Exhibit 99.5


        MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING
       AND ASSIGNMENT OF LEASES, RENTS, AND SECURITY DEPOSITS (FT. LAUDER-
                                 DALE, FLORIDA)


          MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND
ASSIGNMENT OF LEASES, RENTS, AND SECURITY DEPOSITS (FT. LAUDERDALE, FLORIDA),
dated as of February __, 2002 (together with all amendments and supplements,
this Security Instrument), is made by SHELBOURNE PROPERTIES I L.P., a Delaware
limited partnership, as successor by merger to Integrated Resources High Equity
Partners, Series 85, a California Limited Partnership (Borrower), having its
principal office at c/o Shearman & Sterling, 599 Lexington Avenue, New York, New
York 10022-6030, to SHELBOURNE MANAGEMENT LLC, a Delaware limited liability
company, having an address at c/o NorthStar Capital Investment Corp., 527
Madison Avenue, 16th Floor, New York, New York 10022 (together with its
successors and assigns, Lender).

                                    RECITALS

          WHEREAS, Borrower is the owner of (i) the real property commonly known
as 1323 S.E. 17th Street Causeway located in the City of Ft. Lauderdale, County
of Broward and State of Florida such ownership interest being comprised of a fee
simple interest in the land described in Exhibit A attached hereto and made a
part hereof (the Land) and (ii) title to the Improvements (as hereinafter
defined); and

          WHEREAS, pursuant to a Secured Promissory Note (together with all
amendments, replacements and supplements, the Note), dated the date hereof,
made by Borrower in favor of Lender has agreed to make a loan (the Loan) in the
maximum principal amount of $18,939,737 (the Principal Amount) as evidenced by
the Note; and

          WHEREAS, Borrower and Lender intend these Recitals to be a material
part of this Security Instrument.

                              SECURED INDEBTEDNESS

          NOW, THEREFORE, in consideration of the Loan to Borrower evidenced by
the Note and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower hereby agrees as follows:

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          TO SECURE:

                    (i) payment and performance of all covenants, conditions,
          liabilities and obligations of Borrower to Lender contained in the
          Note and the other Loan Documents,

                    (ii) payment of the indebtedness evidenced by, the Note plus
          all interest and all fees payable thereunder; and

                    (iii) payment and performance of all covenants, conditions,
          liabilities and obligations contained in this Security Instrument and
          any extensions, renewals or modifications hereof; and

                    (iv) payment and performance of all covenants, conditions,
          liabilities and obligations of Borrower contained in each of the other
          Loan Documents (as defined below); and

                    (v) without limiting the foregoing, payment of all
          indebtedness, liabilities, and amounts from time to time incurred by
          Lender pursuant to the Note, this Security Instrument or such other
          Loan Documents, even if the aggregate amount of the monetary
          obligation outstanding at any one time exceeds the face amount of the
          Note (all of the foregoing indebtedness, monetary liabilities and
          obligations set forth in clauses (i) through (iv) above and this
          clause (v), collectively, the Indebtedness); and

                    (vi) payment of the obligation of Borrower to pay the
          "Reacquisition Price" (as defined in Section 5.3 of that certain
          Purchase and Contribution Agreement, dated as of February 14, 2002, by
          and among Presidio Capital Investment Company, LLC ("PCIC"), certain
          subsidiaries of PCIC listed on the signature pages thereto,
          NorthStar Capital Investment Corp., Shelbourne Management LLC,
          Shelbourne Properties I, Inc., Shelbourne Properties II, Inc., and
          Shelbourne Properties III, Inc., Shelbourne Properties I, L.P.,
          Shelbourne Properties II, L.P., and Shelbourne Properties III, L.P.
          (the "Purchase Agreement")); and

                    (vii) payment of the Indebtedness together with the payment
          and performance of all other covenants, conditions, liabilities and
          obligations described and set forth in clauses (i) through (vi) above
          and in this clause (vii), collectively, the Obligations.

                                GRANTING CLAUSES

          NOW, THEREFORE, THIS SECURITY INSTRUMENT WITNESSETH: that Borrower, in
consideration of the premises, the Indebtedness evidenced by the Note, and other

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good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged (a) has mortgaged, warranted, granted, bargained, sold, alienated,
released, confirmed, conveyed, pledged and assigned, and (b) by these presents
does hereby irrevocably grant and create a first priority Lien on and security
interest in, subject to the provisions hereof and of the other Loan Documents
and subject to all existing Liens and encumbrances, and does hereby MORTGAGE,
GRANT A SECURITY INTEREST IN AND PLEDGE to Lender and its successors and assigns
forever, all its estate, right, title and interest now owned or hereafter
acquired in, to and under any and all the property (collectively, the Property)
described in the following Granting Clauses:

                    (A) the Land

                    (B) all additional lands, estates and development rights
          hereafter acquired by Borrower and necessary for the operation of the
          Land or the development of the Land and all additional lands and
          estates therein which may, from time to time, by supplemental mortgage
          or otherwise, be expressly made subject to the lien of this Security
          Instrument;

                    (C) all of Borrower's right, title and interest in and to
          the buildings, foundations, structures, improvements and fixtures now
          or hereafter located or erected on the Land (the Improvements);

                    (D) all of Borrower's right, title and interest in and to
          (i) all streets, avenues, roads, alleys, passages, places, sidewalks,
          strips and gores of land and ways, existing or proposed, public or
          private, adjacent to the Land, and all reversionary rights with
          respect to the vacation of said streets, avenues, roads, alleys,
          passages, places, sidewalks and ways in the land lying thereunder;
          (ii) all air, light, lateral support, development, drainage, oil, gas
          and mineral rights, options to purchase or lease, waters, water
          courses and riparian rights now or hereafter pertaining to or used in
          connection with the Land and/or the Improvements; (iii) all and
          singular, the tenements, hereditaments, rights of way, easements,
          appendages and appurtenances and property now or hereafter belonging
          or in any way appertaining to the Land and/or the Improvements; and
          (iv) all estate, right, title, claim or demand whatsoever, either at
          law or in equity, in possession or expectancy, of, in and to the Land
          and/or the Improvements (collectively, the Appurtenances);

                    (E) all of Borrower's right, title and interest in and to
          the machinery, appliances, apparatus, equipment, fittings, fixtures,
          materials, articles of personal property and goods of every kind and
          nature whatsoever used in connection with the Land and/or the
          Improvements and all additions to and renewals and replacements
          thereof, and all substitutions therefor, now or hereafter affixed to,
          attached to, placed upon or located upon or in the Land and/or the
          Improvements, or any part thereof, and used in connection with the
          use, ownership, management, maintenance, enjoyment or operation of the
          Land and/or the Improvements in any present or future occupancy or use
          thereof and now owned or leased (to the extent permitted by the
          applicable Lease) or hereafter owned or leased by Borrower, including,
          but without limiting the generality of the foregoing, all

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          heating, lighting, laundry, cooking, incinerating, loading, unloading
          and power equipment, boilers, dynamos, engines, pipes, pumps, tanks,
          motors, conduits, switchboards, plumbing, lifting, cleaning, fire
          prevention, fire extinguishing, refrigerating, ventilating and
          communications apparatus, air cooling and air conditioning apparatus,
          building materials and equipment, elevators, escalators, carpeting,
          shades, draperies, awnings, screens, doors and windows, blinds,
          furnishings (other than equipment and personal property of tenants or
          guests of the Land and/or the Improvements, or any part thereof)
          (hereinafter collectively called Building Equipment);

                    (F) all of Borrower's right, title and interest as lessor or
          licensor, as the case may be, in, to and under all leases, subleases,
          underlettings, concession agreements and licenses of the Property or
          any part thereof, now existing or hereafter entered into by Borrower
          including, without limitation, any cash and securities deposited
          thereunder (collectively, Leases), the grant of such cash and
          securities hereunder being expressly subject to the provisions of the
          applicable Leases and all of Borrower's right, title and interest,
          subject to the provisions of Section 5, in the right to receive and
          collect the revenues, income, rents, issues, profits, royalties and
          other benefits payable under any of the Leases (collectively, Rents),
          and all revenues, income, rents, issues and profits otherwise arising
          from the use or enjoyment of all or any portion of the Property;

