Document:

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                                                                    EXHIBIT 10.5

                             CRIT SPECIAL III, INC.

                                     BYLAWS
                               AS OF JUNE 8, 2001

                                    ARTICLE I
                            MEETINGS OF SHAREHOLDERS

         1.1 Place and Time of Meetings. Meetings of shareholders shall be held
at such place, either within or without the Commonwealth of Virginia, and at
such time, as may be provided in the notice of the meeting and approved by the
President or the Board of Directors.

         1.2 Annual Meeting. The annual meeting of shareholders, shall be held
on the second Tuesday in August of each year, or on such date, as may be
designated by resolution of the Board of Directors from time to time for the
purpose of electing directors and conducting such other business as may properly
come before the meeting.

         1.3 Special Meetings. Special meetings of the shareholders may be
called by the President or the Board of Directors and shall be called by the
Secretary upon demand of shareholders as required by law. Only business within
the purpose or purposes described in the notice for a special meeting of
shareholders may be conducted at the meeting.

         1.4 Record Dates. The Board of Directors may fix, in advance, a record
date to make a determination of shareholders entitled to notice of, or to vote
at, any meeting of shareholders, to receive any dividend or for any purpose,
such date to be not more than seventy (70) days before the meeting or action
requiring a determination of shareholders. If no such record date is set then
the record date shall be the close of business on the day before the date on
which the first notice is given.

         When a determination of shareholders entitled to notice of, or to vote
at, any meeting of shareholders has been made, such determination shall be
effective for any adjournment of the meeting unless the Board of Directors fixes
a new record date, which it shall do if the meeting is adjourned to a date more
than one hundred twenty (120) days after the date fixed for the original
meeting.

         1.5 Notice of Meetings. Written notice stating the place, day and hour
of each meeting of shareholders and, in case of a special meeting, the purpose
or purposes for which the

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meeting is called, shall be given not less than ten (10) nor more than sixty
(60) days before the date of the meeting (except when a different time is
required in these Bylaws or by law) either personally or by mail, courier,
facsimile, email, or other form of wire or wireless communication, to each
shareholder of record entitled to vote at such meeting. Each such notice shall
be deemed effective on: (a) the fifth (5/th/) business day after being mailed by
United States certified mail, return receipt requested, postage prepaid; (b) the
day when delivered by hand; (c) the first business day after being deposited
with a national overnight courier; or (d) the day when transmitted by facsimile
or email with confirmation of receipt or successful transmission.

         If a meeting is adjourned to a different date, time or place, notice
need not be given if the new date, time or place is announced at the meeting
before adjournment. However, if a new record date for an adjourned meeting is
fixed, notice of the adjourned meeting shall be given to shareholders as of the
new record date, unless a court of competent jurisdiction provides otherwise.

         1.6 Waiver of Notice. A shareholder may waive any notice required by
law, the Articles of Incorporation or these Bylaws before or after the date and
time of the meeting that is the subject of such notice. The waiver shall be in
writing, be signed by the shareholder entitled to the notice, and be delivered
to the Secretary of the Corporation for inclusion in the minutes or filing with
the corporate records.

         A shareholder who attends a meeting waives any objection (a) to lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (b) to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.

         1.7 Quorum and Voting Requirements. Unless otherwise required by law, a
majority of the votes entitled to be cast on a matter constitutes a quorum for
action on that matter. Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or shall be set
for that adjourned meeting. If a quorum exists, action on a matter, other than
the election of directors, is approved if the votes cast favoring the action
exceed the votes cast opposing the action, unless a greater number of
affirmative votes is required by law. Directors shall be elected by a plurality
of the votes cast by the shares entitled

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to vote in the election at a meeting at which a quorum is present. Less than a
quorum may adjourn a meeting.

