SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB
(Mark One)
[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

                 For the fiscal year ended December 31, 2003

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

             For the transition period from _________to _________

                         Commission file number 0-16210

                        ANGELES INCOME PROPERTIES, LTD. 6
                 (Name of small business issuer in its charter)

         California                                              95-4106139
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

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

                    Issuer's telephone number (864) 239-1000

        Securities registered under Section 12(b) of the Exchange Act:

                                      None

        Securities registered under Section 12(g) of the Exchange Act:

                      Units of Limited Partnership Interest
                                (Title of class)

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___

Check if there is no disclosure  of delinquent  filers in response to Item 405
of  Regulation  S-B  contained  in  this  form,  and  no  disclosure  will  be
contained,  to the best of the  registrant's  knowledge in definitive proxy or
information  statements  incorporated  by  reference  in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.  [X]

State issuer's revenues for its most recent fiscal year.  $3,524,000

State the aggregate  market value of the voting  partnership  interests  held by
non-affiliates  computed  by  reference  to the price at which  the  partnership
interests  were sold,  or the average bid and asked  prices of such  partnership
interests as of December 31, 2003. No market exists for the limited  partnership
interests of the Registrant,  and,  therefore,  no aggregate market value can be
determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

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 the 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.

                                     PART I

Item 1.     Description of Business

Angeles Income  Properties,  Ltd. 6 (the  "Partnership"  or  "Registrant")  is a
publicly held limited partnership organized under the California Uniform Limited
Partnership Act on June 29, 1984, as amended. The Partnership Agreement provides
that the  Partnership  is to terminate on December 31, 2037,  unless  terminated
prior to such date.

The Partnership's general partner is Angeles Realty Corporation II, a California
corporation  (the  "General  Partner"  or "ARC II").  The  General  Partner  was
wholly-owned by Insignia Properties Trust ("IPT").  Effective February 26, 1999,
IPT was merged into Apartment  Investment and Management  Company  ("AIMCO"),  a
publicly traded real estate investment trust. Thus, the General Partner is now a
wholly-owned subsidiary of AIMCO.

The Partnership,  through its public offering of Limited Partnership Units, sold
47,384 units aggregating $47,384,000. The General Partner contributed capital in
the amount of $1,000 for a 1%  interest  in the  Partnership.  Since its initial
offering, the Partnership has not received, nor are limited partners required to
make,  additional  capital  contributions.  The  Partnership  was formed for the
purpose of acquiring fee and other forms of equity interests in various types of
real estate property.  At December 31, 2003, the Partnership  owned and operated
two residential properties (see "Item 2. Description of Properties").

The Partnership  has no employees.  Management and  administrative  services are
provided by the General Partner and by agents  retained by the General  Partner.
These services were provided by affiliates of the General  Partner for the years
ended December 31, 2003 and 2002.

Risk Factors

The  real  estate  business  in which  the  Partnership  is  engaged  is  highly
competitive.  There are other  residential  properties within the market area of
the Partnership's properties.  The number and quality of competitive properties,
including  those which may be managed by an affiliate of the General  Partner in
such  market  area,  could have a material  effect on the rental  market for the
apartments at the Partnership's properties and the rents that may be charged for
such apartments. While the General Partner and its affiliates own and/or control
a  significant  number of  apartment  units in the  United  States,  such  units
represent an  insignificant  percentage of total  apartment  units in the United
States and competition for the apartments is local.

Laws benefiting  disabled persons may result in the Partnership's  incurrence of
unanticipated  expenses.  Under the Americans with  Disabilities Act of 1990, or
ADA,  all places  intended to be used by the public are required to meet certain
Federal  requirements  related to access and use by disabled persons.  Likewise,
the Fair Housing Amendments Act of 1988, or FHAA, requires apartment  properties
first occupied after March 13, 1990 to be accessible to the  handicapped.  These
and other  Federal,  state  and  local  laws may  require  modifications  to the
Partnership's   properties,   or  restrict   renovations   of  the   properties.
Noncompliance  with  these laws could  result in the  imposition  of fines or an
award of  damages  to private  litigants  and also  could  result in an order to
correct any  non-complying  feature,  which could result in substantial  capital
expenditures.  Although  the General  Partner  believes  that the  Partnership's
properties  are  substantially  in  compliance  with present  requirements,  the
Partnership  may incur  unanticipated  expenses  to comply  with the ADA and the
FHAA.

Both  the  income  and  expenses  of  operating  the  properties  owned  by  the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar  properties  resulting from various
market  conditions,  increases/decreases  in unemployment or population  shifts,
changes in the availability of permanent mortgage  financing,  changes in zoning
laws,  or changes in patterns or needs of users.  In  addition,  there are risks
inherent in owning and operating residential  properties because such properties
are  susceptible to the impact of economic and other  conditions  outside of the
control of the Partnership.

There have been, and it is possible there may be other, Federal, state and local
legislation  and  regulations   enacted   relating  to  the  protection  of  the
environment.  The Partnership is unable to predict the extent,  if any, to which
such new  legislation  or  regulations  might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.

The Partnership  monitors its properties for evidence of pollutants,  toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental  testing has been performed which resulted in no material  adverse
conditions or liabilities.  In no case has the Partnership  received notice that
it is a potentially  responsible party with respect to an environmental clean up
site.

A further  description  of the  Partnership's  business  is included in "Item 6.
Management's Discussion and Analysis or Plan of Operation" of this Form 10-KSB.

Item 2.     Description of Properties

The following table sets forth the Partnership's investment in properties:

                           Date of
Property                   Purchase       Type of Ownership             Use

Lazy Hollow Apartments     07/01/89  Fee ownership subject to        Apartment
  Columbia, MD (1)                   a first mortgage                178 units

Homestead Apartments       11/10/88  Fee ownership subject to        Apartment
  East Lansing, MI                   a first mortgage                168 units

(1)   Property is held by a Limited  Partnership in which the Partnership owns a
      99% interest.

Schedule of Properties

Set forth below for each of the  Partnership's  properties is the gross carrying
value,  accumulated  depreciation,  depreciable life, method of depreciation and
Federal tax basis.

<TABLE>
<CAPTION>

                             Gross
                           Carrying    Accumulated  Depreciable             Federal
Property                     Value    Depreciation     Life     Method     Tax Basis
                               (in thousands)                           (in thousands)
<S>                         <C>          <C>         <C>                    <C>
Lazy Hollow Apartments      $ 8,331      $ 3,895     5-40 yrs     S/L       $  7,384
Homestead Apartments          6,023        2,760     5-40 yrs     S/L          4,516
                            $14,354      $ 6,655                            $ 11,900
</TABLE>

See  "Item  7.  Financial  Statements  -  Note  A"  for a  description  of the
Partnership's capitalization and depreciation policies.

Schedule of Property Indebtedness

The  following  table  sets  forth  certain  information  relating  to the loans
encumbering the Partnership's properties.

<TABLE>
<CAPTION>

                                  Principal                                        Principal
                                 Balance At                                         Balance
                                December 31,    Interest    Period    Maturity      Due At
Property                            2003          Rate    Amortized     Date     Maturity (1)
                               (in thousands)                                   (in thousands)
Lazy Hollow Apartments
<S>                                <C>            <C>       <C>        <C>           <C>
  1st trust deed                   $ 9,823        5.94%     20 yrs     04/23         $ --
Homestead Apartments
  1st trust deed                     4,268        7.02%     20 yrs     11/21             --
                                   $14,091                                           $ --
</TABLE>

(1)   See "Item 7. Financial  Statements - Note B" for information  with respect
      to the  Partnership's  ability to prepay  these  loans and other  specific
      details about the loans.

On March 31, 2003,  the  Partnership  refinanced the mortgage  encumbering  Lazy
Hollow   Apartments.   The  refinancing   replaced   mortgage   indebtedness  of
approximately  $3,591,000 with a new mortgage of  $10,000,000.  The mortgage was
refinanced at the rate of 5.94% compared to the prior rate of 7.50%. Payments of
principal and interest of approximately $71,000 are due on the first day of each
month  commencing May 2003 until April 2023, at which time the note is scheduled
to be fully  amortized.  Capitalized  loan  costs,  which are  included in other
assets, incurred with the refinancing were approximately $274,000, and are being
amortized over the life of the mortgage note payable.

Rental Rates and Occupancy

Average annual rental rates and occupancy for 2003 and 2002 for each property:

<TABLE>
<CAPTION>

                                          Average Annual                 Average
                                           Rental Rates                 Occupancy
                                            (per unit)
 Property                              2003            2002          2003       2002

<S>                                  <C>             <C>             <C>        <C>
 Lazy Hollow Apartments              $12,364         $11,802         97%        93%
 Homestead Apartments                  8,501           8,709         91%        91%
</TABLE>

The  General  Partner  attributes  the  increase  in  occupancy  at Lazy  Hollow
Apartments to increased marketing efforts.

As noted under "Item 1.  Description of Business",  the real estate  industry is
highly competitive. Both of the properties are subject to competition from other
residential  apartment  complexes in the area. The General Partner believes that
both of the properties  are adequately  insured.  The  multi-family  residential
properties'  lease terms are for one year or less. No residential  tenant leases
10% or more of the available  rental space.  Both of the  properties are in good
physical  condition,  subject to normal  depreciation  and  deterioration  as is
typical for assets of this type and age.

Real Estate Taxes and Rates

Real estate taxes and rates in 2003 for each property were:

                                              2003            2003
                                            Billing           Rate
                                         (in thousands)
Property
Lazy Hollow Apartments (1)                    $156            1.18%
Homestead Apartments                           203            7.20%

(1)   Tax bill is for the fiscal year of the taxing authority which differs from
      that of the Partnership.

Capital Improvements

Lazy Hollow Apartments

During the year ended December 31, 2003, the Partnership completed approximately
$71,000 of capital  improvements at Lazy Hollow  Apartments  consisting of water
heater,  cabinet,  appliance  and floor  covering  replacements  and parking lot
improvements.  These  improvements  were  funded  from  operating  cash flow and
replacement  reserves.  The  Partnership  is  currently  evaluating  the capital
improvement needs of the property for the upcoming year and currently expects to
budget approximately $98,000.  Additional  improvements may be considered during
2004 and will  depend  on the  physical  condition  of the  property  as well as
anticipated cash flow generated by the property.

Homestead Apartments

During the year ended December 31, 2003, the Partnership completed approximately
$46,000 of capital improvements at Homestead Apartments  consisting primarily of
appliance and floor covering  replacements.  These improvements were funded from
operating  cash flow.  The  Partnership  is  currently  evaluating  the  capital
improvement needs of the property for the upcoming year and currently expects to
budget approximately $92,000.  Additional  improvements may be considered during
2004 and will  depend  on the  physical  condition  of the  property  as well as
anticipated cash flow generated by the property.

Item 3.     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 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 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 (the "Heller  action") was filed against the same  defendants that are
named in the Nuanes action,  captioned Heller v. Insignia Financial Group. 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 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes action and the Heller action.

In general  terms,  the  proposed  settlement  provides  for  certification  for
settlement  purposes of a settlement class consisting of all limited partners in
this  Partnership and others (the  "Partnerships")  as of December 20, 2002, the
dismissal  with  prejudice  and  release  of claims  in the  Nuanes  and  Heller
litigation,  payment by AIMCO of $9.9  million  (which shall be  distributed  to
settlement  class  members  after  deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent  appraisals of the  Partnerships'  properties  by a Court  appointed
appraiser.  An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the  partnership  interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners  with the  independent  appraisals  at the time of these  tenders.  The
proposed  settlement  also provided for the  limitation  of the allowable  costs
which the General  Partner or its  affiliates  will charge the  Partnerships  in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation.  On April 11, 2003,  notice was distributed to limited
partners providing the details of the proposed settlement.

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  seeking  to  vacate  and/or  reverse  the  order
approving the settlement and entering  judgment  thereto.  On November 24, 2003,
the Objector filed an  application  requesting the Court order AIMCO to withdraw
settlement  tender offers it had  commenced,  refrain from making further offers
pending the appeal and auction any units tendered to third  parties,  contending
that the offers did not conform  with the terms of the  Settlement.  Counsel for
the Objector (on behalf of another  investor)  had  alternatively  requested the
Court take certain  action  purportedly  to enforce the terms of the  settlement
agreement.  On December 18, 2003,  the Court heard oral  argument on the motions
and denied them both in their entirety.  On January 28, 2004, Objector filed his
opening brief in his pending appeal.  The Managing  General Partner is currently
scheduled  to file a brief in  support  of the order  approving  settlement  and
entering judgment thereto by April 23, 2004.

On August 8, 2003 AIMCO  Properties  L.P., an affiliate of the General  Partner,
was served with a Complaint in the United  States  District  Court,  District of
Columbia alleging that AIMCO Properties L.P.  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  is  styled as 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. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  Complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The  Complaint  also  attempts  to certify a subclass  for  salaried
service  directors who are challenging  their  classification as exempt from the
overtime  provisions of the FLSA.  AIMCO  Properties L.P. has filed an answer to
the  Complaint  denying the  substantive  allegations.  Discovery  is  currently
underway.

The  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.

Item 4.     Submission of Matters to a Vote of Security Holders

During the quarter ended December 31, 2003, no matter was submitted to a vote of
unit holders through the solicitation of proxies or otherwise.

                                     PART II

Item 5.     Market for the Partnership's Common Equity and Related Security
            Holder Matters

The  Partnership,  a  publicly-held  limited  partnership  sold  47,384  Limited
Partnership  Units during its offering period through September 30, 1988, and as
of December 31, 2003, had 47,311 Limited  Partnership  Units outstanding held by
2,425 Limited Partners of record. Affiliates of the General Partner owned 20,973
units or 44.33% at December 31, 2003.

The  Partnership  distributed  the  following  amounts  during  the years  ended
December 31, 2003 and 2002 (in thousands except per unit data):

<TABLE>
<CAPTION>

                                          Per                               Per
                      Year Ended        Limited         Year Ended        Limited
                     December 31,     Partnership      December 31,     Partnership
                         2003             Unit             2002             Unit

<S>                    <C>              <C>              <C>               <C>
Operations             $1,219           $ 25.51          $  650            $13.59
Refinancing (1)         6,077            127.16              --               --
                       $7,296           $152.67          $  650            $13.59
</TABLE>

(1)   From the refinancing of Lazy Hollow Apartments during the first quarter of
      2003.

In  conjunction  with the  transfer  of funds from the  certain  majority  owned
sub-tier  limited  partnership  to the  Partnership,  approximately  $73,000 and
$6,000 was  distributed  to the general  partner of the majority  owned sub-tier
limited  partnership  during  the  years  ended  December  31,  2003  and  2002,
respectively.

Future  distributions  will  depend  on the  levels of net cash  generated  from
operations,   the  availability  of  cash  reserves,  and  the  timing  of  debt
maturities,   refinancings,   and/or  property  sales.  The  Partnership's  cash
available  for  distribution  is  reviewed on a monthly  basis.  There can be no
assurance,  however,  that the Partnership  will generate  sufficient funds from
operations  after required capital  expenditures to permit  distributions to its
partners in the year 2004 or subsequent  periods.  See "Item 2.  Description  of
Properties  - Capital  Improvements"  for  information  relating to  anticipated
capital expenditures at the properties.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates  owned 20,973 limited  partnership  units
(the "Units") in the Partnership representing 44.33% of the outstanding Units at
December  31,  2003.  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  General  Partner.  As a result  of its  ownership  of 44.33% 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 General
Partner owes fiduciary duties to the limited  partners of the  Partnership,  the
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a  result,  the  duties of the  General  Partner,  as  general  partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the General Partner to AIMCO, as its sole stockholder.

Item 6.     Management's Discussion and Analysis or Plan of Operation

This item should be read in conjunction with "Item 7. Financial  Statements" and
other items contained elsewhere in this report.

Results of Operations

The  Partnership  realized net income for the years ended  December 31, 2003 and
2002 of approximately $353,000 and $1,120,000, respectively. The decrease in net
income  for the year  ended  December  31,  2003 is due to a  decrease  in total
revenues and an increase in total expenses.

Total  revenues for the year ended December 31, 2003 decreased due to a decrease
in the casualty  gain at Lazy Hollow  Apartments  recognized  in 2002  partially
offset by an  increase  in rental  income.  Rental  income  increased  due to an
increase  in  occupancy  and  average  rental  rates at Lazy  Hollow  Apartments
partially offset by an increase in concessions and special promotions at both of
the Partnership's properties.

On November 12, 2001, a fire occurred at Lazy Hollow  Apartments that damaged 12
apartment  units. The property  incurred  damages of approximately  $828,000 and
estimated  lost  rents  of   approximately   $83,000.   Insurance   proceeds  of
approximately $823,000 were received during the twelve months ended December 31,
2002 for  building  costs.  The  Partnership  recognized  $83,000  in lost rents
insurance  proceeds in rental income during the twelve months ended December 31,
2002.  The  Partnership  recognized a casualty  gain of  approximately  $425,000
during the twelve months ended December 31, 2002, which represents the excess of
the  proceeds  received  as of  December  31,  2002  over the  write-off  of the
undepreciated damaged assets.

Total  expenses for the year ended  December 31, 2003 increased due to increases
in operating,  general and  administrative,  depreciation and interest expenses.
Operating expenses increased due to an increase in maintenance expense partially
offset by a decrease in administrative  expense.  Maintenance  expense increased
due  to  an  increase  in  contract   labor  at  both   investment   properties.
Administrative  expense  decreased  due to a decrease in business  licenses  and
permits at Lazy Hollow Apartments.  Depreciation expense increased due to assets
being  placed  into  service  during  the  past  twelve  months  at Lazy  Hollow
Apartments.  Interest  expense  increased due to the refinancing of the mortgage
encumbering  Lazy Hollow  Apartments,  which  resulted  in a higher  outstanding
mortgage balance.

General and  administrative  expense  increased for the year ended  December 31,
2003 due to an  increase in  management  reimbursements  to the General  Partner
allowed under the Partnership  Agreement  partially  offset by a decrease in the
Partnership  management  fee due to the General  Partner,  which is based on the
adjusted  cash from  operations.  Also  included in general  and  administrative
expense for the years ended December 31, 2003 and 2002 are costs associated with
the quarterly and annual  communications  with investors and regulatory agencies
and the annual audit required by the Partnership Agreement.

As part of the ongoing  business plan of the  Partnership,  the 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 expense.  As part of this plan,
the  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  General  Partner may use rental
concessions and rental rate reductions to offset  softening  market  conditions,
accordingly,  there is no  guarantee  that the General  Partner  will be able to
sustain such a plan.

Capital Resources and Liquidity

At  December  31,  2003,  the  Partnership  held  cash and cash  equivalents  of
approximately  $601,000  compared to  approximately  $1,166,000  at December 31,
2002. For the year ended December 31, 2003, cash and cash equivalents  decreased
by approximately  $565,000.  The decrease in cash and cash equivalents is due to
approximately  $1,557,000 of cash used in financing activities and approximately
$67,000 of cash used in investing  activities  partially offset by approximately
$1,059,000  of cash  provided by  operating  activities.  Cash used in financing
activities  consisted of the repayment of the previous mortgage encumbering Lazy
Hollow Apartments, loan costs incurred in connection with the refinancing of the
mortgage  encumbering  Lazy  Hollow  Apartments,  payments of  principal  on the
mortgages encumbering both of the Partnership's  properties and distributions to
partners,  partially  offset by proceeds  from the  refinancing  of the mortgage
encumbering Lazy Hollow Apartments.  Cash used in investing activities consisted
of property  improvements  and  replacements  partially  offset by the refund of
restricted  escrows  maintained by the previous  mortgage  lender of Lazy Hollow
Apartments.  The Partnership  invests its working  capital  reserves in interest
bearing accounts.

On March 31, 2003,  the  Partnership  refinanced the mortgage  encumbering  Lazy
Hollow   Apartments.   The  refinancing   replaced   mortgage   indebtedness  of
approximately  $3,591,000 with a new mortgage of  $10,000,000.  The mortgage was
refinanced at the rate of 5.94% compared to the prior rate of 7.50%. Payments of
principal and interest of approximately $71,000 are due on the first day of each
month  commencing May 2003 until April 2023, at which time the note is scheduled
to be fully  amortized.  Capitalized  loan  costs,  which are  included in other
assets, incurred with the refinancing were approximately $274,000, and are being
amortized over the life of the mortgage note payable.

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 both of 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 General Partner
monitors  developments  in the area of legal and  regulatory  compliance  and is
studying  new  federal  laws,  including  the  Sarbanes-Oxley  Act of 2002.  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,  including  increased  legal  and audit  fees.  The  Partnership  is
currently  evaluating  the capital  improvement  needs of the properties for the
upcoming year and currently expects to budget approximately $190,000. Additional
improvements  may be  considered  during  2004 and will  depend on the  physical
condition of each property as well as  anticipated  cash flow  generated by each
property.  To the extent that such budgeted capital  improvements are completed,
the Partnership's  distributable cash flow, if any, may be adversely affected at
least in the short term.

The  Partnership's  assets are thought to be sufficient for any near-term  needs
(exclusive  of  capital   improvements)   of  the   Partnership.   The  mortgage
indebtedness  encumbering both of the Partnership's  properties of approximately
$14,091,000 has maturity dates ranging from November 2021 to April 2023 at which
time the mortgages are scheduled to be fully amortized.


<PAGE>



The  Partnership  distributed  the  following  amounts  during  the years  ended
December 31, 2003 and 2002 (in thousands except per unit data):

<TABLE>
<CAPTION>

                                          Per                               Per
                      Year Ended        Limited         Year Ended        Limited
                     December 31,     Partnership      December 31,     Partnership
                         2003             Unit             2002             Unit

<S>                    <C>              <C>              <C>               <C>
Operations             $1,219           $ 25.51          $  650            $13.59
Refinancing (1)         6,077            127.16              --               --
                       $7,296           $152.67          $  650            $13.59
</TABLE>

(1)   From the refinancing of Lazy Hollow Apartments during the first quarter of
      2003.

In  conjunction  with the  transfer  of funds from the  certain  majority  owned
sub-tier  limited  partnership  to the  Partnership,  approximately  $73,000 and
$6,000 was  distributed  to the general  partner of the majority  owned sub-tier
limited  partnership  during  the  years  ended  December  31,  2003  and  2002,
respectively.

The  Partnership's  cash  available  for  distribution  is reviewed on a monthly
basis. Future cash distributions will depend on the levels of net cash generated
from  operations,  the  availability  of cash  reserves,  and the timing of debt
maturities,  refinancings,  and/or  property  sales.  There can be no assurance,
however,  that the Partnership  will generate  sufficient  funds from operations
after required  capital  expenditures  to permit  distributions  to its partners
during 2004 or subsequent periods.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates  owned 20,973 limited  partnership  units
(the "Units") in the Partnership representing 44.33% of the outstanding Units at
December  31,  2003.  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  General  Partner.  As a result  of its  ownership  of 44.33% 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 General
Partner owes fiduciary duties to the limited  partners of the  Partnership,  the
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a  result,  the  duties of the  General  Partner,  as  general  partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the General Partner to AIMCO, as its sole stockholder.

Critical Accounting Policies and Estimates

A summary of the Partnership's  significant  accounting  policies is included in
"Note A - Organization and Significant Accounting Policies" which is included in
the consolidated  financial  statements in "Item 7. Financial  Statements".  The
General  Partner  believes that the  consistent  application  of these  policies
enables  the  Partnership  to  provide  readers  of the  consolidated  financial
statements  with  useful  and  reliable   information  about  the  Partnership's
operating  results and financial  condition.  The  preparation  of  consolidated
financial statements in conformity with accounting principles generally accepted
in the United States requires the Partnership to make estimates and assumptions.
These  estimates  and  assumptions  affect  the  reported  amounts of assets and
liabilities at the date of the financial  statements as well as reported amounts
of revenues and expenses  during the  reporting  period.  Actual  results  could
differ from these  estimates.  Judgments and  assessments of  uncertainties  are
required in applying the  Partnership's  accounting  policies in many areas. 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  an  impairment  in  the
Partnership's assets.

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less.
Rental income  attributable to leases is recognized monthly as it is earned. 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.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy competition from other similar  apartment  complexes in the
area. Any concessions given at the inception of the lease are amortized over the
life of the lease.


<PAGE>


Item 7.     Financial Statements

ANGELES INCOME PROPERTIES, LTD. 6

LIST OF FINANCIAL STATEMENTS


      Report of Ernst & Young LLP, Independent Auditors

      Consolidated Balance Sheet - December 31, 2003

      Consolidated  Statements of  Operations - Years ended  December 31, 2003
      and 2002

      Consolidated  Statements  of Changes in Partners'  Deficit - Years ended
      December 31, 2003 and 2002

      Consolidated Statements of Cash Flows - Years ended December 31, 2003
                                    and 2002

      Notes to Consolidated Financial Statements


<PAGE>


              Report of Ernst & Young LLP, Independent Auditors



The Partners
Angeles Income Properties, Ltd. 6


We have audited the  accompanying  consolidated  balance sheet of Angeles Income
Properties,  Ltd.  6 as of  December  31,  2003,  and the  related  consolidated
statements of operations,  changes in partners' deficit, and cash flows for each
of the two  years  in the  period  ended  December  31,  2003.  These  financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made  by the  Partnership's  management,  as  well  as  evaluating  the  overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of Angeles Income
Properties,  Ltd. 6 at December 31, 2003,  and the  consolidated  results of its
operations  and its cash  flows  for each of the two years in the  period  ended
December 31, 2003, in conformity with accounting  principles  generally accepted
in the United States.

                                                          /s/ERNST & YOUNG LLP


Greenville, South Carolina
February 27, 2004


<PAGE>



                        ANGELES INCOME PROPERTIES, LTD. 6

                           CONSOLIDATED BALANCE SHEET
                        (in thousands, except unit data)

                                December 31, 2003

<TABLE>
<CAPTION>


Assets
<S>                                                                       <C>
   Cash and cash equivalents                                              $   601
   Receivables and deposits                                                    95
   Other assets                                                               512
   Investment properties (Notes B and G):
      Land                                                  $ 1,398
      Buildings and related personal property                12,956
                                                             14,354
      Less accumulated depreciation                          (6,655)        7,699
                                                                          $ 8,907
Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                       $    33
   Tenant security deposit liabilities                                         95
   Other liabilities                                                          140
   Due to General Partner and affiliates                                      127
   Accrued property taxes                                                      39
   Mortgage notes payable (Note B)                                         14,091

Partners' Deficit
   General partner                                          $  (286)
   Limited partners (47,311 units issued
      and outstanding)                                       (5,332)       (5,618)
                                                                          $ 8,907


        See Accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>


                        ANGELES INCOME PROPERTIES, LTD. 6

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



<TABLE>
<CAPTION>


                                                            Years Ended December 31,
                                                                  2003      2002
     Revenues:
<S>                                                          <C>         <C>
        Rental income                                        $  3,317    $  3,258
        Other income                                              207         223
        Casualty gain (Note C)                                     --         425
           Total revenues                                       3,524       3,906

     Expenses:
        Operating                                               1,173       1,093
        General and administrative                                287         254
        Depreciation                                              520         497
        Interest                                                  829         597
        Property taxes                                            362         345
           Total expenses                                       3,171       2,786

     Net income (Note F)                                     $    353    $  1,120

     Net income allocated to general partner (1%)            $      4    $     11
     Net income allocated to limited partners (99%)               349       1,109
                                                             $    353    $  1,120

     Net income per limited partnership unit                 $   7.38    $  23.44

     Distributions per limited partnership unit              $ 152.67    $  13.59

        See Accompanying Notes to Consolidated Financial Statements
</TABLE>



<PAGE>


                        ANGELES INCOME PROPERTIES, LTD. 6

           CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
                        (in thousands, except unit data)

<TABLE>
<CAPTION>


                                         Limited
                                       Partnership    General     Limited
                                          Units       Partner    Partners     Total

<S>                                       <C>           <C>       <C>        <C>
Original capital contributions            47,384        $ 1       $47,384    $47,385

Partners' (deficiency) capital at
   December 31, 2001                      47,311       $ (142)    $ 1,076     $ 934

Distributions to partners                     --          (13)       (643)      (656)

Net income for the year
   ended December 31, 2002                    --           11       1,109      1,120

Partners' (deficiency) capital at
   December 31, 2002                      47,311         (144)      1,542      1,398

Distributions to partners                     --         (146)     (7,223)    (7,369)

Net income for the year
   ended December 31, 2003                    --            4         349        353

Partners' deficit at
   December 31, 2003                      47,311       $ (286)    $(5,332)   $(5,618)

        See Accompanying Notes to Consolidated Financial Statements
</TABLE>



<PAGE>


                        ANGELES INCOME PROPERTIES, LTD. 6

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                              Years Ended December 31,
                                                                  2003        2002
Cash flows from operating activities:
<S>                                                            <C>          <C>
  Net income                                                   $    353     $  1,120
  Adjustments to reconcile net income to net
   cash provided by operating activities:
   Depreciation                                                     520          497
   Amortization of loan costs                                        15            8
   Casualty gain                                                     --         (425)
   Change in accounts:
      Receivables and deposits                                       92           50
      Other assets                                                   (3)          (9)
      Accounts payable                                               15          (11)
      Tenant security deposit liabilities                            23           17
      Due to General Partner and affiliates                          77           44
      Accrued property taxes                                         39           --
      Other liabilities                                             (72)          90

          Net cash provided by operating activities               1,059        1,381

Cash flows from investing activities:
  Property improvements and replacements                           (197)      (1,117)
  Insurance proceeds received                                        --          823
  Net withdrawals from restricted escrows                           130           28

          Net cash used in investing activities                     (67)        (266)

Cash flows from financing activities:
  Proceeds from mortgage note payable                            10,000           --
  Repayment of mortgage note payable                             (3,591)          --
  Loan costs paid                                                  (274)          --
  Distributions to partners                                      (7,369)        (656)
  Payments on mortgage notes payable                               (323)        (215)

          Net cash used in financing activities                  (1,557)        (871)

Net (decrease) increase in cash and cash equivalents               (565)         244
Cash and cash equivalents at beginning of the year                1,166          922
Cash and cash equivalents at end of the year                   $    601     $  1,166

Supplemental disclosure of cash flow information:
  Cash paid for interest                                       $    814     $    562

Property improvements and replacements in Due to
  General Partner and affiliates                               $     --     $     80

        See Accompanying Notes to Consolidated Financial Statements
</TABLE>

                        ANGELES INCOME PROPERTIES, LTD. 6

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2003


Note A - Organization and Significant Accounting Policies

Organization:   Angeles  Income   Properties,   Ltd.  6  (the  "Partnership"  or
"Registrant")  is  a  publicly-held  limited  partnership  organized  under  the
California Uniform Limited  Partnership Act pursuant to the Agreement of Limited
Partnership dated June 29, 1984, as amended. The Partnership's  general partner,
Angeles Realty  Corporation II, a California  corporation (the "General Partner"
or "ARC II") was wholly-owned by Insignia  Properties  Trust ("IPT").  Effective
February 26, 1999, IPT merged into Apartment  Investment and Management  Company
("AIMCO"),  a publicly traded real estate  investment  trust.  Thus, the General
Partner is now a wholly-owned  subsidiary of AIMCO.  The  Partnership  Agreement
provides  that the  Partnership  is to terminate  on December  31, 2037,  unless
terminated prior to such date. As of December 31, 2003, the Partnership operates
two residential properties in Maryland and Michigan.

Principles  of  Consolidation:  The  consolidated  financial  statements  of the
Partnership  include  its 99%  limited  partnership  interests  in  Lazy  Hollow
Partners,  Ltd.  (the  "Partnership").  The  Partnership  may remove the General
Partner of this  partnership;  therefore,  the  partnership  is  controlled  and
consolidated by the Partnership.  All significant interentity balances have been
eliminated.

Allocations  of  Profits,  Gains,  Losses  and  Distributions  to  Partners:  In
accordance  with  the  Agreement  of  Limited   Partnership  (the   "Partnership
Agreement"),  any gain from the sale or other disposition of Partnership  assets
will be  allocated  first to the General  Partner to the extent of the amount of
any  Incentive  Interest  to which the  General  Partner is  entitled.  Any gain
remaining  after said  allocation  will be allocated to the General  Partner and
Limited Partners in proportion to their interests in the Partnership;  provided,
that the gain  shall  first be  allocated  to  Partners  with  negative  account
balances,  in proportion to such balances, in an amount equal to the sum of such
negative capital account balances.

The Partnership will allocate other profits and losses 1% to the General Partner
and 99% to the Limited Partners.

Except as discussed below, the Partnership will allocate distributions 1% to the
General Partner and 99% to the Limited Partners.

Upon  the  sale  or  other  disposition,  or  refinancing  of any  asset  of the
Partnership, the Distributable Net Proceeds shall be distributed as follows: (i)
First, to the General Partner,  on account of the current and accrued Management
Fee payable,  deferred as contemplated  therein (ii) Second,  to the Partners in
proportion to their interests until the Limited Partners have received  proceeds
equal to their unrecovered  Capital  Contributions  (iii) Third, to the Partners
until the Limited  Partners have received  distributions  equal to their 6% (not
compounded) Cumulative  Distribution;  (iv) Fourth, to the General Partner until
it has received an amount equal to 3% of the aggregate Disposition Prices of all
properties or investments sold (Initial Incentive  Interest);  (v) Fifth, to the
Partners until the Limited Partners have received  distributions  equal to their
8% (not  compounded)  Cumulative  Distribution,  with certain  limited  partners
receiving additional priority  distributions ranging from 1.5% to 4.5% per annum
(not  compounded);  and (vi) Sixth,  thereafter,  86% to the Limited Partners in
proportion to their interests and 14% (Final Incentive  Interest) to the General
Partner.

Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107,  "Disclosures about Fair Value of Financial  Instruments",  as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair  Value  of  Financial  Instruments",  requires  disclosure  of  fair  value
information  about  financial  instruments,  whether  or not  recognized  in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a  current  transaction  between  willing  parties,  other  than in a forced  or
liquidation  sale.  The  Partnership  believes  that the carrying  amount of its
financial  instruments (except for long term debt) approximates their fair value
due to the short  term  maturity  of these  instruments.  The fair  value of the
Partnership's  long term debt, after  discounting the scheduled loan payments to
maturity, approximates its carrying balance.

Depreciation:  Depreciation is calculated by the  straight-line  method over the
estimated  lives of the  investment  properties  and related  personal  property
ranging  from 15 to 40 years for  buildings  and  improvements  and from five to
seven years for  furnishings.  For Federal income tax purposes,  the accelerated
cost recovery method is used for real property over 18 years for additions after
March 15, 1984 and before May 9, 1985,  and 19 years for additions  after May 8,
1985, and before January 1, 1987. As a result of the Tax Reform Act of 1986, for
additions after December 31, 1986, the modified accelerated cost recovery method
is used for depreciation of (1) real property over 27 1/2 years and (2) personal
property additions over 5 years.

Use of  Estimates:  The  preparation  of  consolidated  financial  statements in
conformity with accounting  principles  generally  accepted in the United States
requires  management to make estimates and  assumptions  that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in
banks.  At certain times,  the amount of cash deposited at a bank may exceed the
limit on insured  deposits.  Cash  balances  include  approximately  $577,000 at
December 31, 2003 that are  maintained by the affiliated  management  company on
behalf of affiliated entities in cash concentration accounts.