                    (G) all of Borrower's right, title and interest in and to
          all proceeds, judgments, claims, compensation, awards or payments
          hereafter made to Borrower for the taking, whether permanent or
          temporary, by condemnation, eminent domain, or for any conveyance
          made in lieu of such taking, of the whole or any part of the Property,
          including, without limitation, all proceeds, judgments, claims,
          compensation awards or payments for changes of grade of streets or any
          other injury to or decrease in the value of the Property, whether
          direct or consequential, which awards and payments are hereby assigned
          to Lender, who is hereby authorized to collect and receive the
          proceeds thereof and to give proper receipts and acquittances
          therefor, and to apply the same toward the payment of the Indebtedness
          in such order as Lender may determine in accordance with the provi-
          sions of this Security Instrument without regard to the adequacy of
          Lender's security hereunder and notwithstanding the fact that the
          amount thereof may not then be due and payable, and toward the payment
          of reasonable counsel fees, costs and disbursements incurred by Lender
          in connection with the collection of such awards or payments; and
          Borrower hereby agrees, upon request, to make, execute and deliver any
          and all further assignments and other instruments sufficient for the
          purpose of confirming this assignment of said proceeds, judgments,
          claims, compensation awards or payments to Lender, free, clear and
          discharged of any encumbrances of any kind or nature whatsoever;

                    (H) all of Borrower's right, title and interest in and to
          all unearned premiums paid under insurance policies now or hereafter
          obtained by Borrower to the extent the same insure the Property and
          any other insurance policies required to be maintained hereunder to
          the extent the same insure the Property, including, without
          limitation,

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         liability insurance policies and Borrower's interest in and to all
         proceeds of the conversion and the interest payable thereon, voluntary
         or involuntary, of the Property, or any part thereof, into cash or
         liquidated claims including, without limitation, proceeds of casualty
         insurance, title insurance or any other insurance maintained on or with
         respect to the Property (other than liability insurance);

                    (I) all right, title and interest of Borrower in and to all
          extensions, improvements, betterments, renewals, substitutes and
          replacements of, and all additions and Appurtenances to, the Property,
          hereafter acquired by or released to Borrower or constructed,
          assembled or placed by Borrower on the Property, and all conversions
          of the security constituted thereby; immediately upon such
          acquisition, release, construction, assembling, placement or
          conversion, as the case may be, and in each such case, to the extent
          permitted by law, without any further mortgage, conveyance, assignment
          or other act by Borrower, all such extensions, improvements,
          betterments, renewals, substitutes and replacements shall become
          subject to the Lien of this Security Instrument as fully and
          completely, and with the same effect, as though now owned by Borrower
          and specifically described herein;

                    (J) all of Borrower's right, title and interest in, to and
          under, to the extent the same may be encumbered or assigned by
          Borrower pursuant to the terms thereof without occurrence of a breach
          or default thereunder and to the extent permitted by applicable law,
          and without impairment of the validity or enforceability thereof, (i)
          any reciprocal easement agreements and all contracts and agreements
          relating to the Property (other than the Leases), and other documents,
          books and records related to the ownership and operation of the
          Property; (ii) to the extent permitted by law all Licenses,
          warranties, guaranties, building permits and government approvals
          relating to or required for the construction, completion, occupancy
          and operation of the Property; (iii) all plans and specifications for
          the construction of the Improvements, including, without limitation,
          installations of curbs, sidewalks, gutters, landscaping, utility
          connections and all fixtures and equipment necessary for the
          construction, operation and occupancy of the Improvements; and (iv)
          all such other contracts and agreements (other than the Leases) from
          time to time executed by Borrower relating to the ownership, leasing,
          construction, maintenance, operation, occupancy or sale of the
          Property, together with all rights of Borrower to compel performance
          of the terms of such contracts and agreements;

                    (K) to the extent the same may be encumbered or assigned by
          Borrower pursuant to the terms thereof and to the extent permitted by
          law, all of Borrower's right, title and interest in, to and under
          credit card receivables, escrows, documents, instruments, and general
          intangibles, as the foregoing terms are defined in the UCC (as
          hereinafter defined), in any case which now or hereafter relate to,
          are derived from, or are used in connection with the Property, and all
          contract rights, franchises, books, records, plans, specifications,
          Licenses, actions and causes of action which now or hereafter relate
          to, are derived from or used in connection with the Property or the
          use, operation,

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          maintenance, occupancy or enjoyment thereof or the conduct of any
          business or activities thereon (collectively, the property described
          in the foregoing paragraphs (F), (G), (H), (J) and this paragraph (K),
          the Intangibles);

                    (L) all of Borrower's right, title and interest in all
          proceeds, both cash and noncash, of the foregoing which may be sold or
          otherwise be disposed of pursuant to the terms hereof.

          UPON CONDITION that, until the happening of an Event of Default (as
hereinafter defined), Borrower shall be permitted to possess and use the
Property, and to use the rents, issues, profits, revenues and other income of
the Property as provided in this Security Instrument, the Note and the other
Loan Documents.



                                    HABENDUM

          TO HAVE AND TO HOLD THE PROPERTY hereby conveyed, or mentioned and
intended so to be, whether now owned or held or hereafter acquired, subject only
to the terms hereof, unto Lender, its successors and assigns, forever, upon the
terms and conditions set forth herein and to secure the performance of, and
compliance with, the obligations, covenants and conditions of this Security
Instrument and the other Loan Documents all as herein set forth until the
incurrence of the Refinancing Indebtedness (as defined in the Purchase
Agreement) of the Borrower. Upon the incurrence of such Refinancing
Indebtedness, Lender shall release and discharge the lien of this Security
Instrument and shall provide Borrower with all necessary and customary
documentation to evidence any such release, including, without limitation, the
assignment of this Security Instrument, upon the request of Borrower, to any
other lender providing refinancing of the Loan.

          1. DEFINITIONS. Wherever used in this Security Instrument, the
following terms, and the singular and plural thereof, shall have the
following meanings. All capitalized terms used but not otherwise defined herein
shall have the meanings assigned to them in the Note:

          Appurtenances: Shall have the meaning provided in Granting Clause (D).

          Borrower: Shall have the meaning provided in the Introductory
Paragraph.

          Business Day shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York are not open for business.

          Closing Date: Shall mean the date of this Security Instrument.

          Default Rate: Shall have the meaning provided in Section 9 hereof.


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          Events of Default: Shall mean the occurrence of an "Event of Default"
pursuant to the Note or any other Loan Document, if any.

          Indebtedness: Shall have the meaning provided in Recitals.

          Intangibles: Shall have the meaning provided in Granting Clause (K).

          Land: Shall have the meaning provided in the Recitals.

          Leases: Shall have the meaning provided in Granting Clause (F).

          Lender: Shall have the meaning provided in the Recitals.

          Licenses: Shall mean all certifications, permits, licenses and
approvals, including without limitation, liquor licenses, certificates of
completion and occupancy permits required of Borrower for the legal use,
occupancy and operation of the Improvements on the parcel of Land as a retail
building.

          Lien shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other similar encumbrance
or charge on or affecting the Property, any portion thereof or any interest
therein, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, the filing of any financing statement, and
mechanic's, materialmen's and other similar liens and encumbrances

          Loan: Shall have the meaning provided in the Recitals.

          Note: Shall have the meaning provided in the Recitals.

          Person shall mean any individual, corporation, partnership, joint
venture, limited liability company, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.

          Principal Amount: Shall have the meaning provided in the Recitals.

          Property: Shall have the meaning provided in the recitals to the
Granting Clause.

          UCC: Shall mean the Uniform Commercial Code as in effect in the State
of Florida.

          The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Security Instrument shall refer to this Security
Instrument as a whole and not to any

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particular provision of this Security Instrument, and section, schedule and
exhibit references are to this Security Instrument unless otherwise specified.
The words "includes" and "including" are not limiting and mean "including
without limitation."

