AGREEMENT OF PURCHASE AND SALE OF MORTGAGE LOAN
                               AND JOINT ESCROW INSTRUCTIONS


    THIS AGREEMENT OF PURCHASE AND SALE OF MORTGAGE LOAN AND
JOINT ESCROW INSTRUCTIONS (this "Agreement") is entered into as
of August 2, 1996, by and between FAIRCHILD 234, a California
general partnership ("Seller"), and SPIEKER PROPERTIES, L.P., a
California limited partnership ("Buyer").  

                                     R E C I T A L S:

    A.   Pursuant to that certain Loan Agreement and Escrow
Instructions ("Loan Agreement"), dated as of May 24, 1988, Seller
made a loan ("Loan") to Brinderson Partners, a California Limited
Partnership ("Borrower"), in the original principal amount of
$16,500,000.00.  The Loan is evidenced by a Secured Promissory
Note ("Note"), dated May 24, 1988, pursuant to which Borrower
promised to pay to Seller, or order, the principal sum of
$16,500,000.00, together with interest and certain other sums set
forth in the Note.  

    B.   The Loan is secured by a Deed of Trust With Assignment
of Rents ("Deed of Trust"), encumbering certain real property
("Property") in the City of Irvine, County of Orange, State of
California, more particularly described in Exhibit "A" to this
Agreement.  The Deed of Trust was recorded on May 25, 1988, as
Document No. 88-245250 of Official Records of Orange County,
California.  The Loan is also secured by an Assignment of Leases
("Assignment of Leases") recorded as a lien against the Property
on May 25, 1988, as Document No. 88-245251 of Official Records of
Orange County, California.  The Loan is evidenced by and secured
by certain other documents described in Exhibit "B" to this
Agreement (collectively, "Original Loan Documents").  

    C.   The Loan Agreement was modified by a First Amendment to
Loan Agreement and Escrow Instructions ("First Amendment to Loan
Agreement") between Seller and Borrower, dated as of October 1,
1992.  The Note was amended by a First Amendment to Secured
Promissory Note ("First Amendment to Note") between Seller and
Borrower, dated as of October 1, 1992.  The Deed of Trust was
amended by a First Amendment to Deed of Trust with Assignment of
Rents ("First Amendment to Deed of Trust") between Seller and
Borrower, dated as of October 1, 1992.  The First Amendment to
Deed of Trust was recorded in the Official Records of Orange
County, California, on October 16, 1992, as Document No. 92-703250.  
In connection with the First Amendment to Loan
Agreement, certain other documents were entered into between
Seller and Borrower, a schedule of which is attached to this
Agreement as Exhibit "C" (collectively, "Revised Loan
Documents").  

    D.   In connection with the execution and delivery of the
Revised Loan Documents in 1992, fee simple title to the Property
was transferred from Borrower to Fairchild Irvine Associates, a
California general partnership including Borrower and Fairchild
Property Corporation, a California corporation ("Fairchild
Property Corporation"), as general partners.  On February 9,
1994, Fairchild Irvine Associates was dissolved and fee simple
title to the Property was conveyed to Fairchild Property
Corporation on February 28, 1994.  As of the date of this
Agreement, Fairchild Property Corporation remains the fee simple
owner of the Property.

    E.   Significant payment obligations pursuant to the Note
and the Revised Loan Documents are presently unpaid.  In
connection therewith, Seller previously caused to be filed and
recorded a Notice of Default in the Official Records of Orange
County, California, on December 1, 1995, as Document No. 95-0533423.  
Seller subsequently caused to be filed and recorded a
Notice of Trustee's Sale, which was recorded on April 11, 1996,
in the Official Records of Orange County, California.  As of the
date of this Agreement, accrued but unpaid interest and principal
under the Note and the Revised Loan Documents in excess of
$24,400,000.00 remains due and owing to Seller.  

    F.   Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, the Loan in accordance with the terms and
conditions of this Agreement.  

    NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, Buyer and Seller agree as
follows:

    1.   Sale and Purchase of Loan.

         1.1  Purchase and Sale.  On the terms and conditions of
this Agreement, Seller agrees to sell to Buyer, and Buyer agrees
to buy from Seller, the Loan.

         1.2  Nonrecourse Sale.  The sale of the Loan to Buyer
is without recourse to Seller, except that such sale shall be
subject to the warranties and representations of Seller contained
in this Agreement and to no other warranties or representations.

    2.   Purchase Price.  The total purchase price (the
"Purchase Price") to be paid by Buyer to Seller for the Loan
shall be Ten Million Eighteen Thousand Dollars ($10,018,000.00). 
The Purchase Price shall be paid as follows:

         2.1  Concurrently with the "Opening of Escrow" (as
defined below), Buyer shall deposit into the "Escrow" (as defined
below), into an interest-bearing account, One Hundred Fifty
Thousand Dollars ($150,000.00) (such amount, together with any
interest earned thereon, is herein called the "Deposit").  The
Deposit shall be transferred into the Escrow from funds
previously deposited by Buyer into escrow no. 18974 with Escrow
Holder; the parties to such escrow, Buyer and FPC (defined
below), shall execute all appropriate documents to authorize such
transfer of the Deposit into the Escrow.  Except as specifically
provided in this Agreement, the Deposit shall be non-refundable
to Buyer after the later of the "Decision Date" and the "Title
Decision Date" (as such terms are defined below).  

         2.2  At least one (1) business day prior to the
"Closing Date" (as defined below), Buyer shall deposit into
Escrow the balance of the Purchase Price, subject to adjustment
by reason of any applicable prorations and the allocation of
closing costs described below.  The deposit required by this
Section 2.2 shall be made by wire transfer of federal funds or in
another immediately available form.

    3.   Condition to Close of Escrow and Possible Return of
         Deposit.  

         (a)  The purchase and sale of the Loan by Seller to
Buyer is expressly conditioned upon the concurrent close of
escrow under that certain Purchase and Sale Agreement and Joint
Escrow Instructions ("Property Agreement"), of even date
herewith, between Fairchild Property Corporation, a California
corporation ("FPC" or "Fairchild Property Corporation"), as
seller, and Buyer, as buyer.  Pursuant to the Property Agreement,
FPC and Buyer are agreeing to a deed-in-lieu of foreclosure of
the Property to be delivered by FPC to Buyer, conditioned upon
the satisfaction of certain conditions set forth in the Property
Agreement.  Buyer shall not be obligated to purchase the Loan
from Seller pursuant to this Agreement in the event Buyer, by the
specific terms of the Property Agreement, is not required to
purchase the Property from FPC.  Seller shall not be obligated to
sell the Loan to Buyer pursuant to this Agreement in the event
FPC, by the specific terms of the Property Agreement, is not
obligated to sell the Property to Buyer.  The provisions of this
Section 3(a) and/or any other section of this Agreement
conditioning close of the Escrow upon close of the transaction
contemplated by the Property Agreement shall not be interpreted
as conditioning or excusing the wrongful or unauthorized failure
of Seller, Buyer and/or FPC to perform their respective
obligations under this Agreement and/or the Property Agreement. 
Certain contingencies under the Property Agreement for the
benefit of Buyer must be satisfied or waived by the "Decision
Date" or the "Title Decision Date", as such terms are defined in
the Property Agreement and which definitions shall apply as well
to the use of such terms in this Agreement.

         (b)  In the event Buyer timely elects to terminate the
Property Agreement pursuant to Section 3.4 of such agreement,
Buyer shall be entitled to the return of the Deposit (together
with any interest earned thereon).  

    4.   Closing Through Escrow.  

         4.1  Escrow; Escrow Instructions.  The purchase and
sale of the Loan shall be consummated through an escrow
("Escrow") at Chicago Title Insurance Company, 388 Market Street,
Suite 1300, San Francisco, California 94111, Attention:  Ms.
Michelle Viguie ("Escrow Holder"), which is appointed to act as
escrow holder.  The parties shall deliver a fully executed
counterpart of this Agreement to Escrow Holder.  Upon receipt of
a fully executed counterpart of this Agreement, Escrow Holder
shall advise Seller and Buyer in writing of the date upon which
Escrow Holder received such document, which shall be the date of
"Opening of Escrow".  This Agreement shall constitute escrow
instructions to Escrow Holder as well as an agreement of the
parties.  The parties shall execute such additional escrow
instructions, consistent with this Agreement, as Escrow Holder
shall reasonably deem necessary for the proper implementation of
the purchase and sale of the Loan, including Escrow Holder's
general provisions.  In the event of any conflict between this
Agreement and such additional escrow instructions, the terms of
this Agreement shall govern.  

