontransferable  and such other  Permits,  if any, as may be  designated as
Excluded Permits on Schedule 1.1.17.

1.1.18......"Existing Survey" shall have the meaning set forth in Section 4.2.

1.1.19......"Feasibility   Period"   shall  have  the  meaning  set  forth  in
Section 3.1.

1.1.20......"FHA " shall have the meaning set forth in Section 13.22.

1.1.21......"Final  Response  Deadline"  shall have the  meaning  set forth in
Section 4.3.

1.1.22......"Fixtures  and  Tangible  Personal  Property"  means  all  fixtures,
furniture,  furnishings,  fittings, equipment,  machinery, apparatus, appliances
and other articles of tangible  personal  property located on the Land or in the
Improvements  as of the Effective Date and used or usable in connection with the
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  (a)  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 (b) property owned or leased by any Tenant or guest, employee or other person
furnishing  goods or services to the  Property,  or (c) 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
(d) the property and equipment, if any, expressly identified in Schedule 1.1.22.

1.1.23......"General   Assignment"   shall  have  the  meaning  set  forth  in
Section 5.2.3.

1.1.24......"Good Funds" shall have the meaning set forth in Section 2.2.1.

1.1.25......"Improvements"  means all  buildings and  improvements  located on
the Land taken "as is."

1.1.26......"Initial   Deposit"   shall   have  the   meaning   set  forth  in
Section 2.2.1.

1.1.27......"Land"  means all of those  certain  tracts of land  located  in the
State of  Indiana  described  on  Exhibit  A,  and all  rights,  privileges  and
appurtenances pertaining thereto.

1.1.28......"Lease(s)"  means  the  interest  of  Seller  in and to all  leases,
subleases and other occupancy contracts, 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 Closing Date for the applicable Property.

1.1.29......"Leases   Assignment"   shall  have  the   meaning  set  forth  in
Section 5.2.4.

1.1.30......"Lender"  means the FANNIE MAE,  as  assignee  of GMAC  Commercial
Mortgage Corporation.

1.1.31......Lender  Fees" shall mean all fees and expenses  (including,  without
limitation,  all  prepayment  penalties  and pay-off fees) imposed or charged by
Lender or its counsel in  connection  with the Loan  Payoff,  and, to the extent
that the Loan Payoff occurs on a date other than as permitted under the Note and
Deed of Trust, any amounts of interest charged by Lender for the period from the
Closing Date to the permitted  prepayment date, the amount of the Lender Fees to
be determined as of the Closing Date.

1.1.32......"Loan" means the indebtedness owing to Lender evidenced by the Note.

1.1.33......[Intentionally left blank].

1.1.34......"Loan Balance" shall have the meaning set forth in Section 2.2.3.

1.1.35......"Loan Payoff" shall have the meaning set forth in Section 5.4.7.

1.1.36......"Losses" shall have the meaning set forth in Section 3.4.1.

1.1.37......"Materials" shall have the meaning set forth in Section 3.5.

1.1.38......"Materials Security Deposit" means a portion of the Initial Deposit,
or at such  time as the  Additional  Deposit  has  been  delivered,  the  entire
Deposit, equal to $21,000.00.

1.1.39......"Miscellaneous  Property Assets" means 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, excluding, however, (a) receivables, (b) Property Contracts, (c) Leases,
(d) Permits, (e) cash or other funds, whether in petty cash or house "banks," or
on deposit in bank accounts or in transit for deposit,  (f) refunds,  rebates or
other claims, or any interest thereon,  for periods or events occurring prior to
the Closing  Date,  (g) utility and similar  deposits,  (h)  insurance  or other
prepaid items,  (i) Seller's  proprietary  books and records,  or (j) any right,
title or interest in or to the AIMCO  Marks.  The term  "Miscellaneous  Property
Assets" also shall  include all of Seller's  rights,  if any, in and to the name
"SALEM COURTHOUSE APARTMENTS" as it relates solely to use in connection with the
Property (and not with respect to any other property owned or managed by Seller,
Property Manager, AIMCO, or their respective affiliates).

1.1.40......"New Exception" shall have the meaning set forth in Section 4.4.2.

1.1.41......"New  Exception  Review  Period" shall have the meaning set forth in
Section 4.4.2.

1.1.42......"Note"  means that certain  Variable Note in the original  principal
amount of $5,200,000,  dated October 15, 2003, executed by Seller and payable to
the order of GMAC  Commercial  Mortgage  Corporation,  as assigned to the FANNIE
MAE.

1.1.43......"Objection   Deadline"   shall  have  the  meaning  set  forth  in
Section 4.3.

1.1.44......"Objection   Notice"   shall  have  the   meaning   set  forth  in
Section 4.3.

1.1.45......"Objections" shall have the meaning set forth in Section 4.3.

1.1.46......"Permits" means all licenses and permits granted by any governmental
authority having  jurisdiction over the Property owned by Seller and required in
order to own and operate the Property.

1.1.47......"Permitted  Exceptions"  shall have the meaning set forth in Section
4.4. 1.1.48......"Prohibited Person" means any of the following: (a) a person or
entity that is listed in the Annex to, or is otherwise subject to the provisions
of, Executive Order No. 13224 on Terrorist  Financing  (effective  September 24,
2001) (the "Executive Order"); (b) a person or entity owned or controlled by, or
acting for or on behalf of any person or entity  that is listed in the Annex to,
or is otherwise  subject to the provisions of, the Executive Order; (c) a person
or entity that is named as a "specially designated national" or "blocked person"
on the most current list published by the U.S. Treasury  Department's  Office of
Foreign     Assets    Control     ("OFAC")    at    its    official     website,
http://www.treas.gov/offices/enforcement/ofac;  (d) a person or  entity  that is
otherwise the target of any economic sanctions program currently administered by
OFAC;  or (e) a person or entity  that is  affiliated  with any person or entity
identified in clause (a), (b), (c) and/or (d) above.

1.1.49......"Property"  means (a) the Land and  Improvements  and all  rights of
Seller,  if  any,  in  and to all of  the  easements,  rights,  privileges,  and
appurtenances belonging or in any way appertaining to the Land and Improvements,
(b) the  right,  if any and only to the  extent  transferable,  of Seller in the
Property  Contracts,  Leases,  Permits  (other than Excluded  Permits),  and the
Fixtures and Tangible  Personal  Property,  and (c) the  Miscellaneous  Property
Assets  owned by  Seller  which  are  located  on the  Property  and used in its
operation.

1.1.50......"Property  Contracts"  means all  contracts,  agreements,  equipment
leases, 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 Property,  but only to the extent
assignable by their terms or applicable  law  (including  any contracts that are
assignable with the consent of the applicable vendor), and not including (a) any
national  contracts  entered  into by Seller,  Property  Manager,  or AIMCO with
respect to the Property (i) which terminate  automatically  upon transfer of the
Property by Seller, or (ii) which Seller, in Seller's sole discretion, elects to
terminate with respect to the Property  effective as of the Closing Date, or (b)
any property management contract for the Property.  Property Contracts shall not
include forward or similar long-term contracts to purchase electricity,  natural
gas, or other utilities,  which contracts shall be "Utility  Contracts" governed
by the provisions of Section 5.4.11.

1.1.51......"Property  Contracts  Notice"  shall have the  meaning  set forth in
Section 3.6.

1.1.52......"Property  Manager"  means  the  current  property  manager  of  the
Property.

1.1.53......"Proration   Schedule"   shall  have  the  meaning  set  forth  in
Section 5.4.1.

1.1.54......"Purchase  Price" means the consideration to be paid by Purchaser to
Seller for the purchase of the Property pursuant to Section 2.2.

1.1.55......"Records  Disposal  Notice"  shall  have the  meaning  set  forth in
Section 5.4.12.

1.1.56......"Related  Contract"  means,  individually,  the  Purchase  and  Sale
Contract of even date herewith between Purchaser and Wyckford Commons, L.P., for
the property commonly known as "Wyckford Commons  Apartments",  in Indiana,  and
the Purchase  and Sale  Contract of even date  herewith  between  Purchaser  and
Abington-Oxford Associates, L.P., Abington II-Oxford Associates, L.P., Hunt Club
Associates,  Ltd., Pickwick Place AP XII, LP, and National Property Investors 8.
"Related Contracts" means, collectively, both Related Contracts.

1.1.57......"Rent-Ready Condition" means the physical condition to which Seller,
in  the  ordinary  course  of  its  business,  would  prepare  Tenant  Units  in
anticipation of renting such Tenant Units to Prospective Tenants.

1.1.58......"Regional  Property  Manager"  shall have the  meaning  set forth in
Section 6.4.

1.1.59......[intentionally deleted]

1.1.60......"Rent Roll" shall have the meaning set forth in Section 3.5.3.

1.1.61......[intentionally deleted]

1.1.62......"Required  Assignment Consent" shall have the meaning set forth in
Section  3.6.

1.1.63......"Required  Return  Documents"  shall have the meaning set forth in
Section 3.5.2.

1.1.64......"Response   Deadline"   shall  have  the   meaning  set  forth  in
Section 4.3.

1.1.65......"Response Notice" shall have the meaning set forth in Section 4.3.

1.1.66......"Seller's  Indemnified  Parties"  shall have the meaning set forth
in Section  3.4.1.

1.1.67......"Seller's Property-Related Files and Records" shall have the meaning
set forth in Section 5.4.12.

1.1.68......"Seller's  Representations"  shall have the  meaning  set forth in
Section 6.1.

1.1.69......"Survey" shall have the meaning ascribed thereto in Section 4.2.

1.1.70......"Survival Period" shall have the meaning set forth in Section 6.3.

1.1.71......"Survival Provisions" shall have the meaning set forth in Section
13.28.

1.1.72......"Tenant"  means any person or entity  entitled to occupy any portion
of the Property under a Lease.

1.1.73......"Tenant  Deposits"  means all security  deposits,  prepaid  rentals,
cleaning fees and other  refundable  deposits and fees  collected  from Tenants,
plus any interest  accrued  thereon,  paid by Tenants to Seller  pursuant to the
Leases.  Tenant Deposits shall not include any  non-refundable  deposits or fees
paid by Tenants to Seller, either pursuant to the Leases or otherwise.

1.1.74......"Tenant  Security  Deposit Balance" shall have the meaning set forth
in Section 5.4.6.2.

1.1.75......"Tenant Unit" means each apartment in the Property.

1.1.76......"Terminated  Contracts"  shall  have  the  meaning  set  forth  in
Section 3.6.

1.1.77......[intentionally deleted]

1.1.78......"Third-Party   Reports"   means  any   reports,   studies  or  other
information  prepared or  compiled  for  Purchaser  by any  Consultant  or other
third-party in connection with Purchaser's  investigation  of the Property,  but
excluding any attorney work product.

1.1.79......"Title  Commitment"  shall  have the  meaning  ascribed  thereto  in
Section 4.1.

1.1.80......"Title Documents" shall have the meaning set forth in Section 4.1.

1.1.81......"Title Insurer" shall have the meaning set forth in Section 2.2.1.

1.1.82......"Title Policy" shall have the meaning set forth in Section  4.1.

1.1.83......"Uncollected  Rents"  shall have the meaning set forth in Section
5.4.6.1.

1.1.84......"Utility  Contract " shall have the  meaning set forth in Section
5.4.11.

1.1.85......"Vendor Terminations" shall have the meaning set forth in Section
5.2.5.

                                   ARTICLE II
                 PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT

2.1  Purchase  and  Sale.  Seller  agrees to sell and  convey  the  Property  to
Purchaser  and  Purchaser  agrees to purchase the Property  from Seller,  all in
accordance with the terms and conditions set forth in this Contract.

2.2 Purchase Price and Deposit.  The total purchase price ("Purchase Price") for
the  Property  shall be an amount  equal to  $12,813,250,  less the Lender Fees,
which amount shall be paid by Purchaser, as follows:

2.2.1 Within one Business Day after the Effective Date,  Purchaser shall deliver
to Fidelity National Title Company, c/o Lolly Avant, National Commercial Closing
Specialist,  1900 West Loop South, Suite 650, Houston,  Texas 77027,  telephone:
800-879-1677; fax: 713-623-4406,  e-mail:  lavant@fidelitynt.com ("Escrow Agent"
or "Title  Insurer") an initial  deposit (the "Initial  Deposit") of $105,027 by
wire transfer of immediately available funds ("Good Funds"). The Initial Deposit
shall be held and disbursed in accordance  with the escrow  provisions set forth
in Section  2.3.  Notwithstanding  anything in this  Contract  to the  contrary,
Purchaser shall have the right, in its sole and absolute discretion,  to recover
the  entirety of the Deposit  (other than the  Material  Security  Deposit,  the
return of which is covered  by Section  3.5.2) if it  terminates  this  Contract
prior to the  expiration  of the  Feasibility  Period,  even if  Purchaser is in
default at the time of such termination;  provided, however, Purchaser shall not
have the right to recover  the  Deposit  if  Purchaser  is in  default  and such
default  has caused a Loss to Seller  arising  from  personal  injury,  property
damage or a lien (but Purchaser  shall be precluded from recovery of the Deposit
(less the Materials Security Deposit) only to the extent of such Loss).

2.2.2 Within one Business Day after the Feasibility  Period  expires,  Purchaser
shall deliver to Escrow Agent an additional  deposit (the "Additional  Deposit")
of $147,037 by wire by transfer of Good Funds.  The Additional  Deposit shall be
held and disbursed in accordance with the escrow provisions set forth in Section
2.3.

2.2.3 [Intentionally left blank].

2.2.4 The balance of the Purchase  Price for the  Property  shall be paid to and
received by Escrow Agent by wire  transfer of Good Funds no later than 1:00 p.m.
(in the time zone in which Escrow Agent is located) on the Closing Date (or such
earlier time as required by Seller's lender).

2.3   Escrow Provisions Regarding Deposit.

2.3.1  Escrow  Agent shall hold the Deposit and make  delivery of the Deposit to
the party entitled thereto under the terms of this Contract.  Escrow Agent shall
invest the Deposit in such short-term,  high-grade securities,  interest-bearing
bank accounts,  money market funds or accounts,  bank certificates of deposit or
bank repurchase  contracts as Escrow Agent,  in its discretion,  deems suitable,
and all interest and income  thereon  shall become part of the Deposit and shall
be remitted to the party entitled to the Deposit pursuant to this Contract.

2.3.2 Escrow Agent shall hold the Deposit  until the earlier  occurrence  of (i)
the  Closing  Date,  at which  time the  Deposit  shall be applied  against  the
Purchase  Price,  or (ii) the date on which Escrow Agent shall be  authorized to
disburse  the  Deposit as set forth in  Section  2.3.3.  The tax  identification
numbers of the parties shall be furnished to Escrow Agent upon request.