         1.8 Action Without Meeting. Action required or permitted to be taken at
a meeting of the shareholders may be taken without a meeting and without action
by the Board of Directors if the action is taken by all the shareholders
entitled to vote on the action. The action shall be evidenced by one or more
written consents describing the action taken, signed by all the shareholders and
delivered to the Secretary of the Corporation for inclusion in the minutes or
filing with the corporate records. Action taken by unanimous consent shall be
effective according to its terms when all consents are in the possession of the
Corporation, unless the consent specifies a different effective date, in which
event the action taken shall be effective as of the date specified therein
provided that the consent states the date of execution by each shareholder. A
shareholder may withdraw a consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation.

         If not otherwise fixed pursuant to the provisions of Section, the
record date for determining shareholders entitled to take action without a
meeting is the date the first shareholder signs the consent described in the
preceding paragraph.

                                   ARTICLE II
                                    DIRECTORS

         2.1 General Powers. The Corporation shall have a Board of Directors.
All corporate powers shall be exercised by or under the authority of, and the
business and affairs of the Corporation managed under the direction of, its
Board of Directors, subject to any limitation set forth in the Articles of
Incorporation. Notwithstanding any provision of these Bylaws to the contrary,
the Corporation shall comply with all provisions of its Articles of
Incorporation regarding the Board of Directors, including any provisions
relating to the composition thereof or approval thereby.

         2.2 Number, Term and Election. The number of directors of the
Corporation shall be a minimum of one (1) and a maximum of five (5). The number
of directors may be fixed or changed from time to time, within the minimum and
the maximum, by the shareholders or by the Board of Directors. Only the
shareholders may change the range of the size of the Board of

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Directors or determine whether the Board of Directors shall have a fixed or
variable size. No decrease in number shall have the effect of shortening the
term of any incumbent director. Each director shall hold office until his death,
resignation, retirement or removal, or until his successor is elected.

         Except as provided in Section 2.3 of this Article, the directors (other
than initial directors) shall be elected by the holders of the Common Shares at
the annual meeting of shareholders, and those persons who receive the greatest
number of votes shall be deemed elected even though they do not receive a
majority of the votes cast. No individual shall be named or elected as a
director without his prior consent.

         2.3 Removal and Vacancies. The shareholders may remove one or more
directors, with or without cause, if the number of votes cast to remove him
constitutes a majority of the votes entitled to be cast at an election of
directors. A director may be removed by the shareholders only at a meeting
called for the purpose of removing him and the meeting notice must state that
the purpose, or one of the purposes of the meeting, is removal of the director.

         A vacancy on the Board of Directors, including a vacancy resulting from
the removal of a director or an increase in the number of directors, may be
filled by (a) the shareholders, (b) the Board of Directors or (c) the
affirmative vote of a majority of the remaining directors though less than a
quorum of the Board of Directors, and may, in the case of a resignation that
will become effective at a specified later date, be filled before the vacancy
occurs but the new director may not take office until the vacancy occurs.

         2.4 Annual and Regular Meetings. An annual meeting of the Board of
Directors, which shall be considered a regular meeting, shall be held
immediately following each annual meeting of shareholders, for the purpose of
electing officers and carrying on such other business as may properly come
before the meeting. The Board of Directors may also adopt a schedule of
additional meetings which shall be considered regular meetings. Regular meetings
shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the President or the Board of Directors shall
designate from time to time. If no place is designated, regular meetings shall
be held at the principal office of the Corporation.

         2.5 Special Meetings. Special meetings of the Board of Directors may be
called by the President or a majority of the directors of the Corporation, and
shall be held at such times and at such places, within or without the
Commonwealth of Virginia, as the person or persons calling

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the meetings shall designate. If no such place is designated in the notice of a
meeting, it shall be held at the principal office of the Corporation.

         2.6 Notice of Meetings. No notice need be given of regular meetings of
the Board of Directors.

         Notices of special meetings of the Board of Directors shall be given to
each director in person or delivered to his residence or business address (or
such other place as he may have directed in writing) not less than twenty-four
(24) hours before the meeting by mail, courier, facsimile, email, or other form
of wire or wireless communication or by telephoning such notice to him. Any such
notice shall set forth the time and place of the meeting and state the purpose
for which it is called.