Tenant  Security  Deposits:  The  Partnership  requires  security  deposits from
lessees  for the  duration  of the  lease  and such  deposits  are  included  in
receivables  and  deposits.  Deposits  are  refunded  when the  tenant  vacates,
provided  the tenant has not damaged  their space and is current on their rental
payments.

Investment Properties:  Investment properties consist of two apartment complexes
and are  stated  at cost.  Acquisition  fees are  capitalized  as a cost of real
estate. Expenditures in excess of $250 that maintain an existing asset which has
a useful  life of more  than one year are  capitalized  as  capital  replacement
expenditures  and  depreciated  over the  estimated  useful  life of the  asset.
Expenditures for ordinary repairs,  maintenance and apartment turnover costs are
expensed as incurred.

In accordance  with  Financial  Accounting  Standards  Board  Statement No. 144,
"Accounting  for  the  Impairment  or  Disposal  of  Long-Lived   Assets",   the
Partnership  records  impairment  losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and the
undiscounted  cash flows estimated to be generated by those assets are less than
the carrying  amounts of those assets.  Costs of apartment  properties that have
been  permanently  impaired  have  been  written  down to  appraised  value.  No
adjustment for impairment of value was recorded for the years ended December 31,
2003 and 2002.

Loan Costs: Loan costs of approximately $436,000, less accumulated  amortization
of approximately  $28,000,  are included in other assets and are being amortized
by the straight line method over the life of the loans. Amortization expense for
the year ended December 31, 2003 and 2002 was approximately  $15,000 and $8,000,
respectively,   and  is  included  in  interest   expense  on  the  accompanying
consolidated  statement of operations.  Amortization  expense is estimated to be
approximately $22,000 for each of the years 2004 through 2008.

Advertising:  The  Partnership  expenses  the cost of  advertising  as incurred.
Advertising  costs of  approximately  $54,000  and  $40,000  for the years ended
December 31, 2003 and 2002,  respectively,  were charged to operating expense as
incurred.

Leases: The Partnership  generally leases apartment units for twelve-month terms
or less. The Partnership  recognizes income as earned on leases. 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.  In
addition,  the General  Partner's policy is to offer rental  concessions  during
particularly  slow months or in response to heavy competition from other similar
complexes in the area. Any  concessions  given at the inception of the lease are
amortized over the life of the lease.

Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related  Information"  established  standards  for the way that public  business
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
operating segments in interim financial  reports.  SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major  customers.  As defined in SFAS No. 131, the  Partnership has only one
reportable segment.

Note B - Mortgage Notes Payable

The terms of mortgage notes payable are as follows:

<TABLE>
<CAPTION>

                        Principal      Monthly                            Principal
                       Balance At      Payment     Stated                  Balance
                        December      Including   Interest    Maturity      Due At
      Property            2003         Interest     Rate        Date       Maturity
                            (in thousands)                              (in thousands)
Lazy Hollow
 Apartments
<S>                      <C>             <C>        <C>        <C>           <C>
  1st trust deed         $ 9,823         $ 71       5.94%      04/23         $ --
Homestead
 Apartments
  1st trust deed           4,268           35       7.02%      11/21            --
                        $ 14,091         $106                                $ --
</TABLE>

On March 31, 2003,  the  Partnership  refinanced the mortgage  encumbering  Lazy
Hollow   Apartments.   The  refinancing   replaced   mortgage   indebtedness  of
approximately  $3,591,000 with a new mortgage of  $10,000,000.  The mortgage was
refinanced at the rate of 5.94% compared to the prior rate of 7.50%. Payments of
principal and interest of approximately $71,000 are due on the first day of each
month  commencing May 2003 until April 2023, at which time the note is scheduled
to be fully  amortized.  Capitalized  loan  costs,  which are  included in other
assets, incurred with the refinancing were approximately $274,000, and are being
amortized over the life of the mortgage note payable.

The  mortgage  notes  payable are  nonrecourse  and are secured by pledge of the
Partnership's   investment  properties  and  by  pledge  of  revenues  from  the
investment  properties.  Prepayment  penalties are imposed if the mortgage notes
are repaid prior to maturity. Further, the investment properties may not be sold
subject to existing indebtedness.

Scheduled  principal  payments  of the  mortgage  notes  payable  subsequent  to
December 31, 2003 are as follows (in thousands):

                                   2004          $ 404
                                   2005             431
                                   2006             458
                                   2007             488
                                   2008             519
                                Thereafter       11,791
                                                $14,091

Note C - Casualty Event

On November 12, 2001, a fire occurred at Lazy Hollow  Apartments that damaged 12
apartment  units. The property  incurred  damages of approximately  $828,000 and
estimated  lost  rents  of   approximately   $83,000.   Insurance   proceeds  of
approximately $823,000 were received during the twelve months ended December 31,
2002 for  building  costs.  The  Partnership  recognized  $83,000  in lost rents
insurance  proceeds in rental income during the twelve months ended December 31,
2002.  The  Partnership  recognized a casualty  gain of  approximately  $425,000
during the twelve months ended December 31, 2002, which represents the excess of
the  proceeds  received  as of  December  31,  2002  over the  write-off  of the
undepreciated damaged assets.

Note D - Transactions with Affiliated Parties

The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership  activities.
The  Partnership  Agreement  provides  for certain  payments to  affiliates  for
services and  reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.

Affiliates of the General  Partner are entitled to receive 5% of gross  receipts
from  both of the  Partnership's  residential  properties  as  compensation  for
providing property management services.  The Partnership paid to such affiliates
approximately  $174,000 and  $178,000 for the years ended  December 31, 2003 and
2002, respectively, which is included in operating expense.

An  affiliate  of the General  Partner  received  reimbursement  of  accountable
administrative expenses amounting to approximately $153,000 and $177,000 for the
years  ended  December  31,  2003 and 2002,  respectively,  which is included in
general and  administrative  expenses and investment  properties.  For the years
ended  December  31,  2003 and 2002,  the first  three  quarters  were  based on
estimated amounts and in the fourth quarter of 2003 and 2002, the reimbursements
of accountable  administrative expenses were adjusted based on actual costs (see
"Note E"). Included in these amounts are fees related to construction management
services  provided  by an  affiliate  of the  General  Partner of  approximately
$81,000  for the year ended  December  31,  2002.  The  construction  management
service fees are  calculated  based on a percentage of current year additions to
investment properties. There were no construction management service fees during
the year ended December 31, 2003. As of December 31, 2003, the Partnership  owed
approximately  $59,000  of accrued  accountable  administrative  expenses  to an
affiliate  of the  General  Partner.  Such  amount is included in Due to General
Partner and affiliates on the consolidated balance sheet.

Pursuant  to the  Partnership  Agreement,  the  General  Partner is  entitled to
receive a distribution  equal to 3% of the aggregate  disposition  price of sold
properties. Pursuant to this provision, during the year ended December 31, 2000,
the  Partnership  paid a distribution of  approximately  $174,000 to the General
Partner  related to the sale of  Wakonda  Shopping  Center and Town and  Country
Shopping Center. Pursuant to this provision,  during the year ended December 31,
2001, the Partnership declared and paid a distribution of approximately  $60,000
payable to the General Partner  related to the sale of Casa Granada  Apartments.
These fees are subordinate to the limited partners receiving a preferred return,
as specified in the  Partnership  Agreement.  If the limited  partners  have not
received their  preferred  return when the Partnership  terminates,  the General
Partner will return this amount to the Partnership.

Pursuant  to  the  Partnership   Agreement  for  managing  the  affairs  of  the
Partnership, the General Partner is entitled to receive a Partnership Management
Fee equal to 10% of the  Partnership's  net cash from  operations.  For the year
ended December 31, 2003, the Partnership has expensed  approximately $68,000 for
the 2003 fee. This amount is included in Due to General  Partner and  affiliates
on the  consolidated  balance  sheet.  For the year ended December 31, 2002, the
Partnership had expensed  approximately $90,000 for the 2002 fee. Payment of the
partnership  management  fee is restricted  to  distributable  net proceeds,  as
defined in the Partnership  Agreement.  The 2002 partnership  management fee was
paid  with  distributable  net  proceeds  from the  refinancing  of Lazy  Hollow
Apartments in 2003.  The 2003  partnership  management  fee will remain  accrued
until such time as the partnership has additional distributable net proceeds.

The  Partnership  insures its properties 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  and  vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner.  During the year ended December 31, 2003 and 2002, the  Partnership was
charged  by  AIMCO  and  its  affiliates   approximately  $33,000  and  $40,000,
respectively,  for  insurance  coverage and fees  associated  with policy claims
administration.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates  owned 20,973 limited  partnership  units
(the "Units") in the Partnership representing 44.33% of the outstanding Units at
December  31,  2003.  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  General  Partner.  As a result  of its  ownership  of 44.33% 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 General
Partner owes fiduciary duties to the limited  partners of the  Partnership,  the
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a  result,  the  duties of the  General  Partner,  as  general  partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the General Partner to AIMCO, as its sole stockholder.

Note E - Fourth-Quarter Adjustment

The Partnership's  policy is to record management  reimbursements to the General
Partner as allowed under the Partnership  Agreement on a quarterly basis,  using
estimated  financial  information  furnished  by an  affiliate  of  the  General
Partner.  For the first three quarters of 2003 and 2002, these reimbursements of
accountable  administrative expenses were based on estimated amounts. During the
fourth  quarters of 2003 and 2002,  the  Partnership  recorded an  adjustment to
management  reimbursements  to the General Partner of approximately  $57,000 and
$40,000, respectively, due to a difference in the estimated costs and the actual
costs incurred. The actual management  reimbursements to the General Partner for
the year  ended  December  31,  2003 and 2002 were  approximately  $153,000  and
$96,000,  respectively,  compared to the estimated management  reimbursements to
the General  Partner for the nine months  ended  September  30, 2003 and 2002 of
approximately $72,000 and $102,000, respectively.

Note F - Income Taxes

The Partnership has received a ruling from the Internal  Revenue Service that it
will  be  classified  as  a  partnership   for  Federal   income  tax  purposes.
Accordingly, no provision for income taxes is made in the consolidated financial
statements of the  Partnership.  Taxable  income or loss of the  Partnership  is
reported in the income tax returns of its partners.

The  following is a  reconciliation  of reported net income and Federal  taxable
income (in thousands, except per unit data):

                                             2003          2002

Net income as reported                     $   353       $ 1,120
Add (deduct):
  Depreciation differences                    (123)         (145)
  Other                                       (162)         (399)
Federal taxable income                     $    68       $   576

Federal taxable income per
  limited partnership unit                 $  1.41       $ 12.05

The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets (in thousands):

   Net liabilities as reported         $(5,618)
   Land and buildings                    5,532
   Accumulated depreciation             (1,331)
   Syndication                           6,802
   Other                                   183
   Net assets - tax basis              $ 5,568

Note G - Investment Properties and Accumulated Depreciation


                                                   Initial Cost
                                                  To Partnership
                                                  (in thousands)

<TABLE>
<CAPTION>

                                                          Buildings          Cost
                                                         and Related       Removed
                                                           Personal     Subsequent to
        Description          Encumbrances      Land        Property      Acquisition
                            (in thousands)                              (in thousands)
<S>                             <C>            <C>         <C>             <C>
Lazy Hollow Apartments          $ 9,823        $ 998       $ 8,988         $(1,655)
Homestead Apartments              4,268           557        5,988            (522)

                                $14,091       $ 1,555      $14,976         $(2,177)
</TABLE>

                          Gross Amount At Which Carried
                              At December 31, 2003
                                 (in thousands)

<TABLE>
<CAPTION>

                                    Buildings
                                   And Related
                                    Personal              Accumulated    Date    Depreciable
       Description         Land     Property     Total   Depreciation  Acquired   Life-Years
                                                        (in thousands)
<S>                       <C>       <C>         <C>         <C>        <C>   <C>     <C>
Lazy Hollow Apartments    $  841    $ 7,490     $ 8,331     $ 3,895    07/01/89      5-40
Homestead Apartments         557      5,466       6,023       2,760    11/10/88      5-40

                          $1,398    $12,956     $14,354     $ 6,655
</TABLE>

Reconciliation of "investment properties and accumulated depreciation":

                                                 Years Ended December 31,
                                                  2003             2002
                                                      (in thousands)
Investment Properties
Balance at beginning of year                    $14,237           $13,761
    Property improvements                           117             1,055
    Disposal of investment properties                --              (579)
Balance at end of year                          $14,354           $14,237

Accumulated Depreciation
Balance at beginning of year                    $ 6,135           $ 5,819
    Additions charged to expense                    520               497
    Disposal of investment properties                --              (181)
Balance at end of year                          $ 6,655           $ 6,135

The  aggregate  cost of the real  estate  for  Federal  income tax  purposes  at
December  31,  2003 and 2002,  is  approximately  $19,886,000  and  $19,770,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December  31, 2003 and 2002,  is  approximately  $7,986,000  and  $7,344,000,
respectively.

Note H - 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 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 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 (the "Heller  action") was filed against the same  defendants that are
named in the Nuanes action,  captioned Heller v. Insignia Financial Group. 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 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes action and the Heller action.

In general  terms,  the  proposed  settlement  provides  for  certification  for
settlement  purposes of a settlement class consisting of all limited partners in
this  Partnership and others (the  "Partnerships")  as of December 20, 2002, the
dismissal  with  prejudice  and  release  of claims  in the  Nuanes  and  Heller
litigation,  payment by AIMCO of $9.9  million  (which shall be  distributed  to
settlement  class  members  after  deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent  appraisals of the  Partnerships'  properties  by a Court  appointed
appraiser.  An affiliate of the General Partner has also agreed to make at least
one round of tender offers to purchase all of the  partnership  interests in the
Partnerships within one year of final approval, if it is granted, and to provide
partners  with the  independent  appraisals  at the time of these  tenders.  The
proposed  settlement  also provided for the  limitation  of the allowable  costs
which the General  Partner or its  affiliates  will charge the  Partnerships  in
connection with this litigation and imposes limits on the class counsel fees and
costs in this litigation.  On April 11, 2003,  notice was distributed to limited
partners providing the details of the proposed settlement.

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  seeking  to  vacate  and/or  reverse  the  order
approving the settlement and entering  judgment  thereto.  On November 24, 2003,
the Objector filed an  application  requesting the Court order AIMCO to withdraw
settlement  tender offers it had  commenced,  refrain from making further offers
pending the appeal and auction any units tendered to third  parties,  contending
that the offers did not conform  with the terms of the  Settlement.  Counsel for
the Objector (on behalf of another  investor)  had  alternatively  requested the
Court take certain  action  purportedly  to enforce the terms of the  settlement
agreement.  On December 18, 2003,  the Court heard oral  argument on the motions
and denied them both in their entirety.  On January 28, 2004, Objector filed his
opening brief in his pending appeal.  The Managing  General Partner is currently
scheduled  to file a brief in  support  of the order  approving  settlement  and
entering judgment thereto by April 23, 2004.

On August 8, 2003 AIMCO  Properties  L.P., an affiliate of the General  Partner,
was served with a Complaint in the United  States  District  Court,  District of
Columbia alleging that AIMCO Properties L.P.  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  is  styled as 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. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  Complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The  Complaint  also  attempts  to certify a subclass  for  salaried
service  directors who are challenging  their  classification as exempt from the
overtime  provisions of the FLSA.  AIMCO  Properties L.P. has filed an answer to
the  Complaint  denying the  substantive  allegations.  Discovery  is  currently
underway.

The  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.

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.


Item 8.     Changes in and  Disagreements  with  Accountants on Accounting and
            Financial Disclosures

            None.

Item 8A.    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 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 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
fourth quarter of 2003 that have materially  affected,  or are reasonably likely
to  materially  affect,  the  Partnership's   internal  control  over  financial
reporting.

                                    PART III

Item 9.     Directors,  Executive  Officers,  Promoters  and Control  Persons;
            Compliance with Section 16(a) of the Exchange Act

Angeles Income Properties, Ltd. 6 (the "Partnership" or the "Registrant") has no
officers or directors. The names of the directors and officers of Angeles Realty
Corporation II ("ARC II" or the "General Partner"), their ages and the nature of
all positions with ARC II presently held by them are as follows:

Peter K. Kompaniez               59   Director
Martha L. Long                   44   Director and Senior Vice President
Harry G. Alcock                  41   Executive Vice President
Miles Cortez                     60   Executive Vice President, General Counsel
                                      and Secretary
Patti K. Fielding                40   Executive Vice President
Paul J. McAuliffe                47   Executive Vice President and Chief
                                      Financial Officer
Thomas M. Herzog                 41   Senior Vice President and Chief Accounting
                                     Officer

Peter K.  Kompaniez  has been Director of the General  Partner since  February
2004.  Mr.  Kompaniez  has been Vice  Chairman  of the Board of  Directors  of
AIMCO since July 1994 and was appointed  President in July 1997. Mr. Kompaniez
has also served as Chief Operating  Officer of NHP  Incorporated  after it was
acquired by AIMCO in December 1997.  Effective  April 1, 2004,  Mr.  Kompaniez
resigned as President of AIMCO.  Mr.  Kompaniez  will  continue in his role as
Director of the General  Partner and Vice  Chairman of AIMCO's  Board and will
serve  AIMCO on a variety of special  and  ongoing  projects  in an  operating
role.

Martha L. Long has been a Director  and Senior  Vice  President  of the  General
Partner since February 2004. Ms. Long has been with AIMCO since October 1998 and
has served in various  capacities.  From 1998 to 2001, Ms. Long served as Senior
Vice President and Controller of AIMCO and the General Partner.  During 2002 and
2003,  Ms. Long served as Senior Vice  President of Continuous  Improvement  for
AIMCO.

Harry G. Alcock was appointed Executive Vice President of the General Partner in
February 2004 and has been Executive Vice President and Chief Investment Officer
of AIMCO since October  1999.  Prior to October 1999 Mr. Alcock served as a Vice
President  of AIMCO  from July 1996 to October  1997,  when he was  promoted  to
Senior Vice  President-Acquisitions  where he served  until  October  1999.  Mr.
Alcock has had responsibility for acquisition and financing  activities of AIMCO
since July 1994.

Miles  Cortez was  appointed  Executive  Vice  President,  General  Counsel  and
Secretary of the General  Partner in February  2004 and of AIMCO in August 2001.
Prior to joining  AIMCO,  Mr. Cortez was the senior  partner of Cortez  Macaulay
Bernhardt  &  Schuetze  LLC,  a Denver  law firm,  from  December  1997  through
September 2001.

Patti K. Fielding was appointed  Executive  Vice President - Securities and Debt
of the General  Partner in  February  2004 and of AIMCO in  February  2003.  Ms.
Fielding  previously  served as Senior Vice  President - Securities  and Debt of
AIMCO from  January  2000 to February  2003.  Ms.  Fielding is  responsible  for
securities and debt financing and the treasury  department.  Ms. Fielding joined
AIMCO in February 1997 and served as Vice  President - Tenders,  Securities  and
Debt until January 2000.

Paul J. McAuliffe has been Executive Vice President and Chief Financial  Officer
of the General  Partner since April 2002. Mr.  McAuliffe has served as Executive
Vice  President of AIMCO since February 1999 and was appointed  Chief  Financial
Officer  of AIMCO in October  1999.  From May 1996  until he joined  AIMCO,  Mr.
McAuliffe was Senior Managing Director of Secured Capital Corp.

Thomas M.  Herzog was  appointed  Senior  Vice  President  and Chief  Accounting
Officer of the General  Partner in February  2004 and of AIMCO in January  2004.
Prior to  joining  AIMCO in January  2004,  Mr.  Herzog  was at GE Real  Estate,
serving  as Chief  Accounting  Officer & Global  Controller  from  April 2002 to
January 2004 and as Chief Technical Advisor from March 2000 to April 2002. Prior
to joining GE Real  Estate,  Mr.  Herzog was at  Deloitte & Touche LLP from 1990
until 2000, including a two-year assignment in the real estate national office.

One or more of the above persons are also directors and/or officers of a general
partner (or general partner of a general partner) of limited  partnerships which
either have a class of  securities  registered  pursuant to Section 12(g) of the
Securities Exchange Act of 1934, or are subject to the reporting requirements of
Section  15(d) of such Act.  Further,  one or more of the above persons are also
directors and/or officers of Apartment Investment and Management Company and the
general  partner  of  AIMCO  Properties,  L.P.,  entities  that  have a class of
securities  registered  pursuant to Section 12(g) of the Securities Exchange Act
of 1934, or are subject to the reporting  requirements of Section 15 (d) of such
Act.

The board of  directors of the General  Partner  does not have a separate  audit
committee.  As such, the board of directors of the General Partner  fulfills the
functions of an audit  committee.  The board of directors  has  determined  that
Martha L. Long meets the requirement of an "audit committee financial expert".

The  directors  and  officers of the General  Partner  with  authority  over the
Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code
of ethics that applies to such  directors and officers that is posted on AIMCO's
website  (www.AIMCO.com).  AIMCO's  website is not  incorporated by reference to
this filing.

Item 10.    Executive Compensation

Neither the directors nor officers  received any  remuneration  from the General
Partner during the year ended December 31, 2003.

Item 11.    Security Ownership of Certain Beneficial Owners and Management

Except as noted below,  no person or entity was known by the  Partnership  to be
the  beneficial  owner of more than 5% of the Limited  Partnership  Units of the
Partnership as of December 31, 2003.

Entity                                  Number of Units      Percentage

AIMCO Properties, L.P.                       15,511            32.78%
  (an affiliate of AIMCO)
Cooper River Properties, LLC                  3,506             7.41%
  (an affiliate of AIMCO)
AIMCO IPLP, L.P.                              1,956             4.14%
  (an affiliate of AIMCO)

Cooper River Properties,  LLC and AIMCO IPLP, L.P. (formerly know as Insignia,
L.P.) are indirectly  ultimately owned by AIMCO.  Their business address is 55
Beattie Place, Greenville, SC 29602.

AIMCO  Properties,  LP is  indirectly  ultimately  controlled  by  AIMCO.  Its
business address is 4582 S. Ulster St. Parkway,  Suite 1100, Denver,  Colorado
80237.

No  director  or officer of the  General  Partner  owns any units.  The  General
Partner  owns 100 Units as  required by the terms of the  partnership  agreement
governing the Partnership.

The Partnership knows of no contractual arrangements, the operation of the terms
of  which  may at a  subsequent  date  result  in a  change  in  control  of the
Partnership, except for: Article 12.1 of the Agreement, which provides that upon
a vote of the limited  partners  holding  more than 50% of the then  outstanding
limited  partnership  units  the  general  partner  may  be  expelled  from  the
Partnership upon 90 days written notice.  In the event that a successor  general
partner has been elected by limited  partners  holding more than 50% of the then
outstanding  limited  partnership  units and if said limited  partners  elect to
continue the business of the Partnership,  the Partnership is required to pay in
cash to the expelled  general  partner an amount equal to the accrued and unpaid
management  fee,  described in Article 10 of the  Agreement  and to purchase the
general  partner's  interest in the  Partnership  on the  effective  date of the
expulsion,  which shall be an amount equal to the difference between the balance
of the general  partner's capital account and the fair market value of the share
of  distributable  net proceeds to which the general  partner would be entitled.
Such  determination of the fair market value of the share of  distributable  net
proceeds is defined in Article 12.2(b) of the Agreement.

Item 12.    Certain Relationships and Related Transactions

The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all Partnership  activities.
The  Partnership  Agreement  provides  for certain  payments to  affiliates  for
services and  reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.

Affiliates of the General  Partner are entitled to receive 5% of gross  receipts
from  both of the  Partnership's  residential  properties  as  compensation  for
providing property management services.  The Partnership paid to such affiliates
approximately  $174,000 and  $178,000 for the years ended  December 31, 2003 and
2002, respectively, which is included in operating expense.

An  affiliate  of the General  Partner  received  reimbursement  of  accountable
administrative expenses amounting to approximately $153,000 and $177,000 for the
years  ended  December  31,  2003 and 2002,  respectively,  which is included in
general and  administrative  expenses and investment  properties.  For the years
ended  December  31,  2003 and 2002,  the first  three  quarters  were  based on
estimated amounts and in the fourth quarter of 2003 and 2002, the reimbursements
of accountable  administrative expenses were adjusted based on actual costs (see
"Note E"). Included in these amounts are fees related to construction management
services  provided  by an  affiliate  of the  General  Partner of  approximately
$81,000  for the year ended  December  31,  2002.  The  construction  management
service fees are  calculated  based on a percentage of current year additions to
investment properties. There were no construction management service fees during
the year ended December 31, 2003. As of December 31, 2003, the Partnership  owed
approximately  $59,000  of accrued  accountable  administrative  expenses  to an
affiliate  of the  General  Partner.  Such  amount is included in Due to General
Partner and affiliates on the consolidated balance sheet.

Pursuant  to the  Partnership  Agreement,  the  General  Partner is  entitled to
receive a distribution  equal to 3% of the aggregate  disposition  price of sold
properties. Pursuant to this provision, during the year ended December 31, 2000,
the  Partnership  paid a distribution of  approximately  $174,000 to the General
Partner  related to the sale of  Wakonda  Shopping  Center and Town and  Country
Shopping Center. Pursuant to this provision,  during the year ended December 31,
2001, the Partnership declared and paid a distribution of approximately  $60,000
payable to the General Partner  related to the sale of Casa Granada  Apartments.
These fees are subordinate to the limited partners receiving a preferred return,
as specified in the  Partnership  Agreement.  If the limited  partners  have not
received their  preferred  return when the Partnership  terminates,  the General
Partner will return this amount to the Partnership.

Pursuant  to  the  Partnership   Agreement  for  managing  the  affairs  of  the
Partnership, the General Partner is entitled to receive a Partnership Management
Fee equal to 10% of the  Partnership's  net cash from  operations.  For the year
ended December 31, 2003, the Partnership has expensed  approximately $68,000 for
the 2003 fee. This amount is included in Due to General  Partner and  affiliates
on the  consolidated  balance  sheet.  For the year ended December 31, 2002, the
Partnership had expensed  approximately $90,000 for the 2002 fee. Payment of the
partnership  management  fee is restricted  to  distributable  net proceeds,  as
defined in the Partnership  Agreement.  The 2002 partnership  management fee was
paid  with  distributable  net  proceeds  from the  refinancing  of Lazy  Hollow
Apartments in 2003.  The 2003  partnership  management  fee will remain  accrued
until such time as the partnership has additional distributable net proceeds.

The  Partnership  insures its properties 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  and  vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance policies obtained by AIMCO from insurers unaffiliated with the General
Partner.  During the year ended December 31, 2003 and 2002, the  Partnership was
charged  by  AIMCO  and  its  affiliates   approximately  $33,000  and  $40,000,
respectively,  for  insurance  coverage and fees  associated  with policy claims
administration.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates  owned 20,973 limited  partnership  units
(the "Units") in the Partnership representing 44.33% of the outstanding Units at
December  31,  2003.  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  General  Partner.  As a result  of its  ownership  of 44.33% 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 General
Partner owes fiduciary duties to the limited  partners of the  Partnership,  the
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a  result,  the  duties of the  General  Partner,  as  general  partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the General Partner to AIMCO, as its sole stockholder.

Item 13.    Exhibits and Reports on Form 8-K

      (a)   Exhibits:

            See Exhibit Index attached.

(b) Reports on Form 8-K:

            None filed in the fourth quarter of calendar year 2003.

Item 14.    Principal Accountant Fees and Services

The General Partner has reappointed Ernst & Young LLP as independent auditors to
audit the financial statements of the Partnership for 2004.

Audit  Fees.  The  Partnership   paid  to  Ernst  &  Young  LLP  audit  fees  of
approximately $37,000 and $31,000 for 2003 and 2002, respectively.

Tax Fees.  The  Partnership  paid to Ernst & Young LLP fees for tax services for
2003 and 2002 of approximately $13,000 and $20,000, respectively.

                                   SIGNATURES


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


                                    ANGELES INCOME PROPERTIES, LTD. 6


                                    By:   Angeles Realty Corporation II
                                          General Partner


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


                                    By:   /s/Thomas M. Herzog
                                          Thomas M. Herzog
                                          Senior Vice President
                                          and Chief Accounting Officer

                                    Date: March 26, 2004


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
date indicated.

/s/Peter K. Kompaniez         Director                      Date: March 26, 2004
Peter K. Kompaniez


/s/Martha L. Long             Director and Senior Vice      Date: March 26, 2004
Martha L. Long                President


/s/Thomas M. Herzog           Senior Vice President         Date: March 26, 2004
Thomas M. Herzog              and Chief Accounting Officer



<PAGE>
                                  EXHIBIT INDEX


Exhibit

2.1         NPI, Inc.  Stock  Purchase  Agreement,  dated as of August 17, 1995,
            incorporated  by reference to the  Partnership's  Current  Report on
            Form 8-K dated August 17, 1995.

3.1         Amended  Certificate and Agreement of the Limited  Partnership filed
            in the  Partnership's  Prospectus  dated  June  11,  1987  which  is
            incorporated herein by reference.

3.2         Second  Amended and Restated  Bylaws of IPT,  dated  October 2, 1998
            incorporated  by reference to  Registrant's  Current  Report on Form
            8-K, dated October 1, 1998.

10.7        Agreement  of Purchase  and Sale of Real  Property  with  Exhibits -
            Homestead Apartments filed in Form 8-K dated November 10, 1988 which
            is incorporated herein by reference.

10.9        Agreement of Purchase and Sale of Real  Property and Exhibits - Lazy
            Hollow  Apartments  filed in Form 8-K dated December 1989,  which is
            incorporated herein by reference.

10.12       Stock  Purchase  Agreement  dated  November  24,  1992  showing  the
            purchase  of  100%  of  the  outstanding  stock  of  Angeles  Realty
            Corporation  II by  IAP  GP  Corporation,  a  subsidiary  of  MAE GP
            Corporation,  filed in Form 8-K dated  December 31,  1992,  which is
            incorporated herein by reference.

10.34       Multifamily  Note between GMAC Commercial  Mortgage  Corporation and
            Angeles  Income  Properties,  Ltd. 6 for the  refinance of Homestead
            Apartments (filed as Exhibit 10.34 on Form 8-K September 6, 2001).

10.35       Multifamily  Note dated March 31, 2003 between Lazy Hollow Partners,
            a California general partnership, and Reilly Mortgage Group, Inc., a
            District of Columbia corporation.

10.36       Limited  Guaranty dated March 31, 2003 between Lazy Hollow Partners,
            a California general partnership, and Reilly Mortgage Group, Inc., a
            District of Columbia corporation.

10.37       Multifamily  Deed of  Trust,  Assignment  of  Rents  and  Security
            Agreement  dated March 31, 2003  between Lazy Hollow  Partners,  a
            California general  partnership,  and Reilly Mortgage Group, Inc.,
            a District of Columbia corporation.

10.38       Replacement  Reserve  Agreement  dated March 31, 2003 between Lazy
            Hollow  Partners,  a California  general  partnership,  and Reilly
            Mortgage Group, Inc., a District of Columbia corporation.

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  Pursuant  to  18  U.S.C.  Section  1350,  as  Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.1


                                  CERTIFICATION


I, Martha L. Long, certify that:


1.    I have  reviewed  this  annual  report on Form  10-KSB of  Angeles  Income
      Properties, Ltd. 6;

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 registrant as of, and for, the periods presented in this report;

4.    The  registrant'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 registrant
      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
            registrant,  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 registrant'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  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer(s) and I have disclosed,  based
      on  our  most  recent   evaluation  of  internal  control  over  financial
      reporting,  to the  registrant's  auditors and the audit  committee of the
      registrant'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  registrant'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  registrant's
            internal control over financial reporting.

Date: March 26, 2004

                                    /s/Martha L. Long
                                    Martha L. Long
                                    Senior  Vice  President  of  Angeles  Realty
                                    Corporation  II,  equivalent  of  the  chief
                                    executive officer of the Partnership


<PAGE>


Exhibit 31.2
                                  CERTIFICATION

I, Thomas M. Herzog , certify that:

1.    I have  reviewed  this  annual  report on Form  10-KSB of  Angeles  Income
      Properties, Ltd. 6;

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 registrant as of, and for, the periods presented in this report;

4.    The  registrant'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 registrant
      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
            registrant,  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 registrant'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  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer(s) and I have disclosed,  based
      on  our  most  recent   evaluation  of  internal  control  over  financial
      reporting,  to the  registrant's  auditors and the audit  committee of the
      registrant'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  registrant'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  registrant's
            internal control over financial reporting.

Date: March 26, 2004

                                    /s/Thomas M. Herzog
                                    Thomas M. Herzog  Senior Vice  President and
                                    Chief  Accounting  Officer of Angeles Realty
                                    Corporation  II,  equivalent  of  the  chief
                                    accounting 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  Annual  Report  on  Form  10-KSB  of  Angeles  Income
Properties, Ltd. 6 (the "Partnership"),  for the year ended December 31, 2003 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 Thomas M. Herzog, 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:  March 26, 2004


                                           /s/Thomas M. Herzog
                                    Name:  Thomas M. Herzog
                                    Date:  March 26, 2004


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 10.35



                                                      FHLMC Loan No. 002702010
                                                        Lazy Hollow Apartments


                                MULTIFAMILY NOTE
                    (MULTISTATE - REVISION DATE 11-01-2000)

US $10,000,000.00                                           As of March 31, 2003


      FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of REILLY  MORTGAGE  GROUP,  INC., a
District of Columbia  corporation,  the  principal sum of Ten Million and 00/100
Dollars (US  $10,000,000.00),  with interest on the unpaid principal  balance at
the annual rate of five and ninety-four hundredths percent (5.94%).

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

      2. Address for Payment.  All payments due under this Note shall be payable
at 2010 Corporate Ridge, Suite 1000, McLean, Virginia 22102, or such other place
as may be designated by written notice to Borrower from or on behalf of Lender.

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

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

      (b) Consecutive  monthly  installments of principal and interest,  each in
the amount of Seventy-One  Thousand Two Hundred  Ninety-Seven and 39/100 Dollars
(US  $71,297.39),  shall be payable on the first day of each month  beginning on
May 1, 2003, until the entire unpaid principal balance evidenced by this Note is
fully paid.

      (c) Any accrued  interest  remaining  past due for 30 days or more may, at
Lender's discretion, be added to and become part of the unpaid principal balance
and shall bear  interest at the rate or rates  specified  in this Note,  and any
reference below to "accrued  interest" shall refer to accrued interest which has
not become part of the unpaid  principal  balance.  Any remaining  principal and
interest  shall be due and  payable on April 1, 2023 or on any  earlier  date on
which the unpaid  principal  balance of this Note  becomes due and  payable,  by
acceleration or otherwise (the "Maturity  Date").  The unpaid principal  balance
shall  continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.