2.3.3 At any time on or before the date on which the Feasibility Period expires,
but except as otherwise  provided in the proviso of the last sentence of Section
2.2.1,  if Escrow  Agent shall  receive a demand from  Purchaser,  requesting  a
return of the Initial  Deposit,  then Escrow Agent shall  promptly,  without the
need of confirmation  from, and  irrespective of any notice to the contrary sent
to it by,  Seller,  return  an  amount  equal to the  Initial  Deposit  less the
Materials  Security Deposit to Purchaser,  in which event this Contract shall be
deemed to have been terminated by Purchaser and the Materials  Security  Deposit
shall be returned to Purchaser  only upon  Sellers'  written  confirmation  that
Purchaser has returned all  Third-Party  Reports and Required  Return  Documents
provided to Purchaser.  If, after the expiration of the Feasibility  Period, the
Deposit has not been released  earlier in  accordance  with Section 2.3.2 or the
preceding  sentence  of this  Section  2.3.3,  and either  party makes a written
demand upon Escrow  Agent for payment of the  Deposit,  Escrow  Agent shall give
written  notice to the other  party of such  demand.  If Escrow  Agent  does not
receive a written  objection from the other party to the proposed payment within
5  Business  Days  after  the  giving  of such  notice,  Escrow  Agent is hereby
authorized to make such payment (subject to Purchaser's obligation under Section
3.5.2 to return all Third-Party  Reports and Required Return Documents  provided
to Purchaser as a pre-condition to the return of the Materials  Security Deposit
to Purchaser).  If Escrow Agent does receive such written  objection within such
5-Business  Day period,  Escrow  Agent shall  continue to hold such amount until
otherwise directed by written  instructions from the parties to this Contract or
a final judgment or arbitrator's decision.  However, Escrow Agent shall have the
right at any time to deposit the Deposit and interest  thereon,  if any,  with a
court of competent  jurisdiction  in the state in which the Property is located.
Escrow Agent shall give written  notice of such deposit to Seller and Purchaser.
Upon such deposit,  Escrow Agent shall be relieved and discharged of all further
obligations and responsibilities hereunder.

2.3.4  The  parties  acknowledge  that  Escrow  Agent  is  acting  solely  as  a
stakeholder  at their request and for their  convenience,  and that Escrow Agent
shall not be deemed  to be the  agent of  either of the  parties  for any act or
omission on its part unless taken or suffered in bad faith in willful  disregard
of this Contract or involving gross negligence. Seller and Purchaser jointly and
severally  shall  indemnify and hold Escrow Agent  harmless from and against all
costs, claims and expenses,  including  reasonable  attorney's fees, incurred in
connection with the performance of Escrow Agent's duties hereunder,  except with
respect to actions or omissions  taken or suffered by Escrow Agent in bad faith,
in willful  disregard of this Contract or involving gross negligence on the part
of the Escrow Agent.

2.3.5 The  parties  shall  deliver  to  Escrow  Agent an  executed  copy of this
Contract,  which shall constitute the sole instructions to Escrow Agent.  Escrow
Agent shall execute the  signature  page for Escrow Agent  attached  hereto with
respect to the  provisions  of this Section  2.3;  provided,  however,  that (a)
Escrow  Agent's  signature  hereon  shall not be a  prerequisite  to the binding
nature of this Contract on Purchaser and Seller, and the same shall become fully
effective  upon  execution by  Purchaser  and Seller,  and (b) the  signature of
Escrow Agent will not be necessary to amend any provision of this Contract other
than this Section 2.3.

2.3.6 Escrow Agent, as the person responsible for closing the transaction within
the meaning of Section  6045(e)(2)(A)  of the Internal  Revenue Code of 1986, as
amended (the "Code"),  shall file all necessary information,  reports,  returns,
and statements regarding the transaction required by the Code including, but not
limited  to, the tax  reports  required  pursuant  to Section  6045 of the Code.
Further, Escrow Agent agrees to indemnify and hold Purchaser,  Seller, and their
respective  attorneys and brokers harmless from and against any Losses resulting
from Escrow Agent's failure to file the reports Escrow Agent is required to file
pursuant to this section.

2.3.7 The  provisions of this Section 2.3 shall survive the  termination of this
Contract,  and if not so  terminated,  the Closing  and  delivery of the Deed to
Purchaser.

                                  ARTICLE III
                               FEASIBILITY PERIOD

3.1  Feasibility  Period.  Subject to the terms of Sections  3.3 and 3.4 and the
right of Tenants  under the Leases,  from the  Effective  Date to and  including
September  16,  2005 (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:

3.1.1 To conduct and make any and all customary  studies,  tests,  examinations,
inquiries, and inspections, or investigations (collectively,  the "Inspections")
of or concerning the Property  (including,  without limitation,  engineering and
feasibility  studies,  evaluation  of drainage and flood  plain,  soil tests for
bearing capacity and percolation and surveys, including topographical surveys);

3.1.2 To confirm any and all matters which  Purchaser may  reasonably  desire to
confirm with respect to the Property;

3.1.3 To  ascertain   and  confirm  the   suitability   of  the  property  for
Purchaser's intended use of the Property; and

3.1.4 To review the Materials at Purchaser's sole cost and expense.

3.2  Expiration  of  Feasibility  Period.  If the  results of any of the matters
referred to in Section 3.1 appear  unsatisfactory to Purchaser for any reason or
if Purchaser  elects not to proceed with the  transaction  contemplated  by this
Contract for any other reason, or for no reason whatsoever,  in Purchaser's sole
and absolute  discretion,  then Purchaser shall have the right to terminate this
Contract by giving  written  notice to that effect to Seller and Escrow Agent on
or before 5:00 p.m.  (in the time zone in which the Escrow  Agent is located) on
the date of expiration of the Feasibility  Period.  If Purchaser  exercises such
right to terminate, this Contract shall terminate and be of no further force and
effect subject to and except for the Survival Provisions, and Escrow Agent shall
forthwith  return the  Initial  Deposit to  Purchaser  (subject  to  Purchaser's
obligation  under Section 3.5.2 to return all  Third-Party  Reports and Required
Return  Documents  provided to Purchaser as a pre-condition to the return of the
Materials Security  Deposit).  If Purchaser fails to provide Seller with written
notice of  termination  prior to the  expiration  of the  Feasibility  Period in
strict accordance with the notice provisions of this Contract, Purchaser's right
to  terminate  under  this  Section  3.2 shall be  permanently  waived  and this
Contract shall remain in full force and effect,  the Deposit (including both the
Initial  Deposit and,  when  delivered in  accordance  with Section  2.2.2,  the
Additional  Deposit)  shall be  non-refundable,  and  Purchaser's  obligation to
purchase the Property shall be non-contingent and unconditional  except only for
satisfaction of the conditions expressly stated in Section 8.1.

3.3  Conduct of  Investigation.  Purchaser  shall not permit any  mechanic's  or
materialmen'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  Inspections  conducted by or for Purchaser.
Purchaser shall give notice (which may be delivered  telephonically) to Seller a
reasonable time prior to entry onto the Property and shall permit Seller to have
a  representative  present  during all  Inspections  conducted at 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 Contract or obtained by Purchaser in
the course of its Inspections  shall be treated as  confidential  information by
Purchaser,  and,  prior to the purchase of the Property by Purchaser,  Purchaser
shall  use  commercially   reasonable  efforts  and  diligence  to  prevent  its
Consultants  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 Contract. The provisions of
this Section 3.3 shall survive the  termination of this Contract,  and if not so
terminated  shall  survive  (except for the  confidentiality  provisions of this
Section 3.3) the Closing and delivery of the Deed to Purchaser.

3.4   Purchaser Indemnification.

3.4.1 Purchaser shall  indemnify,  hold harmless and, if requested by Seller (in
Seller's  sole  discretion),  defend (with counsel  approved by Seller)  Seller,
together with Seller's affiliates,  parent and subsidiary entities,  successors,
assigns, partners, managers, members, employees,  officers, directors, trustees,
shareholders,  counsel,  representatives,  agents,  Property  Manager,  Regional
Property  Manager,   and  AIMCO  (collectively,   including  Seller,   "Seller's
Indemnified Parties"),  from and against any and all damages,  mechanics' liens,
liabilities,  losses,  demands,  actions,  causes of action,  claims,  costs and
expenses (including  reasonable  attorneys' fees, including the cost of in-house
counsel and  appeals)  (collectively,  "Losses")  to the extent  arising from or
related to  Purchaser's  or its  Consultants'  entry onto the Property,  and any
Inspections or other matters performed by Purchaser with respect to the Property
during the Feasibility Period or otherwise.

3.4.2 Notwithstanding anything in this Contract to the contrary, Purchaser shall
not be permitted to perform any invasive tests on the Property  without Seller's
prior  written  consent,   which  consent  may  be  withheld  in  Seller's  sole
discretion.  Further,  Seller  shall  have the  right,  without  limitation,  to
disapprove any and all entries, surveys, tests (including, without limitation, a
Phase II environmental study of the Property),  investigations and other matters
that in Seller's  reasonable judgment could result in any injury to the Property
or breach of any  contract,  or expose  Seller  to any  Losses or  violation  of
applicable law, or otherwise  adversely affect the Property or Seller's interest
therein.  Purchaser  shall  use  commercially  reasonable  efforts  to  minimize
disruption  to  Tenants  in  connection  with  Purchaser's  or its  Consultants'
activities  pursuant  to this  Section.  No  consent  by the  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, at Purchaser's
sole cost and expense,  the Property to the same condition existing  immediately
prior  to  Purchaser's  exercise  of its  rights  pursuant  to this  Article  3.
Purchaser  shall maintain and cause its third party  consultants to maintain (a)
casualty insurance and comprehensive  public liability  insurance with coverages
of not less  than  $1,000,000.00  for  injury  or death  to any one  person  and
$3,000,000.00 for injury or death to more than one person and $1,000,000.00 with
respect to property damage, and (b) worker's  compensation  insurance for all of
their respective  employees in accordance with the law of the state in which the
Property is located.  Purchaser  shall deliver  proof of the insurance  coverage
required  pursuant to this Section 3.4.2 to Seller (in the form of a certificate
of insurance)  prior to the earlier to occur of (i)  Purchaser's  or Purchaser's
Consultants' entry onto the Property, or (ii) the expiration of 5 days after the
Effective Date. The provisions of this Section 3.4 shall survive the termination
of this Contract, and if not so terminated, the Closing and delivery of the Deed
to Purchaser.

3.5   Property Materials.

3.5.1 Within 10 days after the Effective  Date, and to the extent the same exist
and are in Seller's possession or reasonable control (subject to Section 3.5.2),
Seller agrees to make the documents set forth on Schedule 3.5 (the  "Materials")
available at the  Property  for review and copying by  Purchaser at  Purchaser's
sole cost and expense.  In the  alternative,  at Seller's  option and within the
foregoing  10-day  period,  Seller may deliver  some or all of the  Materials to
Purchaser,  or make  the  same  available  to  Purchaser  on a  secure  web site
(Purchaser  agrees that any item to be delivered  by Seller under this  Contract
shall be deemed  delivered to the extent  available to Purchaser on such secured
web site).  To the extent that  Purchaser  determines  that any of the Materials
have not been made available or delivered to Purchaser  pursuant to this Section
3.5.1,   Purchaser  shall  notify  Seller  and  Seller  shall  use  commercially
reasonable efforts to deliver the same to Purchaser within 5 Business Days after
such  notification  is  received  by Seller;  provided,  however,  that under no
circumstances  will the  Feasibility  Period be extended and Buyer's sole remedy
will be to terminate this Contract pursuant to Section 3.2.

3.5.2 In providing  such  information  and  Materials to  Purchaser,  other than
Seller's Representations,  SELLER MAKES NO REPRESENTATION OR WARRANTY,  EXPRESS,
WRITTEN,  ORAL,  STATUTORY,   OR  IMPLIED,  AND  ALL  SUCH  REPRESENTATIONS  AND
WARRANTIES ARE HEREBY  EXPRESSLY  EXCLUDED AND  DISCLAIMED.  Any information and
Materials  provided by Seller to Purchaser  under the terms of this  Contract is
for informational  purposes only. All computer disks of due diligence  materials
and surveys (collectively,  the "Required Return Documents"),  together with all
Third-Party Reports,  shall be returned by Purchaser to Seller as a condition to
return of the Deposit to Purchaser  (if  Purchaser is otherwise  entitled to the
Deposit  pursuant to the terms of this  Contract) if this Contract is terminated
for any  reason.  Purchaser  shall not in any way be  entitled  to rely upon the
accuracy of such information and Materials. Purchaser recognizes and agrees that
the Materials and other documents and information delivered or made available by
Seller  pursuant to this Contract may not be complete or constitute  all of such
documents  which are in Seller's  possession or control,  but are those that are
readily  available  to  Seller  after  reasonable  inquiry  to  ascertain  their
availability.  Purchaser understands that, although Seller will use commercially
reasonable  efforts  to  locate  and make  available  the  Materials  and  other
documents  required to be delivered or made available by Seller pursuant to this
Contract,  Purchaser will not rely on such Materials or other documents as being
a complete and accurate source of information with respect to the Property,  and
will  instead in all  instances  rely  exclusively  on its own  Inspections  and
Consultants  with respect to all matters which it deems relevant to its decision
to acquire, own and operate the Property.

3.5.3 In addition to the items set forth on Schedule  3.5, no later than 10 days
after the Effective  Date,  Seller shall deliver to Purchaser (or otherwise make
available  to  Purchaser as provided  under  Section  3.5.1) a rent roll for the
Property listing the move-in date,  monthly base rent payable,  lease expiration
date and unapplied  security deposit for each Lease (the "Rent Roll").  The Rent
Roll shall be part of the  Materials  for all purposes  under this  Contract and
Seller makes no representations or warranties regarding the Rent Roll other than
the express  representation set forth in Section 6.1.7.  Seller shall update the
Rent Roll in accordance with Section 5.2.11.

3.5.4 The  provisions of this Section 3.5 shall survive the Closing and delivery
of the Deed to Purchaser.

3.6 Property  Contracts.  On or before the expiration of the Feasibility Period,
Purchaser may deliver written notice to Seller (the "Property Contracts Notice")
specifying any Property  Contracts which  Purchaser  desires to terminate at the
Closing (the  "Terminated  Contracts");  provided that (a) the effective date of
such  termination  after  Closing  shall be subject to the express terms of such
Terminated  Contracts (and, to the extent that the effective date of termination
of any Terminated Contract is after the Closing Date,  Purchaser shall be deemed
to have assumed all of Seller's obligations under such Terminated Contract as of
the Closing  Date),  (b) if any such  Property  Contract  cannot by its terms be
terminated,  it shall be assumed by Purchaser and not be a Terminated  Contract,
and (c) to the extent that any such Terminated  Contract  requires  payment of a
penalty or premium for cancellation,  Purchaser shall be solely  responsible for
the payment of any such  cancellation  fees or penalties.  If Purchaser fails to
deliver  the  Property  Contracts  Notice on or  before  the  expiration  of the
Feasibility Period,  there shall be no Terminated  Contracts and Purchaser shall
assume all Property  Contracts  at the Closing.  To the extent that any Property
Contract to be assumed by  Purchaser  (including  any  Property  Contract  that,
because of advance notice requirements, will be temporarily assumed by Purchaser
pending the effective date of termination  after the Closing Date) is assignable
but requires the applicable vendor to consent to the assignment or assumption of
the  Property  Contract  by Seller to  Purchaser,  then,  prior to the  Closing,
Purchaser  shall be  responsible  for obtaining  from each  applicable  vendor a
consent (each a "Required Assignment Consent") to the assignment of the Property
Contract  by  Seller  to  Purchaser  (and the  assumption  by  Purchaser  of all
obligations  under such Property  Contract).  Purchaser  shall  indemnify,  hold
harmless and, if requested by Seller (in Seller's sole discretion), defend (with
counsel  approved by Seller) Seller's  Indemnified  Parties from and against any
and all Losses  arising  from or related  to  Purchaser's  failure to obtain any
Required Assignment Consent.