          In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including;" the words "to" and
"until" each mean "to but excluding," and the word "through" means "to and
including."

          References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto executed in
writing by all of the parties thereto and, if Lender's consent was required for
the original of any such document, consented to by Lender. All references in
this Security Instrument to the plural of any document described herein shall
mean all of such documents collectively.

          References to statutes or regulations are to be construed as including
all statutory and regulatory provisions consolidating, amending, or replacing
the statute or regulation.

          The captions and headings of this Security Instrument are for
convenience of reference only and shall not affect the construction of this
Security Instrument.

          Borrower represents and warrants to, and covenants and agrees with,
Lender as follows:

          2. WARRANTY.

          (a) Title. Borrower represents and warrants that Borrower owns good
and insurable fee title to the Property. This Security Instrument, upon its due
execution and proper recordation, is and will remain a valid and enforceable
(and, with respect to all personalty as to which security interests are governed
by the UCC, upon proper recordation and the filing of a financing statement)
perfected first Lien on and security interest on Borrower's right, title and
interest in and to Property, subject to all existing Liens and encumbrances.

          (b) All Property. This Security Instrument grants to Lender a lien on,
and security interest in, all of Borrower's right, title and interest in and to
all of the real property, personal property, equipment and fixtures currently
used in the operation of the business located on the Property (other than
equipment and personal property of tenants or guests of the Land and/or the
Improvements, or any part thereof).

          (c) Enforceability of Security Instrument. This Security Instrument is
the legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms.

          3. AFFIRMATIVE COVENANTS.

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          (a) Payment of Obligations. Borrower shall promptly pay when due the
principal of and interest on the Indebtedness and all other payment Obligations,
all in lawful money of the United States of America in accordance with the Note,
and shall further perform fully and in a timely manner all Obligations of
Borrower. All sums payable by Borrower hereunder shall be paid without demand,
counterclaim (other than mandatory counterclaims), offset or deduction (except
as required by law). Borrower waives all rights now or hereafter conferred by
statute or otherwise to any such demand, counterclaim (other than mandatory
counterclaims), setoff or deduction.

          (b) Performance and Observance of Covenants. Borrower will duly
perform, observe and comply with all of the affirmative and negative covenants,
agreements and obligations to be performed, observed and complied with by
Borrower, and all of the other terms and conditions applicable to Borrower,
under the terms of the Note and any other Loan Document, as if each such
covenant, agreement, obligation, term and condition were expressly set forth
herein in full. Without limiting the generality of the foregoing, Borrower will
maintain the Property, pay all taxes and other similar charges, obtain, pay and
maintain insurance, keep the Property free of Liens, pay the utility charges for
the Property, perform alterations and repairs in respect of the Property, cause
the Property to comply with all laws and other legal requirements, restore the
Property upon any casualty or condemnation, and lease the Property in the
ordinary course of business, all in accordance with and subject to all of the
applicable terms and conditions of this Security Instrument, the Note and the
other Loan Documents.

          (c) Insurance. Borrower shall, at its sole cost and expense,
continuously keep and maintain insurance in respect of the Property and
Borrower's operations thereat, of the type and in the form and with insurers, as
is normal and customary for similar property and is consistent with Borrower's
current practices or as is reasonably acceptable to Lender. All proceeds to
which Borrower may be entitled resulting from damage to or destruction of the
Property or any part hereof by a casualty or a condemnation shall first be
distributed and applied towards the restoration of the Property and to the
extent not restored or there remains excess proceeds after such restoration,
such proceeds shall be paid and applied, at the election of Lender, to the
repayment of the Loan and any Obligations, without penalty or premium, and then
any remainder distributed to the Borrower.

          (d) Maintenance of Validity and Recording.

                    (i) Borrower covenants that it will forthwith after the
          execution and delivery of this Security Instrument and thereafter as
          necessary from time to time cause this Security Instrument and the
          other Loan Documents and any continuation statement or similar
          instrument relating to any property subject thereto or to any property
          intended to be encumbered, granted, conveyed, transferred and assigned
          by this Security Instrument to be filed, registered and recorded in
          such manner and in such places as may be required by law in order to
          publish notice of

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          and fully to protect the validity thereof or the grant thereby of the
          property subject thereto and the interest and rights of Lender
          therein.

                    (ii) Borrower shall maintain the validity, perfection,
          priority and effectiveness of this Security Instrument and the other
          Loan Documents. Unless otherwise permitted in this Security Instrument
          and the other Loan Documents, Borrower will not take any action, will
          not permit action to be taken by others and will not omit to take any
          action, nor will Borrower give any notice, approval or consent or
          exercise, waive or modify any rights under or in respect of the Prop-
          erty, which action, omission, notice, approval, consent or exercise,
          waiver or modification of rights would release Borrower from, or
          reduce any of Borrower's obligations or liabilities under, or would
          result in the termination, surrender or assignment of, or the
          amendment or modification of, any of the Loan Documents, or would
          impair the validity of this Security Instrument or any of the other
          Loan Documents, or would affect the current use and operation of the
          Property in any material adverse respect, without Lender's consent,
          and any attempt to do any of the foregoing without such consent shall
          be of no force and effect.

                    (iii) Borrower, at its expense, will execute, acknowledge
          and deliver all such instruments and take all such actions as Lender
          from time to time reasonably may request or as may be reasonably
          necessary or proper for the better assuring to Lender of the
          properties and rights now or hereafter subject to the Lien hereof or
          intended so to be.

          4. NEGATIVE COVENANTS. Borrower covenants and agrees that, without
Lender's prior written consent, Borrower shall not cause or permit:

          (a) any partition of the Property; or

          (b) any direct or indirect transfer of any interest in the Property
except (A) with respect to normal and customary leases, easements or other
encumbrances in all cases granted or demised in the ordinary course of business
or (B) with the consent of the Lender, which consent shall not be unreasonably
withheld, conditioned or delayed.

          5. LICENSE TO COLLECT RENTS. Lender and Borrower hereby confirm that
for so long as no Event of Default shall have occurred and is continuing, Lender
has granted to Borrower a revocable license to collect and use the Rents as they
become due and payable. Borrower further agrees to execute and deliver such
assignments of Leases and Rents as Lender may from time to time reasonably
request in order to better assure, transfer and confirm to Lender the rights
intended to be granted to Lender with respect thereto. Upon the occurrence and
during the continuance of an Event of Default (1) Borrower agrees that Lender
may, but shall not be obligated to, assume the management of the Property, and
collect the Rents, applying the same upon the Obligations, and (2) Borrower
hereby authorizes and directs all tenants, purchasers or other persons

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occupying, utilizing or acquiring any interest in any part of the Property to
pay all Rents to Lender upon Lender's request. Upon the occurrence and during
the continuance of an Event of Default, Lender shall have and hereby expressly
reserves the right and privilege (but assumes no obligation), to demand,
collect, sue for, receive and recover the Rents, or any part thereof, now
existing or hereafter made, and apply the same in accordance with this Security
Instrument and applicable law.