         4.2  Closing Date.  The closing ("Closing") of the
purchase and sale of the Loan shall occur through Escrow on
August 28, 1996 (the "Closing Date").

         4.3  Closing Documentation and Funds.  

              4.3.1     At least one (1) business day prior to
the Closing Date, Seller shall deliver to Escrow Holder the
following documents with respect to the Loan:

                   4.3.1.1   The original Note and First
Amendment to Note, both properly endorsed by Seller without
recourse, by allonge in the form attached to this Agreement as
Exhibit "D".  If either or both of the Note and the First
Amendment to Note has been lost or destroyed, then instead of
delivering such original Note and/or First Amendment to Note,
Seller shall deliver a copy of the missing document and execute
and deliver a Lost Note Affidavit in the form of Exhibit "E"
attached to this Agreement;

                   4.3.1.2   The original Deed of Trust, the
original First Amendment to Deed of Trust and originals of such
other of the Original Loan Documents and the Revised Loan
Documents as can be reasonably located by Seller [or to the
extent any of such documents cannot be located, copies of the
missing documents], together with an Assignment of the Deed of
Trust and the First Amendment to Deed of Trust (the "Assignment")
in the form of Exhibit "F" attached to this Agreement; 

                   4.3.1.3   The original or duplicate original
(or a copy, if the original or a duplicate original is not
available to Seller) of the title insurance policy issued to
Seller at the time of origination of the Loan; and

                   4.3.1.4   Executed UCC-2 forms, duly
completed and signed by Seller, for the purpose of transferring
the secured party's interest in all executed and unexpired UCC-1
financing statements previously filed with regard to the Loan.

              4.3.2     At least one (1) business day prior to
the Closing Date, Buyer shall deposit funds in the amount of the
balance of the Purchase Price pursuant to Section 2.2 of this
Agreement plus such additional sums as shall be necessary to pay
the expenses payable by Buyer under this Agreement.

              4.3.3     At least two (2) business days prior to
the Closing, Escrow Holder shall deliver to Buyer and Seller a
pro forma closing statement which sets forth, in a manner
satisfactory to Buyer and Seller, the prorations and other
credits and debits contemplated by this Agreement.

         4.4  Closing Procedures.  

              4.4.1     Escrow Holder shall proceed to close
Escrow when each party has delivered into Escrow, or to the
appropriate party, all of the funds and documents required by
Section 4.3 and any other provisions of this Agreement, all
documents requiring approval have been so approved, and when
Escrow Holder is prepared to close concurrently the escrow
provided for in the Property Agreement.

              4.4.2     When Escrow Holder is in a position to
close, Escrow Holder shall close Escrow by:

                   4.4.2.1   Recording or causing to be recorded
in the Orange County Recorder's Office the Assignment with
instructions that when recorded, such document shall be mailed to
Buyer.

                   4.4.2.2   Causing the executed UCC-2 forms
deposited by Seller into Escrow pursuant to Section 4.3.1.4 of
this Agreement to be filed with the California Secretary of
State.

                   4.4.2.3   Delivering the following documents
and monies to the party indicated:



Documents and Monies               Party to Whom Delivered

Note, First Amendment to Note           Buyer
and Allonge duly endorsed by 
Seller

Lost Note Affidavit,               Buyer
if applicable

Deed of Trust, First               Buyer 
Amendment to Deed of Trust 
and other available Original 
Loan Documents and Revised
Loan Documents

Assignment                         Buyer (after recordation)

Title Policy                       Buyer

Funds in amount of                      Seller (by wire transfer
Purchase Price                          of federal funds)

Escrow Closing Statement                Seller and Buyer

Commission                         Broker


         4.5  Closing Costs.  Any escrow fee charged by the
Escrow Holder and all recording and filing charges shall be paid
in equal amounts by Buyer and Seller.  Each party shall be
responsible for the payment of its own attorneys' fees incurred
in connection with the transaction which is the subject of this
Agreement.  

    5.   Representations and Warranties of Seller.  Seller
represents and warrants to Buyer that as of the date of this
Agreement and as of the Closing Date:

         5.1  Power and Authority.  Seller has full power and
authority to enter into this Agreement, and has taken all
necessary action to authorize the execution, delivery and
performance of this Agreement.  Each individual executing this
Agreement on behalf of Seller represents and warrants to Buyer
that he or she is duly authorized to do so.

         5.2  Ownership of Loan.  Seller is the sole owner of
the Loan and has full power and authority to hold, sell, transfer
and assign the same on the terms set forth in this Agreement. 
Upon the Closing, Seller will deliver ownership of the Loan to
Buyer free of any encumbrances created or suffered by Seller or
any affiliate of Seller.

         5.3  No Litigation.  Seller has no current actual
knowledge of any pending litigation that might materially,
detrimentally affect the ownership of the Loan or Seller's
ability to perform its obligations under this Agreement.  For
purposes of this Section 5.3, "actual knowledge" of Seller means
the actual knowledge of Seller's agent, Judy Alexander of LaSalle
Advisors Limited, Sacramento, California, without any duty of
investigation, and "current" means such actual knowledge as of
the date of this Agreement or the Closing.

         5.4  Consents.  Seller is not required to obtain any
consents or approvals to consummate the transactions contemplated
in this Agreement.

         5.5  Survival.  The representations and warranties of
Seller set forth in Sections 5.1 through 5.4, inclusive, shall
survive the Closing for a period of twelve (12) months after the
Closing and any claim against Seller under one or more of such
sections must be made within such twelve (12) month period or
thereafter be barred.

    6.   Representations and Warranties of Buyer.  Buyer repre-
sents and warrants to Seller that as of the date of this
Agreement and as of the Closing Date:

         6.1  Authority.  Buyer has full power and authority to
enter into this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this
Agreement.  Each individual executing this Agreement on behalf of
Buyer represents and warrants to Seller that he or she is duly
authorized to do so.

         6.2  Consents.  Buyer is not required to obtain any
consents or approvals to consummate the transactions contemplated
in this Agreement.

         6.3  Purpose of Acquisition of Loan.  Buyer's purpose
in acquiring the Loan from Seller is solely to effect the
acquisition of fee simple title to the Property from Fairchild
Property Corporation pursuant to the Property Agreement.  Buyer
acknowledges that it has been informed by Seller that Fairchild
Property Corporation is not personally liable for the obligations
of the Note, the Original Loan Documents or the Revised Loan
Documents, and Buyer represents and warrants to Seller (for the
benefit of Seller and Fairchild Property Corporation) that it
will not seek to enforce or collect by any means any personal or
deficiency judgment with regard to the Loan, the Note, the
Original Loan Documents and/or the Revised Loan Documents.

    7.   Prior Review and Approval of Loan Files.  Buyer acknow-
ledges and agrees that Buyer has made such examination, review
and investigation of the Loan, and of any and all facts and
circumstances necessary to evaluate the Loan it has deemed
necessary or appropriate.  Except for the representations and
warranties expressly made by Seller herein, (i) Buyer has been
and will continue to be solely responsible for the making of
Buyer's own independent investigations as to all aspects of the
transactions contemplated hereby, including but not limited to: 
(A) the authorization, execution, legality, validity,
effectiveness, genuineness, enforceability, collectibility and
sufficiency of the Loan, (B) the adequacy of collateral or
perfection of any security interests or liens held by Seller in
connection with the Loan, and (C) the physical condition of the
Property or the improvements thereon, any permits or other
entitlements with regard to the Property (or lack thereof), the
title to the Property, environmental conditions upon or in the
vicinity of the Property, zoning and other governmental or land
use regulations affecting the Property, the content and status of
all leases impacting the Property; and (ii) except as set forth
in this Agreement, Buyer has not relied upon any express or
implied, written or oral representation, warranty or other
statement by Seller concerning any of the foregoing.  Buyer
agrees and acknowledges that it will make its own investigations
regarding the Property as provided in the Property Agreement. 
Buyer further acknowledges and agrees that the representations,
warranties and other obligations of Fairchild Property
Corporation in the Property Agreement are solely the obligations
of Fairchild Property Corporation and not of Seller, and that
Seller shall have no liability or responsibility whatsoever with
regard to any of such representations, warranties and other
obligations, notwithstanding that Seller and Fairchild Property
Corporation are affiliates.