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

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

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

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

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

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

      9. Limits on Personal Liability.

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

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

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

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

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

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

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

      10. Voluntary and Involuntary Prepayments.

      (a)  A  prepayment  premium  shall  be  payable  in  connection  with  any
prepayment (any receipt by Lender of principal, other than principal required to
be paid in  monthly  installments  pursuant  to  Paragraph  3(b),  prior  to the
scheduled Maturity Date set forth in Paragraph 3(c)) under this Note as provided
below:

            (1)  Borrower  may  voluntarily  prepay all of the unpaid  principal
balance  of this  Note  on a  Business  Day  designated  as the  date  for  such
prepayment  in a written  notice from  Borrower to Lender given at least 30 days
prior to the date of such  prepayment.  Such prepayment  shall be made by paying
(A) the amount of principal  being prepaid,  (B) all accrued  interest,  (C) all
other sums due  Lender at the time of such  prepayment,  and (D) the  prepayment
premium  calculated  pursuant to Paragraph 10(c). For all purposes including the
accrual of interest, any prepayment received by Lender on any day other than the
last calendar day of the month shall be deemed to have been received on the last
calendar day of such month.  For  purposes of this Note, a "Business  Day" means
any day other than a  Saturday,  Sunday or any other day on which  Lender is not
open for business. Unless expressly provided for in the Loan Documents, Borrower
shall not have the  option to  voluntarily  prepay  less than all of the  unpaid
principal balance.  However, if a partial prepayment is provided for in the Loan
Documents or is accepted by Lender in Lender's discretion,  a prepayment premium
calculated pursuant to Paragraph 10(c) shall be due and payable by Borrower.

            (2) Upon Lender's  exercise of any right of acceleration  under this
Note,  Borrower shall pay to Lender,  in addition to the entire unpaid principal
balance  of this  Note  outstanding  at the  time of the  acceleration,  (A) all
accrued interest and all other sums due Lender,  and (B) the prepayment  premium
calculated pursuant to Paragraph 10(c).

            (3) Any application by Lender of any collateral or other security to
the repayment of any portion of the unpaid principal  balance of this Note prior
to the Maturity Date and in the absence of acceleration  shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.

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

      (c) Any  prepayment  premium  payable under this Note shall be computed as
follows:

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

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

            (ii) the product obtained by multiplying:

                  (A) the amount of principal  being prepaid,  by (B) the excess
                  (if any) of the Monthly Note Rate over the Assumed
                        Reinvestment Rate, by
                  (C)   the Present Value Factor.

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

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

            Prepayment Date: in the case of a voluntary prepayment,  the date on
            which the  prepayment  is made;  in the case of the  application  by
            Lender of  collateral  or  security  to a portion  of the  principal
            balance,  the date of such  application;  and in any other case, the
            date on which Lender  accelerates  the unpaid  principal  balance of
            this Note.

            Assumed  Reinvestment Rate:  one-twelfth (1/12) of the yield rate as
            of the date 5 Business  Days  before  the  Prepayment  Date,  on the
            9.000% U.S.  Treasury  Security due November 1, 2018, as reported in
            The Wall Street Journal,  expressed as a decimal  calculated to five
            digits.  In the event that no yield is published  on the  applicable
            date  for the  Treasury  Security  used  to  determine  the  Assumed
            Reinvestment  Rate,  Lender,  in its  discretion,  shall  select the
            non-callable  Treasury  Security  maturing  in the same  year as the
            Treasury Security specified above with the lowest yield published in
            The  Wall  Street  Journal  as  of  the  applicable   date.  If  the
            publication  of such  yield  rates in The  Wall  Street  Journal  is
            discontinued  for any reason,  Lender shall select a security with a
            comparable rate and term to the Treasury  Security used to determine
            the  Assumed  Reinvestment  Rate.  The  selection  of  an  alternate
            security  pursuant  to this  Paragraph  shall  be  made in  Lender's
            discretion.

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

                                  [OBJECT OMITTED]

            n = number of months remaining in Yield Maintenance Period

            ARR = Assumed Reinvestment Rate

            (2) If the  prepayment  is made  after the  expiration  of the Yield
Maintenance  Period but before the period set forth in Paragraph 10(b)(A) above,
the  prepayment  premium shall be 1.0% of the unpaid  principal  balance of this
Note.

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

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

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

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

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

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

      14. Loan  Charges.  Neither this Note nor any of the other Loan  Documents
shall be construed to create a contract for the use, forbearance or detention of
money requiring  payment of interest at a rate greater than the maximum interest
rate  permitted  to be charged  under  applicable  law.  If any  applicable  law
limiting the amount of interest or other charges  permitted to be collected from
Borrower in  connection  with the Loan is  interpreted  so that any  interest or
other charge provided for in any Loan Document, whether considered separately or
together with other charges  provided for in any other Loan  Document,  violates
that law, and Borrower is entitled to the benefit of that law,  that interest or
charge is hereby reduced to the extent  necessary to eliminate  that  violation.
The  amounts,  if any,  previously  paid to Lender  in  excess of the  permitted
amounts  shall be applied by Lender to reduce  the unpaid  principal  balance of
this Note.  For the purpose of  determining  whether any applicable law limiting
the amount of interest or other charges  permitted to be collected from Borrower
has been violated,  all Indebtedness that constitutes  interest,  as well as all
other charges made in connection with the Indebtedness that constitute interest,
shall be deemed to be allocated  and spread  ratably over the stated term of the
Note. Unless otherwise required by applicable law, such allocation and spreading
shall be  effected  in such a manner  that the rate of  interest  so computed is
uniform throughout the stated term of the Note.

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

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

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

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

      19.  Notices;  Written  Modifications.  All  notices,  demands  and  other
communications  required or permitted to be given by Lender to Borrower pursuant
to this  Note  shall be given in  accordance  with  Section  31 of the  Security
Instrument.  Any  modification  or amendment  to this Note shall be  ineffective
unless  in  writing  signed  by  the  party  sought  to  be  charged  with  such
modification or amendment;  provided,  however,  that in the event of a Transfer
under  the  terms  of  the  Security  Instrument,  any  or  some  or  all of the
Modifications  to Multifamily Note may be modified or rendered void by Lender at
Lender's option by notice to Borrower/transferee.

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

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


      ATTACHED EXHBIT.  The following Exhibit is attached to this Note:

            -----
            X        Exhibit A     Modifications to Multifamily Note
            -----

      IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal
or has  caused  this  Note to be signed  and  delivered  under  seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.



<PAGE>


                                    LAZY HOLLOW PARTNERS, a California
                                       general partnership

                                    By:   Angeles Realty Corporation II, a
                                          California corporation, its
                                          managing general partner



                                          By:   /S/Patti F. Fielding
                                               Patti K. Fielding
                                               Executive Vice President


                                    95-4217055
                     Borrower's Social Security/Employer ID Number


<PAGE>


PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE  CORPORATION,  WITHOUT  RECOURSE,
THIS 31ST DAY OF MARCH, 2003.

REILLY MORTGAGE GROUP, INC., a
   District of Columbia corporation



By:/s/Julia P. Ensall
   Julia P. Ensall
   Assistant Vice President




<PAGE>



                                    EXHIBIT A

                        MODIFICATIONS TO MULTIFAMILY NOTE

The following  modifications are made to the text of the Note that precedes this
Exhibit.

1. Paragraph 9(f) is modified to read as follows:

            "(f)  In addition to any personal  liability  for the  Indebtedness,
                  Borrower  shall be  personally  liable to  Lender  for (1) the
                  performance of all of Borrower's  obligations under Section 18
                  of  the  Security   Instrument   (relating  to   environmental
                  matters);  (2) the costs of any audit under  Section  14(d) of
                  the Security Instrument;  (3) repayment of any advance made by
                  Lender  under  Section 12 of the Security  Instrument  for the
                  purpose of procuring  insurance  required by Section 19 of the
                  Security  Instrument;  and (4) any costs and expenses incurred
                  by Lender in connection  with the collection of any amount for
                  which  Borrower is personally  liable under this  Paragraph 9,
                  including  fees and out of pocket  expenses of  attorneys  and
                  expert  witnesses and the costs of conducting any  independent
                  audit of Borrower's  books and records to determine the amount
                  for which Borrower has personal liability."

2. AIMCO STANDARD.

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

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

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

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

      C.    Paragraph 19 is modified by deleting: "; provided,  however, that in
            the event of a Transfer under the terms of the Security  Instrument,
            any or some or all of the  Modifications  to Multifamily Note may be
            modified or rendered void by Lender at Lender's  option by notice to
            Borrower/transferee"  in the last sentence of the Paragraph;  and by
            adding the following new sentence:

                  The  Modifications  to  Multifamily  Note  set  forth  in this
                  Exhibit A shall be null and void unless title to the Mortgaged
                  Property is vested in an entity whose Controlling  Interest(s)
                  are directly or indirectly held by AIMCO REIT or AIMCO OP. The
                  capitalized  terms used in this  paragraph  are defined in the
                  Security Instrument.

<PAGE>
                                                                   Exhibit 10.36

                                                      FHLMC Loan No. 002702010
                                                        Lazy Hollow Apartments


                                LIMITED GUARANTY
                   (MULTISTATE - REVISION DATE 11-01-2000)

      This Limited  Guaranty  ("Guaranty") is entered into as of March 31, 2003,
by the  undersigned  person(s) (the  "Guarantor"  whether one or more),  for the
benefit of REILLY MORTGAGE GROUP, INC., a District of Columbia corporation,  and
any subsequent holder of the Note (the "Lender").


                                    RECITALS

      A. LAZY HOLLOW PARTNERS, a California general partnership (the "Borrower")
has   requested   that  Lender  make  a  loan  to  Borrower  in  the  amount  of
$10,000,000.00  (the "Loan").  The Loan will be evidenced by a Multifamily  Note
from Borrower to Lender dated as of the date of this Guaranty (the "Note").  The
Note will be secured by a Multifamily Mortgage, Deed of Trust, or Deed to Secure
Debt dated the same date as the Note (the  "Security  Instrument"),  encumbering
the real property described in the Security Instrument (the "Property").

      B. As a condition to making the Loan to Borrower, Lender requires that the
Guarantor execute this Guaranty.

      C. Guarantor  represents to Lender that Guarantor has a direct or indirect
ownership in Borrower and/or will otherwise derive a material  financial benefit
from the making of the Loan.

      NOW,  THEREFORE,  in order to induce  Lender to make the Loan to Borrower,
and in consideration thereof, Guarantor agrees as follows:

      1.    "Indebtedness"  and other  capitalized terms used but not defined in
            this  Guaranty  shall  have  the  meanings  assigned  to them in the
            Security Instrument.

      2.    Guarantor  hereby   absolutely,   unconditionally   and  irrevocably
            guarantees to Lender the full and prompt  payment when due,  whether
            at maturity or earlier, by reason of acceleration or otherwise,  and
            at all times  thereafter,  and the full and prompt  performance when
            due, of all of the following:

      (a)   A portion  of the  Indebtedness  equal to zero  percent  (0%) of the
            original principal balance of the Note (the "Base Guaranty").

      (b)   In  addition  to the Base  Guaranty,  all  other  amounts  for which
            Borrower is personally  liable under Paragraphs 9(c) through 9(f) of
            the Note.

      (c)   The payment and performance of all of Borrower's  obligations  under
            Section 18 of the Security Instrument.

      (d)   The  entire  Indebtedness,  in the event that (i)  Borrower  becomes
            subject to any bankruptcy, reorganization,  receivership, insolvency
            or other similar  proceeding  (other than a proceeding  initiated by
            Lender)  pursuant to any federal or state law  affecting  debtor and
            creditor  rights,  or (ii) an order for  relief is  entered  against
            Borrower  in  any  such  proceeding  (other  than  in  a  proceeding
            initiated by Lender).

      (e)   All costs and expenses,  including reasonable fees and out of pocket
            expenses of attorneys  and expert  witnesses,  incurred by Lender in
            enforcing its rights under this Guaranty.

      (f)   If the Base  Guaranty  is stated in  Paragraph  2(a) to be 100% of
            the original or unpaid  principal  balance of the Note,  then: (i)
            the Base  Guaranty  shall mean and include  the full and  complete
            guaranty of payment  and  performance  of the entire  Indebtedness
            and of all Borrower's  obligations  under the Loan Documents;  and
            (ii) for so long as the Base  Guaranty  remains  in effect  (there
            shall be no  limit to the  duration  of the Base  Guaranty  unless
            otherwise  expressly  provided in this Guaranty),  the obligations
            guaranteed  pursuant to  Paragraphs  2(b),  2(c) and 2(d) shall be
            part of,  and not in  addition  to or in  limitation  of, the Base
            Guaranty.  If this  Guaranty  is titled as a  "Limited"  Guaranty,
            such title shall not affect the  interpretation  or application of
            this  Paragraph  2(f). If the Base Guaranty is stated in Paragraph
            2(a) to be other  than 100% of the  original  or unpaid  principal
            balance of the Note,  then this Paragraph 2(f) shall be completely
            inapplicable  and  shall  be  treated  as if  not a part  of  this
            Guaranty.

If  Guarantor  is not liable for the entire  Indebtedness,  then for purposes of
determining  Guarantor's  liability  under this  Guaranty,  all payments made by
Borrower  with respect to the  Indebtedness  and all amounts  received by Lender
from the  enforcement  of its  rights  under the  Security  Instrument  shall be
applied first to the portion of the  Indebtedness for which neither Borrower nor
Guarantor has personal liability.

      3. The  obligations  of Guarantor  under this  Guaranty  shall survive any
foreclosure  proceeding,  any foreclosure sale, any delivery of any deed in lieu
of foreclosure,  and any release of record of the Security  Instrument,  and, in
addition,  the obligations of Guarantor relating to Borrower's obligations under
Section 18 of the Security  Instrument  shall survive any repayment or discharge
of the Indebtedness.

      4. Guarantor's obligations under this Guaranty constitute an unconditional
guaranty of payment and performance and not merely a guaranty of collection.

      5. The  obligations  of Guarantor  under this Guaranty  shall be performed
without  demand  by  Lender  and  shall  be  unconditional  irrespective  of the
genuineness,  validity,  regularity or  enforceability of the Note, the Security
Instrument,  or any  other  Loan  Document,  and  without  regard  to any  other
circumstance which might otherwise  constitute a legal or equitable discharge of
a surety,  a guarantor,  a borrower or a mortgagor.  Guarantor hereby waives the
benefit of all  principles or provisions of law,  statutory or otherwise,  which
are or might be in  conflict  with the terms of this  Guaranty  and agrees  that
Guarantor's  obligations shall not be affected by any circumstances,  whether or
not referred to in this Guaranty,  which might  otherwise  constitute a legal or
equitable  discharge  of a surety,  a  guarantor,  a  borrower  or a  mortgagor.
Guarantor hereby waives the benefits of any right of discharge under any and all
statutes  or other laws  relating  to a  guarantor,  a surety,  a borrower  or a
mortgagor,  and any other  rights of a surety,  a  guarantor,  a  borrower  or a
mortgagor  thereunder.   Without  limiting  the  generality  of  the  foregoing,
Guarantor hereby waives,  to the fullest extent  permitted by law,  diligence in
collecting  the  Indebtedness,  presentment,  demand for payment,  protest,  all
notices  with  respect to the Note and this  Guaranty  which may be  required by
statute,  rule of law or otherwise to preserve Lender's rights against Guarantor
under this Guaranty, including, but not limited to, notice of acceptance, notice
of any amendment of the Loan Documents,  notice of the occurrence of any default
or Event of Default,  notice of intent to  accelerate,  notice of  acceleration,
notice of dishonor, notice of foreclosure,  notice of protest, and notice of the
incurring by Borrower of any obligation or indebtedness.  Guarantor also waives,
to the fullest  extent  permitted  by law,  all rights to require  Lender to (a)
proceed  against  Borrower  or any other  guarantor  of  Borrower's  payment  or
performance  with  respect to the  Indebtedness  (an "Other  Guarantor")  (b) if
Borrower or any Other  Guarantor is a partnership,  proceed  against any general
partner of Borrower or the Other  Guarantor,  (c) proceed against or exhaust any
collateral  held by Lender to secure the repayment of the  Indebtedness,  or (d)
pursue any other remedy it may now or hereafter  have against  Borrower,  or, if
Borrower is a partnership,  any general partner of Borrower.  Guarantor  further
waives,  to the fullest extent  permitted by applicable law, any right to revoke
this Guaranty as to any future advances by Lender under the Security  Instrument
to protect Lender's interest in the Property.

      6. At any  time or from  time to time and any  number  of  times,  without
notice to Guarantor and without  affecting  the liability of Guarantor,  (a) the
time for payment of the  principal  of or interest  on the  Indebtedness  may be
extended or the  Indebtedness  may be renewed in whole or in part;  (b) the time
for  Borrower's  performance  of or  compliance  with any  covenant or agreement
contained  in the Note,  the  Security  Instrument  or any other Loan  Document,
whether presently existing or hereinafter  entered into, may be extended or such
performance  or compliance may be waived;  (c) the maturity of the  Indebtedness
may be  accelerated  as provided in the Note,  the Security  Instrument,  or any
other Loan Document;  (d) the Note, the Security  Instrument,  or any other Loan
Document  may be  modified  or amended by Lender and  Borrower  in any  respect,
including,  but not limited to, an increase in the principal amount; and (e) any
security  for  the  Indebtedness  may be  modified,  exchanged,  surrendered  or
otherwise dealt with or additional  security may be pledged or mortgaged for the
Indebtedness.

      7. If more than one person  executes this  Guaranty,  the  obligations  of
those  persons under this Guaranty  shall be joint and several.  Lender,  in its
sole and absolute discretion,  may (a) bring suit against Guarantor,  or any one
or more of the persons constituting Guarantor, and any Other Guarantor,  jointly
and severally, or against any one or more of them; (b) compromise or settle with
any one or more of the persons constituting  Guarantor for such consideration as
Lender may deem  proper;  (c) release  one or more of the  persons  constituting
Guarantor, or any Other Guarantor,  from liability;  and (d) otherwise deal with
Guarantor  and any Other  Guarantor,  or any one or more of them, in any manner,
and no such action shall  impair the rights of Lender to collect from  Guarantor
any amount  guaranteed by Guarantor  under this Guaranty.  Nothing  contained in
this  paragraph  shall in any way affect or impair the rights or  obligations of
Guarantor with respect to any Other Guarantor.

      8. Any  indebtedness of Borrower held by Guarantor now or in the future is
and shall be  subordinated  to the  Indebtedness  and any such  indebtedness  of
Borrower shall be collected,  enforced and received by Guarantor, as trustee for
Lender,  but  without  reducing  or  affecting  in any manner the  liability  of
Guarantor under the other provisions of this Guaranty.

      9.  Guarantor  shall have no right of,  and  hereby  waives any claim for,
subrogation or reimbursement against Borrower or any general partner of Borrower
by reason of any payment by Guarantor under this Guaranty, whether such right or
claim  arises at law or in equity or under any  contract or  statute,  until the
Indebtedness  has been paid in full and there has expired  the maximum  possible
period  thereafter  during  which any  payment  made by  Borrower to Lender with
respect to the Indebtedness could be deemed a preference under the United States
Bankruptcy Code.

      10. If any payment by Borrower is held to  constitute a  preference  under
any  applicable  bankruptcy,  insolvency,  or similar  laws, or if for any other
reason Lender is required to refund any sums to Borrower,  such refund shall not
constitute a release of any liability of Guarantor  under this  Guaranty.  It is
the intention of Lender and Guarantor that  Guarantor's  obligations  under this
Guaranty  shall not be  discharged  except by  Guarantor's  performance  of such
obligations and then only to the extent of such performance.

      11. Guarantor shall from time to time, upon request by Lender,  deliver to
Lender such financial statements as Lender may reasonably require.

      12.  Lender may assign its rights under this  Guaranty in whole or in part
and upon any such  assignment,  all the terms and  provisions  of this  Guaranty
shall inure to the benefit of such assignee to the extent so assigned. The terms
used to  designate  any of the  parties  herein  shall be deemed to include  the
heirs, legal  representatives,  successors and assigns of such parties;  and the
term "Lender" shall include,  in addition to Lender, any lawful owner, holder or
pledgee of the Note.  Reference  herein to "person" or "persons" shall be deemed
to include individuals and entities.

      13.  This  Guaranty  and the  other  Loan  Documents  represent  the final
agreement  between the parties and may not be contradicted by evidence of prior,
contemporaneous  or  subsequent  oral  agreements.  There are no unwritten  oral
agreements  between  the  parties.  All  prior  or  contemporaneous  agreements,
understandings,  representations,  and statements,  oral or written,  are merged
into this Guaranty and the other Loan  Documents.  Guarantor  acknowledges  that
Guarantor has received copies of the Note and all other Loan Documents.  Neither
this  Guaranty  nor any of its  provisions  may be  waived,  modified,  amended,
discharged,  or terminated except by an agreement in writing signed by the party
against which the enforcement of the waiver, modification, amendment, discharge,
or  termination  is  sought,  and  then  only to the  extent  set  forth in that
agreement.

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

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

      16. STATE-SPECIFIC PROVISIONS:

A.     If  Arizona  Law  Applies:  Guarantor  waives,  to the  fullest  extent
         allowed  by  applicable  law,  all  of  Guarantor's  rights  underss.
         12-1641,  12-1642,  12-1643,  12-1644,  44-142 and 47-3605 of Arizona
         Revised  Statutes,  and  Rule  17(f)  of the  Arizona  Rules of Civil
         Procedure,  as  now  in  effect  or as  modified  or  amended  in the
         future.  Guarantor's  obligations under this Guaranty may be enforced
         by Lender in an action  regardless  of  whether a  trustee's  sale is
         held.

B.       If  Colorado  Law  Applies:  Guarantor  waives  the  benefit  of C.R.S.
         Sections 13-50-101 through 13-50-103, inclusive.

C.    If  Connecticut  Law  Applies:  GUARANTOR  ACKNOWLEDGES  THAT  THIS IS A
         "COMMERCIAL  TRANSACTION"  AS SUCH IS DEFINED IN CHAPTER  903a OF THE
         CONNECTICUT   GENERAL   STATUTES,   AS  AMENDED.   GUARANTOR  FURTHER
         ACKNOWLEDGES  THAT,  PURSUANT TO SUCH SECTION,  GUARANTOR HAS A RIGHT
         TO NOTICE OF AND HEARING  PRIOR TO THE  ISSUANCE OF ANY  "PREJUDGMENT
         REMEDY."  NOTWITHSTANDING THE FOREGOING,  GUARANTOR HEREBY WAIVES ALL
         RIGHTS TO SUCH  NOTICE,  JUDICIAL  HEARING  OR PRIOR  COURT  ORDER IN
         CONNECTION WITH ANY SUIT ON THIS GUARANTY.

D.       If Georgia Law Applies:  Guarantor  waives the benefit of O.C.G.A.  ss.
         10-7-24.

E.    If  Kentucky  Law  Applies:  As  defined  in  the  Security  Instrument,
         "Indebtedness"  means the  principal  of,  interest on, and all other
         amounts due at any time under,  the Note or the Security  Instrument,
         or  both,  including  prepayment  premiums,  late  charges,   default
         interest,  and  advances as  provided  in Section 12 of the  Security
         Instrument  to protect the security of the Security  Instrument.  The
         instruments being guaranteed,  within the meaning of K.R.S.  371.065,
         are the Note and the Security  Instrument,  but only to the extent of
         the Indebtedness.

F.       If  Minnesota  Law Applies:  Guarantor  waives the benefit of Minnesota
         Statutes Section 582.30.

G.       If North Carolina Law Applies:  Guarantor  waives all rights granted by
         Sections 26-7 through 26-9, inclusive, of the North Carolina Statutes.

H.       If New Mexico Law  Applies:  Pursuant to Section  58-6-5  NMSA 1978,  a
         contract,  promise or commitment  to loan money or to grant,  extend or
         renew credit,  or any modification  thereof,  in an amount greater than
         Twenty-five  Thousand and No/100 Dollars ($25,000.00) not primarily for
         personal,  family or household purposes made by a financial institution
         is not enforceable unless made in writing and signed by the party to be
         charged or that party's authorized representatives.

I.       If Nevada Law  Applies:  Pursuant  to Nevada  Revised  Statute  40.495,
         Guarantor  also  hereby  unconditionally  and  irrevocably  waives  the
         provisions of Nevada Revised  Statute  40.430,  and  acknowledges  that
         Lender  may  institute  a separate  action  against  Guarantor  for the
         enforcement of Guarantor's obligations,  irrespective of whether Lender
         has exercised any power of sale or other  foreclosure  remedies against
         the Mortgaged Property.

J.       If Oklahoma Law  Applies:  If Lender  elects to enforce  this  Guaranty
         before, or without, enforcing the Security Instrument, Guarantor waives
         any right,  whether  pursuant to 12 Okla.  Stat.  686 or otherwise,  to
         require  Lender  to set off  the  value  of the  Property  against  the
         Indebtedness.

K.       If Oregon Law Applies: UNDER OREGON LAW, MOST AGREEMENTS,  PROMISES AND
         COMMITMENTS MADE BY LENDER AFTER OCTOBER 3, 1989,  CONCERNING LOANS AND
         OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
         PURPOSES  OR  SECURED  SOLELY BY THE  BORROWER'S  RESIDENCE  MUST BE IN
         WRITING,   EXPRESS   CONSIDERATION  AND  BE  SIGNED  BY  LENDER  TO  BE
         ENFORCEABLE.

L.       If Texas Law  Applies:  Guarantor  waives  the  benefit of any right of
         discharge  under Chapter 34 of the Texas Business and Commerce Code and
         all other rights of sureties and guarantors thereunder.

M.       If West  Virginia Law Applies:  Guarantor  waives the benefit of W. Va.
         Code 45-1-1, et. seq.


      ATTACHED EXHIBIT.  The following Exhibit is attached to this Guaranty:

      ------
        X       Exhibit A       Modifications to Guaranty
      ------

      IN WITNESS WHEREOF, Guarantor has signed and delivered this Guaranty under
seal or has caused this  Guaranty to be signed and  delivered  under seal by its
duly authorized  representative.  Guarantor  intends that this Guaranty shall be
deemed to be signed and delivered as a sealed instrument.




<PAGE>


                                    AIMCO PROPERTIES, L.P., a Delaware
                                       limited partnership

                                    By:   AIMCO-GP, Inc., a Delaware
                                          corporation, its general partner



                                          By: /s/Patti K. Fielding
                                             Patti K. Fielding
                                             Executive Vice President



STATE OF COLORADO

CITY and COUNTY OF DENVER, to-wit:

      I hereby  certify  that on this 27th day of March,  2003,  before  me, the
subscriber, a Notary Public of the State of Colorado, in and for the City/County
of Denver, personally appeared Patti K. Fielding, who acknowledged herself to be
the Executive Vice President of AIMCO-GP, Inc., a Delaware corporation,  general
partner of AIMCO Properties, L.P., a Delaware limited partnership, and on behalf
of said limited  partnership  did  acknowledge  that she, as such Executive Vice
President being  authorized so to do, executed the foregoing  instrument for the
purposes therein  contained,  by signing the name of the limited  partnership by
herself as Executive Vice President.

      As Witness:  my hand and notarial seal.

My commission expires: August 02, 2006

                                    /s/Cathleen M. O'Donnell
                                    Cathleen M. O'Donnell
                                    Notary Public


<PAGE>



                                    EXHIBIT A

                            MODIFICATIONS TO GUARANTY


The following  modifications  are made to the text of the Guaranty that precedes
this Exhibit:

1.              Lender may assign its rights  under this  Guaranty  pursuant  to
                Section  12 of  this  Guaranty  only  to a  purchaser  or  other
                transferee of the Loan.

2.              Paragraph 2(a) of this Guaranty is deleted in its entirety;  and
                paragraph 2(b) of this Guaranty is modified to read as follows:

(b)             All  amounts  for which  Borrower  is  personally  liable  under
                Paragraphs 9(c) through 9(f) of the Note.
<PAGE>
                                                                   Exhibit 10.37

                           MULTIFAMILY DEED OF TRUST,
                              ASSIGNMENT OF RENTS
                             AND SECURITY AGREEMENT

                      (MARYLAND - REVISION DATE 11-01-2000)


<PAGE>



                                                      FHLMC Loan No. 002702010
                                                        Lazy Hollow Apartments


                           MULTIFAMILY DEED OF TRUST,
                             ASSIGNMENT OF RENTS AND
                               SECURITY AGREEMENT
                      (MARYLAND - REVISION DATE 11-01-2000)


      THIS MULTIFAMILY DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
(the  "Instrument")  is made as of this 31st day of March,  2003, by LAZY HOLLOW
PARTNERS  a  general  partnership  organized  and  existing  under  the  laws of
California,  whose address is c/o AIMCO, Stanford Place 3, 4582 South Ulster St.
Parkway, Suite 1100, Denver, Colorado 80237, as grantor ("Borrower"), to BERNICE
H. CILLEY,  whose  address is c/o Troutman  Sanders LLP,  1111 East Main Street,
Richmond,  Virginia  23219,  as trustee  ("Trustee"),  for the benefit of REILLY
MORTGAGE GROUP, INC., a corporation organized and existing under the laws of the
District of Columbia, whose address is 2010 Corporate Ridge, Suite 1000, McLean,
Virginia 22102, as beneficiary ("Lender").

      Borrower,  in  consideration  of the Indebtedness and the trust created by
this Instrument,  irrevocably grants,  conveys and assigns to Trustee, in trust,
with power of sale,  the Mortgaged  Property,  including the Land located in the
County of Howard,  State of Maryland and described in Exhibit A attached to this
Instrument,  and authorizes  Trustee to sell the Mortgaged Property upon default
by any lawful means, as provided in this Instrument,  and assents to the passage
of a decree for the sale of the Mortgage Property.

      TO  SECURE  TO LENDER  the  repayment  of the  Indebtedness  evidenced  by
Borrower's  Multifamily  Note  payable to  Lender,  dated as of the date of this
Instrument,  and  maturing  on  April  1,  2023,  in  the  principal  amount  of
$10,000,000.00,   and  all  renewals,   extensions  and   modifications  of  the
Indebtedness,  and the  performance  of the covenants and agreements of Borrower
contained in the Loan Documents.

      Borrower  represents and warrants that Borrower is lawfully  seized of the
Mortgaged Property and has the right,  power and authority to grant,  convey and
assign the Mortgaged Property,  and that the Mortgaged Property is unencumbered.
Borrower  covenants that Borrower will warrant and defend specially the title to
the Mortgaged Property against all claims and demands,  subject to any easements
and  restrictions  listed in a schedule of  exceptions  to coverage in any title
insurance  policy  issued to Lender  contemporaneously  with the  execution  and
recordation of this Instrument and insuring  Lender's  interest in the Mortgaged
Property.

Covenants. Borrower and Lender covenant and agree as follows:

      1.  DEFINITIONS.  The  following  terms,  when  used  in  this  Instrument
(including when used in the above recitals), shall have the following meanings:

      (a) "Borrower"  means all persons or entities  identified as "Borrower" in
the first  paragraph of this  Instrument,  together  with their  successors  and
assigns.

      (b) "Collateral  Agreement" means any separate  agreement between Borrower
and  Lender  for  the  purpose  of  establishing  replacement  reserves  for the
Mortgaged  Property,  establishing a fund to assure the completion of repairs or
improvements  specified  in  that  agreement,   or  assuring  reduction  of  the
outstanding  principal balance of the Indebtedness if the occupancy of or income
from the  Mortgaged  Property  does not  increase to a level  specified  in that
agreement,  or any other  agreement or  agreements  between  Borrower and Lender
which provide for the establishment of any other fund, reserve or account.

      (c)  "Controlling   Entity"  means  an  entity  which  owns,  directly  or
indirectly  through  one  or  more  intermediaries,  (A) a  general  partnership
interest or more than 50% of the limited  partnership  interests in Borrower (if
Borrower  is a  partnership  or joint  venture),  (B) a  manager's  interest  in
Borrower or more than 50% of the ownership or  membership  interests in Borrower
(if Borrower is a limited liability company),  or (C) more than 50% of any class
of voting stock of Borrower (if Borrower is a corporation).

      (d)   "Environmental   Permit"  means  any  permit,   license,   or  other
authorization  issued  under any  Hazardous  Materials  Law with  respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.

      (e) "Event of Default" means the occurrence of any event listed in Section
22.

      (f) "Fixtures"  means all property which is so attached to the Land or the
Improvements  as to  constitute  a  fixture  under  applicable  law,  including:
machinery,   equipment,  engines,  boilers,  incinerators,   installed  building
materials;  systems and equipment  for the purpose of supplying or  distributing
heating,  cooling,  electricity,  gas, water,  air, or light;  antennas,  cable,
wiring and conduits used in connection with radio,  television,  security,  fire
prevention,  or fire  detection or otherwise used to carry  electronic  signals;
telephone systems and equipment;  elevators and related machinery and equipment;
fire detection, prevention and extinguishing systems and apparatus; security and
access control systems and apparatus;  plumbing systems; water heaters,  ranges,
stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers,
dryers and other appliances;  light fixtures,  awnings,  storm windows and storm
doors; pictures,  screens,  blinds, shades,  curtains and curtain rods; mirrors;
cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants;
swimming pools; and exercise equipment.

      (g) "Governmental  Authority" means any board,  commission,  department or
body of any  municipal,  county,  state or  federal  governmental  unit,  or any
subdivision of any of them, that has or acquires jurisdiction over the Mortgaged
Property or the use, operation or improvement of the Mortgaged Property.

      (h)  "Hazardous  Materials"  means  petroleum and  petroleum  products and
compounds containing them, including gasoline,  diesel fuel and oil; explosives;
flammable materials;  radioactive materials;  polychlorinated biphenyls ("PCBs")
and  compounds   containing  them;  lead  and  lead-based  paint;   asbestos  or
asbestos-containing  materials  in any  form  that is or could  become  friable;
underground  or  above-ground  storage  tanks,  whether empty or containing  any
substance;  any  substance  the presence of which on the  Mortgaged  Property is
prohibited by any federal, state or local authority; any substance that requires
special  handling;  and any other  material  or  substance  now or in the future
defined as a "hazardous  substance,"  "hazardous  material,"  "hazardous waste,"
"toxic substance,"  "toxic pollutant,"  "contaminant," or "pollutant" within the
meaning of any Hazardous Materials Law.

      (i) "Hazardous  Materials Laws" means all federal,  state, and local laws,
ordinances and regulations and standards, rules, policies and other governmental
requirements,  administrative  rulings and court judgments and decrees in effect
now or in the future and  including  all  amendments,  that relate to  Hazardous
Materials  and  apply  to  Borrower  or to  the  Mortgaged  Property.  Hazardous
Materials Laws include, but are not limited to, the Comprehensive  Environmental
Response,  Compensation and Liability Act, 42 U.S.C.  Section 9601, et seq., the
Resource  Conservation  and Recovery Act, 42 U.S.C.  Section 6901, et seq.,  the
Toxic  Substance  Control Act, 15 U.S.C.  Section 2601, et seq., the Clean Water
Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation
Act, 49 U.S.C. Section 5101, and their state analogs.

      (j) "Impositions" and "Imposition Deposits" are defined in Section 7(a).

      (k)  "Improvements"  means the buildings,  structures,  improvements,  and
alterations now  constructed or at any time in the future  constructed or placed
upon the Land, including any future replacements and additions.

      (l)  "Indebtedness"  means the  principal  of,  interest on, and all other
amounts  due at any time  under,  the Note,  this  Instrument  or any other Loan
Document,  including prepayment premiums,  late charges,  default interest,  and
advances as provided in Section 12 to protect the security of this Instrument.

      (m) "Initial Owners" means,  with respect to Borrower or any other entity,
the persons or entities who on the date of the Note own in the aggregate 100% of
the ownership interests in Borrower or that entity.

      (n) "Land" means the land described in Exhibit A.