         2.7 Waiver of Notice; Attendance at Meeting. A director may waive any
notice required by law, the Articles of Incorporation, or these Bylaws before or
after the date and time stated in the notice, and such waiver shall be
equivalent to the giving of such notice. Except as provided in the next
paragraph of this section, the waiver shall be in writing, signed by the
director entitled to the notice and filed with the minutes or corporate records.

         A director who attends or participates at a meeting waives any required
notice to him of the meeting unless the director, at the beginning of the
meeting or promptly upon his arrival, objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for, or assent
to, action taken at the meeting.

         2.8 Quorum; Voting. A majority of the number of directors fixed in
these Bylaws shall constitute a quorum for the transaction of business at a
meeting of the Board of Directors. If a quorum is present when a vote is taken,
the affirmative vote of a majority of the directors present is the act of the
Board of Directors. A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless (a) he objects at
the beginning of the meeting, or promptly upon his arrival, to holding it or
transacting specified business at the meeting; or (b) he votes against, or
abstains from, the action taken.

         2.9 Telephonic Meetings. The Board of Directors may permit any or all
directors to participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other

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during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.

         2.10 Action Without Meeting. Action required or permitted to be taken
at a meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board. The action shall be evidenced by
one or more written consents stating the action taken, signed by each director
either before or after the action taken, and included in the minutes or filed
with the corporate records reflecting the action taken. Action taken under this
section shall be effective when the last director signs the consent unless the
consent specifies a different effective date, in which event the action taken is
effective as of the date specified therein provided the consent states the date
of execution by each director.

         2.11 Compensation. The Board of Directors may fix the compensation of
directors and may provide for the payment of all expenses incurred by them in
attending meetings of the Board of Directors.

                                   ARTICLE III
                                    OFFICERS

         3.1  Officers. The officers of the Corporation shall be a President and
a Secretary and, in the discretion of the Board of Directors, such other
officers as may be deemed necessary or advisable to carry on the business of the
Corporation. Any two or more offices may be held by the same person.

         3.2  Election and Term. Officers shall be elected at the annual meeting
of the Board of Directors and may be elected at such other time or times as the
Board of Directors shall determine. They shall hold office, unless removed,
until the next annual meeting of the Board of Directors or until their
successors are elected. Any officer may resign at any time upon written notice
to the Board of Directors, and such resignation shall be effective when notice
is delivered unless the notice specifies a later effective date.

         3.3  Removal of Officers. The Board of Directors may remove any officer
at any time, with or without cause.

         3.4  Duties of Officers. The President shall be the chief executive
officer of the Corporation. He and the other officers shall have such powers and
duties as generally pertain to their respective offices as well as such powers
and duties as may be delegated to them from time

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to time by the Board of Directors. The President, if present, shall be chairman
of all meetings of the shareholders and the Board of Directors, as well as any
committee of which he is a member.

                                   ARTICLE IV
                               SHARE CERTIFICATES

         4.1 Form. Shares of the Corporation, when fully paid, may be evidenced
by certificates containing such information as is required by law and approved
by the Board of Directors. Any share certificates shall be signed by the
President and the Secretary and may (but need not) be sealed with the seal of
the Corporation. The seal of the Corporation and any or all signatures on a
share certificate may be facsimile. The validity of a share certificate that has
been duly signed by an officer of the Corporation shall not be affected in any
way in the event that such officer, subsequent to such signature, ceases to be
an officer of the Corporation.

         4.2 Transfer. The Board of Directors may make rules and regulations
concerning the issue, registration and transfer of certificates representing the
shares of the Corporation. Transfers of shares and of the certificates
representing such shares shall be made upon the books of the Corporation by
surrender of the certificates representing such shares accompanied by written
assignments given by the owners or their attorneys-in-fact.