                                   ARTICLE IV
                                      TITLE

4.1 Title  Documents.  Within 7 calendar days after the Effective  Date,  Seller
shall cause to be delivered to Purchaser a standard  form  commitment  for title
insurance  ("Title  Commitment")  for the  Property  in an  amount  equal to the
Purchase  Price from Title  Insurer for an owner's title  insurance  policy (the
"Title  Policy") on the most recent  standard  American  Land Title  Association
form,  together with copies of all instruments  identified as exceptions therein
(together  with  the  Title  Commitment,   referred  to  herein  as  the  "Title
Documents").  Seller shall be responsible  only for payment of the basic premium
for the Title Policy.  Purchaser shall be solely  responsible for payment of all
other costs relating to procurement of the Title  Commitment,  the Title Policy,
and any requested endorsements, including for "extended" coverage.

4.2  Survey.  Within 3 Business  Days after the  Effective  Date,  Seller  shall
deliver to  Purchaser or make  available at the Property any existing  survey of
the Property (the "Existing  Survey") which to Seller's knowledge is in Seller's
possession  or  reasonable   control  (subject  to  Section  3.5.2).   Purchaser
acknowledges  and agrees  that  delivery  of the  Existing  Survey is subject to
Section  3.5.2.  To the extent that  Purchaser  desires that a new survey of the
Property be prepared (or that the Existing  Survey be updated),  Purchaser shall
request the same in writing to Seller no later than 10  calendar  days after the
Effective  Date,  in which event Seller  shall order such new or updated  survey
(together with the Existing Survey, is referred to herein as the "Survey"); from
the surveyor who  prepared the Existing  Survey (or from such other  surveyor as
Seller determines in its reasonable discretion); provided, however, that nothing
herein shall be deemed to extend either the  Feasibility  Period,  the Objection
Deadline or the Final Response Deadlines.  Purchaser shall pay to the applicable
Seller 75% of the costs of the  Existing  Survey  and any new or updated  survey
requested pursuant to the terms of this Section 4.2; Seller shall be responsible
for the remaining 25% of such costs. Purchaser's obligation to make the payments
to Seller set forth in the preceding  sentence shall survive the  termination of
this Contract or the Closing;  provided,  however, if Purchaser  terminates this
Contract  within 14 days after the Effective  Date, then Purchaser shall have no
obligation to pay such Survey costs.

4.3  Objection  and  Response  Process.  On or  before  September  7,  2005 (the
"Objection  Deadline"),  Purchaser  shall give  written  notice (the  "Objection
Notice")  to the  attorneys  for  Seller  of any  matter  set forth in the Title
Documents  or the  Survey to which  Purchaser  objects  (the  "Objections").  If
Purchaser  fails to  tender an  Objection  Notice  on or  before  the  Objection
Deadline,  Purchaser shall be deemed to have approved and irrevocably waived any
objections to any matters covered by the Title  Documents and the Survey.  On or
before  September 14, 2005 (the  "Response  Deadline"),  Seller may, in Seller's
sole  discretion,  give  Purchaser  notice  (the  "Response  Notice")  of  those
Objections  which Seller is willing to cure, if any. Seller shall be entitled to
reasonable  adjournments of the Closing Date to cure the  Objections.  If Seller
fails to deliver a Response  Notice by the  Response  Deadline,  Seller shall be
deemed to have elected not to cure or otherwise  resolve any matter set forth in
the Objection  Notice.  If Purchaser is dissatisfied  with the Response  Notice,
Purchaser may, as its exclusive remedy,  elect by written notice given to Seller
on or before the  expiration  of the  Feasibility  Period (the  "Final  Response
Deadline")  either (a) to accept the Title Documents and Survey with resolution,
if any, of the Objections as set forth in the Response Notice (or if no Response
Notice is tendered,  without any resolution of the  Objections)  and without any
reduction or abatement of the Purchase Price, or (b) to terminate this Contract,
in which event the Initial  Deposit  shall be returned to Purchaser  (subject to
Purchaser's obligation under Section 3.5.2 to return all Third-Party Reports and
Required Return Documents provided to Purchaser as a pre-condition to the return
of the  Materials  Security  Deposit).  If  Purchaser  fails to give  notice  to
terminate  this  Contract on or before the Final  Response  Deadline,  Purchaser
shall be deemed to have elected to approve and irrevocably waived any objections
to any matters  covered by the Title  Documents  or the Survey,  subject only to
resolution, if any, of the Objections as set forth in the Response Notice (or if
no Response Notice is tendered, without any resolution of the Objections).

4.4   Permitted Exceptions.

4.4.1 The Deed  delivered  pursuant  to this  Contract  shall be  subject to the
following, all of which shall be deemed "Permitted Exceptions":

4.4.1.1.....All  matters shown in the Title Documents and the Survey, other than
(a) those  Objections,  if any,  which Seller has agreed to cure pursuant to the
Response  Notice  under  Section  4.3,  (b)  mechanics'  liens and taxes due and
payable with respect to the period preceding Closing, (c) the standard exception
regarding the rights of parties in  possession,  which shall be limited to those
parties in  possession  pursuant to the Leases,  and (d) the standard  exception
pertaining to taxes, which shall be limited to taxes and assessments  payable in
the year in which the Closing occurs and subsequent taxes and assessments;

4.4.1.2.....All Leases;

4.4.1.3.....[Intentionally left blank];

4.4.1.4.....Applicable zoning and governmental regulations and ordinances;

4.4.1.5.....Any defects in or objections  to title to the  Property,  or title
exceptions or encumbrances, arising by, through or under Purchaser; and

4.4.1.6.....The terms and conditions of this Contract.

4.4.2 If at any time after the expiration of the  Feasibility  Period any update
of the Title Commitment  discloses any material additional items that materially
adversely  affect  title to the  Property  and (a) that have not been caused by,
through or under  Purchaser or its  Consultants,  (b) that were not disclosed on
any  version  of  the  Title  Commitment   delivered  to  Purchaser  during  the
Feasibility  Period,  and (c) which  Seller  does not agree to cure  (with  such
decision to cure to be in such Seller's sole and absolute  discretion) (the "New
Exception"), then Purchaser shall have the lesser of (a) a period of 5 days from
the date of its receipt of such updated  Title  Commitment  or (b) the Scheduled
Closing  Date (the "New  Exception  Review  Period") to review and to approve or
disapprove of the same. If the New Exception is unacceptable  to it,  Purchaser,
at its sole option, may elect either:  (i) to terminate this Contract,  in which
event  this  Contract  shall be of no further  force and  effect  subject to and
except for the Survival Provisions,  and Escrow Agent shall forthwith return the
Deposit to Purchaser  (subject to Purchaser's  obligation under Section 3.5.2 to
return all  Third-Party  Reports  and  Required  Return  Documents  provided  to
Purchaser as a pre-condition to the return of the Materials  Security  Deposit);
or (ii) to waive such objections and proceed with the transactions  contemplated
by this Contract,  in which event Purchaser shall be deemed to have approved the
New Exception and the same shall be a Permitted Exception. If Purchaser fails to
notify Seller of its election to terminate this Contract in accordance  with the
foregoing clause (i) prior to the expiration of the New Exception Review Period,
Purchaser shall be deemed to have elected to approve and  irrevocably  waive any
objections to the New Exception and the same shall be a Permitted Exception.

4.5 Existing  Deed of Trust.  It is understood  and agreed that,  whether or not
Purchaser  gives an Objection  Notice with respect  thereto,  any deeds of trust
and/or mortgages which secure the Note (collectively, the "Deed of Trust") shall
not be deemed  Permitted  Exceptions,  whether  Purchaser  gives further written
notice of such or not,  and  shall,  pursuant  to  Section  5.4.7,  be paid off,
satisfied,  discharged  and/or  cured from  proceeds  of the  Purchase  Price at
Closing,  provided that the Lender Fees due in  connection  with the Loan Payoff
shall be paid by  Purchaser  (subject  to  reduction  of the  Purchase  Price in
accordance with Section 2.2).

4.6 Purchaser  Financing.  Purchaser  assumes full  responsibility to obtain the
funds required for settlement,  and Purchaser's  acquisition of such funds shall
not be a contingency to the Closing.

                                   ARTICLE V
                                     CLOSING

5.1  Closing  Date.  The Closing  shall occur on October 14, 2005 (the  "Closing
Date")  through an escrow with Escrow Agent,  whereby the Seller,  Purchaser and
their  attorneys  need not be physically  present at the Closing and may deliver
documents by overnight air courier or other means. Further, the Closing Date may
be extended  without penalty at the option of Seller to a date not later than 30
days  following  the  Closing  Date  specified  in the  first  sentence  of this
paragraph above (or, if applicable, as extended by Seller pursuant to the second
sentence of this  paragraph) to satisfy any condition to Closing,  or such later
date as is mutually acceptable to Seller and Purchaser.

5.2 Seller Closing Deliveries. No later than 1 Business Day prior to the Closing
Date, Seller shall deliver to Escrow Agent, each of the following items:

5.2.1  Limited  Warranty  Deed (the "Deed") in the form attached as Exhibit B to
Purchaser, subject to the Permitted Exceptions.

5.2.2 A Bill of Sale in the form attached as Exhibit C.

5.2.3 A General  Assignment  in the form  attached  as  Exhibit D (the  "General
Assignment").

5.2.4 An  Assignment  of Leases and  Security  Deposits in the form  attached as
Exhibit E (the "Leases Assignment").

5.2.5 A letter in the form  attached  hereto as Exhibit F prepared by  Purchaser
and  countersigned  by  Seller  to  each of the  vendors  under  the  Terminated
Contracts  informing them of the termination of such  Terminated  Contract as of
the Closing Date (subject to any delay in the  effectiveness of such termination
pursuant to the  express  terms of each  applicable  Terminated  Contract)  (the
"Vendor Terminations").

5.2.6 A closing statement executed by Seller.

5.2.7 A title  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 set forth in this
Contract (other than matters  constituting any Permitted  Exceptions and matters
which are to be completed or performed  post-Closing)  to be issued  pursuant to
the Title  Commitment;  provided that such  affidavit does not subject Seller to
any greater liability, or impose any additional  obligations,  other than as set
forth in this Contract; and

5.2.8 A certification of Seller's non-foreign status pursuant to Section 1445 of
the Internal Revenue Code of 1986, as amended.

5.2.9 Resolutions,  certificates of good standing, and such other organizational
documents  as  Title  Insurer  shall  reasonably  require  evidencing   Seller's
authority to consummate this transaction.

5.2.10......An  updated Rent Roll reflecting the information required in Section
3.5.3; provided, however, that the content of such updated Rent Roll shall in no
event expand or modify the  conditions  to  Purchaser's  obligation  to close as
specified under Section 8.1.

5.2.11......A Sale Disclosure  Statement as required under Indiana law when each
Deed is recorded.

5.3  Purchaser  Closing  Deliveries.  No later than 1 Business  Day prior to the
Closing  Date  (except  for the  balance of the  Purchase  Price  which is to be
delivered at the time specified in Section  2.2.4),  Purchaser  shall deliver to
the Escrow Agent (for  disbursement  to Seller upon the  Closing) the  following
items with respect to the Property being conveyed at such Closing:

5.3.1 The full Purchase  Price (with credit for the Deposit),  plus or minus the
adjustments or prorations required by this Contract.

5.3.2 A title  affidavit (or at Purchaser's  option an indemnity)  pertaining to
Purchaser's  activity on the Property  prior to Closing,  in the customary  form
reasonably  acceptable  to  Purchaser,  to enable  Title  Insurer  to delete the
standard  exceptions  to the title  insurance  policy set forth in this Contract
(other than matters  constituting any Permitted Exceptions and matters which are
to be completed or performed  post-Closing)  to be issued  pursuant to the Title
Commitment;  provided  that such  affidavit  does not subject  Purchaser  to any
greater liability, or impose any additional obligations, other than as set forth
in this Contract.

5.3.3 Any  declaration or other  statement which may be required to be submitted
to the local assessor with respect to the terms of the sale of the Property.

5.3.4 A closing statement executed by Purchaser.

5.3.5 A countersigned counterpart of the General Assignment.

5.3.6 A countersigned counterpart of the Leases Assignment.

5.3.7 Notification  letters to all Tenants prepared and executed by Purchaser in
the form attached hereto as Exhibit G.

5.3.8  The  Vendor  Terminations  (Purchaser  shall be  solely  responsible  for
identifying  each  of  the  Terminated  Contracts  (subject  to  the  terms  and
conditions  of Section  3.6) and  addressing  and  preparing  each of the Vendor
Terminations for execution by Purchaser and Seller).

5.3.9 Any cancellation  fees or penalties due to any vendor under any Terminated
Contract as a result of the termination thereof.

5.3.10......Resolutions,   certificates   of  good  standing,   and  such  other
organizational  documents as Title Insurer shall reasonably  require  evidencing
Purchaser's authority to consummate this transaction.

5.3.11......[Intentionally deleted].

5.3.12......The  Lender Fees  (subject to reduction  from the Purchase  Price in
accordance with Section 2.2).

5.3.13......A Sales Disclosure  Statement as required under Indiana law and when
the Deed is recorded.

5.4   Closing Prorations and Adjustments.

5.4.1 General. All normal and customarily proratable items,  including,  without
limitation,  collected rents, 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 up to the  Closing  Date (and  credited  for any  amounts  paid by Seller
attributable  to the  period  on or  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 the same  attributable  to the  period on and after the
Closing  Date.  Seller  shall  prepare  a  proration  schedule  (the  "Proration
Schedule")  of the  adjustments  described in this Section 5.4 prior to Closing.
Such adjustments  shall be paid by Purchaser to Seller (if the prorations result
in a net credit to Seller) or by Seller to Purchaser (if the  prorations  result
in a net credit to Purchaser),  by increasing or reducing the cash to be paid by
Purchaser at Closing.

5.4.2 Operating Expenses. All of the operating,  maintenance,  taxes (other than
real  estate  taxes,  such as rental  taxes),  and other  expenses  incurred  in
operating  the  Property  that  Seller  customarily  pays,  and any other  costs
incurred in the ordinary  course of business for the management and operation of
the Property,  shall be prorated on an accrual basis.  Seller shall pay all such
expenses that accrue prior to Closing and Purchaser  shall pay all such expenses
that accrue from and after the Closing Date.