      (o) "Leases"  means all present and future  leases,  subleases,  licenses,
concessions or grants or other  possessory  interests now or hereafter in force,
whether oral or written,  covering or affecting the Mortgaged  Property,  or any
portion of the Mortgaged  Property  (including  proprietary  leases or occupancy
agreements  if  Borrower  is  a  cooperative  housing   corporation),   and  all
modifications, extensions or renewals.

      (p)  "Lender"  means  the  entity  identified  as  "Lender"  in the  first
paragraph of this Instrument, or any subsequent holder of the Note.

      (q) "Loan Documents" means the Note, this Instrument,  all guaranties, all
indemnity agreements,  all Collateral  Agreements,  O&M Programs,  and any other
documents now or in the future executed by Borrower,  any guarantor or any other
person in connection  with the loan evidenced by the Note, as such documents may
be amended from time to time.

      (r) "Loan  Servicer" means the entity that from time to time is designated
by Lender to collect  payments and deposits and receive  notices under the Note,
this  Instrument and any other Loan Document,  and otherwise to service the loan
evidenced by the Note for the benefit of Lender. Unless Borrower receives notice
to the contrary,  the Loan Servicer is the entity  identified as "Lender" in the
first paragraph of this Instrument.

      (s) "Mortgaged Property" means all of Borrower's present and future right,
title and interest in and to all of the following:

            (1)   the Land;

            (2)   the Improvements;

            (3)   the Fixtures;

            (4)   the Personalty;

            (5)   all  current  and  future   rights,   including   air  rights,
                  development rights,  zoning rights and other similar rights or
                  interests,  easements,  tenements,  rights-of-way,  strips and
                  gores of land, streets,  alleys, roads, sewer rights,  waters,
                  watercourses,  and appurtenances related to or benefitting the
                  Land or the  Improvements,  or  both,  and all  rights-of-way,
                  streets,  alleys  and roads  which may have been or may in the
                  future be vacated;

            (6)   all  proceeds  paid or to be paid by any  insurer of the Land,
                  the  Improvements,  the Fixtures,  the Personalty or any other
                  part  of the  Mortgaged  Property,  whether  or  not  Borrower
                  obtained the insurance pursuant to Lender's requirement;

            (7)   all awards, payments and other compensation made or to be made
                  by any municipal,  state or federal  authority with respect to
                  the Land, the  Improvements,  the Fixtures,  the Personalty or
                  any other part of the Mortgaged Property, including any awards
                  or settlements resulting from condemnation  proceedings or the
                  total or partial  taking of the Land,  the  Improvements,  the
                  Fixtures,  the  Personalty  or any other part of the Mortgaged
                  Property  under the power of eminent  domain or otherwise  and
                  including any conveyance in lieu thereof;

            (8)   all  contracts,  options and other  agreements for the sale of
                  the Land, the  Improvements,  the Fixtures,  the Personalty or
                  any  other  part of the  Mortgaged  Property  entered  into by
                  Borrower now or in the future,  including  cash or  securities
                  deposited   to  secure   performance   by   parties  of  their
                  obligations;

            (9)   all proceeds from the conversion, voluntary or involuntary, of
                  any of the above into cash or liquidated claims, and the right
                  to collect such proceeds;

            (10)  all Rents and Leases;

            (11)  all  earnings,  royalties,  accounts  receivable,  issues  and
                  profits from the Land, the  Improvements  or any other part of
                  the Mortgaged  Property,  and all undisbursed  proceeds of the
                  loan  secured  by  this  Instrument  and,  if  Borrower  is  a
                  cooperative  housing   corporation,   maintenance  charges  or
                  assessments payable by shareholders or residents;

            (12)  all Imposition Deposits;

            (13)  all refunds or rebates of Impositions by any municipal,  state
                  or federal  authority or insurance company (other than refunds
                  applicable  to periods  before the real  property  tax year in
                  which this Instrument is dated);

            (14)  all tenant security  deposits which have not been forfeited by
                  any tenant under any Lease; and

            (15)  all  names  under  or by  which  any  of the  above  Mortgaged
                  Property may be operated or known,  and all trademarks,  trade
                  names, and goodwill relating to any of the Mortgaged Property.

      (t)  "Note"  means  the  Multifamily  Note  described  on  page 1 of  this
Instrument,  including  all  schedules,  riders,  allonges and addenda,  as such
Multifamily Note may be amended from time to time.

      (u) "O&M Program" is defined in Section 18(a).

      (v) "Personalty" means all furniture,  furnishings,  equipment, machinery,
building materials,  appliances, goods, supplies, tools, books, records (whether
in written or electronic form),  computer equipment  (hardware and software) and
other tangible  personal property (other than Fixtures) which are used now or in
the future in connection with the ownership, management or operation of the Land
or the Improvements or are located on the Land or in the  Improvements,  and any
operating agreements relating to the Land or the Improvements,  and any surveys,
plans and  specifications  and  contracts  for  architectural,  engineering  and
construction  services  relating to the Land or the  Improvements  and all other
intangible  property  and  rights  relating  to the  operation  of,  or  used in
connection  with,  the  Land or the  Improvements,  including  all  governmental
permits relating to any activities on the Land.

      (w) "Property Jurisdiction" is defined in Section 30(a).

      (x) "Rents" means all rents (whether from  residential or  non-residential
space),  revenues  and other income of the Land or the  Improvements,  including
parking fees,  laundry and vending machine income and fees and charges for food,
health care and other services provided at the Mortgaged  Property,  whether now
due, past due, or to become due, and deposits forfeited by tenants.

      (y) "Taxes" means all taxes, assessments, vault rentals and other charges,
if any,  general,  special or otherwise,  including all assessments for schools,
public betterments and general or local improvements, which are levied, assessed
or imposed by any public authority or quasi-public authority,  and which, if not
paid, will become a lien, on the Land or the Improvements.

      (z) "Transfer" means (A) a sale, assignment, transfer or other disposition
(whether  voluntary,  involuntary  or by  operation of law);  (B) the  granting,
creating or  attachment of a lien,  encumbrance  or security  interest  (whether
voluntary,  involuntary  or by  operation  of law);  (C) the  issuance  or other
creation of an ownership  interest in a legal  entity,  including a  partnership
interest,  interest in a limited  liability  company or corporate stock; (D) the
withdrawal,  retirement,  removal or  involuntary  resignation of a partner in a
partnership or a member or manager in a limited  liability  company;  or (E) the
merger,  dissolution,  liquidation,  or  consolidation  of a legal entity or the
reconstitution  of one type of legal entity into  another type of legal  entity.
"Transfer"  does not include (i) a  conveyance  of the  Mortgaged  Property at a
judicial or  non-judicial  foreclosure  sale under this  Instrument  or (ii) the
Mortgaged  Property  becoming  part of a  bankruptcy  estate by operation of law
under the United  States  Bankruptcy  Code.  For  purposes of defining  the term
"Transfer," the term "partnership" shall mean a general  partnership,  a limited
partnership,  a joint venture and a limited liability partnership,  and the term
"partner" shall mean a general partner, a limited partner and a joint venturer.

      2. UNIFORM COMMERCIAL CODE SECURITY  AGREEMENT.  This Instrument is also a
security  agreement  under the Uniform  Commercial Code for any of the Mortgaged
Property  which,  under  applicable  law, may be subject to a security  interest
under the Uniform  Commercial Code,  whether acquired now or in the future,  and
all  products  and  cash  and  non-cash  proceeds  thereof  (collectively,  "UCC
Collateral"),  and Borrower  hereby grants to Lender a security  interest in the
UCC  Collateral.  Borrower  shall  execute and deliver to Lender,  upon Lender's
request,  financing statements,  continuation statements and amendments, in such
form as Lender  may  require  to  perfect or  continue  the  perfection  of this
security  interest.  Borrower  shall  pay all  filing  costs  and all  costs and
expenses  of any  record  searches  for  financing  statements  that  Lender may
require.  Without the prior written consent of Lender, Borrower shall not create
or  permit  to exist  any  other  lien or  security  interest  in any of the UCC
Collateral. If an Event of Default has occurred and is continuing,  Lender shall
have the  remedies  of a secured  party under the Uniform  Commercial  Code,  in
addition  to  all  remedies  provided  by  this  Instrument  or  existing  under
applicable  law. In exercising  any  remedies,  Lender may exercise its remedies
against the UCC Collateral separately or together,  and in any order, without in
any way affecting the  availability of Lender's other remedies.  This Instrument
constitutes  a financing  statement  with  respect to any part of the  Mortgaged
Property which is or may become a Fixture.

      3. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

      (a) As part of the consideration for the Indebtedness, Borrower absolutely
and  unconditionally  assigns  and  transfers  to Lender  all  Rents.  It is the
intention of Borrower to establish a present,  absolute and irrevocable transfer
and  assignment  to Lender of all Rents and to authorize  and empower  Lender to
collect and receive all Rents  without the  necessity  of further  action on the
part of Borrower.  Promptly upon request by Lender,  Borrower  agrees to execute
and deliver such further  assignments  as Lender may from time to time  require.
Borrower and Lender intend this assignment of Rents to be immediately  effective
and to  constitute an absolute  present  assignment  and not an  assignment  for
additional  security  only.  For  purposes  of giving  effect  to this  absolute
assignment of Rents, and for no other purpose, Rents shall not be deemed to be a
part of the  "Mortgaged  Property"  as that term is  defined  in  Section  1(s).
However, if this present,  absolute and unconditional assignment of Rents is not
enforceable by its terms under the laws of the Property  Jurisdiction,  then the
Rents  shall  be  included  as a part of the  Mortgaged  Property  and it is the
intention of the Borrower that in this  circumstance  this Instrument create and
perfect a lien on Rents in favor of Lender,  which lien shall be effective as of
the date of this Instrument.

      (b) After  the  occurrence  of an Event of  Default,  Borrower  authorizes
Lender to collect,  sue for and compromise  Rents and directs each tenant of the
Mortgaged  Property to pay all Rents to, or as  directed  by,  Lender.  However,
until the occurrence of an Event of Default,  Lender hereby grants to Borrower a
revocable  license to collect and receive all Rents,  to hold all Rents in trust
for the  benefit  of Lender  and to apply all Rents to pay the  installments  of
interest and principal then due and payable under the Note and the other amounts
then due and  payable  under  the other  Loan  Documents,  including  Imposition
Deposits,  and to pay the current costs and expenses of managing,  operating and
maintaining the Mortgaged  Property,  including  utilities,  Taxes and insurance
premiums  (to  the  extent  not  included  in   Imposition   Deposits),   tenant
improvements and other capital expenditures.  So long as no Event of Default has
occurred and is continuing,  the Rents remaining after  application  pursuant to
the  preceding  sentence  may be  retained  by  Borrower  free and clear of, and
released from, Lender's rights with respect to Rents under this Instrument. From
and after the  occurrence  of an Event of Default,  and without the necessity of
Lender  entering  upon and  taking  and  maintaining  control  of the  Mortgaged
Property directly,  or by a receiver,  Borrower's license to collect Rents shall
automatically terminate and Lender shall without notice be entitled to all Rents
as they become due and payable,  including  Rents then due and unpaid.  Borrower
shall pay to Lender upon demand all Rents to which  Lender is  entitled.  At any
time on or after the date of  Lender's  demand for Rents,  Lender may give,  and
Borrower hereby irrevocably  authorizes Lender to give, notice to all tenants of
the Mortgaged  Property  instructing them to pay all Rents to Lender,  no tenant
shall be obligated to inquire  further as to the occurrence or continuance of an
Event of  Default,  and no tenant  shall be  obligated  to pay to  Borrower  any
amounts which are actually paid to Lender in response to such a notice. Any such
notice by Lender  shall be delivered  to each tenant  personally,  by mail or by
delivering  such demand to each rental unit.  Borrower  shall not interfere with
and shall cooperate with Lender's collection of such Rents.

      (c)  Borrower  represents  and  warrants to Lender that  Borrower  has not
executed  any prior  assignment  of Rents  (other  than an  assignment  of Rents
securing  indebtedness that will be paid off and discharged with the proceeds of
the loan evidenced by the Note),  that Borrower has not performed,  and Borrower
covenants  and agrees that it will not perform,  any acts and has not  executed,
and shall not execute, any instrument which would prevent Lender from exercising
its rights  under  this  Section  3, and that at the time of  execution  of this
Instrument  there has been no  anticipation  or prepayment of any Rents for more
than two months prior to the due dates of such Rents. Borrower shall not collect
or accept  payment of any Rents  more than two months  prior to the due dates of
such Rents.

      (d) If an Event of Default has  occurred  and is  continuing,  Lender may,
regardless of the adequacy of Lender's  security or the solvency of Borrower and
even in the absence of waste,  enter upon and take and maintain  full control of
the  Mortgaged  Property  in  order  to  perform  all acts  that  Lender  in its
discretion  determines  to be  necessary  or  desirable  for the  operation  and
maintenance of the Mortgaged Property, including the execution,  cancellation or
modification  of Leases,  the collection of all Rents,  the making of repairs to
the Mortgaged  Property and the execution or termination of contracts  providing
for the management,  operation or maintenance of the Mortgaged Property, for the
purposes  of  enforcing  the  assignment  of Rents  pursuant  to  Section  3(a),
protecting  the Mortgaged  Property or the security of this  Instrument,  or for
such other purposes as Lender in its discretion may deem necessary or desirable.
Alternatively, if an Event of Default has occurred and is continuing, regardless
of the adequacy of Lender's security,  without regard to Borrower's solvency and
without the  necessity  of giving  prior  notice  (oral or written) to Borrower,
Lender  may apply to any court  having  jurisdiction  for the  appointment  of a
receiver for the Mortgaged  Property to take any or all of the actions set forth
in the  preceding  sentence.  If  Lender  elects  to seek the  appointment  of a
receiver  for the  Mortgaged  Property at any time after an Event of Default has
occurred and is  continuing,  Borrower,  by its  execution  of this  Instrument,
expressly   consents  to  the  appointment  of  such  receiver,   including  the
appointment of a receiver ex parte if permitted by applicable law. Lender or the
receiver,  as the case may be, shall be entitled to receive a reasonable fee for
managing the Mortgaged  Property.  Immediately upon appointment of a receiver or
immediately upon the Lender's entering upon and taking possession and control of
the Mortgaged  Property,  Borrower shall  surrender  possession of the Mortgaged
Property  to Lender or the  receiver,  as the case may be, and shall  deliver to
Lender or the receiver,  as the case may be, all documents,  records  (including
records  on  electronic  or  magnetic  media),  accounts,  surveys,  plans,  and
specifications  relating to the Mortgaged Property and all security deposits and
prepaid Rents. In the event Lender takes possession and control of the Mortgaged
Property, Lender may exclude Borrower and its representatives from the Mortgaged
Property. Borrower acknowledges and agrees that the exercise by Lender of any of
the rights  conferred under this Section 3 shall not be construed to make Lender
a  mortgagee-in-possession  of the Mortgaged  Property so long as Lender has not
itself entered into actual possession of the Land and Improvements.

      (e) If Lender  enters the  Mortgaged  Property,  Lender shall be liable to
account  only to Borrower  and only for those Rents  actually  received.  Lender
shall not be liable to Borrower,  anyone  claiming under or through  Borrower or
anyone  having an interest in the  Mortgaged  Property,  by reason of any act or
omission  of Lender  under this  Section 3, and  Borrower  hereby  releases  and
discharges  Lender from any such  liability to the fullest  extent  permitted by
law.

      (f) If the Rents are not sufficient to meet the costs of taking control of
and managing the Mortgaged Property and collecting the Rents, any funds expended
by Lender for such purposes shall become an additional part of the  Indebtedness
as provided in Section 12.

      (g) Any entering upon and taking of control of the  Mortgaged  Property by
Lender or the  receiver,  as the case may be,  and any  application  of Rents as
provided  in this  Instrument  shall not cure or waive any Event of  Default  or
invalidate any other right or remedy of Lender under  applicable law or provided
for in this Instrument.

      4. ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

      (a) As part of the consideration for the Indebtedness, Borrower absolutely
and  unconditionally  assigns and transfers to Lender all of  Borrower's  right,
title and  interest  in, to and under the Leases,  including  Borrower's  right,
power  and  authority  to  modify  the  terms of any such  Lease,  or  extend or
terminate  any such  Lease.  It is the  intention  of  Borrower  to  establish a
present,  absolute and  irrevocable  transfer and assignment to Lender of all of
Borrower's right,  title and interest in, to and under the Leases.  Borrower and
Lender intend this  assignment of the Leases to be immediately  effective and to
constitute an absolute  present  assignment and not an assignment for additional
security only. For purposes of giving effect to this absolute  assignment of the
Leases, and for no other purpose, the Leases shall not be deemed to be a part of
the "Mortgaged  Property" as that term is defined in Section 1(s).  However,  if
this  present,  absolute  and  unconditional  assignment  of the  Leases  is not
enforceable by its terms under the laws of the Property  Jurisdiction,  then the
Leases  shall be  included  as a part of the  Mortgaged  Property  and it is the
intention of the Borrower that in this  circumstance  this Instrument create and
perfect a lien on the Leases in favor of Lender,  which lien shall be  effective
as of the date of this Instrument.

      (b) Until  Lender  gives  notice to Borrower  of Lender's  exercise of its
rights under this Section 4, Borrower shall have all rights, power and authority
granted to Borrower under any Lease (except as otherwise limited by this Section
or any other  provision  of this  Instrument),  including  the right,  power and
authority  to modify  the terms of any Lease or extend or  terminate  any Lease.
Upon the  occurrence of an Event of Default,  the  permission  given to Borrower
pursuant to the preceding  sentence to exercise all rights,  power and authority
under  Leases  shall  automatically  terminate.  Borrower  shall comply with and
observe   Borrower's   obligations  under  all  Leases,   including   Borrower's
obligations  pertaining to the  maintenance  and  disposition of tenant security
deposits.

      (c) Borrower  acknowledges and agrees that the exercise by Lender,  either
directly or by a receiver,  of any of the rights  conferred under this Section 4
shall not be construed to make Lender a mortgagee-in-possession of the Mortgaged
Property so long as Lender has not itself entered into actual  possession of the
Land and the  Improvements.  The  acceptance by Lender of the  assignment of the
Leases  pursuant to Section 4(a) shall not at any time or in any event  obligate
Lender to take any  action  under this  Instrument  or to expend any money or to
incur any  expenses.  Lender  shall  not be liable in any way for any  injury or
damage  to person or  property  sustained  by any  person  or  persons,  firm or
corporation in or about the Mortgaged  Property.  Prior to Lender's actual entry
into and taking  possession of the Mortgaged  Property,  Lender shall not (i) be
obligated to perform any of the terms, covenants and conditions contained in any
Lease (or  otherwise  have any  obligation  with respect to any Lease);  (ii) be
obligated to appear in or defend any action or proceeding  relating to the Lease
or the Mortgaged Property;  or (iii) be responsible for the operation,  control,
care,  management  or repair of the  Mortgaged  Property  or any  portion of the
Mortgaged  Property.   The  execution  of  this  Instrument  by  Borrower  shall
constitute  conclusive  evidence  that  all  responsibility  for the  operation,
control,  care,  management and repair of the Mortgaged Property is and shall be
that of Borrower, prior to such actual entry and taking of possession.

      (d) Upon delivery of notice by Lender to Borrower of Lender's  exercise of
Lender's  rights  under this  Section 4 at any time after the  occurrence  of an
Event of Default,  and without the necessity of Lender  entering upon and taking
and maintaining control of the Mortgaged Property directly, by a receiver, or by
any  other  manner  or  proceeding   permitted  by  the  laws  of  the  Property
Jurisdiction,  Lender  immediately  shall have all rights,  powers and authority
granted to Borrower under any Lease, including the right, power and authority to
modify the terms of any such Lease, or extend or terminate any such Lease.

      (e) Borrower shall,  promptly upon Lender's request,  deliver to Lender an
executed  copy  of each  residential  Lease  then  in  effect.  All  Leases  for
residential  dwelling units shall be on forms  approved by Lender,  shall be for
initial terms of at least six months and not more than two years,  and shall not
include options to purchase.

      (f)  Borrower  shall not lease any portion of the  Mortgaged  Property for
non-residential use except with the prior written consent of Lender and Lender's
prior written  approval of the Lease  agreement.  Borrower  shall not modify the
terms of, or extend or terminate,  any Lease for  non-residential use (including
any Lease in existence on the date of this Instrument) without the prior written
consent of  Lender.  Borrower  shall,  without  request  by  Lender,  deliver an
executed copy of each non-residential  Lease to Lender promptly after such Lease
is signed.  All  non-residential  Leases,  including  renewals or  extensions of
existing Leases, shall specifically provide that (1) such Leases are subordinate
to the lien of this  Instrument;  (2) the tenant  shall attorn to Lender and any
purchaser at a  foreclosure  sale,  such  attornment  to be  self-executing  and
effective upon  acquisition of title to the Mortgaged  Property by any purchaser
at a  foreclosure  sale or by Lender in any  manner;  (3) the  tenant  agrees to
execute such further  evidences of  attornment  as Lender or any  purchaser at a
foreclosure  sale may from  time to time  request;  (4) the  Lease  shall not be
terminated by foreclosure or any other transfer of the Mortgaged  Property;  (5)
after  a  foreclosure  sale  of the  Mortgaged  Property,  Lender  or any  other
purchaser at such foreclosure sale may, at Lender's or such purchaser's  option,
accept or terminate such Lease; and (6) the tenant shall, upon receipt after the
occurrence  of an Event of Default of a written  request  from  Lender,  pay all
Rents payable under the Lease to Lender.

      (g)  Borrower  shall not receive or accept  Rent under any Lease  (whether
residential or non-residential) for more than two months in advance.

      5. PAYMENT OF INDEBTEDNESS;  PERFORMANCE UNDER LOAN DOCUMENTS;  PREPAYMENT
PREMIUM.  Borrower shall pay the  Indebtedness  when due in accordance  with the
terms of the Note and the other Loan  Documents and shall  perform,  observe and
comply  with all  other  provisions  of the Note and the other  Loan  Documents.
Borrower shall pay a prepayment  premium in connection with certain  prepayments
of the  Indebtedness,  including a payment made after  Lender's  exercise of any
right of acceleration of the Indebtedness, as provided in the Note.

      6.  EXCULPATION.   Borrower's   personal  liability  for  payment  of  the
Indebtedness and for performance of the other  obligations to be performed by it
under this Instrument is limited in the manner,  and to the extent,  provided in
the Note.

      7. DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES.

      (a) Borrower shall deposit with Lender on the day monthly  installments of
principal  or  interest,  or both,  are due  under the Note (or on  another  day
designated  in writing by Lender),  until the  Indebtedness  is paid in full, an
additional  amount  sufficient to accumulate with Lender the entire sum required
to pay, when due (1) any water and sewer charges which,  if not paid, may result
in a lien on all or any part of the  Mortgaged  Property,  (2) the  premiums for
fire and other hazard insurance, rent loss insurance and such other insurance as
Lender may  require  under  Section  19, (3) Taxes,  and (4)  amounts  for other
charges and expenses  which  Lender at any time  reasonably  deems  necessary to
protect  the  Mortgaged  Property,  to prevent  the  imposition  of liens on the
Mortgaged  Property,  or  otherwise  to  protect  Lender's  interests,   all  as
reasonably  estimated  from  time to  time by  Lender,  plus  one-sixth  of such
estimate.  The amounts  deposited under the preceding  sentence are collectively
referred to in this Instrument as the "Imposition Deposits".  The obligations of
Borrower  for  which the  Imposition  Deposits  are  required  are  collectively
referred to in this  Instrument as  "Impositions".  The amount of the Imposition
Deposits shall be sufficient to enable Lender to pay each Imposition  before the
last date upon which such  payment  may be made  without any penalty or interest
charge being added.  Lender shall  maintain  records  indicating how much of the
monthly Imposition  Deposits and how much of the aggregate  Imposition  Deposits
held by Lender are held for the purpose of paying Taxes,  insurance premiums and
each other  obligation of Borrower for which  Imposition  Deposits are required.
Any waiver by Lender of the requirement that Borrower remit Imposition  Deposits
to Lender may be revoked by Lender,  in  Lender's  discretion,  at any time upon
notice to Borrower.

      (b)  Imposition  Deposits  shall be held in an  institution  (which may be
Lender, if Lender is such an institution) whose deposits or accounts are insured
or  guaranteed  by a  federal  agency.  Lender  shall not be  obligated  to open
additional  accounts or deposit Imposition  Deposits in additional  institutions
when the amount of the  Imposition  Deposits  exceeds the maximum  amount of the
federal  deposit  insurance  or  guaranty.  Lender  shall  apply the  Imposition
Deposits to pay  Impositions  so long as no Event of Default has occurred and is
continuing.  Unless applicable law requires, Lender shall not be required to pay
Borrower any interest,  earnings or profits on the Imposition Deposits. Borrower
hereby  pledges  and  grants to Lender a  security  interest  in the  Imposition
Deposits as  additional  security for all of Borrower's  obligations  under this
Instrument and the other Loan Documents. Any amounts deposited with Lender under
this  Section 7 shall not be trust  funds,  nor shall they operate to reduce the
Indebtedness, unless applied by Lender for that purpose under Section 7(e).

      (c) If Lender  receives a bill or invoice for an Imposition,  Lender shall
pay the  Imposition  from the Imposition  Deposits held by Lender.  Lender shall
have no  obligation to pay any  Imposition  to the extent it exceeds  Imposition
Deposits  then held by Lender.  Lender may pay an  Imposition  according  to any
bill,  statement or estimate  from the  appropriate  public  office or insurance
company without  inquiring into the accuracy of the bill,  statement or estimate
or into the validity of the Imposition.

      (d) If at any time the amount of the  Imposition  Deposits  held by Lender
for  payment of a specific  Imposition  exceeds  the  amount  reasonably  deemed
necessary  by Lender  plus  one-sixth  of such  estimate,  the  excess  shall be
credited against future installments of Imposition Deposits.  If at any time the
amount of the  Imposition  Deposits  held by Lender  for  payment  of a specific
Imposition  is less  than  the  amount  reasonably  estimated  by  Lender  to be
necessary  plus  one-sixth of such  estimate,  Borrower  shall pay to Lender the
amount of the deficiency within 15 days after notice from Lender.

      (e) If an Event of Default  has  occurred  and is  continuing,  Lender may
apply  any  Imposition  Deposits,  in any  amounts  and in any  order as  Lender
determines,  in  Lender's  discretion,  to pay any  Impositions  or as a  credit
against the Indebtedness. Upon payment in full of the Indebtedness, Lender shall
refund to Borrower any Imposition Deposits held by Lender.

      8. COLLATERAL AGREEMENTS.  Borrower shall deposit with Lender such amounts
as may be  required  by any  Collateral  Agreement  and shall  perform all other
obligations of Borrower under each Collateral Agreement.

      9. APPLICATION OF PAYMENTS. If at any time Lender receives,  from Borrower
or otherwise,  any amount applicable to the Indebtedness  which is less than all
amounts  due and  payable at such time,  then  Lender may apply that  payment to
amounts  then due and  payable  in any  manner  and in any order  determined  by
Lender, in Lender's  discretion.  Neither Lender's acceptance of an amount which
is less than all amounts then due and payable nor Lender's  application  of such
payment in the manner  authorized  shall  constitute  or be deemed to constitute
either  a  waiver  of  the  unpaid  amounts  or  an  accord  and   satisfaction.
Notwithstanding  the  application  of  any  such  amount  to  the  Indebtedness,
Borrower's   obligations  under  this  Instrument  and  the  Note  shall  remain
unchanged.

      10. COMPLIANCE WITH LAWS. Borrower shall comply with all laws, ordinances,
regulations  and  requirements  of any  Governmental  Authority and all recorded
lawful covenants and agreements relating to or affecting the Mortgaged Property,
including  all  laws,  ordinances,   regulations,   requirements  and  covenants
pertaining to health and safety,  construction  of improvements on the Mortgaged
Property,  fair  housing,  zoning and land use, and Leases.  Borrower also shall
comply with all applicable  laws that pertain to the maintenance and disposition
of  tenant  security  deposits.  Borrower  shall at all times  maintain  records
sufficient to  demonstrate  compliance  with the  provisions of this Section 10.
Borrower shall take appropriate  measures to prevent, and shall not engage in or
knowingly permit,  any illegal  activities at the Mortgaged  Property that could
endanger tenants or visitors, result in damage to the Mortgaged Property, result
in forfeiture of the Mortgaged Property, or otherwise materially impair the lien
created by this  Instrument  or  Lender's  interest in the  Mortgaged  Property.
Borrower  represents  and  warrants to Lender  that no portion of the  Mortgaged
Property  has  been  or will be  purchased  with  the  proceeds  of any  illegal
activity.

      11. USE OF PROPERTY. Unless required by applicable law, Borrower shall not
(a) except for any change in use  approved by Lender,  allow  changes in the use
for which all or any part of the  Mortgaged  Property  is being used at the time
this  Instrument  was executed,  (b) convert any  individual  dwelling  units or
common  areas to  commercial  use,  (c) initiate or acquiesce in a change in the
zoning   classification  of  the  Mortgaged  Property,   or  (d)  establish  any
condominium or cooperative regime with respect to the Mortgaged Property.

      12. PROTECTION OF LENDER'S SECURITY.

      (a) If  Borrower  fails  to  perform  any of its  obligations  under  this
Instrument  or any  other  Loan  Document,  or if any  action or  proceeding  is
commenced which purports to affect the Mortgaged Property,  Lender's security or
Lender's rights under this  Instrument,  including  eminent domain,  insolvency,
code  enforcement,  civil  or  criminal  forfeiture,  enforcement  of  Hazardous
Materials  Laws,   fraudulent   conveyance  or  reorganizations  or  proceedings
involving a bankrupt or decedent,  then Lender at Lender's  option may make such
appearances, disburse such sums and take such actions as Lender reasonably deems
necessary  to perform  such  obligations  of  Borrower  and to protect  Lender's
interest, including (1) payment of fees and out of pocket expenses of attorneys,
accountants,  inspectors and consultants,  (2) entry upon the Mortgaged Property
to make  repairs  or secure  the  Mortgaged  Property,  (3)  procurement  of the
insurance  required by Section 19, and (4) payment of amounts which Borrower has
failed to pay under Sections 15 and 17.

      (b) Any amounts  disbursed  by Lender  under this Section 12, or under any
other provision of this  Instrument that treats such  disbursement as being made
under this  Section  12,  shall be added to, and become  part of, the  principal
component of the  Indebtedness,  shall be immediately  due and payable and shall
bear interest from the date of disbursement until paid at the "Default Rate", as
defined in the Note.

      (c) Nothing in this Section 12 shall  require  Lender to incur any expense
or take any action.

      13.  INSPECTION.  Lender, its agents,  representatives,  and designees may
make or cause to be made entries upon and inspections of the Mortgaged  Property
(including environmental inspections and tests) during normal business hours, or
at any other reasonable time.

      14. BOOKS AND RECORDS; FINANCIAL REPORTING.

      (a)  Borrower  shall  keep and  maintain  at all  times  at the  Mortgaged
Property or the management agent's offices, and upon Lender's request shall make
available at the Mortgaged Property,  complete and accurate books of account and
records  (including copies of supporting bills and invoices) adequate to reflect
correctly  the operation of the  Mortgaged  Property,  and copies of all written
contracts,  Leases,  and other instruments which affect the Mortgaged  Property.
The books, records,  contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.

      (b) Borrower shall furnish to Lender all of the following:

            (1)   within 120 days after the end of each fiscal year of Borrower,
                  a statement of income and expenses for Borrower's operation of
                  the  Mortgaged  Property  for that fiscal year, a statement of
                  changes in  financial  position  of  Borrower  relating to the
                  Mortgaged Property for that fiscal year and, when requested by
                  Lender,  a balance sheet showing all assets and liabilities of
                  Borrower  relating to the Mortgaged  Property as of the end of
                  that fiscal year;

            (2)   within 120 days after the end of each fiscal year of Borrower,
                  and at any other time upon Lender's  request,  a rent schedule
                  for the  Mortgaged  Property  showing the name of each tenant,
                  and for each tenant, the space occupied,  the lease expiration
                  date, the rent payable for the current month, the date through
                  which  rent  has  been  paid,  and  any  related   information
                  requested by Lender;

            (3)   within 120 days after the end of each fiscal year of Borrower,
                  and at any other time upon Lender's request,  an accounting of
                  all security  deposits held pursuant to all Leases,  including
                  the  name  of the  institution  (if  any)  and the  names  and
                  identification  numbers of the accounts (if any) in which such
                  security  deposits  are  held and the  name of the  person  to
                  contact  at  such  financial   institution,   along  with  any
                  authority   or   release   necessary   for  Lender  to  access
                  information regarding such accounts;

            (4)   within 120 days after the end of each fiscal year of Borrower,
                  and at any other time upon Lender's request,  a statement that
                  identifies  all owners of any  interest  in  Borrower  and any
                  Controlling  Entity and the interest held by each, if Borrower
                  or a  Controlling  Entity is a  corporation,  all officers and
                  directors  of  Borrower  and the  Controlling  Entity,  and if
                  Borrower  or  a  Controlling  Entity  is a  limited  liability
                  company, all managers who are not members;

            (5)   upon Lender's request, quarterly income and expense statements
                  for the Mortgaged Property;

            (6)   upon Lender's request at any time when an Event of Default has
                  occurred  and  is  continuing,   monthly  income  and  expense
                  statements for the Mortgaged Property;

            (7)   upon Lender's  request,  a monthly property  management report
                  for the  Mortgaged  Property,  showing the number of inquiries
                  made  and  rental   applications   received  from  tenants  or
                  prospective tenants and deposits received from tenants and any
                  other information requested by Lender; and

            (8)   upon Lender's request,  a balance sheet, a statement of income
                  and  expenses  for  Borrower  and a  statement  of  changes in
                  financial  position of  Borrower  for  Borrower's  most recent
                  fiscal year.

      (c) Each of the  statements,  schedules  and  reports  required by Section
14(b) shall be certified to be complete  and  accurate by an  individual  having
authority to bind Borrower, and shall be in such form and contain such detail as
Lender may  reasonably  require.  Lender also may require  that any  statements,
schedules or reports be audited at Borrower's  expense by independent  certified
public accountants acceptable to Lender.

      (d) If  Borrower  fails to  provide  in a timely  manner  the  statements,
schedules and reports required by Section 14(b),  Lender shall have the right to
have Borrower's books and records audited, at Borrower's expense, by independent
certified  public  accountants  selected  by  Lender  in  order to  obtain  such
statements,  schedules and reports, and all related costs and expenses of Lender
shall become  immediately due and payable and shall become an additional part of
the Indebtedness as provided in Section 12.

      (e) If an Event of Default has occurred and is continuing,  Borrower shall
deliver to Lender  upon  written  demand all books and  records  relating to the
Mortgaged Property or its operation.

      (f) Borrower  authorizes  Lender to obtain a credit  report on Borrower at
any time.

      15. TAXES; OPERATING EXPENSES.

      (a) Subject to the provisions of Section 15(c) and Section 15(d), Borrower
shall pay,  or cause to be paid,  all Taxes when due and before the  addition of
any interest, fine, penalty or cost for nonpayment.

      (b) Subject to the  provisions of Section  15(c),  Borrower  shall pay the
expenses  of  operating,  managing,  maintaining  and  repairing  the  Mortgaged
Property  (including  insurance premiums,  utilities,  repairs and replacements)
before  the last date upon  which  each such  payment  may be made  without  any
penalty or interest charge being added.