    8.   Conditions Upon Obligations. 

         8.1  Conditions Upon the Obligations of Buyer.  The
following shall be conditions precedent to Buyer's obligations
hereunder, and in the event these conditions are not satisfied at
Closing, Buyer may terminate this Agreement or waive such
conditions and close this transaction as provided for in this
Agreement:

              8.1.1     The warranties of Seller set forth in
Section 5 shall be accurate in all material respects as of the
Closing Date.  If Seller is unable to make any of the warranties
set forth in Section 5 as of the Closing Date, then Buyer shall
not be obligated to purchase, but nevertheless may elect to
purchase, the Loan on the Closing Date.

              8.1.2     Seller shall have performed in all
material respects all of its obligations under this Agreement
which are required to be performed at or prior to the Closing
Date.

              8.1.3     The transaction contemplated by the
Property Agreement shall be in a position to close and shall in
fact close concurrently with the Escrow provided for in this
Agreement.

         8.2  Conditions Upon the Obligations of Seller.  The
following shall be conditions precedent to Seller's obligations
hereunder, and in the event these conditions are not satisfied at
Closing, Seller may terminate this Agreement or waive such
conditions and close this transaction as provided for in this
Agreement:

              8.2.1     The warranties of Buyer set forth in
Section 6 shall be accurate in all material respects as of the
Closing Date.

              8.2.2     Buyer shall have performed in all
material respects all of its obligations under this Agreement
which are required to be performed at or prior to the Closing
Date, including, but not limited to, the delivery of the balance
of the Purchase Price into Escrow in accordance with Section 2.2
of this Agreement.

              8.2.3     The transaction contemplated by the
Property Agreement shall be in a position to close and shall in
fact close concurrently with the Escrow provided for in this
Agreement.

    9.   Hazardous Materials Waiver.  Buyer, on behalf of
itself, its successors and assigns, hereby releases Seller and
its trustees, officers, directors, partners, employees,
contractors, agents, subsidiaries and affiliates, and its and
their respective successors and assigns (collectively,
"Indemnitees") from and against any and all liabilities, claims,
demands, suits, judgments, causes of action (including, but not
limited to, causes of action arising under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Sections 9601 et seq., and causes of action arising
under Sections 25100 et seq. of the California Health and Safety
Code), losses, costs, damages, injuries, penalties, enforcement
actions, fines, taxes, remedial actions, removal and disposal
costs, investigation and remediation costs and expenses
(including, without limitation, attorneys' fees, litigation,
arbitration and administrative proceeding costs, expert and
consultant fees and laboratory costs), sums paid in settlement of
claims, whether direct or indirect, known or unknown, arising out
of, related in any way to, or resulting from or in connection
with, in whole or in part, the presence or suspected presence of
Hazardous Materials (defined below), in, on, under, or about the
Property.  In that connection, Buyer, on behalf of itself, its
successors, assigns and successors-in-interest and such other
persons and entities and after consultation with its counsel
regarding the legal effect of this Section 9, waives the benefit
of any statute or rule of law that limits the effectiveness of a
release if the releasor did not know of the claims being
released, including, without limitation, Section 1542 of the
California Civil Code, which reads as follows:  "A general
release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected
his settlement with the debtor."

         "Hazardous Material(s)" means any chemical, substance,
material, controlled substance, object, condition, waste, living
organisms or combination thereof which is or may be hazardous to
human health or safety or to the environment due to its radio-
activity, ignitability, corrosivity, reactivity, explosivity,
toxicity, carcinogenicity, mutagenicity, phytotoxicity,
infectiousness or other harmful or potentially harmful properties
or effects, including, without limitation, petroleum hydrocarbons
and petroleum products, lead, asbestos, radon, polychlorinated
biphenyls (PCBs) and all of those chemicals, substances,
materials, controlled substances, objects, conditions, wastes,
living organisms or combinations thereof which are now or become
in the future listed, defined or regulated in any manner by any
federal, state or local law, ordinance, rule or regulation based
upon, directly or indirectly, such properties or effects.

    10.  LIQUIDATED DAMAGES.  BUYER AND SELLER AGREE THAT 
IN THE EVENT OF A MATERIAL DEFAULT OR BREACH HEREUNDER
 BY BUYER (INCLUDING, WITHOUT LIMITATION, ANY DEFAULT 
OR BREACH BY BUYER WHICH RESULTS IN THE FAILURE OF 
ESCROW TO CLOSE), THE DAMAGE TO SELLER WOULD BE
 EXTREMELY DIFFICULT AND IMPRACTICABLE TO ASCERTAIN 
AND THAT THEREFORE THE DEPOSIT IS A REASONABLE ESTIMATE
OF THE DAMAGES TO SELLER, SUCH DAMAGES INCLUDING COSTS OF
NEGOTIATING AND DRAFTING OF THIS AGREEMENT, COSTS OF 
COOPERATING IN SATISFYING CONDITIONS TO CLOSING, 
COSTS OF SEEKING ANOTHER BUYER UPON BUYER'S DEFAULT,
 OPPORTUNITY COSTS IN, AND CARRYING COSTS ASSOCIATED 
WITH, KEEPING THE PROPERTY OUT OF THE MARKETPLACE, 
AND OTHER COSTS INCURRED IN CONNECTION HEREWITH. 
ACCORDINGLY, BUYER AND SELLER AGREE THAT UNDER THE
 CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS 
AGREEMENT, THE LIQUIDATED DAMAGES PROVIDED FOR 
IN THIS SECTION REPRESENT A REASONABLE ESTIMATE OF
THE DAMAGES WHICH SELLER WILL INCUR AS A RESULT OF 
BUYER'S DEFAULT UNDER THIS AGREEMENT WHICH PREVENTS 
THE TIMELY CLOSING OF ESCROW; PROVIDED, HOWEVER, THAT 
THIS PROVISION SHALL NOT LIMIT SELLER'S RIGHTS TO RECEIVE 
REIMBURSEMENT FOR ATTORNEYS' FEES RELATING TO ENFORCING 
THIS SECTION 10, NOR WAIVE OR AFFECT SELLER'S RIGHTS 
AND BUYER'S INDEMNITY OBLIGATIONS UNDER OTHER
SECTIONS OF THIS AGREEMENT.  THE PARTIES ACKNOWLEDGE THAT 
THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A
FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL 
CODE SECTION 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE 
LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA 
CIVIL CODE SECTIONS 1671, 1676 AND 1677, AS APPLICABLE.  IN THE 
EVENT OF A DEFAULT BY BUYER UNDER BOTH THIS AGREEMENT 
AND THE PROPERTY AGREEMENT, SELLER AND FPC SHALL TOGETHER 
BE ENTITLED TO ONE MEASURE OF LIQUIDATED DAMAGES IN THE 
AMOUNT OF THE DEPOSIT PROVIDED FOR IN THIS AGREEMENT, 
TOGETHER WITH THEIR ATTORNEYS' FEES AND COSTS 
RELATING TO THE ENFORCEMENT OF THIS SECTION 10, AND ANY
APPORTIONMENT OF SUCH ONE MEASURE OF LIQUIDATED DAMAGES 
BETWEEN SELLER AND FPC SHALL BE BY AGREEMENT BETWEEN 
SELLER AND FPC.  THE PARTIES HAVE SET FORTH THEIR INITIALS
 BELOW TO INDICATE THEIR AGREEMENT WITH THE LIQUIDATED
 DAMAGES PROVISION CONTAINED IN THIS SECTION.

Initials of Buyer:                 Initials of Seller:

____________________               ____________________


    11.  GENERAL PROVISIONS

         11.1 Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all
of which, taken together, shall constitute one and the same
instrument.