5.4.3  Utilities.  The final  readings and final  billings for utilities will be
made if possible as of the Closing Date, in which case Seller shall pay all such
bills as of the Closing Date and no proration  shall be made at the Closing with
respect to utility bills.  Otherwise,  a proration  shall be made based upon the
parties'  reasonable good faith estimate and a readjustment  made within 30 days
after the Closing,  if necessary.  Seller shall be entitled to the return of any
deposit(s)  posted by it with any utility company,  and Seller shall notify each
utility company serving the Property to terminate Seller's account, effective as
of noon on the Closing Date.

5.4.4 Real  Estate and  Personal  Property  Taxes.  Any real  estate ad valorem,
personal  property or similar  taxes for the  Property,  or any  installment  of
assessments  payable in  installments  which  installment is payable in calendar
year 2006,  with respect to the calendar  year of Closing,  shall be prorated to
the date of Closing, based upon actual days involved. By way of illustration and
not  limitation,  if the  Closing  were to occur  in  September  2005,  the 2004
calendar year real estate and personal  property  taxes payable in 2005 shall be
the  responsibility  of  Seller,  with the 2005  calendar  year real  estate and
personal  property  taxes  payable in 2006  being  prorated  between  Seller and
Purchaser  to the  Closing  Date.  The  proration  of  real  property  taxes  or
installments of assessments  shall be based upon the assessed  valuation and tax
rate figures  (assuming  payment at the  earliest  time to allow for the maximum
possible  discount)  for the year in which the Closing  occurs to the extent the
same are  available;  provided,  however,  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  105% of the  assessed  valuation  and tax  rate  figures  from  the
preceding year  (assuming  payment at the earliest time to allow for the maximum
possible  discount).  The  proration  of  real or  personal  property  taxes  or
installments  of  assessments  shall be final and not  subject to  re-adjustment
after Closing.

5.4.5  Property  Contracts.  Purchaser  shall assume at Closing the  obligations
under the Property Contracts assumed by Purchaser;  however,  operating expenses
shall be prorated under Section 5.4.2.

5.4.6 Leases.

5.4.6.1.....All  collected  rent  (whether  fixed  monthly  rentals,  additional
rentals,  escalation rentals,  retroactive rentals, operating cost pass-throughs
or other  sums and  charges  payable by Tenants  under the  Leases),  income and
expenses  from any portion of the  Property  shall be prorated as of the Closing
Date  (prorated for any partial  month).  Purchaser  shall receive all collected
rent and income  attributable  to dates from and after the Closing Date.  Seller
shall receive all collected rent and income  attributable  to dates prior to the
Closing Date.  Notwithstanding  the  foregoing,  no prorations  shall be made in
relation to either (a) non-delinquent  rents which have not been collected as of
the Closing Date, or (b) delinquent  rents  existing,  if any, as of the Closing
Date (the foregoing (a) and (b) referred to herein as the "Uncollected  Rents").
In adjusting for  Uncollected  Rents,  no adjustments  shall be made in Seller's
favor for rents  which  have  accrued  and are  unpaid  as of the  Closing,  but
Purchaser shall pay Seller such accrued  Uncollected Rents as and when collected
by  Purchaser.  Purchaser  agrees  to  bill  Tenants  of the  Property  for  all
Uncollected Rents and to take reasonable  actions to collect  Uncollected Rents.
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  Uncollected
Rents  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  and  the  delivery  of the  Leases  Assignment  shall  not
constitute a waiver by Seller of such right.  Purchaser agrees to cooperate with
Seller in  connection  with all  efforts by Seller to collect  such  Uncollected
Rents 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 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 Uncollected Rents 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.
Notwithstanding  anything  in this  provision  to the  contrary  but  subject to
Seller's  right  to  demand  payment  of and to  collect  Uncollected  Rents  in
accordance  with this Section,  Purchaser's  obligation  to collect  Uncollected
Rents  shall be limited to  Uncollected  Rents of not more than 60 days past due
and  Purchaser's  collection of rents shall be applied,  first,  towards current
rent due and owing under the Leases, and, second, to Uncollected Rents.

5.4.6.2.....At  Closing,  Purchaser  shall receive a credit against the Purchase
Price in an amount equal to the received and  unapplied  balance of all cash (or
cash  equivalent)  Tenant  Deposits,  including,  but not limited to,  security,
damage or other refundable deposits or required to be paid by any of the Tenants
to secure their respective obligations under the Leases, together, in all cases,
with any interest payable to the Tenants  thereunder as may be required by their
respective  Tenant Lease or state law (the "Tenant Security  Deposit  Balance").
Any cash (or cash  equivalents)  held by Seller  which  constitutes  the  Tenant
Security  Deposit  Balance  shall be  retained  by  Seller in  exchange  for the
foregoing  credit  against the Purchase  Price and shall not be  transferred  by
Seller pursuant to this Contract (or any of the documents delivered at Closing),
but  the  obligation  with  respect  to  the  Tenant  Security  Deposit  Balance
nonetheless  shall be assumed by Purchaser.  The Tenant Security Deposit Balance
shall not include any non-refundable deposits or fees paid by Tenants to Seller,
either pursuant to the Leases or otherwise.

5.4.6.3.....With  respect to operating expenses,  taxes, utility charges,  other
operating cost pass-throughs,  retroactive rental  escalations,  sums or charges
payable  by Tenants  under the Tenant  Leases,  to the  extent  that  Seller has
received as of the Closing payments  allocable to periods subsequent to Closing,
the same shall be properly  prorated  with an  adjustment in favor of Purchaser,
and Purchaser  shall receive a credit  therefor at Closing.  With respect to any
payments  received by Purchaser  after the Closing  allocable to Seller prior to
Closing, Purchaser shall promptly pay the same to Seller.

5.4.7 Existing Loan.  Purchaser  acknowledges that Purchaser had the opportunity
to assume the Note or to cause  prepayment of the Note at Closing (but in either
event,  Purchaser would pay the Lender Fees). Purchaser has elected to cause the
debt to be prepaid.  Therefore,  on the Closing Date, a sufficient amount of the
proceeds of the  Purchase  Price will be used to pay the  outstanding  principal
balance of the Note together  with all interest  accrued under the Note prior to
the Closing Date (the "Loan  Payoff"),  and Purchaser  shall pay all Lender Fees
(subject to reduction from the Purchase  Price in accordance  with Section 2.2).
Any existing reserves, impounds and other accounts maintained in connection with
the Loan  shall be  released  in Good  Funds to  Seller  at the  Closing  unless
credited by Lender against the amount due under the Note.

5.4.8  Insurance.  No proration shall be made in relation to insurance  premiums
and insurance policies will not be assigned to Purchaser.

5.4.9 Employees.  All of Seller's and Seller's manager's on-site employees shall
have their employment at the Property terminated as of the Closing Date.

5.4.10......Closing  Costs. Purchaser shall pay any transfer,  sales, use, gross
receipts or similar  taxes,  the cost of recording any  instruments  required to
discharge any liens or encumbrances  against the Property,  any premiums or fees
required to be paid by Purchaser  with  respect to the Title Policy  pursuant to
Section 4.1, and one-half of the  customary  closing  costs of the Escrow Agent.
Seller shall pay the base premium for the Title Policy to the extent required by
Section 4.1, and one-half of the customary closing costs of the Escrow Agent.

5.4.11......Utility  Contracts.  If Seller has entered into an agreement for the
purchase of  electricity,  gas or other  utility  service for the  Property or a
group of  properties  (including  the  Property) (a "Utility  Contract"),  or an
affiliate of Seller has entered into a Utility Contract,  then, at the option of
Seller,  either (a)  Purchaser  either  shall assume the Utility  Contract  with
respect to the Property,  or (b) the reasonably  calculated costs of the Utility
Contract  attributable  to the Property from and after the Closing shall be paid
to Seller at the Closing and Seller shall remain  responsible for payments under
the Utility Contract.

5.4.12......Possession.  Possession  of the  Property,  subject  to the  Leases,
Property  Contracts which are not identified as Terminated  Contracts during the
Feasibility  Period  (subject to the  limitations of Section 3.6), and Permitted
Exceptions,  shall be  delivered  to  Purchaser at the Closing upon release from
escrow of all items to be  delivered  by  Purchaser  pursuant  to  Section  5.3,
including,  without  limitation,  the Purchase Price.  To the extent  reasonably
available to Seller,  originals or copies of the Leases and Property  Contracts,
lease files,  warranties,  guaranties,  operating manuals, keys to the property,
and   Seller's   books  and  records   (other  than   proprietary   information)
(collectively,  "Seller's  Property-Related  Files and  Records")  regarding the
Property shall be made available to Purchaser at the Property after the Closing.
Prior  to   Closing,   Seller   shall  be  entitled  to  copy  any  of  Seller's
Property-Related Files and Records, and, following Closing, shall be entitled to
retain such copies for Seller's own use. With respect to any of Seller's Related
Files that are not copied  pursuant to the  foregoing  sentence,  if at any time
after Closing  Purchaser desires to dispose of Seller's  Property-Related  Files
and Records,  Purchaser  must first  provide  Seller prior  written  notice (the
"Records Disposal Notice").  Seller shall have a period of 30 days after receipt
of the Records  Disposal  Notice to enter the Property  (or such other  location
where  such  records  are then  stored)  and  remove or copy  those of  Seller's
Property-Related Files and Records that Seller desires to retain.

5.4.13......Survival.  The  provisions  of this  Section  5.4 shall  survive the
Closing and delivery of the Deed to Purchaser.

5.5 Post  Closing  Adjustments.  In  general,  and  except as  provided  in this
Contract or the Closing  Documents,  Seller shall be entitled to all income, and
shall pay all expenses, relating to the operation of the Property for the period
prior to the Closing  Date and  Purchaser  shall be entitled to all income,  and
shall pay all expenses, relating to the operation of the Property for the period
commencing on and after the Closing  Date.  Purchaser or Seller may request that
Purchaser and Seller  undertake to re-adjust any item on the Proration  Schedule
(or any item omitted therefrom) in accordance with the provisions of Section 5.4
of  this  Contract;  provided,  however,  that  neither  party  shall  have  any
obligation  to  re-adjust  any items (a) after the  expiration  of 90 days after
Closing,  or (b)  subject  to such  90-day  period,  unless  such  items  exceed
$5,000.00 in magnitude (either individually or in the aggregate). The provisions
of this  Section  5.5 shall  survive  the  Closing  and  delivery of the Deed to
Purchaser.

                                   ARTICLE VI
            REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER

6.1 Seller's Representations. Except, in all cases, for any fact, information or
condition  disclosed  in the Title  Documents,  the  Permitted  Exceptions,  the
Property Contracts,  or the Materials,  or which is otherwise known by Purchaser
prior to the Closing,  Seller represents and warrants to Purchaser the following
(collectively,  the "Seller's  Representations") as of the Effective Date and as
of the Closing Date  (provided  that  Purchaser's  remedies if any such Seller's
Representations are untrue as of the Closing Date are limited to those set forth
in Section 8.1):

6.1.1 Seller is duly organized,  validly existing and in good standing under the
laws of the state of its  formation  set forth in the initial  paragraph of this
Contract;  and,  subject to Section 8.2.4,  has or at the Closing shall have the
entity  power and  authority  to sell and convey the Property and to execute the
documents  to be executed by Seller and prior to the Closing  will have taken as
applicable, all corporate,  partnership, limited liability company or equivalent
entity actions required for the execution and delivery of this Contract, and the
consummation of the transactions  contemplated by this 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 to which Seller is a party or by which Seller is
otherwise bound, which conflict, breach or default would have a material adverse
affect on Seller's  ability to consummate the  transaction  contemplated by this
Contract or on the Property. Subject to Section 8.2.4, this Contract is a valid,
binding and enforceable agreement against Seller in accordance with its terms;

6.1.2 Other than the Leases,  the  Property is not subject to any written  lease
executed by Seller or, to Seller's knowledge,  any other possessory interests of
any person;

6.1.3 Seller is not a "foreign  person," as that term is used and defined in the
Internal Revenue Code, Section 1445, as amended;

6.1.4 Except for (a) any actions by Seller to evict Tenants under the Leases, or
(b) any matter  covered by Seller's  current  insurance  policy(ies),  or (c) an
employment-related  lawsuit by Kenny Stanback, to Seller's knowledge,  there are
no  actions,   proceedings,   litigation  or  governmental   investigations   or
condemnation actions either pending or threatened against the Property;

6.1.5 To Seller's  knowledge,  Seller has not received any written notice from a
governmental  agency of any uncured material  violations of any federal,  state,
county or municipal law, ordinance,  order,  regulation or requirement affecting
the Property; and

6.1.6 To Seller's  knowledge,  Seller has not received any written notice of any
material default by Seller under any of the Property  Contracts that will not be
terminated on the Closing Date.

6.1.7 To the knowledge of Seller,  the Rent Roll (as updated pursuant to Section
5.2.11) for Seller's Property is accurate in all material respects.

6.1.8 No  Bankruptcy/Dissolution  Event (as defined  herein) has  occurred  with
respect to (a) Seller;  or (b) to  Seller's  knowledge,  any general  partner of
Seller.  "Bankruptcy/Dissolution  Event"  means  the  occurrence  of  any of the
following:  (a) the  commencement  of a case under Title 11 of the U.S. Code, as
now constituted or hereafter  amended,  or under any other applicable federal or
state  bankruptcy law or other similar law; (b) the  appointment of a trustee or
receiver  of any  property  interest;  (c) an  assignment  for  the  benefit  of
creditors;  (d)  an  attachment,  execution  or  other  judicial  seizure  of  a
substantial property interest; (e) the taking of, failure to take, or submission
or any action indicating an inability to meet its financial  obligations as they
accrue; or (f) a dissolution or liquidation, death or incapacity;

6.1.9  Seller  has not  intentionally  omitted  or  eliminated  any items  which
otherwise would be required to be delivered by Seller as part of the Materials;

6.1.10......To Seller's knowledge:  (A) no hazardous or toxic materials or other
substances  regulated  by  applicable  federal or state  environmental  laws are
stored by Seller on, in or under Seller's  Property in quantities  which violate
applicable  laws  governing  such  materials  or  substances,  and (B)  Seller's
Property  is not  used by  Seller  for the  storage,  treatment,  generation  or
manufacture of any hazardous or toxic materials or other  substances in a manner
which would constitute a violation of applicable federal or state  environmental
laws;

6.1.11......With  respect to Seller's Property, there are no apartments occupied
by any  employees  of  Seller,  Property  Manager  or AIMCO,  except (a) if such
occupant is paying substantially  market rent for such apartment,  or (b) as set
forth on Schedule 6.1.11; and

6.1.12......Except  for any employment  agreements which would not be binding on
Purchaser  after  the  Closing,  there  are no  collective  bargaining  or other
employment  agreements  with respect to the personnel  employed by Seller in the
operation and maintenance of Seller's Property.

6.1.13......With   respect  to  Seller's   Property  located  in  Indiana,   the
transactions  contemplated  by this  Contract  are not  subject  to the  Indiana
Responsible  Property  Transfer Law (Ind.  Code  13-25-3-1 et seq.) because such
Property does not constitute  "property" as such term is used and defined in the
Indiana Responsible Property Transfer Law.