          6. SECURITY AGREEMENT. This Security Instrument constitutes a
financing statement and, to the extent required under UCC ss.9-402(f) because
portions of the Property may constitute fixtures, this Security Instrument is to
be filed in the office where a mortgage for the Land would be recorded. Lender
also shall be entitled to proceed against all or portions of the Property in
accordance with the rights and remedies available under UCC ss.9-501(d).
Borrower is, for the purposes of this Security Instrument, deemed to be the
Debtor, and Lender is deemed to be the Secured Party, as those terms are defined
and used in the UCC. Borrower agrees that the Indebtedness and Obligations
secured by this Security Instrument are further secured by security interests in
all of Borrower's right, title and interest in and to fixtures, equipment, and
other property covered by the UCC, if any, which are used upon, in, or about the
Property (or any part) or which are used by Borrower or any other person in
connection with the Property. Borrower grants to Lender a valid and effective
first priority security interest, subject to all existing Liens and
encumbrances, in all of Borrower's right, title and interest in and to such
personal property (but only to the extent permitted in the case of leased
personal property), together with all replacements, additions, and proceeds.
Borrower agrees that, without the written consent of Lender, which consent shall
not be unreasonably withheld, conditioned or delayed, no other security
interest will be created under the provisions of the UCC and no lease will be
entered into with respect to any goods, fixtures, equipment, appliances, or
articles of personal property now attached to or used or to be attached to or
used in connection with the Property except as otherwise permitted hereunder.
Borrower agrees that all property of every nature and description covered by the
lien and charge of this Security Instrument together with all such property and
interests covered by this security interest are encumbered as a unit, and upon
and during the continuance of an Event of Default by Borrower, all of the
Property, at Lender's option, may be foreclosed upon or sold in the same or
different proceedings or at the same or different time, subject to the
provisions of applicable law. The filing of any financing statement relating to
any such property or rights or interests shall not be construed to diminish or
alter any of Lender's rights of priorities under this Security Instrument.

          7. LEASE SUBORDINATION AND ATTORNMENT.

          (a) Leases To Be Subordinate. All new Leases entered into by Borrower
after the date hereof shall by their express terms be subject and subordinate to
this Security Instrument, the Note and each of the other Loan Documents (through
a subordination provision contained in such Lease or otherwise) and shall
provide that the Person holding any rights thereunder shall attorn to Lender or
any other Person succeeding to the interests of Lender upon the exercise of its
remedies hereunder or any transfer in lieu thereof on the terms set forth in
this Security Instrument.


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          (b) Attornment. Each new Lease entered into from and after the date
hereof shall provide that in the event of the enforcement by Lender of any
remedy under this Security Instrument or the Note, the tenant under such Lease
shall, at the option of Lender or of any other Person succeeding to the interest
of Lender as a result of such enforcement, attorn to Lender or to such Person
and shall recognize Lender or such successor in the interest as lessor under
such Lease without change in the provisions thereof; provided, however, Lender
or such successor in interest shall not be liable for or bound by (i) any
payment of an installment of rent or additional rent which may have been made
more than thirty (30) days before the due date of such installment, (ii) any act
or omission of or default by Borrower under any such Lease (but the Lender, or
such successor, shall be subject to the continuing obligations of the landlord
to the extent arising from and after such succession to the extent of Lender's,
or such successor's, interest in the Property), (iii) any credits, claims,
setoffs or defenses which any tenant may have against Borrower, (iv) any
obligation on Borrower's part, pursuant to such Lease, to perform any tenant
improvement work or (vi) any obligation on Borrower's part, pursuant to such
Lease, to pay any sum of money to any tenant. Each such tenant, upon the
reasonable request by Lender or such successor in interest, shall execute and
deliver an instrument or instruments confirming such attornment. At the request
of any tenant that enters into a new Lease that is on prevailing market terms,
Lender shall deliver to such tenant a subordination, nondisturbance and
attornment agreement in form and substance reasonably acceptable to Lender.

          8. PROTECTION OF SECURITY; COSTS AND EXPENSES. Borrower shall appear
in and defend any action or proceeding of which it has notice purporting to
affect the security hereof or the rights or powers of Lender hereunder and shall
pay all costs and expenses actually incurred by Lender, including, without
limitation, cost of evidence of title and reasonable attorneys' fees and
disbursements, in any such action or proceeding, and in any suit brought by
Lender to foreclose this Security Instrument or to enforce or establish any
other rights or remedies of Lender hereunder upon the occurrence and during the
continuance of an Event of Default. If an Event of Default occurs and is
continuing under this Security Instrument or the Note, or if any action or
proceeding is commenced in which it becomes necessary to defend or uphold the
lien or priority of this Security Instrument or which adversely affects Lender
or Lender's interest in the Property or any part thereof, including, without
limitation, eminent domain, enforcement of, or proceedings of any nature
whatsoever under any laws or other legal requirement affecting the Property or
involving Borrower's bankruptcy, insolvency, arrangement, reorganization or
other form of debtor relief, then Lender, upon reasonable notice to Borrower,
may, but without obligation to do so and without releasing Borrower from any
obligation hereunder, make such appearances, disburse such reasonable sums and
take such action as Lender reasonably deems necessary or appropriate to protect
Lender's interest in the Property, including, but not limited to, disbursement
of reasonable attorneys' fees, entry upon the Property to make repairs or take
other action to protect the security hereof, and payment, purchase, contest or
compromise of any encumbrance, charge or lien which in the reasonable judgment
of Lender appears to be prior or superior hereto.

          9. LENDER'S RIGHT TO PERFORM. Upon the occurrence and during the
continuance of an Event of Default with respect to the performance of any of the
Obligations

                                       12

<PAGE>

contained herein, Lender may, without waiving or releasing Borrower from any
Obligation or default under this Security Instrument, but shall not be obligated
to, at any time perform the Obligations giving rise to such Event of Default,
and the cost thereof, with interest at the rate set forth in Section 1 of the
Note in the event that the Note is not repaid in full at or prior to the
Maturity Date (the Default Rate) from the date of payment by Lender to the date
such amount is paid by Borrower, shall immediately be due from Borrower to
Lender and the same shall be secured by this Security Instrument and shall be a
Lien on the Property prior to any right, title to, interest in or claim upon the
Property attaching subsequent to the Lien of this Security Instrument. No
payment or advance of money by Lender under this Section 9 shall be deemed or
construed to cure Borrower's Event of Default or waive any right or remedy of
Lender hereunder.

          10. REMEDIES. Upon the occurrence and during the continuation of an
Event of Default hereunder or the Note, Lender may take such actions against
Borrower, subject to Section 12 hereof, and/or against the Property or any
portion thereof as Lender determines is necessary to protect and enforce its
rights hereunder, without notice or demand except as set forth below or as
required under applicable law. Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents. Lender's determination of appropriate action may be based on an
appropriate real estate or other consultant and/or counsel, and Lender may rely
conclusively on such advice. Borrower shall pay such consultants' and reasonable
attorneys' fees and expenses incurred by Lender pursuant to this Section 10.
Such actions may include, without limitation, the following:

          (a) Acceleration. Subject to any applicable provisions of the Note and
the other Loan Documents, Lender may declare all or any portion of the unpaid
principal balance under the Note, together with all accrued and unpaid interest
thereon, and all other unpaid Indebtedness, to be immediately due and payable.

          (b) Entry. Subject to the provisions and restrictions of applicable
law, Lender, personally, or by its agents or attorneys, at Lender's election,
may enter into and upon all or any part of the Property (including, but not
limited to, the Land and Improvements and any part thereof), and may exclude
Borrower, its agents and servants therefrom; and Lender, having and holding the
same, may use, operate, manage and control the Property or any part thereof and
conduct the business thereof, either personally or by its superintendents,
managers, agents, servants, attorneys or receiver. Upon every such entry, Lender
may, at the reasonable expense of the Property and/or Borrower, from time to
time, either by purchase, repair or construction, maintain and restore the
Property or any part thereof, and may insure and reinsure the same in such
amount and in such manner as may seem to them to be advisable. Similarly, from
time to time, Lender may, at the expense of Borrower (which amounts may be
disbursed by Lender from the Property on behalf of Borrower), make all necessary
or proper repairs, renewals, replacements, alterations, additions, betterments
and improvements to and on the Property or any part thereof as it may seem
advisable. Lender or its

                                       13

<PAGE>



designee shall also have the right to manage and operate the Property or any
part thereof and to carry on the business thereof and exercise all rights and
powers of Borrower with respect thereto, either in the name of Borrower or
otherwise, as may seem to them to be advisable. In confirmation of the grant
made in Granting Clause (F) hereof, in the case of the occurrence and
continuation of an Event of Default, Lender shall be entitled to collect and
receive all Rents to be applied in the order of priorities and amounts as shall
be provided for in Section 11 hereof. Lender shall be liable to account only for
Rents and other proceeds actually received by Lender.