         11.2 Entire Agreement.  This Agreement and the Property
Agreement contain the entire integrated agreement between the
parties respecting the subject matter of this Agreement and
supersede all prior and contemporaneous understandings and
agreements, whether oral or in writing, between the parties
respecting the subject matter of this Agreement, including,
without limitation, that certain Purchase and Sale Agreement and
Joint Escrow Instructions between FPC and Buyer, that certain
Tri-Party Agreement between FPC, Buyer and Seller, both dated as
of June 25, 1996, that certain Amendment Number One to the
Purchase and Sale Agreement and Joint Escrow Instructions between
FPC and Buyer, dated as of July 26, 1996, and that certain Second
Amendment to Purchase and Sale Agreement and Joint Escrow
Instructions between FPC and Buyer, dated as of August 2, 1996. 
There are no representations, agreements, arrangements or
understandings, oral or in writing, between or among the parties
to this Agreement relating to the subject matter of this
Agreement which are not fully expressed in this Agreement and the
Property Agreement.  The terms of this Agreement and the Property
Agreement are intended by the parties as a final expression of
their agreement with respect to those terms and they may not be
contradicted by evidence of any prior agreement or of any other
contemporaneous agreement.  The parties further intend that this
Agreement and the Property Agreement constitute the complete and
exclusive statement of their terms and that no extrinsic evidence
whatsoever may be introduced in any judicial proceeding involving
this Agreement and/or the Property Agreement.

         11.3 Legal Advice; Neutral Interpretation; Headings. 
Each party has received independent legal advice from its
attorneys with respect to the advisability of executing this
Agreement and the meaning of the provisions hereof.  The
provisions of this Agreement shall be construed as to their fair
meaning, and not for or against any party based upon any
attribution to such party as the source of the language in
question.  Headings used in this Agreement are for convenience of
reference only and shall not be used in construing this
Agreement.

         11.4 Choice of Law.  This Agreement shall be governed
by the laws of the State of California.

         11.5 Severability.  If any term, covenant, condition or
provision of this Agreement, or the application thereof to any
person or circumstance, shall to any extent be held by a court of
competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, covenants, conditions or provisions of
this Agreement or the application thereof to any person or
circumstance, shall remain in full force and effect and shall in
no way be affected, impaired or invalidated thereby.

         11.6 Waiver of Covenants, Conditions or Remedies.  The
waiver by one party of the performance of any covenant, condition
or promise under this Agreement shall not invalidate this
Agreement nor shall it be considered a waiver by it of any other
covenant, condition or promise under this Agreement.  The waiver
by either or both parties of the time for performing any act
under this Agreement shall not constitute a waiver of the time
for performing any other act or an identical act required to be
performed at a later time.  The exercise of any remedy provided
in this Agreement shall not be a waiver of any consistent remedy
provided by law, and the provision in this Agreement for any
remedy shall not exclude other consistent remedies unless they
are expressly excluded.

         11.7 Exhibits.  All exhibits to which reference is made
in this Agreement are deemed incorporated in this Agreement,
whether or not actually attached.

         11.8 Amendment.  This Agreement may be amended at any
time by the written agreement of Buyer and Seller.  All
amendments, changes, revisions and discharges of this Agreement,
in whole or in part, and from time to time, shall be binding upon
the parties despite any lack of legal consideration, so long as
the same shall be in writing and executed by the parties hereto.

         11.9 Relationship of Parties.  The parties agree that
their relationship is that of seller and buyer, and that nothing
contained herein shall constitute either party the agent or legal
representative of the other for any purpose whatsoever, nor shall
this Agreement be deemed to create any form of business organiza-
tion between the parties hereto, nor is either party granted any
right or authority to assume or create any obligation or
responsibility on behalf of the other party nor shall either
party be in any way liable for any debt of the other.

         11.10     No Third-Party Benefit.  This Agreement is
intended to benefit only the parties hereto and Fairchild
Property Corporation and no other person or entity has or shall
acquire any rights hereunder.

         11.11     Time of the Essence.  Time shall be of the
essence as to all dates and times of performance, whether
contained herein or contained in any escrow instructions to be
executed pursuant to this Agreement, and all escrow instructions
shall contain a provision to this effect.

         11.12     Further Acts.  Each party agrees to perform
any further acts and to execute, acknowledge and deliver any
documents which may be reasonably necessary to carry out the
provisions of this Agreement.

         11.13     Recordation.  Buyer shall not record this
Agreement, any memorandum of this Agreement, any assignment of
this Agreement or any other document which would cause a cloud on
the title to the Property.

         11.14     Assignment.  Buyer shall be permitted to
assign Buyer's rights hereunder to an entity affiliated with
Buyer upon written notice to Seller and delivery to Seller of an
instrument reasonably satisfactory to Seller wherein such
assignee shall assume Buyer's obligations hereunder, but no such
assignment shall delay the Closing or relieve Buyer of any
liability hereunder.  Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the
successors and assigns of the parties to this Agreement.

         11.15     Attorneys' Fees.  In the event of any
litigation involving the parties to this Agreement to enforce any
provision of this Agreement, to enforce any remedy available upon
default under this Agreement, or seeking a declaration of the
rights of either party under this Agreement, the prevailing party
shall be entitled to recover from the other such attorneys' fees
and costs as may be reasonably incurred, including the costs of
reasonable investigation, preparation and professional or expert
consultation incurred by reason of such litigation.  All other
attorneys' fees and costs relating to this Agreement and the
transactions contemplated hereby shall be borne by the party
incurring the same.

         11.16     Brokers.  Seller shall pay The Galbreath
Company ("Broker") through Escrow a commission in the amount of
$175,000.00 for its services as broker in this transaction if, as
and when the Closing occurs.  Only one such commission in the
total amount of $175,000.00 ("Commission") shall be payable with
regard to this Agreement, the Property Agreement and/or any other
agreement pursuant to which Seller, Buyer and/or Fairchild
Property Corporation may owe or be alleged to owe a commission or
other payment to Broker with regard to the Loan, the Property or
any related matter.  Buyer and Seller each represent and warrant
to the other that, except as stated in the preceding sentence,
(a) they have not dealt with any brokers or finders in connection
with the purchase and sale of the Loan and/or the Property, and
(b) insofar as such party knows, no broker or other person is
entitled to any commission or finder's fee in connection with the
purchase and sale of the Loan and/or the Property.  Seller and
Buyer each agree to indemnify and hold harmless the other against
any loss, liability, damage, cost, claim or expense incurred by
reason of any brokerage fee, commission or finder's fee which is
payable or alleged to be payable to any broker or finder because
of any agreement, act, omission or statement of the indemnifying
party.  The provisions of this Section 11.16 shall not be limited
in any way by any terms of this Agreement including, but not
limited to, Section 10 of this Agreement.

         11.17     Manner of Giving Notice.  All notices and
demands which either party is required or desires to give to the
other shall be given in writing by personal delivery, express
courier service or by telecopy followed by next day delivery of a
hard copy to the address or telecopy number set forth below for
the respective party, provided that if any party gives notice of
a change of name, address or telecopy number, notices to that
party shall thereafter be given as demanded in that notice.  All
notices and demands so given shall be effective upon receipt by
the party to whom notice or a demand is being given.

To Buyer:     
              Spieker Properties, L.P.
              Suite 165
              17320 Redhill Avenue
              Irvine, California  92714
              Attn:  John Davenport
              Telephone:  (714) 250-8188
              Telecopy:  (714) 250-7079

With copies to:
              Philip J. Levine, Esq.
              Morrison & Foerster, LLP
              755 Page Mill Road
              Palo Alto, California 94304-1018
              Telephone:  (415) 813-5613
              Telecopy:  (415) 494-0792

To Seller:

              Fairchild 234
              c/o LaSalle Advisors Limited
              1601 Response Road
              Sacramento, California 95815
              Attn:  Michael D. Westfall
              Telephone:  (916) 920-4051
              Telecopy:   (916) 920-0205

With copies to:

              Dennis W. Ghan, Esq.
              Palmieri, Tyler, Wiener, Wilhelm & Waldron
              2603 Main Street, Suite 1300
              Irvine, California 92714
              Telephone:  (714) 851-9400
              Telecopy:   (714) 851-1554

         11.18     Survival.  All covenants of Buyer or Seller
which are intended hereunder to be performed in whole or in part
after the Closing, and all representations, warranties and
indemnities by either party to the other, shall survive the
Closing and be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and
permitted assigns.  