         4.3 Restrictions on Transfer. A lawful restriction on the transfer or
registration of transfer of shares is valid and enforceable against the holder
or a transferee of the holder if the restriction complies with the requirements
of law and its existence is noted conspicuously on the front or back of the
certificate representing the shares. Unless so noted a restriction is not
enforceable against a person without knowledge of the restriction.

         4.4 Lost or Destroyed Share Certificates. The Corporation may issue a
new share certificate in the place of any certificate theretofore issued which
is alleged to have been lost or destroyed and may require the owner of such
certificate, or his legal representative, to give the Corporation a bond, with
or without surety, or such other agreement, undertaking or security as the Board
of Directors shall determine is appropriate, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss or
destruction or the issuance of any such new certificate.

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                                    ARTICLE V
                            MISCELLANEOUS PROVISIONS

         5.1 Corporate Seal. The corporate seal of the Corporation, if any,
shall be circular and shall have inscribed thereon, within and around the
circumference the full name of the Corporation. In the center shall be the word
"SEAL" or a substantially similar term.

         5.2 Fiscal Year. The fiscal year of the Corporation shall be determined
in the discretion of the Board of Directors, but in the absence of any such
determination it shall be the calendar year.

         5.3 Amendments. Except as otherwise provided by law, these Bylaws may
be amended or repealed, and new Bylaws may be made at any regular or special
meeting of the Board of Directors. Bylaws made by the Board of Directors may be
repealed or changed and new Bylaws may be made by the shareholders, and the
shareholders may prescribe that any Bylaw made by them shall not be altered,
amended or repealed by the Board of Directors.

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                                                                    EXHIBIT 10.6

                               OPERATING AGREEMENT
                                       OF
                                 CRIT-NC IV, LLC

     This Operating Agreement (this "Agreement") is made as of June 8, 2001 by
and between CRIT-NC IV, LLC, a Delaware limited liability company (the
"Company"), and CRIT Special III, Inc., a Virginia corporation (the "Sole
Member").

                                    RECITALS

     The Company was organized as a Delaware limited liability company pursuant
to a Certificate of Formation filed on June 8, 2001. The Company is owned by the
Sole Member and has no intention of admitting additional members.

                                    ARTICLE I
                    DEFINITIONS, PURPOSE AND GENERAL MATTERS

     1.1 Purpose. The purpose of the Company is to engage in any lawful
activity. Without limiting the scope of the foregoing, the Company is authorized
(a) to acquire from Cornerstone Realty Income Trust, Inc., a Virginia
corporation, those certain parcels of real property listed on Exhibit A hereto,
                                                              ---------
together with all improvements located thereon (collectively, the "Properties");
and (b) to own, hold, sell, assign, transfer, operate, lease, mortgage, pledge
and otherwise deal with the Properties.

     1.2 Operating Names. The Company may operate under its own name and under
such assumed names as it deems appropriate or convenient.

     1.3 Qualifications in Other Jurisdictions. If required by law, the Company
shall promptly qualify or register to transact business in all jurisdictions in
which it transacts business as a foreign limited liability company.

     1.4 Limited Liability. No member or manager of the Company shall be
personally obligated for any debt, obligation or liability of the Company solely
by reason of being a member or acting as a manager, except as may be required by
applicable law. Such limited liability shall exist to the maximum extent
permitted by the Delaware Limited Liability Company Act, as it may be amended or
replaced from time to time (the "Act"). As of the date of this Agreement, the
Act is set forth in sections 18-101 through -1109 of Title 6 of the Delaware
Code.

     1.5 Status of Agreement. This Agreement is intended to serve as a "limited
liability company agreement" within the meaning of the Act.

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                                   ARTICLE II
                                   MEMBERSHIP

     2.1 Admission of Additional Members. The Company shall not admit a member
in addition to the Sole Member unless all of the following requirements are
satisfied: (a) the Sole Member grants prior written consent to the admission of
the additional member; (b) the Company and the Sole Member amend or replace this
Agreement as may be necessary or appropriate for the purpose of addressing any
issues raised by joint or multiple ownership of the Company; and (c) each person
or entity who seeks to be admitted as a member of the Company executes the
current Operating Agreement of the Company, as amended or replaced in accordance
with the preceding clause , and makes any required capital contributions to the
Company in full.