      (c) As  long as no  Event  of  Default  exists  and  Borrower  has  timely
delivered to Lender any bills or premium notices that it has received,  Borrower
shall not be obligated to pay Taxes,  insurance premiums or any other individual
Imposition to the extent that sufficient  Imposition Deposits are held by Lender
for the  purpose  of paying  that  specific  Imposition.  If an Event of Default
exists,  Lender  may  exercise  any  rights  Lender  may have  with  respect  to
Imposition  Deposits  without  regard to  whether  Impositions  are then due and
payable.  Lender  shall have no  liability  to  Borrower  for failing to pay any
Impositions  to the  extent  that  any  Event of  Default  has  occurred  and is
continuing,  insufficient  Imposition Deposits are held by Lender at the time an
Imposition becomes due and payable or Borrower has failed to provide Lender with
bills and premium notices as provided above.

      (d)  Borrower,  at its own  expense,  may  contest  by  appropriate  legal
proceedings,  conducted  diligently and in good faith, the amount or validity of
any Imposition other than insurance premiums, if (1) Borrower notifies Lender of
the commencement or expected commencement of such proceedings, (2) the Mortgaged
Property is not in danger of being sold or forfeited, (3) Borrower deposits with
Lender  reserves  sufficient  to pay the contested  Imposition,  if requested by
Lender, and (4) Borrower furnishes whatever  additional  security is required in
the  proceedings  or is  reasonably  requested by Lender,  which may include the
delivery to Lender of the reserves  established by Borrower to pay the contested
Imposition.

      (e) Borrower  shall  promptly  deliver to Lender a copy of all notices of,
and invoices for,  Impositions,  and if Borrower pays any  Imposition  directly,
Borrower shall promptly furnish to Lender receipts evidencing such payments.

      16.  LIENS;  ENCUMBRANCES.  Borrower  acknowledges  that,  to  the  extent
provided in Section 21, the grant,  creation or existence of any mortgage,  deed
of trust, deed to secure debt, security interest or other lien or encumbrance (a
"Lien") on the Mortgaged Property (other than the lien of this Instrument) or on
certain ownership  interests in Borrower,  whether voluntary,  involuntary or by
operation  of law,  and whether or not such Lien has  priority  over the lien of
this  Instrument,  is a  "Transfer"  which  constitutes  an Event of Default and
subjects Borrower to personal liability under the Note.

      17.  PRESERVATION,  MANAGEMENT  AND  MAINTENANCE  OF  MORTGAGED  PROPERTY.
Borrower (a) shall not commit waste or permit impairment or deterioration of the
Mortgaged  Property,  (b) shall not abandon the  Mortgaged  Property,  (c) shall
restore or repair promptly,  in a good and workmanlike  manner, any damaged part
of the Mortgaged Property to the equivalent of its original  condition,  or such
other  condition  as Lender may  approve in  writing,  whether or not  insurance
proceeds  or  condemnation  awards  are  available  to cover  any  costs of such
restoration  or repair,  (d) shall keep the  Mortgaged  Property in good repair,
including  the  replacement  of  Personalty  and Fixtures with items of equal or
better function and quality,  (e) shall provide for  professional  management of
the Mortgaged Property by a residential rental property manager  satisfactory to
Lender under a contract approved by Lender in writing, and (f) shall give notice
to Lender of and, unless otherwise  directed in writing by Lender,  shall appear
in and defend  any  action or  proceeding  purporting  to affect  the  Mortgaged
Property,  Lender's security or Lender's rights under this Instrument.  Borrower
shall not (and shall not permit any tenant or other person to) remove,  demolish
or alter the Mortgaged  Property or any part of the Mortgaged Property except in
connection with the replacement of tangible Personalty.

      18. ENVIRONMENTAL HAZARDS.

      (a) Except for  matters  covered by a written  program of  operations  and
maintenance  approved  in  writing  by  Lender  (an "O&M  Program")  or  matters
described  in  Section  18(b),  Borrower  shall not  cause or permit  any of the
following:

            (1)   the presence, use, generation, release, treatment, processing,
                  storage  (including  storage in above  ground and  underground
                  storage  tanks),   handling,  or  disposal  of  any  Hazardous
                  Materials  on or under  the  Mortgaged  Property  or any other
                  property  of  Borrower  that  is  adjacent  to  the  Mortgaged
                  Property;

            (2)   the  transportation  of any  Hazardous  Materials to, from, or
                  across the Mortgaged Property;

            (3)   any  occurrence or condition on the Mortgaged  Property or any
                  other  property of Borrower  that is adjacent to the Mortgaged
                  Property,  which  occurrence  or  condition  is or  may  be in
                  violation of Hazardous Materials Laws; or

            (4)   any  violation  of or  noncompliance  with  the  terms  of any
                  Environmental Permit with respect to the Mortgaged Property or
                  any  property  of Borrower  that is adjacent to the  Mortgaged
                  Property.

The  matters  described  in  clauses  (1)  through  (4)  above are  referred  to
collectively in this Section 18 as "Prohibited Activities or Conditions".

      (b) Prohibited  Activities  and Conditions  shall not include the safe and
lawful use and storage of  quantities  of (1)  pre-packaged  supplies,  cleaning
materials  and  petroleum  products   customarily  used  in  the  operation  and
maintenance  of  comparable  multifamily  properties,  (2)  cleaning  materials,
personal  grooming  items and other items sold in  pre-packaged  containers  for
consumer use and used by tenants and occupants of residential  dwelling units in
the Mortgaged  Property;  and (3)  petroleum  products used in the operation and
maintenance  of  motor  vehicles  from  time to time  located  on the  Mortgaged
Property's  parking  areas,  so long as all of the foregoing  are used,  stored,
handled,  transported  and disposed of in compliance  with  Hazardous  Materials
Laws.

      (c) Borrower shall take all commercially reasonable actions (including the
inclusion of  appropriate  provisions in any Leases  executed  after the date of
this  Instrument) to prevent its employees,  agents,  and  contractors,  and all
tenants and other occupants from causing or permitting any Prohibited Activities
or  Conditions.  Borrower shall not lease or allow the sublease or use of all or
any  portion  of  the  Mortgaged   Property  to  any  tenant  or  subtenant  for
nonresidential  use by any user that,  in the ordinary  course of its  business,
would cause or permit any Prohibited Activity or Condition.

      (d) If an O&M  Program  has been  established  with  respect to  Hazardous
Materials,  Borrower  shall  comply  in a timely  manner  with,  and  cause  all
employees,  agents, and contractors of Borrower and any other persons present on
the Mortgaged Property to comply with the O&M Program.  All costs of performance
of Borrower's  obligations under any O&M Program shall be paid by Borrower,  and
Lender's  out-of-pocket  costs  incurred in connection  with the  monitoring and
review of the O&M Program and Borrower's  performance  shall be paid by Borrower
upon demand by Lender.  Any such  out-of-pocket  costs of Lender which  Borrower
fails to pay promptly  shall become an additional  part of the  Indebtedness  as
provided in Section 12.

      (e) Borrower  represents and warrants to Lender that, except as previously
disclosed by Borrower to Lender in writing:

            (1)   Borrower has not at any time  engaged in,  caused or permitted
                  any Prohibited Activities or Conditions;

            (2)   to the  best of  Borrower's  knowledge  after  reasonable  and
                  diligent inquiry, no Prohibited Activities or Conditions exist
                  or have existed;

            (3)   except to the  extent  previously  disclosed  by  Borrower  to
                  Lender in writing, the Mortgaged Property does not now contain
                  any underground  storage tanks, and, to the best of Borrower's
                  knowledge after reasonable and diligent inquiry, the Mortgaged
                  Property has not  contained any  underground  storage tanks in
                  the past. If there is an  underground  storage tank located on
                  the Property which has been  previously  disclosed by Borrower
                  to Lender in writing, that tank complies with all requirements
                  of Hazardous Materials Laws;

            (4)   Borrower  has  complied  with all  Hazardous  Materials  Laws,
                  including all requirements for notification regarding releases
                  of Hazardous Materials. Without limiting the generality of the
                  foregoing,  Borrower has obtained  all  Environmental  Permits
                  required  for  the  operation  of the  Mortgaged  Property  in
                  accordance with Hazardous Materials Laws now in effect and all
                  such Environmental Permits are in full force and effect;

            (5)   no event has occurred with respect to the  Mortgaged  Property
                  that constitutes, or with the passing of time or the giving of
                  notice would constitute,  noncompliance  with the terms of any
                  Environmental Permit;

            (6)   there are no actions, suits, claims or proceedings pending or,
                  to the  best of  Borrower's  knowledge  after  reasonable  and
                  diligent  inquiry,   threatened  that  involve  the  Mortgaged
                  Property and allege, arise out of, or relate to any Prohibited
                  Activity or Condition; and

            (7)   Borrower  has not  received any  complaint,  order,  notice of
                  violation  or  other   communication   from  any  Governmental
                  Authority  with  regard to air  emissions,  water  discharges,
                  noise   emissions  or  Hazardous   Materials,   or  any  other
                  environmental,   health  or  safety   matters   affecting  the
                  Mortgaged  Property or any other  property of Borrower that is
                  adjacent to the Mortgaged Property.

The  representations  and  warranties  in this  Section  18 shall be  continuing
representations  and  warranties  that  shall be deemed  to be made by  Borrower
throughout  the term of the loan evidenced by the Note,  until the  Indebtedness
has been paid in full.

      (f) Borrower shall  promptly  notify Lender in writing upon the occurrence
of any of the following events:

            (1)   Borrower's discovery of any Prohibited Activity or Condition;

            (2)   Borrower's  receipt of or knowledge of any  complaint,  order,
                  notice  of   violation   or  other   communication   from  any
                  Governmental  Authority or other person with regard to present
                  or future alleged  Prohibited  Activities or Conditions or any
                  other  environmental,  health or safety matters  affecting the
                  Mortgaged  Property or any other  property of Borrower that is
                  adjacent to the Mortgaged Property; and

            (3)   any  representation  or  warranty  in this  Section 18 becomes
                  untrue after the date of this Agreement.

Any such notice given by Borrower shall not relieve  Borrower of, or result in a
waiver of, any  obligation  under this  Instrument,  the Note, or any other Loan
Document.

      (g)  Borrower   shall  pay   promptly  the  costs  of  any   environmental
inspections, tests or audits ("Environmental Inspections") required by Lender in
connection  with  any  foreclosure  or  deed in  lieu  of  foreclosure,  or as a
condition of Lender's  consent to any Transfer  under Section 21, or required by
Lender following a reasonable determination by Lender that Prohibited Activities
or Conditions may exist.  Any such costs incurred by Lender  (including the fees
and out-of-pocket costs of attorneys and technical  consultants whether incurred
in connection with any judicial or  administrative  process or otherwise)  which
Borrower  fails  to  pay  promptly  shall  become  an  additional  part  of  the
Indebtedness  as  provided  in  Section  12. The  results  of all  Environmental
Inspections  made by Lender shall at all times remain the property of Lender and
Lender  shall have no  obligation  to disclose or  otherwise  make  available to
Borrower or any other party such  results or any other  information  obtained by
Lender in connection with its Environmental Inspections.  Lender hereby reserves
the right, and Borrower hereby expressly authorizes Lender, to make available to
any  party,  including  any  prospective  bidder  at a  foreclosure  sale of the
Mortgaged Property, the results of any Environmental  Inspections made by Lender
with respect to the Mortgaged  Property.  Borrower  consents to Lender notifying
any party  (either as part of a notice of sale or  otherwise)  of the results of
any of Lender's  Environmental  Inspections.  Borrower  acknowledges that Lender
cannot control or otherwise  assure the  truthfulness or accuracy of the results
of any of its Environmental  Inspections and that the release of such results to
prospective  bidders at a foreclosure sale of the Mortgaged  Property may have a
material and adverse  effect upon the amount which a party may bid at such sale.
Borrower  agrees that Lender shall have no liability  whatsoever  as a result of
delivering  the  results of any of its  Environmental  Inspections  to any third
party, and Borrower hereby releases and forever  discharges  Lender from any and
all claims,  damages,  or causes of action,  arising out of,  connected  with or
incidental  to the  results of, the  delivery  of any of Lender's  Environmental
Inspections.

      (h)  If  any  investigation,  site  monitoring,   containment,   clean-up,
restoration or other remedial work ("Remedial Work") is necessary to comply with
any Hazardous  Materials Law or order of any Governmental  Authority that has or
acquires  jurisdiction  over the  Mortgaged  Property or the use,  operation  or
improvement  of the  Mortgaged  Property  under  any  Hazardous  Materials  Law,
Borrower  shall,  by the  earlier of (1) the  applicable  deadline  required  by
Hazardous  Materials Law or (2) 30 days after notice from Lender  demanding such
action, begin performing the Remedial Work, and thereafter  diligently prosecute
it to completion,  and shall in any event complete the work by the time required
by applicable  Hazardous  Materials  Law. If Borrower fails to begin on a timely
basis or diligently  prosecute any required  Remedial  Work,  Lender may, at its
option,  cause the Remedial Work to be completed,  in which case Borrower  shall
reimburse Lender on demand for the cost of doing so. Any  reimbursement due from
Borrower to Lender shall become part of the  Indebtedness as provided in Section
12.

      (i)  Borrower  shall  cooperate  with  any  inquiry  by  any  Governmental
Authority and shall comply with any  governmental or judicial order which arises
from any alleged Prohibited Activity or Condition.

      (j) Borrower shall  indemnify,  hold harmless and defend (i) Lender,  (ii)
any prior owner or holder of the Note,  (iii) the Loan Servicer,  (iv) any prior
Loan Servicer, (v) the officers,  directors,  shareholders,  partners, employees
and trustees of any of the foregoing, and (vi) the heirs, legal representatives,
successors   and   assigns  of  each  of  the   foregoing   (collectively,   the
"Indemnitees") from and against all proceedings,  claims, damages, penalties and
costs  (whether  initiated  or sought by  Governmental  Authorities  or  private
parties),  including  fees and out of pocket  expenses of  attorneys  and expert
witnesses,  investigatory  fees,  and  remediation  costs,  whether  incurred in
connection  with any judicial or  administrative  process or otherwise,  arising
directly or indirectly from any of the following:

            (1)   any breach of any  representation  or  warranty of Borrower in
                  this Section 18;

            (2)   any  failure by  Borrower  to perform  any of its  obligations
                  under this Section 18;

            (3)   the existence or alleged existence of any Prohibited  Activity
                  or Condition;

            (4)   the presence or alleged presence of Hazardous  Materials on or
                  under the Mortgaged  Property or any property of Borrower that
                  is adjacent to the Mortgaged Property; and

            (5)   the actual or alleged  violation  of any  Hazardous  Materials
                  Law.

      (k) Counsel selected by Borrower to defend Indemnitees shall be subject to
the approval of those Indemnitees.  However,  any Indemnitee may elect to defend
any claim or legal or administrative proceeding at the Borrower's expense.

      (l)  Borrower  shall  not,  without  the prior  written  consent  of those
Indemnitees  who are  named as  parties  to a claim  or legal or  administrative
proceeding (a "Claim"),  settle or compromise  the Claim if the  settlement  (1)
results in the entry of any judgment  that does not include as an  unconditional
term the delivery by the claimant or plaintiff to Lender of a written release of
those  Indemnitees,  satisfactory  in form and  substance to Lender;  or (2) may
materially  and  adversely  affect  Lender,  as  determined  by  Lender  in  its
discretion.

      (m)  Borrower's  obligation  to  indemnify  the  Indemnitees  shall not be
limited or  impaired by any of the  following,  or by any failure of Borrower or
any guarantor to receive notice of or consideration for any of the following:

            (1) any amendment or modification of any Loan Document;

            (2)   any  extensions of time for  performance  required by any Loan
                  Document;

            (3)   any provision in any of the Loan Documents  limiting  Lender's
                  recourse to property  securing the  Indebtedness,  or limiting
                  the  personal  liability  of  Borrower  or any other party for
                  payment of all or any part of the Indebtedness;

            (4)   the  accuracy  or  inaccuracy  of  any   representations   and
                  warranties made by Borrower under this Instrument or any other
                  Loan Document;

            (5)   the release of Borrower or any other  person,  by Lender or by
                  operation of law, from performance of any obligation under any
                  Loan Document;

            (6)   the  release  or  substitution  in  whole  or in  part  of any
                  security for the Indebtedness; and

            (7)   Lender's  failure to  properly  perfect  any lien or  security
                  interest given as security for the Indebtedness.

      (n) Borrower shall, at its own cost and expense, do all of the following:

            (1)   pay or  satisfy  any  judgment  or decree  that may be entered
                  against  any   Indemnitee  or  Indemnitees  in  any  legal  or
                  administrative  proceeding  incident  to any  matters  against
                  which  Indemnitees  are entitled to be indemnified  under this
                  Section 18;

            (2)   reimburse  Indemnitees  for any  expenses  paid or incurred in
                  connection  with any matters  against  which  Indemnitees  are
                  entitled to be indemnified under this Section 18; and

            (3)   reimburse Indemnitees for any and all expenses, including fees
                  and out of pocket expenses of attorneys and expert  witnesses,
                  paid  or  incurred  in  connection  with  the  enforcement  by
                  Indemnitees  of their  rights  under  this  Section  18, or in
                  monitoring and  participating  in any legal or  administrative
                  proceeding.

      (o) In any  circumstances  in which the  indemnity  under this  Section 18
applies,  Lender may employ its own legal counsel and  consultants to prosecute,
defend or negotiate any claim or legal or administrative  proceeding and Lender,
with the prior  written  consent of Borrower  (which  shall not be  unreasonably
withheld,  delayed or conditioned)  may settle or compromise any action or legal
or  administrative  proceeding.  Borrower shall reimburse Lender upon demand for
all costs and expenses  incurred by Lender,  including all costs of  settlements
entered  into in good  faith,  and the fees and out of pocket  expenses  of such
attorneys and consultants.

      (p) The  provisions of this Section 18 shall be in addition to any and all
other obligations and liabilities that Borrower may have under applicable law or
under  other  Loan  Documents,   and  each  Indemnitee   shall  be  entitled  to
indemnification  under this Section 18 without  regard to whether Lender or that
Indemnitee has exercised any rights against the Mortgaged  Property or any other
security,  pursued any rights against any guarantor, or pursued any other rights
available  under the Loan Documents or applicable  law. If Borrower  consists of
more than one person or entity,  the  obligation of those persons or entities to
indemnify the Indemnitees under this Section 18 shall be joint and several.  The
obligation of Borrower to indemnify the Indemnitees  under this Section 18 shall
survive  any  repayment  or  discharge  of  the  Indebtedness,  any  foreclosure
proceeding,  any  foreclosure  sale,  any  delivery  of  any  deed  in  lieu  of
foreclosure, and any release of record of the lien of this Instrument.

      19. PROPERTY AND LIABILITY INSURANCE.

      (a) Borrower shall keep the Improvements insured at all times against such
hazards as Lender may from time to time require,  which  insurance shall include
but not be limited to coverage  against loss by fire and allied perils,  general
boiler and machinery coverage, and business income coverage.  Lender's insurance
requirements   may  change  from  time  to  time  throughout  the  term  of  the
Indebtedness.  If Lender so requires, such insurance shall also include sinkhole
insurance,  mine  subsidence  insurance,   earthquake  insurance,  and,  if  the
Mortgaged  Property  does not  conform  to  applicable  zoning or land use laws,
building ordinance or law coverage.  If any of the Improvements is located in an
area identified by the Federal Emergency  Management Agency (or any successor to
that agency) as an area having special flood hazards,  and if flood insurance is
available in that area, Borrower shall insure such Improvements  against loss by
flood.

      (b) All premiums on insurance  policies required under Section 19(a) shall
be paid in the manner  provided in Section 7, unless  Lender has  designated  in
writing  another  method of payment.  All such policies  shall also be in a form
approved by Lender.  All policies of property  damage  insurance shall include a
non-contributing,  non-reporting  mortgage  clause  in favor  of,  and in a form
approved by, Lender.  Lender shall have the right to hold the original  policies
or  duplicate  original  policies of all  insurance  required by Section  19(a).
Borrower  shall  promptly  deliver  to  Lender a copy of all  renewal  and other
notices  received by Borrower  with respect to the policies and all receipts for
paid  premiums.  At least  30 days  prior to the  expiration  date of a  policy,
Borrower  shall  deliver to Lender the original  (or a duplicate  original) of a
renewal policy in form satisfactory to Lender.

      (c) Borrower  shall  maintain at all times  commercial  general  liability
insurance,  workers' compensation insurance and such other liability, errors and
omissions  and  fidelity  insurance  coverages  as Lender  may from time to time
require.

      (d) All insurance  policies and renewals of insurance policies required by
this Section 19 shall be in such amounts and for such periods as Lender may from
time to time require, and shall be issued by insurance companies satisfactory to
Lender.

      (e) Borrower  shall comply with all insurance  requirements  and shall not
permit any  condition to exist on the Mortgaged  Property that would  invalidate
any part of any insurance  coverage that this  Instrument  requires  Borrower to
maintain.

      (f) In the event of loss,  Borrower shall give immediate written notice to
the insurance  carrier and to Lender.  Borrower  hereby  authorizes and appoints
Lender as  attorney-in-fact  for  Borrower to make proof of loss,  to adjust and
compromise any claims under policies of property damage insurance,  to appear in
and prosecute any action arising from such property damage  insurance  policies,
to collect and receive the proceeds of property damage insurance,  and to deduct
from  such  proceeds  Lender's  expenses  incurred  in the  collection  of  such
proceeds.  This power of attorney is coupled with an interest  and  therefore is
irrevocable.  However, nothing contained in this Section 19 shall require Lender
to incur any expense or take any action.  Lender  may, at Lender's  option,  (1)
hold the balance of such proceeds to be used to reimburse  Borrower for the cost
of restoring  and  repairing  the  Mortgaged  Property to the  equivalent of its
original condition or to a condition approved by Lender (the "Restoration"),  or
(2) apply the  balance of such  proceeds  to the  payment  of the  Indebtedness,
whether or not then due.  To the extent  Lender  determines  to apply  insurance
proceeds  to  Restoration,  Lender  shall  do so  in  accordance  with  Lender's
then-current  policies relating to the restoration of casualty damage on similar
multifamily properties.

      (g) Lender shall not exercise  its option to apply  insurance  proceeds to
the payment of the Indebtedness if all of the following  conditions are met: (1)
no Event of  Default  (or any  event  which,  with the  giving  of notice or the
passage of time, or both, would constitute an Event of Default) has occurred and
is continuing;  (2) Lender  determines,  in its  discretion,  that there will be
sufficient  funds to complete the  Restoration;  (3) Lender  determines,  in its
discretion,  that the rental income from the Mortgaged Property after completion
of the  Restoration  will be sufficient  to meet all  operating  costs and other
expenses,   Imposition  Deposits,   deposits  to  reserves  and  loan  repayment
obligations  relating to the Mortgaged Property;  and (4) Lender determines,  in
its discretion, that the Restoration will be completed before the earlier of (A)
one year before the maturity  date of the Note or (B) one year after the date of
the loss or casualty.

      (h) If the  Mortgaged  Property  is sold at a  foreclosure  sale or Lender
acquires title to the Mortgaged Property,  Lender shall automatically succeed to
all rights of Borrower in and to any insurance  policies and unearned  insurance
premiums and in and to the proceeds  resulting  from any damage to the Mortgaged
Property prior to such sale or acquisition.

      20. CONDEMNATION.

      (a) Borrower  shall  promptly  notify  Lender of any action or  proceeding
relating to any condemnation or other taking, or conveyance in lieu thereof,  of
all or any  part of the  Mortgaged  Property,  whether  direct  or  indirect  (a
"Condemnation").  Borrower shall appear in and prosecute or defend any action or
proceeding  relating to any Condemnation  unless otherwise directed by Lender in
writing.  Borrower  authorizes  and  appoints  Lender  as  attorney-in-fact  for
Borrower to commence,  appear in and prosecute,  in Lender's or Borrower's name,
any  action  or  proceeding  relating  to  any  Condemnation  and to  settle  or
compromise any claim in connection with any Condemnation. This power of attorney
is coupled  with an interest  and  therefore is  irrevocable.  However,  nothing
contained in this Section 20 shall  require  Lender to incur any expense or take
any action. Borrower hereby transfers and assigns to Lender all right, title and
interest  of  Borrower  in and to any award or payment  with  respect to (i) any
Condemnation, or any conveyance in lieu of Condemnation,  and (ii) any damage to
the Mortgaged  Property caused by governmental  action that does not result in a
Condemnation.

      (b) Lender may apply  such  awards or  proceeds,  after the  deduction  of
Lender's  expenses  incurred  in the  collection  of such  amounts,  at Lender's
option, to the restoration or repair of the Mortgaged Property or to the payment
of the  Indebtedness,  with the  balance,  if any, to  Borrower.  Unless  Lender
otherwise  agrees in writing,  any  application of any awards or proceeds to the
Indebtedness  shall  not  extend  or  postpone  the  due  date  of  any  monthly
installments  referred  to in the  Note,  Section  7 of this  Instrument  or any
Collateral Agreement, or change the amount of such installments. Borrower agrees
to execute  such  further  evidence of  assignment  of any awards or proceeds as
Lender may require.

      21. TRANSFERS OF THE MORTGAGED  PROPERTY OR INTERESTS IN BORROWER.  [RIGHT
TO UNLIMITED TRANSFERS -- WITH LENDER APPROVAL].

      (a) The  occurrence  of any of the  following  events shall  constitute an
Event of Default under this Instrument:

            (1)   a Transfer of all or any part of the Mortgaged Property or any
                  interest in the Mortgaged Property;

            (2)   if  Borrower is a limited  partnership,  a Transfer of (A) any
                  general  partnership  interest,  or  (B)  limited  partnership
                  interests in Borrower  that would cause the Initial  Owners of
                  Borrower  to own  less  than  51% of all  limited  partnership
                  interests in Borrower;

            (3)   if Borrower is a general  partnership  or a joint  venture,  a
                  Transfer of any general  partnership or joint venture interest
                  in Borrower;

            (4)   if Borrower is a limited liability  company, a Transfer of (A)
                  any  membership  interest  in  Borrower  which would cause the
                  Initial  Owners  to own less  than  51% of all the  membership
                  interests in Borrower, or (B) any membership or other interest
                  of a manager in Borrower;

            (5)   if Borrower is a  corporation,  (A) the Transfer of any voting
                  stock in Borrower  which would cause the Initial Owners to own
                  less than 51% of any class of voting  stock in Borrower or (B)
                  if the outstanding  voting stock in Borrower is held by 100 or
                  more   shareholders,   one  or  more  transfers  by  a  single
                  transferor  within a 12-month period affecting an aggregate of
                  5% or more of that stock;

            (6)   if  Borrower  is a trust,  (A) a  Transfer  of any  beneficial
                  interest in Borrower  which would cause the Initial  Owners to
                  own less than 51% of all the beneficial interests in Borrower,
                  or (B) the  termination or revocation of the trust, or (C) the
                  removal, appointment or substitution of a trustee of Borrower;
                  and

            (7)   a Transfer of any interest in a Controlling  Entity which,  if
                  such  Controlling  Entity were  Borrower,  would  result in an
                  Event of Default  under any of Sections  21(a)(1)  through (6)
                  above.

Lender  shall not be  required  to  demonstrate  any  actual  impairment  of its
security  or any  increased  risk of  default  in order to  exercise  any of its
remedies with respect to an Event of Default under this Section 21.

      (b) The occurrence of any of the following  events shall not constitute an
Event of Default under this Instrument, notwithstanding any provision of Section
21(a) to the contrary:

            (1) a Transfer to which Lender has consented;

            (2)   a Transfer that occurs by devise,  descent, or by operation of
                  law upon the death of a natural person;

            (3)   the grant of a leasehold  interest in an  individual  dwelling
                  unit for a term of two years or less not  containing an option
                  to purchase;

            (4)   a Transfer of obsolete or worn out Personalty or Fixtures that
                  are  contemporaneously  replaced  by items of equal or  better
                  function  and quality,  which are free of liens,  encumbrances
                  and security  interests  other than those  created by the Loan
                  Documents or consented to by Lender;

            (5)   the  grant  of  an  easement,   if  before  the  grant  Lender
                  determines  that the easement will not  materially  affect the
                  operation  or  value of the  Mortgaged  Property  or  Lender's
                  interest  in the  Mortgaged  Property,  and  Borrower  pays to
                  Lender, upon demand, all costs and expenses incurred by Lender
                  in connection with reviewing Borrower's request; and

            (6)   the creation of a mechanic's,  materialman's, or judgment lien
                  against the Mortgaged  Property which is released of record or
                  otherwise remedied to Lender's  satisfaction within 30 days of
                  the date of creation.

      (c) Lender shall consent,  without any adjustment to the rate at which the
Indebtedness  secured by this Instrument bears interest or to any other economic
terms of the  Indebtedness,  to a Transfer  that would  otherwise  violate  this
Section  21 if,  prior  to the  Transfer,  Borrower  has  satisfied  each of the
following requirements:

            (1)   the submission to Lender of all information required by Lender
                  to make the determination required by this Section 21(c);

            (2)   the absence of any Event of Default;

            (3)   the  transferee   meets  all  of  the   eligibility,   credit,
                  management and other  standards  (including but not limited to
                  any standards with respect to previous  relationships  between
                  Lender  and  the  transferee  and  the   organization  of  the
                  transferee)  customarily  applied by Lender at the time of the
                  proposed  Transfer to the approval of borrowers in  connection
                  with the  origination  or  purchase  of similar  mortgages  on
                  multifamily properties;

            (4)   the Mortgaged Property,  at the time of the proposed Transfer,
                  meets all  standards  as to its  physical  condition  that are
                  customarily  applied  by  Lender  at the time of the  proposed
                  Transfer to the approval of properties in connection  with the
                  origination  or purchase of similar  mortgages on  multifamily
                  properties;

            (5)   in the case of a Transfer of all or any part of the  Mortgaged
                  Property, (A) the execution by the transferee of an assumption
                  agreement  that is acceptable to Lender and that,  among other
                  things,  requires the transferee to perform all obligations of
                  Borrower set forth in the Note,  this Instrument and any other
                  Loan  Documents,  and may require that the  transferee  comply
                  with any  provisions  of this  Instrument  or any  other  Loan
                  Document which previously may have been waived by Lender,  and
                  (B)  if  a  guaranty  has  been   executed  and  delivered  in
                  connection  with the Note, this Instrument or any of the other
                  Loan Documents,  the transferee causes one or more individuals
                  or  entities  acceptable  to Lender to execute  and deliver to
                  Lender a guaranty in a form acceptable to Lender;

            (6)   in the case of a Transfer of any  interest in a  Controlling
                  Entity,  if a guaranty has been  executed  and  delivered in
                  connection  with the  Note,  this  Instrument  or any of the
                  other  Loan  Documents,  the  Borrower  causes  one or  more
                  individuals or entities  acceptable to Lender to execute and
                  deliver  to  Lender  a  guaranty  in a  form  acceptable  to
                  Lender; and

            (7)   Lender's receipt of all of the following:

                  (A) a review fee in the amount of $3,000.00;

                  (B)   a  transfer  fee in an amount  equal to 1% of the unpaid
                        principal balance of the Indebtedness immediately before
                        the applicable Transfer; and

                  (C)   the amount of Lender's  out-of-pocket  costs  (including
                        reasonable  attorneys'  fees)  incurred in reviewing the
                        Transfer request.

      22. EVENTS OF DEFAULT.  The occurrence of any one or more of the following
shall constitute an Event of Default under this Instrument:

      (a) any failure by Borrower to pay or deposit when due any amount required
by the Note, this Instrument or any other Loan Document;

      (b) any failure by Borrower to maintain the insurance coverage required by
Section 19;

      (c) any failure by Borrower to comply with the provisions of Section 33;

      (d) fraud or material  misrepresentation or material omission by Borrower,
any of its officers,  directors,  trustees,  general partners or managers or any
guarantor  in  connection  with  (A)  the  application  for or  creation  of the
Indebtedness,  (B) any  financial  statement,  rent  roll,  or other  report  or
information  provided to Lender during the term of the Indebtedness,  or (C) any
request for  Lender's  consent to any proposed  action,  including a request for
disbursement of funds under any Collateral Agreement;

      (e) any Event of Default under Section 21;

      (f) the commencement of a forfeiture  action or proceeding,  whether civil
or  criminal,  which,  in  Lender's  reasonable  judgment,  could  result  in  a
forfeiture of the  Mortgaged  Property or otherwise  materially  impair the lien
created by this Instrument or Lender's interest in the Mortgaged Property;

      (g) any failure by Borrower to perform any of its  obligations  under this
Instrument  (other than those  specified in Sections  22(a) through (f)), as and
when  required,  which  continues  for a period of 30 days after  notice of such
failure by Lender to  Borrower.  However,  no such notice or grace  period shall
apply in the case of any such failure which could, in Lender's judgment,  absent
immediate exercise by Lender of a right or remedy under this Instrument,  result
in harm to  Lender,  impairment  of the  Note or this  Instrument  or any  other
security given under any other Loan Document;

      (h) any failure by Borrower to perform any of its  obligations as and when
required  under any Loan Document  other than this  Instrument  which  continues
beyond the applicable cure period, if any, specified in that Loan Document;

      (i) any  exercise  by the  holder  of any  debt  instrument  secured  by a
mortgage,  deed of trust or deed to secure debt on the  Mortgaged  Property of a
right to declare all amounts due under that debt instrument  immediately due and
payable; and

      (j) Borrower voluntarily files for bankruptcy  protection under the United
States  Bankruptcy Code or voluntarily  becomes  subject to any  reorganization,
receivership,  insolvency proceeding or other similar proceeding pursuant to any
other  federal  or  state  law  affecting  debtor  and  creditor  rights,  or an
involuntary  case is  commenced  against  Borrower by any  creditor  (other than
Lender) of  Borrower  pursuant  to the United  States  Bankruptcy  Code or other
federal or state law affecting  debtor and creditor  rights and is not dismissed
or discharged within 60 days after filing.

      23. REMEDIES CUMULATIVE. Each right and remedy provided in this Instrument
is distinct from all other rights or remedies under this Instrument or any other
Loan  Document or afforded by applicable  law, and each shall be cumulative  and
may be exercised concurrently, independently, or successively, in any order.

      24. FORBEARANCE.

      (a) Lender may (but shall not be obligated to) agree with  Borrower,  from
time to time,  and without  giving  notice to, or  obtaining  the consent of, or
having any effect upon the  obligations  of, any  guarantor or other third party
obligor,  to take any of the following  actions:  extend the time for payment of
all or any  part  of the  Indebtedness;  reduce  the  payments  due  under  this
Instrument,  the Note, or any other Loan Document; release anyone liable for the
payment  of any  amounts  under  this  Instrument,  the Note,  or any other Loan
Document;  accept a renewal of the Note; modify the terms and time of payment of
the Indebtedness;  join in any extension or subordination agreement; release any
Mortgaged  Property;  take or release other or additional  security;  modify the
rate of interest or period of  amortization  of the Note or change the amount of
the monthly  installments  payable  under the Note;  and  otherwise  modify this
Instrument, the Note, or any other Loan Document.