         11.19     Dates.  If any date specified herein shall
fall on a Saturday, Sunday or public holiday, such date shall
automatically be revised to be the next business day.


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


SELLER:                      FAIRCHILD 234, 
                             a California general partnership

                             By:   LASALLE ADVISORS LIMITED,
                                   a Delaware limited
partnership,
                                   authorized agent 


                                   By:___________________________
                                      Michael D. Westfall,
                                      Vice President



BUYER:                       SPIEKER PROPERTIES, L.P.,
                             a California limited partnership

                             By:   SPIEKER PROPERTIES, INC.,
                                   a Maryland corporation,
                                   general partner


                                   By:___________________________
                                      John G. Davenport,
                                      Regional Senior Vice President

<PAGE>

                                         EXHIBIT A

                               LEGAL DESCRIPTION OF PROPERTY


PARCEL A:

PARCELS 1 AND 2 IN THE CITY OF IRVINE, COUNTY OF ORANGE, STATE OF
CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 85-346 FILED IN BOOK 206,
PAGES 8, 9, 10 AND 11 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

EXCEPT ALL OIL, OIL RIGHTS, MINERAL RIGHTS, NATURAL GAS, NATURAL
GAS RIGHTS AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT
MAY BE WITHIN OR UNDER THE PARCEL OF LAND HEREINABOVE DESCRIBED,
TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING
AND OPERATING THEREFOR AND REMOVING THE SAME FROM SAID LAND OR
ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY
DRILL AND MINE FROM LANDS OTHER THAN THOSE HEREINABOVE DESCRIBED,
OIL OR GAS WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE
SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH
WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS
UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF,
SUBSURFACE OF THE LAND HEREINABOVE DESCRIBED, AND TO BOTTOM SUCH
WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS
UNDER AND BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO
REDRILL, RETUNNEL, EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE
ANY SUCH WELLS OR MINES, WITHOUT, HOWEVER, THE RIGHT TO DRILL,
MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OF THE UPPER 500
FEET OF THE LAND HEREINABOVE DESCRIBED, AS RESERVED BY THE IRVINE
INDUSTRIAL COMPLEX, A CORPORATION, IN AN INSTRUMENT RECORDED
NOVEMBER 7, 1972, IN BOOK 10414, PAGE 187 OFFICIAL RECORDS.

ALSO EXCEPTING FROM A PORTION OF SAID LAND ALL OIL, OIL RIGHTS,
MINERALS, MINERAL RIGHTS, NATURAL GAS RIGHTS AND OTHER
HYDROCARBONS BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM OR
OTHER
RESOURCES, AND ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING,
THAT MAY BE WITHIN OR UNDER THE LAND, TOGETHER WITH THE PERPETUAL
RIGHT OF DRILLING, MINING, OR EXPLORING AND OPERATING THEREFOR
AND STORING IN AND REMOVING THE SAME FROM THE LAND OR ANY OTHER
LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND
MINE FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL OR GAS
WELLS, TUNNELS AND SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE
OF THE LAND, AND TO BOTTOM SUCH WHIPSTOCKED OR DIRECTIONALLY
DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND BENEATH OR BEYOND THE
EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP,
MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES,
WITHOUT, HOWEVER, THE RIGHT TO DRILL, MINE, STORE, EXPLORE AND
OPERATE THROUGH THE SURFACE OR THE UPPER 500 FEET OF THE
SUBSURFACE OF THE LAND, AS RESERVED BY THE IRVINE 
COMPANY, IN AN INSTRUMENT RECORDED JULY 5, 1985 AS
INSTRUMENT/FILE NO. 85-247702 OF OFFICIAL RECORDS.

ALSO EXCEPT THEREFROM ALL WATER, RIGHTS OR INTERESTS THEREIN, NO
MATTER HOW ACQUIRED BY GRANTOR, AND OWNED OR USED BY GRANTOR IN
CONNECTION WITH OR WITH RESPECT TO THE LAND, TOGETHER WITH THE
RIGHT AND POWER TO EXPLORE, DRILL, REDRILL, REMOVE, AND STORE THE
SAME FROM THE LAND OR TO DIVERT OR OTHERWISE UTILIZE SUCH WATER,
RIGHTS OR INTERESTS ON ANY OTHER PROPERTY OWNED OR LEASED BY
GRANTOR, WHETHER SUCH WATER RIGHTS SHALL BE RIPARIAN, OVERLAYING,
APPROPRIATIVE, LITTORAL, PERCOLATING, PRESCRIPTIVE, ADJUDICATED,
STATUTORY OR CONTRACTUAL, BUT WITHOUT, HOWEVER, ANY RIGHT TO
ENTER UPON THE SURFACE OF THE LAND OR THE UPPER FIFTY (50) FEET
IN THE EXERCISE OF SUCH RIGHTS, OR ABOVE THE UPPER 500 FEET IN
ANY MANNER WHICH MATERIALLY IMPAIRS THE SUBJACENT SUPPORT TO THE
LAND OR ANY IMPROVEMENTS THEREON FROM TIME TO TIME, AS RESERVED
BY THE IRVINE COMPANY, IN AN INSTRUMENT RECORDED JULY 5, 1985 AS
INSTRUMENT/FILE NO. 85-247702 OF OFFICIAL RECORDS.

PARCEL B:

NON-EXCLUSIVE, RECIPROCAL EASEMENTS AND APPURTENANT RIGHTS AND
INTERESTS INCLUDING EASEMENTS FOR INGRESS, EGRESS, PARKING,
SUPPORT, SETTLEMENT, ENCROACHMENT, AND UTILITIES, OVER PARCELS 3,
4 AND 5, IN THE CITY OF IRVINE, COUNTY OF ORANGE, STATE OF
CALIFORNIA, AS SHOWN ON A MAP FILED IN BOOK 206, PAGES 8, 9, 10
AND 11 OF PARCEL MAPS, AS DESCRIBED IN THAT CERTAIN DECLARATION
OF COVENANTS, CONDITIONS AND RESTRICTIONS AND EASEMENT AGREEMENT
- BRINDERSON PLAZA/THE TOWERS, RECORDED DECEMBER 16, 1985 AS
INSTRUMENT NO. 85-503333 OF OFFICIAL RECORDS OF ORANGE COUNTY,
CALIFORNIA, AS AMENDED AND RESTATED BY THAT CERTAIN FIRST AMENDED
AND RESTATED DECLARATION OF COVENANTS, CONDITIONS AND
RESTRICTIONS AND EASEMENT AGREEMENT, RECORDED JULY 15, 1988, AS
INSTRUMENT NO. 88-342793 OF OFFICIAL RECORDS OF ORANGE COUNTY,
CALIFORNIA.  


<PAGE>
The Annual Report to Limited Partners for the Year ended December
31, 1996 should be inserted here.


ANNUAL REPORT
FOR THE PERIOD ENDED
DECEMBER 31, 1996

FELLOW PARTNERS:

Now that we have initiated the disposition phase of your Fund,
the amount of your distributions and the estimated value of a
Fund unit will be influenced more by sales than by operations. As
a result, we thought it appropriate to begin this report by
providing you with the estimated unit value of the Fund and an
update on property dispositions as well as your fourth quarter
distribution.
     At this stage of your Fund's life cycle, our primary focus
is shifting from the production of income to the strategic
positioning of Fund properties to maximize potential sales
proceeds. 

Unit Valuation

As you know, at the end of each year we employ a third-party
appraiser to review and assess the analysis and assumptions used
to prepare an estimated current value of the properties held in
your Fund. We then use these valuations to prepare an estimated
unit value, which may not be representative of the value of your
units when the Fund ultimately liquidates. Nor is there any
assurance that you could sell your units today at a price equal
to the current estimated value.
     At December 31, 1996, the estimated unit value of the Fund
was $147. After adjusting for our February distribution of $2,
the estimated value per unit is $145. Total appreciation for the
year, including net appreciation on the property sold, is 8.4%. 
     As you may recall, we mailed this information to you in a
letter dated January 22, 1997, in response to offerings made to
you by other investors. While we cannot assure that you will
ultimately receive the exact amount of the estimated unit value,
we believe our valuation process has been sound, and we want you
to be as well-informed as possible about the value of your
investment. Our objective is to supply you with the information
you need to make the best decisions based on your particular
circumstances.