          (c) Phase I Environmental Report. Lender may at its option obtain, in
each instance, at its expense, a new phase I environmental report with respect
to the Property, and such reasonable additional environmental studies as may be
recommended in such phase I reports.

          (d) Foreclosure.

                    (i) Lender, with or without entry, personally or by its
          agents or attorneys, insofar as applicable, and in addition to any
          and every other remedy, may (i) sell to the extent permitted by law
          and pursuant to the power of sale granted herein, all and singular,
          the Property, and all estate, right, title and interest, claim and
          demand therein, and right of redemption thereof, at one or more sales,
          as an entirety or in parcels, and at such times and places as required
          or permitted by law and as are customary in the county in which the
          Property is located and upon such terms as Lender may fix and specify
          in the notice of sale to be given to Borrower (and on such other
          notice published or otherwise given as provided by law), or as may be
          required by law; (ii) institute proceedings for the complete or
          partial foreclosure of this Security Instrument under the provisions
          of the laws of the jurisdiction or jurisdictions in which the
          Property or any part thereof is located, or under any other applica-
          ble provision of law; or (iii) take all steps to protect and enforce
          the rights of Lender, whether by action, suit or proceeding in equity
          or at law (for the specific performance of any covenant, condition or
          agreement contained in this Security Instrument, or in aid of the
          execution of any power herein granted, or for any foreclosure
          hereunder, or for the enforcement of any other appropriate legal or
          equitable remedy), or otherwise, as Lender, being advised by counsel
          and its financial advisor, shall deem most advisable to protect and
          enforce any of their rights or duties hereunder.

                    (ii) Lender may conduct any number of sales from time to
          time. The power of sale shall not be exhausted by any one or more such
          sales as to any part of the Property remaining unsold, but shall
          continue unimpaired until the entire Property shall have been sold.

                    (iii) Upon taking title to the Property (whether by
          foreclosure, deed in lieu or otherwise) by Lender or any other
          purchaser or assignee of the Property after an Event of Default,
          Borrower shall assign and transfer all of its right, title and

                                       14

<PAGE>



          interest in and to the Property to Lender. Borrower hereby irrevocably
          appoints Lender as its attorney-in-fact to execute all documents and
          take all actions necessary to effectuate such assignment and transfer,
          provided that such power may only be exercised by Lender while an
          Event of Default exists and is continuing.

          (e) Specific Performance. Lender, in its sole and absolute discretion,
may institute an action, suit or proceeding at law or in equity for the specific
performance of any covenant, condition or agreement contained herein or in the
Note or any other Loan Document, or in aid of the execution of any power granted
hereunder or for the enforcement of any other appropriate legal or equitable
remedy.

          (f) Enforcement of Note. To the extent permitted under the provisions
of applicable law, Lender may recover judgment on the Note (or any portion of
the Indebtedness evidenced thereby), either before, during or after any
proceedings for the foreclosure (or partial foreclosure) or enforcement of this
Security Instrument.

          (g) Sale of Property

                    (i) Lender may postpone any sale of all or any part of the
          Property to be made under or by virtue of this Section 10 by public
          announcement at the time and place of such sale, or by publication, if
          required by law, and, from time to time, thereafter, may further
          postpone such sale by public announcement made at the time of sale
          fixed by the preceding postponement.

                    (ii) Upon the completion of any sale made by Lender under or
          by virtue of this Section 10, Lender shall execute and deliver to the
          accepted purchaser or purchasers a good and sufficient deed or deeds
          or other appropriate instruments, conveying, assigning and
          transferring all its estate, right, title and interest in and to the
          property and rights so sold. Lender is hereby appointed the true and
          lawful irrevocable attorney-in-fact of Borrower in its name and stead
          or in the name of Lender to make all necessary conveyances,
          assignments, transfers and deliveries of the property and rights so
          sold, and, for that purpose, Lender may execute all necessary deeds
          and other instruments of assignment and transfer, and may substitute
          one or more persons with like power, Borrower hereby ratifying and
          confirming all that such attorney or attorneys or such substitute or
          substitutes shall lawfully do by virtue hereof; provided, however,
          that such power of attorney shall be effective only for so long as an
          Event of Default shall exist and be continuing. Borrower shall,
          nevertheless, if so requested in writing by Lender, ratify and confirm
          any such sale or sales by executing and delivering to Lender or to
          such purchaser or purchasers all such instruments as may be advisable,
          in the judgment of Lender, for such purposes and as may be designated
          in such request. Any such sale or sales made under or by virtue of
          this Section 10 shall operate to divest all the estate, right, title,
          interest, claim and demand, whether at law or in equity, of Borrower
          in and to the property

                                       15

<PAGE>



          and rights so sold, and shall be a perpetual bar, at law and in
          equity, against Borrower, its successors and assigns and any Person
          claiming through or under Borrower and its successors and assigns.

                    (iii) The receipt of Lender for the purchase money paid as a
          result of any such sale shall be a sufficient discharge therefor to
          any purchaser of the property or rights, or any part thereof, so sold.
          No such purchaser, after paying such purchase money and receiving such
          receipt, shall be bound to see to the application of such purchase
          money upon or for any trust or purpose of this Security Instrument, or
          shall be answerable, in any manner, for any loss, misapplication or
          non-application of any such purchase money or any part thereof, nor
          shall any such purchaser be bound to inquire as to the authorization,
          necessity, expediency or regularity of such sale.

                    (iv) Upon any sale made under or by virtue of this Section
          10, Lender may bid for and acquire the Property or any part thereof
          and, in lieu of paying cash therefor, may make settlement for the
          purchase price by crediting upon the Note secured by this Security
          Instrument the net proceeds of sale, after deducting there from the
          expense of the sale and the costs of the action and any other sums
          which Lender is authorized to deduct under this Security Instrument.
          The person making such sale shall accept such settlement without
          requiring the production of the Note or this Security Instrument, and
          there shall be deemed credited to the Indebtedness and Obligations
          under this Security Instrument the net proceeds of such sale. Lender,
          upon acquiring the Property or any part thereof, shall be entitled to
          own, hold, lease, rent, operate, manage or sell the same in any manner
          permitted by applicable laws.

          (h) Voluntary Appearance; Receivers. After the happening, and during
the continuance of, any Event of Default hereunder or pursuant to the Note, and
immediately upon commencement of (i) any action, suit or other legal proceeding
by Lender to obtain judgment for the principal and interest on the Note and any
other sums required to be paid pursuant to this Security Instrument, or (ii) any
action, suit or other legal proceeding by Lender of any other nature in aid of
the enforcement of the Loan Documents or any of them, Borrower will (a) enter
their voluntary appearance in such action, suit or proceeding, and (b) if
required by Lender, consent to the appointment, of one or more receivers of the
Property and all of the Rents. After the happening of an Event of Default, or
upon the filing of a bill in equity to foreclose this Security Instrument or to
enforce the specific performance hereof or in aid thereof, or upon the
commencement of any other judicial proceeding to enforce any right of Lender,
Lender shall be entitled, as a matter of right, if it shall so elect, without
notice to any other party and without regard to the adequacy of the security of
the Property, forthwith, either before or after declaring the principal and
interest on the Note to be due and payable, to the appointment of such a
receiver or receivers. Any receiver or receivers so appointed shall have such
powers as a court or courts shall confer, which may include, without limitation,
any or all of the powers which Lender is authorized to exercise by the
provisions of this Section 10, and shall have the right to incur such
obligations and to issue such certificates therefor as the court shall
authorize.

                                       16

<PAGE>


          (i) UCC Remedies. Lender may exercise any or all of the remedies
granted to a secured party under the UCC, specifically including, without
limitation, the right to recover the reasonable attorneys' fees and
disbursements and other expenses incurred by Lender in the enforcement of this
Security Instrument or in connection with Borrower's redemption of the
Improvements or Building Equipment or Intangibles. Lender may exercise its
rights under this Security Instrument independently of any other collateral or
guaranty that Borrower may have granted or provided to Lender in order to secure
payment and performance of the Obligations, and Lender shall be under no
obligation or duty to foreclose or levy upon any other collateral given by
Borrower to secure any Obligation or to proceed against any guarantor before
enforcing its rights under this Security Instrument.