     2.2 Resignation. The Sole Member shall not resign or withdraw from the
Company, except by operation of law or by transferring its entire interest in
the Company in accordance with this Agreement.

                                   ARTICLE III
          MANAGEMENT, PROHIBITED ACTIVITIES AND SEPARATENESS COVENANTS

     3.1 Appointment of Manager. The Company shall be managed by a single
manager (the "Manager"). The Manager may be a person or an entity. The initial
Manager of the Company shall be the Sole Member, who shall not resign as the
Manager unless a qualified replacement Manager has agreed to become the Manager
upon such resignation.

     3.2 Term of Manager. The Manager's term shall continue until the Manager's
resignation, termination by operation of law or death (as applicable for the
then current Manager), or removal by the Company. The Company shall be entitled,
in its sole discretion, to remove or replace the Manager at any time and for any
reason.

     3.3 Authority of Manager. The Manager shall have the authority to act on
behalf of the Company to the maximum extent permitted by the Act. Without
limiting the scope of the foregoing, the Manager shall be entitled to appoint
any officers of the Company (the "Officers") and to establish the authority,
duties, terms and compensation (if any) of the Officers. The parties acknowledge
and agree that the Officers also may hold offices in corporations, including but
not limited to corporations affiliated with the Sole Member.

     3.4 Expenses and Reimbursement. The Company shall be responsible for all
expenses, costs and liabilities arising from the management, organization or
operation of the Company in accordance with this Agreement ("Company Expenses").
The Manager and the Officers shall be entitled to receive prompt reimbursement
from the Company to the extent, if any, that they incur any Company Expenses,
unless such Company Expenses arose from a violation of this Agreement, willful
misconduct or knowing violation of criminal law.

     3.5 Management Compensation. No salary or other compensation shall be paid
to the Manager for the Manager's actions on behalf of the Company.

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     3.6  Certain Prohibited Activities. Notwithstanding any provision hereof to
the contrary, the following shall govern:

          (a) The indebtedness of the Company shall consist only of a first lien
mortgage on the Properties arising from financing by First Union National Bank
(the "Mortgage"), any other indebtedness permitted under the Mortgage, and
normal trade accounts payable in the ordinary course of business. For so long as
any obligation secured by the Mortgage remains outstanding and not paid in full,
the Company shall not incur, assume, or guaranty any indebtedness not permitted
hereunder.

          (b) The Company shall not consolidate or merge with or into any other
entity, or convey or transfer its properties and assets substantially as an
entirety to any entity, unless:

              (i)  the entity that is formed upon such consolidation, that
survives such merger (if other than the Company), or that acquires by conveyance
or transfer the properties and assets of the Company substantially as an
entirety, shall: (A) be organized and existing under the laws of the United
States of America or any State or the District of Columbia, (B) include in its
organizational documents the same limitations set forth in this Article II and
in Section 2.4 hereof (Separateness Covenants), and (C) expressly assume the due
and timely performance of the Company's obligations; and

              (ii) immediately after giving effect to such transaction, no
default or event of default will have occurred under any agreement to which the
Company is a party.

          (c) For so long as any obligation secured by the Mortgage remains
outstanding and not paid in full, the Company shall not voluntarily commence a
case with respect to itself, as debtor, under the Federal Bankruptcy Code or any
similar federal or state statute without the unanimous consent of the Sole
Member's Board of Directors. For so long as any obligation secured by the
Mortgage remains outstanding and not paid in full, no material amendment to this
Company Agreement may be made without the prior approval of the mortgagee
holding the Mortgage.