      (b) Any  forbearance by Lender in exercising any right or remedy under the
Note,  this  Instrument,  or any other Loan  Document or  otherwise  afforded by
applicable  law,  shall not be a waiver of or preclude the exercise of any right
or  remedy.  The  acceptance  by  Lender  of  payment  of all or any part of the
Indebtedness  after the due date of such payment,  or in an amount which is less
than the required  payment,  shall not be a waiver of Lender's  right to require
prompt payment when due of all other payments on account of the  Indebtedness or
to exercise any remedies for any failure to make prompt payment.  Enforcement by
Lender of any security for the Indebtedness  shall not constitute an election by
Lender of remedies so as to preclude the  exercise of any other right  available
to Lender.  Lender's  receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

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

      26. WAIVER OF STATUTE OF LIMITATIONS.  Borrower hereby waives the right to
assert any statute of  limitations  as a bar to the  enforcement  of the lien of
this Instrument or to any action brought to enforce any Loan Document.

      27.  WAIVER OF  MARSHALLING.  Notwithstanding  the  existence of any other
security  interests  in the  Mortgaged  Property  held by Lender or by any other
party, Lender shall have the right to determine the order in which any or all of
the  Mortgaged  Property  shall be subjected  to the  remedies  provided in this
Instrument,  the Note, any other Loan Document or applicable  law.  Lender shall
have the  right to  determine  the  order in which  any or all  portions  of the
Indebtedness are satisfied from the proceeds  realized upon the exercise of such
remedies.  Borrower  and any party who now or in the future  acquires a security
interest in the Mortgaged Property and who has actual or constructive  notice of
this Instrument waives any and all right to require the marshalling of assets or
to require that any of the  Mortgaged  Property be sold in the inverse  order of
alienation  or that any of the  Mortgaged  Property  be sold in parcels or as an
entirety in  connection  with the exercise of any of the  remedies  permitted by
applicable law or provided in this Instrument.

      28. FURTHER ASSURANCES.  Borrower shall execute, acknowledge, and deliver,
at its sole cost and expense, all further acts, deeds, conveyances, assignments,
estoppel certificates,  financing statements, transfers and assurances as Lender
may require from time to time in order to better  assure,  grant,  and convey to
Lender the rights intended to be granted,  now or in the future, to Lender under
this Instrument and the Loan Documents.

      29.  ESTOPPEL  CERTIFICATE.  Within 10 days after a request  from  Lender,
Borrower shall deliver to Lender a written statement, signed and acknowledged by
Borrower,  certifying to Lender or any person  designated  by Lender,  as of the
date of such  statement,  (i) that the Loan Documents are unmodified and in full
force and effect (or, if there have been modifications,  that the Loan Documents
are in full force and effect as modified and setting forth such  modifications);
(ii) the unpaid principal  balance of the Note; (iii) the date to which interest
under the Note has been paid; (iv) that Borrower is not in default in paying the
Indebtedness  or in  performing  or observing any of the covenants or agreements
contained  in this  Instrument  or any of the other Loan  Documents  (or, if the
Borrower is in default,  describing  such  default in  reasonable  detail);  (v)
whether or not there are then existing any setoffs or defenses known to Borrower
against  the  enforcement  of any  right or  remedy  of  Lender  under  the Loan
Documents; and (vi) any additional facts requested by Lender.

      30. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE.

      (a) This Instrument, and any Loan Document which does not itself expressly
identify  the law that is to apply to it,  shall be  governed by the laws of the
jurisdiction in which the Land is located (the "Property Jurisdiction").

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

      31. NOTICE.

      (a) All  notices,  demands and other  communications  ("notice")  under or
concerning this Instrument  shall be in writing.  Each notice shall be addressed
to the intended recipient at its address set forth in this Instrument, and shall
be deemed  given on the  earliest  to occur of (1) the date  when the  notice is
received  by the  addressee;  (2) the first  Business  Day  after the  notice is
delivered to a recognized overnight courier service,  with arrangements made for
payment of charges for next Business Day delivery; or (3) the third Business Day
after the notice is  deposited in the United  States mail with postage  prepaid,
certified mail, return receipt  requested.  As used in this Section 31, the term
"Business Day" means any day other than a Saturday, a Sunday or any other day on
which Lender is not open for business.

      (b) Any party to this  Instrument  may change the address to which notices
intended  for it are to be directed by means of notice  given to the other party
in accordance with this Section 31. Each party agrees that it will not refuse or
reject  delivery of any notice given in accordance with this Section 31, that it
will  acknowledge,  in writing,  the  receipt of any notice upon  request by the
other  party and that any notice  rejected  or refused by it shall be deemed for
purposes of this Section 31 to have been received by the rejecting  party on the
date so refused or rejected,  as conclusively  established by the records of the
U.S. Postal Service or the courier service.

      (c) Any notice under the Note and any other Loan  Document  which does not
specify  how  notices  are to be given  shall be given in  accordance  with this
Section 31.

      32. SALE OF NOTE;  CHANGE IN SERVICER.  The Note or a partial  interest in
the Note  (together with this  Instrument  and the other Loan  Documents) may be
sold one or more times without prior notice to Borrower.  A sale may result in a
change of the Loan  Servicer.  There also may be one or more changes of the Loan
Servicer  unrelated  to a sale of the  Note.  If there  is a change  of the Loan
Servicer, Borrower will be given notice of the change.

      33.  SINGLE  ASSET  BORROWER.  Until  the  Indebtedness  is paid in  full,
Borrower  (a) shall not  acquire any real or  personal  property  other than the
Mortgaged   Property  and  personal   property  related  to  the  operation  and
maintenance of the Mortgaged Property;  (b) shall not operate any business other
than the management and operation of the Mortgaged  Property;  and (c) shall not
maintain its assets in a way difficult to segregate and identify.

      34.  SUCCESSORS AND ASSIGNS  BOUND.  This  Instrument  shall bind, and the
rights granted by this Instrument shall inure to, the respective  successors and
assigns of Lender and Borrower.  However, a Transfer not permitted by Section 21
shall be an Event of Default.

      35. JOINT AND SEVERAL  LIABILITY.  If more than one person or entity signs
this Instrument as Borrower,  the obligations of such persons and entities shall
be joint and several.

      36. RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY.

      (a) The  relationship  between Lender and Borrower shall be solely that of
creditor and debtor,  respectively,  and nothing  contained  in this  Instrument
shall create any other relationship between Lender and Borrower.

      (b) No creditor of any party to this  Instrument and no other person shall
be a third party  beneficiary  of this  Instrument  or any other Loan  Document.
Without limiting the generality of the preceding  sentence,  (1) any arrangement
(a  "Servicing  Arrangement")  between the Lender and any Loan Servicer for loss
sharing  or  interim   advancement  of  funds  shall  constitute  a  contractual
obligation  of such Loan  Servicer  that is  independent  of the  obligation  of
Borrower for the payment of the Indebtedness,  (2) Borrower shall not be a third
party beneficiary of any Servicing  Arrangement,  and (3) no payment by the Loan
Servicer  under  any  Servicing  Arrangement  will  reduce  the  amount  of  the
Indebtedness.

            37. SEVERABILITY;  AMENDMENTS. The invalidity or unenforceability of
 any   provision   of  this   Instrument   shall  not  affect  the  validity  or
 enforceability of any other provision, and all other provisions shall remain in
 full force and effect.  This Instrument contains the entire agreement among the
 parties  as  to  the  rights  granted  and  the  obligations  assumed  in  this
 Instrument.  This Instrument may not be amended or modified except by a writing
 signed by the party against whom enforcement is sought; provided, however, that
 in the  event  of a  Transfer,  any or  some  or  all of the  Modifications  to
 Instrument  set forth in Exhibit B (if any) may be modified or rendered void by
 Lender at Lender's option by notice to Borrower/transferee.

      38.  CONSTRUCTION.  The  captions  and  headings  of the  sections of this
Instrument are for convenience  only and shall be disregarded in construing this
Instrument.  Any  reference  in this  Instrument  to an "Exhibit" or a "Section"
shall,  unless  otherwise  explicitly  provided,   be  construed  as  referring,
respectively,  to an Exhibit attached to this Instrument or to a Section of this
Instrument.  All  Exhibits  attached to or referred  to in this  Instrument  are
incorporated by reference into this Instrument. Any reference in this Instrument
to a statute or  regulation  shall be  construed as referring to that statute or
regulation as amended from time to time.  Use of the singular in this  Agreement
includes the plural and use of the plural includes the singular. As used in this
Instrument, the term "including" means "including, but not limited to."

      39.  LOAN  SERVICING.  All actions  regarding  the  servicing  of the loan
evidenced by the Note,  including  the  collection  of payments,  the giving and
receipt  of  notice,  inspections  of the  Property,  inspections  of books  and
records,  and the granting of consents and  approvals,  may be taken by the Loan
Servicer unless Borrower  receives notice to the contrary.  If Borrower receives
conflicting  notices  regarding  the identity of the Loan  Servicer or any other
subject, any such notice from Lender shall govern.

      40. DISCLOSURE OF INFORMATION.  Lender may furnish  information  regarding
Borrower  or the  Mortgaged  Property  to  third  parties  with an  existing  or
prospective  interest in the servicing,  enforcement,  evaluation,  performance,
purchase or  securitization  of the  Indebtedness,  including but not limited to
trustees,   master   servicers,   special   servicers,   rating  agencies,   and
organizations  maintaining  databases on the  underwriting  and  performance  of
multifamily  mortgage loans.  Borrower  irrevocably waives any and all rights it
may have under  applicable  law to prohibit such  disclosure,  including but not
limited to any right of privacy.

      41.  NO  CHANGE  IN  FACTS  OR  CIRCUMSTANCES.   All  information  in  the
application for the loan submitted to Lender (the "Loan Application") and in all
financial  statements,  rent rolls,  reports,  certificates  and other documents
submitted in connection  with the Loan  Application are complete and accurate in
all material respects.  There has been no material adverse change in any fact or
circumstance that would make any such information incomplete or inaccurate.

      42.  SUBROGATION.  If, and to the extent  that,  the  proceeds of the loan
evidenced by the Note are used to pay,  satisfy or discharge  any  obligation of
Borrower  for the payment of money that is secured by a  pre-existing  mortgage,
deed of trust or other lien encumbering the Mortgaged Property (a "Prior Lien"),
such loan proceeds shall be deemed to have been advanced by Lender at Borrower's
request, and Lender shall automatically, and without further action on its part,
be subrogated to the rights,  including lien priority, of the owner or holder of
the  obligation  secured  by the Prior  Lien,  whether  or not the Prior Lien is
released.

      43. ACCELERATION;  REMEDIES.  At any time during the existence of an Event
of Default,  Lender,  at Lender's  option,  may declare the  Indebtedness  to be
immediately due and payable without further demand,  and may invoke the power of
sale and any other  remedies  permitted  by  Maryland  law or  provided  in this
Instrument or in any other Loan Document.  Borrower  acknowledges that the power
of sale granted in this  Instrument  may be exercised  by Lender  without  prior
judicial  hearing.  Lender  shall be entitled to collect all costs and  expenses
incurred  in  pursuing  such  remedies,  including  attorneys'  fees,  costs  of
documentary evidence, abstracts and title reports.

      If Lender invokes the power of sale, Lender shall mail or cause Trustee to
mail  written  notice of sale to Borrower in the manner  prescribed  by Maryland
law.  Trustee  shall give notice of sale and shall sell the  Mortgaged  Property
according to Maryland law.  Trustee may sell the Mortgaged  Property at the time
and place and under the terms  designated  in the  notice of sale in one or more
parcels and in such order as Trustee may determine. Trustee may postpone sale of
all or any part of the Mortgaged Property by public announcement at the time and
place of any previously scheduled sale. Lender or Lender's designee may purchase
the Mortgaged Property at any sale.

      Trustee shall  deliver to the  purchaser at the sale,  within a reasonable
time after the sale, a deed conveying the Mortgaged Property so sold without any
express or implied covenant or warranty. The recitals in Trustee's deed shall be
prima facie  evidence  of the truth of the  statements  made in those  recitals.
Trustee shall apply the proceeds of the sale in the following  order: (a) to all
costs and expenses of the sale, including Trustee's fees not to exceed 5% of the
gross  sale  price,  attorneys'  fees and  costs of title  evidence;  (b) to the
Indebtedness in such order as Lender, in Lender's  discretion,  directs; and (c)
the excess, if any, to the person or persons legally entitled to the excess.

      Borrower  hereby  assents  to the  passage of a decree for the sale of the
Mortgaged  Property  pursuant  to  Lender's  exercise  of its rights  under this
Section.

      44.  RELEASE.  Upon payment of the  Indebtedness,  Lender or Trustee shall
release this  Instrument.  Borrower  shall pay Lender's or Trustee's  reasonable
costs incurred in releasing this Instrument.

      45. SUBSTITUTE TRUSTEE.  Lender, at Lender's option, may from time to time
remove Trustee and appoint a successor trustee by an instrument  recorded in the
city or county in which this Instrument is recorded.  Without  conveyance of the
Mortgaged Property,  the successor trustee shall succeed to all the title, power
and duties conferred upon the Trustee in this Instrument and by applicable law.

      46. PROTECTIVE PAYMENTS. Any amounts disbursed by Lender under Section 12,
or under any other provision of this Instrument that treats such disbursement as
being made under Section 12, shall be  immediately  due and payable,  shall bear
interest  from the date of  disbursement  until paid at the "Default  Rate",  as
defined in the Note, and, together with the interest thereon, shall be a lien on
the  Mortgaged  Property  and secured by this  Instrument.  This  Section  shall
supersede Section 12(b).

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

      ATTACHED   EXHIBITS.   The  following  Exhibits  are  attached  to  this
Instrument:

            ----
             X      Exhibit A      Description of the Land (required).
            ----

            ----
             X      Exhibit B      Modifications to Instrument
            ----

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





<PAGE>


                                    LAZY HOLLOW PARTNERS, a California
                                       general partnership

                                    By:   Angeles Realty Corporation II, a
                                          California corporation, its
                                          managing general partner



                                          By:  /s/Patti K. Fielding
                                               Patti K. Fielding (SEAL)
                                               Executive Vice President



STATE OF COLORADO

CITY and COUNTY OF DENVER, to-wit:

      I hereby certify that on this 27th day of March, 2003,  before
me, the subscriber, a Notary Public of the State of Colorado,  in and
for the City/County of Denver,  personally appeared Patti K. Fielding,
who  acknowledged  herself to be the Executive  Vice President of Angeles Realty
Corporation  II, a  California  corporation,  managing  general  partner of Lazy
Hollow Partners, a California general partnership, and on behalf of said general
partnership  did  acknowledge  that she, as such Executive Vice President  being
authorized so to do, executed the foregoing  instrument for the purposes therein
contained,  by  signing  the  name of the  general  partnership  by  herself  as
Executive Vice President.

      As Witness:  my hand and notarial seal.

My commission expires:August 2, 2006

                                                  /s/Cathleen M. O'Donnell
                                                  Cahtleen M. O'Donnell
                                                  Notary Public


<PAGE>



                             ATTORNEY CERTIFICATION

      I hereby  certify  that  this  instrument  was  prepared  by or under  the
supervision of the undersigned, an attorney duly admitted to practice before the
Court of Appeals of Maryland.



                                /s/Drew S. Reiferson
                                Drew S. Reiferson



<PAGE>




                                    EXHIBIT A

                            [DESCRIPTION OF THE LAND]

<PAGE>




                                    EXHIBIT B

                      Modifications to Security Instrument

The following modifications are made to the text of the Instrument that precedes
this Exhibit:

1.    Section  18(d)  of the  Security  Instrument  will be  revised  to add the
      following to the end of the paragraph:

            Borrower has provided Lender with a moisture  management and control
            program  ("Moisture  Management  Program") that has been approved by
            Lender and such plan or agreement shall  constitute an "O&M Program"
            for the purposes of this  Instrument  and any other Loan  Documents.
            The Moisture Management Program must include procedures for periodic
            reviews of storage  areas on the lower  levels of each  building and
            the taking of necessary action so as to prevent the re-occurrence of
            mold in those areas.  Without  limiting any other  provision of this
            Instrument  or any other of the Loan  Documents,  any failure on the
            part of  Borrower to comply with the  Moisture  Management  Program,
            shall constitute a Prohibited Activity or Condition.

2. AIMCO STANDARD.

A. Section 1(i) is changed to read as follows:

                  (i) "Hazardous  Materials Laws" means all federal,  state, and
            local laws, ordinances, rules, regulations,  administrative rulings,
            court judgments, and decrees, and all mandatory standards,  policies
            and other governmental  requirements in effect now or in the future,
            including  all  amendments,  that relate to Hazardous  Materials and
            apply to Borrower or to the Mortgaged Property.  Hazardous Materials
            Laws   include,   but  are  not   limited   to,  the   Comprehensive
            Environmental  Response  Compensation  and Liability  Act, 42 U.S.C.
            Section 9601, et seq., the Resource  Conservation  and Recovery Act,
            42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15
            U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section
            1251, et seq., and the Hazardous  Materials  Transportation  Act, 49
            U.S.C. Section 5101, and their state analogs.

B. Section 1(v) is modified to read as follows:

                  (v) "Personalty" means all furniture, furnishings,  equipment,
            machinery,  building materials,  appliances, goods, supplies, tools,
            books,  records  (whether in written or electronic  form),  computer
            equipment  (hardware  and  software)  and  other  tangible  personal
            property  (other than Fixtures)  which are used now or in the future
            exclusively  in  connection   with  the  ownership,   management  or
            operation of the Land or the Improvements or are located on the Land
            or in the Improvements, and any operating agreements relating to the
            Land or the Improvements,  and any surveys, plans and specifications
            and  contracts  for  architectural,   engineering  and  construction
            services  relating  to the Land or the  Improvements  and all  other
            intangible property and rights exclusively relating to the operation
            of,  or  used  exclusively  in  connection  with,  the  Land  or the
            Improvements  including  all  governmental  permits  relating to any
            activities on the Land.

C. The second sentence of Section 2 is modified to read as follows:

            Borrower shall execute and deliver to Lender, upon Lender's request,
            financing  statements,  continuation  statements and amendments,  in
            such form as Lender  reasonably  may  require to perfect or continue
            the  perfection of this security  interest.  Borrower  shall pay all
            filing costs and all costs and  expenses of any record  searches for
            financing statements that Lender reasonably may require.

D. Section 4(b) is changed to read as follows:

                  (b) Until Lender gives notice to Borrower of Lender's exercise
            of its rights under this Section 4, Borrower  shall have all rights,
            power and authority  granted to Borrower  under any Lease (except as
            otherwise  limited by this  Section or any other  provision  of this
            Instrument),  including the right, power and authority to modify the
            terms of any  Lease or  extend  or  terminate  any  Lease.  Upon the
            occurrence and during the  continuance  of an Event of Default,  the
            permission given to Borrower  pursuant to the preceding  sentence to
            exercise  all  rights,   power  and  authority  under  Leases  shall
            automatically  terminate.  Borrower  shall  comply  with and observe
            Borrower's  obligations  under  all  Leases,   including  Borrower's
            obligations  pertaining to the maintenance and disposition of tenant
            security deposits.

E. Section 7(c) is modified to read as follows:

                  (c)  Notwithstanding  the  provisions of Section 7(a),  Lender
            will not require Borrower to deposit with Lender amounts  sufficient
            to  accumulate  with Lender the entire sum required to pay the water
            and sewer charges,  Taxes, fire, hazard or other insurance premiums,
            and ground rents.  At least  annually,  Borrower must provide Lender
            with proof of payment of all such  Impositions  for which  Lender is
            not collecting  Imposition Deposits. In the event that Borrower does
            not timely pay any of the  Impositions,  or fails to provide  Lender
            with proof of such  payment,  or upon the  occurrence of an Event of
            Default  hereunder,  or upon  Borrower's  failure  to  maintain  the
            Mortgaged  Property in a satisfactory  manner in accordance with the
            requirements of this Instrument, then in any such events, Lender may
            require  Borrower to deposit with Lender the Imposition  Deposits as
            provided in Section 7(a).

F.    Except in a case  where  Lender  in its  discretion  determines  that an
      emergency  exists,  Lender may take actions  specified in Section  12(a)
      only if Lender has notified  Borrower of  Borrower's  failure to perform
      any of its obligations  under this Instrument or any other Loan Document
      and  Borrower  does not cure  the  failure  within  10 days  after  such
      notice. If Lender so determines that an emergency  exists,  Lender shall
      notify  Borrower of the action taken within ten days after the action is
      taken.

G.    Sections 14(b)(4) and 14(b)(5) are modified to read as follows:

            (4)   within 120 days after the end of each fiscal year of Borrower,
                  and at any other time upon Lender's request,  a statement that
                  identifies  all owners of any  interest in  Borrower  and each
                  general partner in Borrower, and confirming that the ownership
                  of each other  Controlling  Entity has not changed in a manner
                  that violates Section 21(a);

            (5)   promptly  following  Lender's  request,  quarterly  income and
                  expense  statements  for the Property  relating to a quarterly
                  period ending no later than 45 days before the request;

H.    For purposes of Section 14(b),  Borrower shall be deemed to have delivered
      any  statement  or  document  "upon  Lender's  request"  if  Borrower  has
      delivered the document promptly following Lender's request.

I.    Notwithstanding   Section  (14)(c),  unless  an  Event  of  Default  has
      occurred  and is  continuing,  Lender  may  require  that the  financial
      statements  required  by Sections  14(b)(1),  14(b)(2)  and  14(b)(3) be
      audited,  but  may not  require  that  any  other  financial  statements
      required by Section 14 be audited.  Certification  of a statement by the
      chief  financial  officer  of the  entity  that  is the  subject  of the
      statement or, in the case of a partnership,  the chief financial officer
      of the general  partner,  will be acceptable to Lender as  certification
      by an individual having authority to bind Borrower.

J.    Lender shall not have  Borrower's  books and records  audited  pursuant to
      Section  14(d) unless  Lender has given  Borrower  notice  specifying  the
      statements,  schedules and reports required by Section 14(b) that Borrower
      has failed to provide,  and Borrower has not provided  such  statements by
      the expiration of ten days after such notice.

K.    So  long  as  Borrower  is  contesting  the  amount  and  validity  of any
      Imposition other than insurance  premiums  diligently and in good faith as
      described in Section 15(d) and all of the conditions  specified in clauses
      (1) through (4) of Section 15(d) are  satisfied,  Lender will refrain from
      applying Imposition Deposits to payment of the contested Imposition.

L.    Section 15(e) and Section 16 are modified to read as follows:

            15(e)  Borrower  shall  promptly  deliver  to  Lender  a copy of all
            notices of, and invoices for  Impositions,  and if Borrower pays any
            Imposition  directly  (which Borrower has no obligation to do unless
            Imposition   Deposits  are  insufficient  and  Lender  has  notified
            Borrower of that insufficiency),  Borrower shall promptly furnish to
            Lender receipts evidencing such payments.

            16. LIENS;  ENCUMBRANCES.  Borrower acknowledges that, to the extent
            provided in Section  21, the grant,  creation  or  existence  of any
            mortgage,  deed of trust, deed to secure debt,  security interest or
            other  lien or  encumbrance  (a "Lien")  on the  Mortgaged  Property
            (other  than  (i)  the  lien  of  this  Instrument,   and  (ii)  the
            Subordinate  Debt defined in Section HH of Exhibit B), or on certain
            ownership interests in Borrower,  whether voluntary,  involuntary or
            by operation of law, and whether or not such lien has priority  over
            the lien of this Instrument,  is a "Transfer"  which  constitutes an
            Event of Default and subjects  Borrower to personal  liability under
            the Note.

M.    For purposes of Section 18(b), "pre-packaged supplies,  cleaning materials
      and petroleum  products  customarily used in the operation and maintenance
      of comparable multifamily  properties" shall include,  without limitation,
      pool, spa, maintenance and gardening materials.

N. The second sentence of Section 18(c) is modified to read as follows:

            Borrower  shall not lease or allow the sublease or use of all or any
            portion of the  Mortgaged  Property to any tenant or  subtenant  for
            nonresidential  use by any user that, in the ordinary  course of its
            business,  would be  reasonably  expected  to cause  or  permit  any
            Prohibited Activity or Condition.

O.    For  purposes of Section  18(d),  Borrower  shall only be obligated to pay
      out-of-pocket   expenses   incurred  by  Lender  in  connection  with  the
      monitoring and review of an O&M Program and Borrower's  performance to the
      extent such expenses are reasonable.

P.    Borrower's  representation  and  warranty  in Section  18(e)(4)  regarding
      requirements for notification  regarding  releases of Hazardous  Materials
      shall relate only to such releases, if any, at the Mortgaged Property.

Q.    Section 18(e)(5) is modified to read as follows:

            (5)   no event has occurred with respect to the  Mortgaged  Property
                  that constitutes, or with the passing of time or the giving of
                  notice   would   reasonably   be   expected   to   constitute,
                  noncompliance with the terms of any Environmental Permit;

R. Section 18(g) is modified to read as follows:

                  (g) Borrower shall pay promptly the costs of any environmental
            inspections,  tests or audits ("Environmental Inspections") required
            by Lender in connection  with or in preparation  for any foreclosure
            or deed in lieu of foreclosure. Borrower shall also pay promptly the
            reasonable costs of any Environmental Inspections required by Lender
            in  connection  with,  or as a condition of Lender's  consent to any
            Transfer  under  Section  21,  or  required  by Lender  following  a
            reasonable  determination  by Lender that  Prohibited  Activities or
            Conditions may exist.  Any such costs incurred by Lender  (including
            the  fees  and  out-of-pocket   costs  of  attorneys  and  technical
            consultants  whether  incurred in  connection  with any  judicial or
            administrative  process or otherwise)  which  Borrower  fails to pay
            promptly  shall become an  additional  part of the  Indebtedness  as
            provided in Section 12. The results of all Environmental Inspections
            made  by  Lender  in  connection  with  or in  preparation  for  any
            foreclosure or deed in lieu of foreclosure shall at all times remain
            the  property  of Lender and  Lender  shall  have no  obligation  to
            disclose such results to or otherwise make such results available to
            Borrower or any other party.  Lender will make available to Borrower
            the results of all other  Environmental  Inspections made by Lender.
            Lender  hereby  reserves the right,  and Borrower  hereby  expressly
            authorizes  Lender,  to make  available to any party,  including any
            prospective bidder at a foreclosure sale of the Mortgaged  Property,
            the  results of any  Environmental  Inspections  made by Lender with
            respect  to the  Mortgaged  Property.  Borrower  consents  to Lender
            notifying  any  party  (either  as  part  of a  notice  of  sale  or
            otherwise)   of  the  results  of  any  of  Lender's   Environmental
            Inspections.  Except  in the  case  of an  Environmental  Inspection
            performed  in  connection  with a  foreclosure  or  deed  in lieu of
            foreclosure,  or a disclosure of  Environmental  Inspection  results
            that Lender is required by law to make, Lender shall notify Borrower
            of its  intention  to  disclose  such  information  and  shall  give
            Borrower ten days to provide supplemental information,  explanations
            or corrections to accompany the  disclosure.  Borrower  acknowledges
            that Lender cannot control or otherwise  assure the  truthfulness or
            accuracy of the results of any of its Environmental  Inspections and
            that  the  release  of such  results  to  prospective  bidders  at a
            foreclosure  sale of the Mortgaged  Property may have a material and
            adverse  effect upon the amount  which a party may bid at such sale.
            Borrower agrees that Lender shall have no liability  whatsoever as a
            result  of  delivering  the  results  of any  of  its  Environmental
            Inspections  to any third party,  and Borrower  hereby  releases and
            forever  discharges  Lender  from any and all  claims,  damages,  or
            causes of action,  arising,  out of, connected with or incidental to
            the  results  of,  the  delivery  of any of  Lender's  Environmental
            Inspections.

S.    Lender  shall not  commence  Remedial  Work under the second  sentence  of
      Section 18(h) unless Lender has given Borrower  notice of its intention to
      do so and Borrower has not begun  performing  the Remedial  Work within 10
      days after such notice.

T.    The following sentence is added at the end of Section 18(j):

            However,  Borrower  shall have no obligation to indemnify any of the
            foregoing  parties  to the  extent  that  the  proceedings,  claims,
            damages,  penalties  or costs arise out of the gross  negligence  or
            willful misconduct of Lender, any prior owner or holder of the Note,
            the Loan Servicer or any prior Loan Servicer.

U.    For purposes of Section 19(b),  Lender will accept a duplicate original of
      any insurance policy.

V.    For purposes of Section 19(d), an insurance  company will be acceptable to
      Lender if it has a rating in Best's Key Rating  Guide of at least "A-" and
      a financial size category of at least "v".

W.    Clause (2) of Section 19(g) is modified to read as follows:

            (2) Lender  determines,  in its discretion,  that the combination of
            insurance  proceeds  and amounts  provided by the  Borrower  will be
            sufficient to complete the Restoration.

X.    For  purposes of Section  19(h),  Lender  shall  automatically  succeed to
      rights of Borrower in and to insurance policies and unearned premiums only
      to  the  extent  permitted  by  the  applicable   policies  and  insurance
      companies.

Y.    Intentionally omitted.

Z.    Section 21(a)(2) and (a)(3) are modified to read as follows:

(2)   if  Borrower  is a limited  partnership,  a Transfer  of (A) any general
               partnership  interest  (except  for a Transfer to a
               Qualified  REIT  Subsidiary,  as defined in Section
               856(i)(2) of the Internal  Revenue Code of 1986, of
               Apartment  Investment  and  Management  Company,  a
               Maryland  corporation),  or (B) limited partnership
               interests in Borrower  that would cause the Initial
               Owners  of  Borrower  to own  less  than 51% of all
               limited partnership interests in Borrower;

(3)   if Borrower is a general  partnership or joint venture,  a Transfer of any
      general  partnership  interest  (except for a Transfer to a Qualified REIT
      Subsidiary,  as defined in Section  856(i)(2) of the Internal Revenue Code
      of 1986,  of  Apartment  Investment  and  Management  Company,  a Maryland
      corporation.

AA.   New Sections  21(b)(7),  21(b)(8),  21(b)(9),  and 21(b)(10) are added, as
      follows:

            (7)   The Transfer of any limited or general  partnership  interests
                  in Borrower  provided no Change of Control  occurs as a result
                  of such Transfer.

            (8)   The Transfer of shares of common  stock,  limited  partnership
                  interests or other beneficial or ownership  interests or other
                  forms  of  securities  in  AIMCO  REIT or  AIMCO  OP,  and the
                  issuance of all  varieties  of  convertible  debt,  equity and
                  other  similar  securities  of AIMCO REIT or AIMCO OP, and the
                  subsequent  Transfer of such  securities;  provided,  however,
                  that no Change of Control occurs as a result of such Transfer,
                  either upon such Transfer or upon the subsequent conversion to
                  equity of such convertible debt or other securities.

            (9)   The  issuance by AIMCO REIT or AIMCO OP of  additional  common
                  stock,  limited  partnership  interests or other beneficial or
                  ownership  interests,   convertible  debt,  equity  and  other
                  similar  securities,  and  the  subsequent  Transfer  of  such
                  convertible  debt or securities;  provided,  however,  that no
                  Change  of  Control  occurs as the  result  of such  Transfer,
                  either upon such Transfer or upon the subsequent conversion to
                  equity of such convertible debt or other securities.

            (10)  So long as AIMCO  REIT  owns  100% of the  stock of  AIMCO-LP,
                  Inc., a Transfer of limited partnership interests that results
                  in  AIMCO-LP,  Inc.  owning not less than 50.1% of the limited
                  partnership interests in AIMCO OP.

BB.   Section  21(b)(8)  shall  apply only to a  Transfer  of an  interest  in a
      Controlling Entity that is prohibited by Section 21(a)(7).

CC. A new Section 21(d) is added, as follows:

                  (d) For purposes of this Section 21, the following terms shall
            be defined as follows:

                  (1)   "Change of Control"  shall mean the earliest to occur of
                        (A)  the   date  an   Acquiring   Person   becomes   (by
                        acquisition,   consolidation,   merger  or   otherwise),
                        directly or  indirectly,  the  beneficial  owner of more
                        than  forty  percent  (40%) of the total  Voting  Equity
                        Capital of AIMCO REIT then outstanding,  or (B) the date
                        on  which  AIMCO  REIT  shall  cease  to  hold  (whether
                        directly   or   indirectly   through   a  wholly   owned
                        intermediary entity such as AIMCO-LP,  Inc. or AIMCO-GP,
                        Inc.)  at  least  50.1%  of  the   limited   partnership
                        interests  in AIMCO OP,  or (C) the date on which  AIMCO
                        REIT  shall  cease  for  any  reason  to  hold  (whether
                        directly  or  indirectly)   (i)  the  interests  in  the
                        Managing  General  Partner  held as of the  date of this
                        Instrument  (as evidenced by  organizational  charts and
                        documents  submitted to Lender as of such date) and (ii)
                        the Controlling  Interest(s) in the Borrower, or (D) the
                        replacement  (other than solely by reason of  retirement
                        at age sixty-five or older, death or disability) of more
                        than 50% (or such lesser  percentage  as is required for
                        decisionmaking by the board of directors of trustees, if
                        applicable) of the members of the board of directors (or
                        trustee,  if  applicable)  of AIMCO REIT over a one-year
                        period  where  such  replacement  shall  not  have  been
                        approved  by a vote of at least a majority  of the board
                        of directors (or trustees,  if applicable) of AIMCO REIT
                        then  still in office who  either  were  members of such
                        board of directors (or trustees,  if  applicable) at the
                        beginning  of such one year period or whose  election as
                        members  of the  board of  directors  (or  trustees,  if
                        applicable) was previously so approved.

                  (2)   "Acquiring  Person"  shall mean a  "person"  or group of
                        "persons" within the meaning of Sections 13(d) and 14(d)
                        of the  Securities  Exchange  Act of 1934,  as  amended.
                        However,   notwithstanding  the  foregoing,   "Acquiring
                        Person" shall not be deemed to include any member of the
                        Borrower Control Group unless such member has,  directly
                        or   indirectly,   disposed   of,   sold  or   otherwise
                        transferred to, or encumbered or restricted  (whether by
                        means of voting trust  agreement or  otherwise)  for the
                        benefit of an  Acquiring  Person,  all or any portion of
                        the Voting  Equity  Capital of AIMCO  REIT  directly  or
                        indirectly  owned or  controlled  by such member or such
                        member  directly or indirectly  votes all or any portion
                        of the Voting Equity Capital of AIMCO REIT,  directly or
                        indirectly,  owned or  controlled by such member for the
                        taking  of any  action  which,  directly  or  indirectly
                        constitutes  or would result in a Change of Control,  in
                        which event such member of the  Borrower  Control  Group
                        shall be deemed to constitute an Acquiring Person to the
                        extent of the Voting Equity  Capital of AIMCO REIT owned
                        or controlled by such member.

                  (3)   "Borrower  Control  Group"  shall mean Terry  Considine,
                        Peter  K.  Kompaniez,  Richard  S.  Ellwood,  J.  Landis
                        Martin, Thomas L. Rhodes and James N. Bailey.

                  (4)   A "Person" shall mean an individual, an estate, a trust,
                        a  corporation,   a  partnership,  a  limited  liability
                        company  or any other  organization  or entity  (whether
                        governmental or private).