          (j) Leases. Lender may, at its option, before any proceeding for the
foreclosure (or partial foreclosure) or enforcement of this Security Instrument,
treat any Lease which is subordinate by its terms to the Lien of this Security
Instrument as either subordinate or superior to the Lien of this Security
Instrument.

          (k) Other Rights. Lender may pursue against Borrower any other rights
and remedies of Lender permitted by law, equity or contract or as
set forth herein or in the Note or the other Loan Documents.

          (l) Retention of Possession. Notwithstanding the appointment of any
receiver, liquidator or trustee of Borrower, or any of its property, or of the
Property or any part thereof, Lender, to the extent permitted by law, shall be
entitled to retain possession and control of all property now or hereafter
granted to or held by Lender under this Security Instrument.

          (m) Suits by Lender. All rights of action under this Security
Instrument may be enforced by Lender without the possession of the Note and
without the production thereof or this Security Instrument at any trial or other
proceeding relative thereto, provided, however, Lender shall in any event
certify that it is the current holder of the Note. Any such suit or proceeding
instituted by Lender shall be brought in the name of Lender and any recovery of
judgment shall be subject to the rights of Lender.

          (n) Remedies Cumulative. No remedy herein (or pursuant to the Note or
any Loan Document) conferred upon or reserved to Lender shall exclude any other
remedy, and each such remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity. No
delay or omission of Lender to exercise any right or power accruing upon any
Event of Default shall impair any such right or power, or shall be construed to
be a waiver of any such Event of Default or an acquiescence therein. Every power
and remedy given to Lender by this Security Instrument or any other Loan
Document may be exercised from time to time and as often as Lender may deem
expedient. Nothing in this Security Instrument shall affect Borrower's
obligations to pay the principal of, and interest on, the Note in the manner and
at the time and place expressed in the Note.

                                       17

<PAGE>

          (o) Waiver of Rights. Borrower agrees that, to the fullest extent
permitted by law, it will not at any time, (1) insist upon, plead or claim or
take any benefit or advantage of any stay, extension or moratorium law, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Security Instrument or any Loan Document, (2)
claim, take or insist upon any benefit or advantage of any law, now or at any
time hereafter in force, providing for valuation or appraisal of the Property,
or any part thereof, prior to any sale or sales thereof which may be made
pursuant to any provision herein contained, or pursuant to the decree, judgment
or order of any court of competent jurisdiction, or (3) after any such sale or
sales, claim or exercise any right under any statute heretofore or hereafter
enacted by the United States or any State or otherwise to redeem the property
and rights sold pursuant to such sale or sales or any part thereof. Borrower
hereby expressly waives all benefits and advantages of such laws, and covenants,
to the fullest extent permitted by law, not to hinder, delay or impede the
execution of any power herein granted or delegated to Lender pursuant to any
such law, but will suffer and permit the execution of every power as though no
such laws had been made or enacted. Borrower for itself and all who may claim
through or under it, waives, to the extent it lawfully may do so, any and all
homestead rights and, any and all rights to reinstatement, any and all right to
have the property comprising the Property marshaled upon any foreclosure of the
Lien hereof or to have the Property hereunder and the property covered by any
other mortgage, deed to secure debt or deed.

          11. APPLICATION OF PROCEEDS.

          (a) Sale Proceeds. The proceeds of any sale or foreclosure of the
Property or any portion thereof shall be applied to the following in the
following order of priority: (i) the payment of the costs and expenses of the
foreclosure proceedings with respect to such Property (including reasonable
counsel fees and disbursements actually incurred and advertising costs and
expenses), liabilities and advances made or incurred under this Security
Instrument or any Loan Document, and reasonable receivers' and trustees' fees
and commissions and fees and expenses incurred by Lender, together with interest
at the Default Rate to the extent payable, (ii) payment of any other sums
advanced by Lender (or any advancing agent on its behalf) in accordance with the
terms hereof and not repaid to it by Borrower, together with interest at the
Default Rate to the extent payable, (iii) payment of all sums due under the Note
and the Loan Documents in such order and priority as Lender shall elect in its
sole and absolute discretion; and (iv) payment of any remaining Obligations and
(v) any surplus to Borrower or other party legally entitled thereto.

          (b) Other Proceeds. All other proceeds or other amounts collected by
Lender following an Event of Default shall be applied (1) first, to reimburse
any reasonable expenses related to such collection, and (2) thereafter, as
provided in Section 11(a) hereof. If no Event of Default shall exist and be
continuing, any amount available to make payments or applied in lieu of such
payments thereon shall be applied (1) first, to interest due or overdue on the
Note, and (2) then, any amounts applied to pay or applied in lieu of paying
principal on the Note then due shall be applied to pay or applied in lieu of
paying the Note in order of priority, and (3) thereafter, to Borrower.

                                       18

<PAGE>


          12. MISCELLANEOUS.

          (a) CERTAIN WAIVERS. TO INDUCE LENDER TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED BY THE NOTE AND THIS SECURITY INSTRUMENT, AND FOR OTHER GOOD AND
VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY
ACKNOWLEDGED, EACH OF LENDER AND BORROWER EXPRESSLY AND IRREVOCABLY HEREBY, IN
ADDITION TO AND NOT IN DEROGATION OF ALL OTHER WAIVERS CONTAINED IN THE NOTE,
THIS SECURITY INSTRUMENT AND THE OTHER LOAN DOCUMENTS, WAIVE AND SHALL WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY, OR COUNTERCLAIM ASSERTED
BY LENDER WHICH ACTION, PROCEEDING OR COUNTERCLAIM ARISES OUT OF OR IS CONNECTED
WITH THIS SECURITY INSTRUMENT, THE NOTE OR ANY OTHER LOAN DOCUMENT.

          (b) Notices. Any notice, election, request, demand, report or
statement which by any provision of this Security Instrument is required or
permitted to be given or served hereunder shall be in writing and shall be
effective for all purposes if hand delivered or sent by (a) certified or
registered United States mail, postage prepaid, return receipt requested or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, or (c) by telecopier (with answer
back acknowledged), addressed as follows (or at such other address and Person as
shall be designated from time to time by any party hereto, as the case may be,
in a written notice to the other parties hereto in the manner provided for in
this Section):

                  If to Lender:        Shelbourne Management LLC
                                       c/o NorthStar Capital Investment Corp.
                                       527 Madison Avenue, 16th Floor
                                       New York, New York 10022
                                       Attention:  David T. Hamamoto
                                                   W. Edward Scheetz
                                       Telecopy No.:  (212) 319-4557
                                       Confirmation No.  (212) 319-3400


                  With a copy to:      Skadden, Arps, Slate, Meagher & Flom LLP
                                       Four Times Square
                                       New York, New York 10036
                                       Attention: Randall H. Doud
                                       Facsimile: (917) 777-2524
                                       Confirmation No.   (212) 735-3000


                                       19

<PAGE>



                  If to Borrower:      Shelbourne Properties I, L.P.
                                       c/o Shearman & Sterling
                                       599 Lexington Avenue
                                       New York, New York 10022-6030
                                       Attention: Peter D. Lyons
                                       Facsimile No.: (212) 848-7179

                  With a copy to:      Shearman & Sterling
                                       599 Lexington Avenue
                                       New York, New York 10022-6030
                                       Attention: Christa A. D'Alimonte
                                       Facsimile No.: (212) 848-7179

All notices, elections, requests and demands under this Security Instrument
shall be effective and deemed received upon the earliest of (i) the actual
receipt of the same by personal delivery or otherwise, (ii) one (1) Business Day
after being deposited with a nationally recognized overnight courier service as
required above, (iii) three (3) Business Days after being deposited in the
United States mail as required above or (iv) on the day sent if sent by
facsimile with confirmation on or before 5:00 p.m. New York time on any Business
Day or on the next Business Day if so delivered after 5:00 p.m. New York time or
on any day other than a Business Day. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, election,
request, or demand sent.