     3.7  Separateness Covenants. Notwithstanding any provision hereof to the
contrary, the following shall govern: For so long as any obligation secured by
the Mortgage remains outstanding and not paid in full, in order to preserve and
ensure the Company's separate and distinct identity, in addition to the other
provisions set forth in this Company Agreement, the Company shall conduct its
affairs in accordance with the following provisions:

          (a) It shall establish and maintain an office through which its
business shall be conducted separate and apart from those of the Sole Member and
any affiliate and it shall allocate fairly and reasonably any overhead for
shared office space.

          (b) It shall maintain separate records and books of account from those
of the Sole Member and any affiliate.

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              (c) All actions by the Company shall be authorized by the Sole
Member, who shall observe all necessary formalities in connection with such
authorization.

              (d) It shall not commingle assets with those of the Sole Member or
any affiliate.

              (e) It shall conduct its own business in its own name.

              (f) It shall maintain financial statements separate from the Sole
Member and any affiliate.

              (g) It shall pay any liabilities out of its own funds, including
salaries of any employees, not funds of the Sole Member or any affiliate.

              (h) It shall maintain an arm's length relationship with the Sole
Member and any affiliate.

              (i) It shall not guarantee or become obligated for the debts of
any other person or entity (including, without limitation, the Sole Member or
any affiliate) and shall not hold out its credit as being available to satisfy
the obligations of others.

              (j) It shall use stationery, invoices and checks separate from the
Sole Member and any affiliate.

              (k) It shall not pledge its assets for the benefit of any other
person or entity (including, without limitation, the Sole Member or any
affiliate).

              (l) It shall hold itself out as an entity separate from the Sole
Member and any affiliate.

              (m) It shall not make any loans or advances to any third party
(including, without limitation, any affiliate).

              (n) It shall comply with its obligations under the agreements and
instruments evidencing the Mortgage.

          3.8 Definitions. For purpose of this Article III, the following terms
shall have the indicated meanings:

              (a) "affiliate" means, with respect to a specified person or
entity:

                  (i)  any person or entity directly or indirectly owning,
controlling or holding with power to vote ten percent (10%) or more of the
outstanding voting securities or interests of the specified entity;

                  (ii) any person or entity ten percent (10%) or more of whose
outstanding voting securities or interests are directly or indirectly owned,
controlled or held with power to vote by the specified person or entity;

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                  (iii) any person or entity directly or indirectly controlling,
controlled by or under common control with the specified person or entity;

                  (iv) any officer, director or partner of the specified person
or entity;

                  (v) if the specified person or entity is an officer, director
or partner, any company for which the specified person or entity acts in any
such capacity; and

                  (vi) any close relative or spouse of the specified person.

              (b) "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person or entity, whether through ownership of voting securities, by contract or
otherwise.

              (c) "person or entity" means any individual, corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust (including any beneficiary thereof), unincorporated organization,
government or any agency or political subdivision thereof.

                                   ARTICLE IV
                            CAPITAL AND DISTRIBUTIONS

         4.1  Capital Contributions. The Sole Member has made an initial capital
contribution to the Company, and shall be entitled, in its sole discretion, to
make additional capital contributions to the Company. All such capital
contributions are shown on Exhibit B to this Agreement, which shall be amended
                           ---------
as necessary from time to time.

         4.2  Loans. Any loans from the Sole Member to the Company shall be made
on commercially reasonable terms and conditions, and shall not be considered
capital contributions.

         4.3  Distributions. The Company shall make annual distributions of any
cash amounts that, in the reasonable determination of the Manager, are not
necessary for the Company's operations, expenses or reserves. The Manager is
entitled to authorize more frequent distributions of such cash amounts in the
Manager's sole discretion.

                                    ARTICLE V
                              TRANSFER OF INTEREST

         5.1  Restriction. The Sole Member shall be prohibited from assigning,
selling, exchanging or otherwise transferring its interest in the Company unless
all of the following requirements are satisfied: (a) the proposed transaction
would apply to the entire interest of the Sole Member in the Company; (b) the
proposed transaction would involve one transferee; (c) the prospective
transferee tenders full payment of the required purchase price and executes a
counterpart signature page to this Agreement as a member of the Company; and (d)
the Company receives an opinion from its legal counsel, satisfactory to the
Company in form and

                                       -5-

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substance, confirming that the proposed transaction would not violate any
federal or state securities laws or any other applicable laws.