6.2 AS-IS.  Except for  Seller's  Representations,  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 Seller's Representations).  Purchaser agrees
that Seller shall not be  responsible  or liable to  Purchaser  for any defects,
errors or  omissions,  or on account of any  conditions  affecting the Property.
Purchaser,  its successors and assigns, and anyone claiming by, through or under
Purchaser,   hereby  fully  releases  Seller's  Indemnified  Parties  from,  and
irrevocably  waives  its right to  maintain,  any and all  claims  and causes of
action  that it or they  may now  have or  hereafter  acquire  against  Seller's
Indemnified  Parties with respect to any and all Losses  arising from or related
to any defects,  errors,  omissions or other conditions  affecting the Property.
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  (including,  without limitation,  environmental  studies and
analyses  concerning  the presence of lead,  asbestos,  water  intrusion  and/or
fungal  growth  and any  resulting  damage,  PCBs  and  radon in and  about  the
Property),  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's Indemnified Parties. 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 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.  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 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 Contract.  Purchaser  hereby  releases Seller from
any and all  claims and  liabilities  relating  to the  foregoing  matters.  The
provisions  of this  Section 6.2 shall  survive the Closing and  delivery of the
Deed to Purchaser.

6.3  Survival  of  Seller's  Representations.  Seller and  Purchaser  agree that
Seller's  Representations  shall  survive  Closing for a period of 9 months (the
"Survival  Period").  Seller shall have no liability  after the Survival  Period
with respect to Seller's  Representations  contained herein except to the extent
that  Purchaser has  requested  arbitration  against  Seller during the Survival
Period for breach of any of  Seller's  Representations.  Under no  circumstances
shall  Seller in  aggregate  (together  with the  "sellers"  under  the  Related
Contracts) be liable to Purchaser for more than  $1,000,000.00 in any individual
instance or in the aggregate, under this Contract and the Related Contracts, for
all breaches of Seller's  Representations  by all "Sellers"  under this Contract
and the Related Contracts;  provided,  however, that the foregoing $1,000,000.00
cap shall  reduce on a pro rata basis (based on relevant  purchase  prices) when
and if this Contract or any of the Related  Contracts is terminated with respect
to one or more of the properties to be sold pursuant thereto. For example,  (but
not by way of limitation),  if the purchase price of the terminated  property is
$12,000,000  and the aggregate  purchase price for all of the  properties  under
this Contract and the Related  Contracts is $61,000,000,  then the foregoing cap
would be reduced by an amount equal to (12/61 x $1,000,000),  or $196,721,  to a
revised cap of $803,279.  Purchaser shall not be entitled to bring any claim for
a breach of Seller's Representations unless the claim for damages (either in the
aggregate or as to any individual  claim) by Purchaser  exceeds  $5,000.  In the
event that  Seller  breaches  any  representation  contained  in Section 6.1 and
Purchaser  had  knowledge  of such breach prior to the Closing  Date,  Purchaser
shall be deemed to have waived any right of recovery,  and Seller shall not have
any liability in connection therewith.

6.4 Definition of Seller's  Knowledge.  Any  representations and warranties made
"to the  knowledge of Seller"  shall not be deemed to imply any duty of inquiry.
For purposes of this  Contract,  the term  Seller's  "knowledge"  shall mean and
refer only to actual  knowledge of the Regional  Property  Manager of the Seller
and shall  not be  construed  to refer to the  knowledge  of any other  partner,
officer,  director,  agent,  employee or  representative  of the Seller,  or any
affiliate of the Seller, or to impose upon the Regional Property Manage any duty
to investigate the matter to which such actual  knowledge or the absence thereof
pertains,  or to  impose  upon the  Regional  Property  Manager  any  individual
personal liability.

6.5  Representations  And  Warranties Of Purchaser.  For the purpose of inducing
Seller to enter into this  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:

6.5.1 Purchaser is a limited liability company duly organized,  validly existing
and in good standing under the laws of Illinois.

6.5.2  Purchaser,  acting  through  any of  its  or  their  duly  empowered  and
authorized officers or members,  has all necessary entity 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  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
partners, directors, officers or members are required to so empower or authorize
Purchaser. 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 to which Purchaser is
a party or by which  Purchaser is otherwise  bound,  which  conflict,  breach or
default  would  have  a  material  adverse  affect  on  Purchaser's  ability  to
consummate the  transaction  contemplated  by this Contract.  This Contract is a
valid,  binding and enforceable  agreement  against Purchaser in accordance with
its terms.

6.5.3 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 Contract or would declare illegal, invalid or
non-binding any of Purchaser's obligations or covenants to Seller.

6.5.4  Other  than  Seller's  Representations,  Purchaser  has not relied on any
representation  or  warranty  made by  Seller  or any  representative  of Seller
(including, without limitation, Broker) in connection with this Contract and the
acquisition of the Property.

6.5.5 The Broker and its  affiliates  do not, and will not at the Closing,  have
any  direct or  indirect  legal,  beneficial,  economic  or voting  interest  in
Purchaser  (or in an  assignee of  Purchaser,  which  pursuant to Section  13.3,
acquires the Property at the  Closing),  nor has  Purchaser or any  affiliate of
Purchaser  granted (as of the Effective  Date or the Closing Date) the Broker or
any of its  affiliates  any right or option to acquire  any  direct or  indirect
legal, beneficial, economic or voting interest in Purchaser.

6.5.6 Purchaser is not a Prohibited Person.

6.5.7 To Purchaser's knowledge, none of its investors,  affiliates or brokers or
other agents (if any),  acting or benefiting in any capacity in connection  with
this Contract is a Prohibited Person.

6.5.8 The funds or other  assets  Purchaser  will  transfer to Seller under this
Contract are not the property of, or beneficially owned, directly or indirectly,
by a Prohibited Person.

6.5.9 The funds or other  assets  Purchaser  will  transfer to Seller under this
Contract are not the proceeds of  specified  unlawful  activity as defined by 18
U.S.C. ss. 1956(c)(7).

      The  provisions of this Section 6.5 shall survive the Closing and delivery
of the Deed to Purchaser.

                                  ARTICLE VII
                            OPERATION OF THE PROPERTY

7.1 Leases and Property Contracts.  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 or Property Contract without first obtaining the written
consent  of  Purchaser;  provided,  however,  Seller  agrees  that  any such new
Property  Contracts or any new or renewed Leases shall not have a term in excess
of 1 year (or such longer  period of time for which such  Property  Contracts or
Leases are entered into by Seller in the ordinary course of its operation of the
Property)  without the prior written  consent of Purchaser,  which consent shall
not be unreasonably withheld, conditioned or delayed. With respect to the Leases
and Property Contracts, Seller also covenants as follows:

7.1.1 After the  expiration of the  Feasibility  Period,  Seller will only enter
into new Property Contracts to the extent such Property Contracts are terminable
upon 30 days' prior written notice.

7.1.2 After the expiration of the  Feasibility  Period,  Seller will  materially
comply with all Property Contracts.

7.1.3 No later than 5 days prior to the  expiration of the  Feasibility  Period,
Seller will deliver to Purchaser an updated Rent Roll for its Property,  and, no
later than 5 days after the end of each calendar month between the expiration of
the Feasibility  Period and the Closing Date, Seller will provide Purchaser with
an updated Rent Roll for its Property;  provided,  however,  that the content of
any updated Rent Roll delivered pursuant to this Section 7.1.3 shall in no event
expand or modify the conditions to Purchaser's  obligation to close as specified
under Section 8.1.

7.2   General Operation of Property.

7.2.1 Except as  specifically  set forth in this Article 7, Seller shall operate
the Property  after the Effective Date in the ordinary  course of business,  and
except as necessary in the Seller's  sole  discretion to address (a) any life or
safety  issue  at the  Property  or (b)  any  other  matter  which  in  Seller's
reasonable  discretion  materially adversely affects the use, operation or value
of the Property,  Seller will not make any material  alterations to the Property
or remove any material Fixtures and Tangible Personal Property without the prior
written consent of Purchaser  which consent shall not be unreasonably  withheld,
denied  or  delayed.  Seller  also  covenants  as  follows  from and  after  the
expiration of the Feasibility Period:

7.2.1.1.....Seller  agrees to  maintain  its  existing  insurance  policies  (or
replacement  policies on comparable  terms)  covering its Property in full force
and effect through the Closing Date.

7.2.1.2.....In accordance with Seller's ordinary course of business with respect
to the Property,  Seller shall make necessary reasonable repairs to its Property
and keep its Property in  substantially  the same condition as of the expiration
of the Feasibility  Period,  ordinary wear and tear,  casualty and  condemnation
excepted and subject to the  provisions of Article 11 and Article 12;  provided,
however,  that the foregoing covenant shall not obligate Seller in any manner to
upgrade or make capital improvements to Property;

7.2.1.3.....Seller  will not  sell or  otherwise  dispose  of any  Fixtures  and
Tangible  Personal  Property  except in the  ordinary  course  of such  Seller's
business.

7.2.2  Seller  agrees  that,  with  respect  to its  Property,  at the  Closing,
Purchaser  shall receive a credit  against the Purchase Price in an amount equal
to the product of (a) the number of Tenant Units at such  Property  that,  as of
the  Closing  Date,  have  been  vacant  for  more  than 7 days  and  are not in
Rent-Ready Condition, and (b) $400.

7.3 Liens.  Other than utility  easements and temporary  construction  easements
granted by Seller in the ordinary course of business,  Seller  covenants that it
will not  voluntarily  create or cause any lien or  encumbrance to attach to the
Property  between the Effective Date and the Closing Date (other than Leases and
Property  Contracts as provided in Section 7.1) unless  Purchaser  approves such
lien or  encumbrance,  which  approval  shall not be  unreasonably  withheld  or
delayed. If Purchaser approves any such subsequent lien or encumbrance, the same
shall be deemed a Permitted Encumbrance for all purposes hereunder.

                                  ARTICLE VIII
                         CONDITIONS PRECEDENT TO CLOSING

8.1   Purchaser's  Conditions  to  Closing.  Purchaser's  obligation  to close
under this Contract,  shall be subject to and conditioned upon the fulfillment
of each and all of the following conditions precedent:

8.1.1 All of the  documents  required to be  delivered by Seller to Purchaser at
the  Closing  pursuant  to the  terms  and  conditions  hereof  shall  have been
delivered;

8.1.2 Each of Seller's Representations shall be true in all material respects as
of the Closing Date;

8.1.3 Seller shall have complied  with,  fulfilled and performed in all material
respects  each of the  covenants,  terms and  conditions  to be  complied  with,
fulfilled or performed by Seller hereunder; and

8.1.4  Neither  Seller nor  Seller's  general  partner  shall be a debtor in any
bankruptcy  proceeding  nor shall have been in the last 6 months a debtor in any
bankruptcy proceeding.

8.1.5 Title Insurer shall be prepared to issue the Title Policy  subject only to
the Permitted Exceptions and the payment of any applicable fees and charges.

      Notwithstanding anything to the contrary, there are no other conditions on
Purchaser's  obligation  to Close except as expressly  set forth in this Section
8.1. If any  condition set forth in Sections  8.1.1,  8.1.3 or 8.1.4 is not met,
Purchaser may (a) waive any of the foregoing  conditions  and proceed to Closing
on the Closing Date with no offset or deduction from the Purchase  Price, or (b)
if such failure  constitutes  a default by Seller,  exercise any of its remedies
pursuant to Section  10.2.  If the  condition  set forth in Section 8.1.2 is not
met,  Purchaser  may, as its sole and  exclusive  remedy,  (i) notify  Seller of
Purchaser's  election to  terminate  this  Contract  and receive a return of the
Deposit  from the Escrow  Agent,  or (ii) waive such  condition  and  proceed to
Closing on the Closing Date with no offset or deduction from the Purchase Price.

8.2 Seller's Conditions to Closing. Without limiting any of the rights of Seller
elsewhere  provided  for in this  Contract,  Seller's  obligation  to close with
respect to  conveyance of the Property  under this Contract  shall be subject to
and conditioned upon the fulfillment of each and all of the following conditions
precedent:

8.2.1 All of the  documents  and funds  required to be delivered by Purchaser to
Seller at the Closing  pursuant to the terms and  conditions  hereof  shall have
been delivered;

8.2.2  Each  of the  representations,  warranties  and  covenants  of  Purchaser
contained herein shall be true in all material respects as of the Closing Date;

8.2.3  Purchaser  shall have  complied  with,  fulfilled  and  performed  in all
material  respects each of the  covenants,  terms and  conditions to be complied
with, fulfilled or performed by Purchaser hereunder;

8.2.4  Seller shall have  received all  consents,  documentation  and  approvals
necessary to consummate  and facilitate the  transactions  contemplated  hereby,
including,  without  limitation,  a tax free exchange  pursuant to Section 13.19
(and the amendment of Seller's (or Seller's  affiliates')  partnership  or other
organizational   documents  in   connection   therewith),   (a)  from   Seller's
unaffiliated  partners,  members,  managers,  shareholders  or  directors to the
extent required by Seller's (or Seller's affiliates')  organizational documents,
and (b) as required by law. If Seller fails to obtain any  consents  required by
Section  8.2.4(a)  hereof,  and this  Contract  is  terminated  with  respect to
Seller's Property and such Property is not conveyed to Purchaser because of such
failures,  then Seller shall pay Purchaser  its direct and actual  out-of-pocket
expenses and costs  (documented by paid invoices to third parties) in connection
with its Property for which this Contract has been so terminated,  which damages
shall not exceed $25,000.

8.2.5 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
Contract or declare  illegal,  invalid or  nonbinding  any of the  covenants  or
obligations of the Purchaser;

8.2.6 [Intentionally deleted].

      If any of the foregoing  conditions  to Seller's  obligation to close with
respect to  conveyance of the Property  under this Contract are not met,  Seller
may (a) waive any of the  foregoing  conditions  and  proceed  to Closing on the
Closing Date, or (b) terminate this Contract, and, if such failure constitutes a
default by Purchaser, exercise any of its remedies under Section 10.1.

                                   ARTICLE IX
                                    BROKERAGE

9.1  Indemnity.  Seller  represents  and warrants to Purchaser that it has dealt
only with Marcus & Millichap,  101 West Ohio Street,  15th Floor,  Indianapolis,
Indiana 46204 ("Broker") in connection with this 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  Contract,  and each party  agrees to
indemnify,  hold harmless, and, if requested in the sole and absolute discretion
of the  indemnitee,  defend (with counsel  approved by the indemnitee) the other
party from and against all Losses relating to brokerage commissions and finder's
fees arising from or attributable  to the acts or omissions of the  indemnifying
party.  The provisions of this Section 9.1 shall survive the termination of this
Contract,  and if not so  terminated,  the Closing  and  delivery of the Deed to
Purchaser.

9.2 Broker  Commission.  If the Closing  occurs,  Seller  agrees to pay Broker a
commission  according to the terms of a separate  contract.  Broker shall not be
deemed a party or third party beneficiary of this Contract.