          (c) No Oral Modification. This Security Instrument may not be waived,
altered, amended, modified, changed, discharged or terminated orally but only by
a written agreement signed by the party against which enforcement is sought.

          (d) Partial Invalidity. In the event any one or more of the provisions
contained in this Security Instrument shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included hereunder.

          (e) Successors and Assigns. All covenants of Borrower contained in
this Security Instrument are imposed solely and exclusively for the benefit of
Lender and its successors and assigns, and no other Person shall have standing
to require compliance with such covenants or be deemed, under any circumstances,
to be a beneficiary of such covenants, any or all of which may be freely waived
in whole or in part by Lender at any time if in its sole discretion it deems it
advisable to do so. All such covenants of Borrower shall run with the land and
bind Borrower, the successors and assigns of Borrower (and each of them) and all
subsequent owners, encumbrancers and tenants of the Property, and shall inure to
the benefit of Lender, its successors and assigns.

          (f) GOVERNING LAW.

                                       20

<PAGE>

                    (i) THIS SECURITY INSTRUMENT AND THE OBLIGATIONS ARISING
          HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
          LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW RULES
          AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, PROVIDED
          HOWEVER, THAT (A) THE COVENANTS SET FORTH IN THE RECITALS HEREOF AND
          (B) THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE
          LIENS CREATED HEREUNDER SHALL BE GOVERNED BY FLORIDA LAW TO THE EXTENT
          NECESSARY FOR THE VALIDITY AND ENFORCEMENT THEREOF.

                    (ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
          SECURITY INSTRUMENT AND ANY ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN
          RESPECT THEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
          OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
          YORK, AND, BY EXECUTION AND DELIVERY OF THIS SECURITY INSTRUMENT,
          BORROWER AND EACH PARTY JOINING WITH BORROWER HEREIN HEREBY ACCEPTS,
          AND BY ITS ACCEPTANCE OF THIS SECURITY INSTRUMENT, LENDER HEREBY
          ACCEPTS, EACH FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
          UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
          COURTS AND APPELLATE COURTS FROM ANY THEREOF. BORROWER, EACH PARTY
          JOINING WITH BORROWER HEREIN AND LENDER EACH IRREVOCABLY CONSENTS TO
          THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY
          SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
          REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT THE
          ADDRESS FOR NOTICES SET FORTH HEREIN. BORROWER AND LENDER EACH HEREBY
          IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
          THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS
          ARISING OUT OF OR IN CONNECTION WITH THIS SECURITY INSTRUMENT BROUGHT
          IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES
          AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
          ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
          INCONVENIENT FORUM.

          (g) No Waiver. No failure by Lender to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof shall constitute a waiver of any such term or
right, power or remedy or of any such breach. No waiver of any breach shall
affect or alter this Security Instrument, which shall continue in full force and
effect,

                                       21

<PAGE>



or shall affect or alter the rights of Lender with respect to any other then
existing or subsequent breach.

          (h) Further Assurances. Borrower, at its own expense, will execute,
acknowledge and deliver all such reasonable further documents or instruments
including, without limitation, (i) security agreements on any building equipment
included or to be included in the Property, and (ii) such other documents as
Lender from time to time may reasonably request to better assure, transfer and
confirm unto Lender the rights now or hereafter intended to be granted to Lender
under this Security Instrument or the other Loan Documents. Borrower shall
notify Lender in writing no less than thirty (30) days prior to a change of
address.

          (i) Counterparts. This Security Instrument may be executed in one or
more counterparts, each of which shall be deemed to be an original, and all of
which together shall constitute one and the same instrument.

          (j) Merger, Conversion, Consolidation or Succession to Business of
Lender. Any Person into which Lender may be merged or converted or with which it
may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which Lender shall be a party, or any Person succeeding to all
or substantially all the business of Lender, shall be the successor of Lender
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto.

          (k) No Endorsement. Lender shall not become or be considered to be an
endorser, co-maker or co-obligor on the Note or on any other
Obligation of Borrower secured by this Security Instrument or otherwise.

          (l) Multisite Real Estate Transaction. Borrower acknowledges that this
Security Instrument is one of a number of cross-defaulted Security Instruments
and other security documents (for purposes of this article, collectively the
Other Security Documents) which collectively secure the Obligations. Borrower
agrees that the lien of this Security Instrument shall be absolute and
unconditional and shall not in any manner be affected or impaired by any acts or
omissions whatsoever of Lender and, without limiting the generality of the
foregoing, the lien hereof shall not be impaired by any acceptance by Lender of
any security for or guarantee upon any of the Obligations or by any failure,
neglect or omission on the part of Lender to realize upon or protect any of the
Obligations or any collateral security therefor including the Other Security
Documents, except to the extent otherwise provided by law. The lien hereof shall
not in any manner be impaired or affected by any release (except as to the
property released), sale, pledge, surrender, compromise, settlement, renewal,
extension, indulgence, alteration, changing, modification or any disposition of
any of the Obligations or any of the collateral security therefor, including the
Other Security Documents or of any guarantee therefor. To the extent not
prohibited by applicable law, Lender may, at its discretion, foreclose, exercise
any power of sale, or exercise any other remedy available to it under any or all
of the Other Security Documents without first exercising or enforcing any of its
rights and remedies hereunder, or may foreclose, exercise any power of sale, or
exercise any other

                                       22

<PAGE>



right available under this Security Instrument without first exercising or
enforcing any of its rights or remedies under any or all of the Other Security
Documents. To the extent not prohibited by applicable law, such exercise of
Lender's rights and remedies under any or all of the Other Security documents
shall not in any manner impair the Obligations or the lien of this Security
Instrument, and any exercise of the rights or remedies of the Lender hereunder
shall not impair the lien of any of the Other Security Documents or any of
Lender's rights and remedies thereunder. Borrower specifically consents and
agrees that Lender may exercise its rights and remedies hereunder and under the
Other Security Documents separately or concurrently and in any order that it may
deem appropriate, except to the extent otherwise provided by law.

          13. STATE LAW PROVISIONS

          Notwithstanding anything to the contrary elsewhere in this Security
Instrument, as to the Property:

          (a) The reference in Section 6 to Sections 9-402(f) and 9-501(d) of
the UCC shall be deemed to refer to Florida Statutes Section 679.402 and Section
679.501, as amended, respectively. This Security Instrument is intended to be a
financing statement within the purview of Florida Statute Section 679.402 with
respect to the personal property described herein. The addresses of the Borrower
(Debtor) and the Lender (Secured Party) are herein set forth. This Security
Instrument is to be filed of record with the Clerk of the Circuit Court of the
County or Counties where the mortgaged property is located. Borrower is the
owner of the Property (whether pursuant to a leasehold estate, easement estate
or absolute title).

          (b) This Security Instrument shall constitute a Security Agreement
within the meaning of the Florida Uniform Commercial Code with respect to (i)
any and all sums at any time on deposit for the benefit of the Lender or held by
the Lender (whether deposited by or on behalf of the Borrower or anyone else)
pursuant to any of the provisions of the Security Instrument and (ii) with
respect to any personal property included in the Granting Clauses of this
Security Instrument, and all replacements of such personal property, and the
proceeds thereof. Upon default, without limitation of any other remedies, the
Lender shall have the remedies of a Secured Party under the Florida Uniform
Commercial Code. The Debtor/Borrower hereby authorizes the Lender to execute,
deliver, file or refile as Lender without joinder of the Borrower, any financing
statement, continuation statement or other instruments the Lender may
reasonably require from time to time to perfect or renew such security interest
under the Florida Uniform Commercial Code.

          (c) This Security Instrument shall be deemed to be and shall be
construed as a Security Instrument as well as a Mortgage, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security
Deposits. Each of the remedies set forth herein, including without limitation
the remedies involving a power of sale or power of attorney with respect to the
Property and the right of Lender to exercise self-help in connection with the
enforcement of the terms of this Security Instrument shall be exercisable if and
to the extent permitted by the laws of the State of Florida in force at the time
of the exercise of such remedies

                                       23

<PAGE>



without regard to the enforceability of such remedies at the time of the
execution and delivery of this Security Instrument.

