Exhibit 99.5


        MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING
        AND ASSIGNMENT OF LEASES, RENTS, AND SECURITY DEPOSITS (LIVONIA,
                                    MICHIGAN)


          MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND
ASSIGNMENT OF LEASES, RENTS, AND SECURITY DEPOSITS (LIVONIA, MICHIGAN), dated as
of February __, 2002 (together with all amendments and supplements, this
Security Instrument), is made by SHELBOURNE PROPERTIES III L.P., a Delaware
limited partnership, as successor by merger to High Equity Partners L.P.-Series
88, a Delaware 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 Five Mile and Merriman Road located in the City of Livonia, County of Wayne
and State of Michigan 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 $15,665,421 (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:





<PAGE>



          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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<PAGE>



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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<PAGE>



         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 provisions 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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<PAGE>


         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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<PAGE>

         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 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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<PAGE>

          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 Michigan.

          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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<PAGE>

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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<PAGE>




          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
          Property, 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 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 all cases granted or demised in the ordinary course of business or
(B) with consent of the Lender, which consent shall not be unreasonably
withheld, 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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<PAGE>

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 date hereof shall by their express terms be subject and
subordinate to this Instrument, the Note and each of the other Loan Documents
(through a 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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<PAGE>

               (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 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 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
          applicable 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 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 therefrom 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 III, 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 MICHIGAN 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 as to the Property:

                (a) The rights of the Lender hereunder shall include, without
limitation, all rights conferred by Act No. 210 of the Michigan Public Acts of
1953 as amended by Act No. 151 of the Michigan Public Acts of 1966 (MCL 554.231
et seq.), and Act No. 228 of the Michigan Public Acts of 1925 as amended by Act
No. 55 of the Michigan Public Acts of 1933 (MCL 554.211 et seq.)

         All earnings, revenues, rents, issues, profits and income of the
Property or any part thereof are hereby assigned to Lender and, in the case of
the happening and continuation of an Event of Default, Lender shall be entitled
to collect and receive, all such earnings, revenues, rents issues, profits and
income personally or through a receiver as long as any such Event of Default
shall exist and during the pendency of any foreclosure or proceedings and during
any redemption period. Lender shall be entitled to all of the rights and
benefits conferred by Act No. 210 of the Michigan Public Acts of 1953 as amended
by Act No. 151 of the Michigan Public Acts of 1966 (MCL 554.231 et seq), and
Act. No. 228 of the Michigan Public Act of 1933 (MLC 554.211 et seq), and the
collection of such earnings, revenues, rents, issues, profits and income by
Lender shall in no way waive the right of Lender to foreclose this Security
Instrument in the event of such an Event of Default. The Borrower agrees to
consent to a receiver if this believed necessary to desirable by the Trustees to
enforce its rights hereunder.

                (b) Lender may commence foreclosure proceedings against Property
through judicial proceedings or by advertisement, at the option of Lender,
pursuant to the statutes in such case made and provided, and to sell the
Property or cause the same to be sold at public sale, and to convey the same to
the purchaser, in accordance with said statutes in a single parcel or several
parcels at the option of Lender.

                (c)  WARNING:  THIS SECURITY INSTRUMENT CONTAINS A POWER OF
SALE AND UPON DEFAULT MAY BE FORECLOSED BY ADVERTISEMENT.  IN FORECLOSURE BY
ADVERTISEMENT AND THE SALE OF THE PROPERTY IN THEREWITH, NO HEARING IS REQUIRED
AND THE ONLY NOTICE


                                       23
<PAGE>


REQUIRED IS THE PUBLICATION OF NOTICE IN A LOCAL NEWSPAPER AND THE POSTING O A
COPY OF THE NOTICE ON THE PREMISES.

                           WAIVER:  THE BORROWER HEREBY WAIVES ALL RIGHTS UNDER
THE CONSTITUTION AND LAWS OF THE UNITED STATES AND UNDER THE CONSTITUTION AND
LAWS OF THE STATE OF MICHIGAN TO A HEARING PRIOR TO THE SALE IN CONNECTION WITH
THE ABOVE-MENTIONED FORECLOSURE BY ADVERTISEMENT AND ALL NOTICE REQUIREMENTS
EXCEPT AS SET FORTH IN THE MICHIGAN STATUTE PROVIDING FOR FORECLOSURE BY
ADVERTISEMENT.

                (d) Waste. The failure of the Borrower to pay any taxes or
assessments against the Property, or any installment thereof, or any premiums
payable with respect to any insurance policy covering the Property, shall
constitute waste, as provided by Act No. 236 of the Michigan Public Acts of 1961
as amended (MCL 600.2927). The Borrower further hereby consents to the
appointment of a receiver under said statute, should the Lender elect to seek
such relief thereunder."



                                       24
<PAGE>



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


                             BORROWER:
                             --------

                             SHELBOURNE PROPERTIES III, L.P., a
                             Delaware limited partnership, as successor by
                             merger to High Equity Partners L.P.-Series 88, a
                             Delaware limited partnership

                             By: SHELBOURNE PROPERTIES III GP, INC.,
                             as General Partner



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


                             [Seal]


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


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

                               Mortgage Execution



<PAGE>



STATE OF NEW YORK    )
                     ) ss.
COUNTY OF NEW YORK   )


          The foregoing instrument was acknowledged before me this 27th day of
February, 2002, by _____________________, the _________________ of Shelbourne
Properties III GP, INC. a corporation under the laws of Delaware, the general
partner of Shelbourne Properties III, L.P., a limited partnership under the laws
of Delaware, on behalf of the partnership.

                          -------------------------------------
                          Notary Public
                          Name:
                          County of Notarial Authority:
                          Acting in the County of:

[Notary Seal]                 Sandra Granillo
                              Notary Public State of New York
                              No. 01GR6048043
                              Qualified in Kings County
                              Commission Expires:  September 18, 2002


















                               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 (LIVONIA, MICHIGAN)

                                      from

                         SHELBOURNE PROPERTIES III L.P.
        (as successor by merger to High Equity Partners L.P.-Series 88,
                        a Delaware 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: Five Mile and Merriman Road
                                Livonia, Michigan

                                  County: Wayne

                          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
11.    APPLICATION OF PROCEEDS................................................18

                                        i

<PAGE>



             (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




                                       ii

<PAGE>