9.3 Broker  Signature  Page.  As a condition to Seller's  obligation  to pay the
commission  pursuant to Section 9.2, Broker shall execute the signature page for
Broker  attached  hereto solely for purposes of confirming the matters set forth
therein;  provided,  however,  that (a) Broker's signature hereon shall not be a
prerequisite to the binding nature of this Contract on Purchaser and Seller, and
the same shall become fully  effective  upon  execution by Purchaser and Seller,
and (b) the  signature of Broker will not be necessary to amend any provision of
this Contract.

                                   ARTICLE X
                              DEFAULTS AND REMEDIES
10.1 Purchaser Default.  If Purchaser  defaults in its obligations  hereunder to
(a) deliver the Initial  Deposit or Additional  Deposit (or any other deposit or
payment required of Purchaser  hereunder),  (b) deliver to Seller the deliveries
specified under Section 5.3 on the date required thereunder,  or (c) deliver the
Purchase  Price at the time  required by Section 2.2.4 and close on the purchase
of the Property on the Closing Date,  then,  immediately  and without  notice or
cure,  Purchaser  shall forfeit the Deposit,  and the Escrow Agent shall deliver
the Deposit to Seller,  and neither party shall be obligated to proceed with the
purchase and sale of the Property.  If,  Purchaser  defaults in any of its other
representations, warranties or obligations under this Contract, and such default
continues for more than 10 days after written notice from Seller, then Purchaser
shall  forfeit the Deposit,  and the Escrow  Agent shall  deliver the Deposit to
Seller,  and neither  party shall be  obligated to proceed with the purchase and
sale of the Property; provided, however, if the Purchaser default is not capable
of being cured,  does not  preclude  Purchaser  from  Closing (and  Purchaser is
ready,  willing and able to timely  Close),  and does not  materially  adversely
affect Seller or the  ownership,  operation or  maintenance  of any Property (or
create any  liability  or Loss for Seller or the  Property),  then such  default
shall not permit  Seller to retain the Deposit if it  terminates  this  Contract
because of such default.  The Deposit is liquidated  damages and recourse to the
Deposit is, except for  Purchaser's  indemnity and  confidentiality  obligations
hereunder, Seller's sole and exclusive remedy for Purchaser's failure to perform
its  obligation  to  purchase  the  Property  or breach of a  representation  or
warranty.  Seller  expressly  waives the  remedies of specific  performance  and
additional  damages  for  such  default  by  Purchaser.   SELLER  AND  PURCHASER
ACKNOWLEDGE THAT SELLER'S DAMAGES WOULD BE DIFFICULT TO DETERMINE,  AND THAT THE
DEPOSIT IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES RESULTING FROM A DEFAULT BY
PURCHASER IN ITS  OBLIGATION  TO PURCHASE  THE  PROPERTY.  SELLER AND  PURCHASER
FURTHER  AGREE THAT THIS  SECTION  10.1 IS  INTENDED TO AND DOES  LIQUIDATE  THE
AMOUNT OF DAMAGES DUE SELLER,  AND SHALL BE SELLER'S  EXCLUSIVE  REMEDY  AGAINST
PURCHASER,  BOTH AT LAW AND IN  EQUITY,  ARISING  FROM OR RELATED TO A BREACH BY
PURCHASER OF ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS  CONTEMPLATED BY THIS
CONTRACT,  OTHER THAN WITH RESPECT TO PURCHASER'S  INDEMNITY AND CONFIDENTIALITY
OBLIGATIONS HEREUNDER.

10.2  Seller  Default.  If  Seller,  prior  to  the  Closing,  defaults  in  its
representations,  warranties,  covenants,  or  obligations  under this Contract,
including  to sell the  Property as required by this  Contract  and such default
continues for more than 10 days after written  notice from  Purchaser,  then, at
Purchaser's  election and as Purchaser's sole and exclusive  remedy,  either (a)
this Contract shall terminate,  and all payments and things of value,  including
the  Deposit,  provided by  Purchaser  hereunder  shall be returned to Purchaser
(subject to Purchaser's obligation under Section 3.5.2 to return all Third-Party
Reports and Required Return  Documents  provided to Purchaser as a pre-condition
to the return of the Material  Security  Deposit) and Purchaser may recover,  as
its sole recoverable damages (but without limiting its right to receive a refund
of the  Deposit),  its  direct  and  actual  out-of-pocket  expenses  and  costs
(documented  by  paid  invoices  to  third  parties)  in  connection  with  this
transaction,  which  damages shall not exceed in aggregate  $200,000  under this
Contract and the Related Contracts,  in the aggregate;  provided,  however, that
the foregoing  $200,000 cap shall reduce on a pro rata basis (in accordance with
relative  purchase  prices)  when  and if this  Contract  or any of the  Related
Contracts is terminated with respect to one or more of the properties to be sold
pursuant  thereto.  For example (but not by way of limitation),  if the purchase
price of the terminated property is $12,000,000 and the aggregate purchase price
for all of the  properties  under this  Contract  and the Related  Contracts  is
$61,000,000,  then the  foregoing  cap would be  reduced  by an amount  equal to
(12/61 x $200,000),  or $39,344, to a revised cap of $160,656,  or (b) Purchaser
may seek  specific  performance  of  Seller's  obligation  to  deliver  the Deed
pursuant to this  Contract  (but not  damages).  Purchaser  agrees that it shall
promptly deliver to Seller an assignment of all of Purchaser's  right, title and
interest in and to (together with  possession of) all plans,  studies,  surveys,
reports,  and other materials (other than  Purchaser's  attorney's work product)
paid for with the  out-of-pocket  expenses  reimbursed by Seller pursuant to the
foregoing sentence. SELLER AND PURCHASER FURTHER AGREE THAT THIS SECTION 10.2 IS
INTENDED TO AND DOES LIMIT THE AMOUNT OF DAMAGES DUE  PURCHASER AND THE REMEDIES
AVAILABLE  TO  PURCHASER,  AND SHALL BE  PURCHASER'S  EXCLUSIVE  REMEDY  AGAINST
SELLER,  BOTH AT LAW AND IN EQUITY ARISING FROM OR RELATED TO A BREACH BY SELLER
OF ITS REPRESENTATIONS, WARRANTIES, OR COVENANTS OR ITS OBLIGATION TO CONSUMMATE
THE  TRANSACTIONS  CONTEMPLATED  BY THIS CONTRACT.  UNDER NO  CIRCUMSTANCES  MAY
PURCHASER SEEK OR BE ENTITLED TO RECOVER ANY SPECIAL,  CONSEQUENTIAL,  PUNITIVE,
SPECULATIVE OR INDIRECT  DAMAGES,  ALL OF WHICH PURCHASER  SPECIFICALLY  WAIVES,
FROM  SELLER FOR ANY BREACH BY SELLER,  OF ITS  REPRESENTATIONS,  WARRANTIES  OR
COVENANTS OR ITS OBLIGATIONS UNDER THIS CONTRACT.  PURCHASER SPECIFICALLY WAIVES
THE RIGHT TO FILE ANY LIS PENDENS OR ANY LIEN  AGAINST THE  PROPERTY  UNLESS AND
UNTIL IT HAS IRREVOCABLY  ELECTED TO SEEK SPECIFIC  PERFORMANCE OF THIS CONTRACT
AND HAS FILED AN ACTION SEEKING SUCH REMEDY.

                                   ARTICLE XI
                            RISK OF LOSS OR CASUALTY

11.1 Major  Damage.  If the  Property is damaged or  destroyed  by fire or other
casualty prior to Closing,  and the cost of repair is more than  $300,000,  then
Seller shall have no obligation to repair such damage or  destruction  and shall
notify Purchaser in writing of such damage or destruction (the "Damage Notice").
Within 10 days after  Purchaser's  receipt of the Damage  Notice,  Purchaser may
elect at its option to terminate  this Contract by delivering  written notice to
Seller.  In the event  Purchaser  fails to terminate  this  Contract  within the
foregoing 10-day period, this transaction shall be closed in accordance with the
terms of this  Contract for the full  Purchase  Price  notwithstanding  any such
damage or  destruction  and  Purchaser  shall  receive  all  insurance  proceeds
pertaining  thereto (plus a credit  against the Purchase  Price in the amount of
any deductible payable by Seller in connection therewith) at Closing.

11.2 Minor  Damage.  If the  Property is damaged or  destroyed  by fire or other
casualty  prior to the Closing,  and the cost of repair is equal to or less than
$300,000,  this transaction shall be closed in accordance with the terms of this
Contract,  notwithstanding the damage or destruction;  provided, however, Seller
shall make such repairs to the extent of any recovery from insurance  carried on
the Property if they can be reasonably  effected before the Closing.  Subject to
Section 11.3, if Seller is unable to effect such repairs,  then Purchaser  shall
receive all insurance  proceeds  pertaining  thereto (plus a credit  against the
Purchase  Price in the amount of any uninsured  loss (but only to the extent not
repaired  prior to  Closing)  or  deductible  payable  by Seller  in  connection
therewith) at Closing.

11.3  Repairs.  To the  extent  that  Seller  elects  to  commence  any  repair,
replacement or  restoration of the Property prior to Closing,  then Seller shall
be entitled to receive and apply available  insurance proceeds to any portion of
such repair, replacement or restoration completed or installed prior to Closing,
with Purchaser being  responsible for completion of such repair,  replacement or
restoration after Closing from the balance of any available  insurance proceeds.
The  provisions  of this Section 11.3 shall  survive the Closing and delivery of
the Deed to Purchaser.

                                  ARTICLE XII
                                 EMINENT DOMAIN

12.1 Eminent  Domain.  In the event that,  at the time of Closing,  any material
part of the Property is (or  previously  has been)  acquired,  or is about to be
acquired, by any governmental agency by the powers of eminent domain or transfer
in lieu  thereof  (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
Contract by giving written notice within 10 days after Purchaser's  receipt from
Seller of notice of the occurrence of such event, and if Purchaser so terminates
this  Contract,  Purchaser  shall  recover  the  Deposit  hereunder  (subject to
Purchaser's obligation under Section 3.5.2 to return all Third-Party Reports and
information and Materials provided to Purchaser as a pre-condition to the return
of the  Deposit).  If Purchaser  fails to terminate  this  Contract  within such
10-day period,  this transaction shall be closed in accordance with the terms of
this Contract for the full Purchase  Price and Purchaser  shall receive the full
benefit of any  condemnation  award. It is expressly  agreed between the parties
hereto that this  section  shall in no way apply to  customary  dedications  for
public purposes which may be necessary for the development of the Property.

                                  ARTICLE XIII
                                  MISCELLANEOUS

13.1 Binding  Effect of Contract.  This Contract  shall not be binding on either
party until executed by both Purchaser and Seller.  As provided in Section 2.3.5
and Section 9.3 above,  neither the Escrow Agent's nor the Broker's execution of
this Contract shall be a prerequisite to its effectiveness.

13.2 Exhibits And Schedules. All Exhibits and Schedules,  whether or not annexed
hereto, are a part of this Contract for all purposes.

13.3  Assignability.  This Contract is not assignable by Purchaser without first
obtaining the prior written  approval of the Seller,  except that  Purchaser may
assign this  Contract to one or more  entities  so long as (a)  Purchaser  is an
affiliate of the purchasing entity(ies),  (b) Purchaser is not released from its
liability hereunder,  and (c) Purchaser provides written notice to Seller of any
proposed  assignment  no later than 10 days prior to the Closing  Date.  As used
herein,  an affiliate is a person or entity  controlled by, under common control
with, or  controlling  another  person or entity.  An  "affiliate"  of Purchaser
expressly  includes any entity which is controlled,  directly or indirectly,  by
any combination of (i) Purchaser, (ii) Norm Schwab, or (iii) Michael Aufrecht.

13.4 Binding  Effect.  Subject to Section 13.3,  this Contract  shall be binding
upon and inure to the  benefit of Seller  and  Purchaser,  and their  respective
successors, heirs and permitted assigns.

13.5 Captions.  The captions,  headings,  and arrangements used in this Contract
are for convenience only and do not in any way affect, limit, amplify, or modify
the terms and provisions hereof.

13.6 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.

13.7 Notices. All notices,  demands,  requests and other communications required
or  permitted  hereunder  shall  be in  writing,  and  shall  be (a)  personally
delivered   with   a   written   receipt   of   delivery;    (b)   sent   by   a
nationally-recognized   overnight   delivery   service   requiring   a   written
acknowledgement of receipt or providing a certification of delivery or attempted
delivery;  (c) sent by certified mail, return receipt requested;  or (d) sent by
confirmed  facsimile  transmission with an original copy thereof  transmitted to
the recipient by one of the means  described in  subsections  (a) through (c) no
later than 3 Business Days  thereafter.  All notices  shall be deemed  effective
when actually delivered as documented in a delivery receipt; provided,  however,
that if the notice was sent by  overnight  courier or mail as  aforesaid  and is
affirmatively  refused or cannot be delivered during customary business hours by
reason of the absence of a signatory to acknowledge  receipt,  or by reason of a
change of  address  with  respect  to which the  addressor  did not have  either
knowledge or written notice  delivered in accordance with this  paragraph,  then
the first attempted delivery shall be deemed to constitute delivery.  Each party
shall be  entitled  to  change  its  address  for  notices  from time to time by
delivering to the other party notice  thereof in the manner herein  provided for
the  delivery of  notices.  All notices  shall be sent to the  addressee  at its
address set forth following its name below:

            To Purchaser:
            Prime Quest Management, LLC
            2824 W. Coyle
            Chicago, Illinois  60645
            Attention:  Eli Stefansky
            Telephone:  773-508-9104
            Facsimile:  773-508-9107

      ......with copy to:

            Pircher, Nichols & Meeks
            900 North Michigan Avenue, Suite 1050
            Chicago, Illinois  60611
            Attention:  Real Estate Notices (JDL/EF)
      ......Telephone:  312-915-3112
            Facsimile:  312-915-3348


            To Seller:

                                    c/o AIMCO
            4582 South Ulster Street Parkway
            Suite 1100
            Denver, Colorado  80237
            Attention:  Patrick Slavin
            Telephone:  303-691-4340
            Facsimile:  303-300-3282

            And:

            c/o AIMCO
            4582 South Ulster Street Parkway
            Suite 1100
            Denver, Colorado  80237
            Attention:  Mr. Harry Alcock
            Telephone:  303-691-4344
            Facsimile:  303-300-3282

            with copy to:

            Chad Asarch, Esq.
            Senior Vice President and Associate General Counsel
            AIMCO
            4582 South Ulster Street Parkway
            Suite 1100
            Denver, Colorado  80237
            Telephone: 303-691-4303
            Facsimile:  303-300-3260

            and a copy to:

            Brownstein Hyatt & Farber, P.C.
            410 17th Street, 22nd Floor
            Denver, Colorado  80202
            Attention:  Gary M. Reiff, Esq. and Joshua J. Widoff, Esq.
            Telephone: 303-223-1100
            Facsimile:  303-223-1111

      Any notice required hereunder to be delivered to the Escrow Agent shall be
delivered in accordance with above provisions as follows:

            Fidelity National Title Company
            c/o Lolly Avant, National Commercial Closing Specialist
            1900 West Loop South, Suite 650
            Houston, Texas 77027
            Telephone: 800-879-1677
            Facsimile:  713-623-4406

      Unless specifically  required to be delivered to the Escrow Agent pursuant
to the terms of this  Contract,  no notice  hereunder  must be  delivered to the
Escrow  Agent in order to be  effective  so long as it is delivered to the other
party in accordance with the above provisions.