Disposition Update

The three industrial properties that are held for sale -
Winnetka, Wood Dale, and Riverview -  have been marketed with two
similar holdings in Realty Income Fund II. We signed a letter of
intent with a potential buyer for the entire package in January
and hope to complete the transaction in April, although there is
no assurance the sale will be consummated. 
     In addition, we signed a listing agreement to sell South
Point Plaza, in which the Fund has a 50% interest. The property,
a shopping center in Tempe, Arizona, is being actively marketed
by the listing broker. We will update you on all these properties
held for sale in our next quarterly report.

Cash Distributions

The Fund declared a fourth quarter distribution from operations
of $2 per unit, bringing the total distributions from operations
for the year to $8. Additionally, $21.60 per unit was paid out to
you during the year from sales proceeds for the Fund's 56% share
of Fairchild, resulting in total distributions of $29.60 per unit
for 1996. Future distributions will be determined each quarter
based on cash flow, anticipated capital requirements, and the
status of property dispositions. 

Results of Operations

The Fund had a loss of $724,000 from operations in 1996, before
the gain on the Fairchild sale, compared with net income of
$1,783,000 in 1995. This difference is primarily due to downward
property valuation adjustments at Scripps Terrace, Tierrasanta,
and Clark Avenue totaling $2,750,000, which were partly offset by
an increased contribution to income of $327,000 from River Run.
This property's contribution increased as a result of the Fund's
acquisition of the asset through foreclosure late in 1995. While
conditions in the markets where these properties are located are
generally improving, the shortened anticipated holding period due
to our disposition plans caused us to adjust the carrying values
downward. Property carrying amounts for financial statement
purposes should not be confused with the estimated fair market
values used to determine your estimated unit value.
     The sale of Fairchild in 1996 had a negative effect on
earnings amounting to $45,000 because of the loss of the
property's income for four months of the year. However, the Fund
realized a gain of $1,630,000 on the sale.
     Revenues from rental income and interest totaled $6,280,000
for the year compared with $6,094,000 a year earlier. This
comparison was negatively affected by the absence of a full
year's rental income from Fairchild but was positively affected
by an increased contribution to income from River Run. Results
were helped by a decline of $166,000 in operating expenses before
valuation adjustments during the year.
     At the property level, the year-end leased status of Fund
properties increased by three percentage points. This change was
driven by increases in occupancy at Scripps Terrace and South
Point from the end of the previous year.  At the former property,
located in the San Diego market, two substantial leases were
completed in the fourth quarter and a total of five throughout
the year, including three new and two renewal leases.


Real Estate Investments (Dollars in thousands)
_________________________________________________________________

                                        Average     Contribution
                        Leased Status Leased Status to Net Income
                         ___________  _____________ ____________

                 Gross                   Twelve        Twelve
               Leasable               Months Ended  Months Ended
Property         Area   December 31,  December 31,  December 31,
Name          (Sq. Ft.)     1996       1995  1996   1995  1996
_________    __________  __________    _____ _____  _____ _____

Scripps 
  Terrace      56,796       90%          82%   76%    $   120  $
(959                )

Tierrasanta   104,236       62           75    87    80     (732)

Clark Avenue   40,000       72           79    72   114     (715)

Westbrook
  Commons     121,558       98           98    96   459      398

River Run      92,787       93            -    93   307      634
             ________     ____         ____  __________   ______

              415,377       84           85    88 1,080   
(1,374)
Held for Sale
  Winnetka    188,260      100           96   100   364      491
  South Point
    Plaza      50,497       90           67    74    84      (50)
  Wood Dale    89,718       70           99    86   223      155
  Riverview   113,700      100           93    99   212      294
             ________     ____         ____  ____ ______  ______

              857,552       89           90    91 1,963     (484)
Properties Sold     -        -            -     -    87    1,672
Fund Expenses 
  Less Interest 
  Income            -        -            -     -  (267)    (282)
             ________     ____         ____  __________   ______

Total         857,552       89%          90%   91%    $   1,783$
906


     We reported previously that a tenant who occupied 38% of
Tierrasanta did not renew upon expiration of the lease at the end
of August. There is interest in the property and the market is
tightening; however, several competitive properties have
comparable space available, and we cannot be sure when this space
will be re-leased.
     Occupancy increased to 93% at River Run, due to the signing
of three new and one renewal lease representing 6% of the total
space. This more than offset the loss of one tenant whose lease
expired and another whose lease was terminated prior to
expiration, in exchange for an early termination payment. 

Outlook 

We continue to make progress toward the disposition of the Fund's
properties during the next two years. Some of you have asked why
we are beginning to sell now, just as the market has been
exhibiting signs of strengthening.
     Our primary goal is to take advantage of rising property
values as the Fund nears the end of its planned lifespan. As real
estate markets have been improving during the past few years, we
have used the opportunity to capture higher prices for investors.

     As usually happens in improving markets, the turnaround in
real estate is broadly encouraging an increasing supply of new
properties, which could eventually lead to an oversupply and
softer prices down the road. This is normal as the real estate
cycle runs its course. While we do not expect a recession in
either real estate or the general economy to emerge in the near
future, the  country's economic expansion is almost six years old
and is approaching an advanced stage, by historical measures.
     It is possible that by selling Fund properties during the
next few years, we might miss some further advances in real
estate values. However, with prices currently rising due to
strong tenant and investor demand, supply growing in many
markets, and the Fund nearing the end of its planned lifespan, we
believe it is prudent to sell into that strength while prices are
on the upswing.

     Sincerely,

     James S. Riepe
     Chairman

February 7, 1997


                      REAL ESTATE HOLDINGS
                        December 31, 1996
                         (In thousands)

                                      Date         Carrying
Property Name       Type and Location Acquired      Amount
_______________     _______________   _________    ________
   
Scripps Terrace     Business Park          2/88    $2,185
   San Diego, 
   California

Tierrasanta         Business Park          4/88     1,727
   San Diego, 
   California

Clark Avenue        R&D/Office             10/88    2,597
   King of Prussia, 
   Pennsylvania

River Run           Retail                 6/89     7,515
   Miramar, 
   Florida

Westbrook Commons   Retail                 12/90    4,911
   Westchester, 
   Illinois
                                                  _______

                                                   18,935
                                                   
                                             
Held for Sale
Wood Dale           Industrial             9/88     2,969
   Wood Dale, 
   Illinois                                  
                                             
Winnetka            Industrial             3/88     4,082
   Crystal, 
   Minnesota

Riverview           Industrial             12/88    3,220
   St. Paul, 
   Minnesota

South Point         Retail                 4/88     1,515
   Tempe, Arizona                                 _______
                                             
                                                  $30,721
                                                  _______
                                                  _______

                   CONSOLIDATED BALANCE SHEETS
                         (In thousands)
                                          
                                    December 31,December 31,
                                        1996        1995
                                     _______________________

Assets

Real Estate Property Investments
 Land. . . . . . . . . . . . . . . .           $   6,882   $
12,181
 Buildings and Improvements. . . . .      13,112      33,139
                                        ________    ________

                                          19,994      45,320
 Less:  Accumulated Depreciation and 
    Amortization . . . . . . . . . .     (1,059)     (7,831)
                                        ________    ________

                                          18,935      37,489
 Held for Sale . . . . . . . . . . .      11,786           -
                                        ________    ________
    
                                          30,721      37,489
Cash and Cash Equivalents. . . . . .       2,468       3,436
Accounts Receivable  (less allowances of 
 $131 and $230). . . . . . . . . . .         445         529
Other Assets . . . . . . . . . . . .         318         279
                                        ________    ________
                                         $33,952   $  41,733
                                        ________    ________
                                        ________    ________

Liabilities and Partners' Capital

Security Deposits and Prepaid Rents.     $   439   $     391
Accrued Real Estate Taxes. . . . . .         450         433
Accounts Payable and Other 
 Accrued Expenses. . . . . . . . . .         217         335
                                        ________    ________

Total Liabilities. . . . . . . . . .       1,106       1,159
Partners' Capital. . . . . . . . . .      32,846      40,574
                                        ________    ________

                                         $33,952   $  41,733
                                        ________    ________
                                        ________    ________

The accompanying notes are an integral part of the consolidated
financial statements.