          (d) In any suit to foreclose the lien of this Security Instrument
there shall be allowed and included as additional indebtedness hereby secured in
the final judgment decree all expenditures and expenses which may be paid or
incurred by or on behalf of the Lender for attorneys' and paralegals' fees,
appraisers' fees, outlays for documentary and expert evidence, stenographer
charges, publication costs, costs (which may be estimated as to items to be
expended after entry of the decree) of procuring all title searches and
examinations and policies, and similar data and assurances with respect to title
as Lender may deem reasonably necessary either to prosecute such suit or to
evidence to bidders at sales which may be had pursuant to such decree the true
condition of the title to or the value of the mortgaged property.

          (e) Subject to the extension options set forth in the Loan Documents,
the indebtedness secured by this Security Instrument matures on August 14, 2002.

          (f) It is agreed that any additional sum advanced by the then holder
of the Note secured hereby to or for the benefit of the Borrower, whether such
advances are obligatory or are made at the option of the Lender, or otherwise,
at any time within twenty (20) years from the Closing Date, or within such
lesser period of time as may be provided hereafter by law as a prerequisite for
the sufficiency of actual notice or record notice of the optional future and
additional advances as against the rights of creditors or subsequent purchasers
for valuable consideration, with interest thereon at the rate agreed upon at the
time of each additional loan or advance, shall be equally secured and have the
same priority as the original Obligations and be subject to all of the terms and
provisions of this Security Instrument, whether or not identified by a recital
that such advance is secured by this Security Instrument; provided, however,
that the aggregate amount of the principal indebtedness outstanding and so
secured at any one time shall not exceed Eighteen Million Nine Hundred Thirty
Nine Thousand Seven Hundred Seven Dollars ($18,939,737) plus interest and
disbursements made for the payment of taxes, levies or insurance on the property
covered by this Security Instrument and provided further that it is understood
and agreed that this future advance provision shall not be construed to obligate
the Lender to make any such additional loans or advances. Nothing herein shall
obligate the Lender to loan the Borrower at any one time a sum in excess of the
face amount of the Note. It is further agreed that any additional note or notes
executed and delivered under this future advance provision shall be included in
the word "Note" or "Notes" wherever it appears in the context of this Security
Instrument.





                                       24

<PAGE>





          IN WITNESS WHEREOF, this Security Instrument has been duly executed by
Borrower on the date first hereinabove written.


                                  BORROWER:
                                  --------

                                  SHELBOURNE PROPERTIES I, L.P., a
                                  Delaware limited partnership, as successor by
                                  merger to Integrated Resources High Equity
                                  Partners, Series 85, a California Limited
                                  Partnership

                                  By: SHELBOURNE PROPERTIES I GP, LLC, as
                                  General Partner

                                  By: SHELBOURNE PROPERTIES I, INC., LLC,
                                  as Sole Member




                                  By:   /s/Robert Martin
                                        -------------------------------
                                  Name:
                                  Title:


                                  [Seal]


Witness:  /s/illegible
          --------------------


Witness:  /s/illegible
          --------------------



                               Mortgage Execution

<PAGE>



STATE OF ____________               )
                                    ) ss.
COUNTY OF __________                )

          The foregoing instrument was acknowledged before me this __________
___, 2002 by ________________ the _____________________ of Shelbourne Properties
I, Inc., the sole member of Shelbourne Properties I GP, LLC, the general partner
(or agent) on behalf of Shelbourne Properties I, L.P., a limited partnership.
He/she is personally known to me or has produced
_________________________________ (type of identification as identification.

                      -------------------------------------
                                  Notary Public


[Notary Seal]                       My commission expires:
                                                          ---------------------



                               Mortgage Execution

<PAGE>




                                    EXHIBIT A

                                LEGAL DESCRIPTION


                                       A-1

<PAGE>





               MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT,
                    FIXTURE FILING AND ASSIGNMENT OF LEASES,
              RENTS AND SECURITY DEPOSITS (FT. LAUDERDALE, FLORIDA)

                                      from

                          SHELBOURNE PROPERTIES I L.P.
      (as successor by merger to Integrated Resources High Equity Partners,
                  Series 85, a California Limited Partnership)

                                   as Borrower
                                having an address

                  c/o Shearman & Sterling, 599 Lexington Avenue
                          New York, New York 10022-6030

                                       to
                           SHELBOURNE MANAGEMENT LLC,
                                    as Lender

                              having an address at

                     c/o NorthStar Capital Investment Corp.
                         527 Madison Avenue, 16th Floor
                            New York, New York 10022


                Street Addresses: 1323 S.E. 17th Street Causeway
                             Ft. Lauderdale, Florida

                                 County: Broward

                          Dated as of February __, 2002

-------------------------------------------------------------------------------


                              Record and Return to:
                    Skadden, Arps, Slate, Meagher & Flom LLP
                                Four Times Square
                            New York, New York 10036
                           Attention: Randall H. Doud

<PAGE>



                                TABLE OF CONTENTS
                                                                           Page

RECITALS......................................................................1
SECURED INDEBTEDNESS..........................................................1
GRANTING CLAUSES..............................................................2
HABENDUM......................................................................6

1.       DEFINITIONS..........................................................6
2.       WARRANTY.............................................................8
                  (a)  Title..................................................8
                  (b)  All Property...........................................8
                  (c)  Enforceability of Security Instrument..................8
3.       AFFIRMATIVE COVENANTS................................................8
                  (a)  Payment of Obligations.................................8
                  (b)  Performance and Observance of Covenants................9
                  (c)  Insurance..............................................9
                  (d)  Maintenance of Validity and Recording..................9
4.       NEGATIVE COVENANTS..................................................10
5.       LICENSE TO COLLECT RENTS............................................10
6.       SECURITY AGREEMENT..................................................11
7.       LEASE SUBORDINATION AND ATTORNMENT..................................11
                  (a)  Leases To Be Subordinate..............................11
                  (b)  Attornment............................................11
8.       PROTECTION OF SECURITY; COSTS AND EXPENSES..........................12
9.       LENDER'S RIGHT TO PERFORM...........................................12
10.      REMEDIES............................................................13
                  (a)  Acceleration..........................................13
                  (b)  Entry.................................................13
                  (c)  Phase I Environmental Report..........................14
                  (d)  Foreclosure...........................................14
                  (e)  Specific Performance..................................15
                  (f)  Enforcement of Note...................................15
                  (g)  Sale of Property......................................15
                  (h)  Voluntary Appearance; Receivers.......................16
                  (i)  UCC Remedies..........................................16
                  (j)  Leases................................................17
                  (k)  Other Rights..........................................17
                  (l)  Retention of Possession...............................17
                  (m)  Suits by Lender.......................................17
                  (n)  Remedies Cumulative...................................17
                  (o)  Waiver of Rights......................................17

                                       ii

<PAGE>


                                                                           Page

11.      APPLICATION OF PROCEEDS.............................................18
                  (a)  Sale Proceeds.........................................18
                  (b)  Other Proceeds........................................18
12.      MISCELLANEOUS.......................................................18
                  (a)  CERTAIN WAIVERS.......................................19
                  (b)  Notices...............................................19
                  (c)  No Oral Modification..................................20
                  (d)  Partial Invalidity....................................20
                  (e)  Successors and Assigns................................20
                  (f)  GOVERNING LAW.........................................20
                  (g)  No Waiver.............................................21
                  (h)  Further Assurances....................................22
                  (i)  Counterparts..........................................22
                  (j)  Merger, Conversion, Consolidation or Succession to
                                   Business of Lender........................22
                  (k)  No Endorsement........................................22
                  (l)  Multisite Real Estate Transaction.....................22
13.      STATE LAW PROVISIONS................................................23

EXHIBIT A         LAND






                                       iii