13.8 Governing Law And Venue.  The laws of the State of Indiana shall govern the
validity, construction, enforcement, and interpretation of this Contract, unless
otherwise  specified herein except for the conflict of laws provisions  thereof.
Subject to Section  13.25,  all claims,  disputes and other  matters in question
arising out of or relating to this  Contract,  or the breach  thereof,  shall be
decided  by  proceedings  instituted  and  litigated  in a  court  of  competent
jurisdiction  in the state in which the  Property is  situated,  and the parties
hereto expressly consent to the venue and jurisdiction of such court.

13.9 Entire  Agreement.  This Contract  embodies the entire Contract between the
parties  hereto  concerning  the subject  matter hereof and supersedes all prior
conversations,  proposals, negotiations,  understandings and agreements, whether
written or oral.

13.10  Amendments.  This  Contract  shall  not  be  amended,  altered,  changed,
modified,  supplemented or rescinded in any manner except by a written  contract
executed by all of the  parties;  provided,  however,  that,  (a) as provided in
Section 2.3.5 above,  the signature of the Escrow Agent shall not be required as
to any  amendment of this  Contract  other than an amendment of Section 2.3, and
(b) as provided in Section 9.3 above,  the  signature of the Broker shall not be
required as to any amendment of this Contract.

13.11 Severability.  If any part of this Contract shall be held to be invalid or
unenforceable  by a court of competent  jurisdiction,  such  provision  shall be
reformed, and enforced to the maximum extent permitted by law. If such provision
cannot be  reformed,  it shall be severed from this  Contract and the  remaining
portions of this Contract shall be valid and enforceable.

13.12 Multiple Counterparts/Facsimile  Signatures. This Contract may be executed
in a  number  of  identical  counterparts.  This  Contract  may be  executed  by
facsimile signatures which shall be binding on the parties hereto, with original
signatures to be delivered as soon as reasonably practical thereafter.

13.13  Construction.  No provision of this Contract  shall be construed in favor
of, or against,  any particular  party by reason of any presumption with respect
to the drafting of this Contract;  both parties,  being  represented by counsel,
having fully participated in the negotiation of this instrument.

13.14 Confidentiality. Neither Seller nor Purchaser shall disclose the terms and
conditions  contained  in this  Contract  and shall keep the same  confidential,
provided that  Purchaser may disclose the terms and  conditions of this Contract
(a) as required by law, (b) to  consummate  the terms of this  Contract,  or any
financing  relating  thereto,   or  (c)  to  Purchaser's  or  Seller's  lenders,
investors,  attorneys and accountants. Any information and Materials provided by
Seller to Purchaser hereunder are confidential and Purchaser shall be prohibited
from making such information public to any other person or entity other than its
agents and legal representatives,  without Seller's prior written authorization,
which may be granted or denied in Seller's sole discretion.  Notwithstanding the
provisions of Section 13.9,  Purchaser  agrees that the covenants,  restrictions
and agreements of Purchaser contained in any confidentiality  agreement executed
by Purchaser  prior to the  Effective  Date shall  survive the execution of this
Contract and shall not be superseded hereby.

13.15 Time Of The  Essence.  It is expressly  agreed by the parties  hereto that
time is of the essence with respect to this Contract.

13.16 Waiver.  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 Contract shall
be established by conduct,  custom, or course of dealing and all waivers must be
in writing and signed by the waiving party.

13.17 Attorneys Fees. In the event either party hereto  commences  litigation or
arbitration  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  and
arbitration, including the cost of in-house counsel and any appeals.

13.18 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.

13.19  1031  Exchange.  Seller  and  Purchaser  acknowledge  and agree  that the
purchase  and sale of the  Property  may be part of a  tax-free  exchange  under
Section  1031 of the Code for  either  Purchaser  or Seller.  Each party  hereby
agrees to take all reasonable  steps on or before the Closing Date to facilitate
such exchange if requested by the other party, provided that (a) no party making
such  accommodation  shall be required to acquire any substitute  property,  (b)
such exchange shall not affect the representations,  warranties, liabilities and
obligations  of the  parties to each other  under  this  Contract,  (c) no party
making such accommodation  shall incur any additional cost, expense or liability
in connection with such exchange (other than expenses of reviewing and executing
documents  required in connection with such exchange),  and (d) no dates in this
Contract will be extended as a result thereof.  Notwithstanding  anything to the
contrary  contained in the foregoing,  if Seller so elects to close the transfer
of the  Property  as an  exchange,  then (i)  Seller,  at its sole  option,  may
delegate its  obligations to transfer the Property under this Contract,  and may
assign its rights to receive the Purchase  Price from  Purchaser,  to a deferred
exchange  intermediary  (an  "Intermediary")  or  to an  exchange  accommodation
titleholder, as the case may be; (ii) such delegation and assignment shall in no
way reduce,  modify or otherwise  affect the  obligations of Seller  pursuant to
this Contract;  (iii) Seller shall remain fully liable for its obligations under
this Contract as if such  delegation and assignment  shall not have taken place;
(iv)  Intermediary or exchange  accommodation  titleholder,  as the case may be,
shall have no liability to Purchaser; and (v) the closing of the transfer of the
Property to  Purchaser  shall be  undertaken  by direct deed from Seller (or, if
applicable,  from other  affiliates  of Seller whom Seller will cause to execute
such deeds) to Purchaser or to exchange accommodation  titleholder,  as the case
may be. Notwithstanding  anything to the contrary contained in the foregoing, if
Purchaser  so elects to close the  acquisition  of the  Property as an exchange,
then (i) Purchaser,  at its sole option, may delegate its obligations to acquire
the  Property  under this  Contract,  and may  assign its rights to receive  the
Property  from  Seller,  to an  Intermediary  or to  an  exchange  accommodation
titleholder, as the case may be; (ii) such delegation and assignment shall in no
way reduce,  modify or otherwise affect the obligations of Purchaser pursuant to
this Contract;  (iii)  Purchaser  shall remain fully liable for its  obligations
under this Contract as if such  delegation and  assignment  shall not have taken
place; (iv) Intermediary or exchange accommodation titleholder,  as the case may
be, shall have no liability to Seller; and (v) the closing of the acquisition of
the Property by Purchaser or the exchange accommodation titleholder, as the case
may be, shall be undertaken by direct deed from Seller (or, if applicable,  from
other  affiliates  of Seller whom  Seller  will cause to execute  such deeds) to
Purchaser (or to exchange accommodation titleholder, as the case may be).

13.20 No Personal  Liability  of  Officers,  Trustees or  Directors  of Seller's
Partners. Purchaser agrees that none of Seller's Indemnified Parties (except for
the Seller entity itself) shall have any personal  liability under this Contract
or any document  executed in connection  with the  transactions  contemplated by
this Contract.

13.21 No Exclusive Negotiations. Seller shall have the right, at all times prior
to  the  expiration  of the  Feasibility  Period,  to  enter  into  discussions,
negotiations,  or any other communications  concerning or related to the sale of
the Property with any third-party.

13.22 ADA Disclosure. Purchaser acknowledges that the Property may be subject to
the federal  Americans  With  Disabilities  Act (the "ADA") and the federal Fair
Housing Act (the "FHA").  The ADA requires,  among other  matters,  that tenants
and/or owners of "public  accommodations"  remove  barriers in order to make the
Property  accessible to disabled persons and provide auxiliary aids and services
for  hearing,  vision or speech  impaired  persons.  Seller  makes no  warranty,
representation  or guarantee of any type or kind with respect to the  Property's
compliance  with the ADA or the FHA (or any  similar  state or local  law),  and
Seller expressly disclaims any such representation.

13.23 No  Recording.  Purchaser  shall not cause or allow this  Contract  or any
contract or other document related hereto,  nor any memorandum or other evidence
hereof,  to be recorded or become a public record without Seller's prior written
consent,  which  consent may be withheld at  Seller's  sole  discretion.  If the
Purchaser  records this Contract or any other  memorandum  or evidence  thereof,
Purchaser shall be in default of its obligations under this Contract.  Purchaser
hereby appoints the Seller as Purchaser's attorney-in-fact to prepare and record
any documents  necessary to effect the nullification and release of the contract
or  other  memorandum  or  evidence  thereof  from  the  public  records.   This
appointment shall be coupled with an interest and irrevocable.

13.24  Relationship of Parties.  Purchaser and Seller acknowledge and agree that
the  relationship  established  between the parties pursuant to this Contract is
only that of a seller and a purchaser of property.  Neither Purchaser nor Seller
is, nor shall either hold itself out to be, the agent, employee,  joint venturer
or partner of the other party.

13.25  Dispute  Resolution.  Any  controversy,  dispute,  or claim of any nature
arising  out of, in  connection  with,  or in  relation  to the  interpretation,
performance,  enforcement  or breach of this Contract (and any closing  document
executed in connection herewith), including any claim based on contract, tort or
statute,  shall be resolved at the written request of any party to this Contract
by binding arbitration. The arbitration shall be administered in accordance with
the  then  current  Commercial  Arbitration  Rules of the  American  Arbitration
Association.  Any matter to be settled by arbitration  shall be submitted to the
American  Arbitration  Association  in the state of Indiana.  The parties  shall
attempt to designate one arbitrator from the American  Arbitration  Association.
If they are unable to do so within 30 days after written demand  therefor,  then
the  American  Arbitration  Association  shall  designate  an  arbitrator.   The
arbitration  shall  be  final  and  binding,  and  enforceable  in any  court of
competent  jurisdiction.  The arbitrator  shall award attorneys' fees (including
those of in-house counsel) and costs to the prevailing party and charge the cost
of arbitration to the party which is not the prevailing  party.  Notwithstanding
anything herein to the contrary,  this Section 13.25 shall not prevent Purchaser
or  Seller  from  seeking  and  obtaining  equitable  relief on a  temporary  or
permanent basis, including, without limitation, a temporary restraining order, a
preliminary or permanent injunction or similar equitable relief, from a court of
competent jurisdiction located in the state in which the Property is located (to
which all parties  hereto  consent to venue and  jurisdiction)  by instituting a
legal action or other court proceeding in order to protect or enforce the rights
of such party under this Contract or to prevent irreparable harm and injury. The
court's jurisdiction over any such equitable matter, however, shall be expressly
limited  only to the  temporary,  preliminary,  or  permanent  equitable  relief
sought;  all other  claims  initiated  under this  Contract  between the parties
hereto shall be determined  through final and binding  arbitration in accordance
with this Section 13.25.

13.26 AIMCO Marks.  Purchaser agrees that Seller, the Property Manager or AIMCO,
or their  respective  affiliates,  are the sole  owners of all right,  title and
interest  in and to the AIMCO  Marks (or have the right to use such AIMCO  Marks
pursuant to license  agreements with third parties) and that no right,  title or
interest in or to the AIMCO Marks is granted, transferred,  assigned or conveyed
as a result of this Contract.  Purchaser  further agrees that Purchaser will not
use the AIMCO Marks for any purpose.

13.27  Non-Solicitation  of Employees.  Purchaser  acknowledges and agrees that,
without the express  written  consent of Seller,  neither  Purchaser  nor any of
Purchaser's  employees,  affiliates  or agents  shall  solicit  any of  Seller's
employees  or  any  employees  located  at the  Property  (or  any  of  Seller's
affiliates'  employees  located at any property  owned by such  affiliates)  for
potential employment.

13.28  Survival.  Except for (a) all of the provisions of this Article 13 (other
than Section  13.19 and 13.21),  and (b) any  provision of this  Contract  which
expressly  states that it shall so survive,  and (c) any payment  obligation  of
Purchaser under this Contract (the foregoing (a), (b) and (c) referred to herein
as the "Survival Provisions"), none of the terms and provisions of this Contract
shall survive the  termination of this Contract,  and, if the Contract is not so
terminated,  all of the terms and  provisions of this  Contract  (other than the
Survival  Provisions)  shall be merged into the Closing  documents and shall not
survive Closing.

13.29 Multiple Purchasers.  As used in this Contract, the term "Purchaser" means
all entities  acquiring any interest in the Property at the Closing,  including,
without  limitation,  any  assignee(s)  of the  original  Purchaser  pursuant to
Section 13.3 of this Contract. In the event that "Purchaser" has any obligations
or makes any covenants,  representations or warranties under this Contract,  the
same shall be made  jointly  and  severally  by all  entities  being a Purchaser
hereunder.  In the event that Seller  receives  notice  from any entity  being a
Purchaser  hereunder,  the same shall be deemed to  constitute  notice  from all
entities  being a  Purchaser  hereunder.  In the event that any  entity  being a
Purchaser hereunder takes any action,  breaches any obligation or otherwise acts
pursuant  to the  terms of this  Contract,  the same  shall be  deemed to be the
action of the other  entity(ies)  being a Purchaser  hereunder and the action of
"Purchaser"  under this  Contract.  In the event that Seller is required to give
notice or take action with respect to Purchaser  under this Contract,  notice to
any entity  being a Purchaser  hereunder  or action  with  respect to any entity
being a Purchaser  hereunder shall be a notice or action to all entities being a
Purchaser  hereunder.  In the event that any entity being a Purchaser  hereunder
desires to bring an action or arbitration  against  Seller,  such action must be
joined by all entities being a Purchaser hereunder in order to be effective.  In
the event that there is any  agreement  by Seller to pay any amount  pursuant to
this Contract to Purchaser under any  circumstance,  that amount shall be deemed
maximum  aggregate amount to be paid to all parties being a Purchaser  hereunder
and not an amount that can be paid to each party being a Purchaser hereunder. In
the event that  Seller is required  to return the  Initial  Deposit,  Additional
Deposit or other amount to Purchaser, Seller shall return the same to any entity
being a  Purchaser  hereunder  and,  upon such  return,  shall  have no  further
liability to any other entity being a Purchaser  hereunder for such amount.  The
foregoing  provisions  also shall  apply to any  documents,  including,  without
limitation,  the  General  Assignment  and  Assumption  and the  Assignment  and
Assumption of Leases and Security  Deposits,  executed in  connection  with this
Contract and the transaction(s) contemplated hereby.

13.30  Related  Contracts  Notwithstanding  anything  in  this  Contract  to the
contrary,  and  unless  Seller  agrees  in its  sole  and  absolute  discretion,
Purchaser  may not close on the  acquisition  of the Property  unless  Purchaser
simultaneously,  or  prior  to  such  Closing  Date,  has  acquired  all  of the
properties that are the subject to the Related  Contracts (and, if Seller elects
in its sole  discretion,  then the Closing  Date  hereunder  will be extended to
accommodate a simultaneous  closing with the properties  that are the subject of
one or more of the  Related  Contracts).  Without  limiting  the  foregoing,  if
Purchaser has the right to terminate either of the Related  Contracts,  and does
so  terminate  one or both Related  Contracts  (including,  without  limitation,
pursuant to Sections 3.2 or 4.3 thereof),  Seller shall have the option (but not
the  obligation) to terminate this Contract.  In addition,  if the sellers under
either of the Related Contracts terminates such Related Contract for any reason,
then Seller may (but is not obligated to) terminate this Contract within 10 days
after the termination of the Related Contract.  A default by the Purchaser under
either Related  Contract is, at the option of the Seller under this Contract,  a
default by the Purchaser hereunder.