              CONSOLIDATED STATEMENTS OF OPERATIONS
             (In thousands except per-unit amounts)
 
                                  Years Ended December 31,
                                  1996       1995     1994
                                _________  __________________

Revenues

Rental Income. . . . . . . .    $ 6,091   $ 5,502  $   5,369
Interest Income from 
  Participating Mortgage 
  Loan . . . . . . . . . . .          -       429        858
Other Interest Income. . . .        189       163        130
                                _______   _______    _______
  
                                  6,280     6,094      6,357
                                _______   _______    _______

Expenses

Property Operating Expenses.      1,329     1,284      1,249
Real Estate Taxes. . . . . .      1,083     1,002        936
Depreciation and 
  Amortization . . . . . . .      1,268     1,266      1,572
Decline (Recovery) of Property 
  Values . . . . . . . . . .      2,750      (109)     1,385
Provision for Loan Loss. . .          -       202          -
Management Fee to General 
  Partner. . . . . . . . . .        164       282        342
Partnership Management 
  Expenses . . . . . . . . .        410       384        374
                                _______   _______    _______

                                  7,004     4,311      5,858
                                _______   _______    _______

Income (Loss) from Operations 
  before Real Estate 
  Sold . . . . . . . . . . .       (724)    1,783        499
Gain on Real Estate Sold . .      1,630         -         80
                                _______   _______    _______

Net Income . . . . . . . . .    $   906   $ 1,783  $     579
                                _______   _______    _______
                                _______   _______    _______

Activity per Limited 
  Partnership Unit
Net Income . . . . . . . . .    $  3.54   $  6.96  $    2.26
                                _______   _______    _______
                                _______   _______    _______

Cash Distributions Declared
  from Operations. . . . . .    $  8.00   $ 11.11  $   13.53
  from Sale Proceeds . . . .      21.60         -       3.92
                                _______   _______    _______

Total Distributions Declared    $ 29.60   $ 11.11  $   17.45
                                _______   _______    _______
                                _______   _______    _______

Units Outstanding. . . . . .    253,599   253,599    253,605
                                _______   _______    _______
                                _______   _______    _______

The accompanying notes are an integral part of the consolidated
financial statements.

          CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                         (In thousands)
  
                                General    Limited
                                Partner   Partners     Total
                               ________   ________   ________

Balance, December 31, 1993 .    $  (158)  $44,835    $44,677
Net Income . . . . . . . . .          6       573        579
Redemption of Units. . . . .          -        (1)        (1)
Cash Distributions . . . . .        (34)   (4,400)    (4,434)
                                _______   _______    _______

Balance, December 31, 1994 .       (186)   41,007     40,821
Net Income . . . . . . . . .         18     1,765      1,783
Redemption of Units. . . . .          -        (1)        (1)
Cash Distributions . . . . .        (20)   (2,009)    (2,029)
                                _______   _______    _______

Balance, December 31, 1995 .       (188)   40,762     40,574
Net Income . . . . . . . . .          9       897        906
Cash Distributions . . . . .        (19)   (8,615)    (8,634)
                                _______   _______    _______

Balance, December 31, 1996 .    $  (198)  $33,044    $32,846

The accompanying notes are an integral part of the consolidated
financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

                                   Years Ended December 31,
                                  1996       1995     1994
                                _________  __________________

Cash Flows from Operating 
  Activities
Net Income (Loss)  . . . . .    $   906   $ 1,783  $     579
Adjustments to Reconcile Net 
  Income to Net CasH Provided 
    by Operating Activities
  Depreciation and 
    Amortization . . . . . .      1,268     1,266      1,572
  Decline (Recovery) of 
    Property Values. . . . .      2,750      (109)     1,385
  Change in Loan Loss 
    Provision. . . . . . . .          -       202          -
  Gain on Real Estate Sold .     (1,630)        -        (80)
  Change in Accounts 
    Receivable, Net of 
    Allowances . . . . . . .         77       (95)       (95)
  Increase in Other Assets .        (48)     (101)       (62)
  Change in Accounts Payable and 
    Other Accrued 
    Expenses . . . . . . . .       (118)       35        (52)
  Other Changes in Assets 
    and Liabilities. . . . .         65        (2)        13
                                _______   _______    _______

Net Cash Provided by Operating 
  Activities . . . . . . . .      3,270     2,979      3,260
                                _______   _______    _______

Cash Flows from Investing 
  Activities
Proceeds from Property 
  Dispositions . . . . . . .      5,477         -        994
Investments in Real Estate .     (1,081)   (1,176)      (665)
                                _______   _______    _______

Net Cash Provided by 
  (Used in) 
  Investing Activities . . .      4,396    (1,176)       329
                                _______   _______    _______

Cash Flows Used in Financing 
  Activities
Cash Distributions . . . . .     (8,634)   (2,029)    (4,434)
Redemption of Units. . . . .          -        (1)        (1)
                                _______   _______    _______

Net Cash Used in Financing 
  Activities . . . . . . . .     (8,634)   (2,030)    (4,435)
                                _______   _______    _______

Cash and Cash Equivalents
Net Decrease during 
  Year . . . . . . . . . . .       (968)     (227)      (846)
At Beginning of Year . . . .      3,436     3,663      4,509
                                _______   _______    _______

At End of Year . . . . . . .    $ 2,468   $ 3,436  $   3,663
                                _______   _______    _______
                                _______   _______    _______

The accompanying notes are an integral part of the consolidated
financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION

T. Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership (the
"Partnership"), was formed on October 20, 1986, under the Delaware
Revised Uniform Limited Partnership Act for the purpose of
acquiring, operating, and disposing of existing income-producing
commercial and industrial real estate properties. T. Rowe Price
Realty Income Fund III Management, Inc., is the sole General
Partner. The initial offering resulted in the sale of 253,641
limited partnership units at $250 per unit.
     In accordance with provisions of the partnership agreement,
income from operations is allocated and related cash distributions
are generally paid to the General and Limited Partners at the rates
of 1% and 99%, respectively. Sale or refinancing proceeds are
generally allocated first to the Limited Partners in an amount
equal to their capital contributions, next to the Limited Partners
to provide specified returns on their adjusted capital
contributions, next 3% to the General Partner, with any remaining
proceeds allocated 85% to the Limited Partners and 15% to the
General Partner. Gain on property sold is generally allocated first
between the General Partner and Limited Partners in an amount equal
to the depreciation previously allocated from the property and then
in the same ratio as the distribution of sale proceeds. Cash
distributions, if any, are made quarterly based upon cash available
for distribution, as defined in the partnership agreement. Cash
available for distribution will fluctuate as changes in cash flows
and adequacy of cash balances warrant.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Partnership's financial statements are prepared in accordance
with generally accepted accounting principles which requires the
use of estimates and assumptions by the General Partner.
     The accompanying consolidated financial statements include the
accounts of the Partnership and its pro-rata share of the accounts
of South Point Partners, Tierrasanta 234, and Penasquitos 34
(Westbrook Commons), all of which are California general
partnerships, in which the Partnership has 50%, 30%, and 50%
interests, respectively.   They also include the Partnership's
pro-rata share of the accounts of Fairchild 234, a California
general partnership in which the Partnership had a 56% interest
prior to disposition of the property on August 28, 1996.  The other
partners in these ventures are affiliates of the Partnership.  All
intercompany accounts and transactions have been eliminated in
consolidation.
     Depreciation is calculated primarily on the straight-line
method over the estimated useful lives of buildings and
improvements, which range from five to 40 years. Lease commissions
and tenant improvements are capitalized and amortized over the life
of the lease using the straight-line method.
     Cash equivalents consist of  money market mutual funds, the
cost of which approximates fair value.
     The Partnership uses the allowance method of accounting for
doubtful accounts. Provisions for uncollectible tenant receivables
in the amounts of $143,000, $192,000, and $89,000 were recorded in
1996, 1995, and 1994, respectively. Bad debt expense is included in
Property Operating Expenses.
     The Partnership will review its real estate property
investments for impairment whenever events or changes in
circumstances indicate that the property carrying amounts may not
be recoverable.  Such a review results in the Partnership recording
a provision for impairment of the carrying value of its real estate
property investments whenever the estimated future cash flows from
a property's operations and projected sale are less than the
property's net carrying value. The General Partner believes that
the estimates and assumptions used in evaluating the carrying value
of the Partnership's properties are appropriate; however, changes
in market conditions and circumstances could occur in the near term
which would cause these estimates to change.
     Rental income is recognized on a straight-line basis over the
term of each lease. Rental income accrued, but not yet billed, is
included in Other Assets and aggregates $262,000 and $205,000 at
December 31, 1996 and 1995, respectively.
     Under provisions of the Internal Revenue Code and applicable
state taxation codes, partnerships are generally not subject to
income taxes; therefore, no provision has been made for such taxes
in the accompanying consolidated financial statements.