                  (5)   "Security"  shall  have the same  meaning  as in Section
                        2(1) of the Securities Act of 1933, as amended.

                  (6)   "Controlling Interest(s)" shall mean (i) with respect to
                        a partnership,  such majority  and/or  managing  general
                        partner  interests  which,  together  with a majority of
                        limited  partnership  interests if necessary for consent
                        purposes,  vest in the holder of such interests the sole
                        power,  right and  authority  to control  the day to day
                        operations   of   the   Borrower;   including,   without
                        limitation, the authority to manage, operate and finance
                        the   Mortgaged   Property,   (ii)  with  respect  to  a
                        corporation,  the  number of shares  which  entitle  the
                        holder to elect a majority of the board of  directors of
                        the  Borrower,  and  (iii)  with  respect  to a  limited
                        liability company,  such majority and/or managing member
                        interests  as vest in the holder of such  interests  the
                        sole power,  right and  authority  to control the day to
                        day  operations  of  the  Borrower;  including,  without
                        limitation, the authority to manage, operate and finance
                        the Mortgaged Property.

                  (7)   "AIMCO  REIT"  shall  mean   Apartment   Investment  and
                        Management Company, a corporation organized and existing
                        under the laws of the State of Maryland.

                  (8)   "AIMCO OP" shall mean AIMCO Properties,  L.P., a limited
                        partnership organized and existing under the laws of the
                        State of Delaware.

(9)                     "Managing   General   Partner"  shall  mean  the  entity
                        executing  this  Instrument  on behalf  of the  Borrower
                        and/or its successors or assigns in interest.

(10)                    "Voting  Equity  Capital"  shall mean  Securities of any
                        class or classes,  the holders of which are  ordinarily,
                        in the  absence of  contingencies,  entitled  to elect a
                        majority   of  the  board  of   directors   (or  Persons
                        performing similar functions).

DD.                     Section 21(e) is hereby added as follows:

                  (e) Lender  shall  consent to a one-time  substitution  of the
            Mortgaged Property for another multifamily apartment rental property
            (the "Substitution"), which shall not result in an adjustment to the
            rate at which the  Indebtedness  secured  by this  Instrument  bears
            interest  provided that Borrower has satisfied each of the following
            requirements:

            (1)   there  shall  exist no Event of  Default  uncured  within  any
                  applicable grace period.

            (2)   the  loan to  value  ratio  with  respect  to the  substituted
                  property  (the  "Substituted  Property")  at the  time  of the
                  proposed  Substitution  is not greater  than the lesser of (1)
                  the loan to value ratio of the Mortgaged Property which exists
                  as of the date  hereof,  or (2) the then current loan to value
                  ratio  of the  Mortgaged  Property  at the  time  of any  such
                  Substitution  based  on  an  MAI  appraisal  (prepared  by  an
                  appraiser  acceptable  to Lender and paid for by  Borrower) at
                  the time of any such Substitution.  (As used herein,  "loan to
                  value ratio" means the ratio of (A) the outstanding  principal
                  balance  of  the   Indebtedness   to  (B)  the  value  of  the
                  Substituted   Property   as   determined   by  Lender  in  its
                  discretion, expressed as a percentage);

            (3)   the  debt   service   coverage   ratio  with  respect  to  the
                  Substituted Property for the last twelve full months preceding
                  the proposed  Substitution is not less than the greater of (1)
                  the debt service  coverage  ratio for the  Mortgaged  Property
                  which  exists as of the date  hereof,  or (2) the then current
                  debt service coverage ratio for the Mortgaged  Property at the
                  time of any such Substitution. (As used herein, the term "debt
                  service  coverage ratio" means the ratio of (A) the annual net
                  operating  income from the Substituted  Property's  operations
                  during the  preceding  twelve  month period which is available
                  for  repayment  of  debt,   after  deducting   reasonable  and
                  customary operating expenses,  to (B) the annual principal and
                  interest payable under the Note);

            (4)   any such  Substitution  shall be approved  only  following the
                  date which is ten years from the date of this Instrument;

            (5)   Lender  shall have  received  an  environmental  report on the
                  Substituted  Property  showing that no Phase II  environmental
                  report is required;

            (6)   Lender  shall  have  received  an  engineering  report  on the
                  Substituted  Property showing that there are at least ten (10)
                  years of useful life remaining with respect to the Substituted
                  Property;

            (7)   Lender   shall   have   received   the   amount  of   Lender's
                  out-of-pocket costs (including, without limitation, reasonable
                  attorneys'   fees  and  the  costs  of  engineering   reports,
                  appraisals and  environmental  reports)  incurred in reviewing
                  the Substitution request and implementing the Substitution;

            (8)   Lender shall have received a new currently  dated  mortgagee's
                  title  insurance   policy  in  the  form  and  containing  the
                  exceptions acceptable to Lender according to its standards for
                  title  insurance   policies  in  place  at  the  time  of  the
                  Substitution, insuring the mortgage secured by the Substituted
                  Property;

            (9)   Lender  shall have  received a currently  dated  survey of the
                  Substituted Property,  acceptable to Lender in accordance with
                  its  standards  and  requirements  for surveys in place at the
                  time of the substitution;

            (10)  The  physical  condition,  location  and other  aspects of the
                  Substituted Property shall be substantially  comparable to the
                  Mortgaged  Property as determined by Lender in its  reasonable
                  discretion;

            (11)  If the  Substitution  is  approved,  (i)  Borrower  shall have
                  executed and delivered to Lender for  recordation an amendment
                  to this Instrument in form and substance  acceptable to Lender
                  in its discretion,  substituting the Substituted  Property for
                  the Mortgaged Property;  and (ii) Borrower shall have executed
                  and delivered such additional documentation, including without
                  limitation new Uniform  Commercial Code Financing  Statements,
                  as Lender may  reasonably  require to grant Lender a perfected
                  first lien and security  interest in the Substituted  Property
                  and to otherwise implement the Substitution in accordance with
                  this Section.

EE. Section 22(a) is modified to read as follows:

                  (a) any  failure by Borrower to pay or deposit (i) any payment
            of principal or interest or any Imposition Deposit within three days
            after it is due, or (ii) any other amount required by the Note, this
            Instrument, or any other Loan Document when due.

FF.   Section 28 shall obligate Borrower to provide only such further assurances
      as Lender reasonably may require.

GG.   The words "Except as otherwise disclosed to Lender in writing,  before the
      date of this Instrument" are added at the beginning of the second sentence
      of Section 41.

HH.   Section 48 Subordinate Debt is added as follows:

                  48.  SUBORDINATE DEBT.  Borrower may incur  indebtedness other
            than the  Indebtedness  provided  each of the  following  terms  and
            conditions are satisfied:

                  (a)   any  such  indebtedness  ("Subordinate  Debt")  shall be
                        incurred  by  Borrower  solely  for or in respect of the
                        operation  of the  Mortgaged  Property  in the  ordinary
                        course of business  as a  residential  apartment  rental
                        project.  Such  Subordinate  Debt  shall  be and  remain
                        payable  to,  held by,  and in  favor of only an  "AIMCO
                        Subordinate  Lender",  which shall be defined as:  AIMCO
                        REIT,  AIMCO OP or any  entity  in which  AIMCO  REIT or
                        AIMCO OP holds Controlling Interest(s), whether directly
                        or  indirectly,  and which  entity  shall have a term of
                        existence  not  expiring  prior  to 10 years  after  the
                        maturity date of the Note;

                  (b)   except (1) as set forth in  Subsection  (c),  or (2) for
                        any debt secured by an  ownership  interest in Borrower,
                        any such Subordinate Debt shall be unsecured,  and shall
                        not be evidenced by a note or any like instrument;

                  (c)   any  Subordinate  Debt may be evidenced by a note and/or
                        secured by a lien on the Mortgaged  Property  and/or the
                        other assets of Borrower provided that:

                  (1)   the total debt  service  coverage  ratio with respect to
                        the Mortgaged  Property  after the proposed  Subordinate
                        Debt  is  incurred   and/or  secured  by  the  Mortgaged
                        Property  will  equal  at least a ratio  of  1.10:1,  as
                        determined by Lender in its reasonable  discretion.  (As
                        used  herein,  the term  "total  debt  service  coverage
                        ratio"  means the ratio of (A) the annual net  operating
                        income from the Mortgaged  Property during the preceding
                        12 month  period  which is  available  for  repayment of
                        debt, after deducting reasonable and customary operating
                        expenses,  to (B) the  aggregate  annual  principal  and
                        interest   payable   under   the  Note,   the   proposed
                        Subordinate Debt and any other then existing Subordinate
                        Debt encumbering the Mortgaged Property);

                  (2)   the principal amount of such Subordinate Debt,  together
                        with the  Indebtedness  and all other  Subordinate  Debt
                        then  encumbering  the  Mortgaged  Property,  shall  not
                        exceed 85% of the value of the Mortgaged Property at the
                        time the Borrower incurs the proposed  Subordinate Debt,
                        as determined by Lender, in Lender's sole discretion;

                  (3)   any note and security instrument  evidencing or securing
                        such   Subordinate  Debt  (A)  shall  by  its  terms  be
                        expressly  subordinate  to the  Indebtedness  and to all
                        amendments,  extensions and renewals thereof;  (B) shall
                        provide  that  the  AIMCO   Subordinate   Lender  cannot
                        exercise  its   remedies   for  a  default   under  such
                        Subordinate  Debt without the prior  written  consent of
                        the  Lender;  (C)  shall  provide  that,  so long as the
                        Indebtedness is outstanding, all payments under any such
                        note and/or security  therefore shall accrue if the same
                        are unpaid;  (D) shall  provide that  payments  shall be
                        made  in the  following  order:  (i)  amounts  due  with
                        respect  to  the  operation  and   maintenance   of  the
                        Mortgaged Property,  including,  without limitation, all
                        monthly  installments  of principal  and interest on the
                        Indebtedness and any other operating  expenses,  capital
                        expenses and tax and  insurance  payments,  (ii) amounts
                        due  with  respect  to any  Subordinate  Debt  which  is
                        secured by a lien on the Mortgaged  Property,  and (iii)
                        amounts  due with  respect to any  Subordinate  Debt not
                        secured by a lien on the Mortgaged  Property;  (E) shall
                        provide that the AIMCO Subordinate  Lender shall provide
                        Lender with notice of any default under the  Subordinate
                        Debt not cured within any applicable grace period at the
                        same time it provides such notice to the  Borrower;  and
                        (F) shall  prominently state that the instrument and the
                        Subordinate   Debt  are  not   assignable  or  otherwise
                        transferable except to another AIMCO Subordinate Lender;

                  (4)   Borrower delivers to Lender evidence in writing that the
                        Subordinate Debt loan documents,  the total debt service
                        ratio and the aggregate loan to value ratio  limitations
                        set  forth  herein  comply  in  all  respects  with  the
                        provisions of this Section; and

                  (5)   Borrower's   incurring  of  Subordinate   Debt  and,  if
                        applicable,  placement  of a  subordinate  lien  on  the
                        Mortgaged  Property securing such Subordinate Debt shall
                        not   constitute   an  Event  of   Default   under  this
                        instrument.

(d)   Borrower  and  the  AIMCO   Subordinate   Lender   shall   execute  such
                     instruments  and documents in connection with
                     the  status  of  such   Subordinate  Debt  as
                     Lender  shall  from  time to time  reasonably
                     request,  such  document to be in the form of
                     the subordination  agreement  attached hereto
                     as  Appendix 1.  Borrower  shall bear any and
                     all  expenses  necessary in  connection  with
                     its  compliance  with the  provisions of this
                     subsection    (d),     including,     without
                     limitation, reasonable attorneys' fees.

II.   Section 37 is modified by deleting:  "; provided,  however,  that in the
      event  of a  Transfer,  any or  some  or all  of  the  Modifications  to
      Instrument  set forth in Exhibit B (if any) may be  modified or rendered
      void by Lender  at  Lender's  option by notice to  Borrower/transferee".
      Except for Section JJ below and except for the  definitions of the terms
      used in Section JJ and not defined therein,  the modifications set forth
      in this Exhibit B shall be null and void unless  title to the  Mortgaged
      Property  is vested  in an  entity  whose  Controlling  Interest(s)  are
      directly or indirectly held by AIMCO REIT or AIMCO OP.

JJ.   Section 49 AIMCO- Held Subordinate Debt is added as follows:

                  49. AIMCO-HELD SUBORDINATE DEBT. In connection with a Transfer
             of the  Mortgaged  Property  which has been  consented to by Lender
             pursuant to Section  21(c),  and provided that no Change of Control
             of Borrower  has  occurred  prior to such  Transfer,  the  proposed
             transferee (the "New Borrower") may incur indebtedness,  other than
             the Indebtedness and such other  indebtedness as is permitted under
             the terms of this Instrument,  secured by a lien upon the Mortgaged
             Property,  provided each of the following  terms and conditions are
             satisfied:

                  (a) any  such  indebtedness  ("AIMCO-Held  Subordinate  Debt")
            shall be incurred by the New Borrower  solely in connection with its
            purchase of the Mortgaged Property;

                  (b) The AIMCO-Held Subordinate Debt (and any and all documents
            evidencing such Subordinate Debt) shall be and remain held by and in
            favor of an AIMCO Subordinate Lender;

                  (c)  on the  date  of  the  Transfer,  Lender  and  the  AIMCO
            Subordinate  Lender shall  execute and record  among the  applicable
            land  records  a   subordination   agreement  in  the  form  of  the
            subordination  agreement  attached  hereto  as  Appendix  1,  or  at
            Lender's  option  in  substantially  the  form of any  subordination
            agreement which may have been entered into by and between Lender (or
            predecessor to Lender's interest  hereunder) and any entity in which
            AIMCO  REIT or  AIMCO  OP  holds  Controlling  Interest(s),  whether
            directly or indirectly,  prior to the Transfer and whether or not in
            connection with the Mortgaged  Property,  with such modifications as
            Lender reasonably requires;  provided,  however,  that (i) the AIMCO
            Subordinate Lender shall have the right to further sell or otherwise
            transfer the AIMCO-Held  Subordinate Debt to AIMCO REIT, AIMCO OP or
            any  entity  in which  AIMCO  REIT or  AIMCO  OP  holds  Controlling
            Interest(s),  whether  directly  or  indirectly,  and (ii) the AIMCO
            Subordinate  Lender shall have the right,  without Lender's consent,
            to  accept  a  Transfer  of  title to the  Mortgaged  Property  from
            Borrower  by (A) deed in lieu of  foreclosure  or (B) a  foreclosure
            which  results  in AIMCO  Subordinate  Lender  or an entity in which
            AIMCO REIT or AIMCO OP hold  Controlling  Interest(s),  directly  or
            indirectly, holding title to the Mortgaged Property, in satisfaction
            of the  AIMCO-Held  Subordinate  Debt,  and such Transfer  shall not
            constitute  an  Event  of  Default  under  this  Instrument.   As  a
            prerequisite  to  foreclosure  in  satisfaction  of  the  AIMCO-Hold
            Subordinate Debt, AIMCO Subordinate Lender shall provide Lender with
            thirty (30) days prior written  notice of the  commencement  of such
            foreclosure.  Lender shall acknowledge its receipt of such notice in
            writing within ten (10) business days, and with such acknowledgement
            shall  provide an estimate of the  reasonable  fees and  expenses it
            expects  to  incur  in  connection  with  the   foreclosure.   AIMCO
            Subordinate  Lender shall deposit such  estimated sum in escrow with
            Lender or a representative  designated by Lender.  Promptly upon the
            conclusion of the foreclosure, any excess sums not expended shall be
            returned to AIMCO  Subordinate  Lender or AIMCO  Subordinate  Lender
            shall  pay to  Lender  the  amount  by  which  the  Lender's  actual
            reasonable expenditures exceed the deposited sum.

                  (d) the combined debt service  coverage  ratio with respect to
            the Mortgaged  Property  after the proposed  AIMCO-Held  Subordinate
            Debt  is  incurred  will  equal  at  least  a ratio  of  1.10:1,  as
            determined by Lender in its reasonable discretion (if the AIMCO-Held
            Subordinate Debt requires a balloon payment,  such payment cannot be
            due prior to the Maturity Date of the Note.); and Lender has advised
            the Borrower and New Borrower in writing of such determination prior
            to the Transfer;

                  (e) the principal amount of the AIMCO-Held  Subordinate  Debt,
            together with the Indebtedness  and all other  Subordinate Debt then
            encumbering  the  Mortgaged  Property,  shall not  exceed 85% of the
            value of the Mortgaged  Property at the time the Borrower incurs the
            proposed AIMCO-Held Subordinate Debt, as determined by Lender in its
            sole  discretion;  and  Lender  has  advised  the  Borrower  and New
            Borrower in writing of such determination prior to the Transfer;

                  (f) (i) not less than 40 days prior to the  Transfer,  the New
            Borrower must have submitted to Lender or, if Lender is then Freddie
            Mac, to a party designated by Freddie Mac (the "Designated Seller"),
            a complete  and  accurate  application,  together  with all required
            supporting  documentation  including a written term sheet specifying
            all of the terms of the proposed AIMCO-Held  Subordinate Debt, for a
            subordinate  mortgage loan in the  principal  amount of the proposed
            AIMCO-Held  Subordinate Debt (the "Subordinate  Loan");  and (ii) 10
            days prior to the  Transfer,  Lender or the  Designated  Seller must
            have failed to issue to the proposed transferee a written commitment
            to provide the  Subordinate  Loan at an interest rate and upon terms
            at least as  favorable to the  proposed  transferee  as those of the
            proposed  AIMCO-Held  Subordinate  Debt (and if such  commitment  is
            issued,  Lender or the Designated  Seller shall provide financing to
            the  New  Borrower  in  the  amount  of  the   proposed   AIMCO-Held
            Subordinate Loan); and

                  (g)  Borrower  has paid all costs  and  expenses  incurred  by
            Lender  in  connection   with  the  AIMCO-Held   Subordinate   Debt,
            including,  without  limitation,  a review  fee equal to 0.1% of the
            outstanding  principal balance of the Loan and reasonable attorneys'
            fees.

      Notwithstanding  anything in this Instrument  which may be deemed to be to
      the contrary, (i) AIMCO Subordinate Lender shall have the right to sell or
      otherwise transfer the AIMCO-Held Subordinate Debt to AIMCO REIT, AIMCO OP
      or  any  entity  in  which  AIMCO  REIT  or  AIMCO  OP  holds  Controlling
      Interest(s),  whether  directly  or  indirectly,  and (ii)  shall have the
      right,  without  Lender's  consent,  to accept a Transfer  of title to the
      Mortgaged  Property  from Borrower by  deed-in-lieu  of  foreclosure  or a
      foreclosure  which  results  in AIMCO  Subordinate  Lender or an entity in
      which  AIMCO REIT or AIMCO OP hold  Controlling  Interest(s),  directly or
      indirectly,  holding title to the Mortgaged Property, as more specifically
      set forth above.  Such Transfer  shall not  constitute an Event of Default
      under this  Instrument,  and this entire Exhibit B shall  automatically be
      reinstated in its entirety including and without  limitation,  Sections HH
      and JJ.


<PAGE>


                        APPENDIX 1 TO SECURITY INSTRUMENT

                   SUBORDINATION AND INTERCREDITOR AGREEMENT

      THIS SUBORDINATION AND INTERCREDITOR  AGREEMENT ("Agreement") made as of
the           day           of          ,          ,          by           and
between,  a, having an office at (hereinafter  referred to as the "Subordinate
Mortgagee")  and,  a having  an  office  at  (hereinafter  referred  to as the
"Senior Mortgagee").


                                   WITNESSETH:

      WHEREAS,  the Senior  Mortgagee  is the owner and  holder of that  certain
mortgage  described  on  Exhibit  A  attached  hereto  (said  mortgage,  and any
extensions,  modifications,  substitutions  and  consolidations  thereof,  being
hereinafter  referred to as the "Senior Mortgage"),  covering the estate of (the
"Borrower") in certain  premises located in the County of and State of , as more
particularly  described  on  Exhibit B attached  hereto and made a part  hereof,
together with all  improvements  located thereon  (collectively,  the "Mortgaged
Property"),  and the  note  secured  thereby  (said  note,  and any  extensions,
modifications or substitutions  thereof,  being  hereinafter  referred to as the
"Senior  Note"),  evidencing  and  securing,  a certain  loan made by the Senior
Mortgagee to the Borrower (the "Senior Loan"); and

      WHEREAS,  the Borrower is about to execute and deliver to the  Subordinate
Mortgagee  (i)  a  note  (said  note,  and  any  extensions,   modifications  or
substitutions  thereof, being hereinafter referred to as the "Subordinate Note")
in the principal sum of Dollars ($_________);  (ii) a subordinate mortgage (said
mortgage,  and any extensions,  modifications,  substitutions and consolidations
thereof,  being hereinafter referred to as the "Subordinate  Mortgage") securing
said  Subordinate  Note;  and (iii) a collateral  assignment of leases and rents
covering the Mortgaged  Property,  evidencing and securing a certain subordinate
loan to be made by the Subordinate  Mortgagee to the Borrower (the  "Subordinate
Loan"); and

      WHEREAS,  the Subordinate  Mortgage is intended to be recorded immediately
prior to this Agreement in the office of ___________ County, State of ; and

      WHEREAS,  the Senior  Mortgagee  is  unwilling  to allow the  Borrower  to
further encumber the Mortgaged Property with the Subordinate Mortgage unless the
Subordinate  Mortgage  is  subordinated  to the  Senior  Mortgage  in the manner
hereinafter set forth;

      NOW,  THEREFORE,  in consideration of the mutual promises contained herein
and other good and valuable consideration,  the receipt and sufficiency of which
is hereby acknowledged by the parties hereto, the Subordinate  Mortgagee and the
Senior Mortgagee hereby agree as follows:

            (1)  The  Subordinate  Mortgage,   any  other  document  evidencing,
securing or guaranteeing the indebtedness secured by the Subordinate Mortgage or
otherwise  executed in connection with the Subordinate  Mortgage  (collectively,
together  with any  extensions,  refinancing,  modifications,  substitutions  or
consolidations  thereof,  being  hereinafter  collectively  referred  to as  the
"Subordinate  Loan Documents") and all advances made thereunder are hereby,  and
shall continue to be, subject and subordinate in lien and in payment to the lien
and payment of the Senior Mortgage and any other document  evidencing,  securing
or guaranteeing,  the  indebtedness  secured by the Senior Mortgage or otherwise
executed in connection with the Senior Mortgage (collectively, together with any
extensions, refinancing, modifications, substitutions or consolidations thereof,
being hereinafter  collectively  referred to as the "Senior Loan Documents") and
all advances made thereunder without regard to the application of such advances,
together with all interest, prepayment premiums and all other sums due under the
Senior  Loan  Documents.  All of the  terms,  covenants  and  conditions  of the
Subordinate  Mortgage and the Subordinate  Loan Documents are hereby,  and shall
continue to be, subordinate to all of the terms, covenants and conditions of the
Senior  Mortgage  and the Senior Loan  Documents.  The  foregoing  shall  apply,
notwithstanding  the availability of other collateral to the Senior Mortgagee or
the  actual  date  and  time of  execution,  delivery,  recordation,  filing  or
perfection of the Senior  Mortgage or the Subordinate  Mortgage,  or the lien or
priority of payment thereof,  and  notwithstanding the fact that the Senior Loan
or any claim for the Senior  Loan is  subordinated,  avoided or  disallowed,  in
whole or in part,  under  Title 11 of the United  States  Code (the  "Bankruptcy
Code") or other  applicable  federal or state law. In the event of a proceeding,
whether voluntary or involuntary, for insolvency,  liquidation,  reorganization,
dissolution,  bankruptcy or other similar proceeding  pursuant to the Bankruptcy
Code or other applicable federal or state law, the Senior Loan shall include all
interest  accrued  on the  Senior  Loan,  in  accordance  with and at the  rates
specified in the Senior Loan Documents,  both for periods before and for periods
after the  commencement of any of such  proceedings,  even if the claim for such
interest is not allowed pursuant to applicable law.

            (2) In addition,  without  limiting the foregoing,  the  Subordinate
Mortgagee  agrees  that  all  rights  of the  Subordinate  Mortgagee  under  the
Subordinate  Mortgage  or under the  Subordinate  Loan  Documents  in and to the
Mortgaged Property and the proceeds thereof including  assignments of leases and
rents,  issues and profits and the rights with respect to insurance proceeds and
condemnation awards) shall be expressly subject and subordinate:

                  (a)  to  the  rights  of the  Senior  Mortgagee  in and to the
            Mortgaged Property and the proceeds thereof  (including  assignments
            of leases and rents,  issues and profits and rights with  respect to
            insurance  proceeds and condemnation  awards) on the terms set forth
            in the Senior Mortgage and the Senior Loan Documents; and

                  (b) to any and all advances made and other  expenses  incurred
            under,  and as permitted in, the Senior Mortgage and the Senior Loan
            Documents.

            (3) The Subordinate  Mortgagee  hereby  represents and warrants that
(a) it is now  the  owner  and  holder  of the  Subordinate  Mortgage;  (b)  the
Subordinate  Mortgage  is now in full  force  and  effect;  (c) the  Subordinate
Mortgage has not been modified or amended; (d) the Borrower is not in default in
the observance and/or performance of any of the obligations  thereunder required
to be observed and performed by the Borrower; (e) no event has occurred,  which,
with the  passing  of time or the giving of notice or both  would  constitute  a
default  thereunder;  (f) all  payments  due thereon to and  including  the date
hereof,  have been paid in full;  (g) the principal  balance of the  Subordinate
Mortgage  is as set forth on Exhibit C hereto;  (h)  interest  on the  principal
balance  shall be  calculated  at the annual  rate of  interest  as set forth on
Exhibit C hereto;  (i) no scheduled  monthly payments under the Subordinate Note
have been prepaid; and (j) any rights of the Subordinate Mortgagee in and to the
lien, estate or other interest in the Mortgaged  Property are not subject to the
rights of any third parties by way of subrogation, indemnification or otherwise.

            (4) The Subordinate  Mortgagee hereby agrees that so long as any sum
shall remain outstanding on the Senior Loan Documents:

                  (a) The Subordinate Mortgagee shall simultaneously send to the
            Senior  Mortgagee due notice of all defaults  under the  Subordinate
            Loan  Documents  as well as copies  of all  notices  required  to be
            delivered  to the Borrower  under the  Subordinate  Loan  Documents.
            Notice under the Subordinate  Mortgage shall not be deemed effective
            until such  notice has been  received by the Senior  Mortgagee.  The
            Senior  Mortgagee  shall  have the  right,  but  shall  not have any
            obligation whatsoever, to cure any such default within ten (10) days
            after the expiration of the applicable grace period permitted to the
            Borrower under the Subordinate Loan Documents.

                  (b) The  Subordinate  Mortgagee  shall not,  without the prior
            written consent of the Senior Mortgagee take any Enforcement  Action
            (hereinafter defined). For the purposes of this Agreement,  the term
            "Enforcement Action" shall mean with respect to the Subordinate Loan
            Documents,  the  acceleration of all or any part of the indebtedness
            secured  by  the  Subordinate   Loan   Documents,   any  foreclosure
            proceedings,  the exercise of any power of sale,  the  acceptance by
            the holder of the  Subordinate  Mortgage of a deed or  assignment in
            lieu of  foreclosure,  the  obtaining of a receiver,  the seeking of
            default  interest,  the  taking  of  possession  or  control  of the
            Mortgaged  Property,  the  suing  on  the  Subordinate  Note  or any
            guaranty  or other  obligation  contained  in the  Subordinate  Loan
            Documents,  the exercising of any banker's lien or rights of set-off
            or recoupment, the commencement of any bankruptcy, reorganization or
            insolvency  proceedings  against the Mortgagor  under any federal or
            state law, or the taking of any other enforcement action against the
            Mortgaged Property;

                  (c) In  the  event  (i)  the  Senior  Loan  becomes  due or is
            declared  due and  payable  prior to its stated  maturity,  (ii) the
            Subordinate  Mortgagee  receives  any  prepayment  of  principal  or
            interest,  in part  or in  whole,  under  the  Subordinate  Mortgage
            contrary  to the  terms of the  Subordinate  Loan  Documents,  (iii)
            Borrower is in default under the Senior Loan Documents,  or (iv) any
            payment, distribution, division or application, partial or complete,
            voluntary or involuntary, by operation of law or otherwise, by or on
            behalf of Borrower, or of all or any part of the property, assets or
            business of the Borrower or the proceeds thereof,  in whatever form,
            is made to any  creditor  or  creditors  of the  Borrower  or to any
            holder of indebtedness of the Borrower by reason of or in connection
            with  any  liquidation,  dissolution  or  other  winding  up of  the
            Borrower or its business,  or any receivership or custodianship  for
            the Borrower of all or  substantially  all of its  property,  or any
            insolvency or bankruptcy proceedings or composition or restructuring
            of any debts of Borrower or assignment  for the benefit of creditors
            or any  proceeding  by or against the  Borrower for any relief under
            any bankruptcy, reorganization or insolvency law or laws, federal or
            state,  or any law,  federal  or state,  relating  to the  relief of
            debtors, readjustment of indebtedness,  reorganization,  composition
            or  extension,   then,  and  in  any  such  event,  any  payment  or
            distribution of any kind or character,  whether in cash, property or
            securities which shall be payable or deliverable with respect to any
            or all of the Subordinate  Loan shall be paid forthwith or delivered
            directly to the Senior  Mortgagee for  application to the payment of
            the Senior Loan to the extent  necessary  to make payment in full of
            all sums due under the Senior Loan  remaining  unpaid  after  giving
            effect to any  concurrent  payment  or  distribution  to the  Senior
            Mortgagee or, received by the Subordinate  Mortgagee,  shall be held
            in trust by the Subordinate Mortgagee, for the benefit of the Senior
            Mortgagee.  In any such event,  the Senior  Mortgagee may, but shall
            not be obligated to,  demand,  claim and collect any such payment or
            distribution that would, but for these subordination  provisions, be
            payable  or  deliverable  with  respect  to  the  Subordinate  Loan.
            Subordinate   Mortgagee   hereby  grants  to  Senior   Mortgagee  an
            irrevocable  power of  attorney  coupled  with an  interest  for the
            purpose of exercising  any and all rights and remedies  available to
            Senior  Mortgagee  pursuant to this Paragraph  4(c). In the event of
            the occurrence of (i), (ii) or (iii) above and until the Senior Loan
            shall have been fully paid and satisfied and all of the  obligations
            of the Borrower to the Senior Mortgagee have been performed in full,
            no payment shall be made to or accepted by the Subordinate Mortgagee
            in respect of the Subordinate Loan;

                  (d) No tenant under any lease of any portion of the  Mortgaged
            Property will be made a party  defendant in any  foreclosure  of the
            Subordinate  Mortgage nor will any  Enforcement  Action or any other
            action be taken that would terminate any leases or other rights held
            by or granted to or by third  parties with respect to the  Mortgaged
            Property;

                  (e) (i) If, after the consent  required  under  paragraph 4(b)
            above has been obtained,  any action or proceeding  shall be brought
            to  foreclose  the  Subordinate   Mortgage  or  commence  any  other
            Enforcement  Action, no portion of the rents,  issues and profits of
            the Mortgaged  Property shall be collected except through a receiver
            appointed  by  the  court  in  which  such  foreclosure   action  or
            proceeding is brought,  after due notice of the  application for the
            appointment  of such  receiver  shall  have been given to the Senior
            Mortgagee  and the rents,  issues and profits so  collected  by such
            receiver  shall be applied  first to the payment of  maintenance  of
            taxes  and  insurance  on the  Mortgaged  Property,  and then to the
            payment  of  principal  and  interest  due and  owing on the  Senior
            Mortgage prior to the payment,  if any, of any principal or interest
            due and  owing  on the  Subordinate  Mortgage;  (ii) if  during  the
            pendency of any such foreclosure action or proceeding,  an action or
            proceeding  shall  be  brought  by  the  Senior  Mortgagee  for  the
            foreclosure of the Senior Mortgage and an application is made by the
            Senior  Mortgagee  for an  extension  of such  receivership  for the
            benefit of the Senior Mortgagee,  all such rents, issues and profits
            held by such  receiver as of the date of such  application  shall be
            applied  by the  receiver  solely  for  the  benefit  of the  Senior
            Mortgagee,  and the  Subordinate  Mortgagee shall not be entitled to
            any  portion  thereof  until all sums due and owing  pursuant to the
            Senior  Mortgage  have been paid in full and  applied as  aforesaid;
            (iii)  notice  of  the   announcement  of  any  foreclosure  of  the
            Subordinate Mortgage shall be given to the Senior Mortgagee and true
            copies of all notices  thereof and papers  served or entered in such
            action shall be delivered to the Senior Mortgagee;

                  (f) In the event the Senior  Mortgagee shall release,  for the
            purposes of restoration of all or any part of the improvements on or
            within the Mortgaged Property,  its right, title and interest in and
            to the  proceeds  under  policies of insurance  thereon,  and/or its
            right,  title and interest in and to any awards, or its right, title
            and  interest  in and to other  compensation  made for any  damages,
            losses or  compensation  for  other  rights by reason of a taking in
            eminent  domain,  the  Subordinate  Mortgagee shall release for such
            purpose all of its right, title and interest,  if any, in and to all
            such insurance proceeds,  awards or compensation and the Subordinate
            Mortgagee  agrees that the balance of such proceeds  remaining shall
            be applied to the reduction of principal under the Senior  Mortgage,
            and  if  the  Senior  Mortgagee  holds  such  proceeds,   awards  or
            compensation   and/or  monitors  the   disbursement   thereof,   the
            Subordinate  Mortgagee  agrees that the Senior  Mortgagee shall also
            hold and  monitor  the  disbursement  of such  proceeds,  awards and
            compensation to which the Subordinate Mortgagee is entitled. Nothing
            contained  in this  Agreement  shall be deemed to require the Senior
            Mortgagee,  in any way  whatsoever,  to act for or on  behalf of the
            Subordinate Mortgagee or to hold or monitor any proceeds,  awards or
            compensation in trust for or on behalf of the Subordinate Mortgagee,
            and all or any of such sums so held or monitored  may be  commingled
            with any funds of the Senior Mortgagee;

                  (g)  If   the   Subordinate   Mortgagee   shall   acquire   by
            indemnification, subordination or otherwise, any lien, estate, right
            or other  interest in the  Mortgaged  Property,  that lien,  estate,
            right or other interest shall be subordinate to the Senior  Mortgage
            as provided herein, and the Subordinate  Mortgagee hereby waives any
            and all rights it may acquire by  subrogation  or  otherwise  to the
            lien of the Senior Mortgage or any portion thereof;

                  (h)  The  Subordinate  Mortgagee  shall  not  pledge,  assign,
            hypothecate,  transfer,  convey or sell the Subordinate  Loan or any
            interest in the  Subordinate  Loan or modify,  waive or amend any of
            the terms or provisions  of the  Subordinate  Mortgage,  without the
            prior written consent of the Senior  Mortgagee;  provided,  however,
            that the  Subordinate  Mortgagee may modify,  amend and/or waive any
            provision of the Subordinate  Loan Documents  without the consent or
            approval of the Senior  Mortgagee if,  following such  modification,
            amendment and/or waiver,  the Subordinate Loan Documents comply with
            the terms and provisions of  Subparagraph  (c) of the Section of the
            Senior Mortgage entitled "Subordinate Debt";

                  (i) As to all leases now or  hereafter  in effect with respect
            to the  Mortgaged  Property,  the  Subordinate  Mortgagee  agrees to
            approve all leases which are approved by the Senior  Mortgagee.  The
            Subordinate   Mortgagee  shall  also  enter  into   recognition  and
            non-disturbance  agreements  with any  tenants  to whom  the  Senior
            Mortgagee has granted recognition and  non-disturbance,  on the same
            terms and conditions given by the Senior Mortgagee;

                  (j) The Subordinate Mortgagee hereby expressly consents to and
            authorizes,  at the option of the Senior  Mortgagee,  the release of
            all or any portion of the  Mortgaged  Property  from the lien of the
            Senior Mortgage, and hereby waives any equitable right in respect of
            marshalling it might have, in connection  with any release of all or
            any portion of the Mortgaged  Property by the Senior Mortgagee under
            the Senior Mortgage, to require the separate sales of any portion of
            the Mortgaged Property or to require the Senior Mortgagee to exhaust
            its remedies against any portion of the Mortgaged  Property,  or any
            combination  of the portions of the Mortgaged  Property or any other
            collateral,  or to require the Senior  Mortgagee to proceed  against
            any portion of the Mortgaged Property or combination of the portions
            of the Mortgaged Property or any other collateral, before proceeding
            against any other portion of the Mortgaged  Property or  combination
            of the portions of the Mortgaged Property, and further, in the event
            of any  foreclosure,  the  Subordinate  Mortgagee  hereby  expressly
            consents to and authorizes,  at the option of the Senior  Mortgagee,
            the sale,  either  separately or together,  of all or any portion of
            the Mortgaged Property;

                  (k) The Subordinate  Mortgagee shall not collect  payments for
            the purpose of escrowing taxes, assessments or other charges imposed
            on the Mortgaged Property or insurance premiums due on the insurance
            policies  required  under the  Senior  Mortgage  or the  Subordinate
            Mortgage if the Senior  Mortgagee  is  collecting  payments for such
            purposes,  however,  the Subordinate  Mortgagee may collect payments
            for such  purposes if the Senior  Mortgagee  is not  collecting  the
            same,  provided  such  payments  shall  be  held  in  trust  by  the
            Subordinate Mortgagee to be applied only for such purposes;

                  (l) After  request by the Senior  Mortgagee,  the  Subordinate
            Mortgagee  shall within ten (10) days  furnish the Senior  Mortgagee
            with a statement,  duly acknowledged and certified setting forth the
            original  principal  amount  of the  Subordinate  Note,  the  unpaid
            principal  balance,  all accrued but unpaid  interest  and any other
            sums due and owing  thereunder,  the rate of  interest,  the monthly
            payments  and that there  exists no defaults  under the  Subordinate
            Loan Documents;

                  (m) In any case  commenced  by or against  the  Borrower  or a
            general  partner of Borrower under Chapter 11 of the Bankruptcy Code
            or any similar  provision  thereof or any  similar  federal or state
            statute (a "Reorganization Proceeding"),  the Senior Mortgagee shall
            have the exclusive right to exercise any voting rights in respect of
            the Senior  Mortgagee and the other Senior Loan  Documents,  and the
            Subordinate Mortgagee shall have the exclusive right to exercise any
            voting  rights in respect of its claims  against  the  Borrower or a
            general partner of the Borrower;

                  (n) In  any  Reorganization  Proceeding  with  respect  to the
            Borrower or any general partner of the Borrower, upon any payment or
            distribution (whether in cash, property,  securities,  or otherwise)
            to creditors of the  Borrower or any such general  partner,  (i) the
            indebtedness  under the Senior Loan Documents shall first be paid in
            full in cash before the  Subordinate  Mortgagee shall be entitled to
            receive  any  payment  or other  distribution  on or in  respect  of
            indebtedness  under the Subordinate  Loan Documents,  and (ii) until
            all indebtedness  under the Senior Loan Documents is paid in full in
            cash, any payment or distribution to which the Subordinate Mortgagee
            would be  entitled  but for  this  Subordination  and  Intercreditor
            Agreement (whether in cash, property, securities or otherwise) shall
            be made to the Senior Mortgagee.