          5.2 Effect of Transfer. If the Sole Member transfers its entire
interest in the Company in accordance with this Agreement, such transfer shall
operate, upon completion, as the complete resignation or withdrawal of the Sole
Member from the Company.

          5.3 Related Matters. Any transaction that is subject to this Article
and that fails in any way to comply with its provisions shall be ineffective and
void.

                                   ARTICLE VI
                                   TAX MATTERS

          6.1 Tax Classification. The Company shall be disregarded as an entity
separate from the Sole Member for federal income tax purposes in accordance with
the Internal Revenue Code of 1986, as amended, and section 301.7701-3(b)(1)(ii)
of the Treasury Regulations thereunder (or any successor provisions thereof).

          6.2 Tax Filings. The Company shall make such filings as may be
required to maintain its tax classification as a disregarded entity for income
tax purposes. The Company may obtain a federal tax identification number for
business purposes, and such action shall not be construed as a change to the
Company's tax classification as a disregarded entity.

                                   ARTICLE VII
                        INDEMNIFICATION AND REIMBURSEMENT

          7.1 Definitions. As used in this Article, the term "Affiliate" shall
refer to the Sole Member, the Manager (if different from the Sole Member) and
the Officers, and each employee, director and officer of the Sole Member or the
Manager.

          7.2 Indemnification. The Company shall indemnify each Affiliate
against any and all claims, liabilities, costs and expenses (including but not
limited to reasonable legal fees and costs) arising directly or indirectly from
any suit, action, investigation or other proceeding (whether formal or informal)
that (a) is brought or threatened against an Affiliate; and (b) is based on the
acts or omissions of such Affiliate on behalf of the Company, unless such acts
or omissions violated this Agreement, constituted willful misconduct or resulted
from a knowing violation of criminal law. The Company shall have no obligation
to indemnify an Affiliate to the extent, if any, that the Affiliate is entitled
to be indemnified by another source, such as, without limitation, an insurance
company.

          7.3 Reimbursement. If an Affiliate incurs or pays any indemnified
cost, the Company shall reimburse the Affiliate for the full amount of such
indemnified cost. Such reimbursement shall be due promptly after the Company
receives (a) a written request for reimbursement from the Affiliate; (b) all
information necessary to establish the nature and amount of the indemnified cost
that was incurred or paid by the Affiliate; and (c) a written agreement by the
Affiliate to repay such reimbursement if the Company subsequently determines

                                       -6-

<PAGE>

that the Affiliate was not entitled to indemnification or if the Affiliate
subsequently receives reimbursement from another source, such as, without
limitation, an insurance company.

                                  ARTICLE VIII
                                   DISSOLUTION

          8.1 Events of Dissolution. The Company shall dissolve upon the
occurrence of any of the following events: (a) the written instruction of the
Sole Member; or (b) any event requiring dissolution under the Act.

          8.2 Winding Up of Affairs. Upon the dissolution of the Company, the
Manager shall wind up the affairs of the Company. The Manager shall determine
the time, place, manner and other terms of any sales involving the Company's
assets, with due regard to the activity and the condition of the Company and the
relevant market and economic conditions.

          8.3 Final Distributions. Upon the dissolution of the Company, and
subject to the requirements of the Act, the Manager shall distribute the assets
of the Company in the following order of priority:

              (a) first, to any creditors of the Company;

              (b) second, to known and reasonably estimated costs of dissolution
and winding up;

              (c) third, to any reserves established by the Manager, in the sole
discretion thereof, for contingent liabilities of the Company; and

              (d) fourth, to the Sole Member.

          8.4 Filing of Certificate of Cancellation. Following the winding up of
the Company, the Manager shall be responsible for filing, if necessary, a
Certificate of Cancellation on behalf of the Company with the Delaware Secretary
of State, together with any other documents required to terminate the Company
and its legal existence.