13.31  Non-Refundable  Purchaser Lender Fees. If this Contract is terminated (in
accordance with the terms and conditions  hereof) because of either (a) a Seller
default, or (b) the failure of Seller to obtain the consents required by Section
8.2.4(a),  then, in addition to any other payments  hereunder,  Seller shall pay
Purchaser its actual and documented fees which Purchaser has paid to third-party
prospective  lenders (in conjunction  with potential  financing  associated with
Purchaser's  acquisition of the Property) for application fees,  rate-lock fees,
and third-party reports in an amount not to exceed $10,500.



                                  ARTICLE XIV
                           LEAD-BASED PAINT DISCLOSURE

14.1 Disclosure.  Seller and Purchaser hereby  acknowledge  delivery of the Lead
Based Paint  Disclosure  attached as Exhibit H hereto.  The  provisions  of this
Section 14.1 shall survive the Closing and delivery of the Deed to Purchaser.


                 [Remainder of Page Intentionally Left Blank]


<PAGE>


      NOW,  THEREFORE,  the parties hereto have executed this Contract as of the
date first set forth above.

                                     Seller:


                                    SALEM COURTHOUSE, L.P.,
                                    a South Carolina limited partnership

                                    By:   Salem GP, L.L.C.,
                                          a South Carolina limited liability
                                          company,
                                          Its General Partner

                                    By:   Davidson Diversified Real
                                          Estate III, L.P., a Delaware
                                          limited partnership
                                          Its Member

                                    By:   Davidson Diversified
                                          Properties, Inc., a Tennessee
                                          corporation
                                          Its General Partner

                                    By: /s/Patrick F. Slavin
                                    Name: Patrick F. Slavin
                                    Title: Senior Vice President


                                   Purchaser:


                                    PRIME QUEST MANAGEMENT, LLC, an Illinois
                                    limited liability company

                                    By: /s/Eli Stefansky
                                    Name: Eli Stefansky
                                    Title: President


                                    Purchaser's Tax Identification
                                    Number/Social Security Number:






<PAGE>


                           ESCROW AGENT SIGNATURE PAGE

      The  undersigned  executes  the Contract to which this  signature  page is
attached  for the purpose of agreeing  to the  provisions  of Section 2.3 of the
Contract,  and  hereby  establishes  August  17,  2005 as the date of opening of
escrow and designates 05-194823 as the escrow number assigned to this escrow.


                                    ESCROW AGENT:

                                    FIDELITY NATIONAL TITLE COMPANY


                                    By:/s/Lolly Avant
                                    Name: Lolly Avant
                                    Title: Vice President, Manager




<PAGE>
                              BROKER SIGNATURE PAGE


      The undersigned  Broker hereby executes this Broker  Signature Page solely
to  confirm  the  following:  (a)  Broker  represents  only  the  Seller  in the
transaction  described in the Contract to which this signature page is attached,
(b) Broker  acknowledges  that the only compensation due to Broker in connection
with the  Closing of the  transaction  described  in the  Contract to which this
signature  page is  attached  is as set forth in a  separate  agreement  between
Seller and Broker,  and (c) Broker represents and warrants to Seller that Broker
and its  affiliates  has not and  will not  receive  any  compensation  (cash or
otherwise) from or on behalf of Purchaser or any affiliate thereof in connection
with the transaction,  and do not, and will not at the Closing,  have any direct
or indirect legal,  beneficial,  economic or voting interest in Purchaser (or in
an assignee  of  Purchaser,  which  pursuant  to Section  13.3 of the  Contract,
acquires  the  Property at the  Closing)  nor has  Purchaser  granted (as of the
Effective  Date or the  Closing  Date) the Broker or any of its  affiliates  any
right or option to acquire any direct or indirect legal, beneficial, economic or
voting interest in Purchaser.


                                          BROKER:

                                          MARCUS & MILLICHAP



                                          By:  /s/John S. Sebee
                                          Name: John S. Sebee
                                          Title: Senior Investment Associate



<PAGE>

                                                                   Exhibit 10DDb

                FIRST AMENDMENT TO PURCHASE AND SALE CONTRACT

      THIS FIRST  AMENDMENT TO PURCHASE AND SALE CONTRACT (this  "Amendment") is
made and entered into this 16th day of September,  2005 (the "Amendment  Date"),
by and between SALEM  COURTHOUSE,  L.P., a South  Carolina  limited  partnership
("Seller")  and PRIME  QUEST  MANAGEMENT,  LLC, an  Illinois  limited  liability
company ("Purchaser").

                                    RECITALS:

      WHEREAS,  Seller and Purchaser entered into that certain Purchase and Sale
Contract  dated August 16, 2005 (the  "Contract"),  for a certain parcel of real
property situated in Marion County,  Indiana, and more specifically described in
the Contract; and

      WHEREAS,  Seller and  Purchaser  desire to amend the Contract on the terms
and conditions set forth below.

      NOW, THEREFORE,  in consideration of the mutual covenants set forth in the
Contract and herein and for other good and valuable  consideration,  the receipt
and sufficiency of which are hereby acknowledged,  Seller and Purchaser agree to
amend the Contract as follows:

                                   AGREEMENT:

1.  Extension  of  Feasibility  Period.  Section  3.1 of the  Contract is hereby
amended to provide that the  Feasibility  Period  shall expire on September  23,
2005. Notwithstanding the foregoing, Purchaser agrees that the updated Rent Roll
delivered  by  Seller on  September  8,  2005,  is  sufficient  to  satisfy  the
requirement  under Section 7.1.3 of the Contract that Seller  deliver an updated
Rent Roll for its Property no later than 5 days prior to the  expiration  of the
Feasibility  Period (and Seller will not be required to re-deliver  updated Rent
Roll in advance of the extended Feasibility Period).

2.  Sections  3.5.2 and 6.1.7.  The  respective  references in Section 3.5.2 and
Section  6.1.7 of the  Contract to "Section  5.2.11" are hereby each  changed to
"Section 5.2.10."

3.  Miscellaneous.  The  following  provisions  shall apply with respect to this
Amendment:

(a) Except as modified in this  Amendment,  the  Contract,  is in full force and
effect and is hereby ratified by Seller and Purchaser.

(b)  Capitalized  terms used, but not defined,  in this Amendment shall have the
same meaning as set forth in the Contract.

(c) In the event of any conflict  between the Contract and this  Amendment,  the
terms and conditions of this Amendment shall control.

(d) This  Amendment  may be  executed  in  counterparts,  each of which  (or any
combination  of  which)  when  signed by all of the  parties  shall be deemed an
original,  but all of which when taken together shall  constitute one agreement.
Executed  copies hereof may be delivered by telecopier and upon receipt shall be
deemed originals and binding upon the parties hereto, and actual originals shall
be promptly delivered thereafter.


                   [Signatures appear on following pages.]

<PAGE>

      NOW, THEREFORE,  the parties hereto have executed this Amendment as of the
date first set forth above.


                                     Seller:

                                    SALEM COURTHOUSE, L.P.,
                                    a South Carolina limited partnership

                                    By:   Salem GP, L.L.C.,
                                          a South Carolina  limited  liability
                                           company,
                                          Its General Partner

                                    By:   Davidson Diversified Real
                                          Estate III,  L.P.,  a Delaware
                                          limited partnership
                                          Its Member

                                    By:   Davidson Diversified
                                          Properties, Inc., a Tennessee
                                          corporation
                                          Its General Partner

                                    By:/s/Patrick F. Slavin
                                    Name: Patrick F. Slavin
                                    Title: Senior Vice President



<PAGE>




                                   Purchaser:

                                    PRIME QUEST  MANAGEMENT,  LLC, an Illinois
                                    limited liability company


                                    By: Eli Stefansky
                                    Name: Eli Stefansky
                                    Title: President

<PAGE>

                                                                   Exhibit 10DDc

                      REINSTATEMENT AND SECOND AMENDMENT TO
                           PURCHASE AND SALE CONTRACT

      THIS  REINSTATEMENT  AND SECOND  AMENDMENT TO PURCHASE  AND SALE  CONTRACT
(this "Amendment") is made and entered into as of the 11th day of October,  2005
(the "Amendment Date"), by and between SALEM COURTHOUSE,  L.P., a South Carolina
limited  partnership  ("Seller")  and PRIME QUEST  MANAGEMENT,  LLC, an Illinois
limited liability company ("Purchaser").

                                    Recitals:

      WHEREAS,  Seller and Purchaser entered into that certain Purchase and Sale
Contract,  dated August 16, 2005, as amended by that First Amendment to Purchase
and Sale Contract, dated September 16, 2005 (as so amended, the "Contract"), for
a certain parcel of real property,  situated in Marion County, Indiana, and more
specifically described in the Contract.

      WHEREAS, Pursuant to Section 3.2 of the Contract, Purchaser terminated the
Contract by written notice dated September 23, 2005.

      WHEREAS,  Seller and Purchaser desire to reinstate and ratify the Contract
and to amend the Contract on the terms set forth herein.

      NOW, THEREFORE, in consideration of the Contract, the covenants, promises,
agreements,  and conditions  contained  herein,  and for other good and valuable
consideration,  the  receipt,  sufficiency,  and  adequacy  of which are  hereby
acknowledged, the parties hereto agree as follows:

                                   Agreement:

1. Reinstatement. The Contract is hereby reinstated, as amended herein, ratified
and affirmed and is effective  as of the  Amendment  Date as if the  termination
pursuant to Section 3.2 had not occurred.

2. Purchase Price. Section 2.2 of the Contract is hereby deleted in its entirety
and the following substituted therefor:

"Purchase Price and Deposit. The total purchase price ("Purchase Price") for the
Property shall be an amount equal to  $12,473,250,  less the Lender Fees,  which
amount shall be paid by Purchaser, as follows:"

      The amendment to the Purchase Price set forth in this Amendment is in full
satisfaction  of all issues and  objections  raised by Purchaser  regarding  the
Property.

3. Additional Deposit. In consideration of Seller's execution of this Amendment,
within one Business Day after the Amendment Date, Purchaser shall deliver to the
Escrow  Agent the  Additional  Deposit of  $147,037  by wire by transfer of Good
Funds.

4. Feasibility Period. The Feasibility Period under the Contract shall be deemed
to have  expired for all  purposes  under the  Contract on the  Amendment  Date.
Purchaser  hereby  agrees that it has  completed  its review of the Property and
hereby  waives its right to further  object  (pursuant to Sections 3.2 or 4.3 of
the Contract or otherwise) to any matter  concerning  the Title  Documents,  the
Survey, the Property Contracts,  the Leases, the Miscellaneous  Property Assets,
the  physical  condition  of the  Property,  or  otherwise  with  respect to the
Property;  provided,  however,  that the foregoing waiver shall not waive any of
Purchaser's  express  rights under the Contract which are applicable to the time
period  following  expiration of the Feasibility  Period.  Purchaser agrees that
Seller  has made  all  required  deliveries  required  under  the  Contract  and
performed all of Seller's  required  obligations  under the Contract through the
date hereof.  Purchaser agrees that Purchaser's  right to terminate the Contract
is irrevocably  waived,  the Deposit  (including  the  Additional  Deposit to be
delivered  to  Escrow  Agent  as  required  hereunder)  is  non-refundable,  and
Purchaser's   obligation  to  purchase  the  Properties  is  non-contingent  and
unconditional  except  only for the  satisfaction  of the  conditions  expressly
stated in Section 8.1 of the Contract.

5. Closing Date.  Section 5.1 of the Contract is hereby  deleted in its entirety
and the following substituted therefor:

"Closing Date. The Closing shall occur on November 30, 2005 (the "Closing Date")
through an escrow with Escrow  Agent,  whereby the Seller,  Purchaser  and their
attorneys  need  not be  physically  present  at the  Closing  and  may  deliver
documents by overnight air courier or other means. Further, the Closing Date may
be extended  without penalty at the option of Seller to a date not later than 30
days  following  the  Closing  Date  specified  in the  first  sentence  of this
paragraph  above to satisfy any  condition to Closing,  or such later date as is
mutually acceptable to Seller and Purchaser."

6. Damage  Examples.  The  examples  set forth in  Sections  6.3 and 10.2 of the
Contract  are  hereby  revised  to  reflect  an  aggregate   Purchase  Price  of
$60,000,000  (and,  as a  result,  the  revised  cap in such  examples  would be
$800,000 and $160,000, respectively).

7. Rent Roll Delivery.  Purchaser  agrees that the updated Rent Roll  previously
delivered by Seller is sufficient to satisfy the requirement under Section 7.1.3
of the  Contract  that Seller  deliver an updated  Rent Roll for its Property no
later than 5 days prior to the expiration of the Feasibility  Period (and Seller
will not be  required  to  re-deliver  any  updated  Rent Roll in advance of the
execution of this Amendment).

8.  Ratification  of  Contract.  All terms and  provisions  of the  Contract not
specifically  modified or amended by this  Amendment  shall remain in full force
and effect, and the Contract,  as expressly modified herein, is hereby ratified,
confirmed and approved in all respects by the parties hereto.

9.  Miscellaneous.  The  following  provisions  shall apply with respect to this
Amendment:

a. Capitalized terms used, but not otherwise defined, herein shall have the same
meaning as ascribed to such terms in the Contract.

b. In the event of any conflict  between the Contract  and this  Amendment,  the
terms and conditions of this Amendment shall control.

c.  This  Amendment  may be  executed  in  counterparts,  each of which  (or any
combination  of  which)  when  signed by all of the  parties  shall be deemed an
original,  but all of which when taken together shall  constitute one agreement.
Executed  copies hereof may be delivered by telecopier and upon receipt shall be
deemed originals and binding upon the parties hereto, and actual originals shall
be promptly delivered thereafter.





<PAGE>


      NOW,  THEREFORE,  the parties hereto have executed this  Reinstatement and
Second  Amendment to Purchase  and Sale  Contract as of the date first set forth
above.



                                     Seller:

                                    SALEM COURTHOUSE, L.P.,
                                    a South Carolina limited partnership

                                    By:   Salem GP, L.L.C.,
                                          a South Carolina limited liability
                                          company,
                                          Its General Partner

                                    By:   Davidson Diversified Real
                                          Estate III, L.P., a Delaware limited
                                          partnership
                                          Its Member

                                    By:   Davidson Diversified
                                          Properties, Inc., a Tennessee
                                          corporation
                                          Its General Partner

                                    By:    /s/Kris Vercauteren
                                    Name:  Kris Vercauteren
                                    Title: Vice President
<PAGE>

                                   Purchaser:

                                    PRIME QUEST MANAGEMENT, LLC, an Illinois
                                    limited liability company


                                    By: /s/Eli Stefansky
                                    Name: Eli Stefansky
                                    Title: President