NOTE 3 - TRANSACTIONS WITH RELATED PARTIES

As compensation for services rendered in managing the affairs of
the Partnership, the General Partner earns a partnership management
fee equal to 9% of net operating proceeds. The General Partner
earned partnership management fees of $164,000, $282,000, and
$342,000 in 1996, 1995, and 1994, respectively. In addition, the
General Partner's share of cash available for distribution from
operations, as discussed in Note 1, totaled $20,000, $28,000, and
$34,000 in 1996, 1995, and 1994, respectively.
     In accordance with the partnership agreement, certain
operating expenses are reimbursable to the General Partner. The
General Partner's reimbursement of such expenses totaled $90,000,
$77,000, and $74,000 for communications and administrative services
performed on behalf of the Partnership during 1996, 1995, and 1994,
respectively.
     An affiliate of the General Partner earned a normal and
customary fee of $4,000, $12,000, and $15,000 from the money market
mutual funds in which the Partnership made its interim cash
investments during 1996, 1995, and 1994, respectively.
     LaSalle Advisors Limited Partnership ("LaSalle") is the
Partnership's advisor and is compensated for its advisory services
directly by the General Partner. LaSalle is reimbursed by the
Partnership for certain operating expenses pursuant to its contract
with the Partnership to provide real estate advisory, accounting,
and other related services to the Partnership. LaSalle's
reimbursement for such expenses during each of the last three years
totaled $120,000.
     An affiliate of LaSalle earned $87,000, $61,000, and $37,000
in 1996, 1995, and 1994, respectively, for property management fees
and leasing commissions on tenant renewals and extensions at
several of the Partnership's properties.

NOTE 4 - PROPERTIES HELD FOR SALE AND DISPOSITIONS

In September 1994, the Partnership sold the smallest of the three
Wood Dale industrial buildings, the Beinoris Building, and received
net proceeds of $994,000. The net book value of this property at
the time of disposition was $914,000, after accumulated
depreciation expense.  Accordingly, the Partnership recognized a
gain of $80,000.
     On August 28, 1996, Fairchild Corporate Center, an office
property in which the Partnership had a 56% interest was sold.  The
Partnership received net proceeds of $5,477,000.  The net book
value of the Partnership's interest at the date of sale was
$3,847,000, after deduction of accumulated depreciation, and
previously recorded impairments.  Accordingly, the Partnership
recognized a $1,630,000 gain on the sale of this property.
     The Partnership began actively marketing its three midwest
industrial properties, Wood Dale, Winnetka, and Riverview, in late
1996 and has subsequently signed a letter of intent with a
prospective buyer. In late 1996, the Partnership also began
marketing South Point Plaza, a shopping center in which the
Partnership has a 50% interest. The Partnership has classified the
carrying amounts of these four properties as held for sale in the
accompanying December 31, 1996, balance sheet.  Results of
operations for properties held for sale at December 31, 1996, and
properties sold during the past three years are summarized below:


                                1996         1995        1994
                              _________    ________    ________

Recovery (Decline) of         $(29,000)  $ 109,000   $  82,000
Other Components of 
  Operating Income              961,000    967,000     729,000
                              _________  _________    ________

Results of Operations         $ 932,000  $1,076,000  $ 811,000

NOTE 5 - FORECLOSURE OF MORTGAGE LOAN

In July 1995, the Partnership began consensual foreclosure on the
participating mortgage loan secured by the River Run Shopping
Center and ceased the accrual of interest income.  At September 30,
1995, the carrying value of the loan was reduced to $7,700,000, the
estimated fair value of the property.  On October 10, 1995, the
Partnership purchased the property and, in connection therewith,
reclassified the participating mortgage loan as an investment in
real estate.

NOTE 6 - PROPERTY VALUATIONS

On January 1, 1996, the Partnership adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which changed the Partnership's method of accounting for its real
estate property investments when circumstances indicate that the
carrying amount of a property may not be recoverable.  Measurement
of an impairment loss on an operating property is now based on the
estimated fair value of the property, which becomes the property's
new cost basis, rather than the sum of expected future cash flows. 
Properties held for sale will continue to be reflected at the lower
of historical cost or estimated fair value less anticipated selling
costs.  In addition, properties held for sale are no longer
depreciated.
     Based upon a review of current market conditions, estimated
holding period, and future performance expectations of each
property, the General Partner has determined that the net carrying
value of certain Partnership properties held for operations may not
be fully recoverable.  Charges recognized for such impairments
aggregated $2,721,000 in 1996 and $1,467,000 in 1994.

NOTE 7 - LEASES

Future minimum rentals (in thousands) to be received by the
Partnership under noncancelable operating leases in effect at
December 31, 1996, are:

                   
                 1997           $ 3,729
                 1998             3,349
                 1999             2,447
                 2000             1,709
                 2001             1,041
              Thereafter          8,464
                                _______

                Total           $20,739
                                _______
                                _______

NOTE 8 - RECONCILIATION OF FINANCIAL STATEMENT TO TAXABLE INCOME

As described in Note 2, the Partnership has not provided for an
income tax liability; however, certain timing differences exist
between amounts reported for financial reporting and federal income
tax purposes.  These differences are summarized below for the last
three years:


                                 1996      1995       1994
                               ___________________  ________
                                      (in thousands)

Book net income 
  (loss) . . . . . . . . . .  $   906    $ 1,783   $   579
Allowance for
  doubtful accounts. . . . .      (97)        (4)       71
Property valuation
  allowance and losses
  on dispositions. . . . . .   (6,540)      (109)    1,385
Normalized and
  prepaid rents. . . . . . .        7        (23)     (103)
Interest income. . . . . . .        -        661       633
Depreciation . . . . . . . .      (23)      (283)      353
Provisions for 
  loan loss. . . . . . . . .        -     (1,956)        -
Other items. . . . . . . . .      (12)        16        (1)
                             ________    ________  ________

Taxable income (loss). . . .  ($5,759)   $    85   $ 2,917

NOTE 9 - SUBSEQUENT EVENT

The Partnership declared a quarterly cash distribution of $2.00 per
unit to Limited Partners of the Partnership as of the close of
business on December 31, 1996.  The Limited Partners will receive
$507,000, and the General Partner will receive $5,000.

INDEPENDENT AUDITORS' REPORT

To the Partners
T. Rowe Price Realty Income Fund III,
America's Sales-Commission-Free Real Estate Limited Partnership:

We have audited the accompanying consolidated balance sheets of T.
Rowe Price Realty Income Fund III, America's Sales-Commission-Free
Real Estate Limited Partnership and its consolidated ventures as of
December 31, 1996 and 1995, and the related consolidated statements
of operations, partners' capital and cash flows for each of the
years in the three-year period ended December 31, 1996.  These
consolidated financial statements are the responsibility of the
Partnership's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
     We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material
misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated
financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.
     In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of T. Rowe Price Realty Income Fund III, America's
Sales-Commission-Free Real Estate Limited Partnership and its
consolidated ventures as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Chicago, Illinois
January 30, 1997







<PAGE>