                                   ARTICLE IX
                                 ADMINISTRATION

          9.1 Offices. The Company's initial registered office and registered
agent shall be as designated in its Certificate of Formation. The Manager shall
be entitled to change such designations from time to time, in the Manager's sole
discretion, subject to any requirements of the Act.

          9.2 Information and Records. The Company shall keep accurate and
complete information and records at its principal office (the "Company
Records").

                                       -7-

<PAGE>

     9.3  Inspection. Upon prior notice to the Company of at least two (2)
business days, any designated representative of the Sole Member shall be
entitled, during normal business hours, to inspect the Company Records and to
copy them at the expense of the Sole Member.

                                    ARTICLE X
                            MISCELLANEOUS PROVISIONS

     10.1 Governing Law. The laws of the State of Delaware (without regard to
those laws involving choice of law) shall govern this Agreement and all matters
relating to its interpretation or enforcement.

     10.2 Other Agreements. Any prior operating agreements with respect to the
Company, whether oral or written, have been merged and integrated into this
Agreement and are superseded by this Agreement.

     10.3 Modifications and Waivers. Modifications of this Agreement shall not
be binding, valid or enforceable unless they are approved in writing by each of
the parties. Any modification or waiver of a provision in this Agreement shall
be limited to that provision and the occasion on which it occurred, and shall
not be construed as a modification or waiver with respect to any other provision
or occasion.

     10.4 Enforceable Provisions. All provisions in this Agreement are severable
and each valid and enforceable provision shall remain in full force and effect,
regardless of any judicial or other official declaration that certain provisions
are invalid or unenforceable.

     10.5 Captions and Headings. Captions and headings are used in this
Agreement for convenience only and shall not affect its interpretation or
enforcement. Terms such as "hereof," "hereby," "hereto," "herein" and
"hereunder" shall be deemed to refer to this Agreement as a whole, rather than
to any particular provision.

     10.6 Successors. This Agreement shall be binding upon, and enforceable
against, the parties and all of their permitted assignees and successors in
title or interest.

     10.7 Exclusion of Third Party Benefit. This Agreement is not intended for
the benefit of any person or entity who is not a party to this Agreement (such
as, without limitation, a creditor of the Company or of the Sole Member), and no
such person or entity shall have any rights in connection with this Agreement,
whether for enforcement or otherwise.

     10.8 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which shall constitute, when taken
together, a single instrument.

                                       -8-

<PAGE>

WITNESS the following signatures:

COMPANY:                              CRIT-NC IV, LLC
-------
                                      a Delaware limited liability company

                                      By:  CRIT Special III, Inc.
                                      Its: Sole Member

                                      By:  /s/ Stanley J. Olander, Jr.
                                           ---------------------------
                                           Stanley J. Olander, Jr.
                                           Vice President

SOLE MEMBER:                          CRIT Special III, Inc.
-----------                           a Virginia corporation

                                      By:  /s/ Stanley J. Olander, Jr.
                                           ---------------------------
                                           Stanley J. Olander, Jr.
                                           Vice President

                                       -9-

<PAGE>

                                    Exhibit A
                                    ---------

                              (List of Properties)

The Properties consist of those real properties, together with all improvements
thereon, that are located at the following addresses:

         Deerfield Apartments
         910 Constitution Drive
         Durham, North Carolina 27705

         Meadow Creek Apartments
         12821 Meadow Creek Lane
         Pineville, North Carolina 28134

         Pinnacle Ridge Apartments
         600 Merrimon Drive
         Asheville, North Carolina 28804

                                       -10-

<PAGE>

                                    Exhibit B
                                    ---------

                             Capital Contribution(s)

Name and Address                 Amount of             Type of        Date of
of Member                   Capital Contribution    Contribution   Contribution
---------                   --------------------    ------------   ------------

CRIT Special III, Inc.            $100.00               Cash       June 8, 2001
306 East Main Street
Richmond, Virginia 23219

                                       -11-

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