                  (o) In  any  Reorganization  Proceeding  with  respect  to the
            Borrower or any general partner of the Borrower, (i) the Subordinate
            Mortgagee  shall  file a proof  of claim in  respect  of its  claims
            against  the  Borrower or any general  partner of the  Borrower  and
            shall send to the Senior  Mortgagee  a copy  thereof  together  with
            evidence  of  the  filing  with  the  appropriate   court  or  other
            authority,  (ii) if the  Subordinate  Mortgagee  should fail to file
            such proof of claim by the tenth (10th) business day before the last
            day for  filing  of  proofs of  claim,  or if the  Senior  Mortgagee
            reasonably  believes  that the  proof of claim so filed is less than
            the proper amount thereof,  then the Senior  Mortgagee may file such
            proof of  claim,  or  corrected  proof of  claim,  on  behalf of the
            Subordinate  Mortgagee,  and  (iii)  if  objection  is  made  to the
            allowance  of any claim of the  Subordinate  Mortgagee,  the  Senior
            Mortgagee shall have the right to intervene and fully participate in
            such  proceedings  and if such rights are denied and the Subordinate
            Mortgagee fails to defend such claim,  then the Senior Mortgagee may
            defend  such  claim in the  name of the  Subordinate  Mortgagee  and
            Subordinate  Mortgagee  grants to Senior  Mortgagee  an  irrevocable
            power of  attorney  coupled  with an  interest  for the  purpose  of
            exercising  any and all  rights  and  remedies  available  to Senior
            Mortgagee at law and in equity,  including  without  limitation such
            rights and remedies  available to Senior Mortgagee  pursuant to this
            Paragraph 4; and

                  (p) To the extent any payment under the Senior Loan  Documents
            (whether by or on behalf of the Borrower, as proceeds of security or
            enforcement  of any right of set-off or otherwise) is for any reason
            repaid or  returned  to the  Borrower or its  insolvent  estate,  or
            avoided,  set  aside  or  required  to be  paid to the  Borrower,  a
            trustee,  receiver  or other  similar  party  under any  bankruptcy,
            insolvency,  receivership  or similar  law,  then the Senior Loan or
            part thereof originally  intended to be satisfied shall be deemed to
            be  reinstated  and  outstanding  to the  extent  of any  repayment,
            return, or other action as if such payment had not occurred.

            (5) The  Senior  Mortgagee  hereby  consents  to the  placing of the
Subordinate  Mortgage  on the  Mortgaged  Property  subject to the terms of this
Agreement.  This consent is limited to the Subordinate  Mortgage described above
and shall not be deemed to (a) be a consent to any future encumbrances or to any
modification, renewal, extension or increase of the Subordinate Mortgage, (b) be
a waiver of the  limitation  on  further  encumbrances  contained  in the Senior
Mortgage,  (c) be a consent to or waiver of any other term or  condition  of the
Senior Mortgage, or (d) prejudice any right or rights which the Senior Mortgagee
may now or in the future have under or in connection with the Senior Mortgage.

            (6)  The  Senior  Mortgagee  and  the  Subordinate  Mortgagee  shall
cooperate  fully with each other in order to  promptly  and fully  carry out the
terms and  provisions  of this  Agreement.  Each party hereto shall from time to
time execute and deliver such other  agreements,  documents or  instruments  and
take  such  other  actions  as may  be  reasonably  necessary  or  desirable  to
effectuate the terms of this Agreement.

            (7)  No  failure  or  delay  on the  part  of any  party  hereto  in
exercising  any  right,  power or remedy  hereunder  shall  operate  as a waiver
thereof,  nor shall any single or partial  exercise of any such right,  power or
remedy  preclude  any other or further  exercise  thereof or the exercise of any
other right, power or remedy hereunder.

            (8)  Each  party  hereto  acknowledges  that to the  extent  that no
adequate  remedy  at law  exists  for  breach  of  its  obligations  under  this
Agreement,  in the  event  either  party  fails to comply  with its  obligations
hereunder,  the other party shall have the right to obtain specific  performance
of the obligations of such  defaulting  party,  injunctive  relief or such other
equitable relief as may be available.

            (9) Any notice to be given under this Agreement  shall be in writing
and  shall  be  deemed  to be given  when  received  by the  party to whom it is
addressed.  Notices  shall be in  writing  and  sent by  registered  mail,  hand
delivery or by special courier (in each case, return receipt requested). Notices
to the other party hereto shall be sent to the address first set forth herein or
such  other  address or  addressees  as shall be  designated  by such party in a
written notice to the other parties.

            (10) In the event of any  conflict  between the  provisions  of this
Agreement  and  the  provisions  of  the  Subordinate   Mortgage  or  the  other
Subordinate Loan Documents, the provisions of this Agreement shall prevail.

            (11) No person, including, without limitation,  Borrower, other than
the  parties  hereto and their  successors  and assigns as holders of the Senior
Mortgage  and the  Subordinate  Mortgagee  shall  have  any  rights  under  this
Agreement.

            (12) This Agreement may be executed in two or more counterparts each
of which shall be deemed an original but all of which together shall  constitute
one and the same instrument.

            (13) No amendment, supplement,  modification,  waiver or termination
of  this  Agreement  shall  be  effective  against  a  party  against  whom  the
enforcement of such amendment, supplement,  modification,  waiver or termination
would be asserted, unless such amendment,  supplement,  modification,  waiver or
termination was made in a writing signed by such party.

            (14) In case  any one or more of the  provisions  contained  in this
Agreement,   or  any  application   thereof,   shall  be  invalid,   illegal  or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining provisions contained herein, and. any other application thereof, shall
not in any way be affected or impaired thereby.

            (15)  This  Agreement  shall be  construed  in  accordance  with and
governed by the laws of the state where the Mortgaged Property is located.

            (16)  This  Agreement  shall  bind and inure to the  benefit  of the
Senior Mortgagee and the Subordinate Mortgagee and their respective  successors,
permitted transferees and assigns.


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

                   [ADD SIGNATURES, ACKNOWLEDGMENTS AND EXHIBITS]

<PAGE>
Exhibit 10.38

                                                      FHLMC Loan No. 002702010
                                                        Lazy Hollow Apartments

                          REPLACEMENT RESERVE Agreement
                           (REVISION DATE 01-31-2003)

      This REPLACEMENT RESERVE AGREEMENT ("Agreement") is made and entered into,
to be  effective as of March 31, 2003,  by and between LAZY HOLLOW  PARTNERS,  a
California general partnership ("Borrower"),  and REILLY MORTGAGE GROUP, INC., a
District of Columbia corporation ("Lender") and its successors and assigns.

                             W I T N E S S E T H:

      WHEREAS,  Lender has agreed to make and  Borrower has agreed to accept the
Loan,  which  is to be  evidenced  by the  Note  and  secured  by  the  Security
Instrument  encumbering the Land and the Improvements.  The Land is described on
Exhibit "A" attached to this Agreement; and

      WHEREAS,  as a condition of making the Loan, Lender is requiring  Borrower
to  establish  the   Replacement   Reserve  Fund  for  the  funding  of  Capital
Replacements throughout the Loan term.

      NOW, THEREFORE,  for and in consideration of the Loan, the mutual promises
and covenants herein contained,  and other good and valuable consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  Lender and Borrower
agree as follows:

1.    Definitions.  The following  terms used in this  Agreement  shall have the
      meanings  set  forth  below  in this  Section  1.  Any  term  used in this
      Agreement and not defined shall have the meaning given to that term in the
      Security Instrument.

(a)   "Capital  Replacement"  means the  replacement  of those  items  listed on
      Exhibit "B" of this  Agreement and such other  replacements  of equipment,
      major  components or capital systems related to the Improvements as may be
      approved in writing or required by Lender.

(b)   "Disbursement  Period" means the interval between  disbursements  from the
      Replacement  Reserve Fund,  which interval shall be no shorter than once a
      quarter.

(c)   "Improvements"  means the buildings,  Personal  Property and  improvements
      situated upon the Land,  currently  constituting  a multifamily  apartment
      project known as Lazy Hollow Apartments.

(d)   "Initial Deposit" means the amount of Zero and 00/100 Dollars ($0.00) made
      as of the date of this Agreement.

(e)   "Inspection  Fee" means a fee for performing  any  inspection  required by
      this Agreement in an amount not to exceed Three Hundred and 00/100 Dollars
      ($300.00) per inspection.

(f)   "Investment  Fee" means a one time fee for  establishing  the  Replacement
      Reserve Fund in the amount of Fifty and 00/100 Dollars ($50.00).

(g)   "Loan"  means the loan from Lender to Borrower in the  original  principal
      amount of Ten Million and 00/100 Dollars ($10,000,000.00), as evidenced by
      the Note and secured by the Security Instrument.

(h)   "Minimum  Disbursement Request Amount" means Two Thousand Five Hundred and
      00/100 Dollars ($2,500.00).

(i)   "Monthly  Deposit" means the amount of Four Thousand Seven Hundred Two and
      00/100 Dollars  ($4,702.00) per month to be deposited into the Replacement
      Reserve Fund in accordance with this Agreement.

(j)   "Property" means the Land and Improvements.

(k)   "Replacement  Reserve  Deposit"  means the  Initial  Deposit,  the Monthly
      Deposit and/or the Revised Monthly Deposit, as appropriate.

(l)   "Replacement  Reserve Fund" means the account established pursuant to this
      Agreement to defray the costs of Capital Replacements.

(m)   "Review Period" means the period ending 120 months after the first monthly
      payment date.

(n)   "Revised   Monthly  Deposit"  means  the  amount  per  month  that  Lender
      determines  Borrower must deposit in the  Replacement  Reserve Fund during
      any Subsequent Review Period.

(o)   "Security  Instrument"  means the mortgage,  deed of trust, deed to secure
      debt, or other similar  security  instrument  encumbering the Property and
      securing Borrower's performance of its Loan obligations.

(p)   "Subsequent  Review  Period"  means the  period of 120  months  commencing
      either  (i) at the  termination  of  the  Review  Period  or  (ii)  at the
      termination of a prior  Subsequent  Review Period.  There may be more than
      one Subsequent Review Period.

2.    Replacement Reserve Fund.

(a)   Establishment; Funding.

(i)   Upon the closing of the Loan, the parties shall  establish the Replacement
      Reserve  Fund and, if required by Lender,  Borrower  shall pay the Initial
      Deposit to Lender for deposit into the Replacement Reserve Fund.

(ii)  Commencing on the date the first  installment of principal and/or interest
      is due under the Note and  continuing  on the same day of each  successive
      month until the end of the Review  Period,  Borrower shall pay the Monthly
      Deposit to Lender for deposit into the Replacement  Reserve Fund, together
      with its regular monthly payments of principal and interest as required by
      the Note and Security Instrument.

(iii) Prior to the end of the Review  Period,  Lender will  assess the  physical
      condition of the  Property.  Lender may adjust the Monthly  Deposit at the
      termination of the Review Period to reflect Lender's  determination of the
      condition  of the  Property.  Upon  written  notice  from  Lender  or Loan
      Servicer,  Borrower shall begin paying the Revised  Monthly Deposit on the
      first  monthly  payment  date of the  Subsequent  Review  Period and shall
      continue  paying the Revised  Monthly Deposit until Lender further adjusts
      the  Replacement  Reserve  Deposit during a Subsequent  Review Period,  if
      applicable.  If Lender does not provide  Borrower with written notice of a
      Revised  Monthly  Deposit,  Borrower  shall  continue  to pay the  Monthly
      Deposit or the Revised Monthly Deposit then in effect.

(b)   Investment  of  Deposits.  Borrower  and Lender  agree that Lender shall
            hold all moneys deposited into the Replacement  Reserve Fund in an
            interest bearing  account,  and any interest earned on such moneys
            shall  be  added  to the  principal  balance  of  the  Replacement
            Reserve Fund and  disbursed in accordance  with the  provisions of
            this  Agreement.  Borrower  acknowledges  and agrees that it shall
            not have the right to direct Lender as to any specific  investment
            of moneys in the  Replacement  Reserve  Fund.  Lender shall not be
            responsible for any losses  resulting from investment of moneys in
            the  Replacement  Reserve Fund or for obtaining any specific level
            or  percentage  of earnings on such  investment.  Lender  shall be
            entitled  to  deduct  the  Investment  Fee  from  the  Replacement
            Reserve Fund for establishing the Replacement Reserve.

(c)   Use.  Subject to the  pledge and  security  interest  and other  rights of
      Lender set forth in this Agreement,  the Replacement Reserve Fund shall be
      maintained  for the  payment  of the  costs  of the  Capital  Replacements
      identified on Exhibit "B".

(d)   Deferral  of  Deposits.   Notwithstanding  subsections 2(a)  through (c)
            above,  Lender  defers its right to require  Borrower  to make the
            Replacement  Reserve  Deposit.  However,  at the end of the Review
            Period or any Subsequent Review Period,  Lender reserves the right
            to require  that  Borrower  begin making the  Replacement  Reserve
            Deposit  if  Lender   reasonably   determines  that  the  physical
            condition  of the Property  warrants  that  Borrower  begin making
            such  deposit.  Lender's  determination  to require  such  deposit
            shall not depend on the  existence  of any of the events set forth
            in subsection (e) below.

(e)   Reinstatement of Deposits.  Notwithstanding  subsection 2(d) above, Lender
      reserves  the  right to  require  at any  time,  upon  written  notice  to
      Borrower,  that Borrower begin making the  Replacement  Reserve Deposit if
      Lender  reasonably  determines  that  any of  the  following  events  have
      occurred:

(i)   Borrower's  default  under the  Note,  Security  Instrument,  or any other
      document delivered in connection with the Loan, or

(ii)  the  occurrence of a Transfer  which is prohibited  under the terms of the
      Security Instrument or which requires Lender's consent, or

(iii) Borrower's  failure to  maintain  the  Property in a  satisfactory  manner
      and/or in accordance with the requirements of the Security Instrument.

3.    Performance of Capital Replacements; Disbursements.

(a)   Requests  for   Disbursement.   Lender  shall   disburse  funds  from  the
      Replacement Reserve Fund, in its sole discretion, as follows:

(i)   Borrower's  Request.  If Borrower  determines,  at any time or from time
                  to  time,  that  a  Capital   Replacement  is  necessary  or
                  desirable,  Borrower shall perform such Capital  Replacement
                  and request from Lender, in writing,  reimbursement for such
                  Capital  Replacement.  Borrower's  request for reimbursement
                  shall  include  (A) a detailed  description  of the  Capital
                  Replacement performed, together with evidence,  satisfactory
                  to Lender,  that the cost of such  Capital  Replacement  has
                  been  paid and (B) lien  waivers  from each  contractor  and
                  material  supplier  supplying  labor or  materials  for such
                  Capital Replacement, if required by Lender.

(ii)  Lender's Request. If Lender shall reasonably determine at any time or from
      time to time,  that a Capital  Replacement  is  necessary  for the  proper
      maintenance  of the  Property,  it shall so notify  Borrower,  in writing,
      requesting  that  Borrower  obtain and submit to Lender bids for all labor
      and  materials  required  in  connection  with such  Capital  Replacement.
      Borrower  shall submit such bids and a time schedule for  completing  each
      Capital  Replacement  to Lender within  thirty (30) days after  Borrower's
      receipt of Lender's  written  notice.  Borrower shall perform such Capital
      Replacement and request from Lender,  in writing,  reimbursement  for such
      Capital  Replacement.  Borrower's request for reimbursement  shall include
      (A) a detailed description of the Capital Replacement performed,  together
      with  evidence,  satisfactory  to  Lender,  that the cost of such  Capital
      Replacement  has been paid and (B) lien waivers from each  contractor  and
      material   supplier   supplying   labor  or  materials  for  such  Capital
      Replacement, if required by Lender.

(b)   Conditions Precedent. Disbursement from the Replacement Reserve Fund shall
      be made no more frequently than once every Disbursement Period and, except
      for the final  disbursement,  no  disbursement  shall be made in an amount
      less than the Minimum Disbursement Request Amount.  Disbursements shall be
      made only if the following  conditions  precedent have been satisfied,  as
      reasonably determined by Lender:

(i)   Payment  for  Capital  Replacement.  The  Capital  Replacement  has been
                  performed  and/or  installed  on the  Property in a good and
                  workmanlike  manner with suitable  materials (or in the case
                  of a partial  disbursement,  performed  and/or  installed on
                  the  Property  to an  acceptable  stage)  and  paid  for  by
                  Borrower  as  evidenced  by  copies of all  applicable  paid
                  invoices  or bills  submitted  to Lender by  Borrower at the
                  time Borrower  requests  disbursement  from the  Replacement
                  Reserve Fund.

(ii)  No Default.  There is no condition,  event or act that would  constitute a
      default (with or without notice and/or lapse of time) under this Agreement
      or any other Loan Document.

(iii) Representations  and  Warranties.  All  representations  and warranties of
      Borrower set forth in this Agreement and in the Loan Documents are true in
      all material respects.

(iv)  Continuing Compliance.  Borrower is in full compliance with the provisions
      of this  Agreement,  the other Loan Documents and any request or demand by
      Lender permitted hereby.

(v)   No Lien Claim. No lien or claim based on furnishing labor or materials has
      been filed or asserted against the Property,  unless Borrower has properly
      provided bond or other security against loss in accordance with applicable
      law.

(vi)  Approvals.   All  licenses,   permits,   and  approvals  of   governmental
      authorities  required  for the Capital  Replacement  as  completed  to the
      applicable stage have been obtained.

(vii) Legal Compliance.  The Capital  Replacement as completed to the applicable
      stage does not  violate  any laws,  ordinance,  rules or  regulations,  or
      building lines or restrictions applicable to the Property.

4.    Right to Complete Capital  Replacements.  If Borrower  abandons or fails
      to  proceed   diligently  to  undertake   and/or  complete  any  Capital
      Replacement  in a timely  fashion or is otherwise in default  under this
      Agreement for 30 days after written  notice of such failure by Lender to
      Borrower,  Lender shall have the right (but not the obligation) to enter
      upon  the  Property  and take  over and  cause  the  completion  of such
      Capital  Replacement.  However,  no such  notice or grace  period  shall
      apply in the case of such  failure  which could,  in Lender's  judgment,
      absent  immediate  exercise  by Lender of a right or remedy  under  this
      Agreement,  result in harm to Lender or impairment of the security given
      under  the  Security   Instrument  or  any  other  Loan  Document.   Any
      contracts  entered into or  indebtedness  incurred  upon the exercise of
      such  right  may be in the  name  of  Borrower,  and  Lender  is  hereby
      irrevocably   appointed   the  attorney  in  fact  of   Borrower,   such
      appointment  being  coupled  with  an  interest,   to  enter  into  such
      contracts,  incur such obligations,  enforce any contracts or agreements
      made by or on behalf of Borrower  (including the prosecution and defense
      of  all  actions  and   proceedings  in  connection   with  the  Capital
      Replacement  and the payment,  settlement or compromise of all bills and
      claims for materials and work  performed in connection  with the Capital
      Replacement)  and do any and all things  necessary or proper to complete
      any  Capital  Replacement  including  signing  Borrower's  name  to  any
      contracts  and  documents as may be deemed  necessary  by Lender.  In no
      event shall  Lender be required to expend its own funds to complete  any
      Capital  Replacement,  but Lender may, in its sole  discretion,  advance
      such  funds.  Any  funds  advanced  shall be  added  to the  outstanding
      balance of the Loan,  secured by the Security  Instrument and payable to
      Lender by Borrower in  accordance  with the  provisions  of the Security
      Instrument  pertaining  to  the  protection  of  Lender's  security  and
      advances  made by  Lender.  Borrower  waives  any and all  claims it may
      have against  Lender for  materials  used,  work  performed or resultant
      damage to the Property.

5.    Inspection.  Lender or any  representative  of Lender  may  periodically
      inspect any Capital  Replacement in process and upon  completion  during
      normal  business hours or at any other  reasonable  time upon reasonable
      prior written notice to Borrower (except in an emergency,  as determined
      by  Lender  in its  discretion  or after an Event of  Default,  in which
      event no such prior notice  shall be require).  Lender shall be entitled
      to deduct  the  Inspection  Fee from the  Replacement  Reserve  Fund for
      performing  any such  inspection.  If  Lender,  in its sole  discretion,
      retains a  professional  inspection  engineer or other  qualified  third
      party to inspect any Capital Replacement,  Lender also shall be entitled
      to deduct from the Replacement  Reserve Fund an amount sufficient to pay
      all reasonable fees and expenses charged by such third party inspector.

6.    Insufficient   Account.   If  Borrower  requests   disbursement  from  the
      Replacement Reserve Fund for a Capital Replacement in accordance with this
      Agreement  in an  amount  which  exceeds  the  amount  on  deposit  in the
      Replacement  Reserve  Fund,  Lender  shall  disburse to Borrower  only the
      amount on deposit in the Replacement  Reserve Fund. Borrower shall pay all
      additional   amounts   required  in  connection   with  any  such  Capital
      Replacement from Borrower's own funds.

7.    Security  Agreement.   To  secure  Borrower's   obligations  under  this
      Agreement and to further secure  Borrower's  obligations under the Note,
      Security  Instrument and other Loan Documents,  Borrower hereby conveys,
      pledges,  transfers and grants to Lender a security interest pursuant to
      the Uniform  Commercial  Code of the Property  Jurisdiction or any other
      applicable law in and to all money in the  Replacement  Reserve Fund, as
      same may  increase  or  decrease  from time to time,  all  interest  and
      dividends thereon and all proceeds thereof.

8.    Post  Default.   If  Borrower   defaults  in  the   performance  of  its
      obligations under this Agreement or under the Note,  Security Instrument
      or any other  Loan  Document,  after the  expiration  of any  applicable
      notice or cure period,  Lender shall have all remedies available to them
      under  Article  9  of  the  Uniform  Commercial  Code  of  the  Property
      Jurisdiction  and under any other  applicable  law. In addition,  Lender
      may  retain  all  money  in  the  Replacement  Reserve  Fund,  including
      interest,  and in Lender's discretion,  may apply such amounts,  without
      restriction  and without any specific order of priority,  to the payment
      of any and all  indebtedness or obligations of Borrower set forth in the
      Note,  Security  Instrument or any other Loan Document,  including,  but
      not  limited  to,  principal,  interest,  taxes,  insurance,  reasonable
      attorneys'  fees  and  costs  (including  those  of  Lender's   in-house
      counsel)  and  disbursements  actually  incurred  and/or  repairs to the
      Property.

9.    Termination.  If not  sooner  terminated  by  written  concurrence  of the
      parties,  this Agreement  shall  terminate upon the payment in full of the
      Loan and all indebtedness  incurred in connection  therewith and upon such
      termination,  Lender  shall pay to  Borrower  all funds  remaining  in the
      Replacement Reserve Fund.

10.   No Amendment.  Nothing  contained in this Agreement  shall be construed to
      amend, modify,  alter, change or supersede the terms and provisions of the
      Note, Security  Instrument or any other Loan Document;  and, if there is a
      conflict  between the terms and  provisions of this Agreement and those of
      the Note, Security  Instrument,  or any other Loan Document then the terms
      and  provisions  of the  Note,  Security  Instrument  or such  other  Loan
      Document shall control.

11.   Release; Indemnity.

(a)   Release.  Borrower  covenants and agrees that, in performing  any of its
            duties under this  Agreement,  none of Lender,  any Loan Servicer,
            or any of their  respective  agents or  employees  shall be liable
            for any losses,  claims,  damages,  liabilities  and expenses that
            may be  incurred  by any of them as a result of such  performance,
            except that no such party will be released from  liability for any
            losses,  claims,  damages,  liabilities or expenses arising out of
            the willful misconduct or gross negligence of such party.

(b)   Indemnity.  Borrower  hereby  agrees  to  indemnify  and  hold  harmless
            Lender,  Loan Servicer and their  respective  agents and employees
            against  any and all  losses,  claims,  damages,  liabilities  and
            expenses  including,  without  limitation,  reasonable  attorneys'
            fees and costs (including those of Lender's  in-house counsel) and
            disbursements,  which may be imposed or incurred by any of them in
            connection  with this Agreement  except that no such party will be
            indemnified  from  liability  for  any  losses,  claims,  damages,
            liabilities or expenses  arising out of the willful  misconduct or
            gross negligence of such party.

12.   Choice  of  Law.  This  Agreement  shall  be  construed  and  enforced  in
      accordance with the laws of the Property Jurisdiction.

13.   Successors  and  Assigns.  Lender may  assign  its rights and  interests
      under this  Agreement in whole or in part and upon any such  assignment,
      all the  terms  and  provisions  of this  Agreement  shall  inure to the
      benefit of such  assignee to the extent so  assigned.  The terms used to
      designate  any of the  parties  herein  shall be deemed to  include  the
      heirs,  legal  representatives,  successors and assigns of such parties;
      and the term  "Lender"  shall also include any lawful  owner,  holder or
      pledgee of the Note.  Reference  herein to "person" or  "persons"  shall
      be deemed to include  individuals and entities.  Borrower may not assign
      or delegate its rights,  interests,  or obligations under this Agreement
      without first obtaining Lender's prior written consent.

14.   Attorneys'  Fees.  In the event that  Lender  engages  the  services of an
      attorney  at law to  enforce  the  provisions  of this  Agreement  against
      Borrower, then Borrower shall pay all costs of such enforcement, including
      any  reasonable  attorneys'  fees and costs  (including  those of Lender's
      in-house counsel) and disbursements actually incurred.

15.   Compliance with Laws; Insurance Requirements.

(a)   Compliance with Laws. Borrower shall ensure that all Capital  Replacements
      comply with all applicable laws, ordinances,  rules and regulations of all
      governmental   authorities  having  jurisdiction  over  the  Property  and
      applicable   insurance   requirements   including,   without   limitation,
      applicable building codes, special use permits, environmental regulations,
      and requirements of insurance underwriters.
(b)   Insurance  Requirements.  In addition to any  insurance  required  under
            the  Loan  Documents,  Borrower  shall  provide  or  cause  to  be
            provided  workers'  compensation,  builder's  risk (if required by
            Lender),  and  public  liability  insurance  and  other  insurance
            required  under  applicable  law  in  connection  with  any of the
            Capital  Replacements.  All such  policies  that  can be  endorsed
            with standard  mortgage clauses making losses payable to Lender or
            its assigns  shall be so endorsed.  The originals of such policies
            shall be deposited with Loan Servicer.

16.   Remedies  Cumulative.  In the event of  Borrower's  default  under  this
      Agreement,  Lender may exercise all or any one or more of its rights and
      remedies  available  under this  Agreement,  at law or in  equity.  Such
      rights and  remedies  shall be  cumulative  and  concurrent,  and may be
      enforced separately,  successively or together, and Lender's exercise of
      any particular  right or remedy shall not in any way prevent Lender from
      exercising  any other right or remedy  available  to Lender.  Lender may
      exercise any such remedies from time to time as often as Lender chooses.

17.   Determinations by Lender.  Unless otherwise  provided in this Agreement,
      in any instance  where the consent or approval of Lender may be given or
      is required,  or where any determination,  judgment or decision is to be
      rendered by Lender under this  Agreement,  the granting,  withholding or
      denial  of  such  consent  or  approval   and  the   rendering  of  such
      determination,  judgment  or  decision  shall  be made or  exercised  by
      Lender  (or its  designated  representative)  at its sole and  exclusive
      option and in its sole and absolute discretion.

18.   Completion  of Capital  Replacements.  Lender's  disbursement  of moneys
      from the Replacement Reserve Fund or other  acknowledgment of completion
      of any Capital  Replacement in a manner satisfactory to Lender shall not
      be deemed a  certification  by Lender that the Capital  Replacement  has
      been completed in accordance with applicable  building,  zoning or other
      codes,  ordinances,  statutes,  laws, regulations or requirements of any
      governmental  authority or agency.  Borrower shall at all times have the
      sole  responsibility  for  ensuring  that all Capital  Replacements  are
      completed in accordance with all such governmental requirements.

19.   No  Agency or  Partnership.  Nothing  contained  in this  Agreement  shall
      constitute  Lender as a joint venturer,  partner or agent of Borrower,  or
      render  Lender  liable  for  any  debts,  obligations,   acts,  omissions,
      representations or contracts of Borrower.

20.   Entire   Agreement.   This   Agreement  and  the  other  Loan  Documents
      represent  the  final  agreement  between  the  parties  and  may not be
      contradicted  by evidence of prior,  contemporaneous  or subsequent oral
      agreements.  There  are no oral  agreements  between  the  parties.  All
      prior or  contemporaneous  agreements,  understandings,  representations
      and statements,  oral or written, are merged into this Agreement and the
      other Loan  Documents.  Neither this Agreement nor any of its provisions
      may be waived,  modified,  amended,  discharged or terminated  except in
      writing  signed  by the  party  against  which  the  enforcement  of the
      waiver,  modification,  amendment,  discharge or  termination is sought,
      and then only to the extent  set forth in  writing;  provided,  however,
      that in the event of a Transfer  requiring  Lender's  consent  under the
      terms  of  the  Security   Instrument,   one  or  more  or  all  of  the
      Modifications  to  Agreement  set  forth  in  Exhibit  C (if any) may be
      modified  or  rendered  void by Lender at  Lender's  option by notice to
      Borrower/transferee.

21.   Counterparts.  This  Agreement  may be executed in multiple  counterparts,
      each of which  shall  constitute  an  original  document  and all of which
      together shall constitute one agreement.

      ATTACHED   EXHIBITS.   The  following  Exhibits  are  attached  to  this
Agreement:

      ------
        X       Exhibit A       Legal Description of the Land (required)
      ------

      ------
        X       Exhibit B       Capital Replacements (required)
      ------

      ------
        X       Exhibit C       Modifications to Agreement
      ------

      IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.



<PAGE>


                                    BORROWER:

                                    LAZY HOLLOW PARTNERS, a California
                                       general partnership

                                    By:   Angeles Realty Corporation II, a
                                          California corporation, its
                                          managing general partner
Borrower's Social Security or
Taxpayer Identification No.:
95-4217055
                                          By:   /s/Patti K. Fielding
                                               Patti K. Fielding
                                               Executive Vice President




<PAGE>


                                     LENDER:

                                    REILLY MORTGAGE GROUP, INC., a District
                                       of Columbia corporation



                                    By: /s/Julia P. Ensall
                                       Julia P. Ensall
                                       Assistant Vice President



<PAGE>


                                    EXHIBIT A


                          Legal Description of the Land



<PAGE>



                                    EXHIBIT B


                              Capital Replacements



The  Replacement  Reserve  Fund is to be used to  replace  any of the  following
items:


1.    Carpet/Vinyl flooring
2.    Window treatments
3.    Roofs
4.    Furnaces/Boilers
5.    Air conditioners
6.    Ovens/Ranges
7.    Refrigerators
8.    Dishwashers
9.    Water heaters
10.   Garbage disposals
11.   Parking lot seal and stripe
12.   Washers and Dryers

                                    EXHIBIT C

                           Modifications to Agreement

The following  modifications are made to the tax of the Replacement Reserve that
precedes this Exhibit:  1.  Subsection  (iii) of Section 2(e) of the Replacement
Reserve Agreement is deleted in its entirety and replaced with the following:

            "(iii) Borrower's failure to maintain the Property in a satisfactory
            manner  in  accordance   with  the   requirements  of  the  Security
            